SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-16463
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Full title of the plan and the address of the plan, if different from that of
the issuer named below:
LEE RANCH COAL COMPANY RETIREMENT AND SAVINGS PLAN
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Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
PEABODY ENERGY CORPORATION
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701 MARKET STREET, ST. LOUIS, MISSOURI 63101-1826
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(Address of principal executive offices) (Zip Code)
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm................. 1
Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 2004 and 2003......................................... 2
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 2004 and 2003............................. 3
Notes to Financial Statements...................................... 4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year).......... 10
Signatures.............................................................. 12
Exhibit Index........................................................... 13
Exhibit 23 - Consent of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Defined Contribution Administrative Committee
We have audited the accompanying statements of net assets available for benefits
of Lee Ranch Coal Company Retirement and Savings Plan as of December 31, 2004
and 2003, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2004 and 2003, and the changes in its net assets available for
benefits for the years then ended, in conformity with U.S. generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2004, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
St. Louis, Missouri
June 2, 2005
1
Lee Ranch Coal Company
Retirement and Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2004 2003
----------- -----------
ASSETS
Investments, at fair value:
Investments in mutual funds $ 9,921,462 $ 8,732,976
Investment in common/collective trust 6,605,823 6,211,073
Investment in Peabody Energy Stock Fund 100,203 13,907
Participant notes receivable 1,383,011 1,321,047
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Net assets available for benefits $18,010,499 $16,279,003
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See accompanying notes.
2
Lee Ranch Coal Company
Retirement and Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
2004 2003
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ADDITIONS
Interest and dividends $ 540,701 $ 460,869
Net realized and unrealized appreciation of investments 785,158 1,435,460
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Net investment income 1,325,859 1,896,329
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Contributions:
Employee 1,026,216 1,113,086
Employer 425,173 462,342
Rollovers 9,302 87,959
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Total contributions 1,460,691 1,663,387
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Total additions 2,786,550 3,559,716
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DEDUCTIONS
Withdrawals by participants (1,051,540) (654,354)
Administrative expenses (3,514) (3,270)
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Total deductions (1,055,054) (657,624)
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Net increase in net assets available for benefits 1,731,496 2,902,092
Net assets available for benefits at beginning of year 16,279,003 13,376,911
------------ ------------
Net assets available for benefits at end of year $ 18,010,499 $ 16,279,003
============ ============
See accompanying notes.
3
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements
Years Ended December 31, 2004 and 2003
1. DESCRIPTION OF THE PLAN
The following description of the Lee Ranch Coal Company (the "Company")
Retirement and Savings Plan (the "Plan") provides only general information.
Participants should refer to the plan documents for a more complete description
of the Plan's provisions. The Company is an indirect, wholly-owned subsidiary of
Peabody Energy Corporation.
GENERAL
The Plan is a defined contribution plan covering all employees of the Company.
Participation in the Plan is voluntary, and employees are eligible for
participation on the date of their employment or at any time afterward. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
The Plan allows participants to invest in a selection of mutual funds, a
common/collective trust, and the Peabody Energy Stock Fund. All investments in
the Plan are participant-directed.
CONTRIBUTIONS
Each year, participants may contribute any whole percentage from 2% to 50% of
pre-tax base compensation, as defined in the Plan. After-tax contributions are
allowed only after a participant has exceeded the annual IRC 402(g) limits.
Participants may also contribute distributions from other qualified defined
benefit or defined contribution plans.
In the calendar year that a participant is age 50 or older and each year
thereafter, certain participants meeting additional specific criteria are
permitted to make catch-up contributions to the Plan. These participants are
able to contribute amounts in excess of the maximum otherwise permitted by the
Plan, subject to certain limitations.
The Company makes matching contributions equal to 100% of the first 4% of base
compensation that a participant contributes to the Plan on a pretax basis. After
a participant's pretax contributions reach the pretax limit established by the
Internal Revenue Service ("IRS"), the Company matches 100% of the first 4% of
base compensation that a participant contributes to the Plan on an after-tax
basis.
Participants direct the investment of employee and employer matching
contributions into various investment options offered by the Plan. All
contributions are subject to certain limitations as defined by the Plan and the
IRS.
4
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
FORFEITED ACCOUNTS
Employer contributions are reduced by forfeitures of non-vested amounts. The
forfeiture credits, net of holding gains or losses, amounted to $12,114 and
$43,966 for the years ended December 31, 2004 and 2003, respectively. As of
December 31, 2004 and 2003, the forfeiture credits that were available for
future use amounted to $20,667 and $8,369, respectively.
PARTICIPANT LOANS
Participants may borrow up to 50% of their vested account balance from their
fund accounts, subject to a minimum of $1,000 and a maximum of $50,000. The
loans are secured by the balance in the participant's account and bear interest
at the prime interest rate as published in The Wall Street Journal on the first
business day of the month in which the loan was made, plus 1%. Principal and
interest are paid ratably through payroll deductions. A maximum of two loans may
be outstanding at any time.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions, the
Company's contributions, and plan earnings. The benefit to which a participant
is entitled is the benefit that can be provided from the participant's vested
account.
PAYMENT OF BENEFITS
Participants are eligible for distributions of their vested account balance upon
termination of employment. Participants are eligible for distribution of their
entire account balance at death, disability or retirement after age 65.
Generally, participants may elect to receive their distribution as a lump sum or
annual installment. A beneficiary distribution is available as a lump sum only.
Participants who have attained the age of 59 1/2 have the right to receive a
partial or complete distribution of their vested account balance upon request,
without penalty.
Withdrawals in cases of hardship, as defined in the Plan, are also permitted.
Other withdrawals of after-tax contributions are also available as defined in
the Plan.
5
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
VESTING
Participants are immediately vested in their contributions and actual earnings
thereon. Vesting in Company matching contributions occurs ratably based on years
of continuous service (20% for each year of service, as defined, with 100%
vesting after five years of service), and automatically vests completely when
the participant attains the age of 65.
PLAN TERMINATION
The Plan is voluntary on the part of the Company. The Company may terminate the
Plan in whole or in part subject to the provisions of ERISA. Upon termination or
complete discontinuance of all contributions to the Plan, participants' accounts
become fully vested. Currently, the Company has no intention to terminate the
Plan.
ADMINISTRATIVE EXPENSES
All significant administrative expenses of the Plan are paid by the Company.
Participants are required to pay their own loan fees.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
VALUATION OF INVESTMENTS AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of mutual funds are
valued at quoted market prices which represent the net asset value of shares
held by the Plan at year-end. Units in the common/collective trust are valued at
net asset value at year-end. The stock fund is valued at year-end unit closing
price (comprised of the year-end market price plus any uninvested cash
position). Participant loans are valued at cost, which approximates market
value.
6
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded when earned. Dividends are recorded on the ex-dividend date.
Capital gain distributions are included in dividend income.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
3. RELATED PARTY TRANSACTIONS
The Plan invests in shares of mutual funds managed by an affiliate of its
trustee, Vanguard Fiduciary Trust Company, a party-in-interest with respect to
the Plan. These transactions are covered by an exemption from the "prohibited
transaction" provisions of ERISA and the Internal Revenue Code of 1986 (the
"Code"), as amended. The Plan also invests in Peabody Energy Corporation stock,
through the Peabody Energy Stock Fund, which is a permitted party-in-interest
transaction.
4. INVESTMENTS
The Plan's investments, including those purchased, sold or held during the year,
appreciated in fair value as determined by quoted market prices as follows:
2004 2003
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Mutual funds $ 746,072 $1,431,603
Peabody Energy Stock Fund 39,086 3,857
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$ 785,158 $1,435,460
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7
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements (continued)
4. INVESTMENTS (CONTINUED)
Investments representing 5% or more of the fair value of the Plan's net assets
at December 31 were as follows:
2004 2003
------------ ----------
Mutual funds:
Vanguard 500 Index Fund $ 3,603,523 $3,314,204
Vanguard Prime Money Market LESS THAN 5% 977,803
Vanguard U.S. Growth Portfolio LESS THAN 5% 816,432
Vanguard Wellington Fund 1,115,443 931,446
Vanguard Windsor II Fund 1,354,069 1,071,250
Common/collective trust:
Vanguard Retirement Savings Trust 6,605,823 6,211,073
5. INCOME TAX STATUS
The Plan received a determination letter from the IRS dated May 2, 2003, stating
that the Plan is qualified under Section 401(a) of the Code and, therefore, the
related trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The Plan was
amended subsequent to the IRS determination letter. The Plan's administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes the Plan, as amended, is
qualified and the related trust is tax-exempt. The Plan's sponsor has indicated
that it will take the necessary steps, if any, to maintain the Plan's qualified
status.
6. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
8
Lee Ranch Coal Company
Retirement and Savings Plan
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENT
Effective January 1, 2005, Peabody Investments Corp. became the sponsor of the
Lee Ranch Coal Company Retirement and Savings Plan. Peabody Investments Corp. is
a wholly-owned subsidiary of Peabody Energy Corporation and the indirect parent
of Lee Ranch Coal Company.
9
Supplemental Schedule
Lee Ranch Coal Company
Retirement and Savings Plan
Employer ID #13-2871045
Plan #103
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
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Ariel Growth Fund* 1,289 shares of mutual fund $ 68,552
Barron Asset Fund* 86 shares of mutual fund 4,533
Delaware Intl Val Equity* 206 shares of mutual fund 3,476
Fidelity Blue Chip Growth Fund* 16,219 shares of mutual fund 676,475
Fidelity Equity-Income II Fund* 606 shares of mutual fund 14,557
Harbor Capital Appreciation* 1,021 shares of mutual fund 29,266
Sound Shore Fund* 556 shares of mutual fund 20,417
T. Rowe Price Science/Technology Fund* 1,411 shares of mutual fund 26,949
T. Rowe Price Small-Cap Stock Fund, Inc.* 886 shares of mutual fund 28,207
T. Rowe Price Mid-Cap Growth* 1,443 shares of mutual fund 71,983
Managers Special Equity Fund* 37 shares of mutual fund 3,316
Vanguard 500 Index Fund* 32,278 shares of mutual fund 3,603,523
Vanguard Explorer Fund* 8,574 shares of mutual fund 639,326
Vanguard GNMA Fund* 11,493 shares of mutual fund 119,983
Vanguard High-Yield Corp* 16,723 shares of mutual fund 107,697
Vanguard International Growth Fund* 25,568 shares of mutual fund 482,221
Vanguard LifeStrategy Conservative
Growth Fund* 5,038 shares of mutual fund 76,875
Vanguard LifeStrategy Growth Fund* 3,568 shares of mutual fund 71,509
Vanguard LifeStrategy Income Fund* 7,506 shares of mutual fund 101,550
Vanguard LifeStrategy Moderate
Growth Fund* 3,489 shares of mutual fund 62,484
Vanguard LT Treasury Fund* 3,951 shares of mutual fund 45,471
Vanguard Prime Money Market* 694,408 shares of mutual fund 694,408
10
Supplemental Schedule
Lee Ranch Coal Company
Retirement and Savings Plan
Employer ID #13-2871045
Plan #103
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) (continued)
December 31, 2004
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
-----------------------------------------------------------------------------------------------
Vanguard REIT Index Fund* 6,339 shares of mutual fund 119,055
Vanguard Small-Cap Index Fund* 938 shares of mutual fund 25,155
Vanguard Total Bond Market Index Fund* 32,400 shares of mutual fund 332,745
Vanguard Total Stock Market Index Fund* 772 shares of mutual fund 22,217
Vanguard Wellington Fund* 36,947 shares of mutual fund 1,115,443
Vanguard Windsor II Fund* 44,063 shares of mutual fund 1,354,069
Vanguard Retirement Savings Trust* 6,605,823 shares of common/
collective trust 6,605,823
Peabody Energy Stock Fund* 2,961 units of stock fund 100,203
Various participants Participant loans, interest rates
from 5.0% to 9.5%,
maturities through April 15, 2017 1,383,011
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$ 18,010,499
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*Parties-in-interest
11
SIGNATURES
Lee Ranch Coal Company Retirement and Savings Plan. Pursuant to the requirements
of the Securities Exchange Act of 1934, the plan administrator has duly caused
this annual report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Lee Ranch Coal Company
Retirement and Savings Plan
Date: June 27, 2005 By: /s/ SHARON D. FIEHLER
--------------------------------
Sharon D. Fiehler
Peabody Energy Corporation
Executive Vice President,
Human Resources & Administration
12
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibit
No. Description of Exhibit
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23 Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm
13