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 SALARIED 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
Unaudited Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 2002 and December 31, 2001............................................................ 1
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 2002 and 2001............................................................. 2
Notes to Unaudited Financial Statements............................................................ 3
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year).......................................... 8
Signatures.............................................................................................. 9
Exhibit Index........................................................................................... 10
Exhibit 99.1 - Certification of Periodic Financial Reports.............................................. 11
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Statements of Net Assets Available for Benefits - Unaudited
DECEMBER 31
2002 2001
---------------------------
ASSETS
Investments, at fair value:
Investments in mutual funds $ 6,230,878 $ 3,973,492
Investment in common/collective trusts 5,751,522 2,107,856
Investment in Peabody Energy Stock Fund 8,389 -
Participant notes receivable 1,386,122 514,295
---------------------------
Total investments 13,376,911 6,595,643
---------------------------
Net assets available for benefits $ 13,376,911 $ 6,595,643
===========================
See accompanying unaudited notes.
1
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Statements of Changes in Net Assets Available for Benefits - Unaudited
YEAR ENDED DECEMBER 31
2002 2001
---------------------------
ADDITIONS
Interest and dividends - investments $ 166,462 $ 193,249
Interest income - participant loans 11,920 46,534
Net realized and unrealized depreciation of investments (688,897) (669,757)
---------------------------
Net investment loss (510,515) (429,974)
---------------------------
Contributions:
Employer 130,407 129,964
Employee 338,129 321,517
---------------------------
Total contributions 468,536 451,481
---------------------------
Asset transfers in 7,952,322 -
---------------------------
Total additions 7,910,343 21,507
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DEDUCTIONS
Withdrawals by participants (928,096) (55,098)
Transfer out to other plans (200,249) (10,053)
Administrative expenses (730) (810)
---------------------------
Total deductions (1,129,075) (65,961)
---------------------------
Net increase (decrease) in net assets available for benefits 6,781,268 (44,454)
Net assets available for benefits at beginning of year 6,595,643 6,640,097
---------------------------
Net assets available for benefits at end of year $ 13,376,911 $ 6,595,643
===========================
See accompanying unaudited notes.
2
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Notes to Unaudited 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 Salaried 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 Lee Ranch Coal Company
Retirement and Savings Plan for Hourly Employees (the Hourly Plan) was merged
into the Plan. All assets of the Hourly Plan were merged with the assets of the
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 salaried 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.
3
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Notes to Unaudited 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. Matching contributions are made in cash each pay period, and
are invested according to the employee's investment elections.
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.
4
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Notes to Unaudited 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 amount to $3,708 and $2,768 for the years ended December 31,
2002 and 2001, respectively.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants' accounts become fully vested.
ADMINISTRATIVE EXPENSES
The administrative expenses of the Plan are paid by the Company. Loan fees are
paid by participants.
5
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Notes to Unaudited 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.
6
Lee Ranch Coal Company Retirement and
Savings Plan for Salaried Employees
Notes to Unaudited Financial Statements (continued)
3. INVESTMENTS
The Plan's investments are held by the Vanguard Fiduciary Trust Company (the
Trustee). The Trustee has certified information related to investments as
complete and accurate.
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
----------- ------------
Mutual funds $ (688,897) $ (669,757)
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 $ 2,294,760 $ 1,522,576
Vanguard Prime Money Market 917,910 567,166
Vanguard U.S. Growth Portfolio Less Than 5% 557,102
Vanguard Wellington Fund Less Than 5% 365,231
Vanguard Windsor II Fund 779,029 408,403
Common/collective trust:
Vanguard Retirement Savings Trust 5,751,522 2,107,856
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.
7
Lee Ranch Coal Company Retirement and
Savings Plan For Salaried Employees
Employer ID #13-2871045
Plan #103
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
-----------------------------------------------------------------------------------------------------------------------
Ariel Growth Fund* 301 shares of mutual funds $ 10,611
Fidelity Equity-Income II Fund* 187 shares of mutual funds 3,255
Gabelli Growth Fund* 790 shares of mutual funds 14,993
Janus Fund* 1,287 shares of mutual funds 22,933
Janus Worldwide Fund* 220 shares of mutual funds 7,069
T. Rowe Price Science/Technology Fund* 1,639 shares of mutual funds 20,368
T. Rowe Price Small-Cap Stock Fund, Inc.* 203 shares of mutual funds 4,363
Vanguard 500 Index Fund* 28,278 shares of mutual funds 2,294,760
Vanguard Explorer Fund* 5,046 shares of mutual funds 229,558
Vanguard GNMA Fund* 3,456 shares of mutual funds 37,157
Vanguard International Growth Fund* 19,845 shares of mutual funds 241,318
Vanguard LifeStrategy Conservative Growth Fund* 2,399 shares of mutual funds 30,761
Vanguard LifeStrategy Growth Fund* 2,131 shares of mutual funds 30,602
Vanguard LifeStrategy Income Fund* 938 shares of mutual funds 11,558
Vanguard LifeStrategy Moderate Growth Fund* 1,625 shares of mutual funds 22,535
Vanguard LT Treasury Fund* 1,383 shares of mutual funds 16,269
Vanguard Prime Money Market* 917,910 shares of mutual funds 917,910
Vanguard REIT Index Fund* 2,311 shares of mutual funds 27,359
Vanguard Small-Cap Index Fund* 4 shares of mutual funds 64
Vanguard Total Bond Market Index Fund* 26,976 shares of mutual funds 280,011
Vanguard Total Stock Market Index Fund* 68 shares of mutual funds 1,372
Vanguard U.S. Growth Portfolio* 47,095 shares of mutual funds 567,966
Vanguard Wellington Fund* 26,835 shares of mutual funds 659,057
Vanguard Windsor II Fund* 37,453 shares of mutual funds 779,029
Vanguard Retirement Savings Trust* 5,751,522 shares of common/
collective trust 5,751,522
Peabody Energy Stock Fund* 681 units of stock fund 8,389
Various participants Participant loans, interest rates
from 4.8% to 9.5%,
maturities through 4/15/2017 1,386,122
-------------
$ 13,376,911
=============
*Parties-in-interest
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
Salaried 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 Salaried 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
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