SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 2002
Commission File Number 1-16463
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 FOR HOURLY EMPLOYEES
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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 Auditors.................................................. 1
Audited Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 2002 and December 31, 2001.................................... 2
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 2002 and 2001..................................... 3
Notes to Financial Statements.............................................. 4
Signatures...................................................................... 9
Exhibit Index................................................................... 10
Exhibit 23 - Consent of Independent Auditors.................................... 11
Exhibit 99.1 - Certification of Periodic Financial Reports...................... 12
REPORT OF INDEPENDENT AUDITORS
The Plan Administrators and Participants
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
We have audited the accompanying statements of net assets available for benefits
of Lee Ranch Coal Company Retirement and Savings Plan for Hourly Employees as of
December 31, 2002 and 2001, 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 auditing standards generally accepted
in the 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as 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, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
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Ernst & Young LLP
St. Louis, Missouri
May 16, 2003
1
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Statements of Net Assets Available for Benefits
DECEMBER 31
2002 2001
----------------------
ASSETS
Investments, at fair value:
Investments in mutual funds $ - $ 3,511,674
Investments in common/collective trusts - 3,158,408
Investment in Peabody Energy Stock Fund - 4,578
Participant notes receivable - 833,689
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Total investments - 7,508,349
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Net assets available for benefits $ - $ 7,508,349
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See accompanying notes.
2
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
2002 2001
---------------------------
ADDITIONS
Interest and dividends $ 269,330 $ 311,022
Net realized and unrealized depreciation of investments (879,784) (434,002)
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Net investment loss (610,454) (122,980)
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Contributions:
Employee 768,995 689,290
Employer 306,956 224,214
Rollover 119,872 51,756
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Total contributions 1,195,823 965,260
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Transfers from other plans 200,249 10,053
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Total additions 785,618 852,333
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DEDUCTIONS
Withdrawals by participants (339,330) (317,508)
Administrative expenses (2,315) (2,245)
Asset transfers out (7,952,322) -
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Total deductions (8,293,967) (319,753)
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Net (decrease) increase in net assets available for benefits (7,508,349) 532,580
Net assets available for benefits at beginning of year 7,508,349 6,975,769
----------- -----------
Net assets available for benefits at end of year $ - $ 7,508,349
=========== ===========
See accompanying notes.
3
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Notes to Financial Statements
Years Ended December 31, 2002 and 2001
1. DESCRIPTION OF THE PLAN
The following description of the Lee Ranch Coal Company (the Company) Retirement
and Savings Plan for Hourly Employees (the Plan) provides only general
information. Participants should refer to the plan document for a more complete
description of the Plan's provisions.
Effective at the end of the day on December 31, 2002, the Plan was merged into
the Lee Ranch Coal Company Retirement and Savings Plan for Salaried Employees
(the Salaried Plan). All of the Plan's assets were merged with the assets of the
Salaried Plan on that date to form the Lee Ranch Coal Company Retirement and
Savings Plan. Effective at the end of the day on December 31, 2002, the Plan's
participants became participants in the Lee Ranch Coal Company Retirement and
Savings Plan.
GENERAL
The Plan is a defined contribution plan covering all hourly employees of the
Company. Employees are eligible for participation in the Plan on the date of
their employment or any time afterward. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
The Plan allows participants to invest among several mutual funds and common/
collective trusts. Effective October 2001, the Plan allows participants to
invest in the Peabody Energy Stock Fund, as a result of Peabody Energy
Corporation's initial public offering of common stock in May 2001. All
investments in the Plan are participant-directed.
CONTRIBUTIONS
Each year, participants may contribute from 2% to 50% of pretax or after-tax
annual compensation, as defined in the Plan. Prior to April 1, 2002,
participants could contribute up to 16% of pretax or after-tax annual
compensation, as defined in the Plan. Participants direct the investment of
their contributions into various investment options offered by the Plan.
4
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Effective April 1, 2002, in the calendar year that a participant is age 50 or
older and each year thereafter, certain participants meeting additional specific
criteria will be permitted to make catch-up contributions to the Plan.
Participants will be able to contribute amounts over and above the maximum
otherwise permitted by the Plan, subject to certain limitations.
The Company makes matching contributions of an amount equal to 100% of the first
4% of 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 an amount equal to 100%
of the first 4% of compensation that a participant contributes to the Plan on an
after-tax basis. Prior to April 1, 2002, the Company made matching contributions
of an amount equal to 100% of the first 3% of compensation that a participant
contributed to the Plan on a pretax basis. Participants direct the investment of
employer matching contributions. All contributions are subject to certain
limitations.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution and
allocations of (a) the Company's contribution and (b) plan earnings. Allocations
are based on participant earnings or account balances, as defined. The benefit
to which a participant is entitled is the benefit that can be provided from the
participant's vested account.
VESTING
Participants are vested immediately in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts is based
on years of continuous service. Employer matching contributions become 20%
vested for each year of service, as defined, with 100% vesting after five years
of service. A year of service is defined as any 12-month period during which the
employee completes at least 1,000 hours of service.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their account balance. The
loans are secured by the balance in the participant's account and bear interest
at rates commensurate with 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. Principal and interest is paid ratably through payroll deductions.
5
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PAYMENT OF BENEFITS
On termination of service due to death, disability, or retirement, a participant
may elect to receive either a lump-sum amount equal to the value of the
participant's vested interest in his or her account or annual installments. For
termination of service for other reasons, a participant may receive the value of
the vested interest in his or her account as a lump-sum distribution. A
participant may also elect to take a withdrawal of all or a portion of his or
her employee after-tax contribution account after being a participant for three
months. This withdrawal cannot be made more than once in any three-month period.
Withdrawals in cases of hardship, as defined in the Plan, are also permitted.
FORFEITED ACCOUNTS
Employer contributions are reduced by forfeitures of nonvested amounts. The
forfeiture credits amounted to $2,242 and $0 for the years ended December 31,
2002 and 2001, respectively. As of December 31, 2002, a cumulative balance of
$35,856 exists that represents unapplied forfeitures.
ADMINISTRATIVE EXPENSES
Most administrative expenses of the Plan are paid by the Company. Loan fees are
paid by participants.
OTHER EXPENSES
Other expenses, consisting of administrative expenses, amounted to $2,315 and
$2,245 for the years ended December 31, 2002 and 2001, respectively.
6
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the date of the
financial statements, and reported amounts of additions and deductions during
the reporting period. Actual results could differ from these 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 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.
Purchases and sales 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.
7
Lee Ranch Coal Company Retirement and
Savings Plan for Hourly Employees
Notes to Financial Statements (continued)
3. INVESTMENTS
The Plan's investments (including investments purchased or sold, as well as held
during the year) appreciated (depreciated) in fair value as determined by quoted
market prices as follows:
2002 2001
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Mutual funds $ (880,292) $ (434,582)
Peabody Energy Stock Fund 508 580
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$ (879,784) $ (434,002)
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Investments that represent 5% or more of the fair value of the Plan's net assets
at December 31 are as follows:
2002 2001
-------------------------
Mutual funds:
Vanguard 500 Index Fund $ - $ 1,683,836
Vanguard Windsor II Fund - 550,006
Common/collective trust:
Vanguard Retirement Savings Trust - 3,158,408
All investments in the Plan are participant-directed.
4. INCOME TAX STATUS
The Plan has received a determination letter from the IRS dated May 2, 2003,
stating that the Plan is qualified under Section 401(a) of the Internal Revenue
Code (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's administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes the Plan 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.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the plan
administrator of the Lee Ranch Coal Company Retirement and Savings Plan for
Hourly Employees 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 for Hourly Employees
Date: June 20, 2003 By: /s/ SHARON D. FIEHLER
-------------------------------------
Sharon D. Fiehler
Peabody Energy Corporation
Executive Vice President,
Human Resources & Administration
9
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 Auditors
99.1 Certification of the December 31, 2002 Annual Report on Form 11-K, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, by the Principal Executive Officer
of the Plan and Principal Financial Officer of the Plan.
10