UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

PEABODY ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		1-16463		13-4004153
(State or other jurisdiction of		(Commission File Number)		(I.R.S. Employer Identification No.)
incorporation or organization)

701 Market Street, St. Louis, Missouri		63101
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code ccodecode (314) 342-3400

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 8.01. Other Events.

On October 5, 2006, Peabody Energy Corporation (“Peabody”) priced its $900,000,000 senior notes offering, the proceeds of which will be used, along with the proceeds of other sources of financing, to consummate the acquisition of Excel Coal Limited (“Excel”), with remaining proceeds being used for general corporate purposes. The unaudited pro forma combined financial statements which follow have been revised to reflect the pricing terms of the senior notes offering.

Unaudited Pro Forma Combined Financial Statements

The following unaudited pro forma combined financial statements give effect to Peabody’s anticipated acquisition of Excel and the related financings. The unaudited pro forma combined balance sheet as of June 30, 2006 is presented as if the acquisition and the related financings had occurred on that date. The unaudited pro forma combined statement of operations for the six months ended June 30, 2006 and 2005 and for the year ended December 31, 2005 assume that the acquisition had occurred on January 1, 2005. The acquisition and the related financings are accounted for using the purchase method of accounting, with the purchase price allocated to the assets acquired and liabilities assumed based on estimated fair values, pending the completion of independent appraisals.

The unaudited pro forma combined financial statements should be read in conjunction with (i) Peabody’s historical audited financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed in our Annual Report on Form 10-K for the year ended December 31, 2005, (ii) our historical unaudited financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed in our Quarterly Reports on Form 10-Q for the six months ended June 30, 2006 and 2005 and (iii) the historical audited financial statements of Excel.

The unaudited pro forma combined financial statements are for informational purposes only and are not necessarily indicative of the financial position that would have been obtained or the results of operations that would have occurred if the acquisition and the related financings had been consummated on the dates indicated, nor are they necessarily indicative of our financial position or results of operations in the future. The pro forma adjustments, as described in the Notes to Pro Forma Combined Financial Statements, are based upon available information and upon assumptions that Peabody’s management believes are reasonable. The actual amounts that Peabody records based on its final assessment of fair values may differ materially from the information presented in these unaudited pro forma combined financial statements.

Due to differing fiscal years between Peabody, which ends its fiscal year on December 31, and Excel, which ends its fiscal year on June 30, calculations were necessary to conform Excel’s financial information to the time periods presented.

Information related to Excel included in the unaudited pro forma combined balance sheet as of June 30, 2006 was translated from A$ to US$ using a foreign exchange rate of A$1.00=US$0.7433, based on the closing rate on June 30, 2006. The unaudited pro forma combined statement of operations for the six months ended June 30, 2006 was translated from A$ to US$ using an exchange rate of A$1.00=US$0.7433, based on the average closing rates for the period from January 3, 2006 through June 30, 2006. The unaudited pro forma combined statement of operations for the six months ended June 30, 2005 was translated from A$ to US$ using an exchange rate of A$1.00=US$0.7728, based on the average closing rates for the period from January 4, 2005 through June 30, 2005. The unaudited pro forma combined statement of operations for the year ended December 31, 2005 was translated from A$ to US$ using an exchange rate of A$1.00=US$0.7622, based on the average closing rates for the period from January 4, 2005 through December 30, 2005. Asset retirement obligation expense and depreciation, depletion and amortization were translated from A$ to US$ using a historical exchange rate equal to the opening rate on January 4, 2005 of A$1.00=US$0.7790 for all periods presented.

PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
(Dollars in thousands, except per share data)

		Peabody				Excel Coal
		Energy				Limited				Pro Forma								Pro Forma
		Historical				Historical				Adjustments								as Adjusted
REVENUES
Sales		$	4,545,323			$	326,208											$	4,871,531
Other revenues			99,130				2,130												101,260
Total revenues			4,644,453				328,338				—								4,972,791
COSTS AND EXPENSES
Operating costs and expenses			3,715,836				221,509												3,937,345
Depreciation, depletion and amortization			316,114				17,864				18,575				(a	)			352,553
Asset retirement obligation expense			35,901				4,279												40,180
Selling and administrative expenses			189,802				16,914												206,716
Net (gain) loss on disposal or exchange of assets			(101,487	)			1												(101,486	)
Income from equity affiliates			(30,096	)			(3,445	)											(33,541	)
OPERATING PROFIT			518,383				71,216				(18,575	)							571,024
Interest expense			102,939				7,997				(7,997	)			(b	)			102,939
											126,478				(c	)			126,478
Interest income			(10,641	)			(4,261	)			4,261				(b	)			(10,641	)
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS			426,085				67,480				(141,317	)							352,248
Income tax provision (benefit)			960				18,695				(39,822	)			(d	)			(20,167	)
Minority interests			2,472				4,755												7,227
NET INCOME		$	422,653			$	44,030			$	(101,495	)						$	365,188
Basic earnings per share		$	1.62			$	0.17			$	(0.39	)						$	1.40
Diluted earnings per share		$	1.58			$	0.16			$	(0.38	)						$	1.36
Weighted average shares outstanding — basic			261,519,424				261,519,424				261,519,424								261,519,424
Weighted average shares outstanding — diluted			268,013,476				268,013,476				268,013,476								268,013,476

PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2005
(Dollars in thousands, except per share data)

		Peabody				Excel Coal
		Energy				Limited				Pro Forma								Pro Forma
		Historical				Historical				Adjustments								as Adjusted
REVENUES
Sales		$	2,152,338			$	144,004											$	2,296,342
Other revenues			33,928				470												34,398
Total revenues			2,186,266				144,474				—								2,330,740
COSTS AND EXPENSES
Operating costs and expenses			1,791,986				91,013												1,882,999
Depreciation, depletion and amortization			155,262				9,681				8,850				(a	)			173,793
Asset retirement obligation expense			16,357				2,468												18,825
Selling and administrative expenses			78,431				7,462												85,893
Net (gain) loss on disposal or exchange of assets			(47,574	)			1												(47,573	)
Income from equity affiliates			(18,308	)			(3,166	)											(21,474	)
OPERATING PROFIT			210,112				37,015				(8,850	)							238,277
Interest expense			50,761				4,492				(4,492	)			(b	)			50,761
											63,239				(c	)			63,239
Interest income			(3,183	)			(2,417	)			2,417				(b	)			(3,183	)
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS			162,534				34,940				(70,014)	)							127,460
Income tax provision (benefit)			14,586				8,832				(19,849	)			(d	)			3,569
Minority interests			804				4,159												4,963
NET INCOME		$	147,144			$	21,949			$	(50,165	)						$	118,928
Basic earnings per share		$	0.56			$	0.08			$	(0.19	)						$	0.46
Diluted earnings per share		$	0.55			$	0.08			$	(0.19	)						$	0.44
Weighted average shares outstanding — basic			261,164,418				261,164,418				261,164,418								261,164,418
Weighted average shares outstanding — diluted			267,367,248				267,367,248				267,367,248								267,367,248

PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006
(Dollars in thousands, except per share data)

		Peabody				Excel Coal
		Energy				Limited				Pro Forma								Pro Forma
		Historical				Historical				Adjustments								as Adjusted
REVENUES
Sales		$	2,582,564			$	201,176											$	2,783,740
Other revenues			45,634				2,561												48,195
Total revenues			2,628,198				203,737				—								2,831,935
COSTS AND EXPENSES
Operating costs and expenses			2,075,876				123,017												2,198,893
Depreciation, depletion and amortization			172,439				10,972				10,075				(a	)			193,486
Asset retirement obligation expense			18,843				1,462												20,305
Selling and administrative expenses			87,305				10,562												97,867
Net gain on disposal or exchange of assets			(59,269	)			(450	)											(59,719	)
Income from equity affiliates			(13,932	)			(15	)											(13,947	)
OPERATING PROFIT			346,936				58,189				(10,075	)							395,050
Interest expense			52,738				5,534				(5,534	)			(b	)			52,738
											63,239				(c	)			63,239
Interest income			(4,140	)			(1,578	)			1,578				(b	)			(4,140	)
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS			298,338				54,233				(69,358	)							283,213
Income tax provision (benefit)			8,248				16,216				(19,285	)			(d	)			5,179
Minority interests			6,434				3,003												9,437
NET INCOME		$	283,656			$	35,014			$	(50,073	)						$	268,597
Basic earnings per share		$	1.08			$	0.13			$	(0.19	)						$	1.02
Diluted earnings per share		$	1.05			$	0.13			$	(0.19	)						$	1.00
Weighted average shares outstanding — basic			263,726,123				263,726,123				263,726,123								263,726,123
Weighted average shares outstanding — diluted			269,597,156				269,597,156				269,597,156								269,597,156

PEABODY ENERGY CORPORATION
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2006
(Dollars in thousands)

		Peabody				Excel Coal				Pro Forma
		Energy				Limited				Adjustments
		Historical				Historical				(e)				Total
ASSETS
Cash and cash equivalents		$	318,736			$	29,585			$	(29,585	)		$	318,736
Accounts receivable, less allowance			261,997				33,816				—				295,813
Inventories			167,116				80,465				(6,353	) (g)			241,228
Assets from coal trading activities			84,692				—				—				84,692
Deferred income taxes			94,124				—				—				94,124
Other current assets			78,682				33,493				—				112,175
Total current assets			1,005,347				177,359				(35,938	)			1,146,768
Property, plant, equipment and mine development, net			5,511,559				493,688				1,475,000				7,480,247
Deferred income taxes			—				35,985				—				35,985
Goodwill			—				251				79,382	(g)			79,633
Investments and other assets			324,696				71,267				17,001				412,964
Total assets		$	6,841,602			$	778,550			$	1,535,445			$	9,155,597
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt		$	72,088			$	18,034			$	(18,034	)		$	72,088
Liabilities from coal trading activities			74,271				—				—				74,271
Accounts payable and accrued expenses			778,669				123,094				—				901,763
Total current liabilities			925,028				141,128				(18,034	)			1,048,122
Long-term debt, less current maturities			1,308,565				204,785				1,577,329	(f)			3,090,679
Deferred income taxes			289,083				45,489				—				334,572
Asset retirement obligations			410,566				13,092				—				423,658
Workers’ compensation obligations			239,822				—				—				239,822
Accrued postretirement benefit costs			971,493				3,689				—				975,182
Other noncurrent liabilities			350,940				29,263				300,000				680,203
Total liabilities			4,495,497				437,446				1,859,295				6,792,238
Minority interests			12,828				17,254				—				30,082
Stockholders’ equity
Common stock			2,661				272,891				(272,891	)			2,661
Additional paid-in capital			1,546,985				—				—				1,546,985
Retained earnings			830,648				50,856				(50,856	)			830,648
Accumulated other comprehensive loss			(31,625	)			103				(103	)			(31,625	)
Treasury stock			(15,392	)			—				—				(15,392	)
Total stockholders’ equity			2,333,277				323,850				(323,850	)			2,333,277
Total liabilities and stockholders’ equity		$	6,841,602			$	778,550			$	1,535,445			$	9,155,597

NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS

		Year Ended				Six Months				Six Months
		December 31,				Ended June 30,				Ended June 30,
		2005				2005				2006
Revolving credit facility (1)		$	24,981			$	12,492			$	12,492
Term loan facility (2)			52,089				25,335				28,650
2026 Senior notes (3)			20,139				10,069				10,069
2016 Senior notes (4)			48,660				24,330				24,330
6 7/8% Senior notes (5)			47,746				23,815				23,815
5 7/8% Senior notes (6)			14,879				7,440				7,355
Subordinated note (7)			6,656				3,423				3,026
Surety bond expense (8)			11,095				5,292				4,165
Other long-term debt (9)			3,172				1,804				2,075
Total pro forma interest expense		$	229,417			$	114,000			$	115,977
Less historical interest expense			102,939				50,761				52,738
Net adjustment to interest expense		$	126,478			$	63,239			$	63,239

(e)

To record the purchase transaction and allocate the $1,540 million purchase price (and $49 million of transaction costs) to the assets acquired and the liabilities assumed based on the estimated fair values of each item as follows (dollars in thousands):

		Estimated
		Fair Value
Current assets		$	171,006
Property, plant, equipment and mine development, net			1,968,688
Goodwill			79,633
Investments and other assets			124,253
Current liabilities			(123,094	)
Long-term debt			(222,819	)
Asset retirement obligations			(13,092	)
Accrued postretirement benefit costs			(3,689	)
Other noncurrent liabilities			(374,752	)
Minority interest			(17,254	)
Total		$	1,588,880

(f)

Reflects indebtedness incurred to finance the acquisition of Excel consisting of $512.5 million of the Term Loan Facility, $369.6 million of borrowings under our Revolving Credit Facility and $900.0 million of Senior Notes.

(g)

To record the effects of Emerging Issues Task Force (“EITF”) Issue No. 04-6, “Accounting for Stripping Costs in the Mining Industry” (EITF Issue No. 04-6”), which states “that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred.” EITF Issue No. 04-6 is effective for the first reporting period in fiscal years beginning after December 15, 2005 (January 1, 2006 for Peabody and July 1, 2006 for Excel). On January 1, 2006, Peabody implemented EITF Issue No. 04-6 using its modified transition provisions which allow companies adopting in periods beginning after June 29, 2005 to utilize a cumulative effect adjustment approach where the cumulative effect adjustment is recorded directly to retained earnings in the year of adoption. The adjustment to recognize the impact of EITF Issue No. 04-6 as of June 30, 2006 for Excel resulted in a reduction of “Inventories” by $6.4 million.

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 hereunto duly authorized.