e11vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
or
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-16463
PEABODY WESTERN-UMWA 401(K) PLAN
Full title of the plan
PEABODY ENERGY CORPORATION
701 Market Street, St. Louis, Missouri 63101-1826
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office
Peabody Western-UMWA 401(k) Plan
Financial Statements
Years Ended December 31, 2006 and 2005
Table of Contents
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 the Peabody
Western-UMWA 401(k) Plan (the Plan) as of December 31, 2006 and 2005, 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 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, 2006 and 2005, and
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, 2006 is presented for the purpose 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 the 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.
St. Louis, Missouri
June 25, 2007
1
Peabody Western-UMWA 401(k) Plan
Statements of Net Assets Available for Benefits
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December 31, |
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2006 |
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2005 |
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Assets: |
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Investments, at fair value: |
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Investments in mutual funds |
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$ |
8,617,184 |
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$ |
9,509,459 |
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Investment in common/collective trust |
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870,003 |
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— |
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Investment in Peabody Energy Stock
Fund |
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846,079 |
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550,492 |
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Participant notes receivable |
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673,744 |
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557,747 |
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Net assets,
at fair value |
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11,007,010 |
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10,617,698 |
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Adjustment
from fair value to contract value for fully benefit-responsive
investment contracts |
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8,372 |
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— |
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Net assets
available for benefits |
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$ |
11,015,382 |
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$ |
10,617,698 |
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See accompanying notes.
2
Peabody Western-UMWA 401(k) Plan
Statements of Changes in Net Assets Available for Benefits
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Years Ended December 31, |
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2006 |
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2005 |
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Additions: |
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Interest and dividends |
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$ |
654,238 |
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$ |
457,261 |
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Net realized and unrealized appreciation of
investments |
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442,301 |
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452,931 |
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Net investment income |
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1,096,539 |
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910,192 |
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Contributions: |
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Employee |
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794,865 |
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1,055,987 |
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Employer |
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6,285 |
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6,146 |
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Rollover |
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32,289 |
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— |
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Total contributions |
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833,439 |
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1,062,133 |
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Total additions |
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1,929,978 |
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1,972,325 |
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Deductions: |
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Withdrawals by participants |
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(1,531,119 |
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(1,079,501 |
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Administrative expenses |
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(1,175 |
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(2,000 |
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Total deductions |
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(1,532,294 |
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(1,081,501 |
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Net increase in net assets available for benefits |
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397,684 |
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890,824 |
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Net assets available for benefits at beginning of year |
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10,617,698 |
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9,726,874 |
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Net assets available for benefits at end of year |
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$ |
11,015,382 |
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$ |
10,617,698 |
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See accompanying notes.
3
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
Years Ended December 31, 2006 and 2005
1. Description of the Plan
The following description of the Peabody Western-UMWA 401(k) Plan (the “Plan”) provides only
general information. Participants should refer to the plan documents for a more complete
description of the Plan’s provisions.
General
The Plan is a defined contribution plan and participation in the Plan is voluntary. Employees of
Peabody Western Coal Company, Big Sky Coal Company, and Seneca Coal Company (collectively, the
“Employers”) who are members of the United Mine Workers of America (“UMWA”) collective bargaining
unit covered by the Western Surface Agreement are eligible for participation on the date of their
employment. The Employers are indirect, wholly-owned subsidiaries of Peabody Energy Corporation
(“Peabody”). The Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended (“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 on a pre-tax basis any whole percentage from 2% to 50% of
eligible compensation, as defined in the Plan. Participants may rollover account balances from
other qualified defined benefit or defined contribution plans. Additionally, participants may defer
the cash equivalent of up to 10 employee benefit days per calendar year. The Employers make
matching contributions to the Plan on behalf of all qualified participants. The amount of matching
contributions for each qualified participant is 25% of the cash equivalent of employee benefit days
that a participant defers.
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 Internal Revenue Service (“IRS”).
In the calendar year that a participant is age 50 or older and each year thereafter, certain
participants 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.
4
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
1. Description of the Plan (continued)
Vesting
Participants are vested immediately in their own contributions, employer matching contributions and
the actual earnings thereon.
Participant Loans
Participants may borrow up to 50% of their vested account balance subject to minimum and maximum
amounts of $1,000 and $50,000, respectively. The loan is secured by the balance in the
participant’s account and bears 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 an additional 1%.
Principal and interest are paid ratably through payroll deductions. Only one loan may be
outstanding at a time.
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the employer
contributions, and plan earnings. The benefit to which a participant is entitled is the vested
balance of the participant’s account.
Payment of Benefits
Participants are eligible for distribution of their entire account balance upon death, disability,
or termination of employment. Participants may elect to receive their distribution as either a
lump-sum payment or as installments in certain circumstances, as defined in the Plan. Participants
may also elect to transfer their account balance into an individual retirement account or another
qualified plan.
Participants who have attained the age of 591/2 have the right to receive a partial or full
distribution of their account balance. Withdrawals in cases of hardship are also permitted as
defined in the Plan.
Plan Termination
The Plan could be terminated through the collective bargaining process, subject to the provisions
of ERISA. Participants’ accounts remain fully vested upon termination of the Plan. Currently, the
Employers have no intention to terminate the Plan.
5
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
1. Description of the Plan (continued)
Administrative Expenses
All significant administrative expenses of the Plan, including recordkeeping and trustee fees, are
paid by the Employer. 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 using 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.
Value 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 Peabody Energy Stock Fund is
valued at its year-end unit closing price (comprised of year-end market price plus uninvested cash
position, if any). Participant loans are valued at cost, which approximates market value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded
when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are
included in dividend income.
Payment of Benefits
Benefit distributions are recorded when paid.
6
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
Impact of New Accounting Pronouncement
In December 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position AAG
INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain
Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health
and Welfare and Pension Plans” (the “FSP”). The FSP defines the circumstances in which an
investment contract is considered fully benefit-responsive and provides certain reporting and
disclosure requirements for fully benefit-responsive investment contracts in defined contribution
health and welfare and pension plans. The financial statement presentation and disclosure
provisions of the FSP are effective for financial statements issued for annual periods ending after
December 15, 2006 and are required to be applied retroactively to all prior periods presented for
comparative purposes. The Plan adopted the provisions of the FSP at December 31, 2006.
As required by the FSP, investments in the accompanying Statements of Net Assets Available for
Benefits included fully benefit-responsive investment contracts recognized at fair value. AICPA
Statement of Position 94-4-1, “Reporting of Investment Contracts Held by Health and Welfare Benefit
Plans and Defined Contribution Pension Plans,” as amended, requires fully benefit-responsive
investment contracts to be reported at fair value in the Plan’s Statement of Net Assets Available
for Benefits with a corresponding adjustment to reflect these investments at contract value. The
requirements of the FSP were applied retroactively to the Statement of Net Assets Available for
Benefits as of December 31, 2005 presented for comparative purposes. Adoption of the FSP had no
effect on the Statement of Changes in Net Assets Available for Benefits for any period presented.
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 stock, through the
Peabody Energy Stock Fund, which is a permitted party-in-interest transaction .
7
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
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:
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Years ended December 31, |
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2006 |
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2005 |
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Mutual funds |
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$ |
529,619 |
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$ |
269,773 |
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Peabody Energy Stock Fund |
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(87,318 |
) |
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183,158 |
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$ |
442,301 |
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$ |
452,931 |
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Investments representing 5% or more of the fair value of the Plan’s net assets were as follows:
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December 31, |
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2006 |
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2005 |
Mutual funds: |
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Vanguard Explorer Fund |
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$ |
1,885,294 |
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$ |
2,073,674 |
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Vanguard PRIMECAP Fund |
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1,771,591 |
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1,934,704 |
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Vanguard Windsor II Fund |
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1,662,996 |
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1,642,177 |
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Vanguard International Growth Fund |
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1,111,190 |
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988,893 |
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Vanguard Total Bond Market Index Fund |
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617,462 |
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685,632 |
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Vanguard LifeStrategy Moderate Growth Fund |
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— |
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744,997 |
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Vanguard Prime Money Market Fund |
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— |
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873,924 |
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Common/collective trust: |
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Vanguard Retirement Savings Trust |
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870,003 |
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— |
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Peabody Energy Stock Fund |
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846,079 |
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550,492 |
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8
Peabody
Western-UMWA 401(k) Plan
Notes to Financial Statements
5.
Reconciliation of Financial Statements to Form 5500
The
following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
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December 31, |
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2006 |
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2005 |
Net assets
available for benefits per the financial statements |
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$ |
11,015,382 |
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$ |
10,617,698 |
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Adjustment
from contract value to fair value for fully benefit-responsive
contracts |
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(8,372 |
) |
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— |
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Net assets available for benefits per the Form 5500 |
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$ |
11,007,010 |
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$ |
10,617,698 |
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The
following is a reconciliation of net realized and unrealized
appreciation in fair value of investments per the financial
statements to the Form 5500:
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Years
Ended December 31, |
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2006 |
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2005 |
Net realized
and unrealized appreciation of investments per the financial
statements |
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$ |
442,301 |
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$ |
452,931 |
|
Adjustment
from contract value to fair value for fully benefit-responsive
contracts |
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(8,372 |
) |
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— |
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Net realized
and unrealized appreciation of investments per the Form 5500 |
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$ |
433,929 |
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$ |
452,931 |
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9
Peabody Western-UMWA 401(k) Plan
Notes to Financial Statements
6. Income Tax Status
The Plan received a determination letter from the IRS dated March 3, 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 and restated 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.
7. 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.
10
Supplemental Schedule
Peabody Western-UMWA 401(k) Plan
Employer ID #86-0766626
Plan #001
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2006
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Identity
of Issue |
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Description of Investment Type |
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Current Value |
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Vanguard Explorer Fund* |
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25,235 shares of mutual fund |
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$ |
1,885,294 |
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Vanguard PRIMECAP Fund* |
|
25,694 shares of mutual fund |
|
|
1,771,591 |
|
Vanguard Windsor II Fund* |
|
47,856 shares of mutual fund |
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|
1,662,996 |
|
Vanguard International Growth Fund* |
|
46,571 shares of mutual fund |
|
|
1,111,190 |
|
Vanguard Total Bond Market Index Fund* |
|
61,808 shares of mutual fund |
|
|
617,462 |
|
Vanguard Target Retirement 2005 Fund* |
|
14,297 shares of mutual fund |
|
|
163,985 |
|
Vanguard Target Retirement 2010 Fund* |
|
10,507 shares of mutual fund |
|
|
229,477 |
|
Vanguard Target Retirement 2015 Fund* |
|
36,325 shares of mutual fund |
|
|
452,615 |
|
Vanguard Target Retirement 2020 Fund* |
|
21,028 shares of mutual fund |
|
|
466,828 |
|
Vanguard Target Retirement 2025 Fund* |
|
14,481 shares of mutual fund |
|
|
188,839 |
|
Vanguard Target Retirement 2030 Fund* |
|
1,932 shares of mutual fund |
|
|
43,538 |
|
Vanguard Target Retirement 2040 Fund* |
|
276 shares of mutual fund |
|
|
6,207 |
|
Vanguard Target Retirement Income Fund* |
|
1,604 shares of mutual fund |
|
|
17,162 |
|
Vanguard Retirement Savings Trust* |
|
878,375 shares of common/ collective trust |
|
|
870,003 |
|
Peabody Energy Stock Fund* |
|
12,548 units of stock fund |
|
|
846,079 |
|
Various participants* |
|
Participant loans, interest rates
from
5.0% to 9.25%, maturities through
January 26, 2016 |
|
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673,744 |
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|
|
|
|
|
|
|
$ |
11,007,010 |
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11
SIGNATURE
Peabody Western-UMWA 401(k) 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.
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Peabody Western-UMWA 401(k) Plan
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Date: June 29, 2007
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By:
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/s/ SHARON D. FIEHLER |
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Sharon D. Fiehler |
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Peabody Energy Corporation |
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Executive Vice President of |
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Human Resources and Administration |
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12
EXHIBIT INDEX
The exhibit below is numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
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| Exhibit |
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| No. |
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Description of Exhibit |
23
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
13