UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Commission File Number 1-16463
PEABODY ENERGY CORPORATION
| Delaware | 13-4004153 | |
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| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| 701 Market Street, St. Louis, Missouri | 63101-1826 | |
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| (Address of principal executive offices) | (Zip Code) | |
(314) 342-3400
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). x Yes o No
Number of shares outstanding of each of the Registrant’s classes of Common Stock, as of October 29, 2004: Common Stock, par value $0.01 per share, 64,610,888, shares outstanding.
INDEX
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
PEABODY ENERGY CORPORATION
See accompanying notes to unaudited condensed consolidated financial statements.
2
PEABODY ENERGY CORPORATION
See accompanying notes to unaudited condensed consolidated financial statements.
3
PEABODY ENERGY CORPORATION
See accompanying notes to unaudited condensed consolidated financial statements.
4
PEABODY ENERGY CORPORATION
(1) Basis of Presentation
The condensed consolidated financial statements include the accounts of
Peabody Energy Corporation (the “Company”) and its controlled affiliates.
Earnings of unconsolidated affiliates are included in “Other Revenues.” All
significant intercompany transactions, profits and balances have been
eliminated in consolidation. Certain prior year amounts have been reclassified
to conform with the current year presentation.
The accompanying unaudited condensed consolidated financial statements as
of September 30, 2004 and for the quarters and nine month periods ended
September 30, 2004 and 2003, and the notes thereto, are unaudited. However, in
the opinion of management, these financial statements reflect all normal,
recurring adjustments necessary for a fair presentation of the results of the
periods presented. The statement of operations for the nine months ended
September 30, 2003 contained the cumulative effect of accounting changes, net
of taxes, related to the adoption of new standards regarding asset retirement
obligations, a change in the method of amortizing actuarial gains and losses
related to net periodic postretirement benefit costs, and effect of the
rescission of EITF No. 98-10. The balance sheet information as of December 31,
2003 has been derived from the Company’s audited consolidated balance sheet.
The results of operations for the quarter and nine months ended September 30,
2004 are not necessarily indicative of the results to be expected for future
quarters or for the year ending December 31, 2004.
(2) New Pronouncements
In May 2004, in response to the federal Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (Medicare Act), the FASB finalized
guidance on how employers should account for the Medicare Act (FSP FAS 106-2).
The FASB guidance did not impact the Company’s accounting for the Medicare Act
as initially applied under FSP FAS 106-1, the effects of which were described
in the notes to the Company’s 2003 audited financial statements.
Emerging Issues Task Force (“EITF”) Issue 04-02, effective April 30, 2004,
states that mineral rights are tangible assets. Prior to this consensus, the
Company provided a separate line item for leased coal interests and advance
royalties within the consolidated (audited) balance sheet as of December 31,
2003. As of September 30, 2004, leased coal interests and advance royalties
are presented in the same manner as they had been before December 2003, and are
included within property, plant, equipment and mine development within the
unaudited condensed consolidated balance sheet. Prior year amounts have been
reclassified to conform with the current year presentation.
Effective December 31, 2003, the Company adopted Statement of Financial
Accounting Standards (“SFAS”) No. 132 (revised 2003), “Employers’ Disclosures
about Pensions and Other Postretirement Benefits (an amendment of Financial
Accounting Standards Board (“FASB”) statements No. 87, 88 and 106).” This
Statement revises employers’ disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans required by FASB Statements No. 87, “Employers’ Accounting for
Pensions,” No. 88, “Employers’ Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits,” and No. 106,
“Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The
revised Statement retains the disclosure requirements contained in the original
FASB Statement No. 132 and requires additional disclosures about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The interim
disclosures required by SFAS No. 132 (revised 2003) are included in Note 9 to
the Company’s unaudited condensed consolidated financial statements.
(3) Debt and Equity Offerings
In March 2004, the Company completed the debt and equity offerings
described below. The offerings were made under the Company’s universal shelf
registration statement on Form S-3 that had been declared effective by the U.S.
Securities and Exchange Commission. The universal shelf registration statement
remains effective with a remaining capacity of $602.9 million. The primary
purpose of the debt and primary equity offerings was to fund the April 2004
purchases of coal operations from RAG Coal International AG (described in Note
4). Net proceeds from these offerings totaled $627.8
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
million, which funded the $442.2 million purchase price of the Australia and
Colorado coal operations from RAG Coal International AG, and the remaining
$185.6 million will be used for general corporate purposes and the planned
acquisition of a 25.5% interest in the Paso Diablo Mine in Venezuela. In
addition, a secondary equity offering was completed in which the Company’s then
largest stockholder sold its remaining shares of common stock, as described
below.
Debt Offering
On March 23, 2004, the Company completed an offering of $250.0 million
of 5.875% Senior Notes due 2016. The notes are senior unsecured obligations
of the Company and rank equally with all of the Company’s other senior
unsecured indebtedness. Interest payments are scheduled to occur on April
15 and October 15 of each year, and commenced on April 15, 2004. The notes
are guaranteed by the Company’s “restricted subsidiaries” as defined in the
note indenture. The note indenture contains covenants which, among other
things, limit the Company’s ability to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, make other
restricted payments and investments, create liens, sell assets and merge or
consolidate with other entities. The notes are redeemable prior to April
15, 2009 at a redemption price equal to 100% of the principal amount plus a
make-whole premium (as defined in the indenture) and on or after April 15,
2009 at fixed redemption prices as set forth in the indenture. Net proceeds
from the offering, after deducting underwriting discounts and expenses, were
$244.7 million.
Amendment to Senior Secured Credit Facility
On March 9, 2004, the Company entered into an amendment to the Company’s
senior secured credit facility. This amendment reduces the interest rate
payable on the existing term loan under the senior credit facility from LIBOR
plus 2.5% to LIBOR plus 1.75% (the applicable rate was 3.52% at September 30,
2004), and expands maximum borrowings under the revolving credit facility from
$600.0 million to $900.0 million.
As of September 30, 2004 and December 31, 2003, our total indebtedness
consisted of the following (dollars in thousands):
Equity Offering
On March 23, 2004, the Company completed a concurrent offering of
8,825,000 shares of the Company’s common stock, priced at $45.00 per share.
Net proceeds from the offering, after deducting underwriting discounts and
commissions and other expenses, were $383.1 million.
Secondary Offering
On March 23, 2004, concurrent with the primary equity offering described
above, Lehman Brothers Merchant Banking Partners II L.P. and affiliates
(“Merchant Banking Fund”), the Company’s largest stockholder as of that date,
sold 10,267,169 shares of the Company’s common stock. The Company did not
receive any proceeds from the sale of shares by Merchant Banking Fund. This
offering completed Merchant Banking Fund’s planned exit strategy and eliminated
the remaining portion of their beneficial ownership of the Company.
Debt Repurchase
In July 2004, the Company repurchased $10.5 million of 5.875% Senior Notes
due 2016. In connection with this repurchase, the Company realized a gain on
early debt extinguishment for the quarter and nine months ended September 30,
2004 of $0.6 million, comprised of the following:
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(4) Business Combinations
On April 15, 2004, the Company purchased, through two separate
agreements, three coal operations from RAG Coal International AG. The
combined purchase price, including related costs and fees, of $442.2 million
was funded from the Company’s equity and debt offerings as discussed in Note
3. The purchases include two mines in Queensland, Australia that collectively
are expected to produce 7 to 8 million tons per year of metallurgical coal and
the Twentymile Mine in Colorado, which is expected to produce 8 million tons
per year of steam coal. The two Australian mines increased the Company’s
metallurgical coal capacity to 12 to 14 million tons per year and the Company
believes they are well positioned to access the metallurgical coal markets in
the Pacific Rim. The Twentymile Mine has been perennially one of the largest
and most productive underground mines in the United States. The results of
operations of the two mines in Queensland, Australia are included in the
Company’s Australian Mining Operations segment and the results of operations
of the Twentymile Mine are included in the Company’s Western U.S. Mining
segment from the April 15, 2004 purchase date.
The preliminary purchase accounting allocations related to the acquisition
have been recorded in the accompanying condensed consolidated financial
statements as of, and for periods subsequent to, April 15, 2004. The final
valuation of the net assets acquired is expected to be finalized once
third-party appraisals are completed. The Company expects the completion of
these appraisals prior to year end. Given the size and complexity of the
acquisition, the fair valuation of certain assets is still preliminary.
Additionally, adjustment to the estimated liabilities assumed in connection
with the acquisition may still be required.
The following table summarizes the preliminary estimated fair values of
the assets acquired and the liabilities assumed at the date of acquisition
(dollars in thousands):
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
The following unaudited pro forma financial information presents the
combined results of operations of the Company and the operations acquired from
RAG Coal International AG, on a pro forma basis, as though the companies had
been combined as of the beginning of each period presented. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and the operations acquired from RAG
Coal International AG constituted a single entity during those periods (dollars
in thousands, except per share data):
On June 10, 2004, the Company signed a definitive agreement with RAG Coal
International AG for the purchase of a 25.5% interest in Carbones del Guasare,
S.A., a joint venture that includes Anglo American plc and a Venezuelan
governmental partner, for $37.5 million in cash. The purchase is subject to
certain conditions that, if fulfilled, would lead to an expected closing within
the next several months. Carbones del Guasare operates the Paso Diablo surface
mine in northwestern Venezuela, which produces 7 to 7.5 million tons per year
of coal for electricity generators and steel producers.
(5) Coal Inventory
Inventories consisted of the following (dollars in thousands):
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(6) Assets and Liabilities from Coal Trading Activities
The fair value of coal trading derivatives (and related hedged coal
contracts) as of September 30, 2004 is set forth below (dollars in thousands):
All of the contracts in the Company’s trading portfolio as of September
30, 2004 were valued utilizing prices from over-the-counter market sources, and
adjusted for coal quality.
As of September 30, 2004, the timing of the estimated future realization
of the value of the Company’s trading portfolio was as follows:
The Company’s coal trading operations traded 7.6 million tons and 5.3
million tons for the quarters ended September 30, 2004 and 2003, respectively,
and 25.9 million tons and 28.7 million tons for the nine months ended September
30, 2004 and 2003, respectively.
(7) Earnings Per Share and Stockholders’ Equity
Weighted Average Shares Outstanding
A reconciliation of weighted average shares outstanding follows:
Stock Compensation
These interim financial statements include the disclosure requirements of
SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No.
148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” The
Company applies Accounting Principles Board (“APB”) Opinion No. 25 and related
interpretations in accounting for its equity incentive plans. The Company
recorded $0.1 million of compensation expense for granted stock options during
each of the quarters ended September 30, 2004 and 2003, and $0.2 million of
compensation expense for equity-based compensation during the each of the nine
month periods ended September 30, 2004 and 2003, respectively.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
The following table reflects pro forma net income and basic and diluted
earnings per share had compensation cost been determined for the Company’s
non-qualified and incentive stock options based on the fair value at the grant
dates consistent with the methodology set forth under SFAS No. 123, “Accounting
for Stock-Based Compensation” (dollars in thousands, except share and per share
data):
Treasury Stock
During the nine months ended September 30, 2004, the Company received
5,034 shares of common stock as consideration for employees’ exercise of stock
options. The value of the common stock tendered by employees to exercise stock
options was based upon the closing price on the dates of the respective
transactions. The common stock tenders were in accordance with the provisions
of the 1998 Stock Purchase and Option Plan, which was previously approved by
the Company’s Board of Directors.
(8) Comprehensive Income
The following table sets forth the after-tax components of comprehensive income
for the quarters and nine months ended September 30, 2004 and 2003 (dollars in
thousands):
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(9) Pension and Postretirement Benefit Costs
Components of Net Periodic Pension Costs
Net periodic pension costs included the following components (dollars in
thousands):
Contributions
The Company disclosed in its financial statements for the year ended
December 31, 2003 that it expected to contribute $13.1 million to its funded
pension plans and make $1.0 million in expected benefit payments attributable
to its unfunded pension plans during 2004. As of September 30, 2004, $60.6
million of contributions were made to the funded pension plans and $0.8 million
of expected benefit payments attributable to the unfunded pension plans have
been made. The Company presently anticipates it will contribute $61.0 million
in total to its funded pension plans during 2004. The Company voluntarily
increased pension funding to, among other things, reduce the volatility of cash
contributions otherwise required for near-term future minimum pension
contributions and to significantly reduce cash contributions required over the
five years subsequent to 2004. The revised contribution consists of an April
2004 contribution of $50.0 million to the Peabody Plan, which covers
substantially all salaried U.S. employees and eligible hourly employees at
certain Peabody Holding Company subsidiaries; a $9.9 million contribution,
which is a $2.5 million reduction from December 31, 2003
expectations due to pension funding law changes enacted in early April
2004, to the Western Plan, which covers eligible employees who are represented
by the United Mine Workers of America under the Western Surface Agreement of
2000; and a planned $1.1 million contribution to a new plan which was
established for the salaried employees transferred from RAG-American, Inc.
Components of Net Periodic Postretirement Benefits Costs
Net periodic postretirement benefits costs included the following
components (dollars in thousands):
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Cash Flows
In its financial statements for the year ended December 31, 2003, the
Company announced that it expected to pay $72.5 million attributable to its
postretirement benefit plans during 2004, and it presently anticipates paying
approximately $83.3 million, $62.5 million of which has been paid as of
September 30, 2004.
(10) Segment Information
The Company reports its operations primarily through the following
reportable operating segments: “Eastern U.S. Mining,” “Western U.S. Mining,”
“Australian Mining” and “Trading and Brokerage.” The principal business of the
Eastern U.S. Mining, Western U.S. Mining and Australian Mining segments is
mining, preparation and sale of steam coal, sold primarily to electric
utilities, and metallurgical coal, sold to steel and coke producers. Eastern
U.S. Mining operations are characterized by predominantly underground mining
extraction processes, smaller seam thickness, higher sulfur content and Btu of
coal, and shorter shipping distances from the mine to the customer.
Conversely, Western U.S. Mining operations are characterized by predominantly
surface mining processes, greater seam thickness, lower sulfur content and Btu
of coal, and longer shipping distances from the mine to the customer.
Geologically, Eastern operations mine bituminous and Western operations mine
predominantly subbituminous coal deposits. Australian Mining operations are
characterized by both surface and underground processes, mining low sulfur,
high Btu coal sold to an international customer base. The Trading and
Brokerage segment’s principal business is the marketing, brokerage and trading
of coal. “Corporate and Other” includes selling and administrative expenses,
net gains on property disposals, costs associated with past mining obligations
and revenues and expenses related to our other commercial activities such as
coalbed methane, generation development and resource management.
Operating segment results for the quarters and nine months ended September
30, 2004 and 2003 are as follows (dollars in thousands):
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
A reconciliation of segment adjusted EBITDA to consolidated income (loss)
before income taxes follows (dollars in thousands):
(11) Commitments and Contingencies
Environmental
Superfund and similar state laws create liability for investigation and
remediation in response to releases of hazardous substances in the environment
and for damages to natural resources. Under that legislation and many state
Superfund statutes, joint and several liability may be imposed on waste
generators, site owners and operators and others regardless of fault.
Environmental claims have been asserted against a subsidiary of the
Company, Gold Fields Mining Corporation (“Gold Fields”), at 22 sites in the
United States and remediation has been completed or substantially completed at
five of those sites. Gold Fields is a dormant, non-coal producing entity that
was previously managed and owned by Hanson plc, a predecessor owner of the
Company. In the February 1997 spin-off of its energy businesses, Hanson plc
combined Gold Fields with the Company. These sites are related to activities
of Gold Fields or its former subsidiaries. Some of these claims are based on
the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended, and on similar state statutes.
The Company’s policy is to accrue environmental cleanup-related costs of a
noncapital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires
an assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information
available related to specific sites, the assessment stage of each site
investigation, preliminary findings and the length of time involved in
remediation or settlement. For certain sites, the Company also assesses the
financial capability of other potentially responsible parties and, where
allegations are based on tentative findings, the reasonableness of the
Company’s apportionment. The Company has not anticipated any recoveries from
insurance carriers in the estimation of liabilities recorded on its
consolidated balance sheets. The undiscounted liabilities for environmental
cleanup-related costs recorded as part of “Other noncurrent liabilities” were
$37.8 million and $38.9 million at September 30, 2004 and December 31, 2003,
respectively. These amounts represent those costs that the Company believes
are probable and reasonably estimable.
Although waste substances generated by coal mining and processing are
generally not regarded as hazardous substances for the purposes of Superfund
and similar legislation, some products used by coal companies in operations,
such as chemicals, and the disposal of these products are governed by the
statute. Thus, coal mines currently or previously
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
owned or operated by us, and
sites to which we have sent waste materials, may be subject to liability under
Superfund and similar state laws.
Navajo Nation
On June 18, 1999, the Navajo Nation served the Company’s subsidiaries,
Peabody Holding Company, Inc., Peabody Coal Company and Peabody Western Coal
Company (“Peabody Western”), with a complaint that had been filed in the U.S.
District Court for the District of Columbia. Other defendants in the
litigation are one customer, one current employee and one former employee. The
Navajo Nation has alleged 16 claims, including Civil Racketeer Influenced and
Corrupt Organizations Act, or RICO, violations and fraud and tortious
interference with contractual relationships. The complaint alleges that the
defendants jointly participated in unlawful activity to obtain favorable coal
lease amendments. Plaintiff also
alleges that defendants interfered with the fiduciary relationship between
the United States and the Navajo Nation. The plaintiff is seeking various
remedies including actual damages of at least $600 million, which could be
trebled under the RICO counts, punitive damages of at least $1 billion, a
determination that Peabody Western’s two coal leases for the Kayenta and Black
Mesa mines have terminated due to Peabody Western’s breach of these leases and
a reformation of the two coal leases to adjust the royalty rate to 20%. On
March 15, 2001, the court allowed the Hopi Tribe to intervene in this lawsuit.
The Hopi Tribe has asserted seven claims including fraud and is seeking various
remedies including unspecified actual damages, punitive damages and reformation
of its coal lease.
On March 4, 2003, the U.S. Supreme Court issued a ruling in a companion
lawsuit involving the Navajo Nation and the United States. The Court rejected
the Navajo Nation’s allegation that the United States breached its trust
responsibilities to the Tribe in approving the coal lease amendments and was
liable for money damages. In October 2004 the Court granted the joint motion
of the parties to stay the litigation until February 4, 2005 to enable the
parties to pursue alternative dispute resolution regarding the litigation and
other ongoing business issues with the two tribes and Peabody Western’s
customers.
While the outcome of litigation is subject to uncertainties, based on the
Company’s current evaluation of the issues and their potential impact on the
Company, the Company believes this matter will be resolved without a material
adverse effect on the Company’s financial condition, results of operations or
cash flows.
Salt River Project Agricultural Improvement and Power District — Mine Closing
and Retiree Health Care
Salt River Project and the other owners of the Navajo Generating Station
filed a lawsuit on September 27, 1996 in the Superior Court of Maricopa County
in Arizona seeking a declaratory judgment that certain costs relating to final
reclamation, environmental monitoring work and mine decommissioning and costs
primarily relating to retiree health care benefits are not recoverable by our
subsidiary, Peabody Western Coal Company, under the terms of a coal supply
agreement dated February 18, 1977. The contract expires in 2011.
Peabody Western filed a motion to compel arbitration of these claims,
which was granted in part by the trial court. Specifically, the trial court
ruled that the mine decommissioning costs were subject to arbitration but that
the retiree health care costs were not subject to arbitration. This ruling was
subsequently upheld on appeal. As a result, Peabody Western, Salt River
Project and the other owners of the Navajo Generating Station will arbitrate
the mine decommissioning costs issue and will litigate the retiree health care
costs issue. The Company has recorded a receivable for mine decommissioning
costs of $68.5 million included in “Investments and other assets” at September
30, 2004.
While the outcome of litigation and arbitration is subject to
uncertainties, based on our current evaluation of the issues and the potential
impact on us, and based on outcomes in similar proceedings, we believe that the
matter will be resolved without a material adverse effect on the Company’s
financial condition, results of operations or cash flows.
Mohave Generating Station
Peabody Western has a long-term coal supply agreement with the owners of
the Mohave Generating Station that expires on December 31, 2005. Southern
California Edison (the majority owner and operator of the plant) is involved in
a California Public Utilities Commission proceeding related to the operation of
the Mohave plant beyond 2005 or the temporary or permanent shutdown of the
plant. In a July 2003 filing with the California Public Utilities Commission,
the operator affirmed that the Mohave plant was not forecast to return to
service as a coal-fueled resource until mid-2009 at the earliest if the plant
is shutdown at December 31, 2005. Southern California Edison has subsequently
reaffirmed this forecast to the Commission. On October 20, 2004, one of the
Commission’s administrative law judges issued a proposed decision directing
Southern California Edison, among other things, to continue to negotiate with
the other stakeholders to
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
reach a satisfactory resolution of all outstanding
issues and to do whatever is possible within its control to advance the
timeline on the installation of new environmental controls at the Mohave plant.
The recommended decision must be approved by the Commission. There is a
dispute with the Hopi Tribe regarding the use of groundwater in the
transportation of the coal by pipeline from Peabody Western’s Black Mesa Mine
to the Mohave plant. As a part of the alternate dispute resolution referenced
in the Navajo Nation litigation, Peabody Western will be negotiating with the
owners of the Mohave Generating Station and the Navajo Generating Station, and
the two tribes to resolve the complex issues surrounding the groundwater
dispute and other disputes involving the two generating stations. Resolution
of these issues is critical to the continuation of the operation of the Mohave
Generating Station and the renewal of the coal supply agreement after December
31, 2005. There is no assurance that the issues critical to the continued
operation of the Mohave plant will be resolved. If these issues are not
resolved in a timely manner, the operation of the Mohave plant will cease or be
suspended on December 31, 2005. Absent a satisfactory alternate dispute
resolution, it is unlikely that the coal supply agreement for
the Mohave plant will be renewed in time to avoid a shutdown of the mine
in 2006. The Mohave plant is the sole customer of the Black Mesa Mine, which
sold 4.5 million tons of coal in 2003 and 3.3 million tons in the first nine
months of 2004. Through the first nine months of 2004, the mine generated
$17.8 million of Adjusted EBITDA, which represents 4.5% of the Company’s total
of $394.5 million.
Citizens Power
In connection with the August 2000 sale of the Company’s former
subsidiary, Citizens Power LLC (“Citizens Power”), the Company has indemnified
the buyer, Edison Mission Energy, from certain losses resulting from specified
power contracts and guarantees. Other than those discussed below, there are no
known issues with any of the specified power contracts and guarantees.
During the period that Citizens Power was owned by the Company, Citizens
Power guaranteed the obligations of two affiliates to make payments to third
parties for power delivered under fixed-priced power sales agreements with
terms that extend through 2008. Edison Mission Energy has stated and the
Company believes there will be sufficient cash flow to pay the power suppliers,
assuming timely payment by the power purchasers. To our knowledge, the power
purchasers have made timely payments to the Citizens Power affiliates and
Edison Mission Energy has not made a claim against the Company under the
indemnity.
Oklahoma Lead Litigation
Gold Fields was named in June 2003 as a defendant, along with five other
companies, in a class action lawsuit filed in the U.S. District Court for the
Northern District of Oklahoma. The plaintiffs have asserted nuisance and
trespass claims predicated on allegations of intentional lead exposure by the
defendants, including Gold Fields, and are seeking compensatory damages for
diminution of property value, punitive damages and the implementation of
medical monitoring and relocation programs for the affected individuals. A
predecessor of Gold Fields formerly operated two lead mills near Picher,
Oklahoma prior to the 1950’s. The plaintiff classes include all persons who
have resided or owned property in the towns of Cardin and Picher within a
specified time period. Gold Fields has agreed to indemnify one of the other
defendants, which is a former subsidiary of Gold Fields. Gold Fields is also a
defendant, along with other companies, in five individual lawsuits arising out
of the same lead mill operations involved in the class action. Plaintiffs in
these actions are seeking compensatory and punitive damages for alleged
personal injuries from lead exposure. In December 2003, the Quapaw Indian
tribe and certain Quapaw owners of interests in land filed a class action
lawsuit against Gold Fields and five other companies in U.S. District Court for
the Northern District of Oklahoma. The plaintiffs are seeking compensatory and
punitive damages based on public and private nuisance, trespass, unjust
enrichment, Comprehensive Environmental Response, Compensation, and Liability
Acts (“CERCLA”), Resource Conservation and Recovery Act (“RCRA”), strict
liability and deceit claims. Gold Fields has denied liability to the
plaintiffs, has filed counterclaims against the plaintiffs seeking
indemnification and contribution and has filed a third-party complaint against
the United States, owners of interests in chat and real property in the Picher
area. In June 2004, the Court dismissed the unjust enrichment, deceit and one
of the two RCRA claims.
In February 2004, the town of Quapaw filed a class action lawsuit against
Gold Fields and other mining companies asserting claims similar to those
asserted by the towns of Picher and Cardin, as well as natural resource damage
claims. In July 2004, two lawsuits were filed, one in the U.S. District Court
for the Northern District of Oklahoma and one in Ottawa County, Oklahoma
(subsequently removed to the U.S. District Court for the Northern District of
Oklahoma), against Gold Fields and three other companies in which 48
individuals are seeking compensatory and punitive damages and injunctive relief
from alleged personal injuries resulting from lead exposure. The allegations
relate to the same two lead mills located near Picher, Oklahoma.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
While the outcome of litigation is subject to uncertainties, based on the
Company’s preliminary evaluation of the issues and their potential impact on
the Company, the Company believes this matter will be resolved without a
material adverse effect on the Company’s financial condition, results of
operations or cash flows.
Other
“Accounts receivable” in the consolidated balance sheets as of September 30,
2004 and December 31, 2003 included $17.0 million and $14.0 million of
receivables, respectively, billed during 2001 through 2004 that have been
disputed by two customers who have withheld payment. The Company believes
these billings were made properly under the respective coal supply agreements
with each customer. The Company is in arbitration and litigation with these
customers to resolve this issue, and believes the receivables to be fully
collectible.
Included
in “Investments and other assets” at September 30, 2004 and
December 31, 2003 was $9.7 million and $2.3 million, respectively, of
assessments billed by the UMWA Combined Fund to subsidiaries of the Company.
These assessments are in dispute and being paid under protest by the Company.
The Company, based on input from legal counsel, believes these amounts will be
fully collectible upon resolution of the dispute.
In addition to the matters described above, the Company at times becomes a
party to other claims, lawsuits, arbitration proceedings and administrative
procedures in the ordinary course of business. Management believes that the
ultimate resolution of such other pending or threatened proceedings will not
have a material effect on the financial position, results of operations or cash
flows of the Company.
As of September 30, 2004, purchase commitments for capital expenditures
were approximately $270.4 million. Of this amount, approximately $219.3
million relates to the remaining payments due for the successful bid on 297
million tons of coal reserves in the Powder River Basin.
(12) Related Party Transactions
Lehman Brothers Inc. (“Lehman Brothers”) is an affiliate of Merchant
Banking Fund. As discussed in Note 3, Merchant Banking Fund was the Company’s
largest stockholder and the secondary offering in March 2004 completed the
Merchant Banking Fund’s exit strategy from equity ownership in the Company. In
March 2004, Morgan Stanley and Lehman Brothers served as joint managers in
connection with the secondary equity offering. Lehman Brothers received from
third parties customary underwriting discounts and commissions from the
offering. The Company paid no fees to Lehman Brothers related to those first
quarter equity offerings.
16
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(13) Supplemental Guarantor/Non-Guarantor Financial Information
In accordance with the indentures governing the 6.875% Senior Notes due
2013 and the 5.875% Senior Notes due 2016, certain wholly-owned U.S.
subsidiaries of the Company have fully and unconditionally guaranteed the
6.875% Senior Notes and the 5.875% Senior Notes, on a joint and several basis.
Separate financial statements and other disclosures concerning the Guarantor
Subsidiaries are not presented because management believes that such
information is not material to the holders of the 6.875% Senior Notes and the
5.875% Senior Notes. The following unaudited condensed historical financial
statement information is provided for the Guarantor/Non-Guarantor Subsidiaries.
Peabody Energy Corporation
17
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
18
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
19
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
20
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
21
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
22
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
23
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
Peabody Energy Corporation
(14) Guarantees
In the normal course of business, the Company is a party to the following
guarantees:
The Company owns a 30.0% interest in a partnership that leases a coal
export terminal from the Peninsula Ports Authority of Virginia under a 30-year
lease that permits the partnership to purchase the terminal at the end of the
lease term for a nominal amount. The partners have severally (but not jointly)
agreed to make payments under various agreements which in the aggregate provide
the partnership with sufficient funds to pay rents and to cover the principal
and interest payments on the floating-rate industrial revenue bonds issued by
the Peninsula Ports Authority, and which are supported by letters of credit
from a commercial bank. The Company’s maximum reimbursement obligation to the
commercial bank is in turn supported by a letter of credit totaling $42.8
million.
The Company owns a 49.0% interest in a joint venture that operates an
underground mine and preparation plant facility in West Virginia. The partners
have severally agreed to guarantee the debt of the joint venture, which
consists of a $16.5 million loan facility. Monthly principal payments on the
loan facility of approximately $0.2 million are due through October 2010, and a
final principal payment of $3.0 million is due October 2010. Interest
payments on the loan facility are
24
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
due monthly and accrue at prime plus 1/4%, or
5.00% as of September 30, 2004. The total amount of the joint venture’s debt
guaranteed by the Company was $8.1 million as of September 30, 2004.
The Company owns a 45.0% interest in a joint venture that operates an
underground mine in Kentucky. The Company has agreed to guarantee the debt of
the joint venture, which consists of a term loan in the amount of $9.0 million
which bears interest at 5.59% and a line of credit that allows for maximum
borrowings of $1.3 million which bears interest at 5%. Monthly principal and
interest payments on the term loan of approximately $0.2 million are due
through June 2008. The line of credit expires in July 2005. The Company’s
maximum reimbursement obligation under the guarantee is limited to
$4.0 million. The Company has recognized a liability of $0.1 million at
September 30, 2004 for the fair value of this guarantee.
Pursuant to an exclusive sales representation agreement entered into with
a coal mining company (the “Counterparty”) that operates surface mining
operations in Illinois, the Company issued a financial guarantee in May 2004 on
behalf of the Counterparty. This guarantee allows the Counterparty to obtain
the initial reclamation bonding for the surface mine that will produce the coal
to be purchased under the sales representation agreement. The total amount
guaranteed by the Company was $1.0 million, and the fair value of the guarantee
recognized as a liability was less than $0.1 million as of September 30, 2004.
The Company’s obligation under the guarantee is scheduled to expire by June
2007.
In connection with the sale of Citizens Power, the Company has indemnified
the buyer from certain losses resulting from specified power contracts and
guarantees. The indemnity is described in detail in Note 11.
The Company is the lessee under numerous equipment and property leases.
It is common in such commercial lease transactions for the Company, as the
lessee, to agree to indemnify the lessor for the value of the property or
equipment leased, should the property be damaged or lost during the course of
the Company’s operations. The Company expects that losses with respect to
leased property would be covered by insurance (subject to deductibles). The
Company and certain of its subsidiaries have guaranteed other subsidiaries’
performance under their various lease obligations. Aside from indemnification
of the lessor for the value of the property leased, the Company’s maximum
potential obligations under its leases are equal to the respective future
minimum lease payments and assume that no amounts could be recovered from third
parties.
The Company has provided financial guarantees under certain long-term debt
agreements entered into by its subsidiaries, and substantially all of the
Company’s subsidiaries provide financial guarantees under long-term debt
agreements entered into by the Company. Descriptions of the Company’s (and its
subsidiaries’) debt are included in Note 3, and supplemental
guarantor/non-guarantor financial information is provided in Note 13. The
maximum amounts payable under the Company’s debt agreements are presented in
Note 3 and assume that no amounts could be recovered from third parties.
(15) Subsequent Events
In October 2004, the Company entered into an amendment to the Company’s
senior secured credit facility. This amendment modified the current borrowings
on the Term Loan under Senior Secured Credit Facility from $443.3 million at
September 30, 2004 to $450.0 million and reduced the interest payable from
LIBOR plus 1.75% (the applicable rate was 3.52% at September 30, 2004) to LIBOR
plus 1.25%. Additionally, this amendment reduced interest payable on the $900
million revolving credit facility from LIBOR plus 2.0% (the applicable rate was
3.84% at September 30, 2004) to LIBOR plus 1.25%, reduced commitment fees
relating to the revolving credit facility from 0.50% to 0.25% and extended the
maturity of the revolving credit facility to March 2010.
On October 19, 2004, the Company’s Board of Directors approved an increase
in the quarterly cash dividend to $0.15 per share from $0.125. The first
dividend at the new rate will be paid on November 24, 2004 to shareholders of
record on November 3, 2004. On an annualized basis, the new dividend rate will
be $0.60 per share.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Notice Regarding Forward-Looking Statements
This report includes statements of our expectations, intentions, plans and
beliefs that constitute “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are intended to come within the safe harbor protection
provided by those sections. These statements relate to future events or our
future financial performance, including, without limitations, the section
captioned “Outlook.” We use words such as “anticipate,” “believe,” “expect,”
“may,” “project,” “will” or other similar words to identify forward-looking
statements.
Without limiting the foregoing, all statements relating to our future
outlook, anticipated capital expenditures, future cash flows and borrowings,
and sources of funding are forward-looking statements. These forward-looking
statements are based on numerous assumptions that we believe are reasonable,
but are open to a wide range of uncertainties and business risks, and actual
results may differ materially from those discussed in these statements.
Among the factors that could cause actual results to differ materially
are:
26
When considering these forward-looking statements, you should keep in mind
the cautionary statements in this document, the “Risks Relating to Our Company”
section of Item 7 of our 2003 Annual Report on Form 10-K filed with the
Securities and Exchange Commission and all related documents incorporated by
reference. We do not undertake any obligation to update these statements.
Overview
We are the largest private sector coal company in the world, with majority
interests in 30 active coal operations located throughout all major U.S. coal
producing regions and in Australia. In the third quarter of 2004, we continued
to set company and industry records with sales of 58.7 million tons and through
the first nine months of the year, selling 167.5 million tons. In 2003, we
sold 203.2 million tons of coal that accounted for an estimated 18% of all U.S.
coal sales, and were more than 70% greater than the sales of our closest
competitor. We project 2004 sales to be between 225 and 230 million tons. The
Energy Information Administration estimates that 1.1 billion tons of coal were
consumed in the United States in 2003 and expects domestic consumption of coal
by electricity generators to grow at a rate of 1.8% per year through 2025.
Coal-fueled generation is used in most cases to meet baseload electricity
requirements, and coal use generally grows at the pace of electricity demand
growth. In 2003, coal’s share of electricity generation was approximately 52%.
Our coal products fuel more than 10% of all U.S. electricity generation and
more than 2.5% of worldwide electricity generation.
Our primary customers are U.S. utilities, which accounted for 90% of our
sales in 2003. We typically sell steam coal to utility customers under
long-term contracts (those with terms longer than one year). Metallurgical
coal and export sales represent smaller components of our sales mix, but our
sales growth to these customers has outpaced the overall growth in sales for
the Company. Contracts for metallurgical coal sales into the Asian market are
typically re-negotiated annually and re-pricing occurs at the beginning of our
second quarter. During 2003, 90% of our sales were under long-term contracts.
Our results of operations in the near term could be negatively impacted by,
among other things, poor weather conditions and unforeseen geologic conditions
or equipment problems at mining locations, and by the availability of
transportation for coal shipments. On a long-term basis, our results of
operations could be impacted by, among other things, our ability to secure or
acquire high-quality coal reserves, our ability to find replacement buyers for
coal under contracts with comparable terms to existing contracts, the
reliability and price of third-party supplies and the passage of new or
expanded regulations that could limit our ability to mine or increase the cost
of mining coal. In the past, we have achieved production levels that are
relatively consistent with our projections.
We conduct business through four principal operating segments: Western
U.S. Mining, Eastern U.S. Mining, Australian Mining and Trading and Brokerage.
The principal business of the Eastern U.S. Mining and Western U.S. Mining
segments is the mining, preparation and sale of steam coal, sold primarily to
electric utilities. The Eastern U.S. Mining operations also mine some
metallurgical coal, sold to steel and coke producers. Our Eastern U.S. Mining
operations are characterized by predominantly underground extraction processes,
higher sulfur content and Btu of coal, and lower customer transportation costs
(due to shorter shipping distances). Conversely, our Western U.S. Mining
operations are characterized by
27
predominantly surface extraction processes, lower sulfur content and Btu
of coal, and higher customer transportation costs (due to longer shipping
distances). Geologically, the Eastern operations mine bituminous and the
Western operations mine primarily subbituminous coal deposits. Our Eastern U.S.
Mining operations consist of our Appalachia and Midwest operations and our
Western U.S. Mining operations consist of our Powder River Basin, Southwest and
Colorado operations, which are each described in Item 1 of our 2003 Annual
Report on Form 10-K, with the exception of the newly created Colorado operation
which consists of our Twentymile underground mine acquired in April 2004 and
our Seneca mine. During the second quarter of 2004, we were the winning bidder
for more than 297 million tons of high Btu, low sulfur coal reserves in the
Powder River Basin. The winning bid was 92 cents per mineable ton plus the
federal royalty for some of the lowest sulfur coal reserves in America. The
reserves have a productive overburden-to-coal ratio, meaning the deposits are
relatively near the surface. Our Australian Mining operations consist of our
Wilkie Creek Mine and two additional mines acquired in April 2004, Burton and
North Goonyella, including the recently opened Eaglefield surface operation,
which is adjacent to, and fulfills contract tonnages in conjunction with, the
North Goonyella underground mine. Australian Mining operations are
characterized by both surface and underground extraction processes, mining low
sulfur, high Btu coal sold to an international customer base. Primarily
metallurgical coal is produced from our Australian mines. Metallurgical coal
is approximately 6% of our total sales volume and approximately 3% of U.S.
sales volume. The Trading and Brokerage segment’s principal business is the
marketing and trading of coal.
In addition to our mining operations, which comprised 88% of revenues in
the third quarter of 2004, we also generate revenues from brokering and trading
coal (11% of revenues), and by aggressively managing our vast natural resource
position by selling non-core land holdings and mineral interests to generate
additional cash flows. We are developing coal-fueled power generating projects
in areas of the country where electricity demand is strong and where there is
access to land, water, transmission lines and low-cost coal. These projects
involve mine-mouth generating plants using our surface lands and coal reserves.
Three projects are currently being developed – the 1,500 megawatt Thoroughbred
Energy Campus in Muhlenberg County, Kentucky, the 1,500 megawatt Prairie State
Energy Campus in Washington County, Illinois and the 300 megawatt Mustang
Energy Project near Grants, N.M.. During the third quarter of 2004, the
Company’s Prairie State Energy Campus and Fluor Daniel Illinois, Inc. signed a
letter of intent for engineering, design and construction of Prairie State’s
power-related facilities. In the previous quarter, a group of Midwest rural
electric cooperatives and municipal electric agencies signed a letter of intent
to acquire partial ownership in the Prairie State Energy Campus. Prairie State
would provide approximately one-third of the plant’s annual electricity output
to the group. The plants are expected to be operational following a four-year
construction phase, which would begin after we have completed necessary
permitting, selected partners and sold the majority of the output of the plant.
The Mustang project recently received a $19.7 million Clean Coal Power
Initiative Grant from the Department of Energy for demonstrating technology to
achieve ultra low emissions.
On April 15, 2004, we completed the acquisitions of three coal operations
from RAG Coal International AG. On June 15, 2004, we signed a definitive
agreement to purchase a 25.5 % interest in the Paso Diablo Mine in Venezuela
from RAG Coal International AG for $37.5 million in cash. See discussion of
business combinations in Note 4 to our unaudited consolidated financial
statements.
Results of Operations
Adjusted EBITDA
The discussion of our results of operations in 2004 and 2003 below
includes references to, and analysis of our “Adjusted EBITDA” results. Adjusted
EBITDA is defined as income from continuing operations before deducting early
debt extinguishment (gains) costs, net interest expense, income taxes, minority
interests, asset retirement obligation expense and depreciation, depletion and
amortization. Adjusted EBITDA is used by management to measure operating
performance, and management also believes it is a useful indicator of our
ability to meet debt service and capital expenditure requirements. Because
Adjusted EBITDA is not calculated identically by all companies, our calculation
may not be
28
comparable to similarly titled measures of other companies. Adjusted EBITDA is
reconciled to its most comparable measure, under generally accepted accounting
principles, in Note 10 to our unaudited consolidated financial statements.
Quarter Ended September 30, 2004 Compared to Quarter Ended September 30, 2003
Summary
Our third quarter revenues of $923.1 million were 31.5% higher than prior
year on a sales volume increase of 11.6% to 58.7 million tons. Adjusted EBITDA
rose to $154.2 million, 47.7% higher than third quarter 2003. We achieved
increased EBITDA in every operating segment of the business. U.S. and
Australian Mining results for the third quarter included $119.3 million of
revenues and $34.2 million of Adjusted EBITDA from mines acquired in the second
quarter of 2004. U.S. Mining results improved as a result of higher demand and
prices realized from U.S. electricity, steel and export customers which
overcame higher steel and energy costs and hurricane related transportation
difficulties in our Eastern operations. Australian Mining results improved due
to the second quarter acquisition of two mines selling primarily higher priced,
and higher margin, metallurgical coal.
Net income in the third quarter was $43.4 million, or $0.66 per diluted
share, compared with net income of $21.5 million in the prior year, or $0.39
per diluted share. Current year income reflects improved mining results and
$9.5 million in insurance recoveries, offset by an increase of $15.5 million in
the current quarter tax provision compared with prior year.
Revenues
Total revenues were $923.1 million, an increase 31.5% over the prior year
third quarter. Sales accounted for most of the increase, rising 31.2% on
higher prices and an 11.6% increase in overall volume. Sales volume increased
due to the addition of three mines acquired during the second quarter of 2004,
and on stronger demand in every segment with the exception of Trading and
Brokerage which transacted volumes comparable to prior year. Sales increased
in every segment: U.S. Mining ($95.2 million), Australian Mining ($83.9
million) and Trading and Brokerage ($34.0 million). The recent trend of higher
year-over-year increases in average selling prices continued, rising 13.5% in
the third quarter compared to prior year. Increases in coal pricing,
especially in Appalachia, a change in sales mix, and the addition of 1.8
million tons of higher priced Australian metallurgical coal sales from mines
acquired during the year accounted for the increase in average selling prices.
Recently acquired mines accounted for $119.3 million of the total increase in
revenues. Sales in our Eastern U.S. Mining operations increased $39.9 million,
or 13.4%, compared with prior year due to volumes that were 5.1% higher,
primarily in the Midwest, and improved pricing, up 9.4%, as a result of strong
steam and metallurgical coal demand. Eastern U.S. Mining operations overcame
the effects of several hurricanes which delayed rail and export shipments and
caused some mine flooding during the quarter. Western U.S. Mining operations
sales increased $55.3 million, or 17.4%, primarily due to an increase of 12.1%
in sales volumes resulting from our acquisition of the
29
Twentymile Mine during
the second quarter and higher overall demand. Production in the Powder River
Basin reached a new company record of 30.3 million tons as a result of the
higher demand.
Other revenues increased $8.0 million in the third quarter compared with
prior year. Higher revenues from our Trading and Brokerage operations
contributed $4.0 million of the increase, and the remaining increase was
primarily due to increased equity income from our joint ventures.
Adjusted EBITDA
For the quarter, our Adjusted EBITDA was $154.2 million compared with
$104.4 million in the prior year, detailed as follows.
Western U.S. Mining operations’ Adjusted EBITDA increased $20.7 million,
or 22.2%, during the third quarter of 2004 compared to prior year. Volume
increased by 4.1 million tons and margin per ton increased by $0.25, or 9.1%,
despite higher fuel costs. Our recently acquired Twentymile Mine in Colorado
contributed to both the volume and margin increases in the West, and generated
Adjusted EBITDA of $15.2 million. Additionally, our North Antelope Rochelle
Mine continued to achieve production and shipping records following its recent
upgrade of the loading facility there, driving an $11.5 million increase in
Adjusted EBITDA in the Powder River Basin.
Our Eastern U.S. Mining operations increased Adjusted EBITDA by $10.3
million, or 23.0%, due to a volume increase of 0.6 million tons and a 17.6%
increase in margin per ton. Overall margins increased despite higher
processing costs incurred to upgrade from steam to metallurgical quality,
hurricane-related transportation difficulties, and increased fuel and steel
costs. Adjusted EBITDA in our Appalachia operations increased $15.3 million on
strong demand driven pricing, although volumes were comparable to prior year
due to weather and geologic issues that delayed longwall moves at two mines.
We also experienced ongoing equipment issues at an underground operation in
Kentucky, although its impacts were offset by $9.5 million in insurance
recoveries on a business interruption claim relating to damage and lost
production experienced at the mine in prior periods. In the Midwest, results
decreased $4.9 million, as higher fuel and steel costs slightly outpaced higher
volumes and prices.
Trading and Brokerage operations’ Adjusted EBITDA increased $6.7 million,
or 71.9%, compared with the prior year. The current year third quarter
benefited from a new trading agreement with sourcing and transportation
flexibility that will settle in 2005, the monetization of an option at an
amount greater than carrying value, the settlement of an out of-the-money
trading position (liability) for less than carrying value and the favorable
pricing and volume in our International Brokerage operations.
Australian Mining Adjusted EBITDA increased to $20.8 million from $2.6
million in the prior year, an increase of 699.1%, due to $19.1 million of
Adjusted EBITDA from the acquired mines. Volumes in Australia increased due to
two recently acquired metallurgical coal mines and a new open-cut operation
opened at one of these mines during the third quarter. Improved sales volumes
and prices in Australia were
30
partially offset by port congestion and related
demurrage costs and were further restrained by lost production due to equipment
and geological problems at the underground longwall operations.
Corporate and Other Adjusted EBITDA results include selling and
administrative expenses, net gains on property disposals, costs associated with
past mining obligations and revenues and expenses related to our other
commercial activities such as coalbed methane, generation development and
resource management. Results during the third quarter of 2004 were $6.0
million lower than prior year primarily due to increased selling and
administrative expense of $11.0 million associated with increased travel and
other administrative costs related to recent acquisitions and long-term
incentive compensation, partially offset by lower costs in the third quarter of
2004 associated with past mining obligations ($6.5 million), primarily lower
retiree health care costs resulting from the enactment of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003.
Income Before Income Taxes And Minority Interests
Income before income taxes and minority interests increased by 271.8% to
$50.6 million, $37.0 million greater than the third quarter of 2003. Improved
Adjusted EBITDA results drove the increase, which was partially offset by
increased depreciation, depletion and amortization due to increased production
and recent acquisitions and increased asset retirement obligation expense due
to an increase in the number of reclamation sites associated with recent
acquisitions and accelerated timing on selected reclamation projects.
Net Income
Net income increased $21.9 million, or 101.9%, compared to the third
quarter of 2003, primarily due to the increase in income before income taxes
and minority interests discussed above. Offsetting this increase to net income
was an increase of $15.5 million in income tax expense compared to a prior year
benefit. The tax provision recorded in 2004 differs from the benefit in 2003
primarily as a result of higher pre-tax income partially offset by the
permanent benefit of percentage depletion.
31
Nine Months Ended September 30, 2004 Compared to Nine Months Ended September
30, 2003
Summary
Revenues over the first nine months of 2004 increased to $2,631.8 million
on record sales volume of 167.5 million tons, increases of 26.7% and 11.5%,
respectively. Adjusted EBITDA of $394.5 million was an increase $96.7 million,
or 32.5%, compared to prior year. U.S. and Australian Mining results are
improved over prior year, benefiting from the April 2004 acquisition of two
Australian metallurgical coal mines and one mine in the U.S., and from higher
demand and pricing in the global coal markets. U.S. Mining results benefited
from higher demand and prices realized from electricity, steel and export
customers which overcame higher energy and steel costs and increased
transportation delays and associated costs. Increased sales of metallurgical
coal improved results in both the U.S. and Australia. Mines acquired during
the second quarter of 2004 contributed $209.7 million of revenues and $58.3
million of Adjusted EBITDA during the period.
Net income for the nine months ended September 30, 2004 was $107.5
million, or $1.71 per share, compared prior year net income of $9.1 million, or
$0.17 per share. Current year-to-date income reflects improved operating
results as well as lower debt extinguishment and borrowing costs from
refinancing of debt in the first half of 2003. Pre-tax early debt
extinguishment costs of $53.5 million and an after-tax charge of $10.1 million
for the cumulative effect of changes in accounting principles negatively
impacted prior year earnings. Due primarily to improved operational results,
an increase in the current year income tax provision has decreased current year
earnings by $33.9 million relative to 2003.
Revenues
Revenues increased to $2,631.8 million, an increase of $555.3 million, or
26.7% compared to the first nine months of 2003. Improved revenues were driven
by record sales volumes and improved pricing compared to prior year. Sales in
every reporting segment were higher than prior year as follows: U.S. Mining
Operations ($279.2 million), Australian Mining Operations ($151.7 million) and
Trading and Brokerage activities ($96.4 million). Mines acquired during the
second quarter of 2004 contributed $209.7 million, or 37.8 %, of the total
increase in revenues.
Our average sale price per ton increased 10.9%, due to increased overall
demand, which has driven higher pricing, most notably in Appalachia, and a
change in sales mix. Overall mix has increased average sales price due to
higher volume from the Australian segment, where per ton prices are higher than
Eastern U.S. and Western U.S. pricing. In addition to the geographic mix
change, our product mix has more metallurgical coal sales (our highest value
product) compared to prior year in response to strong international demand.
Metallurgical coals are sold from our Eastern and Australian operations.
Pricing is higher in most of our U.S. operations compared to the first nine
months of last year. In our Eastern U.S. Mining operations, higher volumes and
improved pricing, as a result of strong steam and metallurgical coal demand,
led to an increase in sales of $160.9 million, or 18.4%. Production increases
at most eastern mines more than offset lower than anticipated production at
certain of our mines and from contract sources as a result of geologic
difficulties and hurricane-related production and shipping delays during the
third quarter.
Appalachian sales increase of $100.3 million, or 26.4%, led the East, while
Midwest sales increased 12.2%. Western U.S. Mining operations sales increased
$118.3 million, or 13.2%, primarily on improved sales volumes. Our Twentymile
mine (acquired in April) added $63.4 million to sales. Despite difficulties
with
32
rail service in the Powder River Basin and downtime at the North Antelope
Rochelle Mine to upgrade the loading facility, production and sales volumes
increased as a result of stronger demand for the mines’ low sulfur product.
Other revenues increased $27.9 million from the prior year due to $10.7
million in higher equity investment income from our Kanawha Eagle joint
venture, a $9.9 million gain on the sale of 575,000 common units of Penn
Virginia Resource Partners LP (“Penn Virginia”) in the first quarter and $5.0
million of additional synfuel income. The remainder of the increase is
primarily due to higher royalty income.
Adjusted EBITDA
Our Adjusted EBITDA increased $96.7 million, to $394.5 million from $297.8
million, for the first nine months of 2004 compared with prior year, detailed
as follows.
Our Western U.S. Mining operations increased Adjusted EBITDA by $40.7
million, or 15.8% compared to the first nine months of the prior year. In the
West, improvements have been primarily volume driven with an additional 9.2
million tons sold in the current year, an increase of 9.6%, including 4.0
million tons from the Twentymile Mine acquired in April 2004. Pricing and
volume improvements overcame higher fuel and explosive costs throughout the
region. Per ton margin improvement in the Western operations resulted
primarily from Twentymile Mine margin contributions. Powder River Basin
operations continued to benefit from record shipping levels, overcoming the
effects of a planned outage earlier in the year to increase throughput at our
North Antelope Rochelle Mine. Increases in volumes from most of our Western
U.S. Mining operations were achieved despite rail service problems and the
shutdown of our Big Sky Mine at the end of 2003. Results in the Southwest
approximated prior year levels.
Eastern U.S. Mining operations’ Adjusted EBITDA increased $37.9 million,
or 26.2%, compared to prior year due to a 9.3%, or 3.2 million ton, volume
increase and a $0.66, or 15.7%, increase in margin per ton. Overall margins in
our Eastern operations increased despite higher processing costs incurred to
upgrade from steam to metallurgical quality, the cost of substitute coal
purchases to enable production to be sold in higher-value metallurgical coal
markets, hurricane-related transportation and production interruptions and
increased fuel and steel costs. Improvements in Eastern operations were driven
by Appalachian operations, which improved Adjusted EBITDA by $47.8 million
compared with the first nine months of 2003. The Appalachian region benefited
from strong demand driven pricing and volume and increased higher-priced
metallurgical coal sales. The impact of equipment and geologic issues at an
underground operation in Kentucky was offset by $9.5 million in insurance
recoveries. Adjusted EBITDA in the Midwest decreased $9.8 million, as
increased production and sales volumes in response to strong demand did not
overcome poor geologic conditions at certain mines, higher equipment repair
costs and higher fuel and steel costs.
Trading and Brokerage operations Adjusted EBITDA decreased $3.9 million
from the prior year as lower domestic trading results were partially offset by
improved international brokerage results.
Corporate and Other Adjusted EBITDA results include selling and
administrative expenses, net gains on property disposals, costs associated with
past mining obligations and revenues and expenses
33
related to our other
commercial activities such as coalbed methane, generation development and
resource management. Results for the nine months ended September 30, 2004 were
$9.4 million below the same period of 2003, primarily due to:
These increased costs compared to the first nine months of the prior year were
partially offset by:
Income Before Income Taxes And Minority Interests
Income before income taxes and minority interests for the first nine
months of 2004 was $92.6 million, $120.6 million greater than prior year’s
$27.9 million loss primarily due to improved Adjusted EBITDA results, lower
costs of borrowing in 2004 and $53.5 million in charges during the prior year
for the refinancing of debt. Partially offsetting these improvements, asset
retirement obligation expense increased $11.2 million due to increased or
accelerated reclamation work at certain closed mine sites and the acquisition
of additional mining operations in April 2004, and depreciation, depletion and
amortization cost increases ($26.2 million) due to higher production and the
addition of recently acquired operations.
34
Net Income
Net income increased $98.4 million compared to the first nine months of
2003 due to the increase in income (loss) before income taxes and minority
interests discussed above, offset by the net effects of:
Outlook
Our outlook for the coal markets remains positive. We believe coal
markets continue to be strong worldwide, as a result of growing U.S., China,
Pacific Rim and other industrialized economies that are increasing coal demand
for electricity generation and steelmaking. Published indices also show
improved year-over-year coal prices in most U.S. and global coal markets, and
world-wide coal supply/demand fundamentals remain tight due to market demand
and transportation and production infrastructure limitations in most countries.
We expect our recently acquired Australian operations to further enable us to
capitalize on strong global coal markets.
We believe coal demand in China, India and Pacific Rim nations for
electricity generation and steelmaking is strong due to the construction of a
number of new coal-fueled generating plants and high utilization of steelmaking
capacity. Coal mines, ports and rail systems in a number of countries are
operating near capacity.
In the United States, the high price of the primary competing fuel,
natural gas, is leading coal-fueled generating plants to operate at increasing
levels. Strong demand for coal and coal-based electricity
generation is being driven by a strengthening economy, low customer
stockpiles, production difficulties for some producers, capacity constraints of
nuclear generation and high prices of natural gas and oil. We expect that the
high costs and scarce supplies of oil and natural gas are likely to remain for
the foreseeable future. Current average inventories at U.S. generators are
estimated to be below historical average levels.
35
We are targeting 2004 production of approximately 200 million tons, and
total sales volume of 225 million to 230 million tons. As of September 30,
2004, our 2004 production is essentially all committed. We have unpriced coal
volumes of 25 to 30 million tons for 2005, including 6 to 8 million tons of
metallurgical coal, and 85 to 95 million tons for 2006, based on planned
production levels.
Management expects strong market conditions and recent acquisitions to
overcome external cost pressures and adverse rail and port performance. We
continue to aggressively manage our cost structure and have programs in place
to limit, to the extent possible, the impact of rising costs on our operating
margins. We are experiencing increases in operating costs related to fuel,
explosives, steel and healthcare. In addition, historically low interest rates
also have a negative impact on expenses related to our actuarially determined,
employee-related liabilities. We may also encounter poor geologic conditions,
lower third party contract miner or brokerage source performance or unforeseen
equipment problems that limit our ability to produce at forecasted levels. To
the extent upward pressure on these and other costs exceeds our ability to
realize sales increases, our operating margins would be negatively impacted.
Longer term, the development of new coal plants continues to be strong
around the world. In addition, development of clean coal technologies
continues to progress and receive both U.S. government and private sector
support.
Liquidity and Capital Resources
Our primary sources of cash include sales of our coal production to
customers, cash generated from our trading and brokerage activities, sales of
non-core assets and debt and equity offerings related to significant
transactions. Our primary uses of cash include our cash costs of coal
production, capital expenditures, interest costs and costs related to past
mining obligations as well as planned acquisitions and development activities.
Our ability to pay dividends, service our debt (interest and principal) and
acquire new productive assets or businesses is dependent upon our ability to
continue to generate cash from the primary sources noted above in excess of the
primary uses. We typically fund all of our capital expenditure requirements
with cash generated from operations, and during 2003 and the first nine months
of 2004, have had no borrowings outstanding under our $900.0 million revolving
line of credit, which we use primarily for standby letters of credit. This
provides us with available borrowing capacity ($611.0 million as of September
30, 2004) to use to fund strategic acquisitions or meet other financing needs.
Operating activities provided $152.5 million of cash over the first nine
months of 2004, an increase of $36.7 million compared with prior year. An
increase in net income from operations was the primary contributor to the
improvement, as income before accounting changes increased $88.2 million.
Working capital usage improved $8.5 million during the first nine months of
2004 compared with the same period in the prior year. During the second
quarter of 2004, we utilized operating cash to electively fund $50.0 million to
one pension plan and made an additional $10.6 million in minimum funding for
our pension plans. By contrast, in the first nine months of the prior year,
contributions were $9.9 million.
Net cash used in investing activities was $561.5 million in the first nine
months of 2004, $378.3 million more than prior year. Investment spending in
2004 includes $421.3 million for the acquisition of the Twentymile Mine in
Colorado and two mines in Australia. In the prior year, we spent $90.0 million
to acquire the remaining 18.3% of Black Beauty Coal Company. Capital spending
of $148.3 million in the current year was $29.5 million more than prior year
expenditures of $118.8 million. The increase was primarily due to spending on
a large loading facility upgrade in our Powder River Basin operations, $54.8
million related to the successful acquisition of 297 million tons of Powder
River Basin coal reserves and equipment purchases in the Midwest and at
Australian mines acquired during the 2004. The sale of units of Penn Virginia
contributed $18.5 million to investing cash flows, while proceeds from property
and
equipment disposals were $28.6 million lower than prior year primarily due to
the sale of oil and gas rights, land and coal reserves and surplus surface land
in the Midwest during the first nine months of 2003, with no comparable
transactions in the current year.
36
Financing activities provided $693.4 million during the first nine months
of 2004 compared with $101.1 million in the prior year, an increase of $592.3
million. The current year included net proceeds from our March 2004 offerings
of $383.1 million from our issuance of 8.8 million shares of primary equity at
$45 per share and $250 million from issuance of 5.875% Senior Notes due in
2016. Payments on long-term debt over the first nine months of the year were
$28.7 million. During the same period of 2003, we refinanced our debt and the
net proceeds from the refinancing, after payments on the revolving line of
credit, payments on long-term debt and after covering related debt issuance
costs was $128.7 million. Securitized interest in accounts receivable
increased $100.0 million in the nine months year-to-date compared to an
increase of $3.6 million in the prior year. Financing cash flows in the
current and prior year periods included dividends of $22.9 million and $17.3
million, respectively.
As of September 30, 2004 and December 31, 2003, our total indebtedness
consisted of the following (dollars in thousands):
The debt and equity offerings noted above were made under our universal
shelf registration statement that is currently in effect and has a remaining
capacity of $602.9 million. Concurrent with the debt and equity offerings, we
entered into an amendment to our Senior Secured Credit Facility. The amendment
reduced the interest rate payable by 0.75% on the existing Term Loans under the
facility and provided for up to $300.0 million additional revolving loans for a
total of up to $900.0 million.
As of September 30, 2004, there were no outstanding borrowings under our
Revolving Credit Facility. We had letters of credit outstanding under the
facility of $289.0 million, leaving $611.0 million available for borrowing. We
were in compliance with all of the covenants of the Senior Secured Credit
Facility, the 6.875% Senior Notes and the 5.875% Senior Notes as of September
30, 2004.
At September 30, 2004, purchase commitments for capital expenditures were
approximately $270.4 million. Of this amount, approximately $219.3 million
relates to the remaining payments due for the successful bid on 297 million
tons of coal reserves in the Powder River Basin. Total projected capital
expenditures for calendar year 2004 are approximately $280 million to $300
million, and have been and will be primarily used to purchase or develop
reserves, replace or add equipment, fund cost reduction initiatives and upgrade
equipment and facilities at the operations we recently acquired. We anticipate
funding our capital expenditures primarily through operating cash flow. On
April 15, 2004, we completed the purchase of mines from RAG Coal International
AG for $442.2 million (see discussion of business combinations at Note 4 to our
unaudited consolidated financial statements).
Contractual Obligations
Our report on Form 10-K for the year ended December 31, 2003 included a
table (as of December 31, 2003) setting forth our significant categories of
contractual obligations, as required by Securities Exchange
Commission rules. The following table (as of December 31, 2003) updates
the table included in our 2003 Form 10-K due to issuance of $250 million 5.875%
Senior Notes due 2016 and the remaining payments due for the successful bid on
297 million tons of coal reserves in the Powder River Basin in 2004 (dollars in
thousands):
37
Off-Balance Sheet Arrangements
In March 2000, we established an accounts receivable securitization
program. Under the program, undivided interests in a pool of eligible trade
receivables that have been contributed to our wholly-owned, bankruptcy-remote
subsidiary are sold, without recourse, to a multi-seller, asset-backed
commercial paper conduit (“Conduit”). Purchases by the Conduit are financed
with the sale of highly rated commercial paper. We used proceeds from the sale
of the accounts receivable to repay long-term debt, effectively reducing our
overall borrowing costs. On September 16, 2004, the Company and its
wholly-owned, bankruptcy-remote subsidiary closed on an expansion of the
accounts receivable securitization facility. Under the terms of the amended
Agreement, the total facility capacity was increased from $140 million to $225
million and the receivables of additional wholly-owned subsidiaries of the
Company are now eligible to participate in the facility. The maturity of the
facility was also extended to September 2009. All other terms and conditions
remain substantially unchanged. Under the provisions of SFAS No. 140
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities,” the securitization transactions have been recorded as legal
transfers without recourse, with those accounts receivable removed from the
consolidated balance sheet. The amount of undivided interests in accounts
receivable transferred to the Conduit was $190.0 million and $90.0 million as
of September 30, 2004 and December 31, 2003, respectively.
There were no other material changes to our off-balance sheet arrangements
during the quarter ended September 30, 2004. All material off-balance sheet
arrangements are discussed in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Form 10-K for the year
ended December 31, 2003.
Other
Risks Related to Contract Miners and Brokerage Sources
In conducting our trading, brokerage and mining operations, we utilize
third party sources of coal production, including contract miners and brokerage
sources, to fulfill deliveries under our coal supply agreements. Recently,
certain of our brokerage sources and contract miners have experienced adverse
geologic mining and/or financial difficulties that have made their delivery of
coal to us at the contractual price difficult or uncertain. Our profitability
or exposure to loss on transactions or relationships such as these is dependent
upon the reliability (including financial viability) and price of the
third-party supply, our obligation to supply coal to customers in the event
that adverse geologic mining conditions restrict deliveries from our suppliers,
our willingness to participate in temporary cost increases experienced by our
third-party coal suppliers, our ability to pass on temporary cost increases to
our customers, the ability to substitute, when economical, third-party coal
sources with internal production or coal purchased in the market, and other
factors.
Mohave Generating Station
See Note 11 to our unaudited condensed consolidated financial statements
included in this report relating to the potential cessation or suspension of
the operations of the Mohave Generating Station on December 31, 2005. The
Mohave Generating Station is the sole customer of our Black Mesa Mine, which
sold 4.5 million tons of coal in 2003, and 3.3 million tons for the nine months
ended September 30, 2004.
38
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Trading Activities
Our coal trading activities give rise to commodity price risk, which
represents the potential loss that can be caused by a change in the market
value of a particular commitment. We actively measure, monitor and adjust
traded position levels to remain within risk limits prescribed by management,
as approved by the Board of Directors. For example, we have policies in place
that limit the amount of total exposure we may assume at any point in time.
We account for coal trading derivatives under SFAS No. 133 (as amended),
“Accounting for Derivative Instruments and Hedging Activities,” which requires
us to reflect derivatives, such as forwards, futures, options and swaps, at
market value in the consolidated financial statements.
Daily, we perform a value at risk analysis on our trading portfolio, which
includes over-the-counter and brokerage trading of coal. The use of value at
risk allows us to quantify in dollars the price risk inherent in our trading
portfolio. Our value at risk model is based on the industry standard
risk-metrics variance/co-variance approach. This captures our exposure related
to both option and forward positions. Our value at risk model assumes a 15-day
holding period and a 95% one-tailed confidence interval.
The use of value at risk allows management to aggregate pricing risks
across products in the portfolio, compare risk on a consistent basis and
identify the drivers of risk. Due to the subjectivity in the choice of the
liquidation period, reliance on historical data to calibrate the models and the
inherent limitations in the value at risk methodology, including the use of
delta/gamma adjustments related to options, we perform regular stress, back
testing and scenario analysis to estimate the impacts of market changes on the
value of the portfolio. The results of these analyses are used to supplement
the value at risk methodology and identify additional market-related risks.
During the nine months ended September 30, 2004, the low, high and average
values at risk for our coal trading portfolio were $0.5 million, $5.6 million
and $2.4 million, respectively. As of September 30, 2004, 33% of the value of
our trading portfolio was scheduled to be realized by the end of 2004, and the
remaining 67% of the value of our trading portfolio was scheduled to be
realized by the end of 2005.
We also monitor other types of risk associated with our coal trading
activities, including credit, market liquidity and counterparty nonperformance.
Interest Rate Risk
Our objectives in managing exposure to interest rate changes are to limit
the impact of interest rate changes on earnings and cash flows and to lower
overall borrowing costs. To achieve these objectives, we manage fixed rate
debt as a percent of net debt through the use of various hedging instruments.
As of September 30, 2004, after taking into consideration the effects of
interest rate swaps, we had $873.7 million of fixed-rate borrowings and $543.2
million of variable-rate borrowings outstanding. A one percentage point
increase in interest rates would result in an annualized increase to interest
expense of $5.4 million on our variable-rate borrowings. With respect to our
fixed-rate borrowings, a one-percentage point increase in interest rates would
result in a $63.3 million decrease in the estimated fair value of these
borrowings. See note 15 to our annual report on Form 10-K for additional
discussion of our long-term debt and related interest rate swaps.
Credit Risk
Our concentration of credit risk is substantially with energy producers
and marketers, electric utilities, and international steel producers. Our
policy is to independently evaluate each customer’s creditworthiness prior to
entering into transactions and to constantly monitor the credit extended. In
the event that we engage in a transaction with a counterparty that does not
meet our credit standards, our policy is to require the counterparty to provide
appropriate credit enhancement. When appropriate, we have taken steps to reduce
our
39
credit exposure to certain customers or counterparties whose credit has
deteriorated and who may pose a higher risk, as determined by our credit
management function, of failure to perform under their contractual obligations.
These steps include obtaining letters of credit or cash collateral, requiring
prepayments for shipments or the creation of customer trust accounts held for
our benefit to fund the payment for coal under existing coal supply agreements.
To reduce our credit exposure related to trading and brokerage activities, we
seek to enter into netting agreements with counterparties that permit us to
offset receivables and payables with such counterparties. Counterparty risk
with respect to interest rate swap and foreign currency forwards and options
transactions is not considered to be significant based upon the
creditworthiness of the participating financial institutions.
Foreign Currency Risk
We utilize currency forwards and options to hedge currency risk associated
with anticipated Australian dollar expenditures and certain firm purchase
commitments denominated in Australian dollars. Our currency hedging program for
2004 involves hedging approximately 90% of our anticipated, non-capital
Australian dollar-denominated expenditures. As of September 30, 2004, we had
in place forward contracts designated as cash flows hedges with notional
amounts outstanding totaling $51.0 million and option contracts designated as
cash flow hedges with notional amounts outstanding totaling $2.4 million, which
will expire in 2004, and forward contracts designated as cash flows hedges with
notional amounts outstanding totaling $112.3 million, which will expire in
2005.
Our current expectation for annual non-capital, Australian
dollar-denominated cash expenditures is approximately $420 million. A change
in the Australian dollar/U.S. dollar exchange rate of US$0.01 (ignoring the
effects of hedging) would result in an increase or decrease in our “Operating
costs and expenses” of $4.2 million per year.
Other
We manage our price risk for non-trading purposes through the use of
long-term coal supply agreements, rather than through the use of derivative
instruments. As of September 30, 2004, we have committed and priced essentially
all of our planned 2004 production of 200 million to 205 million tons. We have
unpriced coal volumes of 25 to 30 million tons, including 6 to 8 million tons
of metallurgical coal, for 2005, and 85 to 95 million tons for 2006, based on
planned production levels.
Some of the products used in our mining activities, such as fuel and
explosives, are subject to price volatility. We seek to manage the exposure
related to this volatility by using a combination of fixed priced forward
contracts with our suppliers and cash flow hedges. As of September 30, 2004, we
had derivative contracts outstanding that are designated as cash flow hedges of
anticipated purchases of fuel. Notional amounts outstanding under these
contracts, scheduled to expire through 2007, were 41.6 million gallons of
heating oil and 2.3 million gallons of crude oil.
We expect to consume 95 million gallons of fuel per year. Based on this
usage, a change in fuel prices of just one cent per gallon (ignoring the
effects of hedging) would result in an increase or decrease in our “Operating
costs and expenses” by approximately $1 million per year.
Item 4. Controls and Procedures.
The Chief Executive Officer and Executive Vice President and Chief
Financial Officer have evaluated our disclosure controls and procedures as of
September 30, 2004 and have concluded that the
disclosure controls and procedures were effective. Our disclosure controls and
procedures are designed to, among other things, provide reasonable assurance
that material information, both financial and non-financial, and other
information required under the securities laws to be disclosed is identified
and communicated to senior management on a timely basis.
40
Additionally, during the most recent fiscal quarter, there was no change
to our internal control over financial reporting that could materially affect,
or is reasonably likely to materially affect, our internal control over
financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 11 to our unaudited condensed consolidated financial statements
included in Part I, Item 1 of this report relating to certain legal proceedings
brought against us by the Navajo Nation, the Hopi and Quapaw Tribes and lead
exposure lawsuits brought on behalf of certain individuals and the residents of
the towns of Cardin, Picher, and Quapaw, Oklahoma.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index at page 43 of this report.
(b) Reports on Form 8-K
On July 15, 2004, we furnished a Form 8-K under Item 9, Regulation FD
Disclosure and Item 12, Disclosure of Results of Operations and Financial
Condition announcing our issuance of a press release setting forth our
second quarter 2004 earnings and providing guidance on our third quarter
and full year 2004 forecast results. The press release was included as an
exhibit under Item 7, Financial Statements, Pro Forma Financial Information
and Exhibits.
On August 6, 2004, we filed a Form 8-K under Item 9, Regulation FD
Disclosure, announcing the adoption by Irl F. Engelhardt, our Chairman and
Chief Executive Officer, of a plan to sell a portion of the Peabody common
stock and stock options beneficially owned by him pursuant to Rule 10b5-1 of
the Securities Exchange Act of 1934. (Seven other executives have adopted
10b5-1 plans, and our other executives may also adopt 10b5-1 plans at their
discretion.)
On September 16, 2004, we filed a Form 8-K under item 2.03, Creation of
a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a
Registrant, announcing the expansion of our accounts receivable
securitization program as discussed in Part I, Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
On September 22, 2004, we filed a Form 8-K under Item 1.01, Entry into
a Material Definitive Agreement, announcing the execution of a lease on 297
million tons of coal reserves in the Powder River Basin.
41
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
42
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
43
* Filed herewith.
44
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
895,156
$
682,034
$
2,538,189
$
2,010,825
27,912
19,921
93,584
65,669
923,068
701,955
2,631,773
2,076,494
737,055
578,997
2,147,956
1,725,620
70,132
61,224
202,992
176,789
10,146
7,542
31,810
20,633
33,623
22,590
93,559
76,416
(1,790
)
(3,987
)
(4,267
)
(23,376
)
73,902
35,589
159,723
100,412
24,926
22,347
70,849
77,391
(556
)
—
(556
)
53,513
(1,084
)
(371
)
(3,212
)
(2,549
)
50,616
13,613
92,642
(27,943
)
6,932
(8,598
)
(15,756
)
(49,621
)
247
693
900
2,401
43,437
21,518
107,498
19,277
—
—
—
(10,144
)
$
43,437
$
21,518
$
107,498
$
9,133
$
0.68
$
0.40
$
1.75
$
0.36
—
—
—
(0.19
)
$
0.68
$
0.40
$
1.75
$
0.17
64,278,587
54,002,659
61,354,266
53,062,052
$
0.66
$
0.39
$
1.71
$
0.35
—
—
—
(0.18
)
$
0.66
$
0.39
$
1.71
$
0.17
65,779,032
55,225,879
62,820,996
54,540,603
$
0.125
$
0.125
$
0.375
$
0.325
Table of Contents
(Unaudited)
September 30, 2004
December 31, 2003
$
401,835
$
117,502
173,006
220,891
57,587
44,421
265,452
202,072
131,082
58,321
15,778
15,749
47,455
23,784
1,092,195
682,740
4,725,843
4,280,986
320,893
316,539
$
6,138,931
$
5,280,265
$
18,918
$
23,049
101,398
36,304
665,999
572,615
786,315
631,968
1,398,023
1,173,490
415,567
434,426
412,056
384,048
223,332
209,954
944,336
961,811
41,996
44,779
280,835
305,823
4,502,460
4,146,299
1,991
1,909
—
—
—
—
646
548
1,414,216
1,009,008
292,769
208,149
(488
)
(358
)
(32
)
(31
)
(68,715
)
(81,572
)
(3,916
)
(3,687
)
1,634,480
1,132,057
$
6,138,931
$
5,280,265
Table of Contents
Nine Months Ended
September 30,
2004
2003
$
107,498
$
9,133
—
10,144
107,498
19,277
202,992
176,789
(24,273
)
(50,428
)
(556
)
53,513
6,097
5,935
(4,267
)
(23,376
)
900
2,401
(5,476
)
(4,470
)
(7,842
)
(3,613
)
(48,723
)
(12,523
)
(7,667
)
(20,334
)
(7,655
)
(6,561
)
46,076
7,713
(5,238
)
(10,192
)
6,335
3,701
(27,666
)
165
(2,783
)
(3,482
)
(60,604
)
(9,883
)
(14,643
)
(8,854
)
152,505
115,778
(148,345
)
(118,817
)
(11,560
)
(7,706
)
(426,265
)
(90,000
)
—
(1,400
)
6,131
34,722
18,492
—
(561,547
)
(183,201
)
—
(121,584
)
250,000
1,102,735
(28,749
)
(866,134
)
383,125
—
19,274
24,599
2,343
1,737
(8,922
)
(23,632
)
100,000
3,600
(818
)
(4,063
)
(22,878
)
(17,262
)
—
1,112
693,375
101,108
—
934
284,333
34,619
117,502
71,210
$
401,835
$
105,829
Table of Contents
Table of Contents
•
The excess of carrying value of the notes over the cash cost to retire the notes of $0.8 million; offset by
•
Non-cash charges to write-off debt issuance costs associated with the debt extinguished of $0.2 million.
Table of Contents
Table of Contents
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004 *
2003
$
923,068
$
701,955
$
2,631,773
$
2,076,494
923,068
818,207
2,757,135
2,393,768
$
43,437
$
21,518
$
107,498
$
19,277
43,437
26,557
106,784
49,288
$
43,437
$
21,518
$
107,498
$
9,133
43,437
26,557
106,784
39,144
$
0.68
$
0.40
$
1.75
$
0.17
0.68
0.42
1.63
0.63
$
0.66
$
0.39
$
1.71
$
0.17
0.66
0.41
1.60
0.63
*
During the first quarter of 2004, prior to the Company’s acquisition, the
Australian underground mine acquired by the Company in April 2004
experienced a roof collapse on a portion of the active mine face,
resulting in the temporary suspension of mining activities. Due to the
inability to ship during a portion of this downtime, costs to return the
mine to operations and shipping limits imposed as the result of unrelated
restrictions of capacity at a third party loading facility, the pro forma
Australian operation experienced a net loss in the quarter immediately
prior to acquisition.
September 30,
December 31,
2004
2003
$
11,047
$
15,815
186,160
151,725
68,245
34,532
$
265,452
$
202,072
Table of Contents
Fair Value
Assets
Liabilities
$
131,082
$
101,086
—
312
$
131,082
$
101,398
Quarter Ended September 30,
Nine Months Ended September 30,
2004
2003
2004
2003
64,278,587
54,002,659
61,354,266
53,062,052
1,500,445
1,223,220
1,466,730
1,478,551
65,779,032
55,225,879
62,820,996
54,540,603
Table of Contents
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
43,437
$
21,518
$
107,498
$
9,133
42,131
19,866
103,971
4,369
$
0.68
$
0.40
$
1.75
$
0.17
0.66
0.37
1.69
0.08
$
0.66
$
0.39
$
1.71
$
0.17
0.64
0.36
1.66
0.08
Table of Contents
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
3,147
$
2,546
$
9,122
$
7,638
11,027
10,449
32,594
31,346
(12,573
)
(11,116
)
(37,238
)
(33,347
)
64
63
191
191
5,477
4,022
16,573
9,111
$
7,142
$
5,964
$
21,242
$
14,939
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
908
$
1,262
$
3,308
$
3,786
16,089
19,766
47,680
59,299
(3,308
)
(3,946
)
(9,923
)
(11,840
)
918
4,262
2,755
12,788
$
14,607
$
21,344
$
43,820
$
64,033
Table of Contents
Table of Contents
Quarter Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
154,180
$
104,355
$
394,525
$
297,834
70,132
61,224
202,992
176,789
10,146
7,542
31,810
20,633
24,926
22,347
70,849
77,391
(556
)
—
(556
)
53,513
(1,084
)
(371
)
(3,212
)
(2,549
)
247
693
900
2,401
$
50,369
$
12,920
$
91,742
$
(30,344
)
(1)
Adjusted EBITDA is defined as income from continuing operations before
deducting early debt extinguishment (gains) costs, net interest expense, income
taxes, minority interests, asset retirement obligation expense and
depreciation, depletion and amortization.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Operations
Quarter Ended September 30, 2004
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
$
—
$
769,176
$
169,930
$
(16,038
)
$
923,068
(1,874
)
615,292
139,675
(16,038
)
737,055
—
63,221
6,911
—
70,132
—
9,615
531
—
10,146
354
32,279
990
—
33,623
—
(1,795
)
5
—
(1,790
)
37,201
637
678
(13,590
)
24,926
(556
)
—
—
—
(556
)
(4,594
)
(4,560
)
(5,520
)
13,590
(1,084
)
(30,531
)
54,487
26,660
—
50,616
(11,853
)
9,494
9,291
—
6,932
—
247
—
—
247
$
(18,678
)
$
44,746
$
17,369
$
—
$
43,437
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Operations
Quarter Ended September 30, 2003
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
$
—
$
680,974
$
35,910
$
(14,929
)
$
701,955
—
563,582
30,344
(14,929
)
578,997
—
60,354
870
—
61,224
—
7,480
62
—
7,542
130
21,952
508
—
22,590
—
(3,864
)
(123
)
—
(3,987
)
32,797
30,605
521
(41,576
)
22,347
(20,866
)
(17,346
)
(3,735
)
41,576
(371
)
(12,061
)
18,211
7,463
—
13,613
(9,957
)
2,400
(1,041
)
—
(8,598
)
—
693
—
—
693
$
(2,104
)
$
15,118
$
8,504
$
—
$
21,518
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Operations
Nine Months Ended September 30, 2004
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
$
—
$
2,295,939
$
385,245
$
(49,411
)
$
2,631,773
(1,883
)
1,862,245
337,005
(49,411
)
2,147,956
—
189,746
13,246
—
202,992
—
30,768
1,042
—
31,810
910
90,210
2,439
—
93,559
—
(3,913
)
(354
)
—
(4,267
)
107,367
60,484
2,189
(99,191
)
70,849
(556
)
—
—
—
(556
)
(47,584
)
(40,161
)
(14,658
)
99,191
(3,212
)
(58,254
)
106,560
44,336
—
92,642
(34,034
)
7,326
10,952
—
(15,756
)
—
900
—
—
900
$
(24,220
)
$
98,334
$
33,384
$
—
$
107,498
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Operations
Nine Months Ended September 30, 2003
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
$
—
$
1,998,070
$
123,176
$
(44,752
)
$
2,076,494
—
1,660,050
110,322
(44,752
)
1,725,620
—
174,091
2,698
—
176,789
—
20,447
186
—
20,633
492
74,261
1,663
—
76,416
—
(23,264
)
(112
)
—
(23,376
)
107,253
88,775
1,981
(120,618
)
77,391
46,164
7,349
—
—
53,513
(60,081
)
(52,257
)
(10,829
)
120,618
(2,549
)
(93,828
)
48,618
17,267
—
(27,943
)
(51,328
)
721
986
—
(49,621
)
—
2,401
—
—
2,401
6,762
(16,349
)
(557
)
—
(10,144
)
$
(35,738
)
$
29,147
$
15,724
$
—
$
9,133
Table of Contents
Unaudited Supplemental Condensed Consolidated Balance Sheets
September 30, 2004
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
ASSETS
$
381,223
$
2,461
$
18,151
$
—
$
401,835
1,793
121,438
49,775
—
173,006
—
291,408
31,631
—
323,039
—
131,082
—
—
131,082
—
15,050
728
—
15,778
13,741
28,480
5,234
—
47,455
396,757
589,919
105,519
—
1,092,195
—
5,680,503
299,000
—
5,979,503
—
(1,220,669
)
(32,991
)
—
(1,253,660
)
4,652,339
153,691
2,636
(4,487,773
)
320,893
$
5,049,096
$
5,203,444
$
374,164
$
(4,487,773
)
$
6,138,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
$
4,500
$
13,333
$
1,085
$
—
$
18,918
1,976,478
(2,206,964
)
230,486
—
—
—
101,260
138
—
101,398
14,707
589,768
61,524
—
665,999
1,995,685
(1,502,603
)
293,233
—
786,315
1,329,104
66,713
2,206
—
1,398,023
—
413,999
1,568
—
415,567
15,296
1,874,289
12,970
—
1,902,555
3,340,085
852,398
309,977
—
4,502,460
—
1,991
—
—
1,991
1,709,011
4,349,055
64,187
(4,487,773
)
1,634,480
$
5,049,096
$
5,203,444
$
374,164
$
(4,487,773
)
$
6,138,931
Table of Contents
Supplemental Condensed Consolidated Balance Sheets
December 31, 2003
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
ASSETS
$
114,575
$
1,392
$
1,535
$
—
$
117,502
1,022
190,517
29,352
—
220,891
—
244,372
2,121
—
246,493
—
58,321
—
—
58,321
—
15,050
699
—
15,749
2,793
14,977
6,014
—
23,784
118,390
524,629
39,721
—
682,740
—
5,318,980
61,940
—
5,380,920
—
(1,079,200
)
(20,734
)
—
(1,099,934
)
3,588,554
175,364
1,145
(3,448,524
)
316,539
$
3,706,944
$
4,939,773
$
82,072
$
(3,448,524
)
$
5,280,265
LIABILITIES AND STOCKHOLDERS’ EQUITY
$
4,500
$
16,707
$
1,842
$
—
$
23,049
1,360,978
(1,373,499
)
12,521
—
—
—
35,851
453
—
36,304
16,690
535,914
20,011
—
572,615
1,382,168
(785,027
)
34,827
—
631,968
1,096,364
74,014
3,112
—
1,173,490
—
427,465
6,961
—
434,426
21,824
1,880,889
3,702
—
1,906,415
2,500,356
1,597,341
48,602
—
4,146,299
—
1,909
—
—
1,909
1,206,588
3,340,523
33,470
(3,448,524
)
1,132,057
$
3,706,944
$
4,939,773
$
82,072
$
(3,448,524
)
$
5,280,265
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2004
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Consolidated
$
(43,735
)
$
134,406
$
61,834
$
152,505
—
(136,490
)
(11,855
)
(148,345
)
—
(11,310
)
(250
)
(11,560
)
—
(190,940
)
(235,325
)
(426,265
)
—
5,577
554
6,131
—
18,492
—
18,492
—
(314,671
)
(246,876
)
(561,547
)
250,000
—
—
250,000
(13,850
)
(13,236
)
(1,663
)
(28,749
)
383,125
—
—
383,125
19,274
—
—
19,274
2,343
—
—
2,343
(8,922
)
—
—
(8,922
)
—
—
100,000
100,000
—
(818
)
—
(818
)
(22,878
)
—
—
(22,878
)
(298,709
)
195,389
103,320
—
310,383
181,335
201,657
693,375
266,648
1,070
16,615
284,333
114,575
1,392
1,535
117,502
$
381,223
$
2,462
$
18,150
$
401,835
Table of Contents
Unaudited Supplemental Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003
(In thousands)
Parent
Guarantor
Non-Guarantor
Company
Subsidiaries
Subsidiaries
Consolidated
$
(56,273
)
$
150,841
$
21,210
$
115,778
—
(114,962
)
(3,855
)
(118,817
)
—
(7,706
)
—
(7,706
)
—
(90,000
)
—
(90,000
)
—
(1,400
)
—
(1,400
)
—
34,063
659
34,722
—
(180,005
)
(3,196
)
(183,201
)
—
(121,584
)
—
(121,584
)
1,100,000
2,735
—
1,102,735
(745,259
)
(120,345
)
(530
)
(866,134
)
24,599
—
—
24,599
1,737
—
—
1,737
(23,632
)
—
—
(23,632
)
—
—
3,600
3,600
—
(4,063
)
—
(4,063
)
(17,262
)
—
—
(17,262
)
(245,483
)
268,369
(22,886
)
—
1,112
—
—
1,112
95,812
25,112
(19,816
)
101,108
—
—
934
934
39,539
(4,052
)
(868
)
34,619
60,666
5,365
5,179
71,210
$
100,205
$
1,313
$
4,311
$
105,829
Table of Contents
Table of Contents
•
growth in domestic and international coal and power markets;
•
coal’s market share of electricity generation;
•
future worldwide economic conditions;
•
weather;
•
transportation performance and costs;
•
ability to renew sales contracts;
•
successful implementation of business strategies;
•
regulatory and court decisions;
•
future legislation;
•
changes in postretirement benefit and pension obligations;
•
labor relations and availability;
•
availability and costs of credit, surety bonds and letters of credit;
•
the effects of changes in currency exchange rates;
•
risks associated with customers;
•
geology and equipment risks inherent to mining;
•
terrorist attacks or threats;
•
performance of contractors and third party coal suppliers;
•
replacement of reserves;
Table of Contents
•
implementation of new accounting standards;
•
inflationary trends;
•
the effects of interest rates;
•
the effects of acquisitions or divestitures;
•
changes to contribution requirements to multi-employer benefit funds; and
•
other factors, including those discussed in “Legal
Proceedings” and Note 11 to our unaudited consolidated financial
statements.
Table of Contents
Table of Contents
(Unaudited)
(Unaudited)
Increase (Decrease)
Quarter Ended
Quarter Ended
to Revenues
September 30,
September 30,
2004
2003
$
%
(dollars in thousands)
$
895,156
$
682,034
$
213,122
31.2
%
27,912
19,921
7,991
40.1
%
$
923,068
$
701,955
$
221,113
31.5
%
Table of Contents
(Unaudited)
(Unaudited)
Increase (Decrease)
Quarter Ended
Quarter Ended
to Adjusted EBITDA
September 30,
September 30,
2004
2003
$
%
(dollars in thousands)
$
113,903
$
93,197
$
20,706
22.2
%
54,911
44,641
10,270
23.0
%
16,053
9,341
6,712
71.9
%
20,777
2,600
18,177
699.1
%
(51,464
)
(45,424
)
(6,040
)
(13.3
)%
$
154,180
$
104,355
$
49,825
47.7
%
Table of Contents
(Unaudited)
(Unaudited)
Increase (Decrease)
Quarter Ended
Quarter Ended
to Income
September 30,
September 30,
2004
2003
$
%
(dollars in thousands)
$
154,180
$
104,355
$
49,825
47.7
%
70,132
61,224
(8,908
)
(14.5
)%
10,146
7,542
(2,604
)
(34.5
)%
(556
)
—
556
n/a
24,926
22,347
(2,579
)
(11.5
)%
(1,084
)
(371
)
713
192.2
%
$
50,616
$
13,613
$
37,003
271.8
%
(Unaudited)
(Unaudited)
Increase (Decrease)
Quarter Ended
Quarter Ended
to Income
September 30,
September 30,
2004
2003
$
%
(dollars in thousands)
$
50,616
$
13,613
$
37,003
271.8
%
6,932
(8,598
)
(15,530
)
n/a
247
693
446
64.4
%
$
43,437
$
21,518
$
21,919
101.9
%
Table of Contents
Increase (Decrease)
(Unaudited)
Nine Months Ended
(Unaudited)
Nine Months Ended
to Revenues
September 30, 2004
September 30, 2003
$
%
(dollars in thousands)
$
2,538,189
$
2,010,825
$
527,364
26.2
%
93,584
65,669
27,915
42.5
%
$
2,631,773
$
2,076,494
$
555,279
26.7
%
Table of Contents
Increase (Decrease)
(Unaudited)
Nine Months Ended
(Unaudited)
Nine Months Ended
to Adjusted EBITDA
September 30, 2004
September 30, 2003
$
%
(dollars in thousands)
$
297,676
$
257,007
$
40,669
15.8
%
182,332
144,427
37,905
26.2
%
36,728
40,673
(3,945
)
(9.7
)%
33,655
2,178
31,477
1,445.2
%
(155,866
)
(146,451
)
(9,415
)
(6.4
)%
$
394,525
$
297,834
$
96,691
32.5
%
Table of Contents
•
higher gains on sales of $19.1 million in the prior year, including
a gain of $11.4 million on the sale of land and coal reserves in
Appalachia and a gain of $7.4 million as a result of the sale of oil
and gas rights;
•
costs to resolve a contract indemnification claim related to a
former subsidiary ($4.7 million);
•
increased costs in 2004 for generation development ($4.6 million)
related to the development of the Prairie State and Thoroughbred
Energy Campuses; and
•
increased selling and administrative expenses of $17.2 million,
primarily associated with pensions, the impact of the acquisitions and
long-term incentive compensation.
•
a $9.9 million gain on the sale of 575,000 units of Penn Virginia
in the first quarter of 2004;
•
lower costs ($22.6 million) in the first nine months of 2004
associated with past mining obligations, primarily lower retiree health
care costs from the passage of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 and lower closed and
suspended mine spending.
Increase (Decrease)
(Unaudited)
Nine Months Ended
(Unaudited)
Nine Months Ended
to Income
September 30, 2004
September 30, 2003
$
%
(dollars in thousands)
$
394,525
$
297,834
$
96,691
32.5
%
202,992
176,789
(26,203
)
(14.8
)%
31,810
20,633
(11,177
)
(54.2
)%
(556
)
53,513
54,069
n/a
70,849
77,391
6,542
8.5
%
(3,212
)
(2,549
)
663
26.0
%
$
92,642
$
(27,943
)
$
120,585
n/a
Table of Contents
Increase (Decrease)
(Unaudited)
Nine Months Ended
(Unaudited)
Nine Months Ended
to Income
September 30, 2004
September 30, 2003
$
%
(dollars in thousands)
$
92,642
$
(27,943
)
$
120,585
n/a
(15,756
)
(49,621
)
(33,865
)
(68.2
)%
900
2,401
1,501
62.5
%
107,498
19,277
88,221
457.6
%
—
(10,144
)
10,144
n/a
$
107,498
$
9,133
$
98,365
1,077.0
%
•
a $33.9 million lower tax benefit in the first
three quarters of 2004. The tax benefit recorded in 2004
differs from the benefit in 2003 primarily as a result of
significantly higher pre-tax income, partially offset by the
permanent benefits of percentage depletion and a property
contribution. An additional tax benefit was obtained by filing
an Australian consolidation election. The effects of
acquisitions improved the ability to use net operating loss
carry-forwards and resulted in a $10.0 million reduction in the
valuation allowance on those net operating loss carry-forwards;
•
lower minority interests expense due to the
acquisition in April 2003 of the remaining 18.3% of Black
Beauty Coal Company; and
•
a charge in the first quarter of 2003 relating to
the cumulative effect of accounting changes, net of income
taxes, of $10.1 million. This amount represents the aggregate
amount of the recognition of accounting changes pursuant to the
adoption of SFAS No. 143, the change in method of amortization
of actuarial gains and losses related to net periodic
postretirement benefit costs and the effect of the rescission
of EITF No. 98-10.
Table of Contents
Table of Contents
Table of Contents
Payments Due by Year
Within
2-3
4-5
After
1 Year
Years
Years
5 Years
$
91,785
$
183,012
$
201,322
$
1,607,437
80,186
162,279
154,187
52,672
Table of Contents
Table of Contents
Table of Contents
Table of Contents
PEABODY ENERGY CORPORATION
Date: November 5, 2004
By:
/s/ RICHARD A. NAVARRE
Richard A. Navarre
Executive Vice President and Chief Financial Officer
(On behalf of the registrant and as Principal Financial Officer)
Table of Contents
Exhibit
No.
Description of Exhibit
3.1
3.2
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
Table of Contents
Exhibit
No.
Description of Exhibit
10.64
10.65
10.66*
10.67*
10.68*
10.69*
10.70*
10.71*
31.1*
31.2*
32.1*
32.2*
EXHIBIT 10.66
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT
DATED AS OF MARCH 8, 2004
This AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is among PEABODY ENERGY CORPORATION, a Delaware corporation (the "Borrower"), the Lenders (as defined below), FLEET NATIONAL BANK, as administrative agent (in such capacity, the "Administrative Agent"), and WACHOVIA BANK, NATIONAL ASSOCIATION and LEHMAN COMMERCIAL PAPER INC, as syndication agents.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders and the Administrative Agent have entered into that certain Second Amended and Restated Credit Agreement, dated as of March 21, 2003, by and among the Borrower, the several lenders from time to time parties thereto (the "Lenders"), Wachovia Bank, National Association and Lehman Commercial Paper Inc., as syndication agents, Fleet Securities, Inc., Wachovia Capital Markets, LLC (formerly known as Wachovia Securities, Inc.) and Lehman Brothers Inc., as arrangers, Morgan Stanley Senior Funding, Inc. and U.S. Bank National Association, as documentation agents, and the Administrative Agent (as amended through the date hereof, the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement).
2. The Borrower (i) has requested that the Lenders amend the Credit Agreement to, among other things, reduce the Applicable Margin on the Term Loans and provide for additional Revolving Credit Commitments, (ii) has advised the Lenders that it desires to consummate the Specified Acquisitions (as defined below) and in connection therewith to potentially finance a portion of the purchase price thereof with additional Term Loans under the Credit Agreement or other Indebtedness and (iii) has requested that the Lenders amend the Credit Agreement to permit the Specified Acquisitions, the possible financing thereof with additional Term Loans or other Indebtedness, and certain other amendments.
3. Subject to the terms and conditions set forth below, and in consideration of certain agreements of the Borrower and other Credit Parties set forth herein and in the accompanying Consent of Credit Parties, the Administrative Agent, the Syndication Agent and the requisite Lenders are willing to agree to the amendment described below.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1 Amendments to Credit Agreement. Upon the satisfaction of the applicable conditions precedent set forth in Section 4, the Credit Agreement is hereby amended as follows:
(a) The following new definitions are hereby added to subsection 1.1 of the Credit Agreement:
"Revolving Increase Effective Date": the date on which the amendments contained in Sections 1(a), (c), (d), (f) and (p) of the Second Amendment became effective in accordance with its terms, which for all purposes under this Agreement will be deemed to be March 8, 2004.
"Second Amendment": Amendment No. 2 to this Agreement, dated as of March 8, 2004.
"Specified Acquisitions": the collective reference to three transactions in which the Borrower will acquire certain coal mining assets of RAG Coal International AG, the total consideration for which is approximately $500,000,000, on terms and conditions reasonably satisfactory to the Administrative Agent, including, without limitation, compliance with subsection 6.10.
(b) The definition of "Consolidated EBITDA" contained in subsection 1.1 of the Credit Agreement is hereby amended to insert the following proviso immediately before the period at the end thereof:
"provided, further, that for purposes of calculating Consolidated
EBITDA of the Borrower, for any fiscal quarter, (i) the Consolidated
EBITDA of (A) the businesses acquired in any Specified Acquisition
by the Borrower or any Restricted Subsidiary and (B) any other
business acquired by the Borrower or its Restricted Subsidiaries if
the EBITDA for the most recent twelve-month period for which
quarterly financial statements are available of such business is
equal to or greater than 5% of the Borrower's EBITDA for such
period, in each case, during such fiscal quarter shall be included
on a pro forma basis for such fiscal quarter (assuming the
consummation of such acquisition and the incurrence or assumption of
any Indebtedness in connection therewith occurred on the first day
of such fiscal quarter) if the consolidated balance sheet of the
businesses acquired in such Specified Acquisition or such other
acquired business, as the case may be, as at the end of the fiscal
quarter preceding the date of such acquisition and the related
consolidated statements of income and of cash flows for the fiscal
quarter in respect of which Consolidated EBITDA is to be calculated
(x) have been previously provided to the Administrative Agent and
(y) either (1) have been reported on without a qualification arising
out of the scope of the audit by
independent certified public accountants of nationally recognized standing or (2) have been found reasonably acceptable by the Administrative Agent and (ii) the Consolidated EBITDA of any business disposed of by the Borrower or its Restricted Subsidiaries during such fiscal quarter shall be excluded for such fiscal quarter if the EBITDA for the most recent twelve-month period for which quarterly financial statements are available of such business constituted 5% or more of the Borrower's EBITDA for such period (assuming the consummation or such disposition and the repayment of any indebtedness in connection therewith occurred on the first day of such fiscal quarter)."
(c) The definition of "Lender Addendum" contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:
`"Lender Addendum": with respect to any Lender, a Lender Addendum substantially in the form attached hereto as Exhibit H."
(d) The definition of "Revolving Credit Commitment" contained in subsection 1.1 of the Credit Agreement is hereby amended to replace the clause "which shall be $600,000,000" with the following clause:
"which shall be equal to $600,000,000, as such amount may be increased in accordance with subsection 2.1(a)(ii)".
(e) The definition of "Tangible Assets" contained in subsection 1.1 of the Credit Agreement is hereby amended to add the following clause at the end of clause (a) thereof and immediately prior to the word "minus": "plus, to the extent not otherwise included, any coal reserve held in fee or leasehold".
(f) Subsection 2.1(a)(ii) of the Credit Agreement is hereby amended to insert the following at the end thereof:
"Provided that no Default or Event of Default has occurred and is continuing and the Revolving Credit Commitments have not been terminated, the Borrower shall be entitled, at any time on or after the Revolving Increase Effective Date but prior to April 15, 2004, with the written consent of the Administrative Agent but without any consent from the Lenders, except the Lenders providing all or part of such increased amount, to request an increase in the Revolving Credit Commitments of up to $300,000,000 in the aggregate; and conforming changes may be made to this Agreement by the Administrative Agent to evidence such increase and adjustments may be made among Revolving Credit Lenders to cause all Revolving Credit Lenders to have extended their pro rata share of the Revolving Extensions of Credit after giving effect to any increase in the Revolving Credit Commitments effected hereby."
(g) Subsection 2.17 of the Credit Agreement is hereby amended to insert the following clause immediately after the words "all Lenders" in the last sentence thereof: "or all Lenders with respect to a particular Type of Loan or all Lenders "directly affected" by such consent, waiver or amendment, in each case".
(h) Subsection 7.2(d) of the Credit Agreement is hereby amended to insert immediately after the words "and its Restricted Subsidiaries" in the first line thereof the words "which are Guarantors under the Guarantee and Collateral Agreement".
(i) Subsection 7.2(p) of the Credit Agreement is hereby amended to (1)
insert a "(i)" immediately prior to the words "of Peabody Energy Australia Pty
Ltd", (2) replace the number "$50,000,000" with the number "$100,000,000" and
(3) insert the following clause immediately after the words "Guarantee and
Collateral Agreement": "and (ii) of any Restricted Subsidiary of Peabody Energy
Australia Pty Ltd or Peabody COALTRADE Australia Pty Ltd to Peabody Energy
Australia Pty Ltd, Peabody COALTRADE Australia Pty Ltd or any other Restricted
Subsidiary thereof".
(j) Subsection 7.3(d) of the Credit Agreement is hereby amended to delete clause (iii) in its entirety and replace it with the following new clause (iii):
"(iii) Liens on (x) other assets not constituting Collateral or (y) cash raised to support letters of credit in connection with the issuance thereof with an aggregate value under clauses (x) and (y) for all such assets and cash not in excess of $100,000,000 at any time, in each case to secure obligations under other surety bonds, synthetic letters of credit, synthetic term loans, credit linked deposits or other obligations of like nature".
(k) Subsection 7.9(l) of the Credit Agreement is hereby amended to insert immediately after the words "Unrestricted Subsidiaries", the words ", Restricted Subsidiaries".
(l) Subsection 7.9(p) of the Credit Agreement is hereby amended to (1)
insert a "(i)" immediately prior to the words "by the Borrower", (2) insert the
following new clause immediately after the words "not to exceed $50,000,000":
"and (ii) by any Restricted Subsidiary in Peabody Energy Australia Pty Ltd or in
Peabody COALTRADE Australia Pty Ltd to Peabody Energy Australia Pty Ltd, Peabody
COALTRADE Australia Pty Ltd or any other Restricted Subsidiary thereof" and (3)
replace the number "$50,000,000" with the number "$100,000,000".
(m) Subsection 7.9 of the Credit Agreement is hereby further amended to
(1) delete the word "and" at the end of subsection 7.9(o); (2) replace the "."
at the end of subsection 7.9(p) with "; and" and (3) add the following new
subsection 7.9(q):
"(q) Investments by the Borrower or its Restricted Subsidiaries made to effect any Specified Acquisition; provided that: (a) immediately prior to and after giving effect to such Specified Acquisition, no Default or Event of Default shall have occurred and be continuing and (b) the Borrower shall be in pro forma compliance with the covenants contained in subsection 7.1, calculated based on
the relevant financial statements delivered pursuant to subsection 6.1 and based on the financial statements with respect to such Specified Acquisition meeting the requirements set forth in the last proviso of the definition of Consolidated EBITDA, as though such Specified Acquisition occurred at the beginning of the period covered thereby, and the Borrower shall have certified as to both subclause (a) and (b) to the Administrative Agent in writing."
(n) Subsection 7.14 of the Credit Agreement is hereby amended to insert the following sentence at the end thereof:
"Notwithstanding the foregoing, the Borrower or any of its Restricted Subsidiaries who are Guarantors may enter into agreements in connection with the incurrence of indebtedness permitted by subsection 7.2(d) which prohibit or limit the ability of the Borrower or such Restricted Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenue, whether now owned or hereafter acquired except that no such prohibition or limitation shall apply with respect to the Liens which secure the Obligations."
(o) Schedule I to the Credit Agreement is hereby deleted in its entirety and replaced with the Schedule I attached hereto as Exhibit A.
(p) Exhibit H to the Credit Agreement is hereby deleted in its entirety and replaced with the Exhibit H attached hereto as Exhibit B.
SECTION 2 Additional Amendments to Credit Agreement. Upon the satisfaction of the applicable conditions precedent set forth in Section 4, the Credit Agreement is hereby further amended as follows:
(a) The following new definitions are hereby added to subsection 1.1 of the Credit Agreement:
"Acquisition Closing Date": the earliest date on which any Specified Acquisition is consummated.
"Acquisition Notes": up to $500,000,000 in aggregate principal amount of senior or senior subordinated notes of the Borrower issued on or prior to the Acquisition Closing Date to finance all or a portion of the Specified Acquisitions (the "Initial Acquisition Notes"), and any senior or senior subordinated notes of the Borrower having the same principal amount and other terms as the Initial Acquisition Notes issued in exchange for the Initial Acquisition Notes as contemplated by the Acquisition Notes Documents.
"Acquisition Notes Documents": the Acquisition Notes Indenture, the Australian Acquisition Notes Indenture, the Acquisition Notes, the Australian Acquisition Notes and any registration rights agreements and purchase agreements executed in connection therewith, in each case, in form and substance reasonably satisfactory to the Administrative Agent.
"Acquisition Notes Indenture": the Indenture among the Borrower, the guarantors named therein and the trustee named therein, as trustee, pursuant to which the Acquisition Notes are issued, in form and substance reasonably satisfactory to the Administrative Agent.
"Australian Acquisition Notes": up to $100,000,000 in aggregate principal amount of senior or senior subordinated notes of Peabody Energy Australia Pty Ltd issued on or prior to the Acquisition Closing Date to finance, or within 180 days thereof to refinance, a portion of the Specified Acquisitions (the "Initial Australian Acquisition Notes"), and any senior or senior subordinated notes of Peabody Energy Australia Pty Ltd having the same principal amount and other terms as the Initial Australian Acquisition Notes issued in exchange for the Initial Australian Acquisition Notes as contemplated by the Acquisition Notes Documents.
"Australian Acquisition Notes Indenture": the Indenture among Peabody Energy Australia Pty Ltd (or any Subsidiary thereof) as issuer, and the Borrower, as guarantor, and the trustee named therein, as trustee, pursuant to which the Australian Acquisition Notes are issued, in form and substance satisfactory to the Administrative Agent.
(b) The definition of "Change of Control" contained in subsection 1.1 of the Credit Agreement is hereby amended to delete the final parenthetical therein in its entirety and replace it with the following clause: " or similar term (as defined in the Senior Notes Indenture as in effect on the Effective Date, or in the Acquisition Notes Indenture or the Australian Acquisition Notes Indenture, in each case, as of the date of their respective issuance)".
(c) Subsection 4.5 of the Credit Agreement is hereby amended to replace the words "and the Senior Notes Documents" with the words ", the Senior Notes Documents and the Acquisition Notes Documents".
(d) Subsection 4.26 of the Credit Agreement is hereby amended to replace the words "and under the Senior Notes Documents" with the words "and under the Senior Notes Documents and the Acquisition Notes Documents".
(e) Subsection 7.2 of the Credit Agreement is hereby amended to (1) delete the word "and" at the end of subsection 7.2(o); (2) replace the "." at the end of subsection 7.2(p) with "; and" and (3) add the following new subsection 7.2(q):
"(q) unsecured Indebtedness of the Borrower under the Acquisition Notes and unsecured Indebtedness of Peabody Energy Australia Pty Ltd or a Subsidiary thereof under the Australian Acquisition Notes in an amount not to exceed $100,000,000; provided that the aggregate amount of Indebtedness permitted under this subsection 7.2(q) may not exceed $500,000,000 in the aggregate less the aggregate amount of any other Indebtedness incurred to finance any Specified Acquisition."
(f) Subsection 7.4(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
"(b) guarantees (i) made by the Subsidiaries of the Borrower pursuant to the Senior Notes Indenture or the Acquisition Notes Indenture; provided that such Subsidiaries are parties to the Guarantee and Collateral Agreement and (ii) made by the Borrower pursuant to the Australian Acquisition Notes Indenture".
(g) Subsection 7.4(h) of the Credit Agreement is hereby amended to replace the words "and the Senior Notes Documents" with the words "the Senior Notes Documents and the Acquisition Notes Documents".
(h) Subsection 7.9(n) of the Credit Agreement is hereby amended to replace the words "of Senior Notes" with the words "of Senior Notes, Acquisition Notes or Australian Acquisition Notes, in each case,".
(i) Subsection 7.10(a) of the Credit Agreement is hereby deleted its entirety and restated as follows:
"(a) (1) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of (x) the Senior Notes (whether upon acceleration of the maturity thereof, upon a "Change of Control" (as defined in the Senior Notes Indenture) or otherwise), (y) the Acquisition Notes (whether upon acceleration of the maturity thereof, upon a "Change of Control" or any similar term (as defined in the Acquisition Notes Indenture) or otherwise) or (z) the Australian Acquisition Notes (whether upon acceleration of the maturity thereof, upon a "Change of Control" or any similar term (as defined in the Australian Acquisition Notes Indenture) or otherwise), provided that, the Borrower may (i) prepay the Senior Notes, the Acquisition Notes or the Australian Acquisition Notes in connection with a refinancing of such notes on terms no less
favorable to the Borrower and the Lenders and (ii) make any other optional payment, prepayment, redemption, purchase or defeasance during the term of this Agreement in an aggregate amount not in excess of $100,000,000, or (2) amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any Senior Notes Documents or the Acquisition Notes Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon)."
(j) Subsection 7.10(c) of the Credit Agreement is hereby amended to replace the words "any of the Senior Notes Documents" with the words "any of the Senior Notes Documents or the Acquisition Notes Documents, in each case".
(k) Subsection 7.14 of the Credit Agreement is hereby amended to replace the words "the Senior Notes Documents" in clause (b) thereof with the words "the Senior Notes Documents or the Acquisition Notes Documents".
SECTION 3 Additional Amendments to Credit Agreement to be Effective on the Acquisition Term Loan Effective Date. Upon satisfaction of the applicable conditions precedent set forth in Sections 4 and 5, the Credit Agreement is hereby further amended as follows:
(a) The following new definitions are hereby added to subsection 1.1 of the Credit Agreement:
"Acquisition Closing Date": the earliest date on which any Specified Acquisition is consummated.
"Acquisition Term Loan Commitment Date": the 90th day following the Repricing Effective Date.
"Acquisition Term Loan Lender": any Lender having an Acquisition Term Loan Commitment or an Acquisition Term Loan Outstanding.
"Acquisition Term Loans": the Loans made by the Acquisition Term Loan Lenders pursuant to subsection 2.1(a)(iii).
"Acquisition Term Loan Commitment": the commitment of an Acquisition Term Loan Lender as set forth on Schedule 1 to the Lender Addendum delivered by such Lender (or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof) to make an Acquisition Term Loan to the
Borrower pursuant to subsection 2.1(a)(iii); provided that the original aggregate amount of the Acquisition Term Loan Commitments shall not exceed $500,000,000 (less the aggregate amount of any other Indebtedness incurred to finance any Specified Acquisition).
"Repricing Effective Date": the date on which the amendment contained in Section 1(o) of the Second Amendment became effective in accordance with its terms, which for all purposes under this Agreement will be deemed to be March 9, 2004.
"Tranche B Term Loans": the Loans made by the Term Lenders to the Borrower pursuant to subsection 2.1(a)(i).
(b) The definition of "Term Loans" contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:
`"Term Loans": the Tranche B Term Loans and the Acquisition Term Loans."
(c) The definition of "Term Loan Commitment" contained in subsection 1.1 of the Credit Agreement is hereby amended to (1) replace the cross reference "subsection 2.1(a)(i)" with "subsection 2.1(a)(i) or (iii)" and (2) replace the phrase "which shall be $450,000,000" with the following phrase:
"which shall be equal to the sum of $450,000,000 plus any Acquisition Term Loan Commitments received by the Administrative Agent on or prior to the Acquisition Term Loan Commitment Date (provided that such Acquisition Term Loan Commitments shall not exceed $500,000,000, less the aggregate amount of any other Indebtedness incurred to finance any Specified Acquisition)".
(d) The definition of "Type" contained in subsection 1.1 of the Credit Agreement is hereby amended to replace the phrase "a Term Loan" with the following phrase: "a Tranche B Term Loan, an Acquisition Term Loan".
(e) Subsection 2.1 of the Credit Agreement is hereby amended to (1) replace the defined term "Term Loans" in each place it appears in subsection 2.1(a)(i) with the defined term "Tranche B Term Loans" and (2) add the following new subsection 2.1(a)(iii):
"(iii) Acquisition Term Loans. So long as the Acquisition Closing Date is on or prior to the Acquisition Term Loan Commitment Date, each Acquisition Term Loan Lender severally agrees to make a term loan to the Borrower on the Acquisition Closing Date in an aggregate principal amount equal to such Lender's Acquisition Term Loan Commitment. Acquisition Term Loan Commitments not funded on the Acquisition Closing Date, or
if earlier, the Acquisition Term Loan Commitment Date, will terminate without further obligation or liability of the Acquisition Term Loan Lenders to the Borrower with respect thereto. Proceeds of the Acquisition Term Loans not used to fund a Specified Acquisition on the Acquisition Closing Date shall be deposited in a cash collateral account under the control of the Administrative Agent for the benefit of the Secured Parties and invested in Cash Equivalents (as directed by the Borrower) until (i) used to fund a Specified Acquisition or (ii) directed by the Borrower to be used to repay the Acquisition Term Loans in accordance with Section 2.6."
(f) Subsection 2.5(a) of the Credit Agreement is hereby amended (1) to replace the defined term "Term Loans" in each place it appears therein with the defined term "Tranche B Term Loans", (2) insert a "(i)" immediately prior to the phrase "The Borrower shall make" and (3) insert the following new subsection 2.5(a)(ii):
"(ii) Scheduled Payments of Acquisition Term Loans. The Borrower shall make principal payments on all of the Acquisition Term Loans on March 31, June 30, September 30 and December 31 of each year, (i) commencing on September 30, 2004 and ending on March 31, 2009, in an amount equal to .25% of the aggregate amount of Acquisition Term Loans funded on the Acquisition Closing Date and (ii) on June 30, 2009, September 30, 2009, December 31, 2009 and the Termination Date, in an amount on each such date equal to 25% of the aggregate amount of Acquisition Term Loans outstanding on June 30, 2009; provided that the scheduled installments of principal of the Acquisition Term Loans set forth in this subsection 2.5(a)(ii) shall be reduced in connection with any voluntary or mandatory prepayments of the Acquisition Term Loans in accordance with subsection 2.6 (as provided in such subsection); and provided further than the Acquisition Term Loans and all other amounts owed hereunder with respect to the Acquisition Term Loans shall be paid in full no later than the Termination Date, and the final installment payable by the Borrower in respect of the Acquisition Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the Acquisition Term Loans.
(g) Subsection 4.15 of the Credit Agreement is hereby amended to insert the following sentence at the end thereof:
"Notwithstanding the foregoing, proceeds from the Acquisition Term Loans shall be used solely to pay a portion of the purchase price of the Specified Acquisitions and pay related fees and expenses."
(h) Schedule I to the Credit Agreement is hereby amended to include thereon the Applicable Margin agreed to by the Acquisition Term Loan Lenders and the Borrower for the Acquisition Term Loans; provided that if such Applicable Margin is greater than the Applicable Margin for the Tranche B Term Loans, Schedule I to the Credit Agreement is hereby additionally amended to increase the Applicable Margin for the Tranche B Term Loans so that it is equal to the Applicable Margin for the Acquisition Term Loans.
SECTION 4 Conditions to Effectiveness of All Amendments.
(a) The effectiveness of each of the amendments contained in Section 1, 2 and 3 of this Amendment is conditioned upon satisfaction of the following conditions precedent:
(i) the Administrative Agent shall have received signed written authorization from the Required Lenders to execute this Amendment and counterparts of this Amendment signed by the Borrower and counterparts of the Consent of Credit Parties attached hereto (the "Consent") signed by the Credit Parties;
(ii) each of the representations and warranties in Section 6 below shall be true and correct in all material respects as of the date on which such amendment becomes effective;
(iii) in consideration of this Amendment, the Borrower shall have paid to the Administrative Agent, for the account of each Revolving Credit Lender that executes and returns to the Administrative Agent its consent no later than 5:00 p.m. (New York time) on March 2, 2004, a fee equal to 0.025% of such Lender's Revolving Commitment (prior to giving effect to any increase thereof pursuant to this Amendment) and the Administrative Agent shall have received payment in immediately available funds of all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent (including, without limitation, legal fees) and by Wachovia Bank, National Association, in each case, for which invoices have been presented;
(iv) the Administrative Agent shall have received the executed legal opinion of (x) Simpson, Thacher & Bartlett LLP, counsel to the Borrower and special New York counsel to the other Credit Parties, (y) Jeffery Klinger, Esq., special Missouri counsel to the Borrower and in-house counsel to the other Credit Parties, in each case, in form and substance reasonably acceptable to the Administrative Agent; and
(v) the Administrative Agent shall have received such other documents, instruments and opinions as it shall have reasonably requested, including, without limitation, modifications to the Mortgages.
(b) The effectiveness of the amendments contained in Sections 1(d) and (f) and Section 3 of this Amendment are further conditioned upon the Administrative Agent's receipt of signed written authorization from the Requisite Class Lenders to execute this Amendment.
(c) The effectiveness of the amendment contained in Section 1(o) of this Amendment is further conditioned upon the Administrative Agent's receipt of signed written authorization
from all Term Lenders holding Term Loans (prior to the effectiveness of any amendments contained in Section 2 hereof) to execute this Amendment.
(d) The effectiveness of the amendments contained in Section 2 of this Amendment is further conditioned on the Administrative Agent's receipt, no later than 5 Business Days prior to the estimated Acquisition Closing Date, of a certificate of a Responsible Officer stating that the Borrower intends to finance the Specified Acquisitions in whole or in part with the proceeds of the Acquisition Notes and/or the Australian Acquisition Notes.
SECTION 5 Additional Conditions to Effectiveness of Section 3 Amendments. The effectiveness of the amendments contained in Section 3 of this Amendment and of the requirement of any Acquisition Term Loan Lender to fund the Acquisition Term Loans on the Acquisition Closing Date are additionally conditioned upon satisfaction of the following conditions precedent on or prior to the 90th day after the effectiveness of Section 1(o) of this Amendment (the date on which all such conditions have been satisfied (in addition to the prior satisfaction of the conditions set forth in Sections 4(a) and (b) being referred to herein as the "Acquisition Term Loan Effective Date"):
(a) Each of the representations and warranties in Section 6 below shall be true and correct in all material respects on and as of the Acquisition Term Loan Effective Date;
(b) The Administrative Agent shall have received (i) additional commitments from banks and other financial institutions with respect to the Acquisition Term Loans in an aggregate principal amount equal to the lesser of (A) $500,000,000 and (B) the amount intended to be borrowed by the Borrower on the Acquisition Closing Date and (ii) a fully executed Lender Addendum with respect to each such bank or other financial institution committing to fund such Acquisition Term Loans (and pursuant to which on the Acquisition Term Loan Effective Date such bank or other financial institution shall become an Acquisition Term Loan Lender for all purposes under the Credit Agreement and the other Credit Documents);
(c) The Administrative Agent shall have received payment in immediately available funds of all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent (including, without limitation, legal fees) and by Wachovia Bank, National Association, in each case, for which invoices have been presented, on or before the Acquisition Term Loan Effective Date;
(d) The Borrower shall have paid to each of the Lenders with Acquisition Term Loan Commitments any applicable upfront fees; and
(e) The Administrative Agent shall have received such other documents, instruments, and opinions as it may reasonably request, including, without limitation, a solvency certificate.
SECTION 6 Representations and Warranties. The Borrower represents and warrants to the Administrative Agent and the Lenders as follows:
(a)Authority. Each of the Credit Parties has the requisite corporate power and authority to execute and deliver this Amendment and the Consent, as applicable, and to perform
its obligations hereunder and under the Credit Documents (as modified hereby). The execution, delivery and performance by the Borrower and each other Credit Party of this Amendment, the Consent (as applicable), the Credit Documents (as modified hereby) and the transactions contemplated hereby and thereby have been duly approved by all necessary corporate action of such Person and no other corporate proceedings on the part of such Person are necessary to consummate such transactions.
(b)No Legal Bar. The execution and delivery of this Amendment and of the Consent by each Credit Party party thereto, and the performance of the Credit Agreement and each other Credit Document, as amended hereby, by the Borrower and each other Credit Party party thereto, the borrowing and the use of proceeds of the Loans made pursuant to the increase in the Revolving Credit Commitment and the Acquisition Term Loans: (i) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding, the Borrower any Restricted Subsidiary or any of their respective properties or assets and (ii) will not result in the creation or imposition of a Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Credit Documents.
(c)Enforceability. This Amendment has been duly executed and delivered by the Borrower. The Consent has been duly executed and delivered by each Credit Party. This Amendment, the Consent and each Credit Document (as modified hereby) is the legal, valid and binding obligation of each Credit Party hereto and thereto, enforceable against such Credit Party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing, and is in full force and effect.
(d)Representations and Warranties. The representations and warranties contained in each Credit Document (other than any such representations and warranties that, by their terms, are specifically made as of a date other than the date hereof) are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof.
(e)No Default. Both immediately before and after giving effect to the amendments set forth in Section 1, 2 and 3 hereof, or any portion thereof, no event has occurred and is continuing that constitutes a Default or Event of Default.
SECTION 7 Reference to and Effect on Credit Agreement.
(a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby.
(b) Except as specifically modified above, the Credit Agreement and the other Credit Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Security
Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations under and as defined therein, in each case as modified hereby.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under any of the Credit Documents, nor, except as expressly provided herein, constitute a waiver or amendment of any provision of any of the Credit Documents.
(d) For the avoidance of doubt, the amendments contained in Section 1
hereof may become and thereafter will remain effective regardless of whether the
amendments contained in Section 2 or 3 hereof become effective, and the
amendments in Section 2 or Section 3 hereof may become and therafter will remain
effective regardless of whether the amendments contained in the other such
Section become effective.
SECTION 8 Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent.
SECTION 9 Severability. Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 10 Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
(signature page follows)
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first written above.
PEABODY ENERGY CORPORATION,
a Delaware corporation
By: ____________________________________
Name:
Title:
FLEET NATIONAL BANK,
as Administrative Agent, on behalf of the
Required Lenders
By: ____________________________________
Name:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Syndication Agent
By: ____________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
By: ____________________________________
Name:
Title:
CONSENT OF CREDIT PARTIES
DATED AS OF MARCH 8, 2004
The undersigned, as Guarantors and as Grantors under the "Guarantee
and Collateral Agreement", as Grantors under the "Trademark Security Agreement"
and each "Patent Security Agreement" and as Mortgagors under each "Mortgage" (as
such terms are defined in and under the Credit Agreement referred to in the
foregoing Amendment No. 2), as applicable, each hereby consents and agrees to
the foregoing Amendment No. 2 and hereby confirms and agrees that (i) each of
the Guarantee and Collateral Agreement, the Trademark Security Agreement, each
Patent Security Agreement and each Mortgage is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects
except that, upon the effectiveness of all or any portion of, said Amendment No.
2, each reference in the Guarantee and Collateral Agreement, the Trademark
Security Agreement, each Patent Security Agreement and each Mortgage to the
"Credit Agreement", "thereunder", "thereof" and words of like import referring
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as modified by said Amendment No. 2 (or such portion thereof), (ii) the
Guarantee and Collateral Agreement and all of the Collateral described therein
does, and shall continue to, secure the payment of all of the Obligations as
defined in the Guarantee and Collateral Agreement, (iii) the Trademark Security
Agreement and all of the Collateral described therein does, and shall continue
to, secure the payment of all of the Obligations as defined in the Guarantee and
Collateral Agreement, (iv) each Patent Security Agreement and all of the
Collateral described therein does, and shall continue to, secure the payment of
all of the Obligations as defined in the Guarantee and Collateral Agreement and
(v) each Mortgage and all of the Collateral described therein does, and shall
continue to, secure the payment of all of the Obligations as defined in the
Guarantee and Collateral Agreement.
(signature pages follow)
IN WITNESS WHEREOF, the parties hereto have caused this Consent of Credit Parties to be executed by their respective officers thereunto duly authorized, as of the date first written above.
PEABODY ENERGY CORPORATION
AFFINITY MINING COMPANY
ARCLAR COMPANY, LLC
ARID OPERATIONS INC.
BEAVER DAM COAL COMPANY
BIG RIDGE, INC.
BIG SKY COAL COMPANY
BLACK BEAUTY EQUIPMENT COMPANY
BLACK BEAUTY HOLDING COMPANY, LLC
BLACK BEAUTY MINING, INC.
BLACK BEAUTY RESOURCES, INC.
BLACK BEAUTY UNDERGROUND, INC.
BLACK WALNUT COAL COMPANY
BLUEGRASS COAL COMPANY
BTU WORLDWIDE, INC.
CABALLO COAL COMPANY
CHARLES COAL COMPANY
CLEATON COAL COMPANY
COAL PROPERTIES CORP.
COOK MOUNTAIN COAL COMPANY
COTTONWOOD LAND COMPANY
CYPRUS CREEK LAND COMPANY
EACC CAMPS, INC.
EAGLE COAL COMPANY
EASTERN ASSOCIATED COAL CORP.
EASTERN ROYALTY CORP.
EMPIRE MARINE, LLC
FALCON COAL COMPANY
GALLO FINANCE COMPANY
GIBCO MOTOR EXPRESS, LLC
GOLD FIELDS CHILE, S.A.
GOLD FIELDS MINING CORPORATION
GOLD FIELDS OPERATING CO. - ORTIZ
GRAND EAGLE MINING, INC.
HAYDEN GULCH TERMINAL, INC.
HIGHLAND MINING COMPANY
HIGHWALL MINING SERVICES COMPANY
HILLSIDE MINING COMPANY
INDEPENDENCE MATERIAL HANDLING
COMPANY
INDIAN HILL COMPANY
INTERIOR HOLDINGS CORP.
JAMES RIVER COAL TERMINAL COMPANY
JARRELL'S BRANCH COAL COMPANY
JUNIPER COAL COMPANY
KAYENTA MOBILE HOME PARK, INC.
LOGAN FORK COAL COMPANY
MARTINKA COAL COMPANY
MIDCO SUPPLY AND EQUIPMENT
CORPORATION
MIDWEST COAL ACQUISITION CORP.
MOUNTAIN VIEW COAL COMPANY
NORTH PAGE COAL CORP.
OHIO COUNTY COAL COMPANY
PDC PARTNERSHIP HOLDINGS, INC.
PEABODY AMERICA, INC.
PEABODY COAL COMPANY
PEABODY COALSALES COMPANY
PEABODY COALTRADE, INC.
PEABODY ENERGY GENERATION HOLDING
PEABODY ENERGY INVESTMENTS, INC.
PEABODY ENERGY SOLUTIONS, INC.
PEABODY HOLDING COMPANY, INC.
PEABODY SOUTHWESTERN COAL COMPANY
PEABODY TERMINALS, INC.
PEABODY VENEZUELA COAL CORP.
PEABODY WESTERN COAL COMPANY
PINE RIDGE COAL COMPANY
POND RIVER LAND COMPANY
POWDER RIVER COAL COMPANY
RIO ESCONDIDO COAL CORP.
RIVERS EDGE MINING, INC.
RIVERVIEW TERMINAL COMPANY
SENECA COAL COMPANY
SENTRY MINING COMPANY
SNOWBERRY LAND COMPANY
STERLING SMOKELESS COAL COMPANY
SUGAR CAMP PROPERTIES
YANKEETOWN DOCK CORPORATION
By: ____________________________________
Name:
Title:
(signatures continued next page)
BLACK BEAUTY COAL COMPANY
By: Thoroughbred, L.L.C.,
a Delaware limited liability company, its Partner
By: ____________________________________
Name:
Title:
BLACK HILLS MINING CO., LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
BLACK STALLION COAL COMPANY, LLC
By: Black Walnut Coal Company,
its Sole Member
By: ____________________________________
Name:
Title:
BTU VENEZUELA LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
COLONY BAY COAL COMPANY
By: Charles Coal Company,
a Delaware corporation, its General Partner
By: ____________________________________
Name:
Title:
(signatures continued next page)
CYPRUS CREEK LAND RESOURCES, LLC
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
KANAWHA RIVER VENTURES I, LLC
By: Snowberry Land Company,
its Member
By: ____________________________________
Name:
Title:
MUSTANG ENERGY COMPANY, L.L.C.
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
PATRIOT COAL COMPANY, L.P.
By: Bluegrass Coal Company,
a Delaware corporation, its Partner
By: ____________________________________
Name:
Title:
By: Sentry Mining Company,
a Delaware corporation, its Partner
By: ____________________________________
Name:
Title:
(signatures continued next page)
PEABODY ARCHVEYOR, L.L.C.
By: Gold Fields Mining Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
PEABODY DEVELOPMENT COMPANY, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
PEABODY DEVELOPMENT LAND HOLDINGS, LLC
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
By: Peabody Holding Company, Inc.,
a New York corporation, its Member
By: ____________________________________
Name:
Title:
PEABODY NATURAL GAS, LLC
By: Peabody Holding Company, Inc.,
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
(signatures continued next page)
PEABODY NATURAL RESOURCES COMPANY
By: Gold Fields Mining Corporation,
a Delaware corporation, its Partner
By: ____________________________________
Name:
Title:
By: Peabody America, Inc.,
a Delaware corporation, its Partner
By: ____________________________________
Name:
Title:
PEABODY POWERTREE INVESTMENTS, LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
PEABODY RECREATIONAL LANDS, L.L.C.
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
PEABODY-WATERSIDE DEVELOPMENT, L.L.C.
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
(signatures continued next page)
PEC EQUIPMENT COMPANY, LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
POINT PLEASANT DOCK COMPANY, LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
POND CREEK LAND RESOURCES, LLC
By: Peabody Coal Company,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
PORCUPINE PRODUCTION, LLC
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
PORCUPINE TRANSPORTATION, LLC
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
(signatures continued next page)
PRAIRIE STATE GENERATING COMPANY, LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
STAR LAKE ENERGY COMPANY, L.L.C.
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
THOROUGHBRED, L.L.C.
By: Peabody Holding Company, Inc.,
a New York corporation, its Member
By: ____________________________________
Name:
Title:
By: Peabody Development Company, LLC
By: Peabody Holding Company, Inc.
a New York corporation, its Sole Member
By: ____________________________________
Name:
Title:
THOROUGHBRED GENERATING COMPANY, LLC
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
(signatures continued next page)
THOROUGHBRED MINING COMPANY, L.L.C.
By: Peabody Energy Corporation,
a Delaware corporation, its Sole Member
By: ____________________________________
Name:
Title:
WILLIAMSVILLE COAL COMPANY, LLC
By: Midwest Coal Acquisition Corp.,
its Sole Member
By: ____________________________________
Name:
Title:
EXHIBIT A
Schedule I
to Credit Agreement
Pricing Grids
CONSOLIDATED REVOLVING REVOLVING TRANCHE B TRANCHE B TOTAL CREDIT FACILITY CREDIT FACILITY TERM LOAN TERM LOAN OBLIGATIONS TO APPLICABLE APPLICABLE APPLICABLE APPLICABLE CONSOLIDATED MARGIN - MARGIN - BASE MARGIN - MARGIN - BASE EBITDA RATIO LIBOR RATE RATE LIBOR RATE RATE -------------- --------------- --------------- ---------- ------------- > or = 3.75x 2.500% 1.500% 1.75% 0.75% > or = 3.25x 2.250% 1.250% 1.75% 0.75% > or = 2.75x 2.000% 1.000% 1.75% 0.75% > or = 2.25x 1.750% 0.750% 1.75% 0.75% < 2.25x 1.500% 0.500% 1.75% 0.75% |
COMMITMENT
USAGE RATIO FEE
----------- ----------
> or = 66.67% 0.250%
> or = 33.33% 0.375%
< 33.33% 0.500%
|
EXHIBIT B
FORM OF LENDER ADDENDUM
Reference is made to the Second Amended and Restated Credit Agreement, dated as of March 21, 2003 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Peabody Energy Corporation, a Delaware corporation ("Borrower"), Fleet National Bank, as administrative agent ("Administrative Agent") for the Agents and Lenders parties thereto, Fleet Securities, Inc., Wachovia Capital Markets, LLC (f/k/a Wachovia Securities, Inc.) and Lehman Brothers Inc., as arrangers ("Arrangers"), Wachovia Bank, National Association and Lehman Commercial Paper Inc., as syndication agents ("Syndication Agents") and Morgan Stanley Senior Funding, Inc. and U.S. Bank National Association, as documentation agents ("Documentation Agents"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
Upon execution and delivery of this Lender Addendum by the parties hereto as provided in Section 10.18 of the Credit Agreement, the undersigned hereby [becomes a Lender thereunder having the Commitments] [increases its commitment under the Credit Agreement] as set forth in Schedule 1 hereto, effective as of the [Acquisition Term Loan Effective Date] [___________, 2004].
THIS LENDER ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Lender Addendum may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page hereof by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.
[Signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Lender Addendum to be duly executed and delivered by their proper and duly authorized officers as of this ____ day of ______________, 200_.
By: ____________________________
Name:
Title:
Accepted and agreed:
PEABODY ENERGY CORPORATION
By: ______________________________
Name:
Title:
FLEET NATIONAL BANK, as
Administrative Agent
By:_______________________________
Name:
Title:
SCHEDULE 1
COMMITMENTS AND NOTICE ADDRESS
___________________________________
Attention: ___________________________________
Telephone: ___________________________________
Facsimile: ___________________________________
|
2. Revolving Credit Commitment:
3. Acquisition Term Loan Commitment:
EXHIBIT 10.67
AMENDMENT NO. 1 TO THE
PEABODY ENERGY CORPORATION
2004 LONG TERM INCENTIVE PLAN
WHEREAS, Peabody Energy Corporation (the "Corporation") previously established and currently maintains the Peabody Energy Corporation 2004 Long-Term Equity Incentive Plan (the "Plan");
WHEREAS, pursuant to Section 16 of the Plan, the Board of Directors of the Corporation (the "Board") may amend the Plan, subject to the limitations set forth therein; and
WHEREAS, the Corporation deems it appropriate to further specify in the Plan certain requirements relating to the administration of awards granted under the Plan and the number of shares of the Corporation's common stock available for grants under the Plan;
NOW, THEREFORE, effective as of July 20, 2004, unless otherwise provided herein, the Plan is hereby amended as follows:
I.
Section 3 of the Plan is hereby amended by adding the following at the end of the first paragraph thereof:
"Notwithstanding anything herein to the contrary, the aggregate number of shares of Common Stock available for issuance under the Plan may only be increased by the Board, subject to the approval of the Corporation's shareholders, in accordance with Section 16 hereof."
II.
Section 6 of the Plan is hereby amended by adding the following immediately after the first sentence thereof:
"Notwithstanding the foregoing, with respect to any SAR grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such SAR is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event."
III.
Section 7(c) of the Plan is hereby amended by adding the following at the end thereof:
"Notwithstanding the foregoing, with respect to any Restricted Stock grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such Restricted Stock is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event."
IV.
Section 10 of the Plan is hereby amended by adding the following immediately after the first sentence thereof:
"Notwithstanding the foregoing, with respect to any Stock Unit grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such Stock Unit is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event."
V.
Section 11(b)(iii) of the Plan is hereby amended by adding the following immediately after the first sentence thereof:
"Notwithstanding the foregoing, with respect to any Performance Award grant, the Administrator shall not establish a period of restriction or vesting period of less than two years following the date such Performance Award is granted, subject to such accelerated vesting or lapse of restriction on the basis of death, Disability, Change of Control or Recapitalization Event."
VI.
Section 17 of the Plan is hereby amended by adding the following at the end thereof:
"(m) For purposes hereof, "Change of Control" shall mean:
(i) any Person (other than a Person holding securities representing 10% or more of the combined voting power of the Corporation's outstanding securities as of May 22, 2001, the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any Corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), becomes the beneficial owner, directly or indirectly, of securities of the Corporation,
representing 50% or more of the combined voting power of the Corporation's then-outstanding securities;
(ii) during any period of twenty-four consecutive months (not
including any period prior to May 22, 2001), individuals who at the
beginning of such period constitute the Board, and any new director (other
than (A) a director nominated by a Person who has entered into an
agreement with the Corporation to effect a transaction described in clause
(i), (iii) or (iv) or (B) a director nominated by any Person (including
the Corporation) who publicly announces an intention to take or to
consider taking actions (including, but not limited to, an actual or
threatened proxy contest) which if consummated would constitute a Change
in Control) whose election by the Board or nomination for election by the
Corporation's shareholders was approved by a vote of at least
three-fourths (3/4) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute at least a majority thereof;
(iii) the consummation of any merger, consolidation, plan of arrangement, reorganization or similar transaction or series of transactions in which the Corporation is involved, other than such a transaction or series of transactions which would result in the shareholders of the Corporation immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the securities of the Corporation or such surviving entity (or the parent, if any) outstanding immediately after such transaction(s) in substantially the same proportions as their ownership immediately prior to such transaction(s); or
(iv) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or the sale or disposition by the Corporation of all or substantially all of the Corporation's assets, other than a liquidation of the Corporation into a wholly owned subsidiary.
As used in this Section 17(m), "Person" (including a "group"), has the meaning as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto).
(n) For purposes hereof, "Disability" shall mean the Participant's absence from the full-time performance of the Participant's duties pursuant to a reasonable determination made in accordance with the Corporation's disability plan that the Participant is disabled as a result of incapacity due to physical or mental illness that lasts, or is reasonably expected to last, for at least six months.
(o) For purposes hereof, "Recapitalization Event" shall mean recapitalization, reorganization, stock dividend or other special corporate restructuring which results in an extraordinary distribution to the stockholders of cash and/or securities through the use of leveraging or otherwise but which does not result in a Change of Control.
VII.
In all other respects, the Plan shall remain in full force and effect.
PEABODY ENERGY CORPORATION
/s/ SHARON D. FIEHLER
------------------------------------
Sharon D. Fiehler
EVP Human Resources & Administration
|
EXHIBIT 10.68
BOOK 2001 OF PHOTOS, PAGE 468
PART 1. LEASE RIGHTS GRANTED
This lease, entered into by and between the UNITED STATES OF AMERICA,
hereinafter called lessor, through the Bureau of Land Management (BLM), and
(Name and Address)
BTU Western Resources, Inc. 701 Market Street, Suite #735 St. Louis, MO 63101
hereinafter called lessee, is effective (date) 09/01/2004, for a period of 20 years and for so long thereafter as coal is produced in commercial quantities from the leased lands, subject to readjustment of lease terms at the end of the 20th lease year and each 10-year period thereafter.
Sec. 1. This lease is issued pursuant and subject to the terms and provisions of the:
[X] Mineral Lands Leasing Act of 1920, Act of February 25, 1920, as amended, 41 Stat. 437, 30 U.S.C. 181-287, hereinafter referred to as the Act;
[ ] Mineral Leasing Act for Acquired Lands, Act of August 7, 1947, 61 Stat.
913, 30 U.S.C. 351-359;
and to the regulations and formal orders of the Secretary of the Interior which are now or hereafter in force, when not inconsistent with the express and specific provisions herein.
Sec. 2. Lessor, in consideration of any bonuses, rents, and royalties to be paid, and the conditions and covenants to be observed as herein set forth, hereby grants and leases to lessee the exclusive right and privilege to drill for, mine, extract, remove, or otherwise process and dispose of the coal deposits in, upon, or under the following described lands: in Campbell and Converse Counties:
T. 41 N., R. 70 W., 6th P.M., Wyoming T. 41 N., R. 71 W., 6th P.M., Wyoming
Sec. 19: Lots 6-11, 12(S 1/2), 13-20; Sec. 23: Lots 8(S 1/2), 9;
Sec. 20: Lots 5(S 1/2), 6(S 1/2), 7(S 1/2), Sec. 24: Lots 1, 5(S 1/2),
8(S 1/2), 9-16; 6(S 1/2), 7(S 1/2), 8-16;
Sec. 21: Lots 5(S 1/2), 12, 13; Sec. 25: Lots 1-4, 9-10,
Sec. 28: Lots 3-6, 11, NE 1/4 SW 1/4; 12(N 1/2).
Sec. 29: Lots 1-12;
Sec. 30: Lots 5-12;
|
containing 2,956.725 acres, more or less, together with the right to construct such works, buildings, plants, structures, equipment and appliances and the right to use such on-lease rights-of-way which may be necessary and convenient in the exercise of the rights and privileges granted, subject to the conditions herein provided.
PART II. TERMS AND CONDITIONS
Sec. 1. (a) RENTAL RATE - Lessee must pay lessor rental annually and in advance for each acre or fraction thereof during the continuance of the lease at the rate of $3.00 for each lease year.
(b) RENTAL CREDITS - Rental will not be credited against either production or advance royalties for any year.
Sec. 2. (a) PRODUCTION ROYALTIES - The royalty will be percent of the value of the coal as set forth in the regulations. Royalties are due to lessor the final day of the month succeeding the calendar month in which the royalty obligation accrues.
(b) ADVANCE ROYALTIES - Upon request by the lessee, the BLM may accept, for a total of not more than 10 years, the payment of advance royalties in lieu of continued operation, consistent with the regulations. The advance royalty will be based on a percent of the value of a minimum number of tons determined in the manner established by the advance royalty regulations in effect at the time the lessee requests approval to pay advance royalties in lieu of continued operation.
Sec. 3. BONDS - Lessee must maintain in the proper office a lease bond in the amount of $219,304,000. *The BLM may require an increase in this amount when additional coverage is determined appropriate.
Sec. 4. DILIGENCE - This lease is subject to the conditions of diligent development and continued operation, except that these conditions are excused when operations under the lease are interrupted by strikes, the elements, or casualties not attributable to the lessee. The lessor, in the public interest, may suspend the condition of continued operation upon payment of advance royalties in accordance with the regulations in existence at the time of the suspension. Lessee's failure to produce coal in commercial quantities at the end of 10 years will terminate the lease. Lessee must submit an operation and reclamation plan pursuant to Section 7 of the Act not later than 3 years after lease issuance.
The lessor reserves the power to assent to or order the suspension of the terms and conditions of this lease in accordance with, inter alia, Section 39 of the Mineral Leasing Act, 30 U.S.C. 209.
Sec. 5. LOGICAL MINING UNIT (LMU) - Either upon approval by the lessor of the lessee's application or at the direction of the lessor, this lease will become an LMU or part of an LMU, subject to the provisions set forth in the regulations.
The stipulations established in an LMU approval in effect at the time of LMU approval will supersede the relevant inconsistent terms of this lease so long as the lease remains committed to the LMU. If the LMU of which this lease is a part is dissolved, the lease will then be subject to the lease terms which would have been applied if the lease had not been included in an LMU.
* To be reduced as each deferred bonus payment is made.
(Continued on page 2)
BOOK 2001 OF PHOTOS, PAGE 469
WYW154001
Sec. 6. DOCUMENTS, EVIDENCE AND INSPECTION - At such times and in such form as lessor may prescribe, lessee must furnish detailed statements showing the amounts and quality of all products removed and sold from the lease, the proceeds therefrom, and the amount used for production purposes or unavoidably lost.
Lessee must keep open at all reasonable times for the inspection by BLM the leased premises and all surface and underground improvements, works, machinery, ore stockpiles, equipment, and all books, accounts, maps, and records relative to operations, surveys, or investigations on or under the leased lands.
Lessee must allow lessor access to and copying of documents reasonably necessary to verify lessee compliance with terms and conditions of the lease.
While this lease remains in effect, information obtained under this section will be closed to inspection by the public in accordance with the Freedom of Information Act (5 U.S.C. 552).
Sec. 7. DAMAGES TO PROPERTY AND CONDUCT OF OPERATIONS - Lessee must comply at its own expense with all reasonable orders of the Secretary, respecting diligent operations, prevention of waste, and protection of other resources.
Lessee must not conduct exploration operations, other than casual use, without an approved exploration plan. All exploration plans prior to the commencement of mining operations within an approved mining permit area must be submitted to the BLM.
Lessee must carry on all operations in accordance with approved methods and practices as provided in the operating regulations, having due regard for the prevention of injury to life, health, or property, and prevention of waste, damage or degradation to any land, air, water, cultural, biological, visual, and other resources, including mineral deposits and formations of mineral deposits not leased hereunder, and to other land uses or users. Lessee must take measures deemed necessary by lessor to accomplish the intent of this lease term. Such measures may include, but are not limited to, modification to proposed siting or design of facilities, timing of operations, and specification of interim and final reclamation procedures. Lessor reserves to itself the right to lease, sell, or otherwise dispose of the surface or other mineral deposits in the lands and the right to continue existing uses and to authorize future uses upon or in the leased lands, including issuing leases for mineral deposits not covered hereunder and approving easements or rights-of-way. Lessor must condition such uses to prevent unnecessary or unreasonable interference with rights of lessee as may be consistent with concepts of multiple use and multiple mineral development.
Sec. 8. PROTECTION OF DIVERSE INTERESTS, AND EQUAL OPPORTUNITY - Lessee must:
pay when due all taxes legally assessed and levied under the laws of the State
or the United States; accord all employees complete freedom of purchase; pay all
wages at least twice each month in lawful money of the United States; maintain a
safe working environment in accordance with standard industry practices;
restrict the workday to not more than 8 hours in any one day for underground
workers, except in emergencies; and take measures necessary to protect the
health and safety of the public. No person under the age of 16 years should be
employed in any mine below the surface. To the extent that laws of the State in
which the lands are situated are more restrictive than the provisions in this
paragraph, then the State laws apply.
Lessee will comply with all provisions of Executive Order No. 11246 of September 24, 1965, as amended, and the rules, regulations, and relevant orders of the Secretary of Labor. Neither lessee nor lessee's subcontractors should maintain segregated facilities.
Sec. 9. (a) TRANSFERS
[X] This lease may be transferred in whole or in part to any person, association or corporation qualified to hold such lease interest.
[ ] This lease may be transferred in whole or in part to another public body or to a person who will mine the coal on behalf of, and for the use of, the public body or to a person who for the limited purpose of creating a security interest in favor of a lender agrees to be obligated to mine the coal on behalf of the public body.
[ ] This lease may only be transferred in whole or in part to another small business qualified under 13 CFR 121.
Transfers of record title, working or royalty interest must be approved in accordance with the regulations.
(b) RELINQUISHMENT - The lessee may relinquish in writing at any time all rights under this lease or any portion thereof as provided in the regulations. Upon lessor's acceptance of the relinquishment, lessee will be relieved of all future obligations under the lease or the relinquished portion thereof, whichever is applicable.
Sec. 10. DELIVERY OF PREMISES, REMOVAL OF MACHINERY, EQUIPMENT, ETC. - At such time as all portions of this lease are returned to lessor, lessee must deliver up to lessor the land leased, underground timbering, and such other supports and structures necessary for the preservation of the mine workings on the leased premises or deposits and place all workings in condition for suspension or abandonment. Within 180 days thereof, lessee must remove from the premises all other structures, machinery, equipment, tools, and materials that it elects to or as required by the BLM. Any such structures, machinery, equipment, tools, and materials remaining on the leased lands beyond 180 days, or approved extension thereof, will become the property of the lessor, but lessee may either remove any or all such property or continue to be liable for the cost of removal and disposal in the amount actually incurred by the lessor. If the surface is owned by third parties, lessor will waive the requirement for removal, provided the third parties do not object to such waiver. Lessee must, prior to the termination of bond liability or at any other time when required and in accordance with all applicable laws and regulations, reclaim all lands the surface of which has been disturbed, dispose of all debris or solid waste, repair the offsite and onsite damage caused by lessee's activity or activities incidental thereto, and reclaim access roads or trails.
Sec.11. PROCEEDINGS IN CASE OF DEFAULT - If lessee fails to comply with applicable laws, existing regulations, or the terms, conditions and stipulations of this lease, and the noncompliance continues for 30 days after written notice thereof, this lease will be subject to cancellation by the lessor only by judicial proceedings. This provision will not be construed to prevent the exercise by lessor of any other legal and equitable remedy, including waiver of the default. Any such remedy or waiver will not prevent later cancellation for the same default occurring at any other time.
Sec. 12. HEIRS AND SUCCESSORS-IN-INTEREST - Each obligation of this lease will extend to and be binding upon, and every benefit hereof will inure to, the heirs, executors, administrators, successors, or assigns of the respective parties hereto.
Sec.13. INDEMNIFICATION - Lessee must indemnify and hold harmless the United States from any and all claims arising out of the lessee's activities and operations under this lease.
Sec. 14. SPECIAL STATUTES - This lease is subject to the Clean Water Act (33 U.S.C. 1252 et seq.), the Clean Air Act (42 U.S.C. 4274 et seq.), and to all other applicable laws pertaining to exploration activities, mining operations and reclamation, including the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1201 et seq.).
Sec. 15. SPECIAL STIPULATIONS
See Attached Pages 5 through 8.
Continued on Page 3 (Form 3400-12, Page 2)
BOOK 2001 OF PHOTOS, PAGE 470
Sec. 15. SPECIAL STIPULATIONS (Cont'd.) -
The Privacy Act of 1974 and the regulation in 43 CFR 2.48(d) provide that you be furnished with the following information in connection with information required by this application.
AUTHORITY: 30 U.S.C. 181-287 and 30 U.S.C. 351-359.
PRINCIPAL PURPOSE: BLM will use the information you provide to process your application and determine if you are eligible to hold a lease on BLM Land.
ROUTINE USES: BLM will only disclose the information according to the regulations at 43 CFR 2.56(d).
EFFECT OF NOT PROVIDING INFORMATION: Disclosing the information is necessary to receive a benefit. Not disclosing the information may result in BLM's rejecting your request for a lease.
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.) requires us to inform you that:
This information is being collected to authorize and evaluate proposed exploration and mining operations on public lands.
Response to the provisions of this lease form is mandatory for the types of activities specified.
BLM would like you to know that you do not have to respond to this or any other Federal agency-sponsored information collection unless it displays a currently valid OMB control number.
BURDEN HOURS STATEMENT
Public reporting burden for this form is estimated to average one hour per response including the time for reading the instructions and provisions, and completing and reviewing the form. Direct comments regarding the burden estimate or any other aspect of this form to: U.S. Department of the Interior, Bureau of Land Management (1004-0073), Bureau Information Collection Clearance Officer (WO-630), Mail Stop 401 LS, Washington, D.C. 20240.
THE UNITED STATES OF AMERICA
BTU Western Resources, Inc. By
--------------------------------------- -------------------------------
(Company or Lessee Name)
/s/ KEMAL WILLIAMSON /s/ ALAN L. KESTERKE
--------------------------------------- ---------------------------------
(Signature of Lessee) (BLM)
President Associate State Director
--------------------------------------- ---------------------------------
(Title) (Title)
7-09-04 9-22-04
--------------------------------------- ---------------------------------
(Date) (Date)
|
BOOK 2001 OF PHOTOS, PAGE 471
DEFERRED BONUS PAYMENT SCHEDULE
TO BE ATTACHED TO AND MADE A PART OF
FEDERAL COAL LEASE WYW154001
This lease is issued subject to the payment of $219,294,147.00 by the lessee as a deferred bonus. Payment of the deferred bonus by the lessee shall be made as follows:
Total Amount of Bid $274,117,684.00.
One-fifth in the amount of $54,823,537.00 submitted on the date of sale. Balance is due and payable in equal annual installments on the first four anniversary dates of the lease:
One-fifth in the amount of $54,823,536.75 due on September 1, 2005.
One-fifth in the amount of $54,823,536.75 due on September 1, 2006.
One-fifth in the amount of $54,823,536.75 due on September 1, 2007.
One-fifth in the amount of $54,823,536.75 due on September 1, 2008.
BOOK 2001 OF PHOTOS, PAGE 472
WYW154001
SEC. 15. SPECIAL STIPULATIONS -
In addition to observing the general obligations and standards of performance set out in the current regulations, the lessee shall comply with and be bound by the following special stipulations.
These stipulations are also imposed upon the lessee's agents and employees. The failure or refusal of any of these persons to comply with these stipulations shall be deemed a failure of the lessee to comply with the terms of the lease. The lessee shall require his agents, contractors and subcontractors involved in activities concerning this lease to include these stipulations in the contracts between and among them. These stipulations may be revised or amended, in writing, by the mutual consent of the lessor and the lessee at any time to adjust to changed conditions or to correct an oversight.
(a) CULTURAL RESOURCES - (1) Before undertaking any activities that may disturb the surface of the leased lands, the lessee shall conduct a cultural resource intensive field inventory in a manner specified by the Authorized Officer of the BLM or of the surface managing agency, if different, on portions of the mine plan area and adjacent areas, or exploration plan area, that may be adversely affected by lease-related activities and which were not previously inventoried at such a level of intensity. The inventory shall be conducted by a qualified professional cultural resource specialist (i.e., archeologist, historian, historical architect, as appropriate), approved by the Authorized Officer of the surface managing agency (BLM, if the surface is privately owned), and a report of the inventory and recommendations for protecting any cultural resources identified shall be submitted to the Assistant Director of the Western Support Center of the Office of Surface Mining, the Authorized Office of the BLM, if activities are associated with coal exploration outside an approved mining permit area (hereinafter called Authorized Officer), and the Authorized Officer of the surface managing agency, if different. The lessee shall undertake measures, in accordance with instructions from the Assistant Director, or Authorized Officer, to protect cultural resources on the leased lands. The lessee shall not commence the surface disturbing activities until permission to proceed is given by the Assistant Director or Authorized Officer.
(2) The lessee shall protect all cultural properties that have been determined eligible to the National Register of Historic Places within the lease area from lease-related activities until the cultural resource mitigation measures can be implemented as part of an approved mining and reclamation or exploration plan unless modified by mutual agreement in consultation with the State Historic Preservation Officer.
(3) The cost of conducting the inventory, preparing reports, and carrying out mitigation measures shall be borne by the lessee.
(4) If cultural resources are discovered during operations under this lease, the lessee shall immediately bring them to the attention of the Assistant Director or Authorized Officer, or the Authorized Officer of the surface managing agency, if the Assistant Director is not available. The lessee shall not disturb such resources except as may be subsequently authorized by the Assistant Director or Authorized Officer.
Within two (2) working days of notification, the Assistant Director or Authorized Officer will evaluate or have evaluated any cultural resources discovered and will determine if any action may be required to protect or
BOOK 2001 OF PHOTOS, PAGE 473
WYW154001
SEC. 15. SPECIAL STIPULATIONS (Continued) -
preserve such discoveries. The cost of data recovery for cultural resources discovered during lease operations shall be borne by the lessee unless otherwise specified by the Authorized Officer of the BLM or of the surface managing agency, if different.
(5) All cultural resources shall remain under the jurisdiction of the United States until ownership is determined under applicable law.
(b) PALEONTOLOGICAL RESOURCES - If paleontological resources, either large and conspicuous, and/or of significant scientific value are discovered during mining operations, the find will be reported to the Authorized Officer immediately. Mining operations will be suspended within 250 feet of said find. An evaluation of the paleontological discovery will be made by a BLM approved professional paleontologist within five (5) working days, weather permitting, to determine the appropriate action(s) to prevent the potential loss of any significant paleontological value. Operations with 250 feet of such discovery will not be resumed until written authorization to proceed is issued by the Authorized Officer. The lessee shall bear the cost of any required paleontological appraisals, surface collection of fossils, or salvage of any large conspicuous fossils or significant scientific interest discovered during the operations.
(c) THREATENED AND ENDANGERED SPECIES - The lease area may now or hereafter contain plants, animals, or their habitats determined to be threatened or endangered under the Endangered Species Act of 1973, as amended, 16 U.S.C. 1531 et seq., or that have other special status. The Authorized Officer may recommend modifications to exploration and development proposals to further conservation and management objectives or to avoid activity that will contribute to a need to list such species or their habitat or to comply with any biological opinion issued by the Fish and Wildlife Service for the proposed action. The Authorized Officer will not approve any ground-disturbing activity that may affect any such species or critical habitat until it completes its obligations under applicable requirements of the Endangered Species Act. The Authorized Officer may require modifications to, or disapprove a proposed activity that is likely to result in jeopardy to the continued existence of a proposed or listed threatened or endangered species, or result in the destruction or adverse modification of designated or proposed critical habitat.
The lessee shall comply with instructions from the Authorized Officer of the surface managing agency (BLM, if the surface is private) for ground disturbing activities associated with coal exploration on federal coal leases prior to approval of a mining and reclamation permit or outside an approved mining and reclamation permit area. The lessee shall comply with instructions from the Authorized Officer of the Office of Surface Mining Reclamation and Enforcement, or his designated representative, for all ground-disturbing activities taking place within an approved mining and reclamation permit area or associated with such a permit.
BOOK 2001 OF PHOTOS, PAGE 474
WYW154001
SEC. 15. SPECIAL STIPULATIONS (Continued) -
(d) MULTIPLE MINERAL DEVELOPMENT - Operations will not be approved which, in the opinion of the Authorized Officer, would unreasonably interfere with the orderly development and/or production from a valid existing mineral lease issued prior to this one for the same lands.
(e) OIL AND GAS/COAL RESOURCES - The BLM realizes that coal mining operations conducted on Federal coal leases issued within producing oil and gas fields may interfere with the economic recovery of oil and gas; just as Federal oil and gas leases issued in a Federal coal lease area may inhibit coal recovery. BLM retains the authority to alter and/or modify the resource recovery and protection plans for coal operations and/or oil and gas operations on those lands covered by Federal mineral leases so as to obtain maximum resource recovery.
(f) RESOURCE RECOVERY AND PROTECTION - Notwithstanding the approval of a resource recovery and protection plan (R2P2) by the BLM, lessor reserves the right to seek damages against the operator/lessee in the event (i) the operator/lessee fails to achieve maximum economic recovery (MER) (as defined at 43 CFR 3480.0-5(21)) of the recoverable coal reserves or (ii) the operator/lessee is determined to have caused a wasting of recoverable coal reserves. Damages shall be measured on the basis of the royalty that would have been payable on the wasted or unrecoverable coal.
The parties recognize that under an approved R2P2, conditions may require a modification by the operator/lessee of that plan. In the event a coal bed or portion thereof is not to be mined or is rendered unmineable by the operation, the operator/lessee shall submit appropriate justification to obtain approval by the Authorized Officer to lease such reserves unmined. Upon approval by the Authorized Officer, such coal beds or portions thereof shall not be subject to damages as described above. Further, nothing in this section shall prevent the operator/lessee from exercising its right to relinquish all or portion of the lease as authorized by statue and regulation.
In the event the Authorized Officer determines that the R2P2, as approved, will not attain MER as the result of changed conditions, the Authorized Officer will give proper notice to the operator/lessee as required under applicable regulations. The Authorized Office will order a modification if necessary, identifying additional reserves to be mined in order to attain MER. Upon a final administrative or judicial ruling upholding such an ordered modification, any reserves left unmined (wasted) under that plan will be subject to damages as described in the first paragraph under this section.
Subject to the right to appeal hereinafter set forth, payment of the value of the royalty on such unmined recoverable coal reserves shall become due and payable upon determination by the Authorized Officer that the coal reserves have been rendered unmineable or at such time that the operator/lessee had demonstrated an unwillingness to extract the coal.
The BLM may enforce this provision either by issuing a written decision requiring payment of the MMS demand for such royalties, or by issuing a notice of non-compliance. A decision or notice of non-compliance issued by the lessor that payment is due under this stipulation is appealable as allowed by law.
BOOK 2001 OF PHOTOS, PAGE 475
WYW154001
SEC. 15. SPECIAL STIPULATIONS (Continued) -
(g) PUBLIC LAND SURVEY PROTECTION - The lessee will protect all survey monuments, witness corners, reference monuments, and bearing trees against destruction, obliteration, or damage during operations on the lease areas. If any monuments, corners or accessories are destroyed, obliterated, or damaged by this operation, the lessee will hire an appropriate county surveyor or registered land surveyor to reestablish or restore the monuments, corners, or accessories at the same locations, using the surveying procedures in accordance with the "Manual of Surveying Instructions for the Survey of the Public Lands of the United States." The survey will be recorded in the appropriate county records, with a copy sent to the Authorized Officer.
(h) RAILROAD RIGHT-OF-WAY - No mining activity of any kind may be conducted within the Burlington Northern/Santa Fe and Union Pacific railroad right-of-way. The lessee shall recover all legally and economically recoverable coal from all leased lands not within the foregoing right-of-way. Lessee shall pay all royalties on any legally and economically recoverable coal which it fails to mine without the written permission of the Authorized Officer.
STATE OF WYOMING }
Campbell County } ss.
Filed for record this 27th day of September A.D., 2004 at 2:30 o'clock P.M. and recorded in Book 2001 of Photos on page 468-475 Fees $29.00 839836
RECORDED (ck) By
/s/ SUSAN SAUNDERS ABSTRACTED (ck) Deputy /S/ ELNA MILLER
--------------------------------------------- INDEXED -----------------------------------------
County Clerk and Ex-Officio Register of Deeds CHECKED (ck)
|
(CAMPBELL COUNTY CLERK STAMP)
EXHIBIT 10.69
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT (the "Amendment") dated as of February 27, 2003, is made by and among P & L Receivables Company, LLC, as seller (the "Seller"), Peabody Energy Corporation, as initial Servicer (the "Servicer"), Big Sky Coal Company, Caballo Coal Company, Eastern Associated Coal Corp., Peabody Coal Sales Company, Peabody Coal Company, Peabody Western Coal Company, Powder River Coal Company, Peabody Holding Company, Inc., Peabody Coaltrade, Inc., as Sub-Servicers, Market Street Funding Corporation, as Issuer (the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, as administrator (the "Administrator").
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Receivables Purchase Agreement dated as of February 20, 2002, by and among the Seller, the Servicer, the Sub-Servicers, the Issuer, and the Administrator (the "Receivables Purchase Agreement"), and desire to amend the terms thereof as set forth herein.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:
1. Definitions.
Defined terms used herein unless otherwise defined herein shall have the meanings ascribed to them in the Receivables Purchase Agreement as amended by this Amendment.
2. Amendments to Receivables Purchase Agreement.
(a) Exhibit I, Definition of Special Obligor. The definition of Special Obligor set forth in Exhibit I of the Receivables Purchase Agreement is hereby amended and restated as follows:
""Special Obligor" means each of the Navajo Project and the Mohave Project (each, a "Project"), for so long as, with respect to each Project, (a) the agreement among the project participants requires that upon the default of any participant, the non-defaulting participants are required to cure any such default, and (b) Peabody represents and warrants that, to its knowledge, the statement set forth in subsection (a) above is true, complete and correct. Each Project shall be deemed to be a "Special Group A Obligor" hereunder for so long as such Project has at least one project participant with the rating of a Group A Obligor; each Project shall be deemed to be a "Special Group B Obligor" hereunder for so long as such Project has at least one project participant with the rating of a Group B Obligor (but no project participants with the rating of a Group A Obligor); each Project shall be deemed to be a "Special Group C Obligor" hereunder for so long as such Project has at least one project participant with the rating of a Group C Obligor (but no project participants with the rating of a Group A Obligor or a Group B Obligor); and each
Project shall be deemed to be a "Special Group D Obligor" hereunder for so long as such Project has no project participants with the rating of a Group A Obligor, a Group B Obligor or a Group C Obligor."
(b) Exhibit III, Subsection 2(p). A new Subsection 2(p) is hereby added to Exhibit III of the Receivables Purchase Agreement as follows:
"(p) The agreement among the project participants of the Navajo Project requires that upon the default of any participant, the non-defaulting participants are required to cure any such default."
(c) Exhibit IV, Subsection 2(k). Subsection 2(k) of Exhibit IV of the Receivables Purchase Agreement is hereby amended and restated as follows:
"(k) Mohave Project and Navajo Project. Peabody shall notify the Administrator if (1) a Responsible Officer of Peabody obtains actual knowledge that the documents and agreements governing the Mohave Project are amended in any manner which would cause the representations and warranties set forth in Section 2(o) to be incorrect or untrue in any respect, or (2) a Responsible Officer of Peabody obtains actual knowledge that the documents and agreements governing the Navajo Project are amended in any manner which would cause the representations and warranties set forth in Section 2(p) to be incorrect or untrue in any respect."
3. Representations and Warranties. Each of the Seller, the Servicer, and the Sub-Servicers hereby represents and warrants to the Issuer and Administrator as follows:
A. The representations and warranties of the Seller, the Servicer, and the Sub-Servicers contained in the Receivables Purchase Agreement are true and correct on and as of the date hereof with the same force and effect as though made by the Seller, the Servicer, and the Sub-Servicers on such date, except to the extent that any such representation or warranty expressly relates solely to a previous date; and
B. Each of the Seller, the Servicer, and the Sub-Servicers is in compliance with all terms, conditions, provisions, and covenants contained in the Receivables Purchase Agreement and the execution, delivery, and performance of this Amendment have been duly authorized by all necessary corporate action, require no governmental approval, and will neither contravene, conflict with, nor result in the breach of any law, charter, articles, or certificate of incorporation, bylaws, or agreement governing or binding upon any of the Seller, the Servicer, and the Sub-Servicers or any of their property; and, no Unmatured Termination Event or Termination Event has occurred and is continuing or would result from the making of this Amendment.
4. Conditions of Effectiveness of this Amendment. The effectiveness of this Amendment is expressly conditioned upon satisfaction of each of the following conditions precedent:
A. Legal Details; Counterparts. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance satisfactory to the Administrator, and the Administrator shall have received from the Seller, the Issuer, the Servicer and the Sub-Servicers all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Administrator.
B. No Default. As of the date hereof, no Unmatured Termination Event or Termination Event has occurred and is continuing and each of the Seller, the Servicer, and the Sub-Servicers by executing this Amendment confirms the same and also confirms the accuracy of the representations and warranties in Section 3 above.
5. Amendment. The Receivables Purchase Agreement referred to herein and certain of the exhibits and schedules thereto are hereby amended in accordance with the terms hereof and any reference to the Receivables Purchase Agreement in any document, instrument, or agreement shall hereafter mean and include the Receivables Purchase Agreement, including such schedules and exhibits, as amended hereby.
6. Force and Effect. Each of the Seller, the Servicer, and the Sub-Servicers reconfirms, restates, and ratifies the Receivables Purchase Agreement, the Transaction Documents and all other documents executed in connection therewith except to the extent any such documents are expressly modified by this Amendment and each of the Seller, the Servicer, and the Sub-Servicers confirms that all such documents have remained in full force and effect since the date of their execution.
7. No Waiver. Except as expressly provided herein, this Amendment does not and shall not be deemed to constitute a waiver by Issuer of any Termination Event under the Receivables Purchase Agreement, or of any event which with the passage of time or the giving of notice or both would constitute a Termination Event.
9. Governing Law. This Amendment shall be deemed to be a contract under the laws of the State of Illinois and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without regard to its conflict of laws principles.
10. Counterparts. This Amendment may be signed in any number of counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
11. Effective Date. This Amendment shall be effective as of and shall be dated as of the date of satisfaction of all conditions set forth in Section 4 of this Amendment.
[SIGNATURES BEGIN ON NEXT PAGE]
[SIGNATURE PAGE 1 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
IN WITNESS WHEREOF and intending to be legally bound hereby, the parties hereto have executed this Amendment as of the date first above written.
P & L RECEIVABLES COMPANY, LLC
as Seller
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
PEABODY ENERGY CORPORATION,
as initial Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
[SIGNATURE PAGE 2 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
BIG SKY COAL COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
CABALLO COAL COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
EASTERN ASSOCIATED COAL CORP.,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
PEABODY COAL SALES COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
[SIGNATURE PAGE 3 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PEABODY COAL COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
PEABODY WESTERN COAL COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
POWDER RIVER COAL COMPANY,
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
PEABODY HOLDING COMPANY, INC.
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
[SIGNATURE PAGE 4 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PEABODY COALTRADE, INC.
as Sub-Servicer
By: /s/ Steven F. Schaab
-----------------------
Name: Steven F. Schaab
Title: Vice President
|
[SIGNATURE PAGE 5 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
MARKET STREET FUNDING CORPORATION,
as Issuer
By: /s/ Evelyn Echevarria
-----------------------
Name: Evelyn Echevarria
Title: Vice President
|
[SIGNATURE PAGE 6 OF 6 TO FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By: /s/ John Smathers
-----------------------
Name: John Smathers
Title: Vice President
|
EXHIBIT 10.70
SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT (the "Amendment") dated as of February 18, 2004, is made by and among P & L Receivables Company, LLC, as seller (the "Seller"), Peabody Energy Corporation, as initial Servicer (the "Servicer"), Big Sky Coal Company, Caballo Coal Company, Eastern Associated Coal Corp., Peabody Coal Sales Company, Peabody Coal Company, Peabody Western Coal Company, Powder River Coal Company, Peabody Holding Company, Inc., Peabody Coaltrade, Inc., as Sub-Servicers, Market Street Funding Corporation, as Issuer (the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, as administrator (the "Administrator").
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Receivables Purchase Agreement dated as of February 20, 2002, by and among the Seller, the Servicer, the Sub-Servicers, the Issuer, and the Administrator, as amended by that certain First Amendment to Liquidity Asset Purchase Agreement dated as of February 27, 2003 (the "Receivables Purchase Agreement"), and desire to amend the terms thereof as set forth herein.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:
1. Definitions.
Defined terms used herein unless otherwise defined herein shall have the meanings ascribed to them in the Receivables Purchase Agreement as amended by this Amendment.
2. Amendments to Receivables Purchase Agreement.
(a) Exhibit I, Definition of "Defaulted Receivable". The definition of "Defaulted Receivable" set forth in Exhibit I of the Receivables Purchase Agreement is hereby amended and restated as follows:
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for more than 60 days from the due date for such payment (which shall be determined without regard to any credit memos or credit balances available to the obligor), or
(b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto, or (ii) that has been written off the Seller's books as uncollectible.
(b) Exhibit I, Definition of "Eligible Receivable". The definition of "Eligible Receivable" set forth in Exhibit I of the Receivables Purchase Agreement is hereby amended and restated as follows:
(i) Clause (a) of the definition of "Eligible Receivable" is hereby amended and restated to read as follows:
"(a) the Obligor of which is (i) a United States
resident or if such Obligor is not a United States resident: (A)
such Pool Receivable must result from goods sold and shipped from
the Originator in the United States and payment for such goods must
be denominated and payable only in Dollars and payable to an
Originator at a Lock-Box Account, (B) if such Obligor is a resident
of Canada, the total of all Eligible Receivables the Obligors of
which are Canadian residents does not exceed 3% (or, if at any time
the foreign currency rating of Canada falls below A by Standard &
Poor's or A2 by Moody's, 2%) of all Eligible Receivables and, and
(C) are if such Obligor is neither a U.S. nor a Canadian resident,
the total of all Eligible Receivables the Obligors of which are both
non-U.S. and non-Canadian residents does not exceed 5% of all
Eligible Receivables, (ii) not a government or a governmental
subdivision, affiliate or agency, except that up to 3% of all
Eligible Receivables may consist of Receivables the Obligors of
which are governments, governmental subdivisions, affiliates or
agencies, provided, however, that TVA shall not be subject to the
restrictions of this subsection (ii), (iii) not subject to any
action of the type described in paragraph (f) of Exhibit V to the
Agreement, (iv) not an Affiliate of Peabody or any other Originator,
and (v) not an Obligor as to which the Administrator, in its
reasonable business judgment, has notified the Seller that such
Obligor is not acceptable."
(ii) A new clause (q) is hereby added to the definition of "Eligible Receivable, to follow immediately after existing clause (p) and to read as set forth below, and the period at the end of clause (p) is deleted and the following words are inserted in lieu thereof: ", and":
"(q) that is not a Receivable considered to be a "quality accrual" (as reported on the monthly Information Package), except that up to 5% of Eligible Receivables may be "quality accruals".
3. Representations and Warranties. Each of the Seller, the Servicer, and the Sub-Servicers hereby represents and warrants to the Issuer and Administrator as follows:
A. The representations and warranties of the Seller, the Servicer, and the Sub-Servicers contained in the Receivables Purchase Agreement are true and correct on and as of the date hereof with the same force and effect as though made by the Seller, the Servicer, and the
Sub-Servicers on such date, except to the extent that any such representation or warranty expressly relates solely to a previous date; and
B. Each of the Seller, the Servicer, and the Sub-Servicers is in compliance with all terms, conditions, provisions, and covenants contained in the Receivables Purchase Agreement and the execution, delivery, and performance of this Amendment have been duly authorized by all necessary corporate action, require no governmental approval, and will neither contravene, conflict with, nor result in the breach of any law, charter, articles, or certificate of incorporation, bylaws, or agreement governing or binding upon any of the Seller, the Servicer, and the Sub-Servicers or any of their property; and, no Unmatured Termination Event or Termination Event has occurred and is continuing or would result from the making of this Amendment.
4. Conditions of Effectiveness of this Amendment. The effectiveness of this Amendment is expressly conditioned upon satisfaction of each of the following conditions precedent:
A. Legal Details; Counterparts. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance satisfactory to the Administrator, and the Administrator shall have received from the Seller, the Issuer, the Servicer and the Sub-Servicers all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Administrator.
B. No Default. As of the date hereof, no Unmatured Termination Event or Termination Event has occurred and is continuing and each of the Seller, the Servicer, and the Sub-Servicers by executing this Amendment confirms the same and also confirms the accuracy of the representations and warranties in Section 3 above.
5. Amendment. The Receivables Purchase Agreement referred to herein and certain of the exhibits and schedules thereto are hereby amended in accordance with the terms hereof and any reference to the Receivables Purchase Agreement in any document, instrument, or agreement shall hereafter mean and include the Receivables Purchase Agreement, including such schedules and exhibits, as amended hereby.
6. Force and Effect. Each of the Seller, the Servicer, and the Sub-Servicers reconfirms, restates, and ratifies the Receivables Purchase Agreement, the Transaction Documents and all other documents executed in connection therewith except to the extent any such documents are expressly modified by this Amendment and each of the Seller, the Servicer, and the Sub-Servicers confirms that all such documents have remained in full force and effect since the date of their execution.
7. No Waiver. Except as expressly provided herein, this Amendment does not and shall not be deemed to constitute a waiver by Issuer of any Termination Event under the Receivables Purchase
Agreement, or of any event which with the passage of time or the giving of notice or both would constitute a Termination Event.
9. Governing Law. This Amendment shall be deemed to be a contract under the laws of the State of Illinois and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without regard to its conflict of laws principles.
10. Counterparts. This Amendment may be signed in any number of counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
11. Effective Date. This Amendment shall be effective as of and shall be dated as of the date of satisfaction of all conditions set forth in Section 4 of this Amendment.
[SIGNATURES BEGIN ON NEXT PAGE]
[SIGNATURE PAGE 1 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
IN WITNESS WHEREOF and intending to be legally bound hereby, the parties hereto have executed this Amendment as of the date first above written.
P & L RECEIVABLES COMPANY, LLC
as Seller
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
PEABODY ENERGY CORPORATION,
as initial Servicer
By: /s/ L. Brent Stottlemyre
----------------------------------------------
Name: L. Brent Stottlemyre
Title: Vice President - Finance and Controller
|
[SIGNATURE PAGE 2 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
BIG SKY COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
CABALLO COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
EASTERN ASSOCIATED COAL CORP.,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
PEABODY COAL SALES COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
[SIGNATURE PAGE 3 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PEABODY COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
PEABODY WESTERN COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
POWDER RIVER COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
PEABODY HOLDING COMPANY, INC.
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
[SIGNATURE PAGE 4 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PEABODY COALTRADE, INC.
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
----------------------------------------------
Name: Walter L. Hawkins, Jr.
Title: Vice President and Treasurer
|
[SIGNATURE PAGE 5 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
MARKET STREET FUNDING CORPORATION,
as Issuer
By: /s/ Evelyn Echevarria
----------------------------------------------
Name: Evelyn Echevarria
Title: Vice President
|
[SIGNATURE PAGE 6 OF 6 TO SECOND AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT]
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By: /s/ John Smathers
Name: John Smathers
Title: Vice President
|
EXHIBIT 10.71
THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT (the "Amendment"), dated as of September 16, 2004, is made by and among P & L RECEIVABLES COMPANY, LLC, as seller (the "Seller"), PEABODY ENERGY CORPORATION, as initial Servicer (the "Servicer"), ARCLAR COMPANY, LLC, BLACK BEAUTY COAL COMPANY, CABALLO COAL COMPANY, EASTERN ASSOCIATED COAL CORP., PEABODY COALSALES COMPANY, PEABODY COAL COMPANY, PEABODY WESTERN COAL COMPANY, POWDER RIVER COAL COMPANY, PEABODY HOLDING COMPANY, INC., PEABODY COALTRADE, INC., TWENTYMILE COAL COMPANY (each a "Sub-Servicer" and collectively, the "Sub-Servicers"), as Sub-Servicers, MARKET STREET FUNDING CORPORATION, as Issuer (the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, as administrator (the "Administrator").
WITNESSETH:
WHEREAS, certain of the parties hereto are parties to that certain Receivables Purchase Agreement dated as of February 20, 2002 by and among the Seller, the Servicer, certain of the Sub-Servicers, the Issuer and the Administrator, as amended by that certain First Amendment to Receivables Purchase Agreement dated as of February 27, 2003, and the Second Amendment to Receivables Purchase Agreement dated February 18, 2004 (the "Receivables Purchase Agreement") and desire to amend the terms thereof as set forth herein.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:
1. Definitions. Defined terms used herein unless otherwise defined herein shall have the meanings ascribed to them in the Receivables Purchase Agreement as amended by this Amendment.
2. Amendments to Receivables Purchase Agreement.
(a) Exhibit I Definition of "Facility Termination Date". The definition of "Facility Termination Date" set forth in Exhibit I of the Receivables Purchase Agreement is hereby amended and restated as follows:
"Facility Termination Date" means the earliest to occur of:
(a) September 16, 2009 (b) the date determined pursuant to Section 2.2 of
the Agreement, (c) the date the Purchase Limit reduces to zero pursuant to
Section 1.1(b) of the Agreement, (d) the date that the commitments of the
Purchasers terminate under the Liquidity Agreement, and (e) the Issuer
shall fail to cause the amendment or modification of any Transaction
Document or related opinion as
required by Moody's or Standard and Poor's, and such failure shall continue for 30 days after such amendment is initially requested."
(b) Exhibit I. Definition of "Purchase Limit". The definition of "Purchase Limit" set forth in Exhibit I of the Receivables Purchase Agreement is hereby amended and restated as follows:
"Purchase Limit" means $225,000,000, as such amount may be reduced pursuant to Section 1.1 (b) of the Agreement. References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Capital."
3. Representations and Warranties. Each of the Seller, the Servicer, and the Sub-Servicers hereby represents and warrants to the Issuer and Administrator, with respect to itself, as follows:
(a) The representations and warranties of such Seller, Servicer, or Sub-Servicer, as the case may be, contained in the Receivables Purchase Agreement are true and correct on and as of the date hereof with the same force and effect as though made by such Seller, Servicer, or Sub-Servicer on such date, except to the extent that any such representation or warranty expressly relates solely to a previous date; and
(b) Each of such Seller, Servicer, or Sub-Servicer, as the case may be, is in compliance with all terms, conditions, provisions, and covenants contained in the Receivables Purchase Agreement and the execution, delivery, and performance of this Amendment have been duly authorized by all necessary corporate action, require no governmental approval, and will neither contravene, conflict with, nor result in the breach of any law, charter, articles, or certificate of incorporation, bylaws, or agreement governing or binding upon such Seller, Servicer, or Sub-Servicer or any of their property; and, no Unmatured Termination Event or Termination Event has occurred and is continuing or would result from the making of this Amendment.
4. Conditions of Effectiveness of this Amendment. The effectiveness of this Amendment is expressly conditioned upon satisfaction of each of the following conditions precedent:
(a) Legal Details; Counterparts. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance satisfactory to the Administrator, and the Administrator shall have received from the Seller, the Issuer, the Servicer and the Sub-Servicers all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Administrator.
(b) No Default. As of the date hereof, no Unmatured Termination Event or Termination Event has occurred and is continuing and each of the Seller, the Servicer, and the
Sub-Servicers by executing this Amendment confirms the same and also confirms the accuracy of the representations and warranties that it makes in Section 3 above.
5. Amendment. The Receivables Purchase Agreement referred to herein and certain of the exhibits and schedules thereto are hereby amended in accordance with the terms hereof and any reference to the Receivables Purchase Agreement in any document, instrument, or agreement shall hereafter mean and include the Receivables Purchase Agreement, including such schedules and exhibits, as amended hereby.
6.Force and Effect. Each of the Seller, the Servicer, and the Sub-Servicers reconfirms, restates, and ratifies the Receivables Purchase Agreement, the Transaction Documents and all other documents executed in connection therewith except to the extent any such documents are expressly modified by this Amendment and each of the Seller, the Servicer, and the Sub-Servicers confirms that all such documents have remained in full force and effect since the date of their execution.
7.No Waiver. Except as expressly provided herein, this Amendment does not and shall not be deemed to constitute a waiver by Issuer of any Termination Event under the Receivables Purchase Agreement, or of any event which with the passage of time or the giving of notice or both would constitute a Termination Event.
8.Governing Law. This Amendment shall be deemed to be a contract under the laws of the State of Illinois and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without regard to its conflict of laws principles.
9.Counterparts. This Amendment may be signed in any number of counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
10. Effective Date. This Amendment shall be effective as of and shall be dated as of the date of satisfaction of all conditions set forth in Section 4 of this Amendment.
11. Effective Date of Joinder. Arclar Company, LLC, Black Beauty Coal Company and Twentymile Coal Company have joined the Sale Agreement as Originators through that certain Joinder Agreement, dated the same date hereof and effective immediately prior to the Effective Date of this Amendment.
12. Effective Date of Originator Release. The Seller, the Servicer, the Sub-Servicers, the Issuer, and the Administrator have executed that certain Originator Release, dated the same date hereof and effective immediately subsequent to the Joinder Agreement but immediately prior to the Effective Date of this Amendment whereby (a) Big Sky is released as an Originator under the Sale Agreement, (b) Big Sky is released as a Sub-Servicer under the Receivables Purchase Agreement and (c) all liens against Big Sky pursuant to the Sale Agreement, the Contribution Agreement and the Receivables Purchase Agreement are terminated.
[SIGNATURES BEGIN ON NEXT PAGE]
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
IN WITNESS WHEREOF and intending to be legally bound hereby, the parties hereto have executed this Amendment as of the date first above written.
P & L RECEIVABLES COMPANY, LLC, as
Seller
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
PEABODY ENERGY CORPORATION, as
initial Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
ARCLAR COMPANY, LLC, as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
BLACK BEAUTY COAL COMPANY, as
Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
CABALLO COAL COMPANY, as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
EASTERN ASSOCIATED COAL CORP., as
Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
PEABODY COALSALES COMPANY, as
Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
PEABODY COAL COMPANY, as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
PEABODY WESTERN COAL COMPANY, as
Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
POWDER RIVER COAL COMPANY,
as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
PEABODY HOLDING COMPANY, INC., as
Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
PEABODY COALTRADE, INC., as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
TWENTYMILE COAL COMPANY, as Sub-Servicer
By: /s/ Walter L. Hawkins, Jr.
------------------------------------
Name: WALTER L. HAWKINS, JR.
Title: VP & TREASURER
|
MARKET STREET FUNDING
CORPORATION, as Issuer
By:_________________________________
Name:_______________________________
Title:______________________________
PNC BANK, NATIONAL ASSOCIATION, as
Administrator
By:_________________________________
Name: John Smathers
Title: Vice President
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
TWENTYMILE COAL COMPANY, as Sub-Servicer:
By:______________________________________
Name:____________________________________
Title:___________________________________
MARKET STREET FUNDING
CORPORATION, as Issuer
By: /s/ Evelyn Echevarria
-------------------------------------
Name: Evelyn Echevarria
Title: Vice President
|
PNC BANK, NATIONAL ASSOCIATION, as
Administrator
By:______________________________________
Name: John Smathers
Title: Vice President
[SIGNATURE PAGE - THIRD AMENDMENT
TO RECEIVABLES PURCHASE AGREEMENT]
TWENTYMILE COAL COMPANY, as Sub-Servicer
By:______________________________________
Name:____________________________________
Title:___________________________________
MARKET STREET FUNDING
CORPORATION, as Issuer
By:______________________________________
Name:____________________________________
Title:___________________________________
PNC BANK, NATIONAL ASSOCIATION, as
Administrator
By: /s/ John Smathers
-------------------------------------
Name: John Smathers
Title: Vice President
|
EXHIBIT 31.1
CERTIFICATION
I, Irl F. Engelhardt, certify that:
1. I have reviewed this report on Form 10-Q of Peabody Energy Corporation ("the registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coved by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 2, 2004
/s/ IRL F. ENGELHARDT
----------------------------
Irl F. Engelhardt,
Chief Executive Officer
|
EXHIBIT 31.2
CERTIFICATION
I, Richard A. Navarre, certify that:
1. I have reviewed this report on Form 10-Q of Peabody Energy Corporation ("the registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 2, 2004
/s/ RICHARD A. NAVARRE
----------------------------
Richard A. Navarre
Executive Vice President and
Chief Financial Officer
|
EXHIBIT 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS
I, Irl F. Engelhardt, Chairman and Chief Executive Officer of Peabody Energy
Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Peabody Energy Corporation.
Dated: November 2, 2004
/s/ IRL F. ENGELHARDT
--------------------------------------
Irl F. Engelhardt
Chairman and Chief Executive Officer
|
EXHIBIT 32.2
CERTIFICATION OF PERIODIC FINANCIAL REPORTS
I, Richard A. Navarre, Executive Vice President and Chief Financial Officer of Peabody Energy Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (the "Periodic Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Peabody Energy Corporation.
Dated: November 2, 2004
/s/ RICHARD A. NAVARRE
-----------------------------------
Richard A. Navarre
Executive Vice President
and Chief Financial Officer
|