<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 2000.
REGISTRATION NO. 333-59073
========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
POST-EFFECTIVE
AMENDMENT NO. 2
ON
FORM S-1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
P&L COAL HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1222 13-4004153
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) CODE NUMBER)
----------------------
701 MARKET STREET
ST. LOUIS, MO 63101-1826
(314) 342-3400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
JEFFERY L. KLINGER, ESQ.
P&L COAL HOLDINGS CORPORATION
701 MARKET STREET
ST. LOUIS, MO 63101-1826
(314) 342-3400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------------
WITH A COPY TO:
RISE B. NORMAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 455-2000
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. / /
========================================================================
<PAGE>
<PAGE>
<TABLE>
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<CAPTION>
ADDRESS INCLUDING ZIP
CODE, AND TELEPHONE
EXACT NAME OF STATE OR OTHER I.R.S. NUMBER INCLUDING AREA
REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER CODE, OF REGISTRANT
AS SPECIFIED INCORPORATION IDENTIFICATION GUARANTOR'S PRINCIPAL
IN ITS CHARTER OR ORGANIZATION NUMBER EXECUTIVE OFFICES
----------------------------------- ----------------- -------------------- -------------------------------------------
<S> <C> <C> <C>
Affinity Mining Company West Virginia 25-1207512 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Arid Operations, Inc. Delaware 84-1199578 14062 Denver West Parkway,
Suite 110
Golden, CO 80401-3301, (760-337-5552)
Big Sky Coal Company Delaware 81-0476071 P.O. Box 97
Coalstrip, MT 59323 (406-748-5750)
Blackrock First Capital Corporation West Virginia 55-0695451 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Bluegrass Coal Company Delaware 43-1540253 701 Market Street, Suite 710
St. Louis, MO 63101-1826, (314-342-3400)
Caballo Coal Company Delaware 83-0309633 Caller Box 3037
Gillette, WY 82717, (307-687-6900)
Charles Coal Company Delaware 04-2698757 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Coal Properties Corp. Delaware 04-2702708 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Colony Bay Coal Company West Virginia 55-0604613 800 Laidley Tower
P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Cook Mountain Coal Company Delaware 55-0732291 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Cottonwood Land Company Delaware 43-1721982 301 N. Memorial Drive, Suite 334
St. Louis, MO 63102, (314-342-7610)
Darius Gold Mine Inc. Delaware 13-2899722 14062 Denver West Parkway
Suite 110
Golden, CO 80401-3301, (303-271-3600)
EACC Camps, Inc. West Virginia 25-0600150 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Eastern Associated Coal Corp. West Virginia 25-1125516 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Eastern Royalty Corp. Delaware 04-2698759 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
i
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<PAGE>
<CAPTION>
ADDRESS INCLUDING ZIP
CODE, AND TELEPHONE
EXACT NAME OF STATE OR OTHER I.R.S. NUMBER INCLUDING AREA
REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER CODE, OF REGISTRANT
AS SPECIFIED INCORPORATION IDENTIFICATION GUARANTOR'S PRINCIPAL
IN ITS CHARTER OR ORGANIZATION NUMBER EXECUTIVE OFFICES
----------------------------------- ----------------- -------------------- -------------------------------------------
<S> <C> <C> <C>
Gold Fields Chile, S.A. Delaware 13-3004607 14062 Denver West Parkway
Suite 110
Golden, CO 80401-3301, (303-271-3600)
Gold Fields Mining Corporation Delaware 36-2079582 14062 Denver West Parkway
Suite 110
Golden, CO 80401-3301, (303-271-3600)
Gold Fields Operating Co.--Ortiz Delaware 22-2204381 14062 Denver West Parkway
Suite 110
Golden, CO 80401-3301, (303-271-3600)
Grand Eagle Mining, Inc. Kentucky 61-1250622 19070 Highway 1078 South
Henderson, KY 42420, (502-546-7926)
Hayden Gulch Terminal, Inc. Delaware 86-0719481 P.O. Box 882323
Steamboat Springs, CO 80488, (314-342-3400)
Independence Material Handling Delaware 43-1750064 701 Market Street, Suite 840
Company St. Louis, MO 63101-1826, (314-342-3400)
Interior Holdings Corp. Delaware 43-1700075 701 Market Street, Suite 730
St. Louis, MO 63101-1826, (314-342-3400)
James River Coal Terminal Company Delaware 55-0643770 701 Market Street, Suite 702
St. Louis, MO 63101-1826, (314-342-7600)
Juniper Coal Company Delaware 43-1744675 701 Market Street, Suite 716
St. Louis, MO 63101-1826, (314-342-3400)
Kayenta Mobile Home Park, Inc. Delaware 86-0773596 P.O. Box 605
Kayenta, AZ 86033 (520-677-5008)
Martinka Coal Company Delaware 55-0716084 815 Laidley Tower, PO Box 1233
Charleston, WV 25324-0004, (304-344-0300)
Midco Supply and Equipment Illinois 43-6042249 P.O. Box 14542
Corporation St. Louis, MO 63178, (314-342-3400)
Mountain View Coal Company Delaware 25-1474206 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25334-0004, (304-344-0300)
North Page Coal Corp. West Virginia 31-1210133 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25334-0004, (304-344-0300)
Ohio County Coal Company Kentucky 61-1176239 19070 Highway 1078 South
Henderson, KY 42420, (502-546-7561)
Patriot Coal Company, L.P. Delaware 61-1258748 19070 Highway 1078 South
Henderson, KY 42420, (502-546-9430)
Peabody America, Inc. Delaware 93-1116066 701 Market Street, Suite 720
St. Louis, MO 63101-1826, (303-271-3600)
ii
<PAGE>
<PAGE>
<CAPTION>
ADDRESS INCLUDING ZIP
CODE, AND TELEPHONE
EXACT NAME OF STATE OR OTHER I.R.S. NUMBER INCLUDING AREA
REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER CODE, OF REGISTRANT
AS SPECIFIED INCORPORATION IDENTIFICATION GUARANTOR'S PRINCIPAL
IN ITS CHARTER OR ORGANIZATION NUMBER EXECUTIVE OFFICES
----------------------------------- ----------------- -------------------- -------------------------------------------
<S> <C> <C> <C>
Peabody Coal Company Delaware 13-2606920 800 Laidley Tower
Charleston, WV 25301, (502-827-0800)
Peabody COALSALES Company Delaware 43-1610419 701 Market Street, Suite 830
St. Louis, MO 63101-1826, (314-342-7600)
Peabody COALTRADE, Inc. Delaware 43-1666743 1500 Hugenot Road, Suite 108
Midlothian, VA 23113, (804-878-4655)
Peabody Development Company Delaware 43-1265557 301 North Memorial Drive
St. Louis, MO 63102, (314-342-7610)
Peabody Energy Solutions, Inc. Delaware 43-1753832 701 Market Street, Suite 830
St. Louis, MO 63101, (314-342-7600)
Peabody Holding Company, Inc. New York 13-2871045 701 Market Street, Suite 700
St. Louis, MO 63101-1826, (314-342-3400)
Peabody Natural Resources Company Delaware 51-0332232 701 Market Street, Suite 718
St. Louis, MO 63101, (314-342-3400)
Peabody Terminals, Inc. Delaware 31-1035824 701 Market Street, Suite 712
St. Louis, MO 63101, (314-342-3400)
Peabody Venezuela Coal Corp. Delaware 43-1609813 701 Market Street, Suite 715
St. Louis, MO 63101-1826, (314-342-3400)
Peabody Western Coal Company Delaware 86-0766626 P.O. Box 605
Kayenta, AZ 86033 (520-677-3201)
Pine Ridge Coal Company Delaware 55-0737187 800 Laidley Tower P.O. Box 1233
Charleston, WV 25324, (304-344-0300)
Powder River Coal Company Delaware 43-0996010 1013 East Boxelder
Gillette, WY 82718, (307-687-6900)
Rio Escondido Coal Corp. Delaware 74-2666822 P.O. Box 66746
St. Louis, MO 63166, (314-342-3400)
Seneca Coal Company Delaware 84-1273892 Drawer D
Hayden, CO 81639 (970-276-3707)
Sentry Mining Company Delaware 43-1540251 701 Market Street, Suite 701
St. Louis, MO 63101-1826, (314-342-3400)
Snowberry Land Company Delaware 43-1721980 301 N. Memorial Drive, Suite 333
St. Louis, MO 63102, (314-342-3400)
Sterling Smokeless Coal Company West Virginia 55-0463558 800 Laidley Tower, P.O. Box 1233
Charleston, WV 25324, (314-344-0300)
iii
<PAGE>
<PAGE>
<CAPTION>
ADDRESS INCLUDING ZIP
CODE, AND TELEPHONE
EXACT NAME OF STATE OR OTHER I.R.S. NUMBER INCLUDING AREA
REGISTRANT GUARANTOR JURISDICTION OF EMPLOYER CODE, OF REGISTRANT
AS SPECIFIED INCORPORATION IDENTIFICATION GUARANTOR'S PRINCIPAL
IN ITS CHARTER OR ORGANIZATION NUMBER EXECUTIVE OFFICES
----------------------------------- ----------------- -------------------- -------------------------------------------
<S> <C> <C> <C>
Thoroughbred, L.L.C. Delaware 43-1686687 701 Market Street, Suite 815
St. Louis, MO 63101-1826, (314-342-3400)
</TABLE>
iv
<PAGE>
<PAGE>
PROSPECTUS
P&L COAL HOLDINGS CORPORATION
8-7/8% SERIES B SENIOR NOTES DUE 2008
AND
9-5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
-------------
This prospectus has been prepared for and is to be used by Lehman
Brothers Inc. in connection with offers and sales in market-making
transactions of the notes. We will not receive any of the proceeds from
those sales. Lehman Brothers Inc. may act as a principal or agent in
those transactions. The notes may be offered in negotiated transactions
or otherwise.
There is no existing trading market for the notes and we cannot
assure you that one will develop.
Neither the U.S. Securities and Exchange Commission nor any state
securities commission in the United States has approved or disapproved
of these securities or determined that this prospectus is truthful or
complete. Any representation to the contrary is a criminal offence.
FOR A DISCUSSION OF FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS" BEGINNING
ON PAGE 9.
-------------
LEHMAN BROTHERS
-------------
, 2000
<PAGE>
<PAGE>
You should rely only on the information contained in this
prospectus. We have not authorized any other person to provide you with
different information.
You should assume that the information contained in this
prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, results of operations, financial condition
and prospects may change after that date.
We are not making an offer of the notes to any person in any
jurisdiction except where such an offer or solicitation is permitted.
-------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary 2
Risk Factors 9
Use of Proceeds 17
Capitalization 17
Selected Financial Data 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Coal Industry Overview 26
Business 36
Regulatory Matters 51
Management 58
Security Ownership of Certain Beneficial Owners
and Management 65
The Acquisition 66
Related Party Transactions 68
Description of the Senior Notes 70
Description of the Senior Subordinated Notes 98
Plan of Distribution 128
Experts 128
Available Information 128
Glossary of Selected Terms 130
Organizational Charts 0-1
Index to Financial Statements F-1
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all the information that may be
important to you. You should read the entire prospectus before making an
investment decision. All references to "tons" are references to short
tons and all references to low sulfur coal are references to coal with a
sulfur content of 1% or less by weight. References to years relate to
calendar years, unless otherwise noted. Our management estimated the
market data presented in this prospectus using various third party
sources where available. While management believes that these estimates
are reasonable and reliable, in a number of cases, we cannot verify them
with information from independent sources. Accordingly, we cannot assure
you that market data are accurate in all material respects. You should
carefully consider the information presented under the heading "Risk
Factors."
THE COMPANY
OVERVIEW
We are among the world's largest providers of low cost fuel for
the generation of electricity and are also engaged in power trading and
power and coal contract restructuring services. During the 1990s, we
transformed from a largely high sulfur, high-cost coal producer to a
more broadly based energy company providing predominantly low sulfur,
low-cost coal from operations in the United States and Australia, as
well as a number of fuel/power products to the electricity market.
In fiscal 2000, we sold 190.3 million tons of coal worldwide.
These products were used to generate more than 9% of the electricity
produced in the United States and more than 2.5% of the world's
electricity. Our share of the U.S. coal market was approximately 16.0%
in 1999. We have approximately 10.0 billion tons of proven and probable
coal reserves, which is the largest reserve base of any private sector
coal producing company in the United States.
We currently own interests in more than 35 active mines in the
United States and Australia, and also sell coal produced by third-party
contractors and suppliers. In fiscal 2000, we produced approximately 62%
of our coal in the Western United States, 32% from the eastern half of
the United States and 6% from Australia. Our coal production in the
Western United States has grown from 37 million tons in 1990 to 118
million tons in fiscal 2000. Our highly productive western operations
produce low sulfur coal that utilities use to comply with more stringent
standards resulting from the Clean Air Act.
Our large and diverse customer base includes more than 300
electricity generating plants in the United States as well as steam and
metallurgical customers in 17 other countries. In fiscal 2000, we
supplied 93% of our U.S. production to U.S. electric utilities, 4% to
the export market and 3% to the U.S. industrial sector.
Over the last ten years, coal consumption in the United States has
generally experienced steady growth, reaching a level of approximately
1.1 billion tons in 1999. This steady growth in coal consumption is
correlated to similar growth in the electric generation industry that in
1999 accounted for more than 86% of domestic coal consumption. In 1999,
coal-fired power plants generated approximately 52% of the nation's
electricity, followed by nuclear (20%), gas-fired (15%) and
hydroelectric (8%) facilities. Furthermore, because coal is one of the
least expensive and most abundant and reliable resources for the
production of electricity, we believe coal will become increasingly
important as electricity markets are deregulated in the United States
and privatized around the world. See "Coal Industry Overview."
A substantial majority of our equity is owned by Lehman Brothers
Merchant Banking Partners II L.P., LBI Group Inc. and their affiliated
co-investors, collectively, "Lehman Merchant Banking," each of which is
an affiliate of Lehman Brothers.
THE ACQUISITION AND THE FINANCINGS
On May 19, 1998, we acquired Peabody Holding Company, Inc. and
other related subsidiaries from The Energy Group PLC. The acquisition
was funded by (1) $920.0 million of borrowings by us under a $920.0
million senior secured term facility, (2) the offerings of $400.0
million aggregate principal amount of senior notes and $500.0 million
aggregate principal amount of senior subordinated notes and (3) an
equity contribution to us by Lehman Merchant Banking of $480.0 million.
These amounts were used to (a) pay $2003.6 million for the equity of the
acquired companies, (b) pay $73.0 million of obligations of Citizens
Power, (c) capitalize Citizens Power's energy trading operations with an
additional $50.0 million, (d) increase cash balances by $109.8 million
and (e) pay $61.0 million in transaction fees and expenses incurred in
connection with these transactions. We also entered into a $480.0
million senior revolving credit facility to provide for our
2
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<PAGE>
working capital requirements following the acquisition. We also assumed
(1) a 5% subordinated note of $201.8 million and (2) $75.0 million of
debt of Peabody Resources, our Australian subsidiary. The revolving
credit facility and the term loan facility (collectively the "senior
credit facilities") are provided by a group of banks led by Lehman
Commercial Paper Inc., an affiliate of Lehman Brothers Inc. We refer to
the senior credit facilities and the offerings of the notes collectively
as the "Financings." We refer to the acquisition, the Financings and a
number of distributions to The Energy Group made prior to the
consummation of the acquisition and the Financings as the
"Transactions." See "The Acquisition," "Use of Proceeds,"
"Capitalization" and "Description of Indebtedness."
The sources and uses of the funds for the Transactions,
consummated on May 19, 1998, are shown on the table below.
SOURCES OF FUNDS
AMOUNT
---------------
(IN MILLIONS)
Senior Credit Facilities
Term Loan Facility $ 920.0
8-7/8% Senior Notes 398.8
9-5/8% Senior Subordinated Notes 498.6
Assumption of 5% Subordinated Note 201.8
Assumption of Peabody Resources Debt<F1> 75.0
Equity Contribution 480.0
--------
Total Sources $2,574.2
========
USES OF FUNDS
Purchase of Equity of the Acquired Companies $2,003.6
Assumption of Peabody Resources Debt<F1> 75.0
Assumption of 5% Subordinated Note 201.8
Capitalization of Citizens Power 50.0
Payment of Citizens Power Obligations<F2> 73.0
Increase in Cash Balance 109.8
Transaction Fees and Expenses 61.0
--------
Total Uses $2,574.2
========
[FN]
<F1> Peabody Resources' pro rata share of indebtedness incurred in the
expansion of the Warkworth mine and the development of the
Bengalla mine. Peabody Resources has a 43.75% interest in the
Warkworth joint venture and a 37% interest in the Bengalla joint
venture and manages both joint ventures. Includes $32.3 million of
indebtedness incurred in April 1998. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
<F2> Payment of remaining purchase price obligations to the former
owners of Citizens Power, which was acquired on May 19, 1997. See
"Related Party Transactions."
3
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<PAGE>
<TABLE>
DESCRIPTION OF THE NOTES
SENIOR NOTES
<S> <C>
MATURITY DATE May 15, 2008.
INTEREST 8-7/8% per year, payable in cash.
INTEREST PAYMENT DATES May 15 and November 15, commencing November 15, 1998.
MANDATORY REDEMPTION We are not required to make mandatory redemption or sinking fund
payments.
OPTIONAL REDEMPTION Prior to May 15, 2003, we may redeem the senior notes at a redemption
price equal to 100% of their principal amount plus the applicable
make whole premium, plus, to the extent not included in the make
whole premium, accrued and unpaid interest to the date of redemption.
On or after May 15, 2003, we may redeem the senior notes at the
redemption prices described in this prospectus, plus accrued and
unpaid interest to the applicable date of redemption. In addition, at
any time prior to May 15, 2001, on any one or more occasions we may,
at our option, redeem up to 35% of the aggregate principal amount of
the senior notes at a redemption price equal to 108.875% of their
principal amount, plus accrued and unpaid interest to the applicable
date of redemption, with the net cash proceeds of one or more equity
offerings; provided that at least 65% aggregate principal amount of
senior notes remains outstanding immediately after each of those
redemptions. See "Description of the Senior Notes--Optional
Redemption."
CHANGE OF CONTROL Upon a change of control, each holder of senior notes will have the
right to require us, and we must offer, to purchase all or any part
of that holder's senior notes for 101% of their aggregate principal
amount, plus accrued and unpaid interest to the date of purchase. See
"Description of the Senior Notes--Repurchase at the Option of
Holders--Change of Control."
RANKING The senior notes are our general unsecured obligations, rank senior
in right of payment to all of our subordinated Indebtedness and rank
equally in right of payment with all of our current and future
unsecured senior Indebtedness, including all borrowings under the
senior credit facilities. However, all borrowings under the senior
credit facilities are secured by a first priority lien on some of our
assets and specified Domestic Subsidiaries. As of March 31, 2000, we
had $690.0 million of Indebtedness outstanding under the senior
credit facilities. See "Risk Factors--Risks Relating to the Notes--
Our Financial Performance Could be Affected by our Substantial Debt."
SENIOR NOTE GUARANTEES Some of our current and future Restricted Subsidiaries that are
Domestic Subsidiaries fully and unconditionally, and jointly and
severally, guarantee, or will guarantee, our payment obligations
under the senior notes on a senior basis. The senior subsidiary
guarantees will rank senior to all existing and future subordinated
Indebtedness of the senior subsidiary guarantors and equally with all
other unsecured senior indebtedness of the senior subsidiary
guarantors, including the guarantees of Indebtedness under the senior
credit facilities. Each senior subsidiary guarantor's obligations
under the senior credit facilities, however, will be secured by a
first priority lien on specified assets of that guarantor, and the
senior note indenture restricts, but does not prohibit, the senior
subsidiary guarantors from incurring additional secured indebtedness.
Accordingly, that secured indebtedness will rank prior to the senior
subsidiary guarantees with
4
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<PAGE>
respect to those assets. See "Description of the Senior Notes--Senior
Note Guarantees."
The senior notes will not be guaranteed by some of our Domestic
Subsidiaries or by any of our current or future Foreign Subsidiaries.
For fiscal 2000, after giving effect to the Transactions, the non-
guarantor subsidiaries accounted for 29% and 45% of revenues and
EBITDA, respectively, and, as of March 31, 2000, the non-guarantor
subsidiaries accounted for 20% of assets.
COVENANTS The senior note indenture contains covenants that, among other
things, limit our ability to (1) incur additional indebtedness and
issue preferred stock, (2) pay dividends or make other restricted
payments, (3) create liens, (4) enter into transactions with
affiliates, (5) sell our assets or (6) enter into mergers and
consolidations. In addition, under certain circumstances, we will be
required to offer to purchase the senior notes with the net cash
proceeds of sales and other dispositions of assets at a price equal
to 100% of the principal amount of the senior notes, plus accrued and
unpaid interest to the date of purchase. Citizens Power is designated
as an Unrestricted Subsidiary and is not subject to many of the
covenants under the senior note indenture. See "Description of the
Senior Notes--Covenants."
SENIOR SUBORDINATED NOTES
MATURITY May 15, 2008.
INTEREST 9-5/8% per year, payable in cash.
INTEREST PAYMENT DATES May 15 and November 15, commencing November 15, 1998.
MANDATORY REDEMPTION We are not required to make mandatory redemption or sinking fund
payments with respect to the senior subordinated notes.
OPTIONAL REDEMPTION Prior to May 15, 2003, we may redeem the senior subordinated notes at
a redemption price equal to 100% of their principal amount plus the
applicable make whole premium, plus, to the extent not included in
the make whole premium, accrued and unpaid interest to the date of
redemption.
On or after May 15, 2003, we may redeem the senior subordinated notes
at the redemption prices described in this prospectus plus accrued
and unpaid interest to the applicable date of redemption. In
addition, at any time prior to May 15, 2001, on any one or more
occasions we may, at our option, redeem up to 35% of the aggregate
principal amount of senior subordinated notes at a redemption price
equal to 109.625% of their principal amount, plus accrued and unpaid
interest to the applicable date of redemption, with the net cash
proceeds of one or more equity offerings; provided that at least 65%
aggregate principal amount of senior subordinated notes remains
outstanding immediately after each of those redemptions. See
"Description of the Senior Subordinated Notes--Optional Redemption."
CHANGE OF CONTROL Upon a change of control, each holder of senior subordinated notes
will have the right to require us, and we must offer, to purchase all
or any part of that holder's senior subordinated notes at a price in
cash equal to 101% of their aggregate principal amount, plus accrued
and unpaid interest to the date of purchase. See "Description of the
Senior Subordinated Notes--Repurchase at the Option of Holders--
Change of Control."
5
<PAGE>
<PAGE>
RANKING The senior subordinated notes are our general unsecured obligations
and rank subordinate in right of payment to all existing and future
Senior Debt and senior in right of payment to or equally with all of
our other indebtedness. As of March 31, 2000, we had $2,076.2 million
of indebtedness outstanding (excluding $320.2 million of non-recourse
indebtedness of Citizens Power), of which $1,397.2 million would have
been Senior Debt under the senior credit facilities (excluding
letters of credit) and the senior notes. See "Description of the
Senior Subordinated Notes--Subordination."
SENIOR SUBORDINATED
NOTE GUARANTEES Our payment obligations under the senior subordinated notes are fully
and unconditionally, and jointly and severally, guaranteed on a
senior subordinated basis by the senior subordinated note guarantors.
See "Description of the Senior Subordinated Notes--Senior
Subordinated Guarantees."
The senior subordinated notes are not guaranteed by some of our
Domestic Subsidiaries or by any of our current or future Foreign
Subsidiaries. For fiscal 2000, after giving effect to the acquisition
and related financings, the non-guarantor subsidiaries accounted for
29% and 45% of revenues and EBITDA, respectively, and, as of March
31, 2000, the non-guarantor subsidiaries accounted for 20% of assets.
COVENANTS The senior subordinated note indenture contains covenants that, among
other things, limit our ability to (1) incur additional indebtedness
and issue preferred stock, (2) pay dividends or make other restricted
payments, (3) create liens, (4) enter into transactions with
affiliates, (5) sell our assets or (6) enter into mergers and
consolidations. In addition, under certain circumstances, we will be
required to offer to purchase the senior subordinated notes with the
net cash proceeds of sales and other dispositions of assets at a
price equal to 100% of the principal amount of the senior
subordinated notes, plus accrued and unpaid interest to the date of
purchase. Citizens Power is designated as an Unrestricted Subsidiary
and is not subject to many of the covenants under the senior
subordinated note indenture. See "Description of the Senior
Subordinated Notes-- Covenants."
</TABLE>
6
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<PAGE>
SUMMARY FINANCIAL DATA
The following table presents selected financial data. We purchased
our operating subsidiaries on May 19, 1998, and prior to that date had
no substantial operations. The period ended March 31, 1999 is thus a
full fiscal year, but includes results of operations only from May 20,
1998 forward. For periods prior to May 19, 1998, results of operations
of the operating subsidiaries acquired are defined as the "Predecessor
Company" and are included for comparative purposes. See other factors
affecting the comparability of results in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In early
1999, we increased our interest in Black Beauty Coal Company to 81.7%.
The results of operations include the consolidated results of Black
Beauty Coal Company, effective January 1, 1999. Prior to that date, our
investment in Black Beauty Coal Company was accounted for under the
equity method.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------------------------
PERIOD FROM
MAY 20, 1998 PERIOD FROM
YEAR ENDED TOTAL TO APRIL 1, 1998 YEAR ENDED SIX MONTHS YEAR ENDED
MARCH 31, FISCAL MARCH 31, TO MARCH 31, ENDED SEPTEMBER 30,
2000<F1> 1999<F2> 1999 MAY 19, 1998 1998 MARCH 31, 1997 1996<F3> 1995
---------- ---------- ------------ ------------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA:
Revenues:
Sales $2,610,991 $2,249,887 $1,970,957 $ 278,930 $2,048,694 $1,000,419 $2,075,142 $2,087,656
Other Revenues 99,509 97,603 85,875 11,728 169,328 63,674 118,444 88,180
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 2,710,500 2,347,490 2,056,832 290,658 2,218,022 1,064,093 2,193,586 2,175,836
Operating Costs and
Expenses 2,517,263 2,171,921 1,890,588 281,333 1,957,210 961,998 2,844,882 1,930,224
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Profit (Loss) $ 193,237 $ 175,569 $ 166,244 $ 9,325 $ 260,812 $ 102,095 $ (651,296) $ 245,612
========== ========== ========== ========== ========== ========== ========== ==========
Income (Loss) from
Continuing
Operations $ 118,570 $ 6,007 $ 3,767 $ 2,240 $ 158,895 $ 58,432 $ (446,282) $ 100,387
========== ========== ========== ========== ========== ========== ========== ==========
Income (Loss) from
Discontinued
Operation $ (90,360) $ 4,678 $ 6,442 $ (1,764) $ 1,441 $ -- $ -- $ --
========== ========== ========== ========== ========== ========== ========== ==========
Net Income (Loss) $ 28,210 $ 10,685 $ 10,209 $ 476 $ 160,336 $ 58,432 $ (446,282) $ 100,387
========== ========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Working Capital $ (88,046) $ 486,953 $ 486,953 $ 374,492 $ 535,971 $ 167,076 $ (129,465) $ (104,310)
Total Assets 5,826,849 7,023,931 7,023,931 6,403,151 6,343,009 5,025,812 4,916,693 5,676,923
Recourse Debt 2,076,166 2,208,512 2,208,512 339,640 308,354 321,723 456,867 316,847
Non-Recourse Debt -- 333,867 333,867 293,922 293,922 -- -- --
Stockholders'
Equity/Invested
Capital 508,426 495,230 495,230 1,497,374 1,687,842 1,676,786 1,383,655 1,650,975
OTHER DATA:
Tons Sold 190.3 176.0 154.3 21.7 167.5 81.4 163.0 151.0
EBITDA<F4> $ 443,019 $ 380,267 $ 345,426 $ 34,841 $ 460,981 $ 203,825 $ (453,443) $ 435,942
Net Cash Provided by
(Used in):
Operating Activities 262,911 253,865 282,022 (28,157) 187,852 62,829 211,535 272,543
Investing Activities (185,384) (2,270,886) (2,249,336) (21,550) (136,033) (56,170) (105,640) (462,113)
Financing Activities (205,181) 2,184,818 2,161,281 23,537 (235,389) 94,178 15,987 178,993
Depreciation, Depletion
and Amortization 249,782 204,698 179,182 25,516 200,169 101,730 197,853 190,330
Capital Expenditures 178,754 195,394 174,520 20,874 165,514 76,460 152,106 188,006
Ratio of Earnings to
Fixed Charges<F5> .97x 1.08x 1.04x 2.00x 5.98x 3.63x -- 3.63x
<FN>
<F1> Results of operations for the year ended March 31, 2000 include
$144.0 million of income tax benefit associated with an increase
in the tax basis of a subsidiary's assets due to a change in
federal income tax regulations, and reclassification of the
results of operations and cash flows of Citizens Power LLC to a
discontinued operation.
<F2> For comparative purposes, the "Total Fiscal 1999" column has been
derived from adding the period ended March 31, 1999 with the
Predecessor Company results for the period ended May 19, 1998. The
effects of purchase accounting have not been reflected in the
results of the Predecessor Company.
<F3> Results of operations for the year ended September 30, 1996
include a one-time, non-cash charge of $890.8 million made
pursuant to SFAS No. 121, which had no effect on the Company's
cash flow.
<F4> EBITDA is defined as income from continuing operations before
deducting net interest expense, income taxes, minority interests
and depreciation, depletion and amortization. EBITDA has been
reduced by costs associated with reclamation, retiree health care
and workers' compensation. EBITDA is not a substitute for
operating income, net income and cash flow from operating
activities as determined in accordance with generally accepted
accounting principles as a measure of profitability or liquidity.
EBITDA is presented as additional
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information because management believes it to be a useful
indicator of our ability to meet debt service and capital
expenditure requirements. Because EBITDA is not calculated
identically by all companies, the presentation herein may not be
comparable to similarly titled measures of other companies.
<F5> For purposes of this computation, earnings consist of income
before income taxes plus fixed charges. Fixed charges consist of
interest expense on all indebtedness plus the interest component
of lease rental expense. Earnings were insufficient to cover fixed
charges by $702.5 million for the fiscal year ended September 30,
1996, due to the SFAS No. 121 charge described above.
</TABLE>
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RISK FACTORS
An investment in the notes involves risks. You should consider
carefully, in addition to the other information contained in this
prospectus, the following risk factors before deciding to purchase any
notes.
RISKS RELATING TO THE NOTES
OUR FINANCIAL PERFORMANCE COULD BE AFFECTED BY OUR SUBSTANTIAL DEBT
We are highly leveraged and, at March 31, 2000, had total
indebtedness of $2,076.2 million, excluding $320 million of Citizens
Power non-recourse debt of which:
* $690.0 million consisted of indebtedness under the senior
credit facilities,
* $398.9 million consisted of the senior notes,
* $498.7 million consisted of the senior subordinated notes,
* a $180.3 million, 5% subordinated note,
* $193.7 million in borrowings by Black Beauty, and
* $111.5 million in borrowings by our Australian subsidiary,
including $76.5 million to fund the development of the
Bengalla Mine.
In addition, we had available borrowings of up to $318.0 million under
our credit facilities. We and our Restricted Subsidiaries are permitted
to incur additional indebtedness in the future. See "Capitalization."
Our ability to pay principal and interest on each series of the
notes and to satisfy our other debt service obligations will depend upon
the future operating performance of our subsidiaries, which will be
affected by prevailing economic conditions in the markets they serve and
other factors, some of which are beyond their control. Based upon the
current level of operations, management believes that cash flow from
operations and available cash, together with available borrowings under
the senior credit facilities, will be adequate to meet our future
liquidity needs for at least the next several years. We cannot assure
you that our business will generate sufficient cash flow from operations
or that future borrowings will be available under the senior credit
facilities in an amount sufficient to enable us to service our
indebtedness, including each series of the notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of the
principal of each series of the notes on or prior to maturity. We cannot
assure you that we will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity
and Capital Resources."
The degree to which we are leveraged could have important
consequences to holders of each series of the notes, including, but not
limited to:
* making it more difficult for us to satisfy our obligations
with respect to each series of the notes;
* increasing our vulnerability to general adverse economic and
industry conditions;
* limiting our ability to obtain additional financing to fund
future working capital, capital expenditures, research and
development or other general corporate requirements;
* requiring the dedication of a substantial portion of our
cash flow from operations to the payment of principal of,
and interest on, our indebtedness, thereby reducing the
availability of that cash flow to fund working capital,
capital expenditures, research and development or other
general corporate purposes;
* limiting our flexibility in planning for, or reacting to,
changes in our business and the industries in which we
compete; and
* placing us at a competitive disadvantage compared to less
leveraged competitors. In addition, the indentures and the
senior credit facilities contain financial and other
restrictive covenants that limit our ability to, among other
things, borrow additional funds.
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Our failure to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us. In addition, the degree to which we are leveraged could
prevent us from repurchasing all of the notes tendered to us upon the
occurrence of a change of control.
YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES IS SUBORDINATED TO THAT OF
HOLDERS OF OUR SECURED DEBT
While holders of senior subordinated notes are contractually
subordinated to Senior Debt, holders of any of our secured indebtedness
have claims that are prior to the claims of the holders of each series
of the notes with respect to the assets securing that other
indebtedness. Notably, the senior credit facilities are secured by liens
on specified assets of the guarantors. The senior notes are effectively
subordinated to all of that secured Indebtedness. In the event of any
distribution or payment of our assets in any foreclosure, dissolution,
winding-up, liquidation, reorganization or other bankruptcy proceeding,
holders of secured Indebtedness will have a prior claim to our assets
that constitute their collateral. Holders of the senior notes will
participate ratably with all holders of our unsecured Indebtedness that
is deemed to be of the same class as the senior notes, and potentially
with all of our other general creditors, based upon the respective
amounts owed to each holder or creditor, in our remaining assets. In any
of the foregoing events, we cannot assure you that we would have
sufficient assets to pay amounts due on the senior notes. As a result,
holders of senior notes may receive less, ratably, than holders of
secured indebtedness.
Citizens Power and its subsidiaries are currently our only
Unrestricted Subsidiaries. As of March 31, 2000, Citizens Power had an
aggregate of $320.2 million of indebtedness which is non-recourse to us
and our other subsidiaries. The covenants under the indentures do not
restrict the ability of Unrestricted Subsidiaries to incur additional
non-recourse indebtedness. In May 2000, we signed a Purchase and Sale
Agreement to sell Citizens Power.
As of March 31, 2000, $690.0 million of our secured Indebtedness
(all of which are borrowings under the senior credit facilities) was
outstanding, and $200.0 million was available for additional borrowing
and $235.4 million of letters of credit was available under the senior
credit facilities. The indentures permit us to incur substantial
additional secured indebtedness in the future.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE SENIOR SUBORDINATED NOTES IS
SUBORDINATE TO THAT OF HOLDERS OF OUR SENIOR DEBT
The senior subordinated notes are subordinated in right of payment
to all of our current and future Senior Debt, which includes borrowings
under the senior credit facilities and the senior notes. However, the
senior subordinated note indenture provides that we will not, and will
not permit any of the senior subordinated note guarantors to, incur or
otherwise become liable for any indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect
in right of payment to the senior subordinated notes or any of the
senior subordinated note guarantees. Upon any distribution to our
creditors in a liquidation or dissolution or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating
to us or our property, the holders of Senior Debt will be entitled to be
paid in full in cash or cash equivalents before any payment may be made
with respect to the senior subordinated notes. In addition, the
subordination provisions of the senior subordinated note indenture
provide that payments with respect to the senior subordinated notes will
be blocked in the event of a payment default on Senior Debt and may be
blocked for up to 179 days each year in the event of specified non-
payment defaults on Senior Debt. In the event of our bankruptcy,
liquidation or reorganization, holders of the senior subordinated notes
will participate equally with all holders of our subordinated
indebtedness that are deemed to be of the same class as the senior
subordinated notes, and potentially with all of our other general
creditors, based upon the respective amounts owed to each holder or
creditor, in our remaining assets. In any of the foregoing events, we
cannot assure you that there would be sufficient assets to pay amounts
due on the senior subordinated notes. As a result, holders of senior
subordinated notes may receive less, ratably, than the holders of Senior
Debt.
As of March 31, 2000, the aggregate amount of our Senior Debt
(including borrowings under the senior credit facilities) was $1,397.2
million, and $200.0 million was available for additional borrowing and
$235.4 million of letters of credit was available under the senior
credit facilities. The senior subordinated note indenture permits us to
incur substantial additional indebtedness, including Senior Debt in the
future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
OUR OBLIGATIONS ARE EFFECTIVELY SUBORDINATED TO THE OBLIGATIONS OF OUR
SUBSIDIARIES
We have no operations of our own and derive substantially all of
our revenue from our subsidiaries. Holders of indebtedness of, and trade
creditors of, our subsidiaries would generally be entitled to payment of
their claims from the assets of the affected subsidiaries before those
assets were made available for distribution to us. Each of the
indentures permits us
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to incur substantial additional indebtedness, permits us to make
significant investments and requires specified Restricted Subsidiaries
that are Domestic Subsidiaries to guarantee each series of the notes. In
the event of a bankruptcy, liquidation or reorganization of a
subsidiary, holders of any of that subsidiary's indebtedness will have a
claim to the assets of the subsidiary that is prior to our interest in
those assets.
As of March 31, 2000, the aggregate amount of indebtedness and
other liabilities of the Company and our Restricted Subsidiaries
(including trade payables, land reclamation and environmental
liabilities, workers' compensation liabilities and retiree health care
liabilities) was approximately $5,310.1 million and $435.4 million was
available to the subsidiaries for additional borrowings under the senior
credit facilities including letters of credit. If any subsidiary
indebtedness were to be accelerated, we cannot assure you that the
assets of that subsidiary would be sufficient to repay that indebtedness
or that our assets would be sufficient to repay in full our
indebtedness, including the notes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The notes are not guaranteed by some of our Domestic Subsidiaries
or by any Foreign Subsidiaries. In fiscal 2000, after giving effect to
the Transactions, the non-guarantor subsidiaries accounted for 29% and
45% of revenues and EBITDA, respectively, and as of March 31, 2000, the
non-guarantor subsidiaries accounted for 20% of assets. The claims of
creditors (including trade creditors) of any non-guarantor subsidiary
will generally have priority as to the assets of such subsidiaries over
the claims of the holders of the notes. As of March 31, 2000, the amount
of liabilities of such non-guarantor subsidiaries was $496.3 million.
OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO BORROW ADDITIONAL FUNDS
The indentures and the senior credit facilities contain covenants
that restrict our ability to incur additional indebtedness, pay
dividends, make specified investments and capital expenditures, enter
into transactions with affiliates, allow our Restricted Subsidiaries to
make specified payments, make specified asset dispositions, merge or
consolidate with, or transfer substantially all of our assets to another
person, encumber assets under specified circumstances or restrict
dividends and other payments from Restricted Subsidiaries. In addition,
the senior credit facilities restrict us from prepaying some of our
indebtedness, including the notes. Under the senior credit facilities,
we are also required to maintain specified financial covenants,
including a minimum fixed charge coverage ratio and maximum leverage
ratio (each as defined in the senior credit facilities). We cannot
assure you that our future operating results will be sufficient to
enable us to comply with those covenants, or in the event of a default,
to remedy that default. In the event of a default under the senior
credit facilities, we could be prohibited from making payments of
principal and interest on the notes and all amounts due under the senior
credit facilities could be declared immediately due and payable. The
indentures and the senior credit facilities contain cross-default
provisions under which defaults under other indebtedness constitute
events of default.
OUR ABILITY TO OFFER TO PURCHASE YOUR NOTES IN THE EVENT OF A CHANGE OF
CONTROL MAY BE LIMITED
Upon a change of control, you will have the right to require us to
purchase all or a portion of your notes at a price equal to 101% of
their principal amount, plus accrued and unpaid interest to the purchase
date. The provisions of the indentures may not protect you in the event
of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction involving us, if that transaction does not result
in a change of control. A change in control may result in a default
under the senior credit facilities. Upon a default under the senior
credit facilities or other future Senior Debt, the lenders could
prohibit us from repurchasing the notes or could require us to repay all
of that Senior Debt before repurchasing the notes. The senior
subordinated indenture requires that prior to our repurchasing the
senior subordinated notes upon a change of control, we must either repay
all outstanding indebtedness under the senior credit facilities or
obtain any required consent to that repurchase. If we do not obtain that
consent or repay our outstanding indebtedness under the senior credit
facilities, we would be prohibited from offering to purchase the senior
subordinated notes. In that case, our failure to offer to purchase the
senior subordinated notes could become an Event of Default under the
senior subordinated indenture. If a change of control were to occur, we
cannot assure you that we would have sufficient funds or would be able
to arrange financing to repay all of our obligations under the senior
credit facilities, the Indentures and other indebtedness that may become
payable upon the occurrence of the change of control.
THERE IS NO TRADING MARKET FOR THE NOTES
There is no existing trading market for the notes, and we cannot
assure you that one will develop. If a market were to develop, the notes
could trade at prices that may be higher or lower than their initial
offering price depending on many factors, including prevailing interest
rates, our operating results and the market for similar securities.
Although it is not obligated to do so, Lehman Brothers Inc. intends to
make a market in the notes. Lehman Brothers Inc. may discontinue any
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market-making activity at any time, for any reason, without notice in
its sole discretion. We cannot assure that there will be a liquid
trading market for the notes.
Lehman Brothers Inc. may be deemed to be an affiliate of ours and,
as an affiliate, may be required to deliver a prospectus in connection
with its market-making activities in the notes. We have agreed to file
and maintain a registration statement that would allow Lehman Brothers
Inc. to engage in market-making transactions in the notes. Subject to
some exceptions, the registration statement will remain effective for as
long as Lehman Brothers Inc. may be required to deliver a prospectus in
connection with market-making transactions in the notes. We have agreed
to bear substantially all the costs and expenses related to the
registration statement.
YOUR RIGHTS UNDER THE NOTES COULD BE LIMITED BY FRAUDULENT CONVEYANCE
LAWS
Under federal bankruptcy law and state fraudulent transfer law, if
any of our company or the note guarantors, at the time it incurred the
indebtedness evidenced by each series of the notes or a guarantee:
* (a) was or is insolvent or rendered insolvent by reason of
that incurrence or (b) was or is engaged in a business or
transaction for which its remaining assets constituted
unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur, debts
beyond its ability to pay those debts as they mature and
* we or that guarantor received or receives less than
reasonably equivalent value or fair consideration for the
incurrence of that indebtedness, then each series of the
notes and the guarantees, and any pledge or other security
interest securing that indebtedness, could be voided, or
claims in respect of either series of the notes or the
guarantees could be subordinated to all other debts of our
company or that guarantor, as the case may be.
In addition, the payment of interest and principal by us under
either series of the notes or the payment of amounts by a guarantor
under a guarantee could be voided and required to be returned to the
person making that payment, or to a fund for the benefit of the
creditors of ours or that guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing
considerations will vary depending upon the law applied in any
proceeding with respect to the foregoing. Generally, however, a company
would be considered insolvent if:
* the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a
fair valuation or if the present fair saleable value of its
assets was less than the amount that would be required to
pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or
* it could not pay its debts as they become due.
On the basis of historical financial information, recent operating
history and other factors, we believe that on a consolidated basis after
giving effect to the Transactions, we were solvent at the time the notes
were issued and continue to be solvent, do not have unreasonably small
capital for the business in which we are engaged and will not incur
debts beyond our ability to pay those debts as they mature. We cannot
assure you, however, as to what standard a court would apply in making
those determinations or that a court would agree with our conclusions in
this regard.
Some of our subsidiaries that are providing guarantees on each
series of the notes have significant liabilities associated with
reclamation, workers' compensation (including black lung), and retiree
health care. See "Regulatory Matters." We have not analyzed the solvency
of these subsidiaries with respect to the standards a court would apply
in making a determination as to the solvency of those subsidiaries on a
stand-alone basis. We cannot assure you that funds may be realized on
those guarantees or that the guarantees issued by that guarantor (if a
court were to determine that that guarantor did not receive fair
consideration or reasonably equivalent value for that guarantee) would
not be voided or subordinated under constructive fraudulent conveyance
laws.
RISKS RELATING TO OUR COMPANY
LONG-TERM COAL SUPPLY AGREEMENTS COULD BE TERMINATED
A substantial portion of our sales are made under coal supply
agreements, which are important to the stability and profitability of
our operations. The execution of a satisfactory coal supply agreement is
frequently the basis on which we undertake the development of coal
reserves required to be supplied under the contract. Peabody has a large
portfolio of coal supply agreements. In fiscal 2000, 86% of our sales
volume was sold under coal supply agreements. At March 31, 2000, our
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coal supply agreements had terms ranging from one to 16 years and had an
average volume-weighted remaining term of more than four years.
Many of our coal supply agreements contain price reopener
provisions that provide for the contract price to be adjusted upward or
downward at specified times. Failure of the parties to agree on a price
under those reopener provisions may lead to early termination of the
contracts. Over the last few years, several of our coal supply
agreements have been renegotiated, bringing the contract prices closer
to the then current market prices, thus leading to a reduction in the
revenues from those contracts. A similar reduction in contract prices
has also been experienced in relation to the replacement of expiring
contracts. The coal supply agreements also typically contain force
majeure provisions allowing temporary suspension of performance by us or
the customer during the duration of specified events beyond the control
of the affected party. Most coal supply agreements contain provisions
requiring us to deliver coal within specified ranges for specific coal
characteristics such as Btus, sulfur, ash, grindability and ash fusion
temperature. Failure to meet these specifications could result in
economic penalties or termination of the contracts.
We restructure coal supply agreements in the normal course of
business. In connection with those restructurings, we recognized gains
of $13.0 million, $5.3 million and $49.3 million in fiscal years 2000,
1999 and 1998. We cannot assure you that we will be able to realize
these gains in connection with future coal supply agreement
restructurings.
The operating profit margins we realize under coal supply
agreements depend on a variety of factors. In addition, price
adjustment, price reopener and other provisions may reduce the
insulation from any short-term coal price volatility provided by those
contracts. If a substantial portion of our coal supply agreements were
modified or terminated, we could be materially adversely affected to the
extent that we are unable to find alternate buyers for our coal at the
same level of profitability. Because the price of coal has declined in
recent years, many of our coal supply agreements are for prices above
current spot market prices. We cannot assure you that we will be able to
replace these contracts at the same prices or with similar profit
margins when they expire. In addition, some coal supply agreements are
the subject of ongoing litigation and arbitration.
WE RELY ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR
REVENUES
In fiscal 2000, we derived 27% of our total coal revenues from
sales to our five largest customers, under 13 coal supply agreements
that expire in various years from 2000 to 2014. We are currently engaged
in discussions with several customers to either extend or enter into new
long-term agreements upon expiration of existing agreements. We cannot
assure you these customers either will extend or enter into new long-
term agreements or, in the absence of long-term agreements, that they
will continue to purchase the same amount of coal as they have in the
past or on terms, including pricing terms, as favorable to us as under
existing agreements. The concurrent loss of several coal supply
agreements, reductions in the amounts of coal that all five of these
customers purchase under those agreements, or the terms under which they
buy could have a material adverse effect on our financial condition and
results of operations.
OUR ABILITY TO SELL COAL DEPENDS UPON TRANSPORTATION BEING AVAILABLE AND
AFFORDABLE
Coal producers depend upon rail, barge, trucking, overland
conveyor and other systems to provide access to markets. While customers
typically arrange and pay for transportation of coal from the mine to
the point of use, disruption of these transportation services because of
weather-related problems, strikes, lock-outs or other events could
temporarily impair our ability to supply coal to our customers and thus
could adversely affect our results of operations. For example, the high
volume of coal shipped from all southern Powder River Basin mines could
create temporary congestion on the rail system accessing that region.
Transportation costs represent a significant portion of the total
cost of coal, and as a result, the cost of delivery is a critical factor
in a customer's purchasing decision. Increases in transportation costs
could make coal a less competitive source of energy or could make some
of our operations less competitive than other sources of coal. Those
increases could have a material adverse effect on our ability to compete
and on our financial condition and results of operations.
In Australia, we transport coal using the Hunter River Valley
Railroad and the coal loading terminal at the Port of Newcastle. The
Port of Newcastle has had problems with ship congestion in the past.
That congestion could delay shipments from our Warkworth and Bengalla
mines.
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RISKS INHERENT TO MINING COULD INCREASE THE COST OF OPERATING OUR
BUSINESS
Our mining operations are subject to conditions beyond our control
which can increase the cost of mining at particular mines for varying
lengths of time. These conditions include weather and natural disasters,
unexpected maintenance problems, key equipment failures, variations in
coal seam thickness, variations in the amount of rock and soil overlying
the coal deposit, variations in rock and other natural materials and
variations in geological and other conditions.
WE CANNOT PREDICT THE EFFECT OF THE RESTRUCTURING OF THE AUSTRALIAN COAL
INDUSTRY ON US
The coal mining industry in Australia is going through a process
of restructuring in an effort to improve the industry's international
competitiveness. This restructuring is directed at improving workforce
flexibility through training workers to perform multiple tasks and
eliminating existing inflexibilities in work practices. Some major coal
mining companies, including Peabody Resources, have also attempted to
employ non-union labor under individual contracts of employment. While
to date these changes have been accomplished without major industrial
disruption, we cannot assure you that this state of affairs will
continue or that further restructuring will not cause major work
stoppages in the future.
OUR MINING OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
General. The coal mining industry is subject to regulation by
federal, state and local authorities on matters such as employee health
and safety, permitting and licensing requirements, air quality
standards, water pollution, plant and wildlife protection, reclamation
and restoration of mining properties after mining is completed, the
discharge of materials into the environment, surface subsidence from
underground mining and the effects that mining has on groundwater
quality and availability. In addition, the industry is affected by
significant legislation mandating specified benefits for current and
retired coal miners. Numerous governmental permits and approvals are
required for mining operations. We may be required to prepare and
present to federal, state or local authorities data pertaining to the
effect or impact that any proposed exploration for or production of coal
may have upon the environment. The costs, liabilities and requirements
associated with these regulations may be costly and time-consuming and
may delay commencement or continuation of exploration or production
operations. The possibility exists that new legislation and/or
regulations and orders may be adopted which may materially adversely
affect our mining operations, our cost structure and/or our customers'
ability to use coal. New legislation, including proposals related to the
protection of the environment which would further regulate and tax the
coal industry, may also require us or our customers to change their
operations significantly or incur increased costs. Such factors and
legislation, if enacted, could have a material adverse effect on our
financial condition and results of operations. See "Regulatory Matters."
OUR FUTURE SUCCESS DEPENDS UPON OUR ABILITY TO FIND, DEVELOP OR ACQUIRE
ADDITIONAL COAL RESERVES THAT ARE ECONOMICALLY RECOVERABLE
Our recoverable reserves will generally decline as reserves are
depleted, except to the extent that we conduct successful exploration
and development activities or acquire properties containing recoverable
reserves. To increase reserves and production, we must continue our
development, exploration and acquisition activities or undertake other
replacement activities. Our current strategy includes increasing our
reserve base through acquisitions of government leases and other leases
and producing properties and continuing to exploit our existing
properties. The federal government continually leases coal reserves
through a competitive bidding process. Companies such as ours may
nominate specific areas to be leased by the government by application.
Companies that have operations adjacent to these nominated lease areas
have advantages in the bid process since their mining infrastructure is
in place and they could avoid the cost of developing a new mine. Through
this process, in June 1998, we acquired an additional 532 million tons
of low sulfur coal reserves in a lease auction in the Powder River Basin
adjacent to our North Antelope/Rochelle Mine. We cannot assure you that
we will be able to continue successfully leasing additional reserves
from the federal government. Additionally, we cannot assure you that our
planned development and exploration projects and acquisition activities
will result in significant additional reserves or that we will have
continuing success developing additional mines. Most of our mining
operations are conducted on properties owned or leased by us. Because
title to most of our leased properties and mineral rights are not
thoroughly verified until a permit to mine the property is obtained, our
right to mine some of our reserves may be materially adversely affected
if defects in title or boundaries exist. In addition, we cannot assure
you that we can successfully negotiate new leases from the government or
private parties or mining contracts for properties containing additional
reserves or maintain our leasehold interest in properties on which
mining operations are not commenced during the term of the lease.
14
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<PAGE>
OUR RESULTS OF OPERATIONS ARE HIGHLY DEPENDENT UPON THE PRICES RECEIVED
FOR OUR COAL
Although in fiscal 2000, 86% of our sales were made under coal
supply agreements, many of our coal supply agreements contain price
reopener provisions which provide for the contract price to be adjusted
upward or downward at specified times. Any significant decline in prices
for coal could have a material adverse effect on our financial condition
and results of operations, and quantities of reserves recoverable on an
economic basis. Should the industry experience significant price
declines from current levels or other adverse market conditions, we may
not be able to generate sufficient cash flow from operations to meet our
obligations and make planned capital expenditures.
The availability of a ready market for our coal production also
depends on a number of factors, including the demand and supply of low
sulfur coal and the availability and cost of sulfur dioxide emission
allowances.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY
The coal industry is highly competitive, with numerous producers
in all coal producing regions. We compete with other large producers and
hundreds of small producers in the United States and abroad. Many of our
customers are also customers of our competitors. The markets in which we
sell our coal are highly competitive and affected by factors beyond our
control. Continued demand for our coal and the prices that we will be
able to obtain will depend primarily on coal consumption patterns of the
domestic electric utility industry, which in turn are affected by the
demand for electricity, coal transportation costs, environmental and
other governmental regulations and orders, technological developments
and the availability and price of competing alternative energy sources
such as oil, natural gas, nuclear energy and hydroelectric energy. In
addition, during the mid-1970s and early 1980s, a growing coal market
and increased demand for coal attracted new investors to the coal
industry and spurred the development of new mines and added production
capacity throughout the industry. Although demand for coal has grown
over the recent past, the industry has since been faced with
overcapacity, which in turn has increased competition and lowered
prevailing coal prices. Moreover, because of greater competition for
electricity and increased pressure from customers and regulators to
lower electricity prices, public utilities are lowering fuel costs and
requiring competitive prices on their purchases of coal.
A LARGE PORTION OF OUR LABOR FORCE IS UNIONIZED
Approximately 39% of our and our joint venture's U.S. coal
employees, who accounted for 26% of our U.S. coal sales in fiscal 2000,
are represented by the United Mine Workers of America. The Australian
coal mining industry is highly unionized and the majority of workers
employed at Peabody Resources are members of trade unions. Some of our
competitors have non-union work forces. Because of the increased risk of
strikes and other work-related stoppages in addition to higher labor
costs which may be associated with union operations in the coal
industry, our non-unionized competitors may have a competitive advantage
in areas where they compete with our unionized operations. If some or
all of the company's current non-union operations were to become
unionized, we could incur an increased risk of work stoppages, reduced
productivity and higher labor costs. The ten month long United Mine
Workers of America strike in 1993 had a material adverse effect on us.
Our subsidiaries, Peabody Coal Company and Eastern Associated Coal
Corp., operate under a union contract which is in effect through
December 31, 2002 and our Peabody Western Coal Company subsidiary
operates under a union contract which is in effect through August 31,
2000. The parties are negotiating the terms of a successor labor
contract. Peabody Resources' Warkworth Mine operates under a labor
agreement that expires in October 2000. Peabody Resources,' Ravensworth
and Narama mines entered into two-year labor agreements in May 1999. A
new labor agreement for the Moura Mine is currently under negotiation
and the miners are working under the terms of the expired contract. We
cannot assure you that our unionized labor will not go on strike upon
expiration of existing contracts.
OUR OPERATIONS COULD BE ADVERSELY AFFECTED IF WE FAIL TO MAINTAIN
REQUIRED SURETY BONDS
Federal and state laws require bonds to secure our obligations to
reclaim lands disturbed for mining, to pay federal and state workers'
compensation and to satisfy other miscellaneous obligations. As of March
31, 2000, we had outstanding surety bonds with third parties for post-
mining reclamation totaling $529.1 million. Furthermore, surety bonds
valued at an additional $78.7 million are in place for federal and state
workers' compensation obligations and other miscellaneous obligations.
These bonds are typically renewable on a yearly basis. We cannot assure
you that the surety bond issuers and holders will continue to renew the
bonds or refrain from demanding additional collateral upon those
renewals. Furthermore, as a result of the acquisition financings, we are
highly leveraged, making it questionable whether we will be able to
continue our self-bonding program and thus requiring us to obtain
additional third-party surety bonds. The failure to maintain or the
15
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inability to acquire sufficient surety bonds, as required by state and
federal law, would have a material adverse effect on us. That failure
could result from a variety of factors including the following:
* lack of availability, higher expense or unreasonable terms
of new surety bonds;
* restrictions on the demand for collateral by current and
future third-party surety bond holders due to the terms of
the indentures or the senior credit facilities; and
* the exercise by third-party surety bond holders of their
right to refuse to renew the surety.
WE DEPEND ON KEY PERSONNEL
Our business is managed by a number of key personnel, the loss of
which could have a material adverse effect on us. In addition, as our
business develops and expands, we believe that our future success will
depend greatly on our continued ability to attract and retain highly
skilled and qualified personnel. We cannot assure you that key personnel
will continue to be employed by us or that we will be able to attract
and retain qualified personnel in the future. We currently have not
obtained key person life insurance to cover our executive officers.
Failure by us to retain or attract key personnel could have a material
adverse effect on us.
16
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USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the
notes by Lehman Brothers Inc. in market-making transactions. We will not
receive any of the proceeds from these transactions.
CAPITALIZATION
The following table presents our capitalization, excluding non-
recourse long-term debt of Citizens Power of $320.2 million<F1> as of
March 31, 2000.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
-----------------------
(IN MILLIONS)
<S> <C>
Senior Credit Facilities
Revolving Credit Facility $ --
Term Loan Facility 690.0
Senior Notes 398.9
Senior Subordinated Notes 498.7
Existing U.S. Long-Term Debt 3.1
Black Beauty Debt 193.7
Peabody Resources Debt 111.5
5% Subordinated Note 180.3
---------
Total Debt $ 2,076.2
Stockholder's equity 508.4
---------
Total Capitalization $ 2,584.6
=========
<FN>
<F1> In May 2000, we signed a purchase and sale agreement to sell
Citizens Power.
</TABLE>
17
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SELECTED FINANCIAL DATA
The following table presents selected financial data. We purchased
our operating subsidiaries on May 19, 1998, and prior to that date had
no substantial operations. The period ended March 31, 1999 is thus a
full fiscal year, but includes results of operations only from May 20,
1998 forward. For periods prior to May 19, 1998, results of operations
of the operating subsidiaries acquired are defined as the "Predecessor
Company" and are included for comparative purposes. See other factors
affecting the comparability of results in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In early
1999, we increased our interest in Black Beauty Coal Company to 81.7%.
The results of operations include the consolidated results of Black
Beauty Coal Company, effective January 1, 1999. Prior to that date, our
investment in Black Beauty Coal Company was accounted for under the
equity method.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------------------------
PERIOD FROM
MAY 20, 1998 PERIOD FROM
YEAR ENDED TOTAL TO APRIL 1, 1998 YEAR ENDED SIX MONTHS YEAR ENDED
MARCH 31, FISCAL MARCH 31, TO MARCH 31, ENDED SEPTEMBER 30,
2000<F1> 1999<F2> 1999 MAY 19, 1998 1998 MARCH 31, 1997 1996<F3> 1995
---------- ---------- ------------ ------------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA:
Revenues:
Sales $2,610,991 $2,249,887 $1,970,957 $ 278,930 $2,048,694 $1,000,419 $2,075,142 $2,087,656
Other Revenues 99,509 97,603 85,875 11,728 169,328 63,674 118,444 88,180
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 2,710,500 2,347,490 2,056,832 290,658 2,218,022 1,064,093 2,193,586 2,175,836
Operating Costs and
Expenses 2,517,263 2,171,921 1,890,588 281,333 1,957,210 961,998 2,844,882 1,930,224
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Profit (Loss) $ 193,237 $ 175,569 $ 166,244 $ 9,325 $ 260,812 $ 102,095 $ (651,296) $ 245,612
========== ========== ========== ========== ========== ========== ========== ==========
Income (Loss) from
Continuing
Operations $ 118,570 $ 6,007 $ 3,767 $ 2,240 $ 158,895 $ 58,432 $ (446,282) $ 100,387
========== ========== ========== ========== ========== ========== ========== ==========
Income (Loss) from
Discontinued
Operation $ (90,360) $ 4,678 $ 6,442 $ (1,764) $ 1,441 $ -- $ -- $ --
========== ========== ========== ========== ========== ========== ========== ==========
Net Income (Loss) $ 28,210 $ 10,685 $ 10,209 $ 476 $ 160,336 $ 58,432 $ (446,282) $ 100,387
========== ========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Working Capital $ (88,046) $ 486,953 $ 486,953 $ 374,492 $ 535,971 $ 167,076 $ (129,465) $ (104,310)
Total Assets 5,826,849 7,023,931 7,023,931 6,403,151 6,343,009 5,025,812 4,916,693 5,676,923
Recourse Debt 2,076,166 2,208,512 2,208,512 339,640 308,354 321,723 456,867 316,847
Non-Recourse Debt -- 333,867 333,867 293,922 293,922 -- -- --
Stockholders'
Equity/Invested
Capital 508,426 495,230 495,230 1,497,374 1,687,842 1,676,786 1,383,655 1,650,975
OTHER DATA:
Tons Sold 190.3 176.0 154.3 21.7 167.5 81.4 163.0 151.0
EBITDA<F4> $ 443,019 $ 380,267 $ 345,426 $ 34,841 $ 460,981 $ 203,825 $ (453,443) $ 435,942
Net Cash Provided by
(Used in):
Operating Activities 262,911 253,865 282,022 (28,157) 187,852 62,829 211,535 272,543
Investing Activities (185,384) (2,270,886) (2,249,336) (21,550) (136,033) (56,170) (105,640) (462,113)
Financing Activities (205,181) 2,184,818 2,161,281 23,537 (235,389) 94,178 15,987 178,993
Depreciation, Depletion
and Amortization 249,782 204,698 179,182 25,516 200,169 101,730 197,853 190,330
Capital Expenditures 178,754 195,394 174,520 20,874 165,514 76,460 152,106 188,006
<FN>
<F1> Results of operations for the year ended March 31, 2000 include
$144.0 million of income tax benefit associated with an increase
in the tax basis of a subsidiary's assets due to a change in
federal income tax regulations, and reclassification of the
results of operations and cash flows of Citizens Power LLC to a
discontinued operation.
<F2> For comparative purposes, the "Total Fiscal 1999" column has been
derived from adding the period ended March 31, 1999 with the
Predecessor Company results for the period ended May 19, 1998. The
effects of purchase accounting have not been reflected in the
results of the Predecessor Company.
<F3> Results of operations for the year ended September 30, 1996
include a one-time, non-cash charge of $890.8 million made
pursuant to SFAS No. 121, which had no effect on the Company's
cash flow.
<F4> EBITDA is defined as income from continuing operations before
deducting net interest expense, income taxes, minority interests
and depreciation, depletion and amortization. EBITDA has been
reduced by costs associated with reclamation, retiree health care
and workers' compensation. EBITDA is not a substitute for
operating income, net income and cash flow from operating
activities as determined in accordance with generally accepted
accounting principles as a measure of profitability or liquidity.
EBITDA is presented as additional information because management
believes it to be a useful indicator of our ability to meet debt
service and capital expenditure requirements. Because EBITDA is
not calculated identically by all companies, the presentation
herein may not be comparable to similarly titled measures of other
companies.
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with "Selected Financial Data" and the audited and unaudited combined/
consolidated financial statements and related notes included elsewhere
in this prospectus. Except for the financial statements for the year
ended March 31, 1999 and the period ended March 31, 2000 and, the
financial statements contained in this prospectus are of our
predecessors.
FACTORS AFFECTING COMPARABILITY
Discontinued Operations:
In May 2000, we signed a purchase and sale agreement with Edison
Mission Energy to sell Citizens Power, our subsidiary that markets and
trades electric power and energy-related commodity risk management
products. The anticipated loss from the sale of this subsidiary and the
monetization of non-trading assets ($78.3 million, net of income taxes),
has been reclassified in the results of operations and cash flows as a
discontinued operation for all periods presented. The fair value of the
net assets of Citizens Power has been reclassified to a single line in
the balance sheet entitled "Net assets of discontinued operations" in
the current year only.
Fiscal Year 2000 vs. Fiscal Year 1999:
Effective January 1, 2000, Black Beauty realigned its investment
structure and invested $6.6 million to increase its ownership interest
to obtain control of three of its Midwestern coal mining affiliates --
Sugar Camp Coal, LLC (Sugar Camp), Arclar Coal Company, LLC (Arclar) and
United Minerals Company, LLC (United Minerals). Prior to fiscal year
2000, interests in these affiliates were accounted for under the equity
method, as Black Beauty did not hold decision-making control over their
respective operations. However, effective January 1, 2000, Black Beauty
obtained decision-making control and began consolidating the affiliates
as of that date. In order to provide comparability to future periods, we
have elected to consolidate these affiliates as part of Black Beauty's
results of operations effective April 1, 1999.
The current year results also include the consolidated results of
operations for Black Beauty for 12 months as compared to only three
months in fiscal 1999. We increased our ownership interest in Black
Beauty from 43.3% to 81.7% effective January 1, 1999. We accounted for
our interest in Black Beauty under the equity method from April 1 to
December 31, 1998.
Fiscal Year 1999 vs. Fiscal Year 1998:
The results of operations and cash flows for the period ended
March 31, 1999 reflects our results from April 1 to March 31 (we
acquired the Predecessor Company on May 19, 1998 and prior to such date
had no separate operations) and the results of the Predecessor Company
for April 1 to May 19, 1998. In addition, the results of operations and
cash flows for the period ended March 31, 1999 may not be directly
comparable to the other period indicated as a result of the effects of
restatement of assets and liabilities to their estimated fair market
value in accordance with the application of purchase accounting pursuant
to Accounting Principles Board Opinion No. 16.
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED WITH TOTAL FISCAL 1999
Sales. For fiscal year 2000, sales increased $361.1 million, or
16.0%, to $2.6 billion. The fiscal year results include an increase
attributable to Black Beauty of $428.9 million, which is principally
comprised of two amounts -- the inclusion of Black Beauty's results for
an entire year ($264.1 million), and the consolidation of Sugar Camp,
Arclar and United Minerals on a retroactive basis ($164.8 million).
Sales in Australia increased $75.5 million over fiscal 1999, mainly as a
result of the acquisition of the Moura Mine in August 1999 ($46.3
million), the opening of the Bengalla Mine in fiscal year 2000 ($16.6
million) and higher customer demand. Powder River sales increased $13.1
million, due mainly to a continuing improvement in pricing for the
ultra-low sulfur coal in the Powder River Basin. Offsetting these
increases were declines in the Midwest and Appalachia markets of $68.1
million and $53.8 million, respectively. Both regions were negatively
impacted by mild winter weather that increased customer coal stockpiles,
causing lower demand and pricing. The Midwest region declined primarily
due to the closure and suspension of three high-sulfur mines in the
current year, while results in Appalachia were hampered by price
reductions for coal utilized by the export metallurgical market, and
operating difficulties related to longwall panel development delays and
adverse geological conditions. Finally, brokerage and trading revenues
declined $33.5 million, mainly due to expiring contracts.
19
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<PAGE>
Other Revenues. Other revenues improved $1.9 million compared to
fiscal 1999. This increase is primarily due to a $13.0 million gain from
a contract restructuring, as Black Beauty executed the buyout of a
contract to provide capacity to meet a new long-term coal supply
agreement and a $3.9 million gain on the settlement of a contract
dispute in the fourth quarter of the current year, partially offset by
the exclusion of $7.5 million of equity income in affiliates now
consolidated by Black Beauty as discussed above. We cannot assure you we
will be able to realize similar gains from future coal contract
restructurings.
Selling and Administrative Expenses. Selling and administrative
expenses increased $15.6 million compared to fiscal 1999, to $95.3
million. This increase is the result of the inclusion of a full year of
Black Beauty's operations vs. three months in the prior year (an
increase of $9.9 million) and full year consolidation of Black Beauty
affiliates previously mentioned.
Operating Profit. Operating profit was $193.2 million for the
year ended March 31, 2000, an increase of $17.6 million, or 10.0%. The
impact of Black Beauty on the current year results increased operating
profit $43.8 million, including a $13.0 million gain from the Black
Beauty contract restructuring previously mentioned.
Other regions showing year-over-year improvement were the Midwest
($15.0 million), Powder River ($13.2 million), and Australia ($12.8
million). The Midwest improved over the prior year as a result of lower
reclamation costs occurring from a change in permitting requirements in
the current year ($5.1 million), improved productivity and higher volume
at the ongoing Midwestern operations, partially offset by lower volumes
due to the closure/suspension of three mines in the current year. Powder
River improved profit based upon higher pricing and higher demand for
coal from our lowest cost, most efficient operations in the Powder River
Basin. Australia experienced higher volumes due to higher customer
demand, the contribution of results from the Moura Mine acquisition and
the new Bengalla Mine, and higher profit from additional construction
projects in the current year at their Mining Services division.
Offsetting these increases were decreases in Appalachia ($32.1
million) and Southwest ($4.1 million). Profitability in Appalachia was
directly impacted by soft market conditions and higher costs as a result
of longwall panel development delays. The decline in the Southwest
region is the result of higher operating expenses, primarily as a result
of higher repair and maintenance expenses than in fiscal 1999, offset
partially by higher volumes and a gain from the settlement of a customer
contractual dispute of $3.9 million. In addition, income from brokerage
and trading activities decreased $19.8 million, mainly as a result of
lower volumes that were directly related to contract expirations.
Finally, we experienced higher costs for past mining obligations due to
the current year cost of mine closure and suspension in the Midwest, and
$14.0 million in higher administrative costs as a result of the
inclusion of Black Beauty and its affiliates.
Interest Expense. Interest expense for the year ended March 31,
2000 was $205.1 million, an increase of $24.8 million, or 13.8%. Fiscal
1999 reflects acquisition-related indebtedness from the May 19, 1998
acquisition date forward. Also affecting the current year is the
inclusion of $12.6 million of additional interest associated with Black
Beauty.
Interest Income. Interest income decreased $15.8 million from
fiscal 1999, to $4.4 million. The decrease is primarily attributable to
interest income from higher average cash balances held in fiscal 1999 in
anticipation of the Black Beauty acquisition that occurred late in the
prior fiscal year.
Income Taxes. For fiscal year 2000, we recorded an income tax
benefit of $141.5 million on a pretax loss from continuing operations of
$7.4 million, compared to income tax expense of $7.5 million on pretax
income from continuing operations of $15.4 million in fiscal 1999. The
current year amount reflects a $144.0 million income tax benefit
associated with an election to treat Peabody Natural Resources Company,
a subsidiary of ours, as a corporation rather than a partnership for
federal income tax purposes. This election, which became available
through a change in tax law that occurred in December 1999, resulted in
an increase in the tax basis in the entity's assets and eliminated the
necessity for a deferred tax liability that had reflected the excess of
the book basis in that subsidiary over the tax basis.
Our effective book income tax rate is primarily impacted by two
factors -- the percentage depletion tax deduction utilized by us and our
United States subsidiaries that creates an alternative minimum tax
situation, and the level of contribution by the Australian business to
the consolidated results of operations, which is taxed at a higher rate
than in the United States.
Loss From Discontinued Operations. In fiscal year 2000, the
discontinued operation had a net loss of $12.1 million, as compared to
net income of $4.7 million in fiscal 1999. The decrease is largely the
result of a decline in the number of power contract restructuring
transactions completed in fiscal year 2000 as compared to fiscal 1999.
In addition, the current year includes the estimated after-tax loss on
disposal of Citizens Power of $78.3 million.
20
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TOTAL FISCAL 1999 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1998
Sales. For fiscal 1999, sales increased 9.8%, or $201.2 million,
over the prior twelve-month period. Excluding Black Beauty's results,
sales increased $120.5 million, or 5.9%. We experienced an increase of
$114.4 million in broker transactions, and had sales improvements in the
following United States mining operating regions -- Powder River ($19.1
million), Southern Appalachia ($20.4 million) and the Southwest region
($8.2 million).
The increase in brokered coal activity relates primarily to higher
export volumes, an increased emphasis on broker transactions, newly
added capacity for brokered shipments and the realization of a full year
of sales from agreements entered into late in fiscal 1998.
With respect to the United States mining operations, Powder River
experienced a 5.0% increase in sales volume from continued growth in
demand for coal from this region, while Southern Appalachia sales
volumes improved 13.0%, primarily due to longwall productivity increases
as a result of capital improvements. Sales increases in the Southwest
region are due mainly to improved pricing. Finally, the Midwest region
declined $21.9 million due to the depletion and closing of a surface
mine late in the prior fiscal year, lower shipments in the current year
caused by customer unit outages for maintenance, and higher prior year
sales due to a customer settlement.
Sales in Australia declined $28.3 million versus the prior year,
due to weaker demand, lower pricing and the effects of foreign currency
translation.
Other Revenues. Other revenues declined $71.7 million to $97.6
million for fiscal 1999, due mainly to $44.0 million in lower revenues
from coal contract restructurings and $29.1 million in lower mining
services revenues from Australia. We cannot assure you we will be able
to realize similar gains from future coal contract restructurings.
Operating Profit. For fiscal 1999, operating profit declined $85.2
million to $175.6 million. Operating profit from the United States
mining operations improved by $59.9 million during the period, mainly as
a result of improved results at the Powder River, Southern Appalachia
and Southwest operating regions discussed above, and the inclusion of
Black Beauty as a consolidated entity beginning with the fourth quarter
of fiscal 1999. However, operating profit from Australia declined $9.2
million due to lower demand and prices for coal, lower mining services
revenues and the effect of foreign currency translation.
Additionally, the prior year results included $44.0 million of
actuarial gains associated with certain employee-related liabilities
that are non-recurring, $44.0 million in higher gains from coal supply
contract restructurings mentioned above and $21.5 million in higher
gains on the sale of property, plant and equipment. Current year results
of operations include: $8.5 million of additional depletion and
amortization associated with purchase accounting adjustments to write-up
our net assets to fair value; $3.9 million of compensation expense
associated with the grant of 554,125 shares of Class B common stock to
certain members of management in conjunction with the May 19, 1998
acquisition of Peabody; $3.7 million in additional profit as a result of
the successful resolution of billing disputes with a customer in
Australia; changes in United States employee benefits that resulted in
accrual reductions of $10.2 million; a reduction in cost from a
multiemployer benefit plan refund of $2.6 million; a reduction in
reclamation accruals of $2.7 million due to improved equipment
efficiencies; and $3.9 million in additional income due to the
monetization of a royalty stream in October 1998.
Interest Expense. Interest expense increased $146.9 million for
fiscal 1999. This increase is the result of the borrowings necessary to
fund the acquisition on May 19, 1998, and higher borrowings in Australia
to fund the construction of the Bengalla Mine.
Income Taxes. Our effective book income tax rate for fiscal 1999
was 48.9%. The effective tax rate is primarily impacted by two factors --
the percentage depletion tax deduction utilized by us and our United
States subsidiaries that creates an alternative minimum tax situation,
and the level of contribution by the Australian business to the
consolidated results of operations, which is taxed at a higher rate than
in the United States. The effective tax rate for fiscal 1999 reflects
tax expense in Australia not completely offset by tax benefits in the
United States.
Income From Discontinued Operations. Income from discontinued
operations was $4.7 million in fiscal 1999, as compared to income of
$1.4 million in fiscal year 1998. This increase is primarily related to
a higher volume of asset restructuring transactions in the current year,
and higher income from trading activities.
21
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LIQUIDITY AND CAPITAL RESOURCES
For fiscal year 2000, net cash provided by operating activities
was $262.9 million, which includes $100.0 million in proceeds from the
securitization of a portion of our trade accounts receivable in March
2000, and favorable cash flow from operations during the year. In March
2000, we completed a transaction to establish an accounts receivable
securitization facility with a multi-seller commercial paper conduit.
Proceeds from the transaction totaled $100.0 million and were applied to
the repayment of long-term debt discussed above. The facility is
supported by $100.0 million in 364-day back-up bank lines that are
available to purchase accounts receivable if the conduit is unable to
access commercial paper markets. We pay funding costs based on the
discount or yield accrued on conduit commercial paper plus certain fees
and expenses.
Accounts receivable decreased $159.7 million from the prior year,
primarily due to the $100.0 million sale of receivables discussed above,
and the reclassification of Citizens Power's accounts receivable to "Net
assets of discontinued operations."
Assets from power trading activities and liabilities from power
trading activities were reduced to zero in the current year as a result
of the reclassification of Citizens Power to a discontinued operation.
Assets from coal and emission allowance activities and liabilities
from coal and emission allowance activities were $78.7 million and $75.9
million, respectively, as of March 31, 2000. The increase in these
amounts is directly related to higher volumes of coal and emission
allowance trading in the current year, as we have substantially
increased our coal and emission allowance trading activity to respond to
changes and opportunities in the deregulated electricity market.
Deferred income taxes decreased $155.1 million compared to March
31, 1999. This decrease is primarily the result of the previously
mentioned income tax benefit.
Net cash used in investing activities was $185.4 million,
primarily consisting of $63.3 million in acquisitions during the year,
including $30.2 million for the Moura Mine and $8.0 million for an
additional 3% interest in the Bengalla Mine in Australia, and $25.1
million related to several smaller mines purchased by Black Beauty. We
also had $178.8 million of capital expenditures, a decrease of $16.6
million from fiscal 1999. We had $110.5 million of committed capital
expenditures (primarily related to coal reserves and mining machinery)
at March 31, 2000. It is anticipated these capital expenditures will be
funded through available cash and credit facilities which are discussed
in more detail below.
Net cash used in financing activities was $205.2 million, as
compared to $2,184.8 million of cash provided by financing activities in
fiscal 1999. In fiscal year 2000, we reduced total debt by $466.2
million after considering the reclassification of $333.9 million of
Citizens Power's debt to "Net assets of discontinued operations." The
remaining decrease in total debt of $132.3 million relates to debt
repayments during the current year of $210.0 million ($150.0 million of
optional prepayments and other debt repayments of $60.0 million),
partially offset by an additional $48.5 million of long-term debt
related to previously unconsolidated affiliates of Black Beauty. Fiscal
1999 reflects a $480.0 million capital contribution and $1,817.4 million
in borrowings to fund the acquisition of our predecessor company.
As of March 31, 2000, we had total indebtedness of $2,076.2
million, consisting of the following:
<TABLE>
<CAPTION>
(In millions)
<S> <C>
Term loans under Senior Credit Facilities $ 690.0
9.625% Senior Subordinated Notes due 2008 ("Senior Subordinated Notes") 498.7
8.875% Senior Notes due 2008 ("Senior Notes") 398.9
5.0% Subordinated Note 180.3
Senior unsecured notes under various agreements 99.3
Project finance facility 76.5
Capital lease obligations 27.9
Other 104.6
---------
$ 2,076.2
=========
</TABLE>
22
<PAGE>
<PAGE>
The following table sets forth the mandatory prepayments of our
indebtedness as of March 31, 2000:
<TABLE>
<CAPTION>
(In millions)
5.0%
SENIOR CREDIT SUBORDINATED
FISCAL YEAR FACILITY NOTE OTHER TOTAL
-------------------------------- ------------- ------------ -------- --------
<S> <C> <C> <C> <C>
2001 $ 20.0 $ 38.1 $ 58.1
2002 20.0 77.5 97.5
2003 20.0 41.7 61.7
2004 $ 85.0 20.0 38.8 143.8
2005 69.0 20.0 25.5 114.5
2006 and thereafter 536.0 140.0 924.6 1,600.6
------ ------ -------- --------
$690.0 $240.0 $1,146.2 $2,076.2
====== ====== ======== ========
</TABLE>
The senior credit facilities include a revolving credit facility
that provides for aggregate borrowings of up to $200 million and letters
of credit of up to $280 million. The revolving credit facility
commitment matures in fiscal year 2005. We had no borrowings outstanding
under the revolving credit facility during fiscal year 2000 or 1999.
Interest rates on the revolving loans under the revolving credit
facility are based on the Base Rate (as defined in the senior credit
facilities), or LIBOR (as defined in the senior credit facilities) at
our option. On October 1, 1998, we entered into two interest rate swaps
to fix the interest cost on $500 million of long-term debt outstanding
under the term loan facility. We will pay a fixed rate of approximately
7.0% on $300 million of such long-term debt for a period of three years
ending October 1, 2001, and on $200 million of such long-term debt for
two years ending October 1, 2000. As a result, 72% of amounts
outstanding under the senior credit facilities are fixed at
approximately 7.0% as of March 31, 2000.
The revolving credit facility and related term loan facility also
contain certain restrictions and limitations including, but not limited
to, financial covenants that will require us to maintain and achieve
certain levels of financial performance and limit the payment of cash
dividends and similar restricted payments. In addition, the senior
credit facilities prohibit us from allowing our restricted subsidiaries
(which include all guarantors) to create or otherwise cause any
encumbrance or restriction on the ability of any such restricted
subsidiary to pay any dividends or make certain other upstream payments
subject to certain exceptions. The indentures governing the senior notes
and senior subordinated notes permit us and our restricted subsidiaries
(which include all of our subsidiaries except Citizens Power and its
subsidiaries) to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. In addition, among other
customary restrictive covenants, the indentures prohibit us and our
restricted subsidiaries from creating or otherwise causing any
encumbrance or restriction on the ability of any restricted subsidiary
that is not a guarantor to pay dividends or to make certain other
upstream payments to us or any of our restricted subsidiaries (subject
to certain exceptions). We were in compliance with all of the
restrictive covenants of our loan agreements as of March 31, 2000.
Certain of our subsidiaries maintain short term lines and other
working capital borrowing facilities. Total commitments under such
subsidiary facilities totaled $167 million and borrowings thereunder
totaled $55 million at March 31, 2000. In addition, certain of our
subsidiaries have long-term debt outstanding under various agreements.
These agreements contain certain customary restrictive covenants
including limitations on additional debt, dividends and investments.
OTHER
Mine Closure. In October 1999, we suspended operations at our
Marissa Operating Unit in Illinois. The Marissa Operating Unit, which
shipped 4.4 million tons of coal in fiscal 1999, had attempted to secure
additional business after its principal customer began shifting its
supply to lower-sulfur coal from our Powder River operations. These
efforts were unsuccessful, and as a result the mine was closed in
December 1999. We do not anticipate a material adverse impact on our
results of operations or financial position from the mine closure.
Mine Suspensions. In addition, we suspended operations at our
Lynnville and Hawthorn mines in Indiana in December 1999. The suspension
of operations at these locations is not anticipated to materially affect
the consolidated results of operations or financial position, as the
primary customers of these mines have signed long-term coal supply
agreements and will receive coal from another Peabody affiliate, Black
Beauty. We periodically evaluate the possibility of suspending other
mines due to market conditions. Such suspensions, if any, are not
expected to have a material adverse impact on our results of operations
or financial condition.
23
<PAGE>
<PAGE>
Recent Accounting Pronouncements. In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires
the recognition of all derivatives as assets or liabilities within the
balance sheet, and requires both the derivatives and the underlying
exposure to be recorded at fair value. Any gain or loss resulting from
changes in fair value will be recorded as part of the results of
operations, or as a component of comprehensive income or loss, depending
upon the intended use of the derivative. The Financial Accounting
Standards Board also issued SFAS No. 137, which defers the effective
date of SFAS No. 133 to all fiscal quarters of fiscal years beginning
after June 15, 2000 (effective April 1, 2001 for us). We are evaluating
the requirements of SFAS No. 133 and have not determined the impact of
adoption on the consolidated financial statements.
Year 2000 Issue. The "Year 2000 Issue" is a term used to describe
the problems created by systems that are unable to accurately interpret
dates after December 31, 1999. These problems are derived predominantly
from the fact that many software programs have historically categorized
the "year" in a two-digit format.
We have not experienced any significant impact on our systems or
operations as a result of the Year 2000 Issue. The total cost incurred
to prepare for the Year 2000 Issue was approximately $6.4 million, which
includes $2.3 million for the purchase of new software and hardware that
was capitalized and $4.1 million that was expensed as incurred.
In addition, we have not encountered any significant problems with
third parties such as our customers, suppliers, service providers and
other business partners. However, if these or other third parties with
which we conduct business experience lingering Year 2000 Issues, we
could experience a material adverse impact on our results of operations
and financial position.
FORWARD LOOKING STATEMENTS
This document, the annual report and certain press releases and
statements we make from time to time include statements of our and
management's expectations, intentions, plans and beliefs that constitute
"forward looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act and are
intended to come within the safe harbor protection provided by those
sections. Forward looking statements involve risks and uncertainties,
and a variety of factors could cause actual results to differ materially
from our current expectations, including but not limited to those
factors listed under "Risk Factors" and: coal and power market
conditions and fluctuations in the demand for coal as an energy source;
weather conditions; the continued availability of long-term coal supply
contracts; railroad performance; foreign currency translation; changes
in the government regulation of the mining and power generation
industries; risks inherent to mining; changes in our leverage position;
and the ability to successfully implement operating strategies.
TRADING ACTIVITIES
We market and trade coal, emission allowances and energy-related
commodities. We also market and trade electric power and energy-related
commodities and provide services to the electric power industry through
our subsidiary, Citizens Power, which as previously discussed is no
longer a component of continuing operations. These activities give rise
to market risk, which represents the potential loss that can be caused
by a change in the market value of a particular commitment. Market risks
are actively measured, monitored and controlled to ensure compliance
with management policies. Polices are in place that limit the amount of
total exposure we may enter into at any point in time. In addition, we
have implemented procedures that allow us to measure, monitor and
control all commitments and positions.
Coal and emission allowance trading is accounted for using the
fair value method, whereby financial instruments with third parties
(such as forwards, futures, options and swaps) are reflected at market
value in the consolidated financial statements.
NON-TRADING
Commodity price risk
We manage our commodity price risk for non-trading purposes
through the use of long-term coal supply agreements, rather than through
the use of derivative instruments. Approximately 86% of our sales volume
was sold under long-term coal supply agreements in fiscal year 2000.
24
<PAGE>
<PAGE>
Certain products used in our mining activities are subject to
price volatility. We use forward contracts to manage the volatility
related to this exposure. Commodity price risk associated with these
products used in our mining activities is not material to our
consolidated financial position, results of operations or liquidity.
Interest rate risk
We have exposure to changes in interest rates due to our existing
level of indebtedness. As of March 31, 2000, we had $1.2 billion of
fixed-rate borrowings and approximately $874 million of variable-rate
borrowings outstanding. To minimize our exposure to changes in interest
rates, we have entered into two interest rate swaps in the United States
with a total notional amount of $500 million, and one interest rate swap
in Australia with notional amount of $74 million.
Foreign currency risk
Our Australian subsidiary, Peabody Resources, utilizes the
Australian dollar as its functional currency. Peabody Resources exports
coal to the Asian market under United States dollar-denominated supply
agreements, creating exposure to fluctuations in exchange rates upon
subsequent translation of such export sales to United States dollars in
the consolidated financial statements. Peabody Resources utilizes a
combination of forward currency and option contracts to hedge the impact
of these exchange rate fluctuations.
Sensitivity analysis of market risks
Foreign currency risk
The net amount of our derivative financial instruments and foreign
currency transaction exposure of approximately $212 million, after
considering $215 million of existing foreign exchange contracts, has
been subjected to an assumed 10% appreciation and 10% depreciation in
the value of the Australian dollar versus the United States dollar over
a period not exceeding the average expected maturity of the related
foreign exchange contract. The resulting foreign exchange gain or loss
would be approximately $21 million.
Interest rate risk
After taking into account the interest rate swap transactions
discussed above, a one percentage point increase in interest rates would
result in an annualized increase to interest expense of approximately
$3.0 million on our variable-rate borrowings. With respect to our fixed-
rate borrowings, a one-percentage point increase in interest rates would
result in a $12.9 million decrease in the fair value of such borrowings.
25
<PAGE>
<PAGE>
COAL INDUSTRY OVERVIEW
The information provided in "Coal Industry Overview" regarding
future coal consumption was obtained from the Energy Information
Administration, the independent statistical and analytical agency within
the U.S. Department of Energy, and Resource Data Institute. The
assumptions upon which the Energy Information Administration's forecasts
are based include, among other things, assumptions regarding trends in
various economic sectors (residential, transportation, industrial,
etc.), economic growth rates, technological improvements and demand for
other energy sources and are described more fully in the Energy
Information Administration's Annual Energy Outlook 1999. Resource Data
Institute does not describe the assumptions upon which their projections
are based. Although we believe that these sources are reliable, we
cannot assure you that those projections will prove to have been
correct. See "Risk Factors."
INTRODUCTION
Coal is one of the world's major energy sources whose primary role
is to provide fuel for the generation of electricity. According to the
Energy Information Administration, in 1997 24% of the world's primary
energy supply came in the form of coal and coal was responsible for
approximately 38% of the world's electricity generation. In the United
States, coal's share of the domestic primary energy supply was 32% in
1998, while coal's share of U.S. electricity generation has risen to 52%
in 1999.
The major coal producers in the world are China, the United
States, Russia, Ukraine, India and Australia, although coal is produced
in some 60 countries worldwide. The United States enjoys the world's
largest reserve base, with an estimated 27% of the world's recoverable
bituminous and subbituminous coal reserves, followed by the former
Soviet Union, China, India, South Africa and Australia. An estimated 70%
of the world's fossil energy resources are in the form of coal.
The U.S. coal industry operates under a highly developed
regulatory regime which governs all mining and mine safety activities,
including environmental issues and land reclamation after completion of
mining activities. These include laws requiring that mined lands be
restored to a condition equal to or better than that existing before
mining. While inherently dangerous, coal mining in the United States has
become a relatively safe occupation, relying on sophisticated technology
and a skilled work force to become one of the safest, most productive
coal markets in the world. See "Regulatory Matters."
In recent years the coal industry has experienced significant
gains in coal mine productivity, changes in air quality laws, growth in
utility coal consumption and industry consolidation. According to the
Energy Information Administration, the number of operating mines
declined 52% over the last ten years, while overall coal production
increased approximately 14%. During the same period, average coal mine
productivity has nearly doubled due to changes in work practices, new
technologies and an increase in production in Wyoming's Powder River
Basin coal region, where thick, easily accessible coal seams result in
high productivity. The overall productivity gains have contributed to
stability in coal prices in recent years. A major trend in the industry
has been the shift to low sulfur coal production, particularly in
Wyoming's Powder River Basin, driven by the Clean Air Act Amendments,
which imposed significant restrictions on sulfur dioxide emissions from
coal-fired power plants.
COAL CHARACTERISTICS
There are four types of coal: lignite, subbituminous, bituminous
and anthracite. Each has characteristics that make it more or less
qualified for different end uses. In general, coal of all geological
composition is characterized by end use as either "steam coal" or
"metallurgical coal," sometimes known as "met coal." Steam coal is used
by utilities for electricity generation and by industrial facilities to
produce steam, electricity or both. Metallurgical coal is refined into
coking coal, which is used in the production of steel. Heat value and
sulfur content, the most important variables in the profitable marketing
and transportation of coal, determine the best end use of a particular
type of coal.
Heat Value
The heat value of coal is commonly measured in British thermal
units. A British thermal unit (Btu) is the amount of heat needed to
raise one pound of water one degree Fahrenheit. Coal found in the
eastern and midwestern regions of the United States tends to have a heat
content ranging from 10,000 to 13,400 Btus per pound. Most coal found in
the western United States ranges from 8,000 to 10,000 Btus per pound.
Lignite is a brownish-black coal with a heat content that
generally ranges from 6,500 to 8,300 Btus per pound. Major lignite
operations are located in Texas, North Dakota, Montana and Louisiana.
Lignite is used almost exclusively in power
26
<PAGE>
<PAGE>
plants located adjacent to or near such mines because any transportation
costs, coupled with mining costs, would render its use uneconomical. We
do not have any lignite reserves.
Subbituminous coal is a black coal with a heat content that ranges
from 7,800 to 9,500 Btus per pound. Most subbituminous reserves are
located in Montana, Wyoming, Colorado, New Mexico, Washington and
Alaska. Subbituminous coal is used almost exclusively by electric
utilities and some industrial consumers. We have extensive subbituminous
reserves in the Powder River Basin of Wyoming.
Bituminous coal is a "soft" black coal with a heat content that
ranges from 10,500 to 14,000 Btus per pound. This coal is located
primarily in Appalachia, Arizona, the Midwest, Colorado and Utah, and is
the type most commonly used for electric power generation in the United
States. Bituminous coal is used for utility and industrial steam
purposes, and as a feed stock for coke, which is used in steel
production. All of the company's reserves in Arizona, Colorado,
Illinois, Indiana, Kentucky and West Virginia, as well as its reserves
in New South Wales, Australia, are ranked as bituminous coal.
Anthracite coal is a "hard" coal with a heat content that can be
as high as 15,000 Btus per pound. A limited amount of anthracite
deposits is located primarily in the Appalachian region of Pennsylvania,
and is used primarily for industrial and home heating purposes. We do
not have any anthracite reserves.
Sulfur Content
Sulfur content can vary from seam to seam and sometimes within
each seam. When coal is burned, it produces sulfur dioxide, the amount
of which varies depending on the chemical composition and the
concentration of sulfur in the coal. Low sulfur coal has a variety of
definitions, but it is used in this document to refer to coal with a
sulfur content of 1% or less by weight. Demand for low sulfur coal has
increased, and is expected to continue to increase, as electric
utilities strive to reduce sulfur dioxide emissions. Phase II
requirements are expected to create additional demand for low sulfur
coal. U.S. sulfur dioxide emissions from electric power generation have
decreased 25% from 1980 levels, while U.S. coal consumption has
increased 65%. See "Risk Factors--Risks Relating to the Company--
Government Regulation of the Mining Industry--Impact of Clean Air Act
Amendments on Coal Consumption."
Subbituminous coal typically has a lower sulfur content than
bituminous coal, but some bituminous coal in southern West Virginia,
eastern Kentucky, Colorado and Utah, also has low sulfur content.
Higher sulfur coal can be burned in plants equipped with sulfur-
reduction technology, as the scrubbing process reduces sulfur dioxide
emissions by 50% to 90%. Plants without scrubbers can burn high sulfur
coal by purchasing emission allowances on the open market, which allow
the user to emit a ton of sulfur dioxide. Some older coal-fired plants
have been retrofitted with scrubbers. Any new coal-fired generation
built in the United States will likely use clean coal burning
technology.
Other Important Characteristics
Ash. Ash is the inorganic residue remaining after combustion of
coal. As with sulfur content, ash content varies from seam to seam. Ash
content is also an important characteristic of coal because power plants
must handle and dispose of ash following combustion.
Moisture. Moisture content of coal varies by the type of coal, the
region where it is mined and the location of coal within a seam. In
general, high moisture content decreases the heat value and increases
the weight of the coal, thereby making it more expensive to transport.
Location/Ease of Extraction. It is generally easier to mine a coal
seam that is thick and close to the surface. Typically, coal mining
operations will begin at the part of the coal seam that is easiest and
most economical to mine. In the coal industry, this characteristic is
referred to as "low ratio." As the seam is mined, it becomes more
difficult and expensive to mine because the seam either becomes thinner
or protrudes more deeply into the earth, requiring removal of the
material over the seam (the "overburden"). For example, many seams of
coal in the Midwest are 5 to 10 feet thick and hundreds of feet below
the surface. In contrast, seams in the Powder River Basin of Wyoming may
be 80 feet thick and only 50 feet below the surface.
Coking Properties of Metallurgical Coal. When some types of coal
are super-heated in the absence of oxygen, they form a hard, dry, caking
form of coal called coke, which is chiefly used in the steel production
process as a fuel and reducing agent to smelt iron ore in a blast
furnace.
27
<PAGE>
<PAGE>
COAL COSTS
Cost Comparison of Fuel Types
Coal generated 52% of the electricity in the United States in
1999. Coal attained this dominant market share because of its relatively
low cost and its availability throughout the United States. On an
average, all-in cost per megawatt-hour (MWh) basis, coal-fired
generation is less expensive than electricity generated from natural gas
or nuclear power. Hydroelectric power is inexpensive but is limited
geographically and there are few suitable sites for new hydroelectric
power dams.
The table below illustrates the relative cost advantage of coal
over some other power generation sources.<F1>
<TABLE>
<CAPTION>
1990<F2> 1998<F3>
-------- --------
<S> <C> <C>
Coal $20.06 $18.10
Nuclear 23.36 19.90
Hydro 3.04 3.68
Natural Gas 28.84 30.65
<FN>
<F1> Average annual generating costs per MWh produced for all U.S.
power plants; costs are all-in and include the cost of fuel,
depreciation of plant, and overhead and maintenance.
<F2> Source: Research Data Institute PowerData, 1996, Federal Energy
Regulatory Commission Form 1 Data.
<F3> Source: Research Data Institute PowerData, 2000, Federal Energy
Regulatory Commission Form 1 Data.
</TABLE>
Cost Structure
Coal Prices
Coal prices vary dramatically and are affected by a number of
factors. Two general characteristics are particularly important; first,
coal prices vary widely depending upon the region in which the coal is
produced, and second, utility purchases of coal, in which both mine-
mouth coal prices and transportation are considered, strongly influence
other coal prices. Other factors that influence coal prices are
geological characteristics such as seam thickness, overburden ratios and
depth of underground reserves, transportation costs, regional coal
production capacity relative to demand and coal quality characteristics
such as heat value, ash, moisture and sulfur content. Powder River Basin
coal is relatively inexpensive to mine, or $3 to $5 per ton, based on
our estimates, because the seams are thick and typically close to the
surface. As a result, open-cast mining methods are used. The large
capital costs associated with dragline mining and truck and shovel
mining (a dragline can cost up to $50 million) are amortized over
millions of tons of coal produced. Powder River Basin mines are highly
productive and labor is a much smaller component of the cost structure.
Eastern U.S. coal is more expensive to mine, $15 to $25 per ton, based
on our estimates, than western U.S. coal because it has a high
percentage of underground coal and its surface coal tends to have
thinner coal seams. Additionally, underground mining has higher labor,
including reserves for labor benefits and health care, and capital
costs, including modern mining equipment and construction of extensive
ventilation systems, than those of surface mining.
Industrial coal generally costs more to produce and is shipped in
smaller volumes and thus is priced $3 to $5 per ton more than steam coal
used by utilities. Metallurgical coal has higher carbon and lower ash
content and is usually priced $4 to $10 per ton higher than steam coal
produced in the same regions. Even higher prices are paid for special
coking coal with low volatility characteristics. The following chart
summarizes recent steam coal prices by supply region. As indicated, in
1997 steam coal prices ranged from $3 to $27 per ton, depending upon the
quality and source region of the coal. The chart also indicates
generally stable prices over the past three years, after a period in
which average coal prices declined by 12% from 1990 to 1995, in nominal
dollars.
28
<PAGE>
<PAGE>
<TABLE>
HISTORICAL STEAM COAL SPOT PRICES
(Nominal Dollars per Ton, Free on Board at Mine)
<CAPTION>
POUNDS
SULFUR DIOXIDE
BTUS PER PER MILLION ESTIMATED
REGION/BASIN POUND BTUS 1996 1997 1998 1999
----------------------------- -------- -------------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Central Appalachia >12,500 < or = 1.2 $26.35 $25.01 $26.93 $25.00
>12,500 1.21--1.70 25.46 24.89 25.84 23.82
>12,500 1.71--2.5 24.62 23.92 24.63 22.27
<12,500 < or = 1.2 22.31 23.22 24.77 23.56
<12,500 1.21--1.70 21.77 22.85 22.31 22.45
<12,500 1.71--2.5 21.20 21.24 22.99 21.00
Northeastern Appalachia >12,750 1.2--2.5 $22.91 $24.12 $24.50 $23.46
>12,750 >2.5 22.14 22.07 21.25 19.50
Illinois Basin >11,000 >2.5 $19.55 $19.69 $20.47 $18.85
<11,000 >2.5 17.50 18.89 18.26 17.67
Southern Powder River Basin >8,800 < or = 1.2 $ 4.27 $ 4.04 $ 4.45 $ 4.83
<8,800 < or = 1.2 3.23 3.25 3.34 3.70
Northern Powder River Basin >8,800 < or = 1.2 $ 6.24 $ 6.14 $ 6.50 $ 6.00
Four Corners >9,500 < or = 1.2 $15.80 $17.56 $15.66 $15.90
<FN>
Source: Research Data Institute, Outlook for Coal & Competing Fuels, Winter 1998-1999 and 1999-2000.
</TABLE>
Transportation
Coal for domestic consumption is generally sold at the mine and
transportation costs are normally borne by the purchaser. Export coal is
usually sold at the loading port, and coal producers are responsible for
shipment to the export coal-loading facility and the buyer pays the
ocean freight. Coal for electricity generation is purchased on the basis
of its delivered cost per million Btus. Most utilities arrange long-term
shipping contracts with rail or barge companies to assure stable
delivered costs.
Transportation is often a large component of the buyer's cost.
Although the customer pays the freight, transportation cost is still
important to coal mining companies because the customer may choose a
supplier largely on the cost of transportation. According to the
National Mining Association, in 1997, approximately 75% of all U.S. coal
was shipped by rail or barge, making these modes the keys to domestic
coal distribution. Trucks and overland conveyors are used to haul coal
over shorter distances, while lake carriers and ocean colliers move coal
to export markets, although some domestic coal is shipped over the Great
Lakes. Railroads move more coal than any other commodity, and in 1998
coal accounted for 23% of total U.S. rail freight revenue and more than
46% of total freight tonnage. Most coal mines are served by a single
rail company, but much of the Powder River Basin is served by two
competing rail carriers, the BNSF (Burlington Northern/Santa Fe) and the
Union Pacific. Rail competition in this major coal producing region is
important, since rail costs constitute up to 75% of the delivered cost
of Powder River Basin coal in remote markets. Rail rates for the Powder
River Basin are lower when evaluated on a ton per mile basis because the
relatively flat and straight rail routes out of the region allow heavily
loaded trains to operate with less manpower and locomotive power than
rail routes in other regions.
29
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<PAGE>
COAL REGIONS
Coal is mined from coalfields throughout the United States, with
the major production centers located in the Powder River Basin, Central
Appalachia, Northern Appalachia, the Illinois Basin and in other western
coalfields. We operate mines in all of these major coal producing
regions.
Powder River Basin
The Powder River Basin contains some of the most attractive coal
reserves in the world. The Powder River Basin covers more than 12,000
square miles in northeastern Wyoming and 7,000 square miles in
southeastern Montana. Demonstrated coal reserves total approximately 165
billion tons. Quality varies between lignite and subbituminous, with
current production of subbituminous coal averaging 9,100 Btus per pound
and 0.5% sulfur in Montana, to 8,600 Btus per pound and 0.3% sulfur in
Wyoming. The mines just north and south of Gillette, Wyoming, are
categorized as southern Powder River Basin mines. The coal in the
southern Powder River Basin is ranked as subbituminous with an extremely
favorable sulfur content.
Production in the southern Powder River Basin has increased from
approximately 7 million tons in 1970 to 317 million tons in 1999, and
now accounts for over 30% of U.S. electric utility coal consumption by
volume. The southern Powder River Basin has grown into the largest coal
supply region in the United States. From 1990 to 1999, the region's
compounded annual production growth rate was 7.7% compared to an overall
compounded annual production growth rate of 1.6% for the total U.S. coal
industry. The southern Powder River Basin markets 98% of its coal to
U.S. electric utilities, principally in the region between the Rocky
Mountains and the Appalachian Mountains. We have three active mining
operations in the Powder River Basin: one in Montana and two in
northeastern Wyoming.
Central Appalachia
Central Appalachia contains coalfields in eastern Kentucky,
southwestern Virginia and central and southern West Virginia. Production
in Central Appalachia has decreased slightly from approximately 386
million tons in 1990 to 262 million tons in 1999. Production declined in
all major sections of Central Appalachia except for southern West
Virginia, which has grown due to the expansion of more economically
attractive surface mines. The region has experienced significant
consolidation in the last several years due to modest demand growth and
strong competition from western coal. Central Appalachian operations
market approximately 60% of their coal to electrical utilities,
principally in the South Atlantic region. Central Appalachia also sells
extensively to the export market and industrial customers. Geologic
conditions in Central Appalachia led to the creation of over 100
significant coal-beds, 60 of which are currently mined. A variety of
mining techniques are used as seams are found on mountaintops and below
valley floors. The coal of Central Appalachia has an average heat
content of 12,500 Btus per pound and is generally low sulfur. We operate
five underground mines in southern West Virginia producing low sulfur
steam and metallurgical coal.
Northern Appalachia
High and medium sulfur coal is found in the Northern Appalachian
coalfields of western Pennsylvania, southeastern Ohio and northern West
Virginia. Coal demand in the region has increased slightly in recent
years and, according to Research Data Institute, is expected to remain
stable. Production in the region was approximately 141 million tons in
1999, up from 136 million tons in 1995. Much of the production in this
region is concentrated in a few highly productive longwall mining
operations in southeastern Pennsylvania and northern West Virginia.
Despite its medium sulfur content of 1.5% to 2.0% sulfur, coal from the
Pittsburgh seam produced from these mines is considered attractive to
utility coal customers because of its high heat content, or
approximately 13,000 Btus per pound. We operate one mine in this region.
Illinois Basin
The Illinois Basin is approximately 48,000 square miles in aerial
extent under most of Illinois, western Indiana and western Kentucky. The
area has experienced significant consolidation in the last several
years. The Illinois Basin is a declining production center due to the
region's relatively high sulfur coal and competition from lower sulfur
western coal. Production in the Illinois Basin peaked at 141 million
tons in both 1984 and 1990. Since 1990, production has decreased by 29%
due to displacement by lower sulfur, lower cost coal. In 1996,
production stabilized in several of the Illinois Basin's sub-regions,
including Central Illinois, due to stabilizing demand and limited
capacity. Illinois Basin production is marketed primarily to local
utility and industrial customers. The Southwestern Illinois sub-region
has an expanded customer base, including "scrubbed" utilities in Indiana
and Florida. Demonstrated reserves total an estimated 120 billion tons
of bituminous coal. The coal seams dip toward the center of the basin
and outcrop along its border. Approximately 20 coal seams have been
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identified in the region. Current production quality ranges from 10,000
to 12,500 Btus per pound and 1% to 4% sulfur, with production averaging
11,300 Btus per pound and 2.6% sulfur. We have extensive reserves and
nine active mining operations (four surface mines and five underground
mines) in the Illinois Basin coal region: six in western Kentucky, two
in Indiana and one in Illinois. In addition, the company has a 81.7%
interest in Black Beauty, Indiana's largest coal producer.
Western Bituminous Coal Regions
The western bituminous coal regions include the Hanna Basin in
Wyoming, the Uinta Basin of northwestern Colorado and Utah, the Four
Corners Region in New Mexico and Arizona and the Raton Basin in southern
Colorado. These regions produce high quality, low sulfur steam coal for
selected markets in the region, for export through West Coast ports and
for shipments to some Midwestern power plants for which Powder River
Basin's subbituminous coals are not suitable. Production in these
regions has increased from 104 million tons in 1995 to 112 million tons
in 1999. We have extensive reserves in these regions, as well as four
operating mines.
Lignite Production Regions
Lignite is mined in North Dakota, Texas and Louisiana. We do not
have any lignite reserves.
Australia
The location and quantity of coal reserves in Australia are also
well established, and economical coalfields have been identified in all
states in Australia except Tasmania and the Northern Territory. The
majority of Australia's coal reserves have high heat content, are low
sulfur and are located near ocean ports, making Australia the world's
leading coal exporter, exporting primarily to the Pacific Rim. The
majority of Australian coal production is concentrated in the Bowen
Basin in Queensland, in the Hunter River Valley and Southern coalfields
of New South Wales and in Northern Victoria. We operate four mines in
New South Wales.
World Coal Production
Global coal production was approximately 5.2 billion tons in 1997,
according to the Organization for Economic Cooperation and Development
and the International Energy Agency. The leading producers, in order of
volume, are China, the United States, the former Soviet Union (primarily
Russia and Ukraine), India and Australia, although coal is produced in
many countries. According to the Energy Information Administration world
coal consumption will increase 44% between 1996 and 2020. Because coal
is used primarily as a fuel for the generation of electricity (coal is
currently responsible for 38% of worldwide electricity generation), the
growth in coal demand is being driven by worldwide electricity demand,
which is projected to increase by 67% between 1995 and 2020, according
to the Energy Information Administration. Much of this growth is
projected to occur in the developing countries of Asia and the Pacific
Rim.
COAL MINING TECHNIQUES
Coal mining operations commonly use four distinct techniques to
extract coal from the ground. The most appropriate technique is
determined by coal seam characteristics such as location, logistics and
recoverable reserve base. Drill hole data are used initially to define
the size, depth and quality of the coal reserve area before committing
to a specific extraction technique. All coal mining techniques rely
heavily on technology; consequently, technological improvements have
resulted in increased productivity. The four most common mining
techniques are continuous mining, longwall mining, truck and shovel
mining and dragline mining.
Continuous Mining. Continuous mining is an underground mining
method in which main airways and transportation entries are evacuated
and remote-controlled continuous miners extract coal from "rooms,"
leaving "pillars" to support the roof. Shuttle cars are used to
transport coal from the face to the conveyor belt for transport to the
surface. This method is often used to mine smaller coal blocks or thin
seams and seam recovery is typically approximately 50%. Productivity for
continuous mining averages 25 to 50 tons per manshift.
Longwall Mining. Longwall mining is an underground mining method
that uses hydraulic jacks or shields, varying from five feet to 12 feet
in height, to support the roof of the mine while a mobile cutting
sheerer advances through the coal. Chain belts then move the coal to a
standard deep mine conveyer system for delivery to the surface.
Continuous mining is used to develop access to long rectangular panels
of coal which are then mined with longwall equipment, allowing
controlled subsidence behind the advancing machinery. Longwall mining is
highly productive, but it is effective only for large blocks of
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medium to thick coal seams. High capital costs associated with longwall
mining demand a large, contiguous reserve base. Seam recovery using
longwall mining is typically 70% and productivity averages 48 to 80 tons
per manshift.
Truck and Shovel Mining. Truck and shovel mining is an open-cast
method which uses large electric-powered shovels to remove overburden
which is used to backfill pits after the coal is removed. Shovels load
coal in haul trucks for transportation to the preparation plant or rail
loadout. Seam recovery using the truck and shovel method is typically
90%. Productivity depends on equipment, geological composition and
mining ratios and varies between 250 to 400 tons per manshift in the
Powder River Basin and 30 to 80 tons per manshift in eastern U.S.
regions.
Dragline Mining. Dragline mining is an open-cast method which uses
large capacity electric-powered draglines to remove overburden to expose
the coal seams. Shovels load coal in haul trucks for transportation to
the preparation plant and then to the rail loadout. Truck capacity can
range from 80 to 300 tons per load. Seam recovery using the dragline
method is typically 90% or more and productivity levels are similar to
those for truck and shovel mining.
Once the raw coal is mined, it is often crushed, sized and washed
in preparation plants where the product consistency and heat content are
improved. This process involves crushing the coal to the required size,
removing impurities and, where necessary, blending with other coal to
match customer specification. A coal mine's yield is defined as the
ratio of clean output tonnage to raw material tonnage.
TECHNOLOGY
Coal mining technology is continually evolving, improving, among
other things, underground mining systems and larger earth-moving
equipment for surface mines. For example, longwall mining technology has
increased the average recovery of coal from large blocks of underground
coal from 50% to 70%. At larger surface mines, haul trucks have
capacities of 240 to 320 tons, which is nearly double the maximum
capacity of the largest haul trucks used a decade ago. This increase in
capacity, along with larger shovels and draglines, has increased overall
mine productivity. According to Energy Information Administration data,
overall coal mine productivity, measured in tons produced per manshift,
has increased 120% from 1985 to 1997.
COAL MARKETS
World Coal Market
Approximately 5.0 billion tons of coal were consumed worldwide in
1995. According to the Energy Information Administration's International
Energy Outlook 1999, demand is expected to grow at 1.6% per year through
2015. Coal demand in developing nations is expected to grow at roughly
eight times that in industrialized nations. The chart below illustrates
historical and projected coal demand.
<TABLE>
TOTAL WORLD CONSUMPTION, 1995-2015
<CAPTION>
1995-2015
REGION 1995 2000P 2005P 2010P 2015P CAGR
---------------------------------- ----- ----- ----- ----- ----- ---------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Industrialized 2,710 2,796 2,818 2,789 2,770 0.1%
Developing 2,310 2,616 3,098 3,592 4,075 3.0%
----- ----- ----- ----- -----
Total 5,020 5,412 5,916 6,381 6,845 1.6%
===== ===== ===== ===== =====
<FN>
Source: Energy Information Administration, International Energy Outlook 1999.
</TABLE>
U.S. Market
Approximately 1.1 billion tons of coal were consumed in the United
States in 1999 and, according to Research Data Institute's Outlook for
Coal & Competing Fuels Winter 1999-2000, domestic consumption is
expected to grow at 1.1% annually from 2000 through 2015. Domestic
utility demand for coal, currently 87% of domestic consumption, is
projected to increase at an average annual rate of 0.7% from 1999 to 1.0
billion tons in 2020. Overall, coal use at coke plants and steel mills
is projected to decrease.
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<TABLE>
HISTORICAL AND PROJECTED U.S. COAL CONSUMPTION, 1996-2015
<CAPTION>
CAGR
SECTOR 1996 1999 2000P 2005P 2010P 2020P 1996-2015
------ ----- ----- ----- ----- ----- ----- ---------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Utility 873 895 901 940 976 1,042 0.7 %
Industrial 68 70 70 69 67 65 (0.2)%
Non-Utility Generators 22 24 25 25 25 25 0.5 %
Coke Plants/Steel Mills 37 33 34 26 23 22 2.1 %
----- ----- ----- ----- ----- -----
Total Domestic 1,000 1,022 1,035 1,159 1,189 1,220 0.6 %
Export 91 59 56 57 58 60 (1.7)%
----- ----- ----- ----- ----- -----
Total 1,091 1,081 1,091 1,125 1,495 1,214 0.4 %
===== ===== ===== ===== ===== =====
<FN>
Source: Research Data Institute, Outlook for Coal & Competing Fuels, Winter 1998-1999.
</TABLE>
U.S. Electricity Market
As the table below indicates, coal generated 52% of the
electricity in the United States in 1999.
<TABLE>
DOMESTIC ELECTRICITY FUEL SOURCES COMPARISON
<CAPTION>
1990 1996 1999
---- ---- ----
<S> <C> <C> <C>
Coal 55% 56% 52%
Nuclear 21 22 20
Hydro 10 11 8
Natural Gas 9 9 15
Other 5 2 5
---- ---- ----
Total 100% 100% 100%
==== ==== ====
<FN>
Source: Energy Information Administration Monthly Energy Review.
</TABLE>
The domestic coal industry's principal end market users are
domestic electric utilities. According to Research Data Institute, these
utilities are expected to experience a growing demand for coal as demand
for electricity increases. Coal-fired generation is used in most cases
to meet base-load requirements, so coal use generally grows at the pace
of electricity growth. However, in recent years, coal's share of the
generation market has gradually increased due to its relative low cost.
Although it is anticipated that few, if any, new coal-fired generation
plants will be built, coal-fired plants can still take market share (or
at least maintain market share in a growing market) due to the potential
for increased capacity utilization. In aggregate, domestic coal-fired
plants currently run at 67% capacity utilization (optimal sustainable
capacity utilization is 85% for a typical plant, though most can run at
higher rates for short periods). By 2010, coal-fired plants would have
to run at approximately 82% of capacity, assuming all the same plants
were running at today's efficiency levels and that market share remains
constant. Gas-fired electricity generation, which is used for
intermediate and peak-load demand, is anticipated to gain market share
at the expense of nuclear generation, or where peak-load capacity is
needed.
Over the past several years, largely as a result of sulfur dioxide
gas emissions limitations mandated by the Clean Air Act, demand has
shifted toward lower sulfur coal.
Regional Coal Markets
In 1995, Phase I of the Clean Air Act required high sulfur coal
plants to reduce their emissions of sulfur dioxide. As a result of
large-scale switching to very low sulfur Powder River Basin coal, many
Phase I-affected plants overcomplied with the sulfur dioxide
requirements, creating a surplus of emission allowances. This industry-
wide surplus led to the formation of a market for sulfur dioxide
emissions credits. In 2000, Phase II of the Clean Air Act will tighten
restrictions on sulfur
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emissions from 2.5 to 1.2 lbs. of sulfur dioxide per million Btus or
lower. Surplus emission credits from Phase I will allow some generators
to delay retrofitting old plants with expensive scrubbers. Eventually,
owners of these plants will have to retrofit or switch to Phase II
compliance coal, most likely Powder River Basin or other western low
sulfur coal, as the following exhibit indicates.
<TABLE>
U.S. COAL DEMAND BY PRODUCTION REGION<F1>
<CAPTION>
1996-2020
1996 1999P 2000P 2005P 2010P 2020P CAGR
------------------------------------------------------------------------------------------------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Appalachia 155 150 145 146 158 167 0.3 %
Central/Southern Appalachia 310 286 281 266 264 276 (0.5)%
Illinois Basin 118 107 96 93 94 99 (0.7)%
Southern Powder River Basin 258 296 333 394 410 448 2.3 %
Northern Powder River Basin 38 40 38 37 36 40 0.2 %
Other Western United States 106 111 108 107 108 111 0.2 %
Lignite 90 84 80 73 68 62 (1.5)%
Other 10 8 8 9 9 10 --
----- ----- ----- ----- ----- -----
Total 1,085 1,082 1,089 1,125 1,147 1,213 0.5 %
===== ===== ===== ===== ===== =====
<FN>
Source: Research Data Institute Outlook for Coal & Competing Fuels, Winter 1999-2000.
<F1> Does not equal consumption due to imports and changes in stockpiles.
</TABLE>
According to Standard & Poor's DRI World Energy Service--U.S.
Outlook Fall 1997, to date, the majority of the utilities affected by
the Clean Air Act Amendments have chosen to switch to low sulfur coals
at the expense of high sulfur coal due to the high cost of scrubbers and
the availability of low cost, low sulfur coal in the Powder River Basin.
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Export Market
The international coal trade outlook for exporters is shown below.
<TABLE>
EXPORT MARKET--THE INTERNATIONAL COAL TRADE OUTLOOK FOR EXPORTERS
<CAPTION>
IMPORTERS
--------------------------------------------------------------------------------------------
1995 ACTUAL 2020 PROJECTED
-------------------------------------------- --------------------------------------------
EXPORTERS EUROPE ASIA OTHER TOTAL EUROPE ASIA OTHER TOTAL
-------- ------ ------- ------- -------- ------ ------- -------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Australia 22 120 8 150 44 233 12 289
United States 53 18 18 89 22 7 29 58
South Africa 41 21 4 66 47 46 2 95
South America 17 0 9 26 38 0 30 68
Canada 5 27 6 38 9 24 3 36
China 3 24 1 28 0 53 0 53
Other 39 38 11 88 24 85 0 109
-------- ------ ------- ------- -------- ------ ------- -------
Total 180 248 57 485 184 448 76 708
======== ====== ======= ======= ======== ====== ======= =======
</TABLE>
Source: Energy Information Administration International Energy Outlook,
1997 & 2000.
As shown in the above table, according to the Energy Information
Administration, the international market for coal is predicted to
expand. The primary beneficiaries from this expansion will be Australia,
which serves the growing Asian markets, and the new, low sulfur coal
producers such as Indonesia, Colombia and Venezuela. The largest growth
in coal use is projected to come from Indonesia, India and China, which
have extensive coal reserves and are currently investing heavily in new
generating plants. The Pacific Rim countries, namely Japan, Taiwan and
Korea, are forecast to have some of the fastest growing import demand
for coal through 2020; consequently, the countries supplying this area
will benefit from this growth. Australia's exports are expected to
increase by over 93% during this period, linked primarily to this
demand. The demand for metallurgical coal in the international export
market has historically been higher than the demand for steam coal.
However, metallurgical coal's share of total world coal export market is
projected to fall from its 1995 level of 40% to 31% by 2020 as the
demand for steam coal by electric utilities is projected to increase
more rapidly than the demand for metallurgical coal.
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BUSINESS
OVERVIEW
We are the world's largest coal company. In addition to being the
world's largest producer and marketer of coal, we are engaged in coal
and emission allowance trading, coal contract restructurings,
transportation services and we generate revenues from our substantial
property holdings. During the past decade, we have transformed from a
largely high sulfur, high-cost coal producer to a producer and marketer
of predominantly low sulfur, low-cost coal from operations in the United
States and Australia.
For the year ended March 31, 2000, we sold 190.3 million tons of
coal worldwide. These products were used to generate more than 9% of the
electricity in the United States and more than 2.5% of the world's
electricity. Our share of the U.S. coal market was approximately 16.0%
in calendar 1999. We have approximately 10.0 billion tons of proven and
probable coal reserves, the largest reserve base of any coal-producing
company in the United States.
We currently own interests in more than 35 active mines in the
United States and Australia, and also sell coal produced by third-party
contractors and suppliers. In fiscal year 2000, we produced
approximately 62% of our coal in the Western United States, 32% from the
eastern half of the United States and 6% from Australia. Peabody's coal
production in the Western United States has grown from 37 million tons
in 1990 to 118 million tons in fiscal year 2000. Our highly productive
western operations produce low sulfur coal that utilities utilize to
comply with the more stringent standards resulting from the Clean Air
Act.
Our large and diverse customer base includes more than 300
electricity generating plants and industrial customers in the United
States as well as steam and metallurgical coal customers in 17 other
countries. In fiscal year 2000, we supplied 93% of our United States
production to United States electric utilities, 4% to the export market
and 3% to the United States industrial sector.
COMPANY HISTORY
Peabody, Daniels and Co. was founded in 1883 as a retail coal
supplier, entering the mining business in 1888 as Peabody & Co. with our
first mine in Illinois. In 1926, Peabody Coal Company was listed on the
Chicago Stock Exchange and, beginning in 1949, on the New York Stock
Exchange. In 1955, Peabody Coal Company, primarily an underground mine
operator, merged with Sinclair Coal Company, a major surface mining
company. In 1968, Peabody Coal Company was acquired by Kennecott Copper
Company. In 1977, it was sold to Peabody Holding Company, which was
formed by a consortium of companies.
In July 1990, Hanson acquired Peabody Holding Company. In February
1997, Hanson spun off its energy-related businesses, including Eastern
Group and Peabody Holding Company, into The Energy Group, plc. The
Energy Group was a publicly traded company in the United Kingdom and its
American Depository Receipts (ADR's) were publicly traded on the New
York Stock Exchange. On May 19, 1997, The Energy Group, through Peabody,
purchased Citizens Power, a leading power marketer.
On May 19, 1998, Lehman Brothers Merchant Banking Partners II L.P.,
an affiliate of Lehman Brothers Inc., purchased Peabody Holding
Company and its affiliates, Peabody Resources Limited (Peabody
Resources) and Citizens Power LLC, now collectively called the Peabody
Group. The transaction coincided with the purchase by Texas Utilities of
the remainder of The Energy Group.
During the 1980s, Peabody grew through expansion and acquisition,
opening the North Antelope Mine in Wyoming's coal-rich Powder River
Basin in 1983 and the Rochelle Mine in 1985. In 1984, we acquired the
West Virginia coal properties of ARMCO Steel and the following year
purchased Coal Properties Corp. and Eastern Associated Coal Corp., which
included seven operating mines and substantial low sulfur coal reserves
in West Virginia.
From 1993 to 2000, we made 16 major acquisitions. In 1993,
interests in three mines in New South Wales, Australia, were acquired
from Costain Group in anticipation of the growing Pacific Rim market for
coal. The properties included 100% ownership of the Ravensworth Mine, a
50% interest in the Narama Mine and a 28.75% interest in the Warkworth
Mine, subsequently raised to 43.75%. We also subsequently developed a
fourth mine, Bengalla, which began shipments in early 1999. Our interest
in the Bengalla joint venture was raised from 35% to 37% in 1998 and to
40% in 2000.
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In 1993 we also acquired the Lee Ranch Mine in New Mexico. The
following year, we purchased a one-third ownership in Black Beauty Coal
Company (Black Beauty), Indiana's largest coal producer. We increased
our interest in Black Beauty to 43.3% in February 1998 and to 81.7% in
January 1999. Black Beauty acquired Catlin Coal Company in 1999 and
acquired an additional 25% of Arclar Coal Company in 2000.
In 1994, we acquired the Caballo and Rawhide mines in Wyoming's
Powder River Basin from Exxon Coal USA Inc. This acquisition, along with
the expansion of the North Antelope and Rochelle Mines, positioned
Peabody as the leading producer in the Powder River Basin, the nation's
largest and fastest growing coal region. Our sales volume from the
Powder River Basin increased from 31 million tons in 1993 to 96 million
tons in fiscal year 2000.
In August 1999, we purchased a 55% interest in the Moura Mine in
Queensland, Australia. The Moura Mine supplies a range of steam and
metallurgical coals to Asia-Pacific customers and operates a coalbed
methane extraction operation.
Since 1990, our coal sales volume has grown from approximately
93 million annual tons to approximately 190 million annual tons, an
increase of 104%.
OUR BUSINESSES
COMMERCIAL OPERATIONS
Our sales and marketing operations, Peabody COALSALES and Peabody
COALTRADE, sell coal produced by our large, diverse portfolio of
operations, broker coal sales of other producers to third parties (both
as a principal and as an agent), trade coal and emission allowances, and
provide coal contract restructuring services and transportation
services. Total coal sales volume for fiscal year 2000 was 190.3 million
tons.
RESOURCE MANAGEMENT
We hold approximately 10.0 billion of proven and probable coal
reserves worldwide. Our Resource Management group constantly reviews
this reserve base to generate revenues through the sale of non-strategic
coal reserves and surface land. In addition, revenue is generated
through royalties from coal reserves leased to third parties, and farm
income from surface land under third party contracts. The Resource
Management group is also actively pursuing opportunities in the area of
coalbed methane extraction in the United States through a new
subsidiary, Peabody Natural Gas, LLC.
MINING OPERATIONS
The following provides a description of the operating
characteristics of the principal mines and reserves of each of our
United States and Australian operating units and affiliates.
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U. S. OPERATIONS
[MAP]
UNITED STATES
Within the United States, operations are divided into four
operating regions: Powder River Basin; Southwest; Appalachia and
Midwest.
POWDER RIVER BASIN OPERATIONS
We control approximately 3.5 billion tons of coal reserves in the
southern Powder River Basin, the largest and fastest growing major U.S.
coal-producing region. We own and manage three low sulfur, non-union
surface mining complexes in Wyoming that sold approximately 96.1 million
tons of coal in fiscal year 2000, or approximately 50% of our total coal
sales. The North Antelope/Rochelle and Caballo mines are serviced by
both major western railroads, the Burlington Northern/Santa Fe and Union
Pacific. The Rawhide Mine, which was idled in fiscal year 1999, is
serviced by the Burlington Northern/Santa Fe railroad only.
Our Wyoming Powder River Basin reserves are classified as surface
mineable, subbituminous coal with seam thickness varying from 70 to 105
feet. The sulfur content of the coal in current production ranges from
0.2% to 0.4% and the heat value ranges from 8,250 to 8,900 Btus per
pound.
We also operate the Big Sky Mine in Montana in the northern Powder
River Basin. Coal from this mine is shipped to customers in the upper
Midwest by the Burlington Northern/Santa Fe railroad.
North Antelope/Rochelle
The North Antelope/Rochelle Mine is located 65 miles south of
Gillette, Wyoming. The mine is the largest surface mine and one of the
most productive in the United States, selling 69.3 million tons during
fiscal year 2000. The North
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Antelope/Rochelle Mine produces premium quality coal with a sulfur
content averaging 0.20% and a heat value ranging from 8,500 to 8,900
Btus per pound. It produces the lowest sulfur coal in the United States,
using a dragline along with five truck-and-shovel fleets to uncover the
coal.
Caballo
The Caballo Mine is located 20 miles south of Gillette, Wyoming.
In fiscal year 2000, it sold approximately 26.8 million tons of low
sulfur coal. Caballo is a truck and shovel operation with a coal
handling system that includes two 12,000-ton silos and two 11,000-ton
silos.
Big Sky
The Big Sky Mine is located in the northern end of the Powder
River Basin near Colstrip, Montana and uses dragline mining equipment.
The mine sold 2.5 million tons of low sulfur coal in fiscal year 2000.
The coal is shipped by rail to several major electric utility customers
in the upper Midwestern United States. This mine is near the exhaustion
of its economically recoverable reserves and may be closed in the next
several years, depending upon market and mining conditions. Hourly
workers at the Big Sky Mine are members of the United Mine Workers of
America.
Southwestern Operations
We own and manage two mines in Arizona and one each in Colorado
and New Mexico. Each supply low sulfur coal under long-term coal supply
agreements to electricity generating stations in the region. Together,
these mines sold 19.2 million tons of coal in fiscal year 2000.
Black Mesa
The Black Mesa Mine, which is located on the Navajo Nation and
Hopi Tribe reservations in Arizona, uses two draglines and sold
4.6 million tons of coal in fiscal year 2000. Its coal is crushed, mixed
with water and then transported 273 miles through the underground Black
Mesa Pipeline to the Mohave Generating Station near Laughlin, Nevada
operated by Southern California Edison. The mine and the pipeline were
designed to deliver coal exclusively to the power plant, which has no
other source of coal. The Mohave coal supply agreement extends until
2005. Hourly workers at this mine are members of the United Mine Workers
of America.
Kayenta
The Kayenta Mine is adjacent to the Black Mesa Mine and uses three
draglines in three mining areas. It sold approximately 8.5 million tons
of coal in fiscal year 2000. The coal is crushed, then carried 17 miles
by conveyor belt to storage silos where it is loaded on to a private
rail line and transported 83 miles to the Navajo Generating Station,
operated by the Salt River Project near Page, Arizona. The mine and the
railroad were designed to deliver coal exclusively to the power plant,
which has no other source of coal. The Navajo coal supply agreement
extends until 2011. Hourly workers at this mine are members of the
United Mine Workers of America.
Seneca
The Seneca Mine near Hayden, Colorado shipped 1.4 million tons of
low sulfur coal in fiscal year 2000, operating with two draglines in two
separate mining areas. The mine's coal is hauled by truck to the nearby
Hayden Generating Station, operated by Public Service of Colorado, under
a coal supply agreement that extends until 2011. Hourly workers at this
mine are members of the United Mine Workers of America.
Lee Ranch Coal Company
The Lee Ranch Mine, located near Grants, New Mexico, sold
approximately 4.7 million tons of low sulfur coal in fiscal year 2000.
Lee Ranch shipped the majority of its coal to two customers in Arizona
and New Mexico under coal supply agreements extending until 2010 and
2014, respectively. Lee Ranch is a non-union surface mine that uses a
combination of dragline and truck-and-shovel mining techniques.
Appalachia Operations
We own and manage five operating units and related facilities in
West Virginia. In fiscal year 2000, these operations sold approximately
16.8 million tons of mid to low sulfur steam and metallurgical coal to
customers in the United States and abroad. Hourly workers at these
operations are members of the United Mine Workers of America.
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Big Mountain/Robin Hood Operating Unit
The Big Mountain/Robin Hood Operating Unit is based near Prenter,
West Virginia. In fiscal year 2000, the Big Mountain No. 16 and Robin
Hood No. 9 mines sold approximately 2.3 million tons of steam coal. Both
are underground mines using continuous mining equipment. Processed coal
is loaded on the CSX railroad.
Harris Operating Unit
The Harris Operating Unit consists of the Harris No. 1 Mine near
Bald Knob, West Virginia, which sold approximately 3.0 million tons of
low sulfur coal in fiscal year 2000. This mine uses both longwall and
continuous mining equipment.
Rocklick Operating Unit and Contract Mines
The Rocklick preparation plant, located near Wharton, West
Virginia, processes coal produced by the Harris Mine and contract mining
companies from coal reserves that we control. This preparation plant
shipped approximately 6.2 million tons of steam and metallurgical coal
in fiscal year 2000 (including 3.0 million tons related to the Harris
Operating Unit). Processed coal is loaded at the plant site on the CSX
railroad or transferred via conveyor to our Kopperston loadout facility
and loaded on the Norfolk Southern railroad.
Wells Operating Unit
The Wells Operating Unit, in Boone County, West Virginia, sold
approximately 3.8 million tons of metallurgical and steam coal during
fiscal year 2000. The unit consists of the Lightfoot No. 2 Mine,
contract mines and the Wells Preparation Plant, located near Wharton,
West Virginia. The mine uses continuous miners to produce coal from
reserves we own. The Lightfoot No. 1 Mine closed on February 11, 1999
after depleting its mineable reserves. Processed coal is loaded on the
CSX railroad.
Federal No. 2 Mine
The Federal No. 2 Mine, near Fairview, West Virginia, uses
longwall mining equipment and shipped approximately 4.5 million tons of
steam coal in fiscal year 2000. Coal shipped from the Federal No. 2 Mine
has a sulfur content only slightly above that of low sulfur coal and has
an above average heating content - as a result, it is more marketable
than some other mid-sulfur coals. The mine is served jointly by the CSX
and Norfolk Southern railroads, through which processed coal is sold to
a variety of United States and Canadian electricity generating plants.
Midwest Operations
We own and operate six mines in the Midwestern United States,
which collectively sold 16.5 million tons of coal in fiscal year 2000.
Included are four underground and two surface mines, along with five
preparation plants and four barge loading facilities, located in western
Kentucky, southern Illinois and southwestern Indiana. Coal from these
mines is primarily shipped to electric utilities in the Midwest, while
some coal is sold to industrial customers that generate their own power.
Approximately 56% of the high sulfur coal sold from these mining
operations is shipped to electric generating stations equipped with
desulfurization units. Peabody Coal Company hourly workers are members
of the United Mine Workers of America; Patriot Coal Company operates
union-free.
We control 16 additional mines in the Midwestern United States
through our 81.7% joint venture interest in Black Beauty, as discussed
below.
Camp Operating Unit
The Camp Operating Unit, located near Morganfield, Kentucky,
operates two underground mines and a large preparation and barge loading
facility. Together, these operations sold 6.6 million tons of coal in
fiscal year 2000. The Camp No. 1 Mine uses continuous mining equipment
with both continuous haulage systems and shuttle car haulage. The Camp
No. 11 Mine uses both longwall and continuous mining equipment. Most of
the production is sold under contract to TVA.
Hawthorn and Lynnville Operating Units
In December 1999, we suspended operations at the Hawthorn and
Lynnville Operating Units pending improved market conditions. The
Hawthorn Operating Unit near Carlisle, Indiana sold 2.2 million tons of
coal in fiscal year 2000. The Lynnville Operating Unit, near Lynnville,
Indiana, sold approximately 2.3 million tons of coal in fiscal year 2000.
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Marissa Operating Unit
The Marissa Operating Unit, located near Marissa, Illinois, was
closed in October 1999 after the mine's primary customer shifted its
supply to lower-sulfur coal from our Powder River Basin operations. The
Marissa Operating Unit shipped 2.4 million tons of coal in fiscal year
2000.
Midwest Operating Unit
The Midwest Operating Unit near Graham, Kentucky, sold 1.1 million
tons of coal in fiscal year 2000. The unit includes the Martwick
underground mine, which uses continuous mining equipment, and the
Gibraltar surface mining operations. Coal from these mines is sold to
under contract to TVA.
The unit is also responsible for managing closed and suspended
mining operations throughout Peabody's North American operations. These
properties are managed from bond release until final reclamation
requirements are met.
Patriot Coal Company
Patriot Coal Company operates Patriot, a surface mine, and
Freedom, an underground mine, in Henderson County, Kentucky, and sold
approximately 1.9 million tons of coal in fiscal year 2000. The
underground mine uses continuous mining equipment, and the surface mine
uses truck and shovel equipment. Patriot Coal Company also operates a
preparation plant and a dock.
Black Beauty Coal Company
We also own 81.7% of Black Beauty, which operates 10 mines in
Indiana and also has interests in four mines in southern Illinois
and two mines in western Kentucky. Together these operations sold
19.8 million tons of low, medium and high sulfur steam coal in fiscal year
2000. We purchased a one-third interest in Black Beauty in 1994, and
increased our interest to 43.3% in 1998 and 81.7% in 1999. Black Beauty
Resources, Inc., owned by certain members of Black Beauty's management
team, owns the remaining interest.
Black Beauty's principal mines include Air Quality No. 1, a low
sulfur underground coal mine located near Monroe City, Indiana. In
fiscal year 2000, Air Quality No.1 shipped 1.8 million tons of low
sulfur coal. Among other mines in Indiana, Black Beauty also operates
Farmersburg, a surface mine that produced 3.5 million tons of medium
sulfur coal in fiscal year 2000, the Francisco Mine, a 2.8 million ton
per year surface mine, and Somerville, a 2.0 million ton per year
surface mine.
Black Beauty owns a 75% equity interest in Sugar Camp Coal, LLC, a
3.5 million ton per year surface mine located in southern Illinois.
Sugar Camp owns a 100% interest in Arclar Coal Company, which operates
two underground mines in southern Illinois that sell 1.0 million tons
per year.
Black Beauty controls approximately 385 million tons of coal
reserves, including 100 million tons of reserves that are in compliance
or near compliance with the more stringent Clean Air Act restrictions.
AUSTRALIA
Through Peabody Resources, headquartered in Sydney, Australia, we
own interests in coal mining, coal trading and mining services in
Australia. Peabody Resources manages and owns interests in five surface
coal mines in the Hunter Valley, New South Wales, and one in the Bowen
Basin in Queensland. All operating mines use draglines as the primary
overburden stripping method to uncover coal seams. The mines sold
18.7 million tons during fiscal year 2000, of which Peabody Resources'
entitlement was approximately 11.1 million tons. Approximately 53% of
the coal is sold domestically via term contracts, and 47% is exported to
Asia-Pacific markets, where coal consumption is expanding to satisfy
growing electricity demand. See further information regarding our
Australian operations in the financial statements at note 21 -- "Segment
Information."
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[MAP]
AUSTRALIAN MINING OPERATIONS
Ravensworth Mine
Located 12 miles northwest of Singleton, New South Wales, the
Ravensworth Mine is 100% owned and managed by Peabody Resources under a
contract that runs to the year 2001 and requires the production of
approximately 4.4 million tons per year from coal reserves owned by
Macquarie Generation. The coal is trucked from the pit to a crushing
plant and transported by overland conveyor to nearby Bayswater and
Liddell power stations. Peabody Resources also holds low sulfur coal
resources at Ravensworth West for future domestic supply.
Ravensworth East
During fiscal year 2000, Peabody Resources was awarded a contract
with Macquarie Generation to deliver 1.9 million tons per annum from
January 2001 for three years from Ravensworth East. The coal reserves
and surface land were purchased as Swamp Creek Colliery from Pacific
Power via a competitive tender. Swamp Creek was a domestic mine that has
been on "care and maintenance" since operations ceased in 1991. The
lease acquired by Peabody Resources was renamed Ravensworth East. Coal
will be transported by overland conveyor to the nearby Bayswater and
Liddell Power Stations.
Narama Mine
The Narama Mine opened in January 1993 and is operated by Peabody
Resources as an extension of the adjacent Ravensworth facility using
similar mining techniques in the same coal seams. The Narama Joint
Venture, of which Peabody Resources owns 50%, holds a 20 year contract
extending through 2012 to supply approximately 2.3 million tons annually
to Macquarie Generation.
Warkworth Mine
Located 7 miles southwest of Singleton, the Warkworth Mine opened
in 1981 and produces about 5.8 million tons per year of thermal and
semi-soft coking coal, primarily for export. Peabody Resources manages
the mine and owns 43.75% of the Warkworth Associates Joint Venture. The
coal is processed at Warkworth Mine's preparation plant and blended to
customer specifications before being transported by overland conveyor to
the Mount Thorley rail loop and then by rail to the Port of Newcastle.
Warkworth owns 13.9% of the Mount Thorley facility and 4.2% of the Port
of Newcastle Coal Loading Terminal. Warkworth has also entered into a
30-year supply agreement commencing in 2000 to produce and supply BDT
fuel (Beneficiated Dewatered Tailings) from a washery tailings facility
for sale to the adjacent Redbank Power Station that is under
construction.
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Bengalla Mine
The Bengalla Mine is located near Muswellbrook, New South Wales
and is owned by the Bengalla Joint Venture, in which Peabody Resources
holds a 40% interest, and manages the mine. Construction of the first
stage of the 6.6 million ton per year surface mine and facility was
completed in 1999, with sales commencing in April 1999. The mine sold
2.5 million tons in fiscal year 2000 and is expected to expand to
4.6 million tons of thermal coal predominately for export in 2000. Coal
is mined by excavator and transported on site by overland conveyor to a
modern coal preparation plant and stockpiling facility. Coal is
dispatched by rail to domestic users or to the Port of Newcastle.
Moura Mine
Peabody Resources manages and owns a 55% interest in the Moura
Mine acquired in August 1999. The mine is located 115 miles by rail west
of the port of Gladstone, in Central Queensland. Moura has an annual
production capacity of 5.3 million tons, comprising 2.5 million tons of
semi-soft coking coal and 2.8 million tons of thermal coal. The
acquisition includes coal and coalbed methane operations, together with
leases for nearly 1.8 billion tons of surface and underground resources.
Coal is mined from a variety of locations over a 21-mile lease area.
Overburden is removed by the use of three electric powered draglines.
Front-end loaders, loading a fleet of coal haulers, carry out coal
recovery. Highwall mining techniques are also utilized for coal
extraction. Coal is conveyed to the coal preparation plant prior to
transportation by rail to the Clinton and Barney Point coal terminals
for export primarily to Japan and Korea. The coalbed methane operation
is steadily being built up to an annual output of 18 terrajoules to
supply markets across the state, and will ultimately enhance the
prospects of future underground mining at Moura.
Mining Services
Peabody Resources' Mining Services Division, based in Brisbane,
Queensland, provides specialist tunneling and underground contract-
mining services to the mining and civil engineering industries. The
Mining Services Division has been involved in underground development
work for a number of Australian projects, notably for leading mining
companies including BHP Minerals at Cannington, Western Mining
Corporation at Olympic Dam, Placer Pacific at Osborne, Plutonic
Resources Limited at Darlot, Amalg Resources at Eloise and civil
projects including a tunneling project through a joint venture with
Obayashi Corporation of Japan for the Brisbane City Council. In November
1999, Mining Services acquired the Archveyor highwall mining system. The
Archveyor uses continuous flexible haulage conveyors that are computer
controlled and monitored by one operator. The Archveyor system will
commence operation at the Moura Mine in mid-2000.
COALTRADE Australia
COALTRADE Australia based in Newcastle, New South Wales was
established in April 2000 to complement our existing U.S. coal trading
operations and our Australian export production sales. The operations
provide alternative commercial, logistical and product solutions that
are required in the rapidly expanding seaborne coal market, particularly
customers in the high growth areas of Japan, South Korea, Southeast Asia
and the Pacific Rim countries.
Power Marketing and Electricity Contract Restructuring
Our subsidiary, Citizens Power, headquartered in Boston,
Massachusetts, is engaged in electricity contract restructuring and
electricity, gas and oil trading. For purposes of our financing,
Citizens Power and its subsidiaries are unrestricted subsidiaries.
Typically, Citizens Power acts, through subsidiary companies, as a third
party facilitator to obtain non-recourse financing, the proceeds of
which are used to purchase, and then obtain lower cost replacement power
for, long-term electricity supply contracts between independent power
producers and electric utility companies. In May 2000, we signed a
purchase and sale agreement to sell Citizens Power to Edison Mission
Energy. See further discussion in "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
LONG-TERM COAL SUPPLY AGREEMENTS
United States
We have a large portfolio of coal supply agreements. For the
fiscal year ended March 31, 2000, 86% of our sales volume was sold under
coal supply agreements. We currently have coal supply agreements
totaling approximately one billion tons of coal with terms ranging from
one to 16 years and with an average volume-weighted remaining term of
more than 4 years. In fiscal year 2000, we sold coal to more than 300
power plants and industrial customers in the United States and Canada
and exported to 17 other countries.
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Contract Terms
Typically, customers enter into coal supply agreements to secure
reliable sources of coal at predictable prices, while we seek stable
sources of revenue to support the investments required to open, expand
and maintain or improve productivity at mines needed to supply such
contracts. The terms of coal supply agreements result from bidding and
extensive negotiations with customers. Consequently, the terms of such
contracts typically vary significantly in many respects, including price
adjustment features, price reopener terms, coal quality requirements,
quantity parameters, flexibility and adjustment mechanics, permitted
sources of supply, treatment of environmental constraints, extension
options and force majeure, termination and assignment provisions.
Price reopeners are present in most of the recently negotiated
contracts greater than three years in duration and usually occur midway
through a contract or every two to three years, depending upon the
length of the contract. Price reopeners allow the contract price to be
renegotiated in order to correspond with the market price prevailing at
the time. If the parties do not agree on a new price, the purchaser or
seller often has an option to terminate the contract.
Base prices are set at the start of a contract and are often
adjusted at quarterly or annual intervals for changes due to inflation
and/or changes in actual costs such as taxes, fees and royalties. The
inflation adjustments are measured by public indices, the most common of
which is the implicit price deflator for the gross domestic product as
published by the United States Department of Commerce.
Quality and volumes for the coal are stipulated in coal supply
agreements, and in some instances have the option to vary annual or
monthly volumes if necessary. Variations to the quality and volumes of
coal may lead to adjustments in the contract price. Coal supply
agreements typically stipulate procedures for quality control, sampling
and weighing. Most coal supply agreements contain provisions requiring
us to deliver coal within certain ranges for specific coal
characteristics such as heat content (Btus), sulfur, ash, grindability
and ash fusion temperature. Failure to meet these specifications can
result in economic penalties or termination of the contracts.
Contract provisions in some cases set out how coal volumes will be
temporarily reduced or delayed in the event of a force majeure,
including such events as strikes, adverse mining conditions or serious
transportation problems that affect the seller or unanticipated plant
outages that may affect the buyer. More recent contracts stipulate that
this tonnage can be made up by mutual agreement or at the discretion of
the buyer. Buyers often insert similar clauses covering changes in
environmental laws. We often negotiate the right to supply coal that
complies with a new environmental requirement to avoid contract
termination. Coal supply agreements typically contain termination
clauses if either party fails to comply with the terms and conditions of
the contract.
In certain contracts, we have a right of substitution, allowing us
to provide coal from different mines as long as the replacement coal is
within a certain specified quality and will be sold at the same
delivered cost. Contracts usually contain specified sampling locations:
in the Eastern United States, approximately 50% of customers require
that the coal is sampled and weighed at the destination, whereas in the
Western United States samples are usually taken at the shipping source.
Contract Expirations
Our coal supply agreements have an average volume-weighted
remaining term of more than 4 years. As our coal supply agreements
expire, we intend to negotiate new contracts in order to maintain our
high percentage of volume sold through coal supply agreements and low
percentage of volume sold into the spot market. When contracts expire, a
coal producer is exposed to the risk of selling coal into the spot
market, which may be subject to lower and more volatile prices, or to
closing the mine if follow-on business cannot be obtained.
The total sales commitments corresponding to the coal supply
agreements currently total approximately one billion tons of coal,
assuming all the contracts run through to their expiration date.
Contracts for coal from the mines in the Powder River Basin comprise
approximately 52% of this total commitment.
Australia
In fiscal year 2000, approximately 52% of Peabody Resources'
11.1 million ton share of coal produced by Australian mines was sold under
coal supply agreements to the New South Wales power utility, Macquarie
Generation. The remainder was exported to Pacific Rim countries. Coal
from the Ravensworth, Ravensworth East and Narama mines is sold to
Macquarie Generation under contracts which expire in 2001, 2004 and
2012, respectively. The contracts contain price adjustment provisions
based on the qualities of coal delivered and changes in indices of
mining costs.
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All coal from the Warkworth and Moura mines is exported.
Approximately 72% is sold under contracts, including contracts with the
other joint venture partners in Warkworth, and the remaining 28% is sold
on the spot market. Warkworth has now also entered into short-term
domestic coal supply agreements with Macquarie Generation and Delta
Electricity, which expire in 2003.
The Bengalla mine commenced the sale of coal in April 1999. The
large majority of coal from Bengalla is exported. Of the coal exported,
approximately 30% was sold under long-term contracts, while the
remaining 70% is sold on the spot market. It is anticipated that the mix
of contract and spot coal sold will change over the next few years as
Bengalla establishes its presence in the export coal market. Bengalla
does have a short-term domestic coal supply agreement with Macquarie
Generation, which represented approximately 10% of coal sold in the
current year. All coal from the Moura Mine, which was acquired in August
1999, is exported under contract. Peabody Resources' export contracts
for its Warkworth, Bengalla and Moura mines normally provide for annual
price renegotiations.
TRANSPORTATION
Coal for domestic consumption is generally sold at the mine and
transportation costs are normally borne by the purchaser. Export coal is
usually sold at the loading port, and coal producers are responsible for
shipment to the export coal-loading facility and the buyer pays the
ocean freight. Coal for electricity generation is purchased on the basis
of its delivered cost per million Btus. Most utilities arrange long-term
shipping contracts with rail or barge companies to assure stable
delivered costs.
Transportation is often a large component of the buyer's cost.
Although the cost of freight is absorbed by the customer, transportation
cost is still important to coal mining companies because the customer
may choose a supplier largely based on the cost of transportation.
According to RDI Coaldat, in 1999 approximately 92% of all U.S.
coal was shipped by rail or barge, making these modes the keys to
domestic coal distribution. Most coal mines are served by a single rail
company, but much of the Powder River Basin is served by two competing
rail carriers, the Burlington Northern/Santa Fe and the Union Pacific.
Rail competition in this major coal producing region is important, since
rail costs constitute up to 75% of the delivered cost of Powder River
Basin coal in remote markets. Rail rates for the Powder River Basin are
lower when evaluated on a ton-per-mile basis because the relatively flat
and straight rail routes out of the region allow heavily loaded trains
to operate with less manpower and locomotive power than rail routes in
other regions.
SALES AND MARKETING
Our subsidiaries, Peabody COALSALES and Peabody COALTRADE,
undertake the sales and marketing functions for our U.S. operating
subsidiaries, including exports from the United States. Peabody
COALSALES acts as an agent in the sale and marketing of the coal
produced by each mining subsidiary, and it generates profits through its
brokering and agency activities. Peabody COALTRADE buys and resells coal
produced by a number of third parties, and trades coal and sulfur
dioxide emission allowance forwards and options in the developing over-
the-counter markets. As of March 31, 2000, they had 57 employees located
at five sites, including personnel dedicated to performing market
research, contract administration and risk management activities. They
annually prepare a marketing plan that sets out the sales targets for
the next five years by region, coal type and markets. The strategic plan
formulates and concentrates the ongoing work carried out by the sales
and marketing teams to sell the mines' production through different
sales and marketing initiatives.
COMPETITION
The markets in which we sell our coal are highly competitive. The
top ten coal producers in the United States produce approximately 63% of
total domestic coal, although there are approximately 740 coal producers
in the United States. Our principal competitors in coal operations are
other large coal producers. Our largest competitors are Arch Coal, Inc.,
Kennecott Energy Co., RAG AG, CONSOL Energy Inc., AEI Resources, Inc.
and A.T. Massey Coal Company, which collectively produced approximately
40% of total United States coal production in 1999.
The markets in which we sell our coal are affected by a number of
factors beyond our control. Continued demand for our coal and the prices
obtained by us depend primarily on the coal consumption patterns of the
electricity industries in the United States and the Pacific Rim
countries, the availability, location (and therefore the cost of
transportation) and price of competing coal and alternative electricity
generation and fuel supply sources such as natural gas, oil, nuclear and
hydroelectric. Coal consumption patterns are affected primarily by the
demand for electricity, environmental and other
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governmental regulations and technological developments. In recent
years, there has been excess coal production capacity due to increased
development of large surface mining operations in the Western United
States, more efficient mining equipment and techniques and reduced
consumption of high sulfur coal. We compete on the basis of coal
quality, delivered price, customer service and support and reliability.
SUPPLIERS
The main types of goods we purchase are mining equipment and
replacement parts, explosives, fuel, tires and lubricants. We also
purchase coal from third parties to satisfy some of our customer
contracts. Purchases of capital goods, materials and services are
approximately 25% of our annual revenue. The supplier base providing
these goods has been relatively consistent in recent years as we have
many long established relationships with our key suppliers.
Between 20% and 25% of goods and services are supplied by the top
ten suppliers, and some 60% of goods and services are provided by the
top 100 suppliers. We do not have any supply arrangements with related
parties, and all transactions are carried out on an arm's length basis.
We consider all suppliers of a particular category of supplies to be
interchangeable and do not believe we are vulnerable to over-dependence
on any one supplier.
EMPLOYEES
As of March 31, 2000, we and our consolidated joint ventures had
approximately 7,200 employees. Of these employees, approximately 5,900
worked in the United States and 1,300 worked in foreign countries.
Approximately 39% of our United States coal employees are
affiliated with organized labor unions, which accounts for approximately
26% of the tons sold in the United States during fiscal year 2000.
Relations with organized labor are important to our success. Hourly
workers at our mines in Arizona, Colorado and Montana are represented by
the United Mine Workers of America under the Western Surface Agreement,
which was ratified in 1996 and is effective through August 31, 2000.
Negotiations for a successor labor agreement have not commenced. Union
labor east of the Mississippi is also represented by the United Mine
Workers of America but is subject to the National Bituminous Coal Wage
Agreement. On December 16, 1997, this five-year labor agreement
effective from January 1, 1998 to December 31, 2002, was ratified by the
United Mine Workers of America. The United Mine Workers of America have
stated that the union wishes to reopen the National Bituminous Coal Wage
Agreement, but no negotiations on a reopener have commenced.
The Australian coal mining industry is highly unionized and the
majority of workers employed at Peabody Resources are members of trade
unions. These employees are represented by three unions: the United Mine
Workers, which represents the production employees; and two unions that
represent the other staff. The miners at Warkworth Mine signed a three-
year labor agreement that expires in October 2002. The miners at
Ravensworth and Narama Mines have signed a further enterprise labor
agreement for two years that expires in May 2001. The labor agreement
for the Moura Mine is currently under negotiation and the miners are
working under the terms of the expired contract.
The Australian Federal Government, as part of micro-economic
reform, has a Workplace Relations Strategy that seeks structural reform
to encourage enterprise focus and to facilitate enterprise agreements.
Under the legislation, Bengalla has commenced the employment of its
workforce under individual workplace agreements with each employee.
These agreements do not require ratification by a coal union.
PROPERTIES
Coal Reserves
We had an estimated 10.0 billion tons of proven and probable reserves
as of April 1, 2000, of which approximately 52% were low sulfur coal.
We own approximately 43% of these reserves and lease the remaining 57%.
Below is a table summarizing the locations and reserves of our
major operating units.
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<TABLE>
<CAPTION>
PROVEN AND PROBABLE
RESERVES AS OF APRIL 1, 2000<F1>
(TONS IN MILLIONS)
--------------------------------
OWNED LEASED TOTAL
OPERATING REGIONS LOCATIONS TONS TONS TONS
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Powder River Basin Wyoming and Montana 244 3,234 3,478
Southwestern Arizona, Colorado and New Mexico 728 583 1,311
Appalachia West Virginia 315 510 825
Midwest Illinois, Indiana and Kentucky 3,028 877 3,905
Australia New South Wales and Queensland -- 449 449
----- ----- -----
Total 4,315 5,653 9,968
===== ===== =====
<FN>
<F1> Reserves have been adjusted to take into account losses involved
in producing a saleable product. The amounts include our share of
reserves in joint ventures.
</TABLE>
Reserve estimates are based on geological data assembled and
analyzed by our staff, which includes various geologists and engineers.
The reserve estimates are periodically updated to reflect production of
coal from the reserves and new drilling or other data received.
Accordingly, reserve estimates will change from time to time reflecting
mining activities, analysis of new engineering and geological data,
changes in reserve holdings, modification of mining methods and other
factors. Reserve information, including the quantity and quality (where
available) of reserves as well as production rates, surface ownership,
lease payments and other information relating to our coal reserve and
land holdings, is maintained through a computerized land management
system that we developed.
Our reserve estimates are predicated on information obtained from
our extensive drilling program, which totals nearly 500,000 individual
drill holes. Data from individual drill holes are compiled into a
computerized drill hole system from which the depth, thickness and,
where core drilling is used, the quality of the coal are determined. The
density of the drill pattern determines whether the reserves will be
classified as proven or probable. The drill hole data are then input
into the computerized land management system which overlays the
geological data with data on ownership or control of the mineral and
surface interests to determine the extent of the reserves in a given
area. In addition, we periodically engage independent mining and
geological consultants to review estimates of our coal reserves. The
most recent of these reviews, which was completed on October 1, 1996,
includes a review of the procedures used by us to prepare our internal
reserve estimates, verifying the accuracy of selected property reserve
estimates and retabulating reserve groups according to standard
classifications of reliability.
We have numerous federal coal leases that are administered by the
United States Department of the Interior pursuant to the Federal Coal
Leasing Amendments Act of 1976. These leases cover our principal
reserves in Wyoming and other reserves in Montana and Colorado. Each of
these leases continues indefinitely provided there is diligent
development of the lease and continued operation of the related mine or
mines. The Bureau of Land Management has asserted the right to adjust
the terms and conditions of these leases, including rent and royalties,
after the first 20 years of their life and at ten yearly intervals
thereafter. Annual rents under our federal coal leases are now set at
$3.08 per acre. Production royalties on federal leases are set by
statute at 12.5% of the gross proceeds of coal mined and sold for
surface mined coal and 8% for underground mined coal. Similar provisions
govern three coal leases with the Navajo and Hopi Indian tribes. These
leases cover coal contained in 65,000 acres of land in northern Arizona
lying within the boundaries of the Navajo National and Hopi Indian
reservations. We also lease coal from various state governments.
Private coal leases normally have terms of between 10 and 20 years,
and usually give us the right to renew the lease for a stated
period or to maintain the lease in force until the exhaustion of
mineable and merchantable coal contained on the relevant site. These
private leases provide for royalties to be paid to the lessor either as
a fixed amount per ton or as a percentage of the sales price. Many
leases also require payment of a lease bonus or minimum royalty, payable
either at the time of execution of the lease or in periodic
installments.
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The terms of private leases are normally extended by active
production on or near the end of the lease term. Leases containing
undeveloped reserves may expire or such leases may be renewed
periodically. With a portfolio of approximately 10 billion tons, we
believe that we have sufficient reserves to replace capacity from
depleting mines for the foreseeable future and that our reserve base is
one of our strengths. We believe that the current level of production at
our major mines is sustainable.
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Consistent with industry practice, we conduct only limited
investigation of title to our coal properties prior to leasing. Title to
lands and reserves of the lessors or grantors and the boundaries of our
leased properties are not completely verified until such time as we
prepare to mine such reserves.
Mining and exploration in Australia is generally carried on under
leases or licenses granted by state governments. Mining leases, which
are typically for an initial term of up to 21 years (but which may be
renewed), contain conditions relating to such matters as minimum annual
expenditures, restoration and rehabilitation. Surface rights are
typically acquired directly from landowners and, in the absence of
agreement, there is an arbitration provision in the mining law.
Peabody Resources holds or has rights to coal mining leases at
Warkworth, Bengalla, Narama and Ravensworth East. Ravensworth is mined
under contract from coal reserves owned by Macquarie Generation.
Warkworth's mining lease has been renewed until 2023 with Bengalla and
Narama leases valid until 2017 and 2012, respectively. Development
consent for Ravensworth East was received in March 2000, and an
application for renewal for a 21-year period has been made. Peabody
Resources also holds an exploration license for Ravensworth West and has
applied for a mining lease. The Moura lease is valid until 2019.
LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings arising in
the ordinary course of business. We believe we are adequately reserved
for these liabilities and that there is no individual case pending that
could have a material adverse effect on our financial condition or
results of operations. Our significant legal proceedings are discussed
below. Concurrent adverse resolution of such proceedings could have a
material effect on the financial condition and results of operations for
a particular interim or annual period.
Navajo Nation
On June 18, 1999, The Navajo Nation served our subsidiaries,
Peabody Holding Company, Inc., Peabody Coal Company and Peabody Western
Coal Company, with a complaint that had been filed in the U. S. District
Court for the District of Columbia. Other defendants in the litigation
are two utilities, two current employees and one former employee. The
Navajo Nation has alleged sixteen claims including civil Racketeer
Influenced and Corrupt Organizations Act, or RICO, claims, fraud and
tortious interference with contractual relationships. The plaintiff
is seeking various remedies including actual damages of at least
$600 million which could be trebled under the RICO counts, punitive
damages of at least $1 billion, a determination that Peabody Western Coal
Company's two coal leases for the Kayenta and Black Mesa mines have
terminated due to the failure of a condition and a reformation of the
two coal leases to adjust the royalty rate to 20%. All defendants have
filed a motion to dismiss the complaint.
In March 2000, the Hopi Tribe filed a motion to intervene in this
lawsuit. The Hopi Tribe has alleged seven claims, including fraud. The
Hopi Tribe is seeking various remedies, including unspecified actual and
punitive damages, reformation of its coal lease and a termination of the
coal lease. The federal court has not ruled on the Hopi Tribe's motion.
We believe this matter will be resolved without a material adverse
effect on our financial condition or results of operations.
Salt River Project Agricultural Improvement and Power District
The Salt River Agricultural Improvement and Power District and the
other owners of the Navajo Generating Station, or Salt River, filed a
lawsuit on September 27, 1996 in the Superior Court of Maricopa County
in Arizona seeking a declaratory judgment that certain costs relating to
final reclamation, environmental monitoring work and mine decommissioning,
and costs relating to life insurance and retiree health care benefits are
not recoverable by our subsidiary, Peabody Western Coal Company, under
the terms of a coal supply agreement dated February 18, 1977. The contract
expires in 2011.
Peabody Western filed a Motion to Compel Arbitration of these
claims, which was partially granted by the trial court. The trial court
ruled that the mine decommissioning costs were subject to arbitration
but that the retiree health care costs were not subject to arbitration.
Peabody Western has filed an appeal of the order denying arbitration of
the retiree health care costs with the Arizona Court of Appeals, which
was denied by the Court. Peabody Western then filed an appeal with the
Arizona Supreme Court, which was denied. Peabody Western and Salt River
will arbitrate the mine decommissioning costs issue and will litigate
the retiree health care costs issue.
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If Salt River is successful in the arbitration and litigation, our
financial condition and results of operations may be adversely affected.
However, based on our preliminary evaluation of the issues and the
potential impact on us, and while the outcome of litigation and
arbitration is subject to uncertainties, we believe that the matter will
be resolved without a material adverse affect on our financial condition
or results of operations.
Southern California Edison Company
In response to a demand for arbitration by one of our subsidiaries,
Peabody Western Coal Company ("Peabody Western"), Southern California
Edison Company and the other owners of the Mohave Generating Station,
or Edison, filed a lawsuit on June 20, 1996 in the Superior Court of
Maricopa County, Arizona. The lawsuit sought a declaratory judgment
that mine decommissioning costs and retiree health care costs are not
recoverable by Peabody Western under the terms of a coal supply
agreement dated May 26, 1976. The contract will expire in 2005.
Peabody Western filed a Motion to Compel Arbitration, which was
granted by the trial court. Edison appealed this order to the Arizona
Court of Appeals, which denied its appeal. Edison appealed the order to
the Arizona Supreme Court which remanded the case to the Arizona Court
of Appeals and ordered the appellate court to determine whether the
trial court was correct in determining that Peabody Western's claims are
arbitrable. The Arizona Court of Appeals ruled that neither mine
decommissioning costs nor retiree health care costs are to be arbitrated
and that both issues were to be resolved in litigation. The matter has
been remanded back to the Superior Court of Maricopa County, Arizona
where a trial has been set for April 2001.
If Edison is successful in the matter, our financial condition and
results of operations may be adversely affected. However, based on a
preliminary evaluation of the issues and the potential impact on us, we
believe that the matter will be resolved without a material adverse
affect on our financial condition or results of operations.
Public Service Company of Colorado
In August 1996, Seneca Coal Company, a subsidiary of Peabody Coal
Company, filed a demand for arbitration in accordance with the terms of
an Amended Revised Coal Supply Agreement dated December 1, 1971 between
Seneca and three electric utilities, Public Service Company of Colorado,
Salt River Project Agricultural Improvement District and PacifiCorp, or
the Hayden Participants. The Hayden Participants own the Hayden Electric
Generating Station at Hayden, Colorado. The arbitration demand requested
the entry of an award for Seneca and against the Hayden Participants for
amounts attributable to final reclamation, mine decommissioning and
environmental monitoring of the Seneca mine and life insurance and post-
retirement health care. Subsequent to the arbitration, Seneca Coal
Company and the Hayden Participants negotiated a termination of their
coal supply agreement and resolution of all outstanding disputes between
them. At that same time, the Hayden Participants negotiated a new coal
supply agreement with a term through 2011 with Peabody COALSALES
Company, a company affiliated with Seneca Coal Company.
Macquarie Generation
In September 1997, our subsidiary, Peabody Resources, filed a
lawsuit against Macquarie Generation in the Supreme Court of New South
Wales, Commercial Division, seeking damages for certain coal deliveries
which were not paid by Macquarie Generation and for a declaratory
judgment regarding the assignment to Macquarie Generation of two long-
term coal supply agreements for the Ravensworth and Narama mines. The
contracts expire in 2001 and 2012, respectively. Macquarie Generation
later agreed that the two contracts were properly assigned to it.
Macquarie Generation subsequently filed a cross-claim against Peabody
Resources alleging that Peabody Resources breached the labor escalation
provisions in the coal supply agreements, committed misrepresentations
regarding the labor costs and violated the Australian trade practices
and fair trading laws in relation to the Narama contract. Macquarie
Generation sought to terminate or rescind the Narama coal supply
agreement and had sought damages from Peabody Resources for alleged
breaches of both contracts. Even though we continued to deliver coal,
Macquarie Generation unilaterally reduced the price that it is paying
for coal deliveries under the Narama contract. A trial regarding these
issues began on September 7, 1998 and concluded on September 25, 1998.
On September 22, 1998, Macquarie Generation withdrew its breach of
contract claims.
The Supreme Court of New South Wales issued a decision on November
19, 1998 rejecting Macquarie Generation's claims to terminate the coal
supply agreement for the Narama mine. Macquarie Generation abandoned any
basis to a claim for damages. The Court ordered Macquarie Generation to
pay Peabody Resources the portion of the price that it had unilaterally
withheld, with interest. Macquarie Generation has made that payment to
Peabody Resources and is paying Peabody Resources for deliveries of coal
at the contract prices. Macquarie Generation has filed an appeal of the
decision,
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which is scheduled to be heard in July 2000 by the New South Wales Court
of Appeals. We continue to believe that the matter will be resolved
without a material adverse effect on our financial condition or results
of operations.
Minerals Management Service
The Minerals Management Service issued a preliminary administrative
decision in August 1992, determining that a subsidiary of ours,
subsequently merged into Powder River Coal Company, had underpaid
royalties owed to the federal government. On October 15, 1999, we signed
a settlement agreement with the federal government on all civil claims
related to the dispute. We paid $11.0 million in two installments, which
was charged against a previously established reserve.
Saline Valley Conservancy District
Saline Valley Conservancy District filed a lawsuit against our
subsidiary, Peabody Coal Company, on April 5, 1999 in the Circuit Court
of Saline County, Illinois. Saline Valley alleges that Peabody Coal
Company's coal refuse pits at the closed Eagle No. 2 mine in Saline
County, Illinois constitute a public and private nuisance and a
trespass, and that Peabody Coal Company engaged in various negligent
acts at the coal refuse pits. Saline Valley is seeking up to
$124 million of compensatory damages, $125 million of punitive damages
and injunctive relief. Peabody Coal Company has removed the case to the
United States District Court for the Southern District of Illinois. The
trial has been set for April 2001.
In addition, the state of Illinois has filed an administrative
complaint against Peabody Coal Company alleging that our coal refuse
pits have violated state water pollution control laws and regulations.
The state is seeking daily fines from Peabody Coal Company for these
alleged violations. We believe this matter will be resolved without a
material adverse effect on our financial condition or results of
operations.
Environmental
Federal and State Superfund Statutes
The Comprehensive Environmental Response, Compensation and
Liability Act and similar state laws create liability for investigation
and remediation in response to releases of hazardous substances in the
environment and for damages to natural resources. Under that legislation
and many state Superfund statutes, joint and several liability may be
imposed on waste generators, site owners and operators and others
regardless of fault.
Our subsidiary, Gold Fields, its predecessors and its former
parent company are or may become parties to environmental proceedings
which have commenced or may commence in the United States in relation to
certain sites previously owned or operated by those entities or
companies associated with them. We have agreed to indemnify Gold Fields'
former parent company for any environmental claims resulting from any
activities, operations or conditions that occurred prior to the sale of
Gold Fields to us. Gold Fields is currently involved in environmental
investigation or remediation at 10 sites and is a defendant in
litigation with private parties involving one site.
These 10 sites were formerly owned or operated by Gold Fields. The
Environmental Protection Agency has placed three of these sites on the
National Priorities List, promulgated pursuant to that legislation, and
one of the sites is on a similar state priority list. There are a number
of further sites in the United States that were previously owned or
operated by such companies that could give rise to environmental
proceedings in which Gold Fields could incur liabilities.
Where such sites were identified, independent environmental
consultants were employed in 1997 in order to assess the estimated total
amount of the liability per site and the proportion of those liabilities
that Gold Fields is likely to bear. The available information on which
to base this review was very limited since all of the sites except for
three sites (on which no remediation is currently taking place) are no
longer owned by Gold Fields. We have provisions of $57.7 million as of
March 31, 2000 for the above environmental liabilities relating to Gold
Fields. Significant uncertainty exists as to whether these claims will
be pursued against Gold Fields in all cases, and where they are pursued,
the amount of the eventual costs and liabilities, which could be greater
or less than this provision. We believe that the remaining amount of the
provision is adequate to cover these environmental liabilities.
Although waste substances generated by coal mining and processing
are generally not regarded as hazardous substances for the purposes of
that legislation, some products used by coal companies in operations,
such as chemicals, and the disposal of such products are governed by the
statute. Thus, coal mines currently or previously owned or operated by
us, and sites to which we have sent waste materials, may be subject to
liability under that legislation and similar state laws.
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REGULATORY MATTERS
Our operations are subject to extensive regulation in the United
States and Australia regarding production, sale, distribution, health
and safety and environmental matters.
UNITED STATES
The United States coal mining industry is subject to regulation by
federal, state and local authorities on matters such as employee health
and safety, permitting and licensing requirements, air quality
standards, water pollution, plant and wildlife protection, the
reclamation and restoration of mining properties after mining has been
completed, the discharge of materials into the environment, surface
subsidence from underground mining and the effects of mining on
groundwater quality and availability. In addition, the industry is
affected by significant legislation mandating certain benefits for
current and retired coal miners. Numerous federal, state and local
governmental permits and approvals are required for mining operations.
We believe that all permits currently required to conduct our present
mining operations have been obtained. We may be required to prepare and
present to federal, state or local authorities data pertaining to the
effect or impact that a proposed exploration for or production of coal
may have on the environment. Such requirements could prove costly and
time-consuming, and could delay commencing or continuing exploration or
production operations. Future legislation and administrative regulations
may emphasize the protection of the environment and, as a consequence,
our activities may be more closely regulated. Such legislation and
regulations, as well as future interpretations and more rigorous
enforcement of existing laws, may require substantial increases in
equipment and operating costs to us and delays, interruptions or a
termination of operations, the extent of which cannot be predicted.
We endeavor to conduct our mining operations in compliance with
all applicable federal, state and local laws and regulations. However,
because of extensive and comprehensive regulatory requirements,
violations during mining operations occur from time to time in the
industry. None of the violations to date or the monetary penalties
assessed upon us have been material.
Mine Health and Safety
Stringent health and safety standards have been in effect since
the Coal Mine Health and Safety Act of 1969 was adopted by Congress. The
Federal Mine Health and Safety Act of 1977 significantly expanded the
enforcement of health and safety standards and imposed health and safety
standards on all aspects of mining operations.
Most of the states in which we operate have state programs for
mine health and safety regulation and enforcement. In combination,
federal and state health and safety regulation in the coal mining
industry is perhaps the most comprehensive and pervasive system for
protection of employee health and safety affecting any segment of United
States industry. While regulation has a significant effect on our
operating costs, our U.S. competitors are subject to the same degree of
regulation.
Our goal is to achieve excellent health and safety performance. We
measure our success in this area primarily through the use of accident
frequency rates. We believe that this goal is inherently tied to
achieving our productivity and financial goals. We seek to implement
this goal by: training employees in safe work practices; openly
communicating with employees; establishing, following and improving
safety standards; involving employees in establishing safety standards;
and recording, reporting and investigating all accidents, incidents and
losses to avoid reoccurrence.
Black Lung
Under the Black Lung Benefits Revenue Act of 1977 and the Black
Lung Benefits Reform Act of 1977, as amended in 1981, each coal mine
operator is required to secure payment of federal black lung benefits to
claimants who are current and former employees and to a trust fund for
the payment of benefits and medical expenses to claimants who last
worked in the coal industry prior to July 1, 1973. Less than 7% of the
miners currently seeking federal black lung benefits are awarded such
benefits by the federal government. The trust fund is funded by an
excise tax on production of up to $1.10 per ton for deep-mined coal and
up to $0.55 per ton for surface-mined coal; neither amount to exceed
4.4% of the sales price. This tax is passed on to the purchaser under
many of our coal supply agreements.
Legislation on black lung reform has been introduced in Congress.
The legislation would restrict the evidence that can be offered by a
mining company, establish a standard for evaluation of evidence that
greatly favors black lung claimants, allow claimants who have been
denied benefits at any time since 1981 to refile their claims for
consideration under the new law, make surviving spouse benefits
significantly easier to obtain and retroactively waive repayment of
preliminarily
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awarded benefits that are later determined to have been improperly paid.
If this or similar legislation is passed, the number of claimants who
are awarded benefits could significantly increase.
The U.S. Department of Labor has issued proposed amendments to the
regulations implementing the federal black lung laws which, among other
things, establish a presumption in favor of a claimant's treating
physician and limit a coal operator's ability to introduce medical
evidence regarding the claimant's medical condition. If final amendments
to the regulations are adopted that are similar to the proposed
amendments, the number of claimants who are awarded benefits could
significantly increase and the amounts of awards could significantly
increase.
Coal Industry Retiree Health Benefit Act of 1992
The Coal Industry Retiree Health Benefit Act of 1992, also known
as the Coal Act, was enacted to provide for the funding of health
benefits for certain United Mine Workers of America retirees. The Coal
Act established the Combined Fund into which "signatory operators" and
"related persons" are obligated to pay annual premiums for
beneficiaries. The Coal Act also created a second benefit fund for
miners who retired between July 21, 1992 and September 30, 1994 and
whose former employers are no longer in business. Companies that are
liable under the Coal Act must pay premiums to the Combined Fund. Annual
payments made by certain of our subsidiaries under the Coal Act totaled
$1.7 million in fiscal year 2000.
In October 1998, the Combined Fund sent a premium notice to all
assigned operators subject to the fund that included retroactive death
benefit and health benefit premiums dating back to February 1, 1993. On
November 13, 1998, ten employers (including two of our subsidiaries,
Peabody Coal Company and Eastern Associated Coal Corp.) challenged the
fund's retroactive rebilling in a lawsuit filed in the Northern District
Court of Alabama. Our subsidiaries' retroactive premium amounts to
approximately $1.3 million.
In 1996, the Combined Fund sued the Social Security Administration
in the District of Columbia seeking a declaration that the Social
Security Administration's original calculation of the per-beneficiary
premium was proper. Certain coal companies but not our subsidiaries
intervened in the lawsuit. On February 25, 2000, the federal District
Court ruled in favor of the Combined Fund. The Combined Fund has asked
for an amended order and that request is pending before the court. Once
there is a final order in the case, we anticipate that the intervenor
coal companies will appeal the court's decision. If this decision is
upheld on appeal, our subsidiaries will be required to pay an additional
premium to the Combined Fund of approximately $2.4 million.
Eastern Associated Coal Corp. and Peabody Coal Company filed a
lawsuit in the Western District of Kentucky against the Social Security
Administration asserting that the Social Security Administration had
improperly assigned, under the Coal Act, certain beneficiaries to us.
Subsequently, Peabody Coal and Eastern Associated moved for summary
judgment on the improper assignment of certain beneficiaries that was
granted by the federal District Court. The Social Security
Administration filed a motion seeking a final judgment. Peabody Coal and
Eastern Associated Coal Corp. believe that a final judgment has already
been issued by the federal District Court, and that the time to appeal
the District Court's decision has expired.
Environmental Laws
We are subject to various federal, state and foreign environmental
laws. These laws require approval of many aspects of coal mining
operations, and both federal and state inspectors regularly visit our
mines and other facilities to ensure compliance.
Surface Mining Control and Reclamation Act. The Surface Mining
Control and Reclamation Act, which is administered by the Office of
Surface Mining Reclamation and Enforcement, establishes mining and
reclamation standards for all aspects of surface mining as well as many
aspects of deep mining. The Surface Mining Control and Reclamation Act
and similar state statutes, among other things, require that mined
property be restored in accordance with specified standards and an
approved reclamation plan. In addition, the Abandoned Mine Land Fund,
which is part of the Surface Mining Control and Reclamation Act, imposes
a fee on all current mining operations, the proceeds of which are used
to restore mines closed before 1977. The maximum tax is $0.35 per ton on
surface-mined coal and $0.15 per ton on deep-mined coal.
The Surface Mining Control and Reclamation Act also requires that
comprehensive environmental protection and reclamation standards be met
during the course of, and upon completion of, mining activities. For
example, it requires us to restore a surface mine to the approximate
original contour as contemporaneously as practicable with surface coal
mining operations. A mine operator must submit a bond or otherwise
secure the performance of these reclamation obligations. Mine
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operators must receive permits and permit renewals for surface mining
operations from the Office of Surface Mining Reclamation and Enforcement
or, where state regulatory agencies have adopted federally approved
state programs under the act, the appropriate state regulatory
authority. We accrue for the liability associated with all end-of-mine
reclamation on a ratable basis as the coal reserve is being mined. The
estimated cost of reclamation, and the corresponding accrual on our
financial statements, is adjusted annually.
All states in which our active mining operations are located have
achieved primary control of enforcement through approved state programs.
Although we do not anticipate significant permit issuance or renewal
problems, we cannot assure you that our permits will be renewed or
granted in the future or that permit issues will not adversely affect
operations. Under previous regulations of the act, responsibility for
any coal operator currently in violation of the act could be imputed to
other companies deemed, according to regulations, to "own or control"
the coal operator. Sanctions included being blocked from receiving new
permits and rescission or suspension of existing permits. Because of a
recent federal court action invalidating these ownership and control
regulations, the scope and potential impact of the "ownership and
control" requirements on us are unclear. The Office of Surface Mining
Reclamation and Enforcement has responded to the court action by
promulgating interim regulations, which more narrowly apply the
ownership and control standards to coal companies. Although the federal
action could have, by analogy, a precedential effect on state
regulations dealing with "ownership and control," which are in many
instances similar to the invalidated federal regulations, it is not
certain what impact the federal court decision will have on these state
regulations.
West Virginia Mountaintop Mining. On October 20, 1999, the U.S.
District Court for the Southern District of West Virginia issued a
permanent injunction against the West Virginia Department of
Environmental Protection in a mountaintop-mining lawsuit. As interpreted
by the Director of the Department of Environmental Protection, the
injunction prohibits the Department from approving any new permits that
would authorize the placement of excess spoil in intermittent and
perennial streams for the primary purpose of waste (overburden)
disposal. The Department also interpreted the injunction to affect
certain existing coal refuse ponds, sediment ponds and mountaintop
mining operations.
The Department has filed an appeal of the decision with the Fourth
Circuit Court of Appeals. On October 29, 1999, the District Court issued
a stay of its decision pending a resolution of the appeal. We do not
believe the court order will have any immediate effect on our West
Virginia mines.
In late 1999 certain members of Congress pursued legislation which
would have resolved the issues raised by the district court's decision.
That legislation did not pass in 1999 but we anticipate that similar
legislation will be introduced in 2000. We cannot predict whether any
such legislation will be passed by Congress in 2000.
The Clean Air Act. The Clean Air Act and the Clean Air Act
Amendments, and corresponding state laws that regulate the emissions of
materials into the air, affect coal mining operations both directly and
indirectly. Direct impacts on coal mining and processing operations may
occur through Clean Air Act permitting requirements and/or emission
control requirements relating to particulate matter, such as fugitive
dust, including future regulation of fine particulate matter measuring
10 micrometers in diameter or smaller. The Clean Air Act indirectly
affects coal mining operations by extensively regulating the air
emissions of sulfur dioxide and other compounds, including nitrogen
oxides, emitted by coal-fueled utility power plants.
In July 1997, the Environmental Protection Agency adopted new,
more stringent National Ambient Air Quality Standards for very fine
particulate matter and ozone. As a result, some states will be required
to change their existing implementation plans to attain and maintain
compliance with the new air quality standards. Our mining operations and
utility customers are likely to be directly affected when the revisions
to the air quality standards are implemented by the states. State and
federal regulations relating to implementation of the new air quality
standards may restrict our ability to develop new mines or could require
us to modify our existing operations. The extent of the potential direct
impact of the new air quality standards on the coal industry will depend
on the policies and control strategies associated with the state
implementation process under the Clean Air Act, but could have a
material adverse effect on our financial condition and results of
operations. The Court of Appeals for the District of Columbia ruled in
May 1999 that the existing 10 micrometer particulate and new eight hour
ozone standards were invalid. The Court also ordered a new briefing on
the validity of the very fine particulate standard. The effect of this
decision on us and our customers is unknown at this time.
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Title IV of the Clean Air Act Amendments places limits on sulfur
dioxide emissions from electric power generation plants. The limits set
baseline emission standards for such facilities. Reductions in such
emissions occurred in Phase I in 1995 and in Phase II in 2000 and apply
to all coal-fired power plants. The affected utilities have been able to
meet these
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requirements by, among other ways, switching to lower sulfur fuels,
installing pollution control devices, such as flue gas desulfurization
systems, which are known as "scrubbers", reducing electricity generating
levels or purchasing or trading sulfur dioxide emission allowances.
Emission sources receive these sulfur dioxide emission allowances, which
can be traded or sold to allow other units to emit higher levels of
sulfur dioxide. The effect of these provisions of the Clean Air Act
Amendments on us cannot be completely ascertained at this time. We
believe that implementation of Phase II has resulted in a downward
pressure on the price of higher sulfur coal, as additional coal-burning
utility power plants have complied with the restrictions of Title IV.
The Clean Air Act Amendments also require utilities that currently
are major sources of nitrogen oxides in moderate or higher ozone
nonattainment areas install reasonably available control technology for
nitrogen oxides, which are precursors of ozone. In addition, the
Environmental Protection Agency recently announced the final rules that
would require 19 Eastern states to make substantial reductions in
nitrogen oxide emissions. Installation of additional control measures
required under the final rules will make it more costly to operate coal-
fired utility power plants.
In accordance with Section 126 of the Clean Air Act, eight
Northeastern states filed petitions requesting the Environmental
Protection Agency to make findings and require decreases in nitrogen
oxide emissions from certain sources in certain upwind states that might
contribute to ozone nonattainment in the petitioning states. The
Environmental Protection Agency has granted four of the eight petitions
finding that certain sources are contributing to ozone non-attainment in
certain of the petitioning states and the Environmental Protection
Agency has proposed levels of nitrogen oxide control for the named
sources. Our customers are among the named sources and, implementation
of the requirement to install control equipment could impact the amount
of coal supplied to those customers if they decide to switch to other
sources of fuel, which would result in lower emission of nitrogen
oxides. The Clean Air Act Amendments provisions for new source review
require utilities to install the best available control technology if
they make a major modification to a facility that results in an increase
in its potential to emit. The Justice Department on behalf of the
Environmental Protection Agency filed seven lawsuits in November 1999,
alleging that electric utilities violated the new source review
provisions of the Clean Air Act Amendments at 29 power plants in the
Midwest and South. The Environmental Protection Agency issued an
administrative order alleging similar violations to the Tennessee Valley
Authority affecting seven plants and notices of violation for an
additional eight plants owned by the affected utilities. If the
utilities are found guilty of the violations, they could be subject to
civil penalties and be required to install the required control
equipment or cease operations. Our customers are among the named
utilities and if found guilty, the fines and requirements to install
additional control equipment could impact the amount of coal they would
burn if the plant operating costs were to increase to the point that the
plants were operated less frequently. A coalition of 40 utilities and
power companies have petitioned the U.S. Court of Appeals for the
District of Columbia to review the Environmental Protection Agency's
decision to grant the four petitions.
The Clean Air Act Amendments set a national goal for the
prevention of any future and the remedying of any existing impairment of
visibility in 156 national parks and wildlife areas across the country.
Visibility in these areas is to be returned to natural conditions by
2064 through plans that must be developed by the states. The state plans
may require the application of "Best Available Retrofit Technology"
after 2010 on sources found to be contributing to visibility impairment
of regional haze in these areas. The control technology requirements
could cause our customers to install equipment to control sulfur dioxide
and nitrogen oxide emissions. The requirement to install control
equipment could impact the amount of coal supplied to those customers if
they decide to switch to other sources of fuel which use would result in
lower emission of sulfur oxides and nitrogen oxides.
In addition, the Clean Air Act Amendments require a study of
utility power plant emissions of certain toxic substances, including
mercury, and direct the Environmental Protection Agency to regulate
these substances, if warranted. In a recent report, the Environmental
Protection Agency indicated that although it plans to further study the
issue, it does not plan to make a decision whether regulate mercury
emissions from coal-fired power plants until December 2000. If the
Environmental Protection Agency decides to regulate mercury emissions
from power plants, the regulations would probably not take affect until
after 2007. Regardless of any action by the Environmental Protection
Agency, it is a possibility that future state regulatory or legislative
activity may seek to reduce mercury emissions and such requirements, if
enacted, could result in reduced use of coal if utilities switch to
other sources of fuel.
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Clean Water Act. The Clean Water Act of 1972 affects coal mining
operations by imposing restrictions on effluent discharge into water.
Regular monitoring, reporting requirements and performance standards are
preconditions for the issuance and renewal of permits governing the
discharge of pollutants into water.
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Resource Conservation and Recovery Act. The Resource Conservation
and Recovery Act, (RCRA) which was enacted in 1976, affects coal mining
operations by imposing requirements for the treatment, storage and
disposal of hazardous wastes. Coal mining operations covered by the
Surface Mining Control and Reclamation Act permits are exempted from
regulation under the Resource Conservation and Recovery Act by statute;
however we cannot predict whether this exclusion will continue.
The Resource Conservation and Recovery Act excludes certain large-
volume wastes generated primarily from the combustion of coal from being
regulated as a hazardous waste, pending a report to Congress and a
decision by the U.S. Environmental Protection Agency either to regulate
the coal combustion wastes as a hazardous waste under RCRA or deem such
regulation as unwarranted. The U.S. Environmental Protection Agency made
its report to Congress on March 1999 and determined in May 2000 not to
regulate coal wastes as a hazardous substance under RCRA. The
requirement to regulate coal combustion waste as a hazardous waste could
cause a switch to other lower ash fuels and reduce the amount of coal
used by electric generators.
Federal and State Superfund Statutes. The Comprehensive
Environmental Response Compensation and Liability Act, or Superfund, and
similar state laws affect coal mining and hard rock operations by
creating liability for investigation and remediation in response to
releases of hazardous substances to the environment and for damages to
natural resources. Under Superfund, joint and several liability may be
imposed on waste generators, site owners and operators and others
regardless of fault.
Global Climate Change. The United States, Australia and over 160
other nations are signatories to the 1992 Framework Convention on
Climate Change which is intended to limit emissions of greenhouse gases
such as carbon dioxide. In December 1997 in Kyoto, Japan, the
signatories to the convention established a binding set of emission
targets for developed nations. Although the specific emission targets
vary from country to country, the United States would be required to
reduce emissions to 93% of 1990 levels over a five-year budget period
from 2008 through 2012. Although the United States has not ratified the
emission targets and no comprehensive regulations focusing on greenhouse
gas emissions are in place, such restrictions, whether through
ratification of the emission targets or other efforts to stabilize or
reduce greenhouse gas emissions, could adversely impact the price and
demand for coal. According to the Energy Information Administration's
Annual Energy Outlook for 1998, coal accounts for 36% of greenhouse gas
emissions in the United States, and efforts to control greenhouse gas
emissions could result in reduced use of coal if electric generators
switch to lower carbon sources of fuel.
AUSTRALIA
The Australian mining industry is regulated by Australian federal,
state and local governments with respect to environmental issues such as
land reclamation, water quality, air quality, dust control and noise,
planning issues such as approvals to expand existing mines or to develop
new mines, and health and safety issues. The Australian federal
government retains control over the level of foreign investment and
export approvals. Industrial relations are regulated under both federal
and state laws. Australian state governments also require coal companies
to post deposits or give other security against land which is being used
for mining, with those deposits being returned or security released
after satisfactory rehabilitation.
Mining and exploration in Australia is generally carried on under
leases or licenses granted by state governments. Mining leases, which
are typically for an initial term of up to 21 years (but which may be
reviewed), contain conditions relating to such matters as minimum annual
expenditures, restoration and rehabilitation. Surface rights are
typically acquired directly from landowners and, in the absence of
agreement, there is an arbitration provision in the mining law.
Environmental
Primary responsibility for environmental regulation in Australia
is vested in the State rather than the federal system. Each State and
Territory in Australia has its own environmental and planning regime for
the development of mines. In addition, each State and Territory also has
a specific Act dealing with mining in particular, regulating the
granting of mining licenses and leases. The mining legislation in each
State and Territory operates concurrently with environmental and
planning legislation. The mining legislation governs mining licenses and
leases, including the restoration of land, following the completion of
mining activities. Apart from the grant of rights to mine itself (which
are covered by the mining statutes), all licensing, permitting, consent
and approval requirements are contained in the various State and
Territory environmental and planning statutes.
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<PAGE>
The particular provisions of the various State and Territory
environmental and planning statutes vary depending upon the
jurisdiction. Despite the variation in particulars, each State and
Territory has a system involving at least two major phases. First,
obtaining the developmental application and, if that is granted,
obtaining the detailed operational pollution control licenses (which
authorize emissions up to a maximum level); and second, obtaining
pollution control approvals (which authorize the installation of
pollution control equipment and devices). In the first regulatory phase,
an application to a regulatory authority is filled. The relevant
authority will either grant a conditional consent, an unconditional
consent, or deny the application based on the details of the application
and on any submissions or objections lodged by members of the public. If
the developmental application is granted, the detailed pollution control
license may then be issued and such license may regulate emissions to
the atmosphere; emissions in waters; noise impacts including impacts
from blasting; dust impacts; the generation, handling, storage and
transportation of waste; and requirements for the rehabilitation and
restoration of land.
Each State and Territory in Australia also has either a specific
statute or certain sections in other environmental and planning statutes
relating to the contamination of land and vesting powers in the various
regulatory authorities in respect of the remediation of contaminated
land. Those statutes are based on varying policies - the primary
difference between the statutes is that in certain States and
Territories, liability for remediation is placed upon the occupier of
the land, regardless of the culpability of that occupier for the
contamination. In other States and Territories, primary liability for
remediation is placed on the original polluter, whether or not the
polluter still occupies the land. If the original polluter cannot itself
carry out the remediation, then a number of the statutes contain
provisions which enable recovery of the costs of remediation from the
polluter as a debt.
Many of the environmental planning statutes across the States and
Territories contain "third party" appeal rights in relation,
particularly, to the first regulatory phase. This means that any party
has a right to take proceedings for a threatened or actual breach of the
statute, without first having to establish that any particular interest
of that person (other than as a member of the public) stands to be
affected by the threatened or actual breach.
Accordingly, in most States and Territories throughout Australia,
mining activities involve a number of regulatory phases. Following
exploratory investigations pursuant to a mining lease, the activity
proposed to be carried out must be the subject of an application for the
activity or development. This phase of the regulatory process, as noted
above, usually involves the preparation of extensive documents to
constitute the application, addressing all of the environmental impacts
of the proposed activity. It also generally involves extensive
notification and consultation with other relevant statutory authorities
and members of the public. Once a decision is made to allow a mine to be
developed by the grant of a development consent, permit or other
approval, then a formal mining lease can be obtained under the mining
statute. In addition, operational licenses and approvals can then be
applied for and obtained in relation to pollution control devices and
emissions to the atmosphere, to waters and for noise. The obtaining of
licenses and approvals, during the operational phase, generally does not
involve any extensive notification or consultation with members of the
public, as most of these issues are anticipated to be resolved in the
first regulatory phase.
Peabody is recognized as a leader in the field of environmental
stewardship and is a signatory to the Australian Federal Government's
Greenhouse Challenge Program and the Australian Minerals Industry Code
of Environmental Management. Annual independent environmental audits are
conducted at our mining operations to review our environmental
management systems to maintain environmental performance. Ravensworth,
Narama, Bengalla and Warkworth maintain ISO 14001 certification for
their respective environmental management systems.
OCCUPATIONAL HEALTH AND SAFETY
The combined effect of various State and Federal statutes requires
an employer to ensure that persons employed in a mine are safe from
injury by providing a safe working environment and systems of work;
safety machinery; equipment, plant and substances; and appropriate
information, instruction, training and supervision.
In recognition of the specialized nature of mining and mining
activities, specific occupational health and safety obligations have
been mandated under state legislation that deals specifically with the
coal mining industry. Mining employers, owners, directors and managers,
persons in control of work places, mine managers, supervisors and
employees are all subject to these duties.
<PAGE>
It is mandatory for an employer to have insurance coverage in
respect of the compensation of injured workers; similar schemes are in
effect throughout Australia which are of a no fault nature and which
provide for benefits up to a prescribed level. The specific benefits
vary from jurisdiction to jurisdiction, but generally include the
payment of weekly compensation
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<PAGE>
to an incapacitated employee, together with payment of medical, hospital
and related expenses. The injured employee has a right to sue his or her
employer for further damages if a case of negligence can be established.
Safety performance at the coal mining operations continues to be
well below the average for Australian open cut mines with annual
independent audits conducted of our safety management systems.
DEREGULATION OF THE ELECTRIC UTILITY INDUSTRY
In October 1992, the Energy Policy Act of 1992 was enacted. To
stimulate competition in the electricity market, the Act gave wholesale
suppliers access to the transmission lines of United States electric
utility companies. In April 1996, the Federal Energy Regulatory
Commission issued the first of a series of orders establishing rules
providing for open access to electricity transmission systems. While the
Federal Energy Regulatory Commission proceeds to open access to
wholesale electric markets, individual states are proceeding with the
opening of retail access.
The pace of change differs significantly from state to state. To
date, 22 states and the District of Columbia have enacted programs
leading to the deregulation of the retail electricity market; 20 other
states are considering such programs, and the U.S. Congress is
considering federal legislation. Due to the uncertainty around timing
and implementation of deregulation, it is difficult to predict the
impact on individual electric generators.
When ultimately implemented, full-scale deregulation of the power
industry will enable both industrial and residential customers to shop
for the lowest cost supply of power and the best service available. This
fundamental change in the power industry is expected to compel electric
utilities to be more aggressive in developing and defending market
share, to be more focused on their pricing and cost structures and to be
more flexible in reacting to changes in the market.
A possible consequence of the deregulation is anticipated downward
pressure on fuel prices. However, because coal-fired generation is
competitive with most other forms of generation, a competitive
electricity market may stimulate greater demand for coal to be burned in
plants with currently unused capacity. In 1999, for example, the average
cost of generating electricity in coal-based generating units was less
than one half the average cost of generating electricity in gas-fired
units, and coal-based generation accounted for more than one-half of all
electricity produced in the United States last year. Because of coal's
cost advantage and because some coal-based generating facilities are
underutilized in the current regulated electricity market, we estimate
that additional coal demand could arise if the electricity market were
rationalized and the most efficient coal-fired power plants were used to
their full capacity. Estimates of this additional demand for coal vary
between 100 and more than 200 million tons annually for the coal
industry as a whole.
Australia
In the early 1990's, the Australian Federal Government commenced
deregulation of the electricity market as part of Australia's ongoing
micro-economic reform.
The commencement of the National Electricity Market in 1998 was to
introduce competition in the wholesale supply and purchase of
electricity combined with an open access regime for the use of
electricity networks across the Eastern States of Australia.
Introduction of competition was to be achieved by restructuring the
supply industry into the separate elements of generation, transmission
and distribution, and retail supply; privatization of generation and
retail supply; and enhancement and extension of the Eastern States
interconnection of power systems.
Some States, in particular Victoria, have privatized power
generation, transmission and distribution, and retail supply as part of
the ongoing deregulation of the industry. In New South Wales the market
is dominated by incorporated government utilities.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages as of March 31, 2000 and
current positions with us and our subsidiaries of our executive officers
and Directors. The terms of our Directors will expire upon the election
and qualification of successors at the annual meeting of stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Irl F. Engelhardt 53 Chairman, Chief Executive Officer and Director
Richard M. Whiting 45 President, Chief Operating Officer and Director
Roger B. Walcott, Jr. 44 Executive Vice President
Mark Maisto 44 Chief Executive Officer and President, Citizens Power
Christopher G. Farrand 59 Vice President - Corporate Affairs
George J. Holway 50 Vice President - Mining Business Development
Robert D. Humphris 57 Managing Director-Australia
Jeffery L. Klinger 53 Vice President, Legal Services and Secretary
Richard A. Navarre 39 Vice President and Chief Financial Officer
Sharon K. Schergen 43 Vice President - Human Resources
Paul H. Vining 45 President, Peabody COALSALES Company
William E. Broshears 51 Group Executive - Resource Development
Roger H. Goodspeed 49 Director
Henry E. Lentz 55 Director
Alan H. Washkowitz 59 Director
</TABLE>
Irl F. Engelhardt served as President and Chief Executive Officer
of Peabody from 1990 to 1995 and Chairman and Chief Executive Officer of
Peabody since 1993, and has been a Director of Peabody since June 1998.
Since joining Peabody in 1979, he has held various officer level
positions in the executive, sales, business development and
administrative areas, including serving as Chairman of Peabody Resources
Ltd. (Australia) and Chairman of Citizens Power. Mr. Engelhardt also
served as an executive director of The Energy Group from February 1997
to May 1998, Chairman of Cornerstone Construction & Materials, Inc. from
September 1994 to May 1995 and Chairman of Suburban Propane Company from
May 1995 to February 1996. He also served as a Director and Group Vice
President of Hanson Industries from 1995 to 1996. Mr. Engelhardt is
Co-Chairman of the Coal Utilization Research Council and past Chairman of
the National Mining Association and the Coal Industry Advisory Board of
the International Energy Agency. He is also a director of Firstar
(formerly Mercantile Bank of St. Louis, N. A.).
Richard M. Whiting was promoted to President and Chief Operating
Officer of Peabody in January 1998 and has been a Director of Peabody
and a member of the Management Committee since June 1998. He served as
President of Peabody COALSALES Company from June 1992 to January 1998.
Since joining Peabody in 1976, Mr. Whiting has held a number of
operations, sales and engineering positions both at the corporate
offices and at field locations. From 1989 to 1990, Mr. Whiting served as
Vice President of Engineering and Operations Support. Mr. Whiting is
currently Chairman of the Bituminous Coal Operators' Association and
Chairman of the National Mining Association's Safety and Health
Committee.
Roger B. Walcott, Jr. joined Peabody in June 1998 as Executive
Vice President and a member of Peabody's Management Committee. From 1981
to 1998, he was a Senior Vice President & Director with The Boston
Consulting Group where he served a variety of clients in strategy and
operational assignments. He was also Chairman of The Boston Consulting
Group's Human Resource Capabilities Committee. Mr. Walcott holds an MBA
with high distinction from the Harvard Business School.
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<PAGE>
Mark Maisto was named Chief Executive Officer of Citizens Power in
September 1998. He was also named a member of Peabody's Management
Committee at that time. He has been President of Citizens Power since
February 1998. He joined Peabody in 1997 as Executive Vice President of
Citizens Power. Prior to joining Citizens Power he was a Senior Vice
President at Lehman Brothers. At Lehman Brothers, he specialized in
corporate and project finance working with electric utility companies.
Prior to joining Lehman Brothers in 1987, Mr. Maisto was employed at
GE Capital, where he was Director-Utility Finance. Mr. Maisto holds an
MBA from New York University.
Christopher G. Farrand has been Vice President of Corporate
Affairs of Peabody since June 1992. From April 1991 to June 1992, he
served as President of Peabody Development Company. Between 1981 and
1992 he worked as Vice President of Government Relations for both
Peabody Coal Company and Peabody Holding Company. Mr. Farrand joined
Peabody as Director of Corporate Planning for Peabody Coal Company in
1978. Prior to working for Peabody, Mr. Farrand held several positions
in the United States Department of Interior, including Deputy Under
Secretary in 1977 and 1978 and Deputy Assistant Secretary from 1974 to
1976. He currently serves on the board of directors of the National Coal
Association.
George J. Holway was appointed to his current position as Vice
President-Mining Business Development in October 1999. Previously he had
served as Vice President and Chief Financial Officer from June 1998 to
October 1999. Prior to that, he had been Vice President of Corporate
Development with responsibilities for our mining business development
and land functions. After first joining Peabody in 1980, Mr. Holway
served in several financial positions at Peabody Holding Company
including Vice President and Controller from 1990 to 1992. In 1992, he
left Peabody to become Chief Financial Officer of Zeigler Coal Holding
Company, a position he held until he rejoined Peabody in November 1996.
Prior to joining the Peabody in 1980, Mr. Holway was employed by Arthur
Andersen & Co. Mr. Holway is a CPA and holds an MBA from Saint Louis
University.
Robert D. Humphris has been Managing Director-Australia and a
member of Peabody's Management Committee since May 1998. Prior to that,
he had been Managing Director of Peabody Resources since April 1993. He
has held management positions at various mining companies in the United
Kingdom and Australia, including Managing Director of mining operations
for Costain Australia Limited, which was subsequently acquired by
Hanson. He was actively involved in Costain's real estate and
construction activities in Australia. Mr. Humphris is immediate past
Chairman of the New South Wales Minerals Council, past Chairman of the
Australian Coal Association and the Chairman of Newcastle Coal Shippers.
He is a member of the Coal Industry Advisory Board of the International
Energy Agency and the State Minerals Advisory Council.
In May 2000, Mr. Humphris announced that he will retire in October
2000. Ian Craig, Deputy Managing Director of Peabody Resources, will
succeed Mr. Humphris.
Jeffery L. Klinger was named Vice President of Legal Services and
Secretary in May 1998. Prior to that, he had been Vice President,
Secretary and Chief Legal Officer since October 1990. From 1986 to
October 1990, he served as Eastern Regional Counsel for Peabody Holding
Company and from 1982 to 1986 as Director of Legal and Public Affairs,
Eastern Division of Peabody Coal Company and joined Peabody as Director
of Legal and Public Affairs, Indiana Division of Peabody Coal Company
from 1978 to 1982. He is a past President of the Indiana Coal Council
and is currently a trustee of the Energy and Mineral Law Foundation.
Richard A. Navarre was named Vice President and Chief Financial
Officer in October 1999. Prior to that, he was President of Peabody
COALSALES Company from January 1998 to October 1999 and previously
served as President of Peabody Energy Solutions, Inc. Prior to his roles
in sales and marketing, he was Vice President of Finance and served as
Vice President and Controller of Peabody. He joined Peabody in 1993 as
Director of Financial Planning. Prior to joining Peabody, Mr. Navarre
was a senior manager with KPMG Peat Marwick. Mr. Navarre is a member of
the Trade and International Affairs Committee and the Transportation
Committee of the National Mining Association. He is also a member of the
NYMEX Coal Advisory Council.
Sharon K. Schergen has been Vice President-Human Resources since
1991, with executive responsibility for employee development, benefits,
compensation, employee relations and affirmative action programs. She
joined Peabody in 1981 as Manager-Salary Administration and has held a
series of employee relations, compensation, and salaried benefits
positions. Prior to joining Peabody, Ms. Schergen, who earned degrees in
social work and psychology and an MBA, was a personnel representative
for Ford Motor Company. Ms. Schergen is a member of the National Mining
Association's Human Resource Committee.
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Paul H. Vining was named President of Peabody COALSALES Company in
October 1999. Prior to that, he was President of Peabody COALTRADE, Inc.
from March 1997 to October 1999, and Senior Vice President of Peabody
COALSALES Company from August 1995-February 1997. Mr. Vining is a member
of the Board of Directors of the Coal Exporters Association.
William E. Broshears was named Group Executive-Resource
Development in July 1999. Prior to that he was Group Executive-Mining
Services from May 1999 to July 1999, Vice President-Operations of
Peabody Coal Company from October 1996 to May 1999 and Vice
President-Surface Operations of Eastern Associated Coal Corp. from
November 1995 to October 1996. Mr. Broshears is the Chairman of the West
Virginia Mining and Reclamation Association.
Roger H. Goodspeed became a Director in May 1998. He is also a
Managing Director of Lehman Brothers. He joined Lehman Brothers in 1974
and became a Managing Director in 1984. During his tenure at Lehman
Brothers, he has served in management positions for several different
groups. In 1994, he became Chairman of Citizens Lehman Power, an
electric power marketing joint venture 50% owned by Lehman Brothers
until the joint venture was sold to The Energy Group in 1997.
Mr. Goodspeed remains a director of the ongoing entity, Citizens Power.
Mr. Goodspeed received an MBA from the University of California,
Los Angeles.
Henry E. Lentz became a Director in February 1998. He is also a
Managing Director of Lehman Brothers and a principal of the firm's
Merchant Banking Group. Mr. Lentz joined Lehman Brothers in 1971 and
became a Managing Director in 1976. In 1988, Mr. Lentz left Lehman
Brothers to serve as Vice Chairman of Wasserstein Perella Group, Inc. In
1993, he returned to Lehman Brothers as a Managing Director and, prior
to joining the Merchant Banking Group, served as head of the firm's
worldwide energy practice. Mr. Lentz is currently a director of Rowan
Companies, Inc. and Consort Holdings plc. Mr. Lentz holds an MBA, with
honors, from the Wharton School of the University of Pennsylvania.
Alan H. Washkowitz became a Director in May 1998. He is also a
Managing Director of Lehman Brothers and the head of the firm's Merchant
Banking Group, responsible for the oversight of Lehman Brothers Merchant
Banking Partners II L.P. Mr. Washkowitz joined Kuhn Loeb & Co. in 1968
and became a general partner of Lehman Brothers in 1978 when Kuhn Loeb &
Co. was acquired. Prior to joining the Merchant Banking Group, Mr.
Washkowitz headed Lehman Brothers' Financial Restructuring Group. He is
currently a director of Illinois Central Corporation, L-3 Communications
Corporation, K&F Industries, Inc. and McBride plc. Mr. Washkowitz holds
an MBA from Harvard University and a JD from Columbia University.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for our
chief executive officer and the four most highly compensated executive
officer, (the named executive officers, other than the chief executive
officer for their services to Peabody during fiscal years 2000, 1999 and
1998.
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -----------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARs PAYMENTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)<F1> (#)<F2> ($)<F3> ($)<F4>
------ ------- ------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irl F. Engelhardt 2000 700,000 875,000 -- -- -- -- 51,525
Chairman, Chief Executive Officer 1999 681,264 700,000 -- 154,639 499,885 441,240 23,998
and Director 1998 550,000 412,500 -- -- -- 42,644 15,754
Richard M. Whiting 2000 400,000 500,000 -- -- -- -- 28,662
President, Chief Operating Officer 1999 385,834 400,000 -- 51,546 179,828 168,051 12,238
and Director 1998 244,851 182,501 -- -- -- 12,326 7,058
Roger B. Walcott, Jr. 2000 350,000 437,500 -- 51,546 -- -- 24,955
Executive Vice President 1999 291,667 350,000 -- -- 179,828 -- 8,374
1998 -- -- -- -- -- -- --
Mark Maisto 2000 300,000 600,000 -- 51,546 -- -- 14,272
President and Chief Executive 1999 282,485 450,000 -- -- 179,828 -- 10,650
Officer, Citizens Power LLC 1998 208,333 300,000 -- -- -- -- 9,167
Richard A. Navarre 2000 233,750 343,750 -- -- -- -- 17,203
Vice President and Chief Financial 1999 220,000 220,000 -- 38,660 134,902 45,030 6,824
Officer 1998 182,917 132,000 -- -- -- 3,096 5,488
W. Howard Carson<5> 2000 331,758 381,875 -- -- -- -- 660,678
Former Chief Commercial Officer 1999 312,633 325,000 -- 51,546 179,828 169,716 37,055
1998 225,750 130,368 -- -- -- 20,391 6,773
<FN>
<F1> Represents number of shares of our Class B common stock granted to
executives as of May 19, 1998. In addition, shares purchased by
Mr. Walcott and Mr. Maisto on May 19, 1998 were converted to
granted shares during the year ended March 31, 2000.
<F2> Represents number of shares of our Class A common stock underlying
options issued as of May 19, 1998.
<F3> Represents certain long-term incentive payments earned during the
fiscal year that relate to Predecessor Company compensation plans.
<F4> Represents annual matching contributions and performance
contributions to qualified and non-qualified savings and
investment plans, and group term life insurance. Also includes
amounts related to Mr. Carson's resignation in fiscal year 2000,
and his relocation benefit received in fiscal year 1999.
<F5> Mr. Carson resigned effective March 8, 2000.
</TABLE>
Pension Benefits
Our Salaried Employees Retirement Plan, or pension plan, is a
"defined benefit" plan. The pension plan provides a monthly annuity to
salaried employees when they retire. A salaried employee must have at
least five years of service to be vested in the pension plan. A full
benefit is available to a retiree at age 62. A retiree can begin
receiving a benefit as early as age 55; however, a 4% reduction factor
applies for each year a retiree receives a benefit prior to age 62.
An individual's retirement benefit under the pension plan is equal to
the sum of (1) 1.112% of the average monthly earnings over 60
consecutive months up to the "covered compensation limit" multiplied by
the employee's years of service, not to exceed 35 years, and (2) 1.5% of
the average monthly earnings over 60 consecutive months over the
"covered compensation limit" multiplied by the employee's years of
service, not to exceed 35 years.
We announced in February 1999 that the pension plan would be phased out
beginning January 1, 2001. Certain transition benefits were introduced
based on the age and/or service of the employee at December 31, 2000:
(1) employees age 50 or older will continue to accrue service at 100%;
(2) employees between the ages of 45 and 49 or with 20 years or more of
service will accrue service at the rate of 50% for each year of service
worked after December 31, 2000; and (3) employees under age 45 with less
than 20 years of service will have their pension benefit frozen. In all
cases, final average earnings for retirement plan purposes will be
capped at December 31, 2000 levels.
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<PAGE>
We have three supplemental retirement plans, which provide pension
benefits to executives whose pay exceeds legislative limits for
qualified pension plans. The estimated annual benefits payable upon
retirement at age 62, the normal retirement age, for the CEO and named
executive officers are as follows:
Irl F. Engelhardt $487,883
Richard M. Whiting 262,395
Roger B. Walcott, Jr. 24,663
Richard A. Navarre 38,138
W. Howard Carson 144,820
Mr. Maisto is not eligible for the pension plan.
Other Benefit Plans
In addition to the pension plan, we maintain various other benefit
plans covering employees and retirees. We announced in February 1999
that we were restructuring several of these plans over the next four
years. The benefits associated with the medical plan and savings and
long term investment plan will be most significantly impacted.
The changes to the medical plan include the following as of January 1,
2000: (1) a decrease in employee/retiree contributions; (2) an increase
in medical contributions for dependents; (3) a decrease in medical
coverage for certain expenses; (4) additional medical plan options; and
(5) changes to dependent eligibility rules for retirees. In addition,
the medical plan was restructured so that employees leaving Peabody on
or after January 1, 2003 (age 55 or older with ten years of service)
will be covered under a medical premium reimbursement plan instead of
the current medical plan.
Beginning with fiscal year 2000, a performance contribution feature was
added to the savings and long-term investment plan to allow for Company
contributions up to a maximum of 4% of employees' salary based upon
meeting certain Company performance targets. Effective January 1, 2001,
we will increase our match for the savings and long-term investment
plan.
Management Incentive Compensation Plans
We have established an incentive compensation plan that provides a
bonus to selected employees based on the participant's base salary,
target level, and the attainment of certain organizational and
individual targets. The organizational targets are a ratio of net debt
(total debt minus cash) divided by earnings before interest, income
taxes and depreciation, depletion and amortization expense, or EBITDA.
Employment Agreements
We have entered into employment agreements with Mr. Engelhardt,
the Chairman and Chief Executive Officer, or CEO, and Messrs. Whiting,
Walcott, Maisto, Navarre and eight other key executive officers. The
CEO's employment agreement provides for an initial term of three years
and the other executives' employment agreements provide for initial
terms of two years, each of which extend thereafter on a day-to-day
basis such that the CEO's employment agreement continually has a three
year term and the other executives, subsequent to their initial one year
of employment, continually have a one-year term. Upon a termination
without cause or resignation for good reason, the executive is entitled
to the following benefits during the continuation period, described
below: (1) base salary; (2) bonus actually paid in the year prior to
such termination, except that, instead of such actual bonus amount, the
CEO shall receive an amount equal to 100% of his final base salary in
each of the three years following such termination; (3) a one-time
prorated bonus for the year of termination (based on actual performance
multiplied by a fraction, the numerator of which is the number of
business days such executive was employed during the year of termination
and the denominator of which is the total number of business days during
such year); and (4) continuation of qualified and nonqualified pension,
life insurance, medical, hospitalization and other benefits; provided,
however, that we shall not be obligated to provide any benefits under
tax qualified plans which are not permitted by the terms of each such
plan or by applicable law or could jeopardize the plan's tax status;
provided, further, that any such coverage shall terminate to the extent
that executive is offered or obtains comparable coverage from any other
employer. The "continuation period" is three years for the CEO and for
the other executives, the balance of the initial two-year term if
termination occurs during the first year of the initial term, or for a
period of one year after. The employment agreements provide for
confidentiality during employment and at all times thereafter, and
include a noncompetition and nonsolicitation agreement that is effective
during the employment term and for one year thereafter.
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<PAGE>
Equity Agreements
The executives and 20 other employees acquired, in the aggregate,
approximately 3% of our initial fully-diluted equity, issued as Class B
common stock in connection with our acquisition on May 19, 1998. With
respect to these Class B shares, we provided a full recourse loan for
the amount of the tax liability to each executive, and to certain of
these executives, an additional full recourse loan for the amount of the
value of the stock, with a five-year principal balloon payment which
accelerates to the date which is six months following any termination of
employment or disposition of the stock, with interest payable throughout
the term of the loan at the applicable federal rate.
Stock Option Plan
We adopted the 1998 Stock Purchase and Option Plan for Key
Employees, under which we granted options to certain employees to
purchase shares of our common stock. We granted the executives who
received Class B common stock and other employees our options
exercisable for common stock to purchase an aggregate of 7% of our
initial fully-diluted equity; 931,885 of which were granted as "time
options" in the form of Incentive Stock Options (as defined in Section
422 of the Internal Revenue Code), to the extent permitted, and
2,863,988 of which were granted in the form of nonqualified stock
options as "performance options." Time options become exercisable with
respect to 20% of the shares subject to such options on each of the
first five anniversaries of the date of the closing of the transaction
if the executive's employment continues through and including such date,
subject to acceleration upon (1) death, (2) disability (3) a change of
control or (4) a recapitalization event. Performance options become
exercisable at the end of nine and one-half years, whether or not the
applicable performance targets are achieved, but become exercisable
earlier with respect to up to 20% of the shares subject to the
performance options, on each of the first five anniversaries of the date
of May 19, 1998, to the extent certain performance targets, as
determined by the Board of Directors and based on net debt and EBITDA,
are met or exceeded. Performance options accelerate upon (1) a change of
control, (2) a recapitalization event or (3) an initial public offering.
"Change of control," for the purposes of this section, means an
acquisition of all or substantially all of our direct and indirect
assets by merger, consolidation, recapitalization event, stock or asset
sale or otherwise, whereby immediately following any such transaction
(1) Lehman Merchant Banking owns less than 8.1 million of our
outstanding voting securities or (2) any person individually owns more
of our then outstanding voting securities entitled to vote generally
than Lehman Merchant Banking. "Recapitalization event" means a
recapitalization, reorganization, stock dividend or other special
corporate restructuring which results in an extraordinary distribution
to the stockholders of cash and/or securities through the use of
leveraging or otherwise but which does not result in a change of
control.
We granted these executives performance-based options exercisable
for common stock to purchase an aggregate of 7% of our initial fully-
diluted equity. Options vest upon the earlier of (1) achievement of
certain financial performance targets and the earliest of completion of
(x) an initial public offering, (y) a change of control or (z) a
recapitalization event; and (2) nine and one-half years from the date of
grant. Vesting of options accelerate: (1) upon completion of an initial
public offering during our first 36 months following the closing of our
acquisition, at least 2.5% of these options shall vest and the balance
shall vest in accordance with the achievement of certain financial
performance targets; or (2) upon a change of control or a
recapitalization event during the first 36 months following the closing
of our acquisition, at least 5% of these options shall vest.
The options have an exercise price of $20.00 per share of the
Class A common stock.
The options have a 10-year term; provided, however, that
exercisable non-performance based options expire earlier upon
termination of employment as follows: (1) upon termination for cause or
a resignation without good reason, immediately upon such termination; or
(2) upon termination without cause, resignation for good reason, death,
disability or retirement, one year after termination of employment.
Unexercisable options terminate upon termination of employment, unless
acceleration in connection with such termination is explicitly provided
for. Upon a change of control, the Board of Directors may terminate the
options, so long as the executives are cashed out at the change of
control price or are permitted to exercise their options prior to the
change of control, except as otherwise provided.
63
<PAGE>
<PAGE>
<TABLE>
FY-END OPTIONS/SAR VALUES
<CAPTION>
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
OPTIONS/SARs AT FY-END
---------------------------------------------
NAME EXERCISABLE (#) UNEXERCISABLE (#)
------------------------------------------------------------------------
<S> <C> <C>
Irl F. Engelhardt 44,000 455,855
Richard M. Whiting 15,985 163,843
Roger B. Walcott, Jr. 15,985 163,843
Mark Maisto 15,985 163,843
Richard A. Navarre 11,992 122,910
W. Howard Carson 15,985 --
</TABLE>
Stockholders Agreements
We have entered into stockholders agreements with the executives
who received our Class B common stock and will enter into shareholder
agreements with employees who have options to purchase shares of common
stock when such options have vested and are exercised. Such stockholders
agreements contain, among other things, puts/calls, drag-along, tag-
along, voting, corporate governance and registration rights provisions.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
ownership of the capital stock as of March 31, 2000 by persons who
beneficially own more than 5% of the outstanding shares of capital
stock, each person who is a director of Peabody, each person who is a
named executive officer, and all directors and executive officers as a
group. Our capital stock consists of our Class A common stock, our Class
B common stock and our non-convertible, exchangeable preferred stock.
Class B common stock has voting rights and other attributes similar to
Class A common stock (except that Class A common stock will have a
liquidation preference) and will convert to Class A common stock upon
consummation of a change of control, an initial public offering or a
recapitalization event or, in any event, after nine years. Of the
$480 million equity contribution made in connection with our acquisition
on May 19, 1998, $100 million was in the form of preferred stock. The
preferred stock bears the same voting powers, dividend rights and other
rights as, and votes as a single class with, the common stock, except
for the following: (1) upon the occurrence of any merger, consolidation,
sale of all or substantially all assets, liquidation, dissolution or
winding up of Peabody, the holders of the preferred stock will receive a
preferential distribution of available assets equal to the cost per
share before the holders of the common stock receive any distributions
(following which the holders of common stock will receive a similar
preferential distribution of any remaining available assets equal to the
same cost per share, and thereafter the shares of Common Stock and
Preferred Stock will receive equal distributions per share of any
remaining available assets); (2) we may, at any time at our discretion,
exchange all or part of the shares of preferred stock for an equal
number of shares of common stock; and (3) we may, at our discretion and
only for the first six months after the issuance of shares of the
preferred stock, redeem all or part of the shares of preferred stock for
an amount equal to the cost per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED
------------------------------------
CLASS A CLASS B
COMMON COMMON PREFERRED PERCENT OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK<F1> STOCK STOCK<F2> CLASS A CLASS B
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lehman Brothers Merchant Banking Partners II, L.P.,
LBI Group Inc. and their affiliated co-investors
c/o Lehman Brothers Holdings Inc.
3 World Financial Center, 200 Versey Street
New York, NY 10285 16,000,000 -- 5,000,000 85.0% --
Co-Investment Partners, L.P.
c/o Lexington Partners Inc.
659 Madison Avenue, 23rd Floor
New York, NY 10021 2,500,000 -- -- 13.3% --
Irl F. Engelhardt 88,000 154,639 -- 0.4% 22.6%
Richard M. Whiting 31,970 51,546 -- 0.1% 7.5%
Roger B. Walcott, Jr. 31,970 51,546 -- 0.1% 7.5%
Mark Maisto 31,970 51,546 -- 0.1% 7.5%
Richard A. Navarre 23,984 38,660 -- 0.1% 5.6%
Roger H. Goodspeed -- -- -- -- --
Henry E. Lentz -- -- -- -- --
Alan H. Washkowitz -- -- -- -- --
All executives and directors as a group (15 people) 327,230 548,966 -- 1.5% 73.6%
<FN>
<F1> Totals for named executive officers represent options exercisable
within 60 days after July 31, 2000.
<F2> Lehman Brothers Merchant Banking Partners II L.P., LBI Group Inc.
and their affiliated co-investors own 100% of the outstanding
Preferred Stock of P&L Coal Holdings Inc.
</TABLE>
65
<PAGE>
<PAGE>
THE ACQUISITION
THE ACQUISITION
The statements made under this heading relating to the
acquisition are summaries of the agreements described. While we
believe that these summaries include the material terms of the
acquisition, they are qualified in their entirety by reference to
those agreements.
THE PURCHASE AGREEMENT
Our company and The Energy Group entered into the Purchase
Agreement dated March 2, 1998. The purchase agreement provided,
among other things, for the purchase by us from The Energy Group
of the "Acquired Companies," consisting of the equity interests
described below. As consideration for those interests, we paid
$2,003.6 million to The Energy Group. Under the purchase
agreement, upon the consummation of the purchase, we acquired:
(1) all of the common stock of Peabody Holding Company, (2) all
of the common stock of Gold Fields, (3) all of the membership
interests of Citizens Power, (4) the 1% interests in CL Hartford,
L.L.C., a Delaware limited liability company, and Citizens Power
Sales, a Delaware general partnership (CP Sales), both
subsidiaries of Citizens Power, (5) all of the shares of Darex
Capital Inc., a company incorporated in the Republic of Panama,
and (6) all of the ordinary shares of Peabody Australia Limited,
which together with Darex Capital Inc. owns Peabody Resources.
The acquisition was conditioned upon the tender offer by Texas
Utilities to purchase all the outstanding common shares of The
Energy Group becoming or being declared unconditional in all
respects (see "The Participation Agreement" below) and not at
that time being publicly opposed by the board of directors of The
Energy Group. For additional information regarding the
relationship between the acquisition and the Texas Utilities
offer, as well as among Lehman Merchant Banking, us and Texas
Utilities, see "The Participation Agreement" below. The
acquisition was further conditioned upon satisfaction or waiver
of the following conditions: (1) the consent to the acquisition
by the Australian Foreign Investment Review Board, (2) the
issuance of an approval order by the Federal Energy Regulatory
Commission and (3) the absence of any statute, rule, regulation,
court or executive order, decree, or other order of any kind that
would prohibit, restrain or restrict the acquisition. The
Australian Foreign Investment Review Board provided its consent
to the acquisition on April 1, 1998 and the Federal Energy
Regulatory Commission provided its consent to the acquisition on
April 24, 1998. On May 19, 1998, the Texas Utilities tender offer
was declared unconditional and the acquisition was consummated.
The purchase agreement contained only limited representations
from each party relating to corporate authorization, due execution
and lack of conflict with organizational documents, material
agreements and laws. In addition, The Energy Group has made further
representations regarding title to equity interests in the Acquired
Companies and capitalization of the Acquired Companies and their
subsidiaries.
THE PARTICIPATION AGREEMENT
Lehman Merchant Banking and Texas Utilities entered into
the Participation Agreement, dated March 1, 1998, which, among
other things, governs the basis on which Texas Utilities made the
tender offer and we agreed to consummate the acquisition, and
also governs the relationship between The Energy Group and the
Acquired Companies and their subsidiaries after the acquisition.
Under the terms of the participation agreement, Lehman Merchant
Banking agreed to cause us to consummate the acquisition upon
satisfaction of the purchase conditions according to the terms of
the purchase agreement. In addition, at the closing, Lehman
Merchant Banking caused us to pay a portion of the Citizens Power
Obligations and to assume all outstanding indebtedness of the
Acquired Companies and their subsidiaries, provided that non-
recourse debt will remain non-recourse. Texas Utilities also
agreed to cause The Energy Group to provide credit support for
some of Citizens Power's asset restructuring debt in order to
make effective consents to the acquisition by Citizens Power's
note holders.
<PAGE>
Lehman Merchant Banking and Texas Utilities further agreed
that the purchase price would be adjusted (1) to the extent the
total assets less current liabilities and long-term debt of the
Acquired Companies and their subsidiaries shown on an audited
balance sheet as of March 31, 1998 differ from agreed-upon
projections and (2) to the extent of any dividends or
distributions from, or contributions to, the Acquired Companies
and their subsidiaries after March 31, 1998 and before the
closing. The participation agreement contains a representation
and warranty to Texas Utilities that, for U.S. federal income
taxation purposes, The Energy Group's adjusted tax basis in the
shares of Peabody Holding Company as of January 31, 1998 was
equal to the portion of the purchase price allocated to those
shares, up to $1.8 billion. Following the closing, we caused the
rest of the Acquired Companies and their subsidiaries to assume
that warranty.
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<PAGE>
Texas Utilities agreed not to revise or amend the terms
and conditions of its tender offer in a manner that could
reasonably be expected to materially and adversely affect Lehman
Merchant Banking, the Acquired Companies and their subsidiaries,
the acquisition or the Financings and not to waive any conditions
of its tender offer without Lehman Merchant Banking's consent
where Lehman Merchant Banking demonstrates that the matter or
circumstance giving rise to the right to invoke the condition
arose after the date of the participation agreement, could
reasonably be expected to materially and adversely affect the
Acquired Companies and their subsidiaries or the purchase of the
equity of the Acquired Companies and their subsidiaries
(including the financing of that purchase) and is of material
significance in the context of the tender offer. Texas Utilities
has also agreed not to extend its tender offer to an expiration
date beyond four months from the announcement date of the offer.
We will indemnify Texas Utilities and its affiliates and
subsidiaries (including The Energy Group and its subsidiaries)
against all past, present and future claims, suits or liabilities
arising from or out of the Acquired Companies and their
subsidiaries, including environmental and employee benefits
claims or liabilities against the former holding companies for
the U.S. Peabody coal business arising from events occurring
prior to the closing. Similarly, Texas Utilities has agreed to
indemnify Lehman Merchant Banking, our company and their
affiliates and subsidiaries against all past, present and future
claims, suits or liabilities relating to The Energy Group, except
for those relating to the Acquired Companies and their
subsidiaries.
The parties have agreed that the Acquired Companies and
their subsidiaries will not be liable for any U.S., Australian or
United Kingdom tax liability (including its subdivisions) of the
portion of The Energy Group purchased by Texas Utilities, and The
Energy Group will similarly not be liable for that tax liability
of the Acquired Companies and their subsidiaries. The parties
have further agreed that Texas Utilities and The Energy Group, on
the one hand and Lehman Merchant Banking, on the other hand, will
not be liable to the other for any tax imposed by any jurisdiction
as a result of the allocation of the purchase price as between the
U.S. and Australian tax jurisdictions. In conjunction with the
signing of the participation agreement, the parties also agreed
upon a Tax Allocation Agreement that was entered into among the
former U.S. holding companies for the U.S. Peabody coal business,
our company and some of their affiliates at the closing and, among
other things, allocates the tax liabilities among them on the basis
of the taxes that would have been incurred if they were stand-alone
entities.
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<PAGE>
<PAGE>
RELATED PARTY TRANSACTIONS
AFFILIATES OF LEHMAN BROTHERS HOLDINGS INC.
Lehman Brothers Merchant Banking Partners II L.P. and other
affiliates of Lehman Brothers Holdings Inc. (collectively, the
"Lehman Merchant Banking Fund") own a substantial majority of our
outstanding shares of capital stock. Messrs. Washkowitz, Lentz
and Goodspeed, each directors of Peabody, are investors in the
Lehman Merchant Banking Fund and employees of an affiliate of
Lehman Brothers Holdings Inc.
During the fiscal year ended March 31, 2000, Lehman
Brothers Inc. received approximately $1 million in cash for
advising on the acquisition of an additional 38.3% of Black
Beauty in the prior fiscal year, and $0.8 million in fees
associated with a power contract restructuring by Citizens Power
during fiscal year 2000. During fiscal year ended March 31, 1999,
affiliates of Lehman Brothers Holdings Inc. received approximately
$90 million in cash for advising on the acquisition of some of our
subsidiaries from The Energy Group plc, including Citizens Power
LLC, on May 19, 1998 and arranging the financing for the acquisition.
In addition, during the fiscal year ended March 31, 1999, we have
paid affiliates of Lehman Brothers Holdings Inc. $0.9 million for
other management, consulting and financial services, as well as
reimbursements for expenses. Affiliates of Lehman Brothers Holdings
Inc. also received customary fees from Texas Utilities Company in
connection with advising on and arranging financing for the purchase
of The Energy Group plc by Texas Utilities.
On May 19, 1997, The Energy Group plc purchased Citizens
Power through us from Lehman Brothers Holdings Inc. (which owned
50% of Citizens Power), a number of employees of Citizens Power
(who owned 20% of Citizens Power) and some other parties
(collectively, the "Selling Shareholders") for $120 million,
which included (1) an up-front cash payment of $20 million and
(2) up to $100 million of future cash payments (the "Citizens
Power Obligation"). The Citizens Power Obligation was comprised
of (1) a payment based upon the net asset value of Citizens Power
as of the date of the sale to The Energy Group plc (subject to
specified adjustments based upon events occurring between the
date of sale and June 30, 1997) up to a maximum of $30 million
and (2) net asset value increase payments for the fiscal years
ending on March 31 or 2000, 2001 and 2002, which combined with
the amount of the initial net asset value payment would be no
greater than $100 million. The agreement for the purchase of
Citizens Power included a provision that protected the selling
shareholders in the event of material changes that would
adversely affect the ability of Citizens Power to attain expected
net asset value increases, including a change of control. Due to
the change of control of Citizens Power in our acquisition, we
agreed to pay the selling shareholders $72.96 million on May 19,
1998 and $20.0 million plus interest on April 3, 2000 in full
consideration for the Citizens Power Obligation. Lehman Brothers
Holdings Inc. has guaranteed payment of this obligation. Mr.
Goodspeed, who is a director of our company and an employee of an
affiliate of Lehman Brothers Holdings Inc. and Mr. Maisto, a
named executive officer and an employee of Citizens Power,
received a portion of the proceeds received by Lehman Brothers
Holdings Inc.
In connection with our acquisition, Lehman Brothers
Holdings Inc. agreed to provide a guarantee facility to trading
counterparties of Citizens Power Sales, the trading subsidiary of
Citizens Power LLC, for trades initiated after the acquisition.
The guaranty facility initially was to be available for 364 days
after the date of the acquisition. For establishing the guaranty
facility, Lehman Brothers Holdings Inc. was paid a minimum fee of
$0.5 million and reimbursed for the associated legal and out-of-
pocket costs. The guaranty facility was allowed to terminate
according to its terms in November 1998 with respect to all
subsequent transactions of Citizens Power Sales.
OTHER TRANSACTIONS WITH AFFILIATES
Peabody COALSALES, a subsidiary of ours, purchased
0.3 million tons of coal from Black Beauty for $5.5 million
during the fiscal year ended March 31, 1999. The terms of these
transactions are comparable to those negotiated with independent
third parties. Executive officers of Peabody, which is a general
partner of Black Beauty, serve on the partnership committee of
Black Beauty. The members of the Black Beauty partnership
committee do not receive a fee for their services. In early 1999
we increased our ownership of Black Beauty from 43.3% to 81.7%,
making Black Beauty our subsidiary.
<PAGE>
TRANSACTIONS WITH MANAGEMENT
During the fiscal years ended March 31, 2000 and 1999, our
executive officers were granted or allowed to purchase shares of
our capital stock pursuant to the 1998 Stock Purchase and Option
Plan for Key Employees. In connection with these grants and
sales, we, affiliates of Lehman Brothers Holdings Inc. and the
executives who received our Class B common
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<PAGE>
<PAGE>
stock entered into a stockholders agreement providing for piggy-
back registration rights and drag-along and tag-along rights with
respect to certain sales of our capital stock by affiliates of
Lehman Brothers Holdings Inc.
In conjunction with the grant or sale of our capital stock,
the executive officers executed term notes as of December 31,
1998. The term notes for executive officers receiving grants of
capital stock are generally due on March 31, 2003 and bear annual
interest at an applicable United States federal rate utilized by
the Internal Revenue Service for loans to employees. The term
notes for executive officers who purchased capital stock are
payable in equal amounts on from March 31, 1999 to 2003 and have
a 5% annual interest rate. Either form of promissory note will
accelerate upon the occurrence of certain events.
The following table indicates the amounts due under the
term notes for our executive officers with aggregate indebtedness
in excess of $60,000 during the fiscal year ended March 31, 2000:
<TABLE>
<CAPTION>
LARGEST AGGREGATE INDEBTEDNESS
DURING FISCAL YEAR ENDED OUTSTANDING INDEBTEDNESS AT
NAME MARCH 31, 2000 MARCH 31,2000
---- ------------------------------ ---------------------------
<S> <C> <C>
Irl F. Engelhardt $551,593 $551,593
Richard M. Whiting 183,852 183,852
Roger B. Walcott, Jr. 182,500 182,500
Mark Maisto 182,500 182,500
Christopher G. Farrand 91,925 91,925
George J. Holway 137,889 137,889
Robert D. Humphris 95,058 95,058
Jeffery L. Klinger 91,932 91,932
Richard A. Navarre 137,883 137,883
Sharon K. Schergen 91,928 91,928
</TABLE>
69
<PAGE>
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
The following is a summary of the material terms of the senior
notes and is qualified in its entirety by reference to the indenture
(the "senior notes indenture") between our company and State Street Bank
and Trust Company, as trustee (the "senior notes trustee").
GENERAL
The senior notes were issued under the senior note indenture. The
terms of the senior notes include those stated in the senior note
indenture and those made part of the senior note indenture by reference
to the Trust Indenture Act of 1939. The senior notes are subject to all
of those terms, and holders of senior notes are referred to the senior
note indenture and the Trust Indenture Act. The following summary of the
material provisions of the senior note indenture does not purport to be
complete and is qualified in its entirety by reference to the senior
note indenture, including the definitions of a number of terms used
below. Copies of the senior note indenture are available as described
below under "Available Information." The definitions of certain terms
used in the following summary are described below under "--Definitions."
For purposes of this summary, the term "our company" refers only to P&L
Coal Holdings Corporation and not to any of its Subsidiaries.
On May 18, 1998, our company issued $400.0 million aggregate
principal amount of senior notes under the senior note indenture. The
senior notes are general unsecured obligations of our company and rank
equally in right of payment with all current and future senior
Indebtedness of our company, including the Senior Credit Facilities.
However, our company and its Restricted Subsidiaries are parties to
Senior Credit Facilities and all borrowings thereunder are secured by a
first priority Lien on certain of the assets of our company and its
Restricted Subsidiaries. As a result, the senior notes are effectively
subordinated to the Senior Credit Facilities to the extent of such
collateral. As of March 31, 2000, $690.0 million was outstanding under
the Senior Credit Facilities. The senior note indenture permits
substantial additional borrowings under the Senior Credit Facilities in
the future. See "Risk Factors--Risks Relating to the Notes--Ranking--
Your Right to Receive Payments on the Senior Subordinated Notes is
Subordinate to that of Holders of our Senior Debt."
The operations of our company are conducted through its
Subsidiaries and, therefore, our company is dependent upon the cash flow
of its Subsidiaries to meet its obligations, including its obligations
under the senior notes. The senior notes are effectively subordinated to
all Indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of our company's Subsidiaries. Any right
of our company to receive assets of any of its Subsidiaries upon
liquidation or reorganization, and the consequent right of the holders
of the senior notes to participate in those assets, will be effectively
subordinated to the claims of that Subsidiary's creditors, except to the
extent that our company is itself recognized as a creditor of such
Subsidiary, in which case the claims of our company would still be
subordinate to any security in the assets of such Subsidiary and any
indebtedness of such Subsidiary senior to that held by our company. As
of March 31, 2000, our company's Subsidiaries had approximately $3,897.7
million of Indebtedness (including trade payables, land reclamation and
environmental liabilities, workers' compensation liabilities and retiree
health care liabilities). See "Risk Factors--Risks Relating to the
Notes--Our Obligations Are Effectively Subordinated to the Obligations
of our Subsidiaries."
All of our company's Subsidiaries other than Citizens Power and
its Subsidiaries are Restricted Subsidiaries. However, under certain
circumstances, our company will be able to designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants contained in
the senior note indenture.
PRINCIPAL, MATURITY AND INTEREST
The senior notes are limited in aggregate principal amount to
$550.0 million, of which $400.0 million was issued on May 18, 1998, and
will mature on May 15, 2008. Interest on the senior notes accrues at the
rate of 8-7/8% per year and is payable semi-annually in arrears on May
15 and November 15 to holders of record on the immediately preceding May
1 and November 1. Additional senior notes may be issued from time to
time, subject to the provisions of the senior note indenture described
below under the caption "--Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." Interest on the senior notes accrues from
the most recent date to which interest has been paid. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal, premium, if any, and interest and Liquidated Damages,
if any, on the senior notes are payable at the office or agency of our
company maintained for such purpose within the City and State of New
York or, at the option of our company, payment of interest and
liquidated damages, if any, may be made by check mailed to the holders
of the senior notes at their respective addresses listed in the
register of holders of senior notes;
70
<PAGE>
<PAGE>
provided that all payments of principal, premium, interest and
Liquidated Damages, if any, with respect to senior notes the holders of
which have given wire transfer instructions to our company are required
to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof. Until otherwise designated by
our company, our company's office or agency in New York will be the
office of the senior note trustee maintained for such purpose. The
senior notes were issued in denominations of $1,000 and integral
multiples thereof.
SENIOR NOTE GUARANTEES
Our company's payment obligations under the senior notes are fully
and unconditionally, and jointly and severally, guaranteed by the senior
note guarantors. The obligations of each senior note guarantor under its
senior note guarantee will be limited to the maximum amount that would
not constitute a fraudulent conveyance under applicable law. See "Risk
Factors--Risks Relating to the Notes--Your Rights Under the Notes Could
Be Limited By Fraudulent Conveyance Laws." Notwithstanding the
foregoing, no Subsidiary of our company will be required to endorse a
senior note guarantee unless such Subsidiary is required to, and does,
simultaneously execute a guarantee of the Senior Credit Facilities.
As of June 30, 2000, the senior note guarantors were: Affinity
Mining Company, Arid Operations Inc., Big Sky Coal Company, Blackrock
First Capital Corporation, Bluegrass Coal Company, Caballo Coal Company,
Charles Coal Company, Cleaton Coal Company, Coal Properties Corp.,
Colony Bay Coal Company, Cook Mountain Coal Company, Cottonwood Land
Company, Darius Gold Mine, Inc., EACC Camps, Inc., Eastern Associated
Coal Corp., Eastern Royalty Corp., Gallo Finance Company, Gold Fields
Chile, S.A., Gold Fields Mining Corporation, Gold Fields Operating Co.--
Oritz, Grand Eagle Mining, Inc., Hayden Gulch Terminal, Inc., Highland
Mining Co., Independence Material Handling Company, Interior Holdings
Corp., James River Coal Terminal Company, Juniper Coal Company, Kayenta
Mobile Home Park, Inc., Martinka Coal Company, Midco Supply and
Equipment Corporation, Mountain View Coal Company, North Page Coal
Corp., Ohio County Coal Company, Patriot Coal Company L.P., Peabody
America, Inc., Peabody COALSALES Company, Peabody COALTRADE, Inc.,
Peabody Coal Company, Peabody Development Company, Peabody Development
Land Holdings, LLC, Peabody Energy Solutions, Inc., Peabody Enterprises,
Inc. II, Peabody Holding Company, Inc., Peabody Natural Gas, LLC,
Peabody Natural Resources Company, Peabody Southwestern Coal Company,
Peabody Terminals, Inc., Peabody Venezuela Coal Corp., Peabody Western
Coal Company, Pine Ridge Coal Company, Porcupine Productions, LLC,
Porcupine Transportation, LLC, Land Power River Coal Company, Rio
Escondido Coal Corp., Seneca Coal Company, Sentry Mining Company,
Snowberry Land Company, Sterling Smokeless Coal Company, and
Thoroughbred, L.L.C.
The senior notes are not guaranteed by certain of our company's
Domestic Subsidiaries or by any Foreign Subsidiaries of our company. For
the fiscal year ended March 31, 2000, the Non-Guarantor Subsidiaries
accounted for 29% and 45% of revenues and EBITDA, respectively, and, as
of March 31, 2000, the Non-Guarantor Subsidiaries accounted for 20% of
assets. The claims of creditors (including trade creditors) of any Non-
Guarantor Subsidiary will generally have priority as to the assets of
such Subsidiaries over the claims of the holders of the senior notes. As
of March 31, 2000, the amount of liabilities of such Non-Guarantor
Subsidiaries was approximately $496.3 million.
The senior note indenture provides that no senior note guarantor
may consolidate with or merge with or into (whether or not such senior
note guarantor is the surviving Person), another corporation, Person or
entity whether or not affiliated with such senior note guarantor unless
(1) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than
such senior note guarantor) assumes all the obligations of such senior
note guarantor under a supplemental indenture in form and substance
reasonably satisfactory to the senior note trustee, under the senior
notes, the senior note indenture and the Senior Registration Rights
Agreement; (2) immediately after giving effect to such transaction, no
Default or Event of Default exists; and (3) our company would be
permitted by virtue of our company's pro forma Fixed Charge Coverage
Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness under the Fixed Charge Coverage
Ratio test contained in the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
The senior note indenture provides that in the event of (a) a sale
or other disposition of all of the assets of any senior note guarantor,
by way of merger, consolidation or otherwise, (b) a sale or other
disposition of all of the capital stock of any senior note guarantor or
(c) the designation of a senior note guarantor as an Unrestricted
Subsidiary in accordance with the terms of the senior note indenture,
then such senior note guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such senior note guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of
all of the assets of such senior note guarantor) will be released and
relieved of any obligations under its senior note guarantee; provided
that the Net Proceeds of any such sale or other disposition are applied
in accordance with the applicable provisions of the senior note
indenture and any such designation of
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a senior note guarantor as an Unrestricted Subsidiary complies with all
applicable covenants. See "--Repurchase at the Option of Holders--Asset
Sales."
"Senior note guarantors" means each of (i) our company's Domestic
Subsidiaries at the date of the closing of the Acquisition, other than
Citizens Power and the Subsidiaries of Citizens Power at the date of the
senior note indenture and (ii) any other subsidiary that executes a
subordinated note guarantee in accordance with the provisions of the
senior note indenture, and their respective successors and assigns.
OPTIONAL REDEMPTION
The senior notes are subject to redemption at any time at the
option of our company, in whole or in part, upon not less than 30 nor
more than 60 days' notice.
Prior to May 15, 2003, the senior notes will be redeemable at a
redemption price equal to 100% of the principal amount thereof plus the
applicable Senior Notes Make Whole Premium, plus, to the extent not
included in the Senior Notes Make Whole Premium, accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption. For
purposes of the foregoing, "Senior Notes Make Whole Premium" means, with
respect to a senior note, an amount equal to the greater of (a) 104.438%
of the outstanding principal amount of such senior note and (b) the
excess of (1) the present value of the remaining interest, premium, if
any, and principal payments due on such senior note as if such senior
note were redeemed on May 15, 2003, computed using a discount rate equal
to the Treasury Rate plus 50 basis points, over (2) the outstanding
principal amount of such senior note.
On or after May 15, 2003, the senior notes are redeemable at the
redemption prices (expressed as percentages of principal amount)
provided below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 15 of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2003 104.438%
2004 102.958%
2005 101.479%
2006 and thereafter 100.000%
Notwithstanding the foregoing, during the first 36 months after
the date of the closing of the Acquisition, our company may on any one
or more occasions redeem up to 35% of the aggregate principal amount of
senior notes issued under the senior note indenture at a redemption
price of 108.875% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that at least 65% of the aggregate principal amount
of senior notes issued remain outstanding immediately after the
occurrence of such redemption (excluding senior notes held by our
company and its Subsidiaries); and provided, further, that such
redemption shall occur within 120 days of the date of the closing of
such Equity Offering.
SELECTION AND NOTICE
If less than all of the senior notes are to be redeemed or
purchased in an offer to purchase at any time, selection of senior notes
for redemption or purchase will be made by the senior note trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the senior notes are listed, or, if the
senior notes are not so listed, on a pro rata basis, by lot or by such
method as the senior note trustee shall deem fair and appropriate;
provided that no senior notes of $1,000 or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least
30 but not more than 60 days before the redemption date to each holder
of senior notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any senior note is to be redeemed
in part only, the notice of redemption that relates to such senior note
shall state the portion of the principal amount thereof to be redeemed.
A new senior note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon
cancellation of the original senior note. Senior notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on senior notes or portions
of them called for redemption.
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of senior
notes will have the right to require our company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such
holder's senior notes pursuant to the offer described below (the "Change
of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change
of Control Payment"). Within ten days following any Change of Control,
our company will mail a notice to each holder describing the transaction
or transactions that constitute the Change of Control and offering to
repurchase senior notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), under the
procedures required by the senior note indenture and described in such
notice. Our company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the senior notes as a result of a
Change of Control.
On the Change of Control Payment Date, our company will, to the
extent lawful, (1) accept for payment all senior notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all senior notes or portions thereof so tendered
and (3) deliver or cause to be delivered to the senior note trustee the
senior notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of senior notes or portions thereof being
purchased by our company. The Paying Agent will promptly mail to each
holder of senior notes so tendered the Change of Control Payment for
such senior notes, and the senior note trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
holder a new senior note equal in principal amount to any unpurchased
portion of the senior notes surrendered, if any; provided that each such
new senior note will be in a principal amount of $1,000 or an integral
multiple thereof. The senior note indenture will provide that, prior to
complying with the provisions of this covenant, but in any event within
90 days following a Change of Control, our company will either repay all
outstanding Senior Debt other than the senior notes or obtain the
requisite consents, if any, under all agreements governing outstanding
Senior Debt other than the senior notes to permit the repurchase of
senior notes required by this covenant. The company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be
applicable whether or not any other provisions of the senior note
indenture are applicable. Except as described above with respect to a
Change of Control, the senior note indenture does not contain provisions
that permit the holders of the senior notes to require that our company
repurchase or redeem the senior notes in the event of a takeover,
recapitalization or similar transaction.
Our company's other senior indebtedness contains prohibitions on
certain events that would constitute a Change of Control. In addition,
the exercise by the holders of senior notes of their right to require
our company to repurchase the senior notes could cause a default under
such other senior indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchases on our
company. Finally, our company's ability to pay cash to the holders of
senior notes upon a repurchase may be limited by our company's then
existing financial resources. See "Risk Factors--Risks Relating to the
Notes--Our Ability to Offer to Purchase Your Notes in the Event of a
Change of Control may be Limited."
The Senior Credit Facilities currently prohibit our company from
purchasing any senior notes or senior subordinated notes, and also
provide that certain change of control events with respect to our
company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which our
company becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when our company is
prohibited from purchasing senior notes, our company could seek the
consent of its lenders to the purchase of senior notes or could attempt
to refinance the borrowings that contain such prohibition. If our
company does not obtain such a consent or repay such borrowings, our
company will remain prohibited from purchasing senior notes. In such
case, our company's failure to purchase tendered senior notes would
constitute an Event of Default under the senior note indenture which
would, in turn, constitute a default under the Senior Credit Facilities.
Our company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements contained in the senior note indenture applicable to a
Change of Control Offer made by our company and purchases all senior
notes validly
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tendered and not withdrawn under such Change of Control Offer or if our
company exercises its option to purchase the senior notes.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of our company
and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal (as defined below), (2) the
adoption of a plan relating to the liquidation or dissolution of our
company, (3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall
be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock
of our company (measured by voting power rather than number of shares)
or (4) the first day on which a majority of the members of the Board of
Directors of our company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of our company and its Subsidiaries
taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly,
the ability of a holder of senior notes to require our company to
repurchase such senior notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of our
company and its Subsidiaries taken as a whole to another Person or group
may be uncertain.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of our company who (1) was a member of
such Board of Directors on the date of the closing of the Acquisition or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Principals" means Lehman Brothers Merchant Banking Partners II
L.P., any of its respective Affiliates and executive officers of our
company as of the date of the closing of the Acquisition.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal
or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately
preceding clause (A).
ASSET SALES
The senior note indenture provides that our company will not, and
will not permit any of its Restricted Subsidiaries to, consummate an
Asset Sale unless (1) our company (or the Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at
least equal to the fair market value as determined in good faith by our
company (evidenced by a resolution of the Board of Directors contained
in an Officers' Certificate delivered to the senior note trustee with
respect to any Asset Sale determined to have a value greater that $25.0
million) of the assets or Equity Interests issued or sold or otherwise
disposed of and (2) at least 75% of the consideration therefor received
by our company or such Subsidiary is in the form of cash, Cash
Equivalents or Marketable Securities; provided that the following
amounts shall be deemed to be cash: (w) any liabilities (as shown on our
company's or such Restricted Subsidiary's most recent balance sheet), of
our company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
senior notes or any guarantee thereof) that are assumed by the
transferee of any such assets under a customary novation agreement that
releases our company or such Restricted Subsidiary from further
liability, (x) any securities, notes or other obligations received by
our company or any such Restricted Subsidiary from such transferee that
are converted by our company or such Restricted Subsidiary into cash
within 180 days following the closing of such Asset Sale (to the extent
of the cash received), (y) any Designated Noncash Consideration received
by our company or any of its Restricted Subsidiaries in such Asset Sale;
provided that the aggregate fair market value (as determined above) of
such Designated Noncash Consideration, taken together with the fair
market value at the time of receipt of all other Designated Noncash
Consideration received pursuant to this clause (y) less the amount of
Net Proceeds previously realized in cash from prior Designated Noncash
Consideration is less than 5% of Total Assets at the time of the receipt
of such Designated Noncash Consideration (with the fair market value
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of each item of Designated Noncash Consideration being measured at the
time received and without giving effect to subsequent changes in value)
and (z) Additional Assets received in an exchange of assets transaction.
Within 360 days after the receipt of any cash Net Proceeds from an
Asset Sale, our company or such Restricted Subsidiary, at its option,
may apply such cash Net Proceeds, at its option, (a) to repay
Indebtedness of our company or any Restricted Subsidiary that is not
subordinated in right of payment to Indebtedness under a Credit
Facility, (b) to the Acquisition of a majority of the assets of, or a
majority of the Voting Stock of, another Permitted Business, the making
of a capital expenditure or the Acquisition of other assets or
Investments that are used or useful in a Permitted Business or (c) to
apply the cash Net Proceeds from such Asset Sale to an Investment in
Additional Assets. Any cash Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, our company will be
required to make an offer to all holders of senior notes and all holders
of other Indebtedness that ranks equally with the senior notes
containing provisions similar to those contained in the senior note
indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of senior notes and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, in accordance with the procedures contained in the senior
note indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, our
company may use such Excess Proceeds for any purpose not otherwise
prohibited by the senior note indenture. If the aggregate principal
amount of senior notes and such other Indebtedness tendered into such
Asset Sale Offer surrendered by holders thereof exceeds the amount of
Excess Proceeds, the senior note trustee shall select the senior notes
and such other Indebtedness to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
COVENANTS
RESTRICTED PAYMENTS
The senior note indenture provides that our company will not, and
will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (1) declare or pay any dividend or make any other payment or
distribution on account of our company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving our
company or any of its Restricted Subsidiaries) or to the direct or
indirect holders of our company's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified
Stock) of our company); (2) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection with any
merger or consolidation involving our company) any Equity Interests of
our company or any direct or indirect parent of our company; (3) make
any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
subordinated to the senior notes or any senior note guarantee, except a
payment of interest or principal at Stated Maturity or Indebtedness
permitted under clause (8) of the covenant described under "--Incurrence
of Indebtedness and Issuance of Preferred Stock;" or (4) make any
Restricted Investment (all such payments and other actions contained in
clauses (1) through (4) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect
to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) our company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness under the Fixed Charge
Coverage Ratio test described in the first paragraph of the
covenant described below under caption "Incurrence of Indebtedness
and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by our company and
its Subsidiaries after the date of the closing of the Acquisition
(excluding Restricted Payments permitted by clauses (2), (3), (4),
(5), (9), (10) and (12) of the next succeeding paragraph), is less
than the sum, without duplication, of (1) 50% of the Consolidated
Net Income of our company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing
after the date of the closing of the Acquisition to the end of our
company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (2) 100% of the
aggregate net cash proceeds or the fair market value of property
other than cash received by our
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company since the date of the closing of the Acquisition as a
contribution to its common equity capital or from the issue or
sale of Equity Interests of our company (other than Disqualified
Stock) or from the issue or sale of Disqualified Stock or debt
securities of our company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified
Stock or convertible debt securities) sold to a Subsidiary of our
company), plus (3) to the extent that either any Existing Citizens
Power Investment or any Restricted Investment that reduced the
amount available for Restricted Payments under this clause (c) is
sold for cash or otherwise liquidated or repaid for cash or any
dividend or payment is received by our company or a Restricted
Subsidiary after the date of the closing of the Acquisition in
respect of such Investment, 100% of the amount of Net Proceeds or
dividends or payments (including the fair market value of
property) received in connection therewith, up to the amount of
the Existing Citizens Power Investment on the date of the closing
of the Acquisition or the Restricted Investment that reduced this
clause (c), as the case may be, and thereafter 50% of the amount
of Net Proceeds or dividends or payments (including the fair
market value of property) received in connection therewith (except
that the amount of dividends or payments received in respect of
payments of Obligations in respect of such Investments, such as
taxes, shall not increase the amounts under this clause (c)), plus
(4) to the extent that any Unrestricted Subsidiary of our company
is redesignated as a Restricted Subsidiary after the date of the
closing of the Acquisition, 100% of the fair market value of our
company's Investment in such Subsidiary as of the date of such
redesignation up to the amount of the Restricted Investments made
in such Subsidiary that reduced this clause (c) and 50% of the
excess of the fair market value of our company's Investment in
such Subsidiary as of the date of such redesignation over (i) the
amount of the Restricted Investment that reduced this clause (c)
and (ii) any amounts that increased the amount available as a
Permitted Investment; provided, further, that if Citizens Power or
any of its Subsidiaries is designated as a Restricted Subsidiary,
the amount of the fair market value of the Investment therein on
the date of the senior note indenture shall also be credited to
this clause (c); provided, further, that any amounts that increase
this clause (c) shall not duplicatively increase amounts available
as Permitted Investments.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the senior note
indenture;
(2) the redemption, repurchase, retirement, defeasance or
other Acquisition of any subordinated Indebtedness or Equity
Interests of our company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of our company) of, other Equity Interests
of our company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
Acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other
Acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) dividends or distributions by a Restricted Subsidiary
of our company so long as, in the case of any dividend or
distribution payable on or in respect of any class or series of
securities issued by a Restricted Subsidiary, our company or a
Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests
in such class or series of securities;
(5) Investments in Unrestricted Subsidiaries having an
aggregate fair market value not to exceed the amount, at the time
of such Investment, substantially concurrently contributed in cash
or Cash Equivalents to the common equity capital of our company
after the date of the closing of the Acquisition; provided that
any such amount contributed shall be excluded from the calculation
made pursuant to clause (c) above;
(6) the payment of dividends on our company's common stock,
following the first public offering of our company's common stock
after the date of the closing of the Acquisition, of up to 6% per
annum of the net proceeds received by our company in such public
offering, other than public offerings with respect to our
company's common stock registered on Form S-8;
(7) the repurchase, redemption or other Acquisition or
retirement for value of any Equity Interests of our company or any
Restricted Subsidiary of our company held by any present or former
employee or director of our company (or any of its Restricted
Subsidiaries) under any management equity subscription agreement
or stock option agreement or any other management or employee
benefit plan in effect as of the date of the closing of the
Acquisition; provided that (A) the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $2.0
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million in any twelve-month period (with unused amounts in any
calendar year being carried over to succeeding calendar years
subject to a maximum (without giving effect to the following
proviso) of $5.0 million in any calendar year); provided further
that such amount in any calendar year may be increased by an
amount not to exceed (x) the cash proceeds from the sale of Equity
Interests of our company or a Restricted Subsidiary to members of
management and directors of our company and its Subsidiaries that
occurs after the date of the closing of the Acquisition, plus (y)
the cash proceeds of key-man life insurance policies received by
our company and its Restricted Subsidiaries after the date of the
closing of the Acquisition, less (z) the amount of any Restricted
Payments previously made pursuant to clauses (x) and (y) of this
subparagraph (7); and, provided further, that cancellation of
Indebtedness owing to our company from members of management of
our company or any of its Restricted Subsidiaries in connection
with a repurchase of Equity Interests of our company or a
Restricted Subsidiary will not be deemed to constitute a
Restricted Payment for purposes of this covenant or any other
provision of the senior note indenture and (B) no Default or Event
of Default shall have occurred and be continuing immediately after
such transaction;
(8) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a
portion of the exercise price of such options;
(9) the repurchase, redemption or other Acquisition or
retirement for value of the senior subordinated notes under the
provisions described under the caption "Description of the Senior
Subordinated Notes--Optional Redemption;" provided that the amount
of any Equity Offering used to effect such a repurchase,
redemption or other Acquisition or retirement for value shall be
excluded from the calculation made pursuant to clause (c) above;
(10) the repurchase, redemption or other Acquisition or
retirement for value of the senior subordinated notes under the
provisions described under the caption "Description of the Senior
Subordinated Notes--Repurchase at the Option of Holders--Change of
Control" and "Description of the Senior Subordinated Notes--
Repurchase at the Option of Holders--Asset Sales;" provided that,
as of the date of such repurchase, redemption or other Acquisition
or retirement for value, no Default or Event of Default shall have
occurred and be continuing or, with the passage of time, would
occur as a consequence thereof;
(11) the repurchase, redemption or other Acquisition or
retirement for value of the senior subordinated notes under the
provisions described under the caption "Description of the Senior
Subordinated Notes--Escrow of Proceeds; Special Mandatory
Redemption of Senior Subordinated Notes;" provided that the amount
of any such repurchase, redemption, Acquisition or retirement
shall be excluded from the calculation made pursuant to clause (c)
above; and
(12) other Restricted Payments not otherwise prohibited by
this covenant in an aggregate amount not to exceed $25.0 million
under this clause (12).
All of our company's Subsidiaries other than Citizens Power and
its Subsidiaries are Restricted Subsidiaries. The Board of Directors may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if
such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by our company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the
subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an
amount equal to the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
If, at any time, any Unrestricted Subsidiary would fail to meet
the requirements in the definition of "Unrestricted Subsidiary" as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the senior note indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of our company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," our company shall be in default of such
covenant). The Board of Directors of our company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of our company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is
permitted under the covenant described under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock," calculated on a pro
forma basis as if such designation had occurred at the
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beginning of the four-quarter reference period, and (2) no Default or
Event of Default would be in existence following such designation.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the
asset(s) or securities proposed to be transferred or issued by our
company or such Restricted Subsidiary, as the case may be, pursuant to
the Restricted Payment. The fair market value of any noncash Restricted
Payment or any adjustment made pursuant to paragraph (c) of this
covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the senior note trustee, such
determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $25.0 million. Not later than the date of
making any Restricted Payment, our company shall deliver to the senior
note trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were
computed.
If any Restricted Investment is sold or otherwise liquidated or
repaid or any dividend or payment is received by our company or a
Restricted Subsidiary and such amounts may be credited to clause (c)
above, then such amounts will be credited only to the extent of amounts
not otherwise included in Consolidated Net Income and that do not
otherwise increase the amount available as a Permitted Investment.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The senior note indenture provides that our company will not, and
will not permit any of its Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and
that our company will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that our company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and our company's
Restricted Subsidiaries may incur Indebtedness or issue Disqualified
Stock or preferred stock if the Fixed Charge Coverage Ratio for our
company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued would have been at least
2.0 to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred
stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(1) the incurrence by our company of term Indebtedness under
Credit Facilities (and the guarantee thereof by the senior note
guarantors); provided that the aggregate principal amount of all
term Indebtedness outstanding under this clause (1) after giving
effect to such incurrence does not exceed an amount equal to
$920.0 million;
(2) the incurrence by our company of revolving credit
Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of our company and its Restricted Subsidiaries
thereunder) under Credit Facilities (and the guarantee thereof by
the senior note guarantors); provided that the aggregate principal
amount of all revolving credit Indebtedness outstanding under this
clause (ii) after giving effect to such incurrence does not exceed
an amount equal to $480.0 million;
(3) the incurrence by our company and its Restricted
Subsidiaries of the Existing Indebtedness;
(4) the incurrence by our company, the senior note
guarantors and the senior subordinated note guarantors of
Indebtedness represented by the senior notes, the senior
subordinated notes, the senior note guarantees and the senior
subordinated guarantees limited in aggregate principal amount,
without duplication, to amounts outstanding under the senior note
indenture and the senior subordinated note indenture as of their
respective dates;
(5) (A) the guarantee by our company or any of the senior
note guarantors of Indebtedness of our company or a Restricted
Subsidiary of our company or (B) the incurrence of Indebtedness of
a Restricted Subsidiary to the extent that such Indebtedness is
supported by a letter of credit, in each case that was permitted
to be incurred by another provision of this covenant;
(6) the incurrence by our company or any of its Restricted
Subsidiaries of Indebtedness (including Capital Lease Obligations)
to finance the Acquisition (including by direct purchase, by lease
or indirectly by the Acquisition of the
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capital stock of a Person that becomes a Restricted Subsidiary as
a result of such Acquisition) or improvement of property (real or
personal) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then
outstanding pursuant to this clause (6) and including all
Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any Indebtedness incurred pursuant to this clause (6),
does not exceed an amount equal to 5% of Total Assets at the time
of such incurrence;
(7) the incurrence by our company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany Indebtedness) that
was permitted by the senior note indenture to be incurred under
the first paragraph hereof or clauses (3), (4) or (7) of this
paragraph;
(8) the incurrence by our company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among our
company and any of its Restricted Subsidiaries; provided, however,
that (1) if our company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the senior
subordinated notes and (2)(A) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being
held by a Person other than our company or a Restricted Subsidiary
thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either our company or a
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by our company or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (8);
(9) the incurrence by our company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the
ordinary course of business for the purpose of risk management and
not for the purpose of speculation;
(10) the incurrence by our company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided, however, that if any
such Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary, such event shall be deemed to constitute
an incurrence of Indebtedness by a Restricted Subsidiary of our
company that was not permitted by this clause (10), and the
issuance of preferred stock by Unrestricted Subsidiaries;
(11) the incurrence of Indebtedness solely in respect of
performance, surety and similar bonds or completion or performance
guarantees (including, without limitation, performance guarantees
under coal supply agreements or equipment leases), to the extent
that such incurrence does not result in the incurrence of any
obligation for the payment of borrowed money to others;
(12) the incurrence of Indebtedness arising from agreements
of our company or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary; provided,
however that (1) such Indebtedness is not reflected on the balance
sheet of our company or any Restricted Subsidiary (contingent
obligations referred to in a footnote to financial statements and
not otherwise reflected on the balance sheet will not be deemed to
be reflected on such balance sheet for purposes of this clause
(1)) and (2) the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds
including noncash proceeds (the fair market value of such noncash
proceeds being measured at the time received and without giving
effect to any subsequent changes in value) actually received by
our company and its Restricted Subsidiaries in connection with
such disposition;
(13) the guarantee by our company or any of the senior note
guarantors of additional Indebtedness relating to Black Beauty
Coal Company not to exceed $50.0 million in aggregate principal
amount outstanding at any one time under this clause (13);
(14) the incurrence of Indebtedness relating to the Bengalla
Joint Venture or the Warkworth Associates Joint Venture in an
aggregate amount not to exceed $100.0 million in aggregate
principal amount outstanding at any one time under this clause
(14); and
(15) the incurrence by our company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to
this clause (15), not to exceed $250.0 million.
The senior note indenture also provides that our company will not
incur, and will not permit its Restricted Subsidiaries to incur, any
Indebtedness (including Permitted Debt) that is contractually
subordinated in right of payment to any other Indebtedness of our
company or such Restricted Subsidiary unless such Indebtedness is also
contractually subordinated in
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right of payment to the senior notes, or the senior note guarantees, as
the case may be, on substantially identical terms; provided, however,
that no Indebtedness of our company or any Restricted Subsidiary shall
be deemed to be contractually subordinated in right of payment to any
other Indebtedness of our company or any Restricted Subsidiary solely by
virtue of being unsecured.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through
(15) above or is entitled to be incurred pursuant to the first paragraph
of this covenant, our company shall, in its sole discretion, classify or
reclassify such item of Indebtedness in any manner that complies with
this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the payment
of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the amount
thereof is included in Fixed Charges of our company as accrued.
LIENS
The senior note indenture provides that our company will not and
will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or otherwise cause or suffer to exist
or become effective any Lien of any kind (other than Permitted Liens)
upon any of their property or assets, now owned or hereafter acquired,
unless all payments due under the senior note indenture and the senior
notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligations are no longer secured by a
Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The senior note indenture provides that our company will not, and
will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any
Restricted Subsidiary that is not a senior note guarantor to (1)(a) pay
dividends or make any other distributions to our company or any of its
Restricted Subsidiaries (i) on its capital stock or (ii) with respect to
any other interest or participation in, or measured by, its profits, or
(b) pay any indebtedness owed to our company or any of its Restricted
Subsidiaries, (2) make loans or advances to our company or any of its
Restricted Subsidiaries or (3) transfer any of its properties or assets
to our company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions
existing under or by reason of (a) Existing Indebtedness as in effect on
the date of the closing of the Acquisition, (b) the Senior Credit
Facilities as in effect as of the date of the closing of the
Acquisition, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect to
such dividend and other payment restrictions than those contained in the
Senior Credit Facilities as in effect on the date of the closing of the
Acquisition, (c) the senior note indenture, the senior subordinated note
indenture, the senior notes and the senior subordinated notes,
(d) applicable law or any applicable rule, regulation or order, (e) any
instrument governing Indebtedness or capital stock of a Person acquired
by our company or any of its Restricted Subsidiaries as in effect at the
time of such Acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such Acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of
the senior note indenture to be incurred, (f) customary non-assignment
provisions in leases and other agreements entered into in the ordinary
course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (3)
above on the property so acquired, (h) any agreement for the sale of a
Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the
Indebtedness being refinanced, (j) secured Indebtedness otherwise
permitted to be incurred under the provisions of the covenant described
above under the caption "--Liens" that limits the right of the debtor to
dispose of the assets securing such Indebtedness, (k) provisions with
respect to the disposition or distribution of assets or property in
joint venture agreements and other similar agreements entered into in
the ordinary course of business, (l) restrictions on cash or other
deposits or net worth imposed by customers or lessors under contracts or
leases entered into in the ordinary course of business and (m) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements
or refinancings of the contracts, instruments or
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obligations referred to in clauses (a) through (l) above, provided that
such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are, in the good
faith judgment of our company's Board of Directors, not materially more
restrictive in the aggregate with respect to such dividend and other
payment restrictions than those (considered as a whole) contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The senior note indenture provides that our company may not
consolidate or merge with or into (whether or not our company is the
surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation,
Person or entity unless (1) our company is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation
or merger (if other than our company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (2) the entity or Person
formed by or surviving any such consolidation or merger (if other than
our company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
assumes all the obligations of our company under the Senior Registration
Rights Agreement, the senior notes and the senior note indenture
pursuant to a supplemental indenture in a form reasonably satisfactory
to the senior note trustee; (3) immediately after such transaction no
Default or Event of Default exists; and (4) except in the case of a
merger of our company with or into a Wholly Owned Restricted Subsidiary
of our company, immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of the
applicable four-quarter period, (A) the entity surviving such
consolidation or merger would be permitted to incur at least $1.00 of
additional Indebtedness under the Fixed Charge Coverage Ratio test
contained in the first paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock" or (B) the Fixed Charge Coverage Ratio for our company or the
entity or Person formed by or surviving any such consolidation or merger
(if other than our company), or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
would, immediately after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, not be less than such Fixed Charge Coverage Ratio for our
company and its Restricted Subsidiaries immediately prior to such
transaction. The senior note indenture also provides that our company
may not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other
Person. The provisions of this covenant will not be applicable to a
sale, assignment, transfer, conveyance or other disposition of assets
between or among our company and its Restricted Subsidiaries.
Notwithstanding the foregoing clause (4), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of
its properties and assets to our company and (2) our company may merge
with an Affiliate that has no significant assets or liabilities and was
formed solely for the purpose of changing the jurisdiction of
organization of our company in another State of the United States or the
form of organization of our company so long as the amount of
Indebtedness of our company and its Restricted Subsidiaries is not
increased thereby and provided that the successor assumes all the
obligations of our company under the Senior Registration Rights
Agreement, the senior notes and the senior note indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the senior
note trustee.
TRANSACTIONS WITH AFFILIATES
The senior note indenture provides that our company will not, and
will not permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of,
any Affiliate (each of the foregoing, an "Affiliate Transaction")
involving aggregate payments or consideration in excess of $5.0 million,
unless (1) such Affiliate Transaction is on terms that are materially no
less favorable to our company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by our
company or such Restricted Subsidiary with an unrelated Person and (2)
our company delivers to the senior note trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, a
resolution of the Board of Directors contained in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (1) above and that such Affiliate Transaction has been approved
by a majority of the members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $25.0
million, an opinion as to the
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fairness to the holders of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking
firm of national standing.
Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (1) any employment agreement or
other compensation plan or arrangement for employees entered into by our
company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of our company or such
Restricted Subsidiary, (2) transactions between or among our company
and/or its Restricted Subsidiaries, (3) payment of reasonable fees to
officers, directors, employees or consultants of our company, (4)
Restricted Payments that are permitted by, and Investments that are not
prohibited by, the provisions of the senior note indenture described
above under the caption "--Restricted Payments," (5) indemnification
payments made to officers, directors and employees of our company or any
Restricted Subsidiary under charter, bylaw, statutory or contractual
provisions; (6) the payment of customary annual management, consulting
and advisory fees and related expenses to Lehman Merchant Bank and its
Affiliates; (7) payments by our company or any of its Restricted
Subsidiaries to Lehman Merchant Bank and its Affiliates made for any
financial advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including, without
limitation, in connection with Acquisitions or divestitures which
payments are approved by a majority of the Board of Directors of our
company in good faith; (8) the existence of, or the performance by our
company or any of its Restricted Subsidiaries of its obligations under
the terms of, any stockholders' agreement (including any registration
rights agreement or purchase agreement related thereto) to which it is a
party as of the date of the closing of the Acquisition and any similar
agreements which it may enter into thereafter; provided, however, that
the existence of, or the performance by our company or any of its
Restricted Subsidiaries of obligations under any future amendment to any
such existing agreement or under any similar agreement entered into
after the date of the closing of the Acquisition shall only be permitted
by this clause (8) to the extent that the terms of any such amendment or
new agreement are not otherwise disadvantageous to the holders in any
material respect; (9) transactions under the terms of the Transaction
Documents in effect on the date of the closing of the Acquisition; (10)
transactions with Unrestricted Subsidiaries, customers, clients,
suppliers, joint venture partners or purchasers or sellers of goods or
services, in each case in the ordinary course of business (including,
without limitation, under joint venture agreements) and otherwise in
compliance with the terms of the senior note indenture which are, in the
aggregate (taking into account all the costs and benefits associated
with such transactions), materially no less favorable to our company or
its Restricted Subsidiaries than those that would have been obtained in
a comparable transaction by our company or such Restricted Subsidiary
with an unrelated Person, in the reasonable determination of the Board
of Directors of our company or the senior management thereof, or are on
terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party; (11) guarantees of performance by
our company and its Restricted Subsidiaries of Unrestricted Subsidiaries
in the ordinary course of business, except for guarantees of Obligations
in respect of borrowed money; and (12) pledges of Equity Interests of
Unrestricted Subsidiaries for the benefit of lenders of Unrestricted
Subsidiaries.
ADDITIONAL SENIOR NOTE GUARANTEES
The senior note indenture provides that if our company or any of
its Domestic Subsidiaries shall acquire or create another Domestic
Subsidiary after the date of the senior note indenture and such Domestic
Subsidiary provides a guarantee of the Senior Credit Facilities, then
such newly acquired or created Domestic Subsidiary shall execute a
supplemental indenture in form and substance satisfactory to the senior
note trustee providing that such Domestic Subsidiary shall become a
senior note guarantor under the senior note indenture, provided,
however, this covenant shall not apply to any Domestic Subsidiary that
has been properly designated as an Unrestricted Subsidiary in accordance
with the senior note indenture for so long as it continues to constitute
an Unrestricted Subsidiary.
BUSINESS ACTIVITIES
Our company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses,
except to such extent as would not be material to our company and its
Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The senior note indenture provides that neither our company nor
any of its Restricted Subsidiaries will, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any senior notes for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of
the senior note indenture or the senior notes unless such consideration
is offered to be paid or is paid to all holders of the senior notes that
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consent, waive or agree to amend in the time frame provided in the
solicitation documents relating to such consent, waiver or agreement.
REPORTS
The senior note indenture provides that, whether or not required
by the rules and regulations of the Commission, so long as any senior
notes are outstanding, our company will furnish to the holders of senior
notes (1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if our company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" that describes the financial condition and results of
operations of our company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in
the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition
and results of operations of our company and its Restricted Subsidiaries
separate from the financial condition and results of operations of the
Unrestricted Subsidiaries of our company) and, with respect to the
annual information only, a report thereon by our company's certified
independent accountants and (2) all current reports that would be
required to be filed with the Commission on Form 8-K if our company were
required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Senior Registration Rights Agreement, whether or not required by the
rules and regulations of the Commission, our company will file a copy of
all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules
and regulations (unless the Commission will not accept such a filing)
and make such information available to securities analysts and
prospective investors upon request. In addition, our company and the
senior note guarantors have agreed that, for so long as any senior notes
remain outstanding, they will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered under Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The senior note indenture provides that each of the following
constitutes an Event of Default: (1) default for 30 days in the payment
when due of interest on, or Liquidated Damages, if any, with respect to,
the senior notes; (2) default in payment when due of the principal of or
premium, if any, on the senior notes; (3) failure by our company or any
of its Subsidiaries to make the offer required or to purchase any of the
senior notes as required under the provisions described under the
captions "--Change of Control," or "--Asset Sales;" (4) failure by our
company or any of its Subsidiaries for 30 days after notice to comply
with the provisions of the covenants entitled "--Restricted Payments" or
"--Incurrence of Indebtedness and Issuance of Preferred Stock;" or
failure by our company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in the senior note
indenture or the senior notes; (5) default under any mortgage, indenture
or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by our company
or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by our company or any of its Restricted Subsidiaries) whether
such Indebtedness or guarantee now exists, or is created after the date
of the senior note indenture, which default results in the acceleration
of such Indebtedness prior to its express maturity and the principal
amount of any such Indebtedness aggregates $50.0 million or more; (6)
failure by our company or any of its Restricted Subsidiaries or any
group of Restricted Subsidiaries that, taken as a whole, would be a
Significant Subsidiary to pay final judgments aggregating in excess of
$50.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (7) except as permitted by the senior note indenture,
any senior note guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full
force and effect or any senior note guarantor, or any Person acting on
behalf of any senior note guarantor, shall deny or disaffirm its
obligations under its senior note guarantee; (8) certain events of
bankruptcy or insolvency with respect to our company, any of its
Significant Subsidiaries that are Restricted Subsidiaries or any group
of Restricted Subsidiaries that, taken as a whole, would be a
Significant Subsidiary; and (9) any failure of our company to deposit
the required amounts into the Escrow Account under the Escrow Letter or
any failure of the proceeds of the Escrow Account to be applied as
required under the Escrow Letter.
If any Event of Default occurs and is continuing, the senior note
trustee or the holders of at least 25% in principal amount of the then
outstanding senior notes may declare all the senior notes to be due and
payable immediately; provided, that so long as any Indebtedness
permitted to be incurred pursuant to the Senior Credit Facilities shall
be outstanding, such acceleration shall not be effective until the
earlier of (1) an acceleration of any such Indebtedness under the Senior
Credit Facilities or (2) five business days after receipt by our company
of written notice of such acceleration of the senior notes.
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency,
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with respect to our company, any Significant Subsidiary that is a
Restricted Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all
outstanding senior notes will become due and payable without further
action or notice. Holders of the senior notes may not enforce the senior
note indenture or the senior notes except as provided in the senior note
indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding senior notes may direct the
senior note trustee in its exercise of any trust or power. The senior
note trustee may withhold from holders of the senior notes notice of any
continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of our
company with the intention of avoiding payment of the premium that our
company would have had to pay if our company then had elected to redeem
the senior notes under the optional redemption provisions of the senior
note indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the
acceleration of the senior notes. If an Event of Default occurs prior to
May 15, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of our company with the intention of avoiding
paying the premium upon redemption of the senior notes prior to May 15,
2003, then the premium specified in the senior note indenture shall also
become immediately due and payable to the extent permitted by law upon
the acceleration of the senior notes.
The holders of a majority in aggregate principal amount of the
senior notes then outstanding by notice to the senior note trustee may
on behalf of the holders of all of the senior notes waive any existing
Default or Event of Default and its consequences under the senior note
indenture except a continuing Default or Event of Default in the payment
of interest on, or the principal of, the senior notes.
Our company is required to deliver to the senior note trustee
annually a statement regarding compliance with the senior note
indenture, and our company is required upon becoming aware of any
Default or Event of Default, to deliver to the senior note trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of our
company or any Person controlling such Person, as such, shall have any
liability for any obligations of our company under the senior notes, the
subordinated note guarantors, the senior note indenture or for any claim
based on, in respect of, or by reason of, such obligations or their
creation. Each holder of senior notes by accepting a senior note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the senior notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Our company may, at its option and at any time, elect to have all
of its obligations discharged with respect to the outstanding senior
notes ("Legal Defeasance") except for (1) the rights of holders of
outstanding senior notes to receive payments in respect of the principal
of, premium, if any, and interest and Liquidated Damages, if any, on
such senior notes when such payments are due from the trust referred to
below, (2) our company's obligations with respect to the senior notes
concerning issuing temporary senior notes, registration of senior notes,
mutilated, destroyed, lost or stolen senior notes and the maintenance of
an office or agency for payment and money for security payments held in
trust, (3) the rights, powers, trusts, duties and immunities of the
senior note trustee, and our company's obligations in connection
therewith and (4) the Legal Defeasance provisions of the senior note
indenture. In addition, our company may, at its option and at any time,
elect to have the obligations of our company released with respect to
certain covenants that are described in the senior note indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with
respect to the senior notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to
the senior notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance, (1) our company must irrevocably deposit with the senior
note trustee, in trust, for the benefit of the holders of the senior
notes, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding senior notes on the
stated maturity or on the applicable redemption date, as the case may
be, and our company must specify whether the senior notes are being
defeased to maturity or to a particular redemption date; (2) in the case
of Legal Defeasance, our company shall have delivered to the senior note
trustee an opinion of counsel in the
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United States reasonably acceptable to the senior note trustee
confirming that (A) our company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of the senior note indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding senior notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (3) in the case of
Covenant Defeasance, our company shall have delivered to the senior note
trustee an opinion of counsel in the United States reasonably acceptable
to the senior note trustee confirming that the holders of the
outstanding senior notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; (4) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the effective date of such defeasance (5) such Legal
Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the senior note indenture) to which our company
or any of its Subsidiaries is a party or by which our company or any of
its Subsidiaries is bound; (6) our company must have delivered to the
senior note trustee, at or prior to the effective date of such
defeasance, an opinion of counsel to the effect that at the effective
date of such defeasance, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (7) our company must
deliver to the senior note trustee an Officers' Certificate stating that
the deposit was not made by our company with the intent of preferring
the holders of senior notes over the other creditors of our company with
the intent of defeating, hindering, delaying or defrauding creditors of
our company or others; and (8) our company must deliver to the senior
note trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange senior notes in accordance with
the senior note indenture. The Registrar and the senior note trustee may
require a holder, among other things, to furnish appropriate
endorsements and transfer documents and our company may require a holder
to pay any taxes and fees required by law or permitted by the senior
note indenture. Our company is not required to transfer or exchange any
senior note selected for redemption. Also, our company is not required
to transfer or exchange any senior note for a period of 15 days before a
selection of senior notes to be redeemed.
The registered holder of a senior note will be treated as the
owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
senior note indenture or the senior notes may be amended or supplemented
with the consent of the holders of at least a majority in principal
amount of the senior notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, senior notes), and any existing
default or compliance with any provision of the senior note indenture or
the senior notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding senior notes
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, senior notes).
Without the consent of each holder affected, an amendment or
waiver may not (with respect to any senior notes held by a non-
consenting holder): (1) reduce the principal amount of senior notes
whose holders must consent to an amendment, supplement or waiver, (2)
reduce the principal of or change the fixed maturity of any senior note
or alter the provisions with respect to the redemption of the senior
notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"), (3) reduce
the rate of or change the time for payment of interest on any senior
note, (4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the senior notes (except
a rescission of acceleration of the senior notes by the holders of at
least a majority in aggregate principal amount of the senior notes and a
waiver of the payment default that resulted from such acceleration), (5)
make any senior note payable in money other than that stated in the
senior notes, (6) make any change in the provisions of the senior note
indenture relating to waivers of past Defaults or the rights of holders
of senior notes to receive payments of principal of or premium, if any,
or interest on the senior notes, (7) waive a redemption payment with
respect to any senior note (other than a payment required by one of the
covenants described above under the caption "--Repurchase at the Option
of Holders"), (8)
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make any change in the foregoing amendment and waiver provisions or (9)
release any senior subordinated note guarantor from any of its
obligations under its subordinated subsidiary guarantee or this senior
subordinated note indenture, except in accordance with the terms of this
senior subordinated note indenture.
Notwithstanding the foregoing, without the consent of any holder
of senior notes, our company and the senior note trustee may amend or
supplement the senior note indenture or the senior notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated senior
notes in addition to or in place of certificated senior notes, to
provide for the assumption of our company's obligations to holders of
senior notes in the case of a merger or consolidation or sale of all or
substantially all of our company's assets, to make any change that would
provide any additional rights or benefits to the holders of senior notes
or that does not adversely affect the legal rights under the senior note
indenture of any such holder, to comply with requirements of the
Commission in order to effect or maintain the qualification of the
senior note indenture under the Trust Indenture Act to provide for the
issuance of additional senior subordinated notes in accordance with the
limitations contained in this senior subordinated note indenture as of
the date hereof or to allow any senior subordinated note guarantor to
execute a supplemental senior subordinated note indenture and/or a
subordinated subsidiary guarantee with respect to the senior
subordinated notes.
CONCERNING THE SENIOR NOTE TRUSTEE
The senior note indenture contains certain limitations on the
rights of the senior note trustee, should it become a creditor of our
company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The senior note trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then
outstanding senior notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the senior note trustee, subject to certain exceptions. The
senior note indenture provides that in case an Event of Default shall
occur (which shall not be cured), the senior note trustee will be
required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such
provisions, the senior note trustee will be under no obligation to
exercise any of its rights or powers under the senior note indenture at
the request of any holder of senior notes, unless such holder shall have
offered to the senior note trustee security and indemnity satisfactory
to it against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the senior notes will be issued in
fully registered form. Except as described in the next paragraph, the
senior notes initially will be represented by permanent global senior
notes, in definitive, fully registered form without interest coupons and
will be deposited with the senior note trustee as custodian for The
Depositary Trust Company, New York, New York ("DTC") and registered in
the name of a nominee of DTC.
Except as described below, the global senior notes may be
transferred, in whole and not in part, only to another nominee of DTC or
to a successor of DTC or its nominee. Beneficial interests in the global
senior notes may not be exchanged for senior notes in certificated form
except in the limited circumstances described below. See "--Exchange of
Book-Entry Senior Notes for Certificated Senior Notes." Except in the
limited circumstances described below, owners of beneficial interests in
the global senior note will not be entitled to receive physical delivery
of certificated senior notes (as defined below).
The senior note trustee will act as Paying Agent and Registrar.
The senior notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC
are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement
systems and are subject to changes by them from time to time. Our
company takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to
discuss these matters.
DTC has advised our company that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants
through electronic book-entry changes in accounts of its Participants.
The participants
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include securities brokers and dealers (including the Initial Purchaser,
banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by
or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised our company that, pursuant to procedures
established by it, (1) upon deposit of the global senior notes, DTC will
credit the accounts of Participants designated by the Initial Purchaser
with portions of the principal amount of the global senior notes and (2)
ownership of such interests in the global senior notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners
of beneficial interest in the global senior notes).
Investors in the global senior note may hold their interests
therein directly through DTC, if they are Participants in such system,
or indirectly through organizations which are Participants in such
system. All interests in a global senior note may be subject to the
procedures and requirements of DTC. The laws of some states require that
certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial
interests in a global senior note to such persons will be limited to
that extent. Because DTC can act only on behalf of Participants, which
in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a global senior note
to pledge such interests to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate
evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL
SENIOR NOTES WILL NOT HAVE SENIOR NOTES REGISTERED IN THEIR NAMES, WILL
NOT RECEIVE PHYSICAL DELIVERY OF SENIOR NOTES IN CERTIFICATED FORM AND
WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER
THE SENIOR NOTE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any,
Liquidated Damages, if any, and interest on a global senior note
registered in the name of DTC or its nominee will be payable to DTC in
its capacity as the registered holder under the senior note indenture.
Under the terms of the senior note indenture, our company and the senior
note trustee will treat the persons in whose names the senior notes,
including the global senior notes, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither our company, the senior note
trustee nor any agent of our company or the senior note trustee has or
will have any responsibility or liability for (1) any aspect of DTC's
records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the
global senior notes, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the global senior
notes or (2) any other matter relating to the actions and practices of
DTC or any of its Participants or Indirect Participants. DTC has advised
our company that its current practice, upon receipt of any payment in
respect of securities such as the senior notes (including principal and
interest), is to credit the accounts of the relevant Participants with
the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interests in
the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the
beneficial owners of senior notes will be governed by standing
instructions and customary practices and will be the responsibility of
the Participants or the Indirect Participants and will not be the
responsibility of DTC, the senior note trustee or our company. Neither
our company nor the senior note trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of
the senior notes, and our company and the senior note trustee may
conclusively rely on and will be protected in relying on instructions
from DTC or its nominee for all purposes.
The global senior notes are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and secondary market trading
activity in such interests will, therefore, settle in immediately
available funds, subject in all cases to the rules and procedures of DTC
and its Participants. See "--Same Day Settlement and Payment."
Transfers between Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same day funds.
DTC has advised our company that it will take any action permitted
to be taken by a holder of senior notes only at the direction of one or
more Participants to whose account DTC has credited the interests in the
global senior notes and only in
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respect of such portion of the aggregate principal amount of the senior
notes as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under the
senior notes, DTC reserves the right to exchange the global senior notes
for legended senior notes in certificated form, and to distribute such
senior notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the global senior notes among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither
our company nor the senior note trustee nor any of their respective
agents will have any responsibility for the performance by DTC or its
participants or indirect participants of its obligations under the rules
and procedures governing its operations.
EXCHANGE OF BOOK-ENTRY SENIOR NOTES FOR CERTIFICATED SENIOR NOTES
A global senior note is exchangeable for definitive senior notes
in registered certificated form ("certificated senior notes") if (1) DTC
(x) notifies our company that it is unwilling or unable to continue as
depositary for the global senior notes and our company thereupon fails
to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (2) our company, at its
option, notifies the senior note trustee in writing that it elects to
cause the issuance of the certificated senior notes or (3) there shall
have occurred and be continuing a Default or Event of Default with
respect to the senior notes. In addition, beneficial interests in a
global senior note may be exchanged for certificated senior notes upon
request but only upon prior written notice given to the senior note
trustee by or on behalf of DTC in accordance with the senior note
indenture. In all cases, certificated senior notes delivered in exchange
for any global senior note or beneficial interests therein will be
registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its
customary procedures).
EXCHANGE OF CERTIFICATED SENIOR NOTES FOR BOOK-ENTRY SENIOR NOTES
Senior notes issued in certificated form may be exchanged for
beneficial interests in any global senior note.
SAME DAY SETTLEMENT AND PAYMENT
The senior note indenture will require that payments in respect of
the senior notes represented by the global senior notes (including
principal, premium, if any, interest and Liquidated Damages, if any) be
made by wire transfer of immediately available funds to the accounts
specified by the global senior note holder. With respect to senior notes
in certificated form, our company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing a check
to each such holder's registered address. The senior notes represented
by the global senior notes are expected to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity
in such senior notes will, therefore, be required by DTC to be settled
in immediately available funds. We expect that secondary trading in any
certificated senior notes will also be settled in immediately available
funds.
DEFINITIONS
The following are defined terms used in the senior note indenture.
Reference is made to the senior note indenture for a full disclosure of
all such terms, as well as any other capitalized terms used herein for
which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (1)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with,
or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and (2) Indebtedness
secured by a Lien encumbering any asset acquired by such specified
Person.
"Acquisition" means the Acquisition by our company of: (1) all of
the common stock of Peabody Holding Company, (2) all of the common stock
of Gold Fields Mining Corp., (3) all of the membership interests of
Citizens Power, (4) the 1% interests in CL Hartford, L.L.C., a Delaware
limited liability company, and Citizens Power Sales, a Delaware general
partnership, both subsidiaries of Citizens Power, (5) all of the shares
of Darex Capital Inc., a company incorporated in the Republic of Panama,
and (6) all of the ordinary shares of Peabody Australia Ltd., which
together with Darex Capital, Inc. owns Peabody Resources.
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"Additional Assets" means (1) any property or assets (other than
capital stock, Indebtedness or rights to receive payments over a period
greater than 180 days, other than with respect to coal supply contract
restructurings) that is usable by our company or a Restricted Subsidiary
in a Permitted Business or (2) the capital stock of a Person that is at
the time, or becomes, a Restricted Subsidiary as a result of the
Acquisition of such capital stock by our company or another Restricted
Subsidiary.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed
to be control.
"Asset Sale" means (1) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by
way of a sale and leaseback) other than sales of inventory in the
ordinary course of business consistent with past practices (provided
that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of our company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
senior note indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption
"--Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant), and (2) the issue or sale by our company or
any of its Restricted Subsidiaries of Equity Interests of any of our
company's Restricted Subsidiaries, in the case of either clause (1) or
(2), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $5.0 million or (b) for
Net Proceeds in excess of $5.0 million. Notwithstanding the foregoing,
the following items shall not be deemed to be Asset Sales: (1) a
transfer of assets by our company to a Restricted Subsidiary or by a
Restricted Subsidiary to our company or to another Restricted
Subsidiary, (2) an issuance of Equity Interests by a Restricted
Subsidiary to our company or to another Restricted Subsidiary, (3) a
Restricted Payment that is permitted by, or an Investment that is not
prohibited by, the covenant described above under the caption
"--Restricted Payments," (4) a disposition of Cash Equivalents or obsolete
equipment, (5) foreclosures on assets, (6) the sale or discount, in each
case without recourse, of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise or
collection thereof and (7) the factoring of accounts receivable arising
in the ordinary course of business under arrangements customary in the
industry.
"Bengalla Joint Venture" means Bengalla Mining Co. Pty Limited,
Bengalla Agricultural Co. Pty Limited and Bengalla Coal Sales Co. Pty
Ltd. which are the joint venture companies related to the Bengalla mine
in New South Wales, Australia.
"Black Beauty Coal Company" means the Indiana general partnership
among Thoroughbred, L.L.C., Black Beauty Resources, Inc. and Pittsburg
and Midway Coal Mining Co., and any Person collectively owned by those
three partners including, but not limited to, Eagle Coal Company and
Falcon Coal Company.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of Acquisition issued or fully guaranteed or
insured by the U.S. Government or any agency thereof, (b) certificates
of deposit and time deposits with maturities of one year or less from
the date of Acquisition and overnight bank deposits of any lender under
the Senior Credit Facilities or of any commercial bank having capital
and surplus in excess of $500.0 million, (c) repurchase obligations of
any lender under the Senior Credit Facilities or of any commercial bank
satisfying the requirements of clause (b) of this definition, having a
term of not more than 90 days with respect to securities issued or fully
guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-2 by Standard and Poor's
Rating Group ("S&P") or P-2 by Moody's Investors Service, Inc.
("Moody's"), or carrying an equivalent rating by a nationally recognized
rating agency if both of S&P and Moody's cease publishing ratings of
investments, (e) securities with maturities of one year or less from the
date of Acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by Moody's, (f) securities with maturities of one year or less from the
date of Acquisition backed by standby letters of credit issued by any
lender under the Senior Credit Facilities or
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any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (a)
through (f) of this definition.
"Citizens Power" means Citizens Power LLC, a Delaware limited
liability company and its direct and indirect Subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus
(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net
Income, plus (2) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization
of debt issuance costs, deferred financing fees and original issue
discount, noncash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations), to the extent that any such expense was deducted
in computing such Consolidated Net Income, plus (3) an amount equal to
any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (4) depreciation, depletion, amortization
(including amortization of goodwill and other intangibles) and other
noncash expenses (including, without limitation, writedowns and
impairment of property, plant and equipment and intangibles and other
long-lived assets) (excluding any such noncash expense to the extent
that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in
a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, depletion, amortization and
other noncash expenses were deducted in computing such Consolidated Net
Income, minus (5) noncash items increasing such Consolidated Net Income
for such period (other than accruals in accordance with GAAP), plus (6)
without duplication for amounts otherwise included in Consolidated Cash
Flow, the amount of our company's and its Restricted Subsidiaries'
proportionate share of the Consolidated Cash Flow of Black Beauty Coal
Company and its Subsidiaries for such period (calculated in proportion
to our company's and its Restricted Subsidiaries common equity
ownership), in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for
taxes on the income or profits of, and the depreciation, depletion and
amortization and other noncash expenses of, a Restricted Subsidiary that
is not a senior note guarantor shall be added to Consolidated Net Income
to compute Consolidated Cash Flow only to the extent that a
corresponding amount would be permitted at the date of determination to
be dividended to our company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct
or indirect restriction under the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (1) the Net Income of any Person
that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof, (2) the Net Income of any Restricted
Subsidiary that is not a senior note guarantor shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (3) the
Net Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such Acquisition shall be excluded,
(4) the cumulative effect of a change in accounting principles shall be
excluded, and (5) the Net Income (or loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to our company
or one of its Restricted Subsidiaries.
"Credit Facilities" means, with respect to our company or any of
its Restricted Subsidiaries, one or more debt facilities (including,
without limitation, the Senior Credit Facilities) or commercial paper
facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or
letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time
to time. Indebtedness under Credit Facilities outstanding on the date on
which senior notes are first issued and authenticated under the senior
note indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (1) of the definition of
Permitted Indebtedness.
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"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by our company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate,
setting forth the basis of such valuation, executed by the principal
executive officer and the principal financial officer of our company,
less the amount of cash or Cash Equivalents received in connection with
a sale of such Designated Noncash Consideration.
"Disqualified Stock" means any capital stock that, by its terms
(or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, under
a sinking fund obligation or otherwise, or redeemable at the option of
the holder thereof, in whole or in part, on or prior to the date that is
91 days after the date on which the senior notes mature; provided,
however, that any capital stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require our company
to repurchase such capital stock upon the occurrence of a Change of
Control or an Asset Sale shall not constitute Disqualified Stock if the
terms of such capital stock provide that our company may not repurchase
or redeem any such capital stock under such provisions unless such
repurchase or redemption complies with the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"Domestic Subsidiary" means a Subsidiary that is (1) formed under
the laws of the United States of America or a state or territory thereof
or (2) as of the date of determination, treated as a domestic entity or
a partnership or a division of a domestic entity for United States
federal income tax purposes.
"Equity Interests" means capital stock and all warrants, options
or other rights to acquire capital stock (but excluding any debt
security that is convertible into, or exchangeable for, capital stock).
"Equity Offering" means any public or private sale of equity
securities (excluding Disqualified Stock) of our company, other than any
private sales to an Affiliate of our company.
"Escrow Account" means the escrow account maintained under the
Escrow Letter.
"Escrow Letter" means that certain escrow letter dated March 2,
1998, by and among Lazard Brothers & Co., Limited, The Energy Group PLC,
Peabody Investments Inc. and P&L Coal Holdings Corporation.
"Existing Citizens Power Investment" means the Investments in
Citizens Power by our company and its Restricted Subsidiaries as of the
date of the closing of the Acquisition.
"Existing Indebtedness" means up to $292.5 million in aggregate
principal amount of Indebtedness of our company and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit
Facilities, the senior notes, the senior exchange subordinated notes and
related guarantees) in existence on the date of the closing of the
Acquisition, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (1) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original
issue discount, noncash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, and net payments (if any) under Hedging
Obligations, but excluding amortization of debt issuance costs) and (2)
the consolidated interest of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (3) any interest expense on
the portion of Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (4) the product of (a)
all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries,
other than dividend payments on Equity Interests payable solely in
Equity Interests of our company (other than Disqualified Stock) or to
our company or a Restricted Subsidiary of our company, times (b) a
fraction, the numerator of which is one and the denominator of which is
one minus the effective combined federal, state and local tax rate of
such Person for such period, expressed as a decimal, in each case, for
our company and its Restricted Subsidiaries on a consolidated basis and
in accordance with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any Person and
its Restricted Subsidiaries for any period, the ratio of the
Consolidated Cash Flow of such Person and its Restricted Subsidiaries
for such period to the Fixed Charges of such Person and its Restricted
Subsidiaries for such period. In the event that the referrent Person or
any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or
issues or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness,
or such issuance or redemption of preferred stock, as if the same had
occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to
above, (1) Acquisitions that have been made by our company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions and including pro forma
cost savings permitted by Article 11 of Regulation S-X, during the four-
quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be given pro forma effect as if
they had occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (3) of the proviso contained in the
definition of Consolidated Net Income, and (2) the Consolidated Cash
Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to
the Calculation Date, shall be excluded, and (3) the Fixed Charges
attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"Foreign Subsidiaries" means Subsidiaries of our company that are
not Domestic Subsidiaries.
"GAAP" means generally accepted accounting principles described in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on
the date of the senior note indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (1) currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity
cap agreements and currency exchange, interest rate or commodity collar
agreements and (2) other agreements or arrangements designed to protect
such Person against fluctuations in currency exchange, interest rates or
commodity prices, in each case for the purpose of risk management and
not for speculation.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, if and to the extent any of the
foregoing (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a
Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person, but
excluding from the definition of "Indebtedness," any of the foregoing
that constitutes (1) an accrued expense, (2) trade payables and (3)
Obligations in respect of reclamation, workers' compensation, including
black lung, pensions and retiree health care, in each case to the extent
not overdue for more than 90 days. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in
the case of any Indebtedness issued with original issue discount, and
(ii) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the form of
direct or indirect loans (including guarantees, other than performance
guarantees provided for the benefit of Citizens Power, of any portion of
Indebtedness or other obligations), advances or capital contributions
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
Acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP. If our company or any Restricted Subsidiary of our company sells
or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of our company such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted
Subsidiary of our company, our company shall be deemed to have made an
Investment on the date of any such sale or disposition equal
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to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided
in the final paragraph of the covenant described above under the caption
"--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of
or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Marketable Securities" means, with respect to any Asset Sale, any
readily marketable equity securities that are (1) traded on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National
Market; and (2) issued by a corporation having a total equity market
capitalization of not less than $250.0 million; provided that the excess
of (A) the aggregate amount of securities of any one such corporation
held by our company and any Restricted Subsidiary over (B) ten times the
average daily trading volume of such securities during the 20
immediately preceding trading days shall be deemed not to be Marketable
Securities; as determined on the date of the contract relating to such
Asset Sale.
"Net Income" means, with respect to any Person, the net income or
loss of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however,
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries
and (2) any extraordinary or nonrecurring gain or loss, together with
any related provision for taxes on such extraordinary or nonrecurring
gain or loss.
"Net Proceeds" means the aggregate proceeds (cash or property)
received by our company or any of its Restricted Subsidiaries in respect
of any Asset Sale (including, without limitation, any cash received upon
the sale or other disposition of any noncash consideration received in
any Asset Sale) or the sale or disposition of any Investment, net of the
direct costs relating to such Asset Sale, sale or disposition,
(including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"Non-Guarantor Subsidiaries" means (1) Citizens Power and its
direct and indirect Subsidiaries, (2) our company's future Unrestricted
Subsidiaries and (3) our company's current and future Foreign
Subsidiaries.
"Non-Recourse Debt" means Indebtedness (1) as to which neither our
company nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness) other than a pledge of the Equity
Interests of any Unrestricted Subsidiaries, (b) is directly or
indirectly liable (as a guarantor or otherwise) other than by virtue of
a pledge of the Equity Interests of any Unrestricted Subsidiaries, or
(c) constitutes the lender; and (2) no default with respect to which
(including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other
Indebtedness (other than the senior notes being offered hereby) of our
company or any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated
or payable prior to its stated maturity.
"Obligations" means any principal, premium (if any), interest,
penalties, fees, charges, expenses, indemnifications, reimbursement
obligations, damages, guarantees and other liabilities and amounts
payable under the documentation governing any Indebtedness or in respect
thereto.
"Permitted Business" means coal production, coal mining, coal
brokering, coal transportation, mine development, power marketing,
electricity generation, power/energy sales and trading, energy
transactions/asset restructurings, risk management products associated
with energy, fuel/power integration and other energy related businesses,
ash disposal, environmental remediation, coal, natural gas, petroleum or
other fossil fuel exploration, production, marketing, transportation and
distribution and other related businesses, and activities of our company
and its Subsidiaries as of the date of the closing of the Acquisition
and any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or ancillary
thereto.
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"Permitted Investments" means (a) any Investment in our company or
in a Restricted Subsidiary of our company; (b) any Investment in Cash
Equivalents; (c) any Investment by our company or any Restricted
Subsidiary of our company in a Person, if as a result of such Investment
(i) such Person becomes a Restricted Subsidiary of our company or (ii)
such Person, in one transaction or a series of related transactions, is
merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, our
company or a Restricted Subsidiary of our company; (d) any Acquisition
of assets solely in exchange for the issuance of Equity Interests (other
than Disqualified Stock) of our company; (e) any Investment existing on
the date of the closing of the Acquisition (an "Existing Investment")
and any Investment that replaces, refinances or refunds an Existing
Investment, provided that the new Investment is in an amount that does
not exceed the amount replaced, refinanced or refunded and is made in
the same Person as the Investment replaced, refinanced or refunded, (f)
advances to employees not in excess of $10.0 million outstanding at any
one time; (g) Hedging Obligations permitted under clause (9) of the
"--Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(h) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
expenses, in each case incurred in the ordinary course of business; (i)
any Investment in a Permitted Business (whether or not an Investment in
an Unrestricted Subsidiary) having an aggregate fair market value, when
taken together with all other Investments made pursuant to this clause
(i), does not exceed in aggregate amount the sum of (1) 10% of Total
Assets at the time of such Investment (with the fair market value of
each Investment being measured at the time made and without giving
effect to subsequent changes in value) plus (2) 100% of the Net Proceeds
from the sale or disposition of any Investment previously made pursuant
to this clause (i) or 100% of the amount of any dividend, distribution
or payment from any such Investment, net of income taxes paid or payable
in respect thereof, in each case up to the amount of the Investment that
was made pursuant to this clause (i) and 50% of the amount of such Net
Proceeds or 50% of such dividends, distributions or payments, in each
case received in excess of the amount of the Investments made pursuant
to this clause (i); (j) guarantees of Indebtedness permitted under the
covenant "--Incurrence of Indebtedness and Issuance of Preferred Stock;"
(k) any Investment acquired by our company or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts
receivable held by our company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization
or recapitalization of the issuer of such other Investment or accounts
receivable or (B) as a result of the transfer of title with respect to
any secured Investment in default as a result of a foreclosure by our
company or any of its Restricted Subsidiaries with respect to such
secured Investment; (l) any Investment in Black Beauty Coal Company
having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (l), that are at the time
outstanding not to exceed $50.0 million (with any write-down or write-
off of any such Investment deemed to remain outstanding); (m)
Investments in Citizens Power having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause
(m), that are at that time outstanding not to exceed $50.0 million at
the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (n) any Investment in the Bengalla Joint
Venture and the Warkworth Associates Joint Venture having an aggregate
fair market value, taken together with all other Investments made
pursuant to this clause (n), that are at the time outstanding, not to
exceed $25.0 million (with any write-down or write-off of any such
Investment deemed to remain outstanding); (o) that portion of any
Investment by our company or a Restricted Subsidiary in a Permitted
Business to the extent that our company or such Restricted Subsidiary
will receive in a substantially concurrent transaction an amount in cash
equal to the amount of such Investment (or the fair market value of such
Investment), net of any obligation to pay taxes or other amounts in
respect of the receipt of such cash; provided that the receipt of such
cash does not carry any obligation by our company or such Restricted
Subsidiary to repay or return such cash; and (p) the forgiveness or
cancellation of any payable due from Citizens Power and its direct and
indirect Subsidiaries outstanding on the date of the closing of the
Acquisition; provided, however, that with respect to any Investment, our
company may, in its sole discretion, allocate all or any portion of any
Investment to one or more of the above clauses so that the entire
Investment would be a Permitted Investment.
"Permitted Liens" means (1) Liens securing Indebtedness under
Credit Facilities that were permitted by the terms of the senior note
indenture to be incurred; (2) Liens in favor of our company; (3) Liens
on property of a Person existing at the time such Person is merged into
or consolidated with our company or any Restricted Subsidiary of our
company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
our company; (4) Liens on property existing at the time of Acquisition
thereof by our company or any Restricted Subsidiary of our company,
provided that such Liens were in existence prior to the contemplation of
such Acquisition; (5) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business; (6) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance or other kinds of social security; (7) Liens existing on the
date of the closing of the Acquisition; (8) Liens for taxes, assessments
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or governmental charges or claims that are not yet delinquent or that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (9) Liens on assets of senior note guarantors
to secure Senior Debt of such senior note guarantors that was permitted
by the senior note indenture to be incurred; (10) Liens incurred in the
ordinary course of business of our company or any Restricted Subsidiary
of our company with respect to obligations that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business) and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by our company or such Restricted Subsidiary; (11) Liens on
assets of Foreign Subsidiaries to secure Indebtedness that was permitted
by the senior note indenture to be incurred; (12) statutory liens of
landlords, mechanics, suppliers, vendors, warehousemen, carriers or
other like Liens arising in the ordinary course of business; (13)
judgment Liens not giving rise to an Event of Default so long as any
appropriate legal proceeding that may have been duly initiated for the
review of such judgment shall not have been finally terminated or the
period within which such legal proceeding may be initiated shall not
have expired; (14) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects incurred or
imposed, as applicable, in the ordinary course of business and
consistent with industry practices which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto (as such property is used
by our company or its Subsidiaries) or interfere with the ordinary
conduct of the business of our company or such Subsidiaries; provided,
however, that any such Liens are not incurred in connection with any
borrowing of money or any commitment to loan any money or to extend any
credit; (15) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (6) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" and other purchase money Liens to finance property or assets of
our company or any Restricted Subsidiary acquired in the ordinary course
of business; provided that such Liens are only secured by such property
or assets so acquired or improved (including, in the case of the
Acquisition of capital stock, of a Person who becomes a Restricted
Subsidiary, Liens on the assets of the Person whose capital stock was so
acquired); (16) Liens securing Indebtedness under Hedging Obligations;
provided that such Liens are only secured by property or assets that
secure the Indebtedness subject to the Hedging Obligation; (17) Liens to
secure Indebtedness permitted by clause (15) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock;" and (18) Liens on the Equity Interests of Unrestricted
Subsidiaries securing obligations of Unrestricted Subsidiaries not
otherwise prohibited by the senior note indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of our
company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of our company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness); provided
that: (1) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest and
premium, if any, on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (2) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (3) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the senior notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment
to, the senior notes on terms at least as favorable to the holders of
senior notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (4) such Indebtedness is incurred either by our company or
by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means those certain Senior Credit
Facilities, dated as of May 18, 1998, by and among our company, the
senior note guarantors, Lehman Commercial Paper Inc., as Arranger,
Syndication Agent and the Administrative Agent and the other lenders
party thereto, including any related notes, guarantees, collateral
documents, letters of credit, instruments and agreements executed in
connection therewith (and any appendices, exhibits or schedules to any
of the foregoing), and in each case as amended, modified, supplemented,
restated, renewed, refunded, replaced, restructured, repaid or
refinanced from time to time (whether with the original agents and
lenders or other agents and lenders or otherwise, and whether provided
under the original credit agreement or other credit agreements or
otherwise).
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"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated under the Securities Act, as such Regulation
is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which
such payment of interest or principal was scheduled to be paid in the
original documentation governing such Indebtedness, and shall not
include any contingent obligations to repay, redeem or repurchase any
such interest or principal prior to the date originally scheduled for
the payment thereof.
"Subordinated Subsidiary Guarantees" mean the guarantees endorsed
on the senior subordinated notes by the Subordinated Note Guarantors.
"Subsidiary" means, with respect to any Person, (1) any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or senior note trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person (or a combination thereof) and (2)
any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Total Assets" means the total assets of our company and its
Restricted Subsidiaries on a consolidated basis determined in accordance
with GAAP, as shown on the most recently available consolidated balance
sheet of our company and its Restricted Subsidiaries.
"Transaction Documents" means the documents related to (1) the
Acquisition (including, without limitation, the purchase agreement, the
participation agreement and the escrow agreement), (2) the Senior Credit
Facilities and (3) the original offering of the notes.
"Treasury Rate" means the yield to maturity at the time of the
computation of the United States Treasury securities with a constant
maturity (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15(519), which has become publicly
available at least two Business Days prior to the date fixed for
redemption (or if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to
the then remaining average life to May 15, 2003; provided, however, that
if the average life of such senior note is not equal to the constant
maturity of the United States Treasury security for which weekly average
yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which
such yields are given, except that if the average life of such senior
note is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one
year shall be used.
"Unrestricted Subsidiary" means (1) Citizens Power, any direct or
indirect Subsidiary of Citizens Power on the date of the senior note
indenture and (2) any Subsidiary that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Person: (a) has no Indebtedness other
than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with our company or any Restricted
Subsidiary of our company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to our
company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of our company; (c) is a
Person with respect to which neither our company nor any of its
Restricted Subsidiaries has any obligation (x) to subscribe for
additional Equity Interests in Unrestricted Subsidiaries or (y) to
maintain or preserve such Person's net worth (except with respect to
Permitted Investments); and (d) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of our
company or any of its Restricted Subsidiaries; provided, however, that
our company and its Restricted Subsidiaries may guarantee the
performance of Unrestricted Subsidiaries in the ordinary course of
business except for guarantees of Obligations in respect of borrowed
money. Any such designation by the Board of Directors shall be evidenced
to the senior note trustee by filing with the senior note trustee a
certified copy of the Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied
with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted
Payments."
"Voting Stock" of any Person as of any date means the capital
stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
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"Warkworth Associates Joint Venture" means Warkworth Coal Sales
Ltd., Warkworth Pastoral Co. Pty, Limited and Warkworth Mining Limited,
which are the joint venture companies related to the Warkworth mine in
New South Wales, Australia.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding capital
stock or other ownership interests of which (other than directors'
qualifying shares) shall at the time be owned by such Person or by one
or more Wholly Owned Restricted Subsidiaries of such Person and one or
more Wholly Owned Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding capital stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be
owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person and one or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF THE SENIOR SUBORDINATED NOTES
The following is a summary of the material terms of the senior
subordinated notes and is qualified in its entirety by reference to the
indenture (the "senior subordinated notes indenture") between our
company and State Street Bank and Trust Company, as trustee (the "senior
subordinated note trustee").
GENERAL
The senior subordinated notes were issued under the senior
subordinated note indenture. The terms of the senior subordinated notes
include those stated in the senior subordinated note indenture and those
made part of the senior subordinated note indenture by reference to the
Trust Indenture Act. The senior subordinated notes are subject to all
such terms, and holders of senior subordinated notes are referred to the
senior subordinated note indenture and the Trust Indenture Act. The
following summary of the material provisions of the senior subordinated
note indenture does not purport to be complete and is qualified in its
entirety by reference to the senior subordinated note indenture,
including the definitions therein of certain terms used below. Copies of
the senior subordinated note indenture are available as described below
under "Available Information." The definitions of certain terms used in
the following summary are described below under "--Definitions." For
purposes of this summary, the term "company" refers only to P&L Coal
Holdings Corporation and not to any of its Subsidiaries.
On May 18, 1998, our company issued $500.0 million aggregate
principal amount of senior subordinated notes under the senior
subordinated note indenture.
The senior subordinated notes are general unsecured obligations of
our company and are subordinated in right of payment to all current and
future Senior Debt. As of March 31, 2000, our company had Senior Debt of
$1,397.2 million and $200.0 million of available borrowing capacity and
$280.0 million of letters of credit available under the Senior Credit
Facilities. The senior subordinated note indenture permits the
incurrence of additional Senior Debt in the future.
The operations of our company are conducted through its
Subsidiaries and, therefore, our company is dependent upon the cash flow
of its Subsidiaries to meet its obligations, including its obligations
under the senior subordinated notes. The senior subordinated notes are
effectively subordinated to all Indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of our
company's Subsidiaries. Any right of our company to receive assets of
any of its Subsidiaries upon the latter's liquidation or reorganization
(and the consequent right of the holders of the senior subordinated
notes to participate in those assets) will be effectively subordinated
to the claims of that Subsidiary's creditors, except to the extent that
our company is itself recognized as a creditor of such Subsidiary, in
which case the claims of our company would still be subordinate to any
security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by our company. As of March 31, 2000, our
company's Subsidiaries had approximately $3,897.7 million of
Indebtedness (including trade payables, land reclamation and
environmental liabilities, workers' compensation liabilities and retiree
health care liabilities). See "Our Obligations Are Effectively
Subordinated to the Obligations of our Subsidiaries."
All of our company's Subsidiaries other than Citizens Power and
its Subsidiaries were Restricted Subsidiaries. However, under certain
circumstances, our company will be able to designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants contained in
the senior subordinated note indenture.
PRINCIPAL, MATURITY AND INTEREST
The senior subordinated notes are limited in aggregate principal
amount to $650.0 million, of which $500.0 million was issued in the
Offering, and will mature on May 15, 2008. Interest on the senior
subordinated notes accrues at the rate of 9-5/8% per annum and is
payable semi-annually in arrears on May 15 and November 15, commencing
on November 15, 1998, to holders of record on the immediately preceding
May 1 and November 1. Additional senior subordinated notes may be issued
from time to time after the Offering, subject to the provisions of the
senior subordinated note indenture described below under the caption
"--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Interest on the senior subordinated notes accrues from the most recent
date to which interest has been paid or, if no interest has been paid,
from May 18, 1998. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages, if any, on the senior subordinated
notes are payable at the office or agency of our company maintained for
such purpose within the City and State of New York or, at the option of
our company, payment of interest and Liquidated Damages, if any, may be
made by check mailed to the holders of the senior subordinated notes at
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their respective addresses listed in the register of holders of senior
subordinated notes; provided that all payments of principal, premium,
interest and Liquidated Damages, if any, with respect to senior
subordinated notes the holders of which have given wire transfer
instructions to our company are required to be made by wire transfer of
immediately available funds to the accounts specified by the holders
thereof. Until otherwise designated by our company, our company's office
or agency in New York will be the office of the senior subordinated note
trustee maintained for such purpose. The senior subordinated notes were
issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the
senior subordinated notes is subordinated in right of payment, as
described in the senior subordinated note indenture, to the prior
payment in full in cash of all Senior Debt, whether outstanding on the
date of the senior subordinated note indenture or thereafter incurred.
Upon any distribution to creditors of our company in a liquidation
or dissolution of our company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to our company
or its property, an assignment for the benefit of creditors or any
marshaling of our company's assets and liabilities, the holders of
Senior Debt will be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after
the commencement of any such proceeding at the rate specified in the
applicable Senior Debt, whether or not an allowable claim in any such
proceeding) before the holders of senior subordinated notes will be
entitled to receive any payment with respect to the senior subordinated
notes, and until all Obligations with respect to Senior Debt are paid in
full, any distribution to which the holders of senior subordinated notes
would be entitled shall be made to the holders of Senior Debt (except
that, in each case, holders of senior subordinated notes may receive and
retain Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance").
We also may not make any payment upon or in respect of the senior
subordinated notes (except in Permitted Junior Securities or from the
trust described under "--Legal Defeasance and Covenant Defeasance") if
(1) a default in the payment of the principal of, premium, if any, or
interest on Designated Senior Debt occurs and is continuing or (2) any
other default occurs and is continuing with respect to Designated Senior
Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity (or that would permit such
holders to accelerate with the giving of notice or the passage of time
or both) and the senior subordinated note trustee receives a notice of
such default (a "Payment Blockage Notice") from our company or the
holders of any Designated Senior Debt. Payments on the senior
subordinated notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated. No new
period of payment blockage may be commenced with respect to any
particular Designated Senior Debt unless and until (1) 360 days have
elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (2) all scheduled payments of principal, premium, if
any, and interest and Liquidated Damages, if any, on the senior
subordinated notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the senior subordinated note
trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been waived for a period
of not less than 90 days.
The senior subordinated note indenture will further require that
our company promptly notify holders of Senior Debt if payment of the
senior subordinated notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in
the event of a liquidation or insolvency, holders of senior subordinated
notes may recover less ratably than creditors of our company who are
holders of Senior Debt. The principal amount of Senior Debt outstanding
at March 31, 2000, was approximately $1,397.2 million. The senior
subordinated note indenture will limit, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Debt,
that our company and its Subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" means (1) any Indebtedness of our company
or any of its Restricted Subsidiaries outstanding under Credit
Facilities, (2) any Indebtedness outstanding under the senior note
indenture and (3) any other Senior Debt permitted under the senior
subordinated note indenture the principal amount of which is $25.0
million or more and that has been designated by our company as
"Designated Senior Debt."
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"Permitted Junior Securities" means Equity Interests in our
company or any senior subordinated note guarantor or debt securities
that are subordinated to all Senior Debt (and any debt securities issued
in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the senior subordinated notes and the
Subordinated Subsidiary guarantees are subordinated to Senior Debt under
Article 10 of the senior subordinated note indenture.
"Senior Debt" means (1) all Indebtedness of our company or any of
its Restricted Subsidiaries outstanding under Credit Facilities and all
Hedging Obligations with respect thereto, (2) any other Indebtedness
permitted to be incurred by our company or any of its Restricted
Subsidiaries under the terms of the senior subordinated note indenture,
unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right
of payment to the senior subordinated notes or any guarantee of the
senior subordinated notes and (3) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (w) any liability for federal, state, local
or other taxes owed or owing by our company or any Subsidiary, (x) any
Indebtedness of our company or any Subsidiary to any Subsidiaries of our
company or to our company, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the senior subordinated
note indenture.
SENIOR SUBORDINATED NOTE GUARANTEES
Our company's payment obligations under the senior subordinated
notes will be fully and unconditionally, and jointly and severally,
guaranteed by the senior subordinated note guarantors. The senior
subordinated note guarantee of each senior subordinated note guarantor
will be subordinated to the prior payment in full of all Senior Debt of
the senior subordinated note guarantors and the amounts for which the
senior subordinated note guarantors will be liable under the guarantees
issued from time to time with respect to Senior Debt. The obligations of
each senior subordinated note guarantor under its senior subordinated
guarantee will be limited to the maximum amount that would not
constitute a fraudulent conveyance under applicable law. See "Risk
Factors--Risks Relating to the Notes--Your Rights Under the Notes Could
Be Limited By Fraudulent Conveyance Laws." Notwithstanding the
foregoing, no Subsidiary of our company will be required to endorse a
senior subordinated note guarantee unless such Subsidiary is required
to, and does, simultaneously execute a guarantee of the Senior Credit
Facilities.
As of June 30, 2000, the senior subordinated note guarantors were:
Affinity Mining Company, Arid Operations Inc., Big Sky Coal Company,
Blackrock First Capital Corporation, Bluegrass Coal Company, Caballo
Coal Company, Charles Coal Company, Cleaton Coal Company, Coal
Properties Corp., Colony Bay Coal Company, Cook Mountain Coal Company,
Cottonwood Land Company, Darius Gold Mine, Inc., EACC Camps, Inc.,
Eastern Associated Coal Corp., Eastern Royalty Corp., Gallo Finance
Company, Gold Fields Chile, S.A., Gold Fields Mining Corporation, Gold
Fields Operating Co.--Oritz, Grand Eagle Mining, Inc., Hayden Gulch
Terminal, Inc., Highland Mining Co., Independence Material Handling
Company, Interior Holdings Corp., James River Coal Terminal Company,
Juniper Coal Company, Kayenta Mobile Home Park, Inc., Martinka Coal
Company, Midco Supply and Equipment Corporation, Mountain View Coal
Company, North Page Coal Corp., Ohio County Coal Company, Patriot Coal
Company L.P., Peabody America, Inc., Peabody COALSALES Company, Peabody
COALTRADE, Inc., Peabody Coal Company, Peabody Development Company,
Peabody Development Land Holdings, LLC, Peabody Energy Solutions, Inc.,
Peabody Enterprises, Inc. II, Peabody Holding Company, Inc., Peabody
Natural Gas, LLC, Peabody Natural Resources Company, Peabody
Southwestern Coal Company, Peabody Terminals, Inc., Peabody Venezuela
Coal Corp., Peabody Western Coal Company, Pine Ridge Coal Company,
Porcupine Productions, LLC Porcupine Transportation, LLC, Power River
Coal Company, Rio Escondido Coal Corp., Seneca Coal Company, Sentry
Mining Company, Snowberry Land Company, Sterling Smokeless Coal Company,
and Thoroughbred, L.L.C.
The senior subordinated notes are not guaranteed by certain of our
company's Domestic Subsidiaries or by any Foreign Subsidiaries of our
company. For the fiscal year ended March 31, 2000, the Non-Guarantor
Subsidiaries accounted for 29% and 45% of revenues and EBITDA,
respectively, and, as of March 31, 2000, the Non-Guarantor Subsidiaries
accounted for 20% of assets. The claims of creditors (including trade
creditors) of any Non-Guarantor Subsidiary will generally have priority
as to the assets of such Subsidiaries over the claims of the holders of
the senior subordinated notes. As of March 31, 2000, the amount of
liabilities of such Non-Guarantor Subsidiaries was $496.3 million.
The senior subordinated note indenture provides that no senior
subordinated note guarantor may consolidate with or merge with or into
(whether or not such senior subordinated note guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated
with such senior subordinated note guarantor unless (1) subject to the
provisions of the following paragraph, the Person formed by or surviving
any such consolidation or merger (if other than such senior subordinated
note guarantor) assumes all the obligations of such senior subordinated
note guarantor under a supplemental
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indenture in form and substance reasonably satisfactory to the senior
subordinated note trustee, under the senior subordinated notes, the
senior subordinated note indenture and the Senior Subordinated
Registration Rights Agreement; (2) immediately after giving effect to
such transaction, no Default or Event of Default exists; and (3) our
company would be permitted by virtue of our company's pro forma Fixed
Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness under
the Fixed Charge Coverage Ratio test contained in the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
The senior subordinated note indenture provides that in the event
of (a) a sale or other disposition of all of the assets of any senior
subordinated note guarantor, by way of merger, consolidation or
otherwise, (b) a sale or other disposition of all of the capital stock
of any senior subordinated note guarantor or (c) the designation of a
senior subordinated note guarantor as an Unrestricted Subsidiary in
accordance with the terms of the senior subordinated note indenture,
then such senior subordinated note guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise,
of all of the capital stock of such senior subordinated note guarantor)
or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such senior subordinated note
guarantor) will be released and relieved of any obligations under its
senior subordinated note guarantee; provided that the Net Proceeds of
any such sale or other disposition are applied in accordance with the
applicable provisions of the senior subordinated note indenture and any
such designation of a senior subordinated note guarantor as an
Unrestricted Subsidiary complies with all applicable covenants. See
"--Repurchase at the Option of Holders--Asset Sales."
"Senior subordinated note guarantors" means each of (1) our
company's Domestic Subsidiaries at the date of the closing of the
acquisition, other than Citizens Power and the Subsidiaries of Citizens
Power at the date of the senior subordinated note indenture and (2) any
other subsidiary that executes a senior subordinated Guarantee in
accordance with the provisions of the senior subordinated note
indenture, and their respective successors and assigns.
OPTIONAL REDEMPTION
The senior subordinated notes are subject to redemption at any
time at the option of our company, in whole or in part, upon not less
than 30 nor more than 60 days' notice.
Prior to May 15, 2003, the senior subordinated notes will be
redeemable at a redemption price equal to 100% of the principal amount
thereof plus the applicable Senior Subordinated Notes Make Whole
Premium, plus, to the extent not included in the Senior Subordinated
Notes Make Whole Premium, accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. For purposes of the
foregoing, "Senior Subordinated Notes Make Whole Premium" means, with
respect to a senior subordinated note, an amount equal to the greater of
(a) 104.813% of the outstanding principal amount of such senior
subordinated note and (b) the excess of (1) the present value of the
remaining interest, premium, if any, and principal payments due on such
senior subordinated note as if such senior subordinated note were
redeemed on May 15, 2003, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (2) the outstanding principal
amount of such senior subordinated note.
On or after May 15, 2003, the senior subordinated notes are
redeemable at the redemption prices (expressed as percentages of
principal amount) provided below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date,
if redeemed during the twelve-month period beginning on May 15 of the
years indicated below:
YEAR PERCENTAGE
---- ----------
2003 104.813%
2004 103.208%
2005 101.604%
2006 and thereafter 100.000%
Notwithstanding the foregoing, during the first 36 months after
the date of the closing of the Acquisition, our company may on any one
or more occasions redeem up to 35% of the aggregate principal amount of
senior subordinated notes issued under the senior subordinated note
indenture at a redemption price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the redemption date, with the net cash proceeds of
one or more Equity Offerings; provided that at least 65% of the
aggregate principal amount of senior subordinated notes issued remain
outstanding immediately after the occurrence of such redemption
(excluding senior subordinated notes held by
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our company and its Subsidiaries); and provided, further, that such
redemption shall occur within 120 days of the date of the closing of
such Equity Offering.
SELECTION AND NOTICE
If less than all of the senior subordinated notes are to be
redeemed or purchased in an offer to purchase at any time, selection of
senior subordinated notes for redemption or purchase will be made by the
senior subordinated note trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the senior
subordinated notes are listed, or, if the senior subordinated notes are
not so listed, on a pro rata basis, by lot or by such method as the
senior subordinated note trustee shall deem fair and appropriate;
provided that no senior subordinated notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to
each holder of senior subordinated notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any
senior subordinated note is to be redeemed in part only, the notice of
redemption that relates to such senior subordinated note shall state the
portion of the principal amount thereof to be redeemed. A new senior
subordinated note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon
cancellation of the original senior subordinated note. Senior
subordinated notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to
accrue on senior subordinated notes or portions of them called for
redemption.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of senior
subordinated notes will have the right to require our company to
repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such holder's senior subordinated notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to
the date of purchase (the "Change of Control Payment"). Within ten days
following any Change of Control, our company will mail a notice to each
holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase senior subordinated notes
on the date specified in such notice, which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), under the procedures
required by the senior subordinated note indenture and described in such
notice. Our company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the senior subordinated notes as a
result of a Change of Control.
On the Change of Control Payment Date, our company will, to the
extent lawful, (1) accept for payment all senior subordinated notes or
portions thereof properly tendered pursuant to the Change of Control
Offer, (2) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all senior subordinated notes or
portions thereof so tendered and (3) deliver or cause to be delivered to
the senior subordinated note trustee the senior subordinated notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of senior subordinated notes or portions thereof being
purchased by our company. The Paying Agent will promptly mail to each
holder of senior subordinated notes so tendered the Change of Control
Payment for such senior subordinated notes, and the senior subordinated
note trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new senior subordinated note
equal in principal amount to any unpurchased portion of the senior
subordinated notes surrendered, if any; provided that each such new
senior subordinated note will be in a principal amount of $1,000 or an
integral multiple thereof. The senior subordinated note indenture will
provide that, prior to complying with the provisions of this covenant,
but in any event within 90 days following a Change of Control, our
company will either repay all outstanding Senior Debt other than the
senior notes or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt other than the senior notes
to permit the repurchase of senior subordinated notes required by this
covenant. With respect to the senior subordinated notes, our company may
effect a Change of Control under the terms of the senior subordinated
note indenture; provided that our company complies with the provisions
of the senior note indenture under the covenant described under
"Description of the Senior Notes--Repurchase at the Option of Holders--
Change of Control." The company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
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The Change of Control provisions described above will be
applicable whether or not any other provisions of the senior
subordinated note indenture are applicable. Except as described above
with respect to a Change of Control, the senior subordinated note
indenture does not contain provisions that permit the holders of the
senior subordinated notes to require that our company repurchase or
redeem the senior subordinated notes in the event of a takeover,
recapitalization or similar transaction.
Our company's other senior indebtedness contains prohibitions on
certain events that would constitute a Change of Control. In addition,
the exercise by the holders of senior subordinated notes of their right
to require our company to repurchase the senior subordinated notes could
cause a default under such other senior indebtedness, even if the Change
of Control itself does not, due to the financial effect of such
repurchases on our company. Finally, our company's ability to pay cash
to the holders of senior subordinated notes upon a repurchase may be
limited by our company's then existing financial resources. See "Risk
Factors--Risks Relating to the Notes--Our Ability to Offer to Purchase
Your Notes in the Event of a Change of Control may be Limited."
The Senior Credit Facilities currently prohibit our company from
purchasing any senior notes or senior subordinated notes, and also
provide that certain change of control events with respect to our
company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which our
company becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when our company is
prohibited from purchasing senior subordinated notes, our company could
seek the consent of its lenders to the purchase of senior subordinated
notes or could attempt to refinance the borrowings that contain such
prohibition. If our company does not obtain such a consent or repay such
borrowings, our company will remain prohibited from purchasing senior
subordinated notes. In such case, our company's failure to purchase
tendered senior subordinated notes would constitute an Event of Default
under the senior subordinated note indenture which would, in turn,
constitute a default under the Senior Credit Facilities. In such
circumstances, the subordination provisions in the senior subordinated
note indenture would likely restrict payments to the holders of senior
subordinated notes. See "--Subordination."
Our company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements contained in the senior subordinated note indenture
applicable to a Change of Control Offer made by our company and
purchases all senior subordinated notes validly tendered and not
withdrawn under such Change of Control Offer or if our company exercises
its option to purchase the senior subordinated notes.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of our company
and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal (as defined below), (2) the
adoption of a plan relating to the liquidation or dissolution of our
company, (3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall
be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock
of our company (measured by voting power rather than number of shares)
or (4) the first day on which a majority of the members of the Board of
Directors of our company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of our company and its Subsidiaries
taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly,
the ability of a holder of senior subordinated notes to require our
company to repurchase such senior subordinated notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all
of the assets of our company and its Subsidiaries taken as a whole to
another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of our company who (1) was a member of
such Board of Directors on the date of the closing of the Acquisition or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
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"Principals" means Lehman Brothers Merchant Banking Partners II
L.P., any of its respective Affiliates and executive officers of our
company as of the date of the closing of the Acquisition.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal
or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such
Principal and/or such other Persons referred to in the immediately
preceding clause (A).
ASSET SALES
The senior subordinated note indenture provides that our company
will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless (1) our company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value as determined in
good faith by our company (evidenced by a resolution of the Board of
Directors described in an Officers' Certificate delivered to the senior
subordinated note trustee with respect to any Asset Sale determined to
have a value greater that $25.0 million) of the assets or Equity
Interests issued or sold or otherwise disposed of and (2) at least 75%
of the consideration therefor received by our company or such Subsidiary
is in the form of cash, Cash Equivalents or Marketable Securities;
provided that the following amounts shall be deemed to be cash: (w) any
liabilities (as shown on our company's or such Restricted Subsidiary's
most recent balance sheet), of our company or any Restricted Subsidiary
(other than contingent liabilities and liabilities that are by their
terms subordinated to the senior subordinated notes or any guarantee
thereof) that are assumed by the transferee of any such assets under a
customary novation agreement that releases our company or such
Restricted Subsidiary from further liability, (x) any securities, notes
or other obligations received by our company or any such Restricted
Subsidiary from such transferee that are converted by our company or
such Restricted Subsidiary into cash within 180 days following the
closing of such Asset Sale (to the extent of the cash received), (y) any
Designated Noncash Consideration received by our company or any of its
Restricted Subsidiaries in such Asset Sale; provided that the aggregate
fair market value (as determined above) of such Designated Noncash
Consideration, taken together with the fair market value at the time of
receipt of all other Designated Noncash Consideration received pursuant
to this clause (y) less the amount of Net Proceeds previously realized
in cash from prior Designated Noncash Consideration is less than 5% of
Total Assets at the time of the receipt of such Designated Noncash
Consideration (with the fair market value of each item of Designated
Noncash Consideration being measured at the time received and without
giving effect to subsequent changes in value) and (z) Additional Assets
received in an exchange of assets transaction.
Within 360 days after the receipt of any cash Net Proceeds from an
Asset Sale, our company or such Restricted Subsidiary, at its option,
may apply such cash Net Proceeds, at its option, (a) to repay Senior
Debt of our company or any Restricted Subsidiary including, without
limitation, Indebtedness under a Credit Facility and the senior notes,
(b) to the Acquisition of a majority of the assets of, or a majority of
the Voting Stock of, another Permitted Business, the making of a capital
expenditure or the Acquisition of other assets or Investments that are
used or useful in a Permitted Business or (c) to apply the cash Net
Proceeds from such Asset Sale to an Investment in Additional Assets. Any
cash Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $15.0 million, our company will be required to make an
offer to all holders of senior subordinated notes and all holders of
other Indebtedness that is not Senior Debt containing provisions similar
to those contained in the senior subordinated note indenture with
respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount
of senior subordinated notes and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, in accordance with the procedures contained in the senior
subordinated note indenture and such other Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale
Offer, our company may use such Excess Proceeds for any purpose not
otherwise prohibited by the senior subordinated note indenture. If the
aggregate principal amount of senior subordinated notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by holders
thereof exceeds the amount of Excess Proceeds, the senior subordinated
note trustee shall select the senior subordinated notes and such other
Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at
zero.
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COVENANTS
RESTRICTED PAYMENTS
The senior subordinated note indenture provides that our company
will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly: (1) declare or pay any dividend or make any
other payment or distribution on account of our company's or any of its
Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving our company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of our company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of our company); (2) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving our company) any
Equity Interests of our company or any direct or indirect parent of our
company; (3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the senior subordinated notes or
any senior subordinated guarantee, except a payment of interest or
principal at Stated Maturity or Indebtedness permitted under clause (8)
of the covenant described under "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" or (4) make any Restricted Investment (all
such payments and other actions contained in clauses (1) through (4)
above being collectively referred to as "Restricted Payments"), unless,
at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) our company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness under the Fixed Charge
Coverage Ratio test described in the first paragraph of the
covenant described below under caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by our company and
its Subsidiaries after the date of the closing of the Acquisition
(excluding Restricted Payments permitted by clauses (2), (3), (4),
(5), and (9) of the next succeeding paragraph), is less than the
sum, without duplication, of (1) 50% of the Consolidated Net
Income of our company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing
after the date of the closing of the Acquisition to the end of our
company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (2) 100% of the
aggregate net cash proceeds or the fair market value of property
other than cash received by our company since the date of the
closing of the Acquisition as a contribution to its common equity
capital or from the issue or sale of Equity Interests of our
company (other than Disqualified Stock) or from the issue or sale
of Disqualified Stock or debt securities of our company that have
been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of our company), plus (3) to the extent that
either any Existing Citizens Power Investment or any Restricted
Investment that reduced the amount available for Restricted
Payments under this clause (c) is sold for cash or otherwise
liquidated or repaid for cash or any dividend or payment is
received by our company or a Restricted Subsidiary after the date
of the closing of the Acquisition in respect of such Investment,
100% of the amount of Net Proceeds or dividends or payments
(including the fair market value of property) received in
connection therewith, up to the amount of the Existing Citizens
Power Investment on the date of the closing of the Acquisition or
the Restricted Investment that reduced this clause (c), as the
case may be, and thereafter 50% of the amount of Net Proceeds or
dividends or payments (including the fair market value of
property) received in connection therewith (except that the amount
of dividends or payments received in respect of payments of
Obligations in respect of such Investments, such as taxes, shall
not increase the amounts under this clause (c)), plus (4) to the
extent that any Unrestricted Subsidiary of our company is
redesignated as a Restricted Subsidiary after the date of the
closing of the Acquisition, 100% of the fair market value of our
company's Investment in such Subsidiary as of the date of such
redesignation up to the amount of the Restricted Investments made
in such Subsidiary that reduced this clause (c) and 50% of the
excess of the fair market value of our company's Investment in
such Subsidiary as of the date of such redesignation over (i) the
amount of the Restricted Investment that reduced this clause (c)
and (ii) any amounts that increased the amount available as a
Permitted Investment; provided, further, that if Citizens Power or
any of its Subsidiaries is designated as a Restricted Subsidiary,
the amount of the fair market value of the Investment therein on
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the date of the senior subordinated note indenture shall also be
credited to this clause (c); provided, further, that any amounts
that increase this clause (c) shall not duplicatively increase
amounts available as Permitted Investments.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the senior
subordinated note indenture;
(2) the redemption, repurchase, retirement, defeasance or
other Acquisition of any subordinated Indebtedness or Equity
Interests of our company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of our company) of, other Equity Interests
of our company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
Acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other
Acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) dividends or distributions by a Restricted Subsidiary of
our company so long as, in the case of any dividend or
distribution payable on or in respect of any class or series of
securities issued by a Restricted Subsidiary, our company or a
Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests
in such class or series of securities;
(5) Investments in Unrestricted Subsidiaries having an
aggregate fair market value not to exceed the amount, at the time
of such Investment, substantially concurrently contributed in cash
or Cash Equivalents to the common equity capital of our company
after the date of the closing of the acquisition; provided that
any such amount contributed shall be excluded from the calculation
made pursuant to clause (c) above;
(6) the payment of dividends on our company's common stock,
following the first public offering of our company's common stock
after the date of the closing of the acquisition, of up to 6% per
annum of the net proceeds received by our company in such public
offering, other than public offerings with respect to our
company's common stock registered on Form S-8;
(7) the repurchase, redemption or other Acquisition or
retirement for value of any Equity Interests of our company or any
Restricted Subsidiary of our company held by any present or former
employee or director of our company (or any of its Restricted
Subsidiaries) under any management equity subscription agreement
or stock option agreement or any other management or employee
benefit plan in effect as of the date of the closing of the
Acquisition; provided that (A) the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $2.0 million in any twelve-month period (with
unused amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum (without giving
effect to the following proviso) of $5.0 million in any calendar
year); provided further that such amount in any calendar year may
be increased by an amount not to exceed (x) the cash proceeds from
the sale of Equity Interests of our company or a Restricted
Subsidiary to members of management and directors of our company
and its Subsidiaries that occurs after the date of the closing of
the Acquisition, plus (y) the cash proceeds of key-man life
insurance policies received by our company and its Restricted
Subsidiaries after the date of the closing of the Acquisition,
less (z) the amount of any Restricted Payments previously made
pursuant to clauses (x) and (y) of this subparagraph (7); and,
provided further, that cancellation of Indebtedness owing to our
company from members of management of our company or any of its
Restricted Subsidiaries in connection with a repurchase of Equity
Interests of our company or a Restricted Subsidiary will not be
deemed to constitute a Restricted Payment for purposes of this
covenant or any other provision of the senior subordinated note
indenture and (B) no Default or Event of Default shall have
occurred and be continuing immediately after such transaction;
(8) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a
portion of the exercise price of such options; and
(9) other Restricted Payments not otherwise prohibited by
this covenant in an aggregate amount not to exceed $25.0 million
under this clause (9).
All of our company's Subsidiaries other than Citizens Power and
its Subsidiaries are Restricted Subsidiaries. The Board of Directors may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if
such designation would not
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cause a Default. For purposes of making such determination, all
outstanding Investments by our company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated
will be deemed to be Restricted Payments at the time of such designation
and will reduce the amount available for Restricted Payments under the
first paragraph of this covenant. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the fair
market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary.
If, at any time, any Unrestricted Subsidiary would fail to meet
the requirements in the definition of "Unrestricted Subsidiary" as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the senior subordinated note indenture and
any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of our company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," our company shall be in default of such
covenant). The Board of Directors of our company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of our company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is
permitted under the covenant described under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock," calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (2) no Default or Event of Default
would be in existence following such designation.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the
asset(s) or securities proposed to be transferred or issued by our
company or such Restricted Subsidiary, as the case may be, pursuant to
the Restricted Payment. The fair market value of any noncash Restricted
Payment or any adjustment made pursuant to paragraph (c) of this
covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the senior subordinated note
trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $25.0 million. Not
later than the date of making any Restricted Payment, our company shall
deliver to the senior subordinated note trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the
basis upon which the calculations required by the covenant "Restricted
Payments" were computed.
If any Restricted Investment is sold or otherwise liquidated or
repaid or any dividend or payment is received by our company or a
Restricted Subsidiary and such amounts may be credited to clause (c)
above, then such amounts will be credited only to the extent of amounts
not otherwise included in Consolidated Net Income and that do not
otherwise increase the amount available as a Permitted Investment.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The senior subordinated note indenture provides that our company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt)
and that our company will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that our company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and our company's
Restricted Subsidiaries may incur Indebtedness or issue Disqualified
Stock or preferred stock if the Fixed Charge Coverage Ratio for our
company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued would have been at least
2.0 to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred
stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(1) the incurrence by our company of term Indebtedness under
Credit Facilities (and the guarantee thereof by the senior
subordinated note guarantors); provided that the aggregate
principal amount of all term Indebtedness outstanding under this
clause (1) after giving effect to such incurrence does not exceed
an amount equal to $920.0 million;
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(2) the incurrence by our company of revolving credit
Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of our company and its Restricted Subsidiaries
thereunder) under Credit Facilities (and the guarantee thereof by
the senior subordinated note guarantors); provided that the
aggregate principal amount of all revolving credit Indebtedness
outstanding under this clause (2) after giving effect to such
incurrence does not exceed an amount equal to $480.0 million;
(3) the incurrence by our company and its Restricted
Subsidiaries of the Existing Indebtedness;
(4) the incurrence by our company, the senior subordinated
note guarantors and the senior note guarantors of Indebtedness
represented by the senior notes, the senior subordinated notes,
the senior subordinated note guarantees and the senior
subordinated note guarantees limited in aggregate principal
amount, without duplication, to amounts outstanding under the
senior note indenture and the senior subordinated note indenture
as of their respective dates;
(5) (A) the guarantee by our company or any of the senior
subordinated note guarantors of Indebtedness of our company or a
Restricted Subsidiary of our company or (B) the incurrence of
Indebtedness of a Restricted Subsidiary to the extent that such
Indebtedness is supported by a letter of credit, in each case that
was permitted to be incurred by another provision of this
covenant;
(6) the incurrence by our company or any of its Restricted
Subsidiaries of Indebtedness (including Capital Lease Obligations)
to finance the Acquisition (including by direct purchase, by lease
or indirectly by the Acquisition of the capital stock of a Person
that becomes a Restricted Subsidiary as a result of such
Acquisition) or improvement of property (real or personal) in an
aggregate principal amount which, when aggregated with the
principal amount of all other Indebtedness then outstanding
pursuant to this clause (6) and including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (6), does not
exceed an amount equal to 5% of Total Assets at the time of such
incurrence;
(7) the incurrence by our company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany Indebtedness) that
was permitted by the senior subordinated note indenture to be
incurred under the first paragraph hereof or clauses (3), (4) or
(7) of this paragraph;
(8) the incurrence by our company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among our
company and any of its Restricted Subsidiaries; provided, however,
that (1) if our company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the senior
subordinated notes and (2)(A) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being
held by a Person other than our company or a Restricted Subsidiary
thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either our company or a
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by our company or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (8);
(9) the incurrence by our company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the
ordinary course of business for the purpose of risk management and
not for the purpose of speculation;
(10) the incurrence by our company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided, however, that if any
such Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary, such event shall be deemed to constitute
an incurrence of Indebtedness by a Restricted Subsidiary of our
company that was not permitted by this clause (10), and the
issuance of preferred stock by Unrestricted Subsidiaries;
(11) the incurrence of Indebtedness solely in respect of
performance, surety and similar bonds or completion or performance
guarantees (including, without limitation, performance guarantees
under coal supply agreements or equipment leases), to the extent
that such incurrence does not result in the incurrence of any
obligation for the payment of borrowed money to others;
(12) the incurrence of Indebtedness arising from agreements
of our company or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary; provided,
however that (1) such Indebtedness is not reflected on the balance
sheet of our company or any Restricted Subsidiary (contingent
obligations referred to in a footnote to financial statements and
not otherwise reflected on the balance sheet will not be deemed to
be reflected on such balance sheet for purposes of this clause
(1)) and (2) the maximum assumable liability in respect of all
such
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Indebtedness shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds
being measured at the time received and without giving effect to
any subsequent changes in value) actually received by our company
and its Restricted Subsidiaries in connection with such
disposition;
(13) the guarantee by our company or any of the senior
subordinated note guarantors of additional Indebtedness relating
to Black Beauty Coal Company not to exceed $50.0 million in
aggregate principal amount outstanding at any one time under this
clause (13);
(14) the incurrence of Indebtedness relating to the Bengalla
Joint Venture or the Warkworth Associates Joint Venture in an
aggregate amount not to exceed $100.0 million in aggregate
principal amount outstanding at any one time under this clause
(14); and
(15) the incurrence by our company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to
this clause (15), not to exceed $250.0 million.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through
(15) above or is entitled to be incurred pursuant to the first paragraph
of this covenant, our company shall, in its sole discretion, classify or
reclassify such item of Indebtedness in any manner that complies with
this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the payment
of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the amount
thereof is included in Fixed Charges of our company as accrued.
LIENS
The senior subordinated note indenture provides that our company
will not and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing
Indebtedness or trade payables (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all
payments due under the senior subordinated note indenture and the senior
subordinated notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer
secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The senior subordinated note indenture provides that our company
will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary that is not a senior subordinated note guarantor
to (1)(a) pay dividends or make any other distributions to our company
or any of its Restricted Subsidiaries (i) on its capital stock or (ii)
with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to our company or any of
its Restricted Subsidiaries, (2) make loans or advances to our company
or any of its Restricted Subsidiaries or (3) transfer any of its
properties or assets to our company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the closing of the Acquisition,
(b) the Senior Credit Facilities as in effect as of the date of the
closing of the Acquisition, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements
or refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement
or refinancings are no more restrictive, taken as a whole, with respect
to such dividend and other payment restrictions than those contained in
the Senior Credit Facilities as in effect on the date of the closing of
the Acquisition, (c) the senior note indenture, the senior subordinated
note indenture, the senior notes and the senior subordinated notes,
(d) applicable law or any applicable rule, regulation or order, (e) any
instrument governing Indebtedness or capital stock of a Person acquired
by our company or any of its Restricted Subsidiaries as in effect at the
time of such Acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such Acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of
the senior subordinated note indenture to be incurred, (f) customary
non-assignment provisions in leases and other agreements entered into in
the ordinary course of business and consistent with past practices, (g)
purchase money obligations
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for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (3) above on the property
so acquired, (h) any agreement for the sale of a Restricted Subsidiary
that restricts distributions by that Restricted Subsidiary pending its
sale, (i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced, (j) secured Indebtedness otherwise permitted to be incurred
under the provisions of the covenant described above under the caption
"--Liens" that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary
course of business, (l) restrictions on cash or other deposits or net
worth imposed by customers or lessors under contracts or leases entered
into in the ordinary course of business and (m) any encumbrances or
restrictions imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (a) through (l) above, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment
of our company's Board of Directors, not materially more restrictive in
the aggregate with respect to such dividend and other payment
restrictions than those (considered as a whole) contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The senior subordinated note indenture provides that our company
may not consolidate or merge with or into (whether or not our company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation,
Person or entity unless (1) our company is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation
or merger (if other than our company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (2) the entity or Person
formed by or surviving any such consolidation or merger (if other than
our company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
assumes all the obligations of our company under the Senior Subordinated
Registration Rights Agreement, the senior subordinated notes and the
senior subordinated note indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the senior subordinated note
trustee; (3) immediately after such transaction no Default or Event of
Default exists; and (4) except in the case of a merger of our company
with or into a Wholly Owned Restricted Subsidiary of our company,
immediately after giving pro forma effect to such transaction, as if
such transaction had occurred at the beginning of the applicable four-
quarter period, (A) the entity surviving such consolidation or merger
would be permitted to incur at least $1.00 of additional Indebtedness
under the Fixed Charge Coverage Ratio test contained in the first
paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock" or (B) the
Fixed Charge Coverage Ratio for our company or the entity or Person
formed by or surviving any such consolidation or merger (if other than
our company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made would, immediately
after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, not be
less than such Fixed Charge Coverage Ratio for our company and its
Restricted Subsidiaries immediately prior to such transaction. The
senior subordinated note indenture also provides that our company may
not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other
Person. The provisions of this covenant will not be applicable to a
sale, assignment, transfer, conveyance or other disposition of assets
between or among our company and its Restricted Subsidiaries.
Notwithstanding the foregoing clause (4), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of
its properties and assets to our company and (2) our company may merge
with an Affiliate that has no significant assets or liabilities and was
formed solely for the purpose of changing the jurisdiction of
organization of our company in another State of the United States or the
form of organization of our company so long as the amount of
Indebtedness of our company and its Restricted Subsidiaries is not
increased thereby and provided that the successor assumes all the
obligations of our company under the Senior Subordinated Registration
Rights Agreement, the senior subordinated notes and the senior
subordinated note indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the senior subordinated note trustee.
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TRANSACTIONS WITH AFFILIATES
The senior subordinated note indenture provides that our company
will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction") involving aggregate payments or consideration in excess of
$5.0 million, unless (1) such Affiliate Transaction is on terms that are
materially no less favorable to our company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by our company or such Restricted Subsidiary with an
unrelated Person and (2) our company delivers to the senior subordinated
note trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, a resolution of the Board of Directors
contained in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above and that such Affiliate
Transaction has been approved by a majority of the members of the Board
of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in
excess of $25.0 million, an opinion as to the fairness to the holders of
such Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (1) any employment agreement or
other compensation plan or arrangement for employees entered into by our
company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of our company or such
Restricted Subsidiary; (2) transactions between or among our company
and/or its Restricted Subsidiaries; (3) payment of reasonable fees to
officers, directors, employees or consultants of our company; (4)
Restricted Payments that are permitted by, and Investments that are not
prohibited by, the provisions of the senior subordinated note indenture
described above under the caption "--Restricted Payments;" (5)
indemnification payments made to officers, directors and employees of
our company or any Restricted Subsidiary under charter, bylaw, statutory
or contractual provisions; (6) the payment of customary annual
management, consulting and advisory fees and related expenses to Lehman
Merchant Bank and its Affiliates; (7) payments by our company or any of
its Restricted Subsidiaries to Lehman Merchant Bank and its Affiliates
made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities,
including, without limitation, in connection with Acquisitions or
divestitures which payments are approved by a majority of the Board of
Directors of our company in good faith; (8) the existence of, or the
performance by our company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders' agreement (including
any registration rights agreement or purchase agreement related thereto)
to which it is a party as of the date of the closing of the Acquisition
and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by our company or any
of its Restricted Subsidiaries of obligations under any future amendment
to any such existing agreement or under any similar agreement entered
into after the date of the closing of the Acquisition shall only be
permitted by this clause (8) to the extent that the terms of any such
amendment or new agreement are not otherwise disadvantageous to the
holders in any material respect; (9) transactions under the terms of the
Transaction Documents in effect on the date of the closing of the
Acquisition; (10) transactions with Unrestricted Subsidiaries,
customers, clients, suppliers, joint venture partners or purchasers or
sellers of goods or services, in each case in the ordinary course of
business (including, without limitation, under joint venture agreements)
and otherwise in compliance with the terms of the senior subordinated
note indenture which are, in the aggregate (taking into account all the
costs and benefits associated with such transactions), materially no
less favorable to our company or its Restricted Subsidiaries than those
that would have been obtained in a comparable transaction by our company
or such Restricted Subsidiary with an unrelated Person, in the
reasonable determination of the Board of Directors of our company or the
senior management thereof, or are on terms at least as favorable as
might reasonably have been obtained at such time from an unaffiliated
party; (11) guarantees of performance by our company and its Restricted
Subsidiaries of Unrestricted Subsidiaries in the ordinary course of
business, except for guarantees of Obligations in respect of borrowed
money; and (12) pledges of Equity Interests of Unrestricted Subsidiaries
for the benefit of lenders of Unrestricted Subsidiaries.
ADDITIONAL SUBORDINATED SUBSIDIARY GUARANTEES
The senior subordinated note indenture provides that if our
company or any of its Domestic Subsidiaries shall acquire or create
another Domestic Subsidiary after the date of the senior subordinated
note indenture and such Domestic Subsidiary provides a guarantee of the
Senior Credit Facilities, then such newly acquired or created Domestic
Subsidiary shall execute a supplemental indenture in form and substance
satisfactory to the senior subordinated note trustee providing that such
Domestic Subsidiary shall become a senior subordinated note guarantor
under the senior subordinated note indenture,
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provided, however, this covenant shall not apply to any Domestic
Subsidiary that has been properly designated as an Unrestricted
Subsidiary in accordance with the senior subordinated note indenture for
so long as it continues to constitute an Unrestricted Subsidiary.
NO SENIOR SUBORDINATED DEBT
The senior subordinated note indenture provides that (1) our
company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right
of payment to the senior subordinated notes, and (2) no senior
subordinated note guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to the senior note guarantees and senior in
any respect in right of payment to the senior subordinated note
guarantees.
BUSINESS ACTIVITIES
Our company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses,
except to such extent as would not be material to our company and its
Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The senior subordinated note indenture provides that neither our
company nor any of its Restricted Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any senior subordinated
notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the senior subordinated note indenture or
the senior subordinated notes unless such consideration is offered to be
paid or is paid to all holders of the senior subordinated notes that
consent, waive or agree to amend in the time frame under the
solicitation documents relating to such consent, waiver or agreement.
REPORTS
The senior subordinated note indenture provides that, whether or
not required by the rules and regulations of the Commission, so long as
any senior subordinated notes are outstanding, our company will furnish
to the holders of senior subordinated notes (1) all quarterly and annual
financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if our company were required
to file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the
financial condition and results of operations of our company and its
consolidated Subsidiaries (showing in reasonable detail, either on the
face of the financial statements or in the footnotes thereto and in
Management's Discussion and Analysis of Financial Condition and Results
of Operations, the financial condition and results of operations of our
company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of
our company) and, with respect to the annual information only, a report
thereon by our company's certified independent accountants and (2) all
current reports that would be required to be filed with the Commission
on Form 8-K if our company were required to file such reports, in each
case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange
offer contemplated by the Senior Subordinated Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, our company will file a copy of all such information and
reports with the Commission for public availability within the time
periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
In addition, our company and the senior subordinated note guarantors
have agreed that, for so long as any senior subordinated notes remain
outstanding, they will furnish to the holders and to securities analysts
and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The senior subordinated note indenture provides that each of the
following constitutes an Event of Default: (1) default for 30 days in
the payment when due of interest on, or Liquidated Damages, if any, with
respect to, the senior subordinated notes (whether or not prohibited by
the subordination provisions of the senior subordinated note indenture);
(2) default in payment when due of the principal of or premium, if any,
on the senior subordinated notes (whether or not prohibited by the
subordination provisions of the senior subordinated note indenture); (3)
failure by our company or any of its Subsidiaries to make the offer
required or to purchase any of the senior subordinated notes as required
under the provisions described under
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the captions "--Change of Control," or "--Asset Sales;" (4) failure by
our company or any of its Subsidiaries for 30 days after notice to
comply with the provisions of the covenants entitled "--Restricted
Payments" or "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" or failure by our company or any of its Subsidiaries for 60 days
after notice to comply with any of its other agreements in the senior
subordinated note indenture or the senior subordinated notes; (5)
default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by our company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by our company or
any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the senior
subordinated note indenture, which default results in the acceleration
of such Indebtedness prior to its express maturity and the principal
amount of any such Indebtedness aggregates $50.0 million or more; (6)
failure by our company or any of its Restricted Subsidiaries or any
group of Restricted Subsidiaries that, taken as a whole, would be a
Significant Subsidiary to pay final judgments aggregating in excess of
$50.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (7) except as permitted by the senior subordinated
note indenture, any senior subordinated note guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any senior subordinated
note guarantor, or any Person acting on behalf of any senior
subordinated note guarantor, shall deny or disaffirm its obligations
under its senior subordinated note guarantee; (8) certain events of
bankruptcy or insolvency with respect to our company, any of its
Significant Subsidiaries that are Restricted Subsidiaries or any group
of Restricted Subsidiaries that, taken as a whole, would be a
Significant Subsidiary; and (9) any failure of our company to deposit
the required amounts into the Escrow Account under the Escrow Letter or
any failure of the proceeds of the Escrow Account to be applied as
required under the Escrow Letter.
If any Event of Default occurs and is continuing, the senior
subordinated note trustee or the holders of at least 25% in principal
amount of the then outstanding senior subordinated notes may declare all
the senior subordinated notes to be due and payable immediately;
provided, that so long as any Indebtedness permitted to be incurred
under the Senior Credit Facilities shall be outstanding, such
acceleration shall not be effective until the earlier of (1) an
acceleration of any such Indebtedness under the Senior Credit Facilities
or (2) five business days after receipt by our company of written notice
of such acceleration of the senior subordinated notes. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, with respect to our company, any
Significant Subsidiary that is a Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding senior subordinated notes will
become due and payable without further action or notice. Holders of the
senior subordinated notes may not enforce the senior subordinated note
indenture or the senior subordinated notes except as provided in the
senior subordinated note indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding senior
subordinated notes may direct the senior subordinated note trustee in
its exercise of any trust or power. The senior subordinated note trustee
may withhold from holders of the senior subordinated notes notice of any
continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of our
company with the intention of avoiding payment of the premium that our
company would have had to pay if our company then had elected to redeem
the senior subordinated notes under the optional redemption provisions
of the senior subordinated note indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the senior subordinated notes. If an
Event of Default occurs prior to May 15, 2003 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of our company
with the intention of avoiding paying the premium upon redemption of the
senior subordinated notes prior to May 15, 2003, then the premium
specified in the senior subordinated note indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the senior subordinated notes.
The holders of a majority in aggregate principal amount of the
senior subordinated notes then outstanding by notice to the senior
subordinated note trustee may on behalf of the holders of all of the
senior subordinated notes waive any existing Default or Event of Default
and its consequences under the senior subordinated note indenture except
a continuing Default or Event of Default in the payment of interest on,
or the principal of, the senior subordinated notes.
Our company is required to deliver to the senior subordinated note
trustee annually a statement regarding compliance with the senior
subordinated note indenture, and our company is required upon becoming
aware of any Default or Event of Default, to deliver to the senior
subordinated note trustee a statement specifying such Default or Event
of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of our
company or any Person controlling such Person, as such, shall have any
liability for any obligations of our company under the senior
subordinated notes, the senior subordinated note guarantees, the senior
subordinated note indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of senior
subordinated notes by accepting a senior subordinated note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the senior subordinated notes. Such waiver
may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against
public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Our company may, at its option and at any time, elect to have all
of its obligations discharged with respect to the outstanding senior
subordinated notes ("Legal Defeasance") except for (1) the rights of
holders of outstanding senior subordinated notes to receive payments in
respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such senior subordinated notes when such
payments are due from the trust referred to below, (2) our company's
obligations with respect to the senior subordinated notes concerning
issuing temporary senior subordinated notes, registration of senior
subordinated notes, mutilated, destroyed, lost or stolen senior
subordinated notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (3) the rights,
powers, trusts, duties and immunities of the senior subordinated note
trustee, and our company's obligations in connection therewith and (4)
the Legal Defeasance provisions of the senior subordinated note
indenture. In addition, our company may, at its option and at any time,
elect to have the obligations of our company released with respect to
certain covenants that are described in the senior subordinated note
indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default
with respect to the senior subordinated notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event
of Default with respect to the senior subordinated notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance, (1) our company must irrevocably deposit with the senior
subordinated note trustee, in trust, for the benefit of the holders of
the senior subordinated notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest and Liquidated Damages, if any, on the outstanding
senior subordinated notes on the stated maturity or on the applicable
redemption date, as the case may be, and our company must specify
whether the senior subordinated notes are being defeased to maturity or
to a particular redemption date; (2) in the case of Legal Defeasance,
our company shall have delivered to the senior subordinated note trustee
an opinion of counsel in the United States reasonably acceptable to the
senior subordinated note trustee confirming that (A) our company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the senior subordinated note
indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion
of counsel shall confirm that, the holders of the outstanding senior
subordinated notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred; (3) in the case of Covenant Defeasance, our
company shall have delivered to the senior subordinated note trustee an
opinion of counsel in the United States reasonably acceptable to the
senior subordinated note trustee confirming that the holders of the
outstanding senior subordinated notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred; (4) no Default or
Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit) or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at
any time in the period ending on the effective date of the defeasance;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the senior subordinated note
indenture) to which our company or any of its Subsidiaries is a party or
by which our company or any of its Subsidiaries is bound; (6) our
company must have delivered to the senior subordinated note trustee, at
or prior to the effective date of such defeasance, an opinion of counsel
to the effect that at the effective date of such defeasance, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (7) our company must deliver to the senior subordinated note
trustee an Officers' Certificate stating that the deposit was not made
by our company with the intent of preferring the holders of senior
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subordinated notes over the other creditors of our company with the
intent of defeating, hindering, delaying or defrauding creditors of our
company or others; and (8) our company must deliver to the senior
subordinated note trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange senior subordinated notes in
accordance with the senior subordinated note indenture. The Registrar
and the senior subordinated note trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents
and our company may require a holder to pay any taxes and fees required
by law or permitted by the senior subordinated note indenture. Our
company is not required to transfer or exchange any senior subordinated
note selected for redemption. Also, our company is not required to
transfer or exchange any senior subordinated note for a period of 15
days before a selection of senior subordinated notes to be redeemed.
The registered holder of a senior subordinated note will be
treated as the owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
senior subordinated note indenture or the senior subordinated notes may
be amended or supplemented with the consent of the holders of at least a
majority in principal amount of the senior subordinated notes then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
senior subordinated notes), and any existing default or compliance with
any provision of the senior subordinated note indenture or the senior
subordinated notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding senior subordinated
notes (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, senior
subordinated notes).
Without the consent of each holder affected, an amendment or
waiver may not (with respect to any senior subordinated notes held by a
non-consenting holder): (1) reduce the principal amount of senior
subordinated notes whose holders must consent to an amendment,
supplement or waiver, (2) reduce the principal of or change the fixed
maturity of any senior subordinated note or alter the provisions with
respect to the redemption of the senior subordinated notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (3) reduce the rate of or
change the time for payment of interest on any senior subordinated note,
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the senior subordinated notes (except
a rescission of acceleration of the senior subordinated notes by the
holders of at least a majority in aggregate principal amount of the
senior subordinated notes and a waiver of the payment default that
resulted from such acceleration), (5) make any senior subordinated note
payable in money other than that stated in the senior subordinated
notes, (6) make any change in the provisions of the senior subordinated
note indenture relating to waivers of past Defaults or the rights of
holders of senior subordinated notes to receive payments of principal of
or premium, if any, or interest on the senior subordinated notes,
(7) waive a redemption payment with respect to any senior subordinated
note (other than a payment required by one of the covenants described
above under the caption "--Repurchase at the Option of Holders"), (8)
make any change in the foregoing amendment and waiver provisions or (9)
release any senior subordinated note guarantor from any of its
obligations under its senior subordinated note guarantee or the senior
subordinated note indenture, except in accordance with the terms of the
senior subordinated note indenture. In addition, any amendment to the
provisions of Article 10 of the senior subordinated note indenture
(which relate to subordination) will require the consent of the holders
of at least 75% in aggregate principal amount of the senior subordinated
notes then outstanding if such amendment would adversely affect the
rights of holders of senior subordinated notes.
Notwithstanding the foregoing, without the consent of any holder
of senior subordinated notes, our company and the senior subordinated
note trustee may amend or supplement the senior subordinated note
indenture or the senior subordinated notes to cure any ambiguity, defect
or inconsistency, to provide for uncertificated senior subordinated
notes in addition to or in place of certificated senior subordinated
notes, to provide for the assumption of our company's obligations to
holders of senior subordinated notes in the case of a merger or
consolidation or sale of all or substantially all of our company's
assets, to make any change that would provide any additional rights or
benefits to the holders of senior subordinated notes or that does not
adversely affect the legal rights under the senior subordinated note
indenture of any such holder, to comply with requirements of the
Commission in order to effect or maintain the qualification of the
senior subordinated note indenture under the Trust Indenture Act, to
provide for the issuance of additional senior subordinated notes in
accordance with the
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limitations contained in this senior subordinated note indenture as of
the date hereof or to allow any senior subordinated note guarantor to
execute a supplemental senior subordinated note indenture and/or a
senior subordinated note guarantee with respect to the senior
subordinated notes.
CONCERNING THE SENIOR SUBORDINATED NOTE TRUSTEE
The senior subordinated note indenture contains certain
limitations on the rights of the senior subordinated note trustee,
should it become a creditor of our company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The senior subordinated note
trustee will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or
resign.
The holders of a majority in principal amount of the then
outstanding senior subordinated notes will have the right to direct the
time, method and place of conducting any proceeding for exercising any
remedy available to the senior subordinated note trustee, subject to
certain exceptions. The senior subordinated note indenture provides that
in case an Event of Default shall occur (which shall not be cured), the
senior subordinated note trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of
his own affairs. Subject to such provisions, the senior subordinated
note trustee will be under no obligation to exercise any of its rights
or powers under the senior subordinated note indenture at the request of
any holder of senior subordinated notes, unless such holder shall have
offered to the senior subordinated note trustee security and indemnity
satisfactory to it against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the senior subordinated notes will
be issued in fully registered form. Except as described in the next
paragraph, the senior subordinated notes initially will be represented
by permanent global senior subordinated notes, in definitive, fully
registered form without interest coupons and will be deposited with the
senior subordinated note trustee as custodian for DTC and registered in
the name of a nominee of DTC.
Except as described below, the global senior subordinated notes
may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee. Beneficial interests in the
global senior subordinated notes may not be exchanged for senior
subordinated notes in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Senior
Subordinated Notes for Certificated Senior Subordinated Notes." Except
in the limited circumstances described below, owners of beneficial
interests in the global senior subordinated notes will not be entitled
to receive physical delivery of certificated senior subordinated notes
(as defined below).
The senior subordinated note trustee will act as Paying Agent and
Registrar. The senior subordinated notes may be presented for
registration of transfer and exchange at the offices of the Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC
are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement
systems and are subject to changes by them from time to time. Our
company takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to
discuss these matters.
DTC has advised our company that DTC is a limited-purpose trust
company created to hold securities for the Participants and to
facilitate the clearance and settlement of transactions in those
securities between Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities
brokers and dealers (including the Initial Purchaser, banks, trust
companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC
only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each
security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised our company that, pursuant to procedures
established by it, (i) upon deposit of the global senior subordinated
notes, DTC will credit the accounts of Participants designated by the
Initial Purchaser with portions of the principal amount of the global
senior subordinated notes and (ii) ownership of such interests in the
global senior subordinated notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained
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by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial
interest in the global senior subordinated notes).
Investors in the global senior subordinated notes may hold their
interests therein directly through DTC, if they are Participants in such
system, or indirectly through organizations which are Participants in
such system. All interests in a global senior subordinated note may be
subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a global senior subordinated note to such
persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having
beneficial interests in a global senior subordinated note to pledge such
interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such
interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL
SENIOR SUBORDINATED NOTE WILL NOT HAVE SENIOR SUBORDINATED NOTES
REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF SENIOR
SUBORDINATED NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE SENIOR SUBORDINATED
NOTE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any,
Liquidated Damages, if any, and interest on a global senior subordinated
note registered in the name of DTC or its nominee will be payable to DTC
in its capacity as the registered holder under the senior subordinated
note indenture. Under the terms of the senior subordinated note
indenture, our company and the senior subordinated note trustee will
treat the persons in whose names the senior subordinated notes,
including the global senior subordinated notes, are registered as the
owners thereof for the purpose of receiving such payments and for any
and all other purposes whatsoever. Consequently, neither our company,
the senior subordinated note trustee nor any agent of our company or the
senior subordinated note trustee has or will have any responsibility or
liability for (1) any aspect of DTC's records or any Participant's or
Indirect Participant's records relating to or payments made on account
of beneficial ownership interests in the global senior subordinated
notes, or for maintaining, supervising or reviewing any of DTC's records
or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the global senior subordinated notes
or (2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants. DTC has advised our
company that its current practice, upon receipt of any payment in
respect of securities such as the senior subordinated notes (including
principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of
beneficial interests in the relevant security as shown on the records of
DTC unless DTC has reason to believe it will not receive payment on such
payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of senior subordinated notes will be governed
by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the senior subordinated note trustee
or our company. Neither our company nor the senior subordinated note
trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the senior subordinated notes,
and our company and the senior subordinated note trustee may
conclusively rely on and will be protected in relying on instructions
from DTC or its nominee for all purposes.
Interests in the global senior subordinated notes are expected to
be eligible to trade in DTC's Same-Day Funds Settlement System and
secondary market trading activity in such interests will, therefore,
settle in immediately available funds, subject in all cases to the rules
and procedures of DTC and its Participants. See "--Same Day Settlement
and Payment."
Transfers between Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same day funds.
DTC has advised our company that it will take any action permitted
to be taken by a holder of senior subordinated notes only at the
direction of one or more Participants to whose account DTC has credited
the interests in the global senior subordinated notes and only in
respect of such portion of the aggregate principal amount of the senior
subordinated notes as to which such Participant or Participants has or
have given such direction. However, if there is an Event of Default
under the senior subordinated notes, DTC reserves the right to exchange
the global senior subordinated notes for legended senior subordinated
notes in certificated form, and to distribute such senior subordinated
notes to its Participants.
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Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the global senior subordinated notes among
Participants in DTC, it is under no obligation to perform or to continue
to perform such procedures, and such procedures may be discontinued at
any time. Neither our company nor the senior subordinated note trustee
nor any of their respective agents will have any responsibility for the
performance by DTC, or its participants or indirect participants of its
obligations under the rules and procedures governing its operations.
EXCHANGE OF BOOK-ENTRY SENIOR SUBORDINATED NOTES FOR CERTIFICATED
SENIOR SUBORDINATED NOTES
A global senior subordinated note is exchangeable for definitive
senior subordinated notes in registered certificated form ("certificated
senior subordinated notes") if (1) DTC (x) notifies our company that it
is unwilling or unable to continue as depositary for the global senior
subordinated notes and our company thereupon fails to appoint a
successor depositary or (y) has ceased to be a clearing agency
registered under the Exchange Act, (2) our company, at its option,
notifies the senior subordinated note trustee in writing that it elects
to cause the issuance of the certificated senior subordinated notes or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the senior subordinated notes. In addition,
beneficial interests in a global senior subordinated note may be
exchanged for certificated senior subordinated notes upon request but
only upon prior written notice given to the senior subordinated note
trustee by or on behalf of DTC in accordance with the senior
subordinated note indenture. In all cases, certificated senior
subordinated notes delivered in exchange for any global senior
subordinated note or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures)
and will bear the applicable restrictive legend referred to in "Notice
to Investors," unless our company determines otherwise in compliance
with applicable law.
EXCHANGE OF CERTIFICATED SENIOR SUBORDINATED NOTES FOR BOOK-ENTRY
SENIOR SUBORDINATED NOTES
Senior subordinated notes issued in certificated form may be
exchanged for beneficial interests in any global senior subordinated
note upon request.
SAME DAY SETTLEMENT AND PAYMENT
The senior subordinated note indenture requires that payments in
respect of the senior subordinated notes represented by the global
senior subordinated notes (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the global
senior subordinated note holder. With respect to senior subordinated
notes in certificated form, our company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by
wire transfer of immediately available funds to the accounts specified
by the holders thereof or, if no such account is specified, by mailing a
check to each such holder's registered address. The senior subordinated
notes represented by the global senior subordinated notes are expected
to trade in DTC's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such senior subordinated notes
will, therefore, be required by DTC to be settled in immediately
available funds. We expect that secondary trading in any certificated
senior subordinated notes will also be settled in immediately available
funds.
DEFINITIONS
The following are defined terms used in the senior subordinated
note indenture. Reference is made to the senior subordinated note
indenture for a full disclosure of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (1)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with,
or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and (2) Indebtedness
secured by a Lien encumbering any asset acquired by such specified
Person.
"Acquisition" means the Acquisition by our company of: (1) all of
the common stock of Peabody Holding Company, (2) all of the common stock
of Gold Fields Mining Corp., (3) all of the membership interests of
Citizens Power, (4) the 1% interests in CL Hartford, L.L.C., a Delaware
limited liability company, and Citizens Power Sales, a Delaware general
partnership.
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"Additional Assets" means (1) any property or assets (other than
capital stock, Indebtedness or rights to receive payments over a period
greater than 180 days, other than with respect to coal supply contract
restructurings) that is usable by our company or a Restricted Subsidiary
in a Permitted Business or (2) the capital stock of a Person that is at
the time, or becomes, a Restricted Subsidiary as a result of the
Acquisition of such capital stock by our company or another Restricted
Subsidiary.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed
to be control.
"Asset Sale" means (1) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by
way of a sale and leaseback) other than sales of inventory in the
ordinary course of business consistent with past practices (provided
that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of our company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
senior subordinated note indenture described above under the caption
"--Change of Control" and/or the provisions described above under the
caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and (2) the issue or sale by our
company or any of its Restricted Subsidiaries of Equity Interests of any
of our company's Restricted Subsidiaries, in the case of either clause
(1) or (2), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $5.0 million
or (b) for Net Proceeds in excess of $5.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales:
(1) a transfer of assets by our company to a Restricted Subsidiary or by
a Restricted Subsidiary to our company or to another Restricted
Subsidiary, (2) an issuance of Equity Interests by a Restricted
Subsidiary to our company or to another Restricted Subsidiary, (3) a
Restricted Payment that is permitted by, or an Investment that is not
prohibited by, the covenant described above under the caption
"--Restricted Payments," (4) a disposition of Cash Equivalents or obsolete
equipment, (5) foreclosures on assets, (6) the sale or discount, in each
case without recourse, of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise or
collection thereof and (7) the factoring of accounts receivable arising
in the ordinary course of business under arrangements customary in the
industry.
"Bengalla Joint Venture" means Bengalla Mining Co. Pty Limited,
Bengalla Agricultural Co. Pty Limited and Bengalla Coal Sales Co. Pty
Ltd. which are the joint venture companies related to the Bengalla mine
in New South Wales, Australia.
"Black Beauty Coal Company" means the Indiana general partnership
among Thoroughbred, L.L.C., Black Beauty Resources, Inc. and Pittsburg
and Midway Coal Mining Co., and any Person collectively owned by those
three partners including, but not limited to, Eagle Coal Company and
Falcon Coal Company.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of Acquisition issued or fully guaranteed or
insured by the U.S. Government or any agency thereof, (b) certificates
of deposit and time deposits with maturities of one year or less from
the date of Acquisition and overnight bank deposits of any lender under
the Senior Credit Facilities or of any commercial bank having capital
and surplus in excess of $500.0 million, (c) repurchase obligations of
any lender under the Senior Credit Facilities or of any commercial bank
satisfying the requirements of clause (b) of this definition, having a
term of not more than 90 days with respect to securities issued or fully
guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-2 by S&P or P-2 by Moody's,
or carrying an equivalent rating by a nationally recognized rating
agency if both of S&P and Moody's cease publishing ratings of
investments, (e) securities with maturities of one year or less from the
date of Acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by Moody's, (f) securities with maturities of one year or less from the
date of Acquisition backed by standby letters of credit issued by any
lender under the Senior Credit Facilities or any commercial bank
satisfying the requirements of clause (b) of this definition
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or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition.
"Citizens Power" means Citizens Power LLC, a Delaware limited
liability company and its direct and indirect Subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus
(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net
Income, plus (2) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization
of debt issuance costs, deferred financing fees and original issue
discount, noncash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) under Hedging
Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (3) an amount equal to any
extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (4) depreciation, depletion, amortization
(including amortization of goodwill and other intangibles) and other
noncash expenses (including, without limitation, writedowns and
impairment of property, plant and equipment and intangibles and other
long-lived assets) (excluding any such noncash expense to the extent
that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in
a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, depletion, amortization and
other noncash expenses were deducted in computing such Consolidated Net
Income, minus (5) noncash items increasing such Consolidated Net Income
for such period (other than accruals in accordance with GAAP), plus (6)
without duplication for amounts otherwise included in Consolidated Cash
Flow, the amount of our company's and its Restricted Subsidiaries'
proportionate share of the Consolidated Cash Flow of Black Beauty Coal
Company and its Subsidiaries for such period (calculated in proportion
to our company's and its Restricted Subsidiaries common equity
ownership), in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for
taxes on the income or profits of, and the depreciation, depletion and
amortization and other noncash expenses of, a Restricted Subsidiary that
is not a senior subordinated note guarantor shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the
extent that a corresponding amount would be permitted at the date of
determination to be dividended to our company by such Restricted
Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction under the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (1) the Net Income of any Person
that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof, (2) the Net Income of any Restricted
Subsidiary that is not a senior subordinated note guarantor shall be
excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income
is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders,
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such Acquisition shall
be excluded, (4) the cumulative effect of a change in accounting
principles shall be excluded, and (5) the Net Income (or loss) of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to
our company or one of its Restricted Subsidiaries.
"Credit Facilities" means, with respect to our company or any of
its Restricted Subsidiaries, one or more debt facilities (including,
without limitation, the Senior Credit Facilities) or commercial paper
facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or
letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time
to time. Indebtedness under Credit Facilities outstanding on the date on
which senior subordinated notes are first issued and
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authenticated under the senior subordinated note indenture shall be
deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Indebtedness.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by our company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate,
setting forth the basis of such valuation, executed by the principal
executive officer and the principal financial officer of our company,
less the amount of cash or Cash Equivalents received in connection with
a sale of such Designated Noncash Consideration.
"Disqualified Stock" means any capital stock that, by its terms
(or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, under
a sinking fund obligation or otherwise, or redeemable at the option of
the holder thereof, in whole or in part, on or prior to the date that is
91 days after the date on which the senior subordinated notes mature;
provided, however, that any capital stock that would constitute
Disqualified Stock solely because the holders thereof have the right to
require our company to repurchase such capital stock upon the occurrence
of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such capital stock provide that our
company may not repurchase or redeem any such capital stock under such
provisions unless such repurchase or redemption complies with the
covenant described above under the caption "--Certain Covenants--
Restricted Payments."
"Domestic Subsidiary" means a Subsidiary that is (1) formed under
the laws of the United States of America or a state or territory thereof
or (2) as of the date of determination, treated as a domestic entity or
a partnership or a division of a domestic entity for United States
federal income tax purposes.
"Equity Interests" means capital stock and all warrants, options
or other rights to acquire capital stock (but excluding any debt
security that is convertible into, or exchangeable for, capital stock).
"Equity Offering" means any public or private sale of equity
securities (excluding Disqualified Stock) of our company, other than any
private sales to an Affiliate of our company.
"Escrow Account" means the escrow account maintained under the
Escrow Letter.
"Escrow Letter" means that certain escrow letter dated March 2,
1998, by and among Lazard Brothers & Co., Limited, The Energy Group PLC,
Peabody Investments Inc. and P&L Coal Holdings Corporation.
"Existing Citizens Power Investment" means the Investments in
Citizens Power by our company and its Restricted Subsidiaries as of the
date of the closing of the Acquisition.
"Existing Indebtedness" means up to $292.5 million in aggregate
principal amount of Indebtedness of our company and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit
Facilities, the senior notes, the senior subordinated notes and related
guarantees) in existence on the date of the closing of the Acquisition,
until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (1) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original
issue discount, noncash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, and net payments (if any) under Hedging
Obligations, but excluding amortization of debt issuance costs) and (2)
the consolidated interest of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (3) any interest expense on
the portion of Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (4) the product of (a)
all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries,
other than dividend payments on Equity Interests payable solely in
Equity Interests of our company (other than Disqualified Stock) or to
our company or a Restricted Subsidiary of our company, times (b) a
fraction, the numerator of which is one and the denominator of which is
one minus the effective
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combined federal, state and local tax rate of such Person for such
period, expressed as a decimal, in each case, for our company and its
Restricted Subsidiaries on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person and
its Restricted Subsidiaries for any period, the ratio of the
Consolidated Cash Flow of such Person and its Restricted Subsidiaries
for such period to the Fixed Charges of such Person and its Restricted
Subsidiaries for such period. In the event that the referrent Person or
any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or
issues or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness,
or such issuance or redemption of preferred stock, as if the same had
occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to
above, (1) Acquisitions that have been made by our company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions and including pro forma
cost savings permitted by Article 11 of Regulation S-X, during the four-
quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be given pro forma effect as if
they had occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (3) of the proviso contained in the
definition of Consolidated Net Income, and (2) the Consolidated Cash
Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to
the Calculation Date, shall be excluded, and (3) the Fixed Charges
attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"Foreign Subsidiaries" means Subsidiaries of our company that are
not Domestic Subsidiaries.
"GAAP" means generally accepted accounting principles described in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on
the date of the senior subordinated note indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (1) currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity
cap agreements and currency exchange, interest rate or commodity collar
agreements and (2) other agreements or arrangements designed to protect
such Person against fluctuations in currency exchange, interest rates or
commodity prices, in each case for the purpose of risk management and
not for speculation.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, if and to the extent any of the
foregoing (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a
Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person, but
excluding from the definition of "Indebtedness," any of the foregoing
that constitutes (1) an accrued expense, (2) trade payables and (3)
Obligations in respect of reclamation, workers' compensation, including
black lung, pensions and retiree health care, in each case to the extent
not overdue for more than 90 days. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in
the case of any Indebtedness issued with original issue discount, and
(ii) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the form of
direct or indirect loans (including guarantees, other than performance
guarantees provided for the benefit of Citizens Power of any portion of
Indebtedness or other obligations), advances or capital contributions
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
Acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP. If our company or any Restricted
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Subsidiary of our company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of our company
such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of our company, our company
shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of
or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Marketable Securities" means, with respect to any Asset Sale, any
readily marketable equity securities that are (1) traded on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National
Market; and (2) issued by a corporation having a total equity market
capitalization of not less than $250.0 million; provided that the excess
of (A) the aggregate amount of securities of any one such corporation
held by our company and any Restricted Subsidiary over (B) ten times the
average daily trading volume of such securities during the 20
immediately preceding trading days shall be deemed not to be Marketable
Securities; as determined on the date of the contract relating to such
Asset Sale.
"Net Income" means, with respect to any Person, the net income or
loss of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however,
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries
and (2) any extraordinary or nonrecurring gain or loss, together with
any related provision for taxes on such extraordinary or nonrecurring
gain or loss.
"Net Proceeds" means the aggregate proceeds (cash or property)
received by our company or any of its Restricted Subsidiaries in respect
of any Asset Sale (including, without limitation, any cash received upon
the sale or other disposition of any noncash consideration received in
any Asset Sale) or the sale or disposition of any Investment, net of the
direct costs relating to such Asset Sale, sale or disposition,
(including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"Non-Guarantor Subsidiaries" means (1) Citizens Power and its
direct and indirect Subsidiaries, (2) our company's future Unrestricted
Subsidiaries and (3) our company's current and future Foreign
Subsidiaries.
"Non-Recourse Debt" means Indebtedness (1) as to which neither our
company nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness) other than a pledge of the Equity
Interests of any Unrestricted Subsidiaries, (b) is directly or
indirectly liable (as a guarantor or otherwise) other than by virtue of
a pledge of the Equity Interests of any Unrestricted Subsidiaries, or
(c) constitutes the lender; and (2) no default with respect to which
(including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other
Indebtedness (other than the senior subordinated notes being offered
hereby) of our company or any of its Restricted Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Obligations" means any principal, premium (if any), interest,
penalties, fees, charges, expenses, indemnifications, reimbursement
obligations, damages, guarantees and other liabilities and amounts
payable under the documentation governing any Indebtedness or in respect
thereto.
"Permitted Business" means coal production, coal mining, coal
brokering, coal transportation, mine development, power marketing,
electricity generation, power/energy sales and trading, energy
transactions/asset restructurings, risk management products associated
with energy, fuel/power integration and other energy related businesses,
ash disposal, environmental remediation, coal, natural gas, petroleum or
other fossil fuel exploration, production, marketing, transportation and
distribution and other related businesses, and activities of our company
and its Subsidiaries as of the date of the closing
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of the Acquisition and any business or activity that is reasonably
similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"Permitted Investments" means (a) any Investment in our company or
in a Restricted Subsidiary of our company; (b) any Investment in Cash
Equivalents; (c) any Investment by our company or any Restricted
Subsidiary of our company in a Person, if as a result of such Investment
(i) such Person becomes a Restricted Subsidiary of our company or (ii)
such Person, in one transaction or a series of related transactions, is
merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, our
company or a Restricted Subsidiary of our company; (d) any Acquisition
of assets solely in exchange for the issuance of Equity Interests (other
than Disqualified Stock) of our company; (e) any Investment existing on
the date of the closing of the Acquisition (an "Existing Investment")
and any Investment that replaces, refinances or refunds an Existing
Investment, provided that the new Investment is in an amount that does
not exceed the amount replaced, refinanced or refunded and is made in
the same Person as the Investment replaced, refinanced or refunded, (f)
advances to employees not in excess of $10.0 million outstanding at any
one time; (g) Hedging Obligations permitted under clause (9) of the
"--Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(h) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
expenses, in each case incurred in the ordinary course of business; (i)
any Investment in a Permitted Business (whether or not an Investment in
an Unrestricted Subsidiary) having an aggregate fair market value, when
taken together with all other Investments made pursuant to this clause
(i), does not exceed in aggregate amount the sum of (1) 10% of Total
Assets at the time of such Investment (with the fair market value of
each Investment being measured at the time made and without giving
effect to subsequent changes in value) plus (2) 100% of the Net Proceeds
from the sale or disposition of any Investment previously made pursuant
to this clause (i) or 100% of the amount of any dividend, distribution
or payment from any such Investment, net of income taxes paid or payable
in respect thereof, in each case up to the amount of the Investment that
was made pursuant to this clause (i) and 50% of the amount of such Net
Proceeds or 50% of such dividends, distributions or payments, in each
case received in excess of the amount of the Investments made pursuant
to this clause (i); (j) guarantees of Indebtedness permitted under the
covenant "--Incurrence of Indebtedness and Issuance of Preferred Stock;"
(k) any Investment acquired by our company or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts
receivable held by our company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization
or recapitalization of the issuer of such other Investment or accounts
receivable or (B) as a result of the transfer of title with respect to
any secured Investment in default as a result of a foreclosure by our
company or any of its Restricted Subsidiaries with respect to such
secured Investment; (l) any Investment in Black Beauty Coal Company
having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (l), that are at the time
outstanding not to exceed $50.0 million (with any write-down or write-
off of any such Investment deemed to remain outstanding); (m)
Investments in Citizens Power having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause
(m), that are at that time outstanding not to exceed $50.0 million at
the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (n) any Investment in the Bengalla Joint
Venture and the Warkworth Associates Joint Venture having an aggregate
fair market value, taken together with all other Investments made
pursuant to this clause (n), that are at the time outstanding, not to
exceed $25.0 million (with any write-down or write-off of any such
Investment deemed to remain outstanding); (o) that portion of any
Investment by our company or a Restricted Subsidiary in a Permitted
Business to the extent that our company or such Restricted Subsidiary
will receive in a substantially concurrent transaction an amount in cash
equal to the amount of such Investment (or the fair market value of such
Investment), net of any obligation to pay taxes or other amounts in
respect of the receipt of such cash; provided that the receipt of such
cash does not carry any obligation by our company or such Restricted
Subsidiary to repay or return such cash; and (p) the forgiveness or
cancellation of any payable due from Citizens Power and its direct and
indirect Subsidiaries outstanding on the date of the closing of the
Acquisition; provided, however, that with respect to any Investment, our
company may, in its sole discretion, allocate all or any portion of any
Investment to one or more of the above clauses so that the entire
Investment would be a Permitted Investment.
"Permitted Liens" means (1) Liens securing Indebtedness under
Credit Facilities that were permitted by the terms of the senior
subordinated note indenture to be incurred; (2) Liens in favor of our
company; (3) Liens on property of a Person existing at the time such
Person is merged into or consolidated with our company or any Restricted
Subsidiary of our company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with our company; (4) Liens on property existing at the
time of Acquisition thereof by our company or any Restricted Subsidiary
of our company, provided that such Liens were in existence prior to the
contemplation of such Acquisition; (5) Liens to secure the performance
of statutory
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obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business; (6) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance or other kinds of social security; (7) Liens existing on the
date of the closing of the Acquisition; (8) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (9) Liens on assets of senior subordinated note
guarantors to secure Senior Debt of such senior subordinated note
guarantors that was permitted by the senior subordinated note indenture
to be incurred; (10) Liens incurred in the ordinary course of business
of our company or any Restricted Subsidiary of our company with respect
to obligations that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the
aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by our
company or such Restricted Subsidiary; (11) Liens on assets of Foreign
Subsidiaries to secure Indebtedness that was permitted by the senior
subordinated note indenture to be incurred; (12) statutory liens of
landlords, mechanics, suppliers, vendors, warehousemen, carriers or
other like Liens arising in the ordinary course of business; (13)
judgment Liens not giving rise to an Event of Default so long as any
appropriate legal proceeding that may have been duly initiated for the
review of such judgment shall not have been finally terminated or the
period within which such legal proceeding may be initiated shall not
have expired; (14) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects incurred or
imposed, as applicable, in the ordinary course of business and
consistent with industry practices which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto (as such property is used
by our company or its Subsidiaries) or interfere with the ordinary
conduct of the business of our company or such Subsidiaries; provided,
however, that any such Liens are not incurred in connection with any
borrowing of money or any commitment to loan any money or to extend any
credit; (15) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (6) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" and other purchase money Liens to finance property or assets of
our company or any Restricted Subsidiary acquired in the ordinary course
of business; provided that such Liens are only secured by such property
or assets so acquired or improved (including, in the case of the
Acquisition of capital stock of a Person who becomes a Restricted
Subsidiary, Liens on the assets of the Person whose capital stock was so
acquired); (16) Liens securing Indebtedness under Hedging Obligations;
provided that such Liens are only secured by property or assets that
secure the Indebtedness subject to the Hedging Obligation; (17) Liens to
secure Indebtedness permitted by clause (15) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock;" and (18) Liens on the Equity Interests of Unrestricted
Subsidiaries securing obligations of Unrestricted Subsidiaries not
otherwise prohibited by the senior subordinated notes indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of our
company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of our company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness); provided
that: (1) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest and
premium, if any, on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (2) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (3) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the senior
subordinated notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated
in right of payment to, the senior subordinated notes on terms at least
as favorable to the holders of senior subordinated notes as those
contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (4)
such Indebtedness is incurred either by our company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means those certain Senior Credit
Facilities, dated as of May 18, 1998, by and among our company, the
senior note guarantors, Lehman Commercial Paper Inc., as Arranger,
Syndication Agent and the Administrative Agent and the other lenders
party thereto, including any related notes, guarantees, collateral
documents,
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letters of credit, instruments and agreements executed in connection
therewith (and any appendices, exhibits or schedules to any of the
foregoing), and in each case as amended, modified, supplemented,
restated, renewed, refunded, replaced, restructured, repaid or
refinanced from time to time (whether with the original agents and
lenders or other agents and lenders or otherwise, and whether provided
under the original credit agreement or other credit agreements or
otherwise).
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated under the Securities Act, as such Regulation
is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which
such payment of interest or principal was scheduled to be paid in the
original documentation governing such Indebtedness, and shall not
include any contingent obligations to repay, redeem or repurchase any
such interest or principal prior to the date originally scheduled for
the payment thereof.
"Subsidiary" means, with respect to any Person, (1) any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or senior subordinated note trustees thereof is at
the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person (or a combination
thereof) and (2) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Total Assets" means the total assets of our company and its
Restricted Subsidiaries on a consolidated basis determined in accordance
with GAAP, as shown on the most recently available consolidated balance
sheet of our company and its Restricted Subsidiaries.
"Transaction Documents" means the documents related to (1) the
Acquisition (including, without limitation, the purchase agreement, the
participation agreement and the escrow agreement), (2) the Senior Credit
Facilities and (3) the original offering of the notes.
"Treasury Rate" means the yield to maturity at the time of the
computation of the United States Treasury securities with a constant
maturity (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15(519), which has become publicly
available at least two Business Days prior to the date fixed for
redemption (or if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to
the then remaining average life to May 15, 2003; provided, however, that
if the average life of such senior subordinated note is not equal to the
constant maturity of the United States Treasury security for which
weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year)
from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of such
senior subordinated note is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (1) Citizens Power, any direct or
indirect Subsidiary of Citizens Power on the date of the senior
subordinated note indenture and (2) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Person: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with our company or
any Restricted Subsidiary of our company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable
to our company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of our company;
(c) is a Person with respect to which neither our company nor any of its
Restricted Subsidiaries has any obligation (x) to subscribe for
additional Equity Interests in Unrestricted Subsidiaries (except with
respect to Permitted Investments) or (y) to maintain or preserve such
Person's net worth; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of our company
or any of its Restricted Subsidiaries; provided, however, that our
company and its Restricted Subsidiaries may guarantee the performance of
Unrestricted Subsidiaries in the ordinary course of business except for
guarantees of Obligations in respect of borrowed money. Any such
designation by the Board of Directors shall be evidenced to the senior
subordinated note trustee by filing with the senior subordinated note
trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by
the covenant described above under the caption "Certain Covenants--
Restricted Payments."
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"Voting Stock" of any Person as of any date means the capital
stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Warkworth Associates Joint Venture" means Warkworth Coal Sales
Ltd., Warkworth Pastoral Co. Pty, Limited and Warkworth Mining Limited,
which are the joint venture companies related to the Warkworth mine in
New South Wales, Australia.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding capital
stock or other ownership interests of which (other than directors'
qualifying shares) shall at the time be owned by such Person or by one
or more Wholly Owned Restricted Subsidiaries of such Person and one or
more Wholly Owned Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding capital stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be
owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person and one or more Wholly Owned Subsidiaries of such Person.
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PLAN OF DISTRIBUTION
This prospectus is to be used by Lehman Brothers Inc. in
connection with offers and sales of the notes in market-making
transactions effected from time to time. Lehman Brothers Inc. may act as
a principal or agent in those transactions, including as agent for the
counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts
and commissions, including from both counterparties when it acts as
agent for both. These sales will be made at prevailing market prices at
the time of sale, at prices related thereto or at negotiated prices.
As of March 31, 2000, affiliates of Lehman Brothers Inc.
beneficially owned 85.1% of our capital stock. See "Ownership of Capital
Stock." Because Lehman Brothers Inc. may purchase and sell notes, and
because this prospectus may be used by Lehman Brothers Inc. in
connection with future offers and sales of notes in market-making
transactions effected from time to time, no estimate can be given as to
the number and percentage of notes that will be held by Lehman Brothers
Inc. upon termination of any of those sales. Lehman Brothers Inc. has
informed us that it does not intend to confirm sales of the notes to any
accounts over which it exercises discretionary authority without the
prior specific written approval of those transactions by the customer.
We have been advised by Lehman Brothers Inc. that, subject to
applicable laws and regulations, Lehman Brothers Inc. currently intends
to make a market in the notes. However, Lehman Brothers Inc. is not
obligated to do so and any market-making may be interrupted or
discontinued at any time without notice. In addition, that market-making
activity will be subject to the limits imposed by the Securities Act and
the Exchange Act. There can be no assurance that an active trading
market will develop or be sustained. See "Risk Factors--There Is No
Trading Market for the Notes."
Lehman Brothers Inc. has provided investment banking services to
us in the past and may provide those services and financial advisory
services to us in the future. Lehman Brothers Inc. acted as purchaser in
connection with the initial sale of the notes and received an
underwriting discount of $27.0 million in connection therewith. See
"Related Party Transactions."
Lehman Brothers Inc. has entered into a registration rights
agreement with us with respect to the use by Lehman Brothers Inc. of
this prospectus. Under that agreement, we agreed to bear all
registration expenses incurred under that agreement, and we agreed to
indemnify Lehman Brothers Inc. against specified liabilities, including
liabilities under the Securities Act.
EXPERTS
The reserve reports and estimates of the company's proven and
probable coal reserves included herein have, to the extent described
herein, been prepared by the company and reviewed by the John T. Boyd
Company.
Ernst & Young LLP, independent auditors, have audited our
consolidated financial statements and schedule as of March 31, 2000 and
for the year ended March 31, 2000 and the period ended March 31, 1999,
and the combined financial statements and schedule of P&L Coal Group
(the Predecessor Company) for the period ended May 19, 1998 and year
ended March 31, 1998, as set forth in their report. We've included our
financial statements and schedules in the prospectus and elsewhere in
the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
We file annual, quarterly and current reports and other
information with the SEC. You may access and read our SEC filings,
including the complete registration statement and all of the exhibits to
it, through the SEC's Internet site at www.sec.gov. This site contains
reports and other information regarding issuers that we file
electronically with the SEC. You may also read and copy any document we
file at the SEC's public reference room located at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room.
We have filed with the SEC a registration statement under the
Securities Act with respect to the notes offered by this prospectus.
This prospectus, which constitutes part of the registration statement,
does not contain all of the information presented in the registration
statement and its exhibits and schedules. Our descriptions in this
prospectus of the provisions of documents filed as exhibits to the
registration statement or otherwise filed with the SEC are only
summaries of the documents' material terms. If you want a complete
description of the content of the documents, you should obtain the
documents yourself by following the procedures described above.
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You may request copies of the filings, at no cost, by telephone at
(314) 342-3400 or by mail at: P&L Coal Holdings Corporation, 701 Market
Street, Suite 700, St. Louis, Missouri 63101, attention: Public
Relations.
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<PAGE>
GLOSSARY OF SELECTED TERMS
Anthracite. The highest rank of economically usable coal with
moisture content less than 15% by weight and heating value as high as
15,000 Btus per pound. It is jet black with a high luster. It is mined
primarily in Pennsylvania.
Appalachian Region. Coal producing states of Alabama, Georgia,
eastern Kentucky, Maryland, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia and West Virginia.
Ash. Impurities consisting of iron, alumina and other
incombustible matter that are contained in coal. Since ash increases the
weight of coal, it adds to the cost of handling and can affect the
burning characteristics of coal.
Bituminous Coal. The most common type of coal with moisture
content less than 20% by weight and heating value of 10,500 to 14,000
Btus per pound. It is dense and black and often has well-defined bands
of bright and dull material.
British Thermal Unit ("Btu"). A measure of the energy required to
raise the temperature of one pound of water one degree Fahrenheit.
Clean Air Act Amendments of 1990. A comprehensive set of
amendments to the federal law governing the nation's air quality. The
Clean Air Act was originally passed in 1970 to address significant air
pollution problems in our cities. The 1990 amendments broadened and
strengthened the original law to address specific problems such as acid
deposition, urban smog, hazardous air pollutants and stratospheric ozone
depletion.
Coal Seam. Coal deposits occur in layers. Each layer is called a
"seam."
Coke. A hard, dry carbon substance produced by heating coal to a
very high temperature in the absence of air. Coke is used in the
manufacture of iron and steel. Its production results in a number of
useful byproducts.
Coking Coal. Coal used to make coke and interchangeably referred
to as metallurgical coal.
Continuous Mining. A form of underground room-and-pillar mining
which uses a continuous mining machine to cut coal from the seam and
load it onto conveyors or into shuttle cars in a continuous operation.
Deep Mine. An underground coal mine.
Draglines. A large excavating machine used in the surface mining
process to remove overburden.
Dragline Mining. A form of mining where large capacity electric-
powered draglines remove overburden to expose the coal seam. Smaller
shovels load coal in haul trucks for transportation to the preparation
plant and then to the rail loadout.
Federal Energy Regulatory Commission ("FERC"). A regulatory agency
within the Department of Energy that has jurisdiction over interstate
electricity sales, wholesale electric rates, hydro-electric licensing,
natural gas pricing, oil pipeline rates and gas pipeline certification.
Fossil Fuel. Fuel such as coal, petroleum or natural gas formed
from the fossil remains of organic material.
Greenfield. Undeveloped coal reserves.
Hard Rock Mine. A mine for hard rock minerals, which include
copper, lead, zinc, magnesium, nickel and gold. Coal mines are not
considered hard rock mines.
Illinois Basin. Coal producing area in Illinois, western Indiana
and western Kentucky.
Interior Region. Coal producing states of Arkansas, Illinois,
Indiana, Iowa, Kansas, Michigan, western Kentucky, Louisiana, Missouri,
Oklahoma and Texas.
Lignite. The lowest rank of coal with a high moisture content of
up to 45% by weight and heating value of 6,500 to 8,300 Btus per pound.
It is brownish black and tends to oxidize and disintegrate when exposed
to air.
Longwall Mining. A form of underground mining in which a panel or
block of coal, generally 700 feet wide and often over one mile long, is
completely extracted. The working area is protected by a moveable,
powered roof support system.
Metallurgical Coal. The various grades of coal suitable for
carbonization to make coke for steel manufacture. Also known as "met"
coal, it possesses four important qualities: volatility, which
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affects coke yield; the level of impurities, which affects coke quality;
composition, which affects coke strength; and basic characteristics,
which affect coke oven safety. Met coal has a particularly high Btu, but
low ash content.
Nitrogen Oxide (NO2). A gas formed in high temperature
environments such as coal combustion. It is a harmful pollutant that
contributes to acid rain.
Non-utility Generator (NUG). Non-utility generator that sells
power to a regulated utility under a long term contract.
Organization for Economic Cooperation and Development (OECD).
Members of the OECD include Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United
States and its territories (Guam, Puerto Rico and the U.S. Virgin
Islands).
Overburden. Layers of earth and rock covering a coal seam. In
surface mining operations, overburden is removed prior to coal
extraction.
Overburden Ratio/Stripping Ratio. The amount of overburden that
must be removed to excavate a given quantity of coal. It is commonly
expressed in cubic yards per ton of coal or as a ratio comparing the
thickness of the overburden with the thickness of the coal bed.
Pillar. An area of coal left to support the overlying strata in a
mine; sometimes left permanently to support surface structures.
Powder River Basin. Coal producing area in northeastern Wyoming
and southeastern Montana. This is the largest known source of coal
reserves and the largest producing region in the United States.
Preparation Plant. Usually located on a mine site, although one
plant may serve several mines. A preparation plant is a facility for
crushing, sizing and washing coal to prepare it for use by a particular
customer. The washing process has the added benefit of removing some of
the coal's sulfur content.
Probable Reserves. In relation to coal, means reserves for which
there is a moderate degree of geological assurance. Coal tonnages are
computed by projection data from available seam measurements for a
distance beyond coal classed as measured or proven. The assurance,
although lower than for proven coal, is high enough to assume continuity
between points of measurement. The maximum acceptable distance for
projection of indicated probable tonnage is one-half to three-quarters
mile from points of observation. Further exploration is necessary to
place these reserves in a proven category.
Proven Reserves. In relation to coal, means reserves for which
there is the highest degree of geological assurance. The sites for
measurement are so closely spaced and the geological character so well
defined that the thickness, real extent, size, shape and depth of coal
are well established. The maximum acceptable distance for projections
from seam data points varies with the geological nature of the coal seam
being studied, but generally, a radius of one-quarter mile is recognized
as the standard. Proven reserves may also be referred to as measured.
Reclamation. The process of restoring land and the environment to
their original state following mining activities. The process commonly
includes "recontouring" or reshaping the land to its approximate
original appearance, restoring topsoil and planting native grass and
ground covers. Reclamation operations are usually underway before the
mining of a particular site is completed. Reclamation is closely
regulated by both state and federal law.
Recoverable Reserves. The amount of coal that can be recovered
from the reserve base. The average recovery factor for underground mines
and surface mines is about 57% and 80%, respectively. Using these
percentages, there are about 300 billion tons of recoverable reserves in
the United States, enough to last more than 300 years at current
consumption levels.
Roof. The stratum of rock or other mineral above a coal seam; the
overhead surface of a coal working place. Same as "back" or "top."
Roof Bolt. A long steel bolt driven into the roof of underground
excavations to support the roof, preventing and limiting the extent of
roof falls. The unit consists of the bolt (up to four feet long), steel
plate, expansion shell, and pal nut. The use of roof bolts eliminates
the need for timbering by fastening together, or "laminating," several
weaker layers of roof strata to build a "beam."
Roof Support. Posts, jacks, roof bolts and beams used to support
the rock overlying a coal seam in an underground mine. A good roof
support plan is part of mine safety and coal extraction.
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Room and Pillar Mining. The most common method of underground
mining in which the mine roof is supported mainly by coal pillars left
at regular intervals. Rooms are placed where the coal is mined; pillars
are areas of coal left between the rooms. Room-and-pillar mining is done
either by conventional or continuous mining.
Scrubber (flue gas desulfurization unit). Any of several forms of
chemical/physical devices which operate to neutralize sulfur compounds
formed during coal combustion. These devices combine the sulfur in
gaseous emissions with other chemicals to form inert compounds, such as
gypsum, which must then be removed for disposal. Although effective in
substantially reducing sulfur from combustion gases, scrubbers require
about six to seven % of a power plant's electrical output and thousands
of gallons of water to operate.
Steam Coal. Coal used by power plants and industrial steam boilers
to produce electricity or process steam. It generally is lower in Btu
heat content and higher in volatile matter than metallurgical coal.
Subbituminous Coal. Dull, black coal that ranks between lignite
and bituminous coal. Its moisture content is between 20% and 30% by
weight, and its heat content ranges from 7,800 to 9,500 Btus per pound
of coal.
Sulfur. One of the elements present in varying quantities in coal
that contributes to environmental degradation when coal is burned.
Sulfur dioxide is produced as a gaseous by-product of coal combustion.
Sulfur Content. Coal is commonly described by its sulfur content
due to the importance of sulfur in environmental regulations. "Low
sulfur" coal has a variety of definitions but typically is used to
describe coal consisting of 1.0% or less sulfur. A majority of the
company's Appalachian and Powder River Basin reserves are of low sulfur
grades.
Surface Mine. A mine in which the coal lies near the surface and
can be extracted by removing the covering layer of soil (see
"Overburden"). About 60% of total U.S. coal production comes from
surface mines.
Tons. A "short" or net ton is equal to 2,000 pounds. A "long" or
British ton is 2,240 pounds; a "metric" ton is approximately 2,205
pounds. The short ton is the unit of measure referred to in this
document.
Truck and Shovel Mining. A form of mining where large shovels are
used to remove overburden, which is used to backfill pits after the coal
is removed. Smaller shovels load coal in haul trucks for transportation
to the preparation plant or rail loadout.
Underground Mine. Also known as a "deep" mine. Usually located
several hundred feet below the earth's surface, an underground mine's
coal is removed mechanically and transferred by shuttle car or conveyor
to the surface. Most underground mines are located east of the
Mississippi River and account for about 40% of annual U.S. coal
production.
Unit Train. A train of 100 or more cars carrying only coal. A
typical unit train can carry at least 10,000 tons of coal in a single
shipment.
Western Bituminous Coal Regions. Coal producing area including,
the Hanna Basin in Wyoming, the Uinta Basin of northwestern Colorado and
Utah, the Four Corners Region in New Mexico and Arizona and the Raton
Basin in southern Colorado.
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[P&L Coal Holding Corporation Chart]
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<TABLE>
Index to Financial Statements and Supplementary Data
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors F-2
Audited Financial Statements:
Statements of Operations - Year ended March 31, 2000, periods ended
March 31, 1999 and May 19, 1998 and year ended March 31, 1998 F-3
Balance Sheets - March 31, 2000 and 1999 F-4
Statements of Cash Flows - Year ended March 31, 2000, periods ended
March 31, 1999 and May 19, 1998 and year ended March 31, 1998 F-5
Statements of Changes in Stockholders' Equity/Invested Capital - Year ended
March 31, 2000, periods ended March 31, 1999 and May 19, 1998 and year
ended March 31, 1998 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
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<PAGE>
Report of Independent Auditors
Board of Directors
P&L Coal Holdings Corporation
We have audited the accompanying consolidated balance sheets of P&L Coal
Holdings Corporation (the Company) as of March 31, 2000 and 1999, and
the related consolidated statements of operations, changes in
stockholders' equity and cash flows of the Company for the year and
period then ended. We have also audited the combined statements of
operations, changes in invested capital and cash flows of P&L Coal Group
(the Predecessor Company) for the period ended May 19, 1998 and the year
ended March 31, 1998. These financial statements are the responsibility
of the Company'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 consolidated financial position of
P&L Coal Holdings Corporation at March 31, 2000 and 1999, the
consolidated results of operations and cash flows of the Company for the
year ended March 31, 2000 and the period ended March 31, 1999, and the
combined results of operations and cash flows of the Predecessor Company
for the period ended May 19, 1998 and the year ended March 31, 1998 in
conformity with accounting principles generally accepted in the United
States.
Ernst & Young LLP
April 27, 2000
St. Louis, Missouri
F-2
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<TABLE>
P&L COAL HOLDINGS CORPORATION
STATEMENTS OF OPERATIONS
(Dollars in thousands)
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
REVENUES
Sales $2,610,991 $1,970,957 $278,930 $2,048,694
Other revenues 99,509 85,875 11,728 169,328
---------- ---------- -------- ----------
Total revenues 2,710,500 2,056,832 290,658 2,218,022
OPERATING COSTS AND EXPENSES
Operating costs and expenses 2,178,664 1,643,718 244,128 1,695,216
Depreciation, depletion and amortization 249,782 179,182 25,516 200,169
Selling and administrative expenses 95,256 67,688 12,017 83,640
Net gain on property and
equipment disposals (6,439) - (328) (21,815)
---------- ---------- -------- ----------
OPERATING PROFIT 193,237 166,244 9,325 260,812
Interest expense 205,056 176,105 4,222 33,410
Interest income (4,421) (18,527) (1,667) (14,543)
---------- ---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTERESTS (7,398) 8,666 6,770 241,945
Income tax provision (benefit) (141,522) 3,012 4,530 83,050
Minority interests 15,554 1,887 - -
---------- ---------- -------- ----------
INCOME FROM CONTINUING OPERATIONS 118,570 3,767 2,240 158,895
Discontinued operations:
(Income) loss from discontinued operations,
net of income tax provision (benefit) of ($1,297),
$6,035, ($189) and $7,143, respectively 12,087 (6,442) 1,764 (1,441)
Loss from disposal of discontinued operations,
net of income tax benefit of $31,188 78,273 - - -
---------- ---------- -------- ----------
NET INCOME $ 28,210 $ 10,209 $ 476 $ 160,336
========== ========== ======== ==========
See accompanying notes to financial statements.
</TABLE>
F-3
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<PAGE>
<TABLE>
P & L COAL HOLDINGS CORPORATION
BALANCE SHEETS
AS OF MARCH 31
(Dollars in thousands)
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 65,618 $ 194,078
Accounts receivable, less allowance of $1,233 and $177, respectively 153,021 312,748
Materials and supplies 48,809 53,978
Coal inventory 193,341 195,919
Assets from power trading activities - 1,037,300
Assets from coal and emission allowance trading activities 78,695 2,514
Deferred income taxes 49,869 8,496
Other current assets 43,192 27,428
---------- ----------
Total current assets 632,545 1,832,461
Property, plant, equipment and mine development
Land and coal interests 4,135,010 4,023,546
Building and improvements 350,284 316,163
Machinery and equipment 741,486 651,728
Less accumulated depreciation, depletion and amortization (411,270) (193,492)
---------- ----------
Property, plant, equipment and mine development, net 4,815,510 4,797,945
Net assets of discontinued operations 90,000 -
Investments and other assets 288,794 393,525
---------- ----------
Total assets $5,826,849 $7,023,931
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt $ 57,977 $ 72,404
Income taxes payable 13,594 7,308
Liabilities from power trading activities - 638,062
Liabilities from coal and emission allowance trading activities 75,883 12
Accounts payable and accrued expenses 573,137 627,722
---------- ----------
Total current liabilities 720,591 1,345,508
Long-term debt, less current maturities 2,018,189 2,469,975
Deferred income taxes 625,124 780,175
Accrued reclamation and other environmental liabilities 502,092 498,032
Workers' compensation obligations 212,260 207,544
Accrued postretirement benefit costs 971,186 956,714
Obligation to industry fund 64,737 63,107
Other noncurrent liabilities 162,979 183,736
---------- ----------
Total liabilities 5,277,158 6,504,791
Minority interests 41,265 23,910
Stockholders' equity
Preferred stock - $0.01 per share par value; 10,000,000 shares authorized,
5,000,000 shares issued and outstanding as of March 31, 2000 and 1999 50 50
Common stock - Class A, $0.01 per share par value; 30,000,000 shares authorized,
19,000,000 shares issued and outstanding as of March 31, 2000 and 1999 190 190
Common stock - Class B, $0.01 per share par value; 3,000,000 shares authorized,
746,329 shares issued and 684,473 shares outstanding as of March 31, 2000; 3,000,000
shares authorized and 708,767 shares issued and outstanding as of March 31, 1999 7 7
Additional paid-in capital 485,037 484,772
Employee stock loans (2,391) (2,331)
Accumulated other comprehensive income (loss) (12,667) 2,333
Retained earnings 38,419 10,209
Treasury shares, at cost: 61,856 Class B shares as of March 31, 2000 (219) -
---------- ----------
Total stockholders' equity 508,426 495,230
---------- ----------
Total liabilities and stockholders' equity $5,826,849 $7,023,931
========== ==========
See accompanying notes to financial statements.
</TABLE>
F-4
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<TABLE>
P&L COAL HOLDINGS CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28,210 $ 10,209 $ 476 $160,336
(Income) loss from discontinued operations 12,087 (6,442) 1,764 (1,441)
Loss from disposal of discontinued operations 78,273 - - -
-------- ---------- -------- --------
Income from continuing operations 118,570 3,767 2,240 158,895
Adjustments to reconcile income from continuing operations
to net cash provided by (used in) continuing operations:
Depreciation, depletion and amortization 249,782 179,182 25,516 200,169
Deferred income taxes (157,803) (679) 2,835 65,508
Amortization of debt discount and debt issuance costs 18,911 16,120 1,379 11,205
Net gain on property and equipment disposals (6,439) - (328) (21,815)
Gain on coal contract restructurings (12,957) (5,300) - (49,270)
Minority interests 15,554 1,887 - -
Changes in current assets and liabilities, excluding
effects of acquisitions:
Sale of accounts receivable 100,000 - - -
Accounts receivable, net of sale 18,712 20,164 (9,768) (18,622)
Materials and supplies 5,227 3,620 881 (438)
Coal inventory 10,774 5,781 (2,807) (16,160)
Net assets from coal and emission allowance trading
activities (310) - - -
Other current assets (16,862) 7,459 (10,707) (10,607)
Accounts payable and accrued expenses (15,064) (50,373) (34,685) (3,226)
Income taxes payable 7,549 173 1,234 (12,447)
Accrued reclamation and related liabilities (18,233) (4,468) (1,622) (18,509)
Workers' compensation obligations 4,716 (10,449) (2,156) (23,106)
Accrued postretirement benefit costs 14,472 6,094 6,092 15,292
Obligation to industry fund 1,630 (3,619) (2,379) (26,771)
Royalty prepayment - 135,903 - -
Other, net (34,814) 25,661 (5,586) 16,932
-------- ---------- -------- --------
Net cash provided by (used in) continuing operations 303,415 330,923 (29,861) 267,030
Net cash provided by (used in) discontinued operations (40,504) (48,901) 1,704 (79,178)
-------- ---------- -------- --------
Net cash provided by (used in) operating activities 262,911 282,022 (28,157) 187,852
-------- ---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, equipment and mine development (178,754) (174,520) (20,874) (165,514)
Additions to advance mining royalties (25,292) (11,509) (2,302) (6,174)
Acquisitions, net (63,265) (2,110,400) - (58,715)
Investment in joint venture (4,325) - - -
Proceeds from coal contract restructurings 32,904 2,515 328 57,460
Proceeds from property and equipment disposals 19,284 11,448 1,374 37,723
Proceeds from sale-leaseback transactions 34,234 - - -
-------- ---------- -------- --------
Net cash used in continuing operations (185,214) (2,282,466) (21,474) (135,220)
Net cash provided by (used in) discontinued operations (170) 33,130 (76) (813)
-------- ---------- -------- --------
Net cash used in investing activities (185,384) (2,249,336) (21,550) (136,033)
-------- ---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings and long-term debt 22,026 1,870,778 53,597 269,391
Payments of short-term borrowings and long-term debt (209,985) (222,715) (19,423) (350,737)
Capital contribution - 480,000 - -
Distributions to minority interests (3,353) (3,080) - -
Dividends paid - - (173,330) (65,109)
Transactions with affiliates:
Loan to affiliate - - - (141,000)
Proceeds from affiliated loan - - 141,000 -
Advances from affiliates - - - 16,882
Repayments to affiliates - (3,647) - -
Invested capital transactions with affiliates - (30,369) - (55,176)
-------- ---------- -------- --------
Net cash provided by (used in) continuing operations (191,312) 2,090,967 1,844 (325,749)
Net cash provided by (used in) discontinued operations (13,869) 70,314 21,693 90,360
-------- ---------- -------- --------
Net cash provided by (used in) financing activities (205,181) 2,161,281 23,537 (235,389)
Effect of exchange rate changes on cash and cash equivalents (806) 111 (292) (718)
-------- ---------- -------- --------
Net increase (decrease) in cash and cash equivalents (128,460) 194,078 (26,462) (184,288)
Cash and cash equivalents at beginning of period 194,078 - 96,821 281,109
-------- ---------- -------- --------
Cash and cash equivalents at end of period $ 65,618 $ 194,078 $ 70,359 $ 96,821
======== ========== ======== ========
See accompanying notes to financial statements.
</TABLE>
F-5
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<TABLE>
P&L COAL HOLDINGS CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY / INVESTED CAPITAL
(Dollars in thousands)
<CAPTION>
Accumulated
Other
Compre-
Additional Employee hensive
Preferred Common Paid-in Stock Income
Stock Stock Capital Loans (Loss)
--------- ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
-------------------
March 31, 1997 $ - $ - $ - $ - $ (2,799)
Comprehensive income:
Net income - - - - -
Foreign currency
translation adjustment - - - - (39,385)
Comprehensive income
Dividend paid - - - - -
Net transactions
with affiliates - - - - -
---- ---- -------- ------- --------
March 31, 1998 - - - - (42,184)
Comprehensive loss:
Net income - - - - -
Foreign currency
translation adjustment - - - - (17,974)
Comprehensive loss
Dividend paid - - - - -
Net transactions
with affiliates - - - - -
---- ---- -------- ------- --------
May 19, 1998 $ - $ - $ - $ - $(60,158)
==== ==== ======== ======= ========
--------------------------------------------------------------------------------------------------------------------------------
May 20, 1998 $ - $ - $ - $ - $ -
Capital contribution 50 190 479,760 - -
Comprehensive income:
Net income - - - - -
Foreign currency
translation adjustment - - - - 4,128
Minimum pension liability
(net of $1,248 tax provision) - - - - (1,795)
Comprehensive income
Stock grants to employees - 5 3,919 (1,236) -
Stock purchases
by employees - 2 1,093 (1,095) -
---- ---- -------- ------- --------
March 31, 1999 50 197 484,772 (2,331) 2,333
Comprehensive income:
Net income - - - - -
Foreign currency
translation adjustment - - - - (16,795)
Minimum pension liability
(net of $1,248 tax benefit) - - - - 1,795
Comprehensive income
Stock grants to employees - - 265 (103) -
Loan repayments - - - 901 -
Additional loans - - - (858) -
Shares repurchased - - - - -
---- ---- -------- ------- --------
March 31, 2000 $ 50 $197 $485,037 $(2,391) $(12,667)
==== ==== ======== ======= ========
<PAGE>
<CAPTION>
Total
Stockholders'
Retained Invested Treasury Equity / Invested
Earnings Capital Stock Capital
-------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
PREDECESSOR COMPANY
-------------------
March 31, 1997 $ - $1,679,585 $ - $1,676,786
Comprehensive income:
Net income - 160,336 - 160,336
Foreign currency
translation adjustment - - - (39,385)
----------
Comprehensive income 120,951
Dividend paid - (65,109) - (65,109)
Net transactions
with affiliates - (44,786) - (44,786)
------- ---------- ----- ----------
March 31, 1998 - 1,730,026 - 1,687,842
Comprehensive loss:
Net income - 476 - 476
Foreign currency
translation adjustment - - - (17,974)
----------
Comprehensive loss (17,498)
Dividend paid - (173,330) - (173,330)
Net transactions
with affiliates - 360 - 360
------- ---------- ----- ----------
May 19, 1998 $ - $1,557,532 $ - $1,497,374
======= ========== ===== ==========
------------------------------------------------------------------------------------------------------------
May 20, 1998 $ - $ - $ - $ -
Capital contribution - - - 480,000
Comprehensive income:
Net income 10,209 - - 10,209
Foreign currency
translation adjustment - - - 4,128
Minimum pension liability
(net of $1,248 tax provision) - - - (1,795)
----------
Comprehensive income 12,542
Stock grants to employees - - - 2,688
Stock purchases
by employees - - - -
------- ---------- ----- ----------
March 31, 1999 10,209 - - 495,230
Comprehensive income:
Net income 28,210 - - 28,210
Foreign currency
translation adjustment - - - (16,795)
Minimum pension liability
(net of $1,248 tax benefit) - - - 1,795
----------
Comprehensive income 13,210
Stock grants to employees - - - 162
Loan repayments - - - 901
Additional loans - - - (858)
Shares repurchased - - (219) (219)
------- ---------- ----- ----------
March 31, 2000 $38,419 $ - $(219) $ 508,426
======= ========== ===== ==========
See accompanying notes to financial statements.
</TABLE>
F-6
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE NOTED AND PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the consolidated
balance sheets of P&L Coal Holdings Corporation (the "Company" or
"Peabody") as of March 31, 2000 and 1999, and the consolidated
results of operations and cash flows for the year ended March 31,
2000 and the period ended March 31, 1999. These financial
statements include the subsidiaries (collectively, known as the
"Predecessor Company") of Peabody Holding Company, Inc. ("Peabody
Holding Company"), Gold Fields Mining Corporation ("Gold Fields")
which owns Lee Ranch Coal Company ("Lee Ranch"), Citizens Power
LLC ("Citizens Power") and Peabody Resources Limited ("Peabody
Resources"), an Australian company. The combined financial
statements include the combined results of operations and cash
flows of the Predecessor Company from April 1, 1998 to May 19,
1998 and the fiscal year ended March 31, 1998.
Until May 19, 1998, the Predecessor Company was a wholly owned
indirect subsidiary of The Energy Group, PLC ("The Energy Group").
Effective May 20, 1998, the Predecessor Company was acquired by
the Company, which at the time was wholly owned by Lehman Brothers
Merchant Banking Partners II L.P. and its affiliates ("Lehman Brothers
Merchant Banking"), an investment fund affiliated with Lehman Brothers
Inc. The transaction was part of the sale of The Energy Group to
Texas Utilities Company. P&L Coal Holdings Corporation, a holding
company with no direct operations and nominal assets other than
its investment in its subsidiaries, was formed by Lehman Brothers
Merchant Banking on February 27, 1998 for the purpose of acquiring
the Predecessor Company and had no significant activity until the
acquisition.
Subsequent to March 31, 2000, the Company signed a purchase and
sale agreement with Edison Mission Energy to sell Citizens Power
(see note 3). Results of operations and cash flows have been
restated for all periods presented to properly reflect the
discontinued operation.
DESCRIPTION OF BUSINESS
The Company is principally engaged in the mining of coal for sale
primarily to electric utilities. The Company also markets and
trades coal and emission allowances.
NEW PRONOUNCEMENTS
Effective April 1, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires that noncash changes
in stockholders' equity be combined with net income and reported
in a new financial statement category entitled "accumulated other
comprehensive income."
The Company also adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," and SFAS No. 132,
"Employers' Disclosures About Pensions and Other Postretirement
Benefits" effective April 1, 1998. SFAS No. 131 and SFAS No. 132
address the disclosures required for the Company's operating
segments and employee benefit obligations, respectively.
The adoption of SFAS Nos. 130, 131 and 132 had no effect on the
Company's results of operations.
JOINT VENTURES
Joint ventures are accounted for using the equity method except
for undivided interests in Australia, which are reported using pro
rata consolidation whereby the Company reports its proportionate
share of assets, liabilities, income and expenses. All significant
intercompany transactions have been eliminated in consolidation.
The financial statements include the following asset and operating
amounts for Australian entities utilizing pro rata consolidation:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total revenue $122,689 $ 72,057 $10,996 $76,406
Operating profit 17,038 18,767 3,695 17,731
Total assets 149,864 189,363
</TABLE>
F-7
<PAGE>
<PAGE>
ACCOUNTING FOR COAL AND EMISSION ALLOWANCE TRADING
The Company engages in risk management activities for both trading
and non-trading purposes. Activities for trading purposes,
generally consisting of coal and emission allowance trading, are
accounted for using the fair value method. Under such method, the
derivative commodity instruments (forwards, options and swaps)
with third parties are reflected at market value and are included
in "Assets and liabilities from coal and emission allowance
trading activities" in the consolidated balance sheets. In the
absence of quoted values, financial commodity instruments are
valued at fair value, considering the net present value of the
underlying sales and purchase obligations, volatility of the
underlying commodity, appropriate reserves for market and credit
risks and other factors, as determined by management. Subsequent
changes in market value are recognized as gains or losses in
"Other revenues" in the period of change.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to hedge the
impact of exchange rate fluctuations on anticipated future sales
as well as to hedge the impact of interest rate movements on
floating rate debt and certain commodity supplies. The Company's
Australian operations use forward currency contracts to manage
their exposure against foreign currency fluctuations on sales
denominated in U.S. dollars. These financial instruments are
accounted for using the deferral method. Changes in the market
value of these transactions are deferred until the gain or loss on
the underlying hedged item is recognized as part of the related
sales transaction. If the future sale is no longer anticipated,
the changes in market value of the forward currency contracts
would be recognized as an adjustment to revenue in the period of
change.
A portion of the Company's long-term indebtedness bears interest
at rates that fluctuate based upon certain indices. The Company
utilizes financial instruments, such as interest rate swap
agreements, to mitigate the impact of changes in interest rates on
a portion of its floating rate debt. Gains or losses on interest
rate swap agreements are recognized as they occur and are included
as a component of interest expense.
As a writer of options, the Company receives a premium where the
option is written and then bears the risk of unfavorable changes
in the price of the financial instruments underlying the option.
Forwards, swaps and over-the-counter options are traded in
unregulated markets.
Over-the-counter forwards, options and swaps are either liquidated
with the same counterparty or held to settlement date. For these
financial instruments, the unrealized gains or losses on financial
settlements, rather than the contract amounts, represent the
approximate future cash requirements. Realized gains and losses on
trading activities are recorded as part of "Other revenues" as
they occur. Physical settlements are recorded on a gross basis
within "Sales" and "Operating costs and expenses."
REVENUE RECOGNITION
The Company incurs certain "add-on" taxes and fees on coal sales.
Coal sales are reported including taxes and fees charged by
various federal and state governmental bodies. The Company
recognizes revenue from coal sales when title passes to the
customer.
OTHER REVENUES
Other revenues include royalties related to coal lease agreements,
earnings and losses from joint ventures, management fees, farm
income, contract restructuring payments, coal trading activities
and revenues from contract mining services. Royalty income
generally results from the lease or sub-lease of mineral rights to
third parties, with payments based upon a percentage of the
selling price or an amount per ton of coal produced. Certain
agreements require minimum annual lease payments regardless of the
extent to which minerals are produced from the leasehold. The
terms of these agreements generally range from specified periods
of 5 to 20 years, or can be for an unspecified period until all
reserves are depleted.
Revenues from coal trading activities are recognized for the
differences between contract and market prices.
F-8
<PAGE>
<PAGE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are stated at cost, which approximates
fair value. Cash equivalents consist of highly liquid investments
with original maturities of three months or less.
INVENTORIES
Materials and supplies and coal inventory are valued at the lower
of average cost or market. Coal inventory costs include labor,
supplies, equipment costs, operating overhead and other related
costs.
PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT
Property, plant, equipment and mine development are recorded at
cost. Interest costs applicable to major asset additions are
capitalized during the construction period, including $1.8 million
for the year ended March 31, 2000, $3.0 million for the period
ended March 31, 1999, $0.2 million for the period ended May 19,
1998 and $1.5 million for the year ended March 31, 1998.
Expenditures which extend the useful lives of existing plant and
equipment are capitalized. Maintenance and repairs are charged to
operating costs and expensed as incurred. Costs incurred to
develop coal mines or to expand the capacity of operating mines
are capitalized. Development costs incurred to maintain current
production capacity at a mine and exploration expenditures are
charged to expense as incurred. Certain costs to acquire computer
hardware and the development and/or purchase of software for
internal use are capitalized and depreciated over the estimated
useful lives.
Depletion of coal interests is computed using the units-of-
production method utilizing only proven and probable reserves in
the depletion base. Mine development costs are principally
amortized over the estimated lives of the mines using the
straight-line method. Depreciation of plant and equipment
(excluding life of mine assets) is computed using the straight-
line method over the estimated useful lives as follows:
Years
-----
Building and improvements 10 to 20
Machinery and equipment 2 to 30
Leasehold improvements Life of Lease
In addition, certain plant and equipment assets associated with
mining are depreciated using the straight-line method over the
estimated life of the mine, which varies from 3 to 24 years.
ACCRUED RECLAMATION AND OTHER ENVIRONMENTAL LIABILITIES
The Company records a liability for the estimated costs to reclaim
land as the acreage is disturbed during the ongoing surface mining
process. The estimated costs to reclaim support acreage and to
perform other related functions at both surface and underground
mines are recorded ratably over the lives of the mines. As of
March 31, 2000, the Company had $529.1 million in surety bonds
outstanding and $19.4 million in letters of credit to secure
reclamation. As of March 31, 1999, the Company had $534.9 million
in surety bonds outstanding related to reclamation. The amount of
reclamation self-bonding in certain states in which the Company
qualifies was $186.1 million and $240.5 million at March 31, 2000
and March 31, 1999, respectively.
Accruals for other environmental matters are recorded in operating
expenses when it is probable that a liability has been incurred
and the amount of the liability can be reasonably estimated.
Accrued liabilities are exclusive of claims against third parties
and are not discounted. In general, costs related to environmental
remediation are charged to expense. Environmental costs are
capitalized only to the extent they extend the life of the asset,
mitigate environmental contamination that has yet to occur, or are
incurred in preparing an asset for sale.
F-9
<PAGE>
<PAGE>
INCOME TAXES
Income taxes are accounted for using a balance sheet approach
known as the liability method. The liability method accounts for
deferred income taxes by applying statutory tax rates in effect at
the date of the balance sheet to differences between the book and
tax basis of assets and liabilities.
POSTEMPLOYMENT BENEFITS
The Company provides postemployment benefits to qualifying
employees, former employees and dependents under the provisions of
various benefit plans or as required by state, federal or
Australian law. The Company accounts for workers' compensation
obligations and other Company provided postemployment benefits on
the accrual basis of accounting.
CONCENTRATION OF CREDIT RISK AND MARKET RISK
The Company's power, coal and emission allowance trading and risk
management activities give rise to market risk, which represents
the potential loss caused by a change in the market value of a
particular commitment. Market risks are actively monitored to
ensure compliance with the risk management policies of the
Company. Policies are in place that limit the Company's total net
exposure at any point in time. Procedures exist which allow for
monitoring of all commitments and positions, with daily reporting
to senior management.
The Company's concentration of credit risk is substantially with
electricity producers and marketers and electric utilities. The
Company's policy is to independently evaluate each customer's
creditworthiness prior to entering into transactions and to
constantly monitor the credit extended. In the event that the
Company engages in a transaction with a counterparty that does not
meet its credit standards, the Company will protect its position
by requiring the counterparty to provide appropriate credit
enhancement. Counterparty risk with respect to interest rate swap
transactions is not considered to be significant based upon the
creditworthiness of the participating financial institutions.
Approximately 39 percent of the Company's U.S. coal employees are
affiliated with organized labor unions, which accounts for
approximately 26 percent of the tons sold in the U.S. during
fiscal year 2000. Hourly workers at the Company's mines in
Arizona, Colorado and Montana are represented by the United Mine
Workers' of America under the Western Surface Agreement, which was
ratified in 1996 and is effective through August 31, 2000. Union
labor east of the Mississippi is also represented by the United
Mine Workers of America but is subject to the National Bituminous
Coal Wage Agreement. On December 16, 1997, this five-year labor
agreement effective from January 1, 1998 to December 31, 2002, was
ratified by the United Mine Workers of America.
The Australian coal mining industry is highly unionized and the
majority of workers employed at Peabody Resources are members of
trade unions. These employees are represented by three unions: the
United Mine Workers, which represents the production employees;
and two unions that represent the other staff. The miners at
Warkworth Mine signed a three-year labor agreement that expires in
October 2002. The miners at Ravensworth and Narama Mines have
signed a further enterprise labor agreement for two years that
expires in May 2001. The labor agreement for the Moura Mine is
currently under negotiation.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be
generated by those assets under various assumptions are less than
the carrying amounts of those assets. Impairment losses are
measured by comparing the estimated fair value of the assets to
their carrying amount.
F-10
<PAGE>
<PAGE>
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign affiliates are generally
translated at current exchange rates, and related translation
adjustments are reported as a component of comprehensive income.
Income statement accounts are translated at an average rate for
each period.
RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform
with the report classifications of the year ended March 31, 2000,
with no effect on previously reported net income or stockholders'
equity.
(2) BUSINESS COMBINATIONS
Peabody Resources
Effective August 20, 1999, Peabody Resources purchased a 55
percent interest in the Moura Mine in Queensland, Australia for
$30.2 million. The acquisition was accounted for as a purchase and
the operating results have been included in the Company's
financial statements since the date of acquisition using pro rata
consolidation. The acquisition includes the coal mining and
coalbed methane operations, along with 67 million tons of saleable
coal reserves and rights to more than 1.9 billion tons in place
surface and underground coal resources.
Black Beauty Coal Company
Effective January 1, 2000, Black Beauty Coal Company ("Black
Beauty"), a subsidiary of the Company, invested $6.6 million to
increase its ownership interest and obtain control of three of its
Midwestern coal mining affiliates - Sugar Camp Coal, LLC, Arclar
Coal Company, LLC and United Minerals Company, LLC. Prior to
fiscal year 2000, interests in these affiliates were accounted for
under the equity method, as Black Beauty did not hold decision-
making control over their respective operations. However,
effective January 1, 2000, Black Beauty obtained decision-making
control and began consolidating the affiliates as of that date. In
order to provide comparability to future periods, the Company has
elected to consolidate these affiliates as part of Black Beauty's
results of operations effective April 1, 1999.
Effective January 1, 1999, the Company purchased an additional
38.3 percent interest in Black Beauty, raising its ownership
percentage to 81.7 percent. Total consideration paid for the
additional interest was $150.7 million. The acquisition was
accounted for as a purchase and, accordingly, the operating
results of Black Beauty have been included in the Company's
financial statements since the effective date of acquisition.
Prior to the acquisition, the Company accounted for its ownership
using the equity method of accounting.
Effective January 1, 1998, the Predecessor Company purchased an
additional 10.0 percent interest in Black Beauty for $37.7 million
in cash, and as a result, increased its ownership in the
partnership to 43.3 percent.
P&L Coal Group
The acquisition of Peabody Group by the Company on May 19, 1998
was funded through borrowings by the Company pursuant to a $920.0
million Senior Secured Term Facility, the offerings of $400.0
million aggregate principal amount of Senior Notes and $500.0
million aggregate principal amount of Senior Subordinated Notes,
an equity contribution to the Company by Lehman Brothers Merchant Banking
of $400.0 million, and an equity contribution of $80.0 million
from other parties, including Lehman Brothers Holdings, Inc. Such
amounts were used to pay $2,003.6 million for the equity of the
Company, repay debt, increase cash balances and pay transaction
fees and expenses incurred with the acquisition. The Company also
entered into a $480.0 million senior revolving credit facility to
provide for the Company's working capital requirements following
the acquisition. The acquisition was accounted for under the
purchase method of accounting.
F-11
<PAGE>
<PAGE>
The following unaudited pro forma results of operations assumed
the acquisitions had occurred as of April 1:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Total revenues $2,728,694 $2,765,979
Income (loss) before income taxes, minority interests
and discontinued operations (6,278) 7,736
Net income 28,916 236
</TABLE>
(3) DISCONTINUED OPERATIONS
Subsequent to March 31, 2000, the Company signed a purchase and
sale agreement with Edison Mission Energy to sell Citizens Power,
its wholly-owned subsidiary that engages in power trading and
power contract restructuring transactions. The estimated loss on
disposal of the entity is $109.5 million on a pretax basis
($78.3 million after-tax), which includes a provision for estimated
operating losses until disposal and estimated proceeds from the
monetization of non-trading assets concurrent with the disposal of
Citizens Power. The Company expects to complete the disposal
before the end of the next fiscal year.
The results of operations of Citizens Power have been reported
separately as a discontinued operation in the statements of
operations for all periods presented, and are summarized as
follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenues $ 17,225 $37,394 $ 1,750 $26,440
Income (loss) before income taxes (13,369) 12,477 (1,953) 8,584
Income tax provision (benefit) (1,297) 6,035 (189) 7,143
Net income (loss) from discontinued
operations (12,087) 6,442 (1,764) 1,441
</TABLE>
The fair value of net assets related to the discontinued operation
have been segregated in the March 31, 2000 consolidated balance
sheet and include the following:
Cash $ 41,222
Accounts receivable 46,339
Assets from power trading activities 908,256
Liabilities from power trading activities (524,366)
Other current liabilities (75,701)
Non-recourse debt (305,750)
--------
$ 90,000
========
(4) ACCOUNTS RECEIVABLE SECURITIZATION
In March 2000, the Company and a wholly-owned subsidiary
("Seller") entered into agreements with certain financial
institutions to establish a five-year receivables purchase
facility. Under the facility, up to $100.0 million of beneficial
interests in accounts receivable that have been contributed to the
Seller may be sold, without recourse, to a commercial paper
conduit ("Conduit"). Under the provisions of SFAS No. 125,
"Accounting for Transfers and Servicing of
F-12
<PAGE>
<PAGE>
Financial Assets and Extinguishments of Liabilities," the
transaction was recorded as a sale, with those accounts receivable
sold to the Conduit removed from the consolidated balance sheet.
The Seller is a separate legal entity and its assets are available
first and foremost to satisfy the claims of its creditors.
As of March 31, 2000, $100.0 million in beneficial interests were
sold to the Conduit under the facility. The Seller also maintained
a subordinated interest in $20.5 million of remaining accounts
receivable under the terms of the facility. Proceeds from the sale
were used to repay long-term debt.
(5) COAL INVENTORY
Coal inventory consisted of the following as of March 31:
2000 1999
-------- --------
Saleable coal $ 41,047 $ 50,293
Raw coal 18,400 23,299
Work in process 133,894 122,327
-------- --------
$193,341 $195,919
======== ========
Raw coal represents coal stockpiles that may be sold in current
condition or may be further processed prior to shipment to a
customer. Work in process consists of the average cost to remove
overburden above an unmined coal seam as part of the surface
mining process.
(6) LEASES
The Company leases equipment and facilities under various
noncancelable lease agreements. Certain lease agreements require
the maintenance of specified ratios and contain restrictive
covenants which limit indebtedness, subsidiary dividends,
investments, asset sales and other Company actions. Rental expense
under operating leases was $39.7 million for the year ended March
31, 2000, $34.6 million for the period ended March 31, 1999, $5.4
million for the period ended May 19, 1998 and $39.9 million for
the year ended March 31, 1998. The cost of property, plant,
equipment and mine development assets acquired under capital
leases was $31.2 million and $34.8 million at March 31, 2000 and
1999, respectively. The related accumulated amortization was $6.3
million and $2.2 million at March 31, 2000 and 1999, respectively.
The Company also leases coal reserves under agreements that
require royalties to be paid as the coal is mined. Total royalty
expense was $164.2 million for the year ended March 31, 2000,
$123.2 million for the period ended March 31, 1999, $17.3 million
for the period ended May 19, 1998 and $132.9 million for the year
ended March 31, 1998. Certain agreements also require minimum
annual royalties to be paid regardless of the amount of coal mined
during the year.
A substantial amount of the coal mined by the Company is produced
from reserves leased from the owner of the coal. One of the major
lessors is the U.S. government, from which the Company leases
substantially all of the coal which it mines in Wyoming, Montana
and Colorado under terms set by Congress and administered by the
U.S. Bureau of Land Management. The terms of these leases are
generally for an initial term of ten years but may be extended by
diligent development and mining of the reserve until all
economically recoverable reserves are depleted. The Company has
met the diligent development requirements for substantially all of
these federal leases either directly through production or by
including the lease as a part of a logical mining unit with other
leases upon which development has occurred. Annual production on
these federal leases must total at least 1 percent of the original
amount of coal in the entire logical mining unit. Royalties are
payable monthly at a rate of 12.5 percent of the gross realization
from the sale of the coal mined using surface mining methods and
at a rate of 8.0 percent of the gross realization for coal
produced using underground mining methods. The Company also leases
the coal production at its Arizona mines from The Navajo Nation
and the Hopi Tribe under leases that are administered by the U.S.
Department of the Interior. These leases expire once mining
activities cease. The royalty rates are also generally based upon
a percentage of the gross realization from the sale of coal. These
rates are subject to redetermination every ten years under the
terms of the leases. The remainder of the leased coal is generally
leased from state governments, land holding companies and various
individuals. The duration of these leases
F-13
<PAGE>
<PAGE>
varies greatly. Typically, the lease terms are automatically
extended as long as active mining continues. Royalty payments are
generally based upon a specified rate per ton or a percentage of
the gross realization from the sale of the coal.
In fiscal year 2000, the Company sold certain assets for $34.2
million and those assets were leased back under operating lease
agreements from the purchasers over a period of seven to 13 years.
No gains were recognized on these transactions. Each lease
agreement contains renewal options at lease termination and
purchase options at amounts approximating fair market value during
the lease and at lease termination.
Future minimum lease and royalty payments as of March 31, 2000 are
as follows:
<TABLE>
<CAPTION>
Capital Operating Coal
Fiscal Year Ending March 31 Leases Leases Reserves
----------------------------- ------- --------- --------
<S> <C> <C> <C>
2001 $ 6,873 $ 51,394 $ 38,559
2002 3,641 47,399 33,201
2003 3,560 41,473 31,407
2004 4,081 36,674 31,007
2005 2,378 30,988 8,930
2006 and thereafter 16,245 64,147 33,935
------- -------- --------
Total minimum lease payments 36,778 $272,075 $177,039
======== ========
Less interest 8,919
-------
Present value of minimum
capital lease payments $27,859
=======
</TABLE>
F-14
<PAGE>
<PAGE>
(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following
as of March 31:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Trade accounts payable $180,682 $211,993
Accrued payroll and related benefits 85,281 71,508
Accrued taxes other than income 76,841 77,839
Accrued health care 62,127 63,422
Accrued interest 46,166 41,219
Workers' compensation obligations 35,246 38,542
Accrued royalties 18,624 22,425
Accrued lease payments 11,188 11,536
Other accrued expenses 56,982 89,238
-------- --------
Total accounts payable and accrued expenses $573,137 $627,722
======== ========
</TABLE>
(8) INCOME TAXES
Pretax income (loss) from continuing operations consisted of:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations:
United States $(49,550) $(22,942) $4,134 $199,300
Non U.S. 42,152 31,608 2,636 42,645
-------- -------- ------ --------
$ (7,398) $ 8,666 $6,770 $241,945
======== ======== ====== ========
</TABLE>
F-15
<PAGE>
<PAGE>
Total income tax provision (benefit) from continuing operations
consisted of:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Current:
U.S. federal $ - $ - $ - $ -
Non U.S. 16,224 9,700 1,427 21,001
State 57 26 79 3,684
--------- ------- ------ -------
Total current 16,281 9,726 1,506 24,685
--------- ------- ------ -------
Deferred:
U.S. federal (124,807) (8,309) 1,904 61,288
Non U.S. (4,037) 2,026 - (5,457)
State (28,959) (431) 1,120 2,534
--------- ------- ------ -------
Total deferred (157,803) (6,714) 3,024 58,365
--------- ------- ------ -------
Total provision (benefit) $(141,522) $ 3,012 $4,530 $83,050
========= ======= ====== =======
</TABLE>
The deferred tax benefit for the year ended March 31, 2000
includes the effect of a change in tax regulations and statutes in
the current period which allowed the Company to make a tax
election to treat a wholly owned partnership as a corporation. The
election eliminated a $144.0 million deferred tax liability
previously recognized pursuant to the provisions of SFAS No. 109
on the "outside tax basis," which represents the tax effected
difference between the book value and the tax basis of the
investment in the partnership interest. The election allowed the
Company to treat the partnership as a corporation and look to the
"inside tax basis," which represents the tax effected difference
between the book value of the assets and liabilities recorded on
the balance sheet of the partnership and the tax basis of the
individual assets and liabilities. The Company recognized deferred
tax benefit of $144.0 million in the year ended March 31, 2000
related to this election.
The non U.S. tax deferred tax provision includes a benefit of
$3.2 million due to changes in the Australian tax rate from 36 percent
to 34 percent effective April 1, 2000. In addition, the Australian
rate is scheduled to change to 30 percent effective April 1, 2001.
F-16
<PAGE>
<PAGE>
The income tax rate on income (loss) from continuing operations
differed from the U.S. federal statutory rate as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Federal statutory rate $ (2,590) $ 3,033 $2,369 $84,681
Changes in valuation allowance 31,907 16,386 6,012 14,280
Partnership tax basis election (144,028) - - -
Foreign earnings (2,566) 676 506 1,002
State income taxes, net of U.S. federal
tax benefit (6,458) (3,391) 2,881 4,047
Depletion (26,151) (13,320) (2,182) (20,794)
Other, net 8,364 (372) (5,056) (166)
--------- ------- ------ -------
$(141,522) $ 3,012 $4,530 $83,050
========= ======= ====== =======
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
consisted of the following as of March 31:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Deferred tax assets:
Accrued long-term reclamation and mine closing liabilities $ 107,854 $ 104,777
Accrued long-term workers' compensation liabilities 92,778 99,776
Postretirement benefit obligations 402,747 401,994
Intangible tax asset and purchased contract rights 168,092 164,239
Tax credits and loss carryforwards 155,626 84,862
Obligation to industry fund 26,169 39,389
Others 136,471 79,986
---------- ----------
Total gross deferred tax assets 1,089,737 975,023
---------- ----------
Deferred tax liabilities:
Property, plant, equipment and mine development, principally due to
differences in depreciation, depletion and asset writedowns 1,385,195 1,226,002
Long-term debt, principally due to amortization of debt discount 24,704 19,756
Others 150,047 432,026
---------- ----------
Total gross deferred tax liabilities 1,559,946 1,677,784
---------- ----------
Valuation allowance (105,046) (68,918)
---------- ----------
Net deferred tax liability $ (575,255) $ (771,679)
========== ==========
</TABLE>
F-17
<PAGE>
<PAGE>
Deferred taxes consisted of the following as of March 31:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Current deferred income taxes $ 49,869 $ 8,496
Noncurrent deferred income taxes (625,124) (780,175)
--------- ---------
Net deferred tax liability $(575,255) $(771,679)
========= =========
</TABLE>
The Company's deferred tax assets include alternative minimum tax
("AMT") credits of $50.6 million and net operating loss ("NOL")
carryforwards of $105.0 million at March 31, 2000. The AMT credits
have no expiration date and the NOL carryforwards expire beginning
in the year 2019. The AMT credits and NOL carryforwards are offset
by a valuation allowance of $105.0 million.
The Company made U.S. federal tax payments totaling $0.3 million
for the year ended March 31, 2000 and $0.1 million for the year
ended March 31, 1998. No payments for U.S. federal taxes were made
for the periods ended March 31, 1999 or May 19, 1998. The Company
paid state and local income taxes totaling $0.6 million for the
year ended March 31, 2000, $0.7 million for the period ended March
31, 1999 and $0.8 million for the year ended March 31, 1998. No
state or local income tax payments were made for the period ended
May 19, 1998.
Non U.S. tax payments were $8.8 million for the year ended March
31, 2000, $11.9 million for the period ended March 31, 1999, $0.3
million for the period ended May 19, 1998 and $18.3 million for
the year ended March 31, 1998.
(9) SHORT-TERM BORROWINGS
Short-term borrowings were $9.9 million and $9.5 million at March
31, 2000 and 1999, respectively.
The Company maintains a Revolving Credit Facility that provides
for aggregate borrowings of up to $200.0 million and letters of
credit of up to $280.0 million. During the period ended March 31,
2000, the Company had no borrowings outstanding under the
Revolving Credit Facility. Interest rates on the revolving loans
under the Revolving Credit Facility are based on the Base Rate (as
defined in the Senior Credit Facilities) or LIBOR (as defined in
the Senior Credit Facilities) at the Company's option. The
applicable rate was 8.9 percent at March 31, 2000. The Revolving
Credit Facility commitment matures in fiscal 2005.
At March 31, 2000, Peabody Resources maintained four 365-day
corporate debt facilities with several banks totaling $110.0
million in Australian dollars (approximately $66.7 million in U.S.
dollars). The interest rate is determined at the time of borrowing
based on the Bank Bill Swap Rate plus a margin. At March 31, 2000,
$9.9 million was outstanding and the effective annual interest
rate was 6.0 percent.
The amount of interest paid was $2.1 million for the year ended
March 31, 2000, $1.4 million for the period ended March 31, 1999,
$0.2 million for the period ended May 19, 1998 and $1.8 million
for the year ended March 31, 1998.
F-18
<PAGE>
<PAGE>
(10) LONG-TERM DEBT
Long-term debt consisted of the following as of March 31:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Term loans under Senior Credit Facilities $ 690,000 $ 840,000
9.625% Senior Subordinated Notes
("Senior Subordinated Notes") due 2008 498,747 498,649
8.875% Senior Notes ("Senior Notes") due 2008 398,971 398,887
Non-Recourse Debt (see note 3) - 333,867
5.0% Subordinated Note 180,335 190,567
Senior unsecured notes under various agreements 99,286 107,143
Project finance facility 76,539 66,588
Unsecured revolving credit agreement 44,721 45,400
Capital lease obligations 27,859 26,881
Other 49,773 24,876
---------- ----------
Total long-term debt 2,066,231 2,532,858
Less current maturities (48,042) (62,883)
---------- ----------
Long-term debt, less current maturities $2,018,189 $2,469,975
========== ==========
</TABLE>
The Senior Credit Facilities are secured by a first priority lien
on certain assets of the Company and its domestic subsidiaries.
During fiscal 2000, the Company made optional prepayments of
$150.0 million on the Senior Credit Facilities, which it applied
against mandatory Term Loan A and B payments in order of maturity.
The Senior Subordinated Notes are general unsecured obligations of
the Company and are subordinate in right of payment to all
existing and future senior debt (as defined), including borrowings
under the Senior Credit Facilities and the Senior Notes. The
Senior Notes are general unsecured obligations of the Company,
rank senior in right of payment to all subordinated indebtedness
(as defined) and rank equally in right of payment with all current
and future unsecured indebtedness of the Company.
The Company maintains two interest rate swap agreements to fix the
interest cost on $500.0 million of long-term debt outstanding
under the Term Loan Facility. The Company will pay a fixed rate of
approximately 7.0 percent on $300.0 million of such long-term
debt for a period of three years ending October 1, 2001, and on
$200.0 million of such long-term debt for two years ending October 1,
2000. The Company also has an interest rate swap agreement to fix
the interest cost on 90 percent of the project finance facility
for a period of ten years ending December 2010 at a fixed rate of
6.75 percent.
The indentures governing the Senior Notes and Senior Subordinated
Notes permit the Company and its Restricted Subsidiaries (which
include all subsidiaries of the Company except Citizens Power and
its subsidiaries) to incur additional indebtedness, including
secured indebtedness, subject to certain limitations. In addition,
among other customary restrictive covenants, the indentures
prohibit the Company and its Restricted Subsidiaries from creating
or otherwise causing any encumbrance or restriction on the ability
of any Restricted Subsidiary that is not a Guarantor to pay
dividends or to make certain other upstream payments to the
Company or any of its Restricted Subsidiaries (subject to certain
exceptions). The Revolving Credit Facility and related term loans
also contain certain restrictions and limitations including, but
not limited to, financial covenants that will require the Company
to maintain and achieve certain levels of financial performance
and limit the payment of cash dividends and similar restricted
payments. In addition, the Senior Credit Facilities prohibit the
Company from allowing its Restricted Subsidiaries (which include
all Guarantors) to create or otherwise cause any encumbrance or
restriction on the ability of any such Restricted Subsidiary to
pay any dividends or make certain other upstream payments subject
to certain exceptions. At March 31, 2000, restricted net assets of
the Company's consolidated subsidiaries was $634.6 million.
F-19
<PAGE>
<PAGE>
The 5.0 percent Subordinated Note, which had an original face
value of $400.0 million, is recorded net of discount at an
effective annual interest rate of approximately 12.0 percent.
Interest and principal are payable each March 1 and scheduled
principal payments of $20.0 million per year are due from 2001
through 2006 with any unpaid amounts due March 1, 2007. The
5.0 percent Subordinated Note is expressly subordinated in right
of payment to all prior indebtedness (as defined), including
borrowings under the Senior Credit Facility and the Senior Notes.
The senior unsecured notes represent obligations of Black Beauty
and include $39.3 million of senior notes and three series of
notes with an aggregate principal amount of $60.0 million. The
senior notes bear interest at 9.2 percent, payable quarterly, and
are prepayable in whole or in part at any time, subject to certain
make-whole provisions. The three series of notes include Series A,
B and C Notes, totaling $45.0 million, $5.0 million, and
$10.0 million, respectively. The Series A Notes bear interest at an
annual rate of 7.5 percent and are due in fiscal 2008. The Series
B Notes bear interest at an annual rate of 7.4 percent and are due
in fiscal 2004. The Series C Notes bear interest at an annual rate
of 7.4 percent and are due in fiscal 2003.
Peabody Resources entered into a project finance facility in 1998
to finance the construction of its interest in the Bengalla Mine.
The facility, which is denominated in U.S. dollars, expires in
2010 and the maximum drawdown is $88.3 million. In accordance with
the facility agreement, the loan will be repaid from the net
proceeds derived from coal sales from the Bengalla Mine. There
were borrowings against the facility of $76.5 million and
$66.6 million as of March 31, 2000 and 1999, respectively, with
an effective annual interest rate of 6.75 percent.
At March 31, 2000, Black Beauty maintained a $100.0 million
revolving credit facility with several banks that matures on
February 28, 2002. Black Beauty may elect one or a combination of
interest rates on its borrowings; the effective annual interest
rate was 6.7 percent at March 31, 2000. Borrowings outstanding at
March 31, 2000 were $44.7 million. Quarterly commitment fees are
paid on the unused portion of the facility at a 0.15 percent rate.
Capital lease obligations are payable in installments through 2008
with a weighted average effective interest rate of 5.9 percent.
Other, principally notes payable, is due in installments through
2005 with a weighted average effective interest rate of 7.9 percent.
The aggregate amounts of long-term debt maturities subsequent to
March 31, 2000 are as follows:
2001 $ 48,042
2002 97,461
2003 61,741
2004 143,817
2005 114,533
2006 and thereafter 1,600,637
----------
$2,066,231
==========
The amount of interest paid was $196.9 million for the year ended
March 31, 2000, $138.8 million for the period ended March 31,
1999, $0.5 million for the period ended May 19, 1998 and $44.6
million for the year ended March 31, 1998.
F-20
<PAGE>
<PAGE>
(11) WORKERS' COMPENSATION OBLIGATIONS
The workers' compensation obligations consisted of the following
as of March 31:
2000 1999
-------- --------
Occupational disease costs $156,729 $154,311
Traumatic injury claims 89,355 90,361
State assessment taxes 1,422 1,414
-------- --------
Total obligations 247,506 246,086
Less current portion (35,246) (38,542)
-------- --------
Noncurrent obligations $212,260 $207,544
======== ========
Workers' compensation obligations consist of amounts accrued for
loss sensitive insurance premiums, uninsured claims, and related
taxes and assessments under traumatic injury and occupational
disease workers' compensation programs. As of March 31, 2000, the
Company had $78.7 million in surety bonds outstanding to secure
workers' compensation obligations.
In Australia, workers' compensation funds are either separately
administered industry funds or externally insured. Premiums are
paid as a percentage of salary and labor costs. The administration
of claims and the liability for payment of workers' compensation
is the responsibility of the industry fund or the insurance
company.
Certain subsidiaries of the Company are subject to the Federal
Coal Mine Health & Safety Act of 1969, and the related workers'
compensation laws in the states in which they operate. These laws
require the subsidiaries to pay benefits for occupational disease
resulting from coal workers' pneumoconiosis ("CWP"). The provision
for CWP claims (including projected claims costs and interest
discount accruals) was a charge of $12.0 million for the year
ended March 31, 2000, a charge of $11.1 million for the period
ended March 31, 1999, a benefit of $0.4 million for the period
ended May 19, 1998 and a benefit of $9.4 million for the year
ended March 31, 1998. The benefits recorded in prior years were
primarily attributable to favorable loss experience factors and
changes in certain actuarial assumptions.
The liability for occupational disease claims represents the
present value of known claims and an actuarially-determined
estimate of future claims that will be awarded to current and
former employees. The projections at March 31, 2000 were based on
a 7.125 percent per annum interest discount rate and a 3.5 percent
estimate for the annual rate of inflation, and the projections at
March 31, 1999 were based on a 7.25 percent per annum interest
discount rate and a 3.5 percent estimate for the annual rate of
inflation. Traumatic injury workers' compensation obligations are
estimated from both case reserves and actuarial determinations of
historical trends, discounted at approximately 7.125 and 7.25
percent per annum at March 31, 2000 and 1999, respectively.
F-21
<PAGE>
<PAGE>
(12) PENSION AND SAVINGS PLANS
Peabody Holding Company sponsors a defined benefit pension plan
covering substantially all salaried U.S. employees (the "Peabody
Plan"). A Peabody Holding Company subsidiary also has a defined
benefit pension plan covering eligible employees who are
represented by the United Mine Workers of America under the
Western Surface Agreement of 1996 (the "Western Plan"). Peabody
Holding Company and Gold Fields sponsor separate unfunded
supplemental retirement plans to provide senior management with
benefits in excess of limits under the federal tax law and
increased benefits to reflect a service adjustment factor. Powder
River Coal Company, a wholly owned subsidiary, sponsored a defined
benefit pension plan for its salaried employees that was merged
into the Peabody Plan effective January 1, 1999. Pension benefits
were not affected by the merger. Lee Ranch sponsors two defined
benefit pension plans, one which covers substantially all Lee
Ranch hourly employees (the "Lee Ranch Hourly Plan") and one which
covers substantially all Lee Ranch salaried employees (the "Lee
Ranch Salaried Plan"). Peabody Resources participates in a number
of superannuation funds and contributes on various percentages of
employee compensation. Members of the funds may voluntarily
contribute additional amounts to their accounts. Fund members are
variously entitled to benefits on retirement, withdrawal,
disability or death.
Benefits under the Peabody Plan and the Lee Ranch Salaried Plan
are computed based on the number of years of service and
compensation during certain years. Benefits under the Western Plan
are computed based on the number of years of service with the
subsidiary or other specified employers. Benefits under the Lee
Ranch Hourly Plan are computed based on job classification and
years of service.
Annual contributions to the plans are made as determined by
consulting actuaries based upon the Employee Retirement Income
Security Act of 1974 minimum funding standard. As a result of the
acquisition of the Predecessor Company, the Company entered into
an agreement with the Pension Benefit Guaranty Corporation which
requires the Company to maintain minimum funding requirements.
Assets of the plans are primarily invested in various marketable
securities, including U.S. government bonds, corporate obligations
and listed stocks. The funds are part of a master trust
arrangement managed by the Company.
Net periodic pension costs included the following components:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Service cost for benefits earned $ 9,773 $ 9,098 $2,323 $10,282
Interest cost on projected
benefit obligation 34,389 29,640 7,543 33,095
Expected return on plan assets (42,691) (48,546) (9,125) (50,755)
Other amortizations and deferrals (455) 12,083 - 16,135
------- ------- ------ -------
Net periodic pension costs $ 1,016 $ 2,275 $ 741 $ 8,757
======= ======= ====== =======
</TABLE>
During the period ended March 31, 1999, the Company made an
amendment to phase out the Peabody Plan beginning January 1, 2000.
This plan amendment resulted in a curtailment gain of $7.1
million. During the year ended March 31, 1998 early retirement and
reduction in force programs were offered to certain employees as
part of company-wide restructuring and cost reduction efforts. As
a result of the special termination benefits offered, a charge of
$0.6 million was recognized during the year ended March 31, 1998,
in accordance with SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits."
F-22
<PAGE>
<PAGE>
The following summarizes the change in benefit obligation, change
in plan assets and funded status of the Company's plans:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $492,867 $496,037
Service cost 9,773 9,098
Interest cost 34,389 29,640
Plan amendments - (5,803)
Benefits paid (28,506) (23,235)
Curtailments - (20,701)
Actuarial (gain) loss (49,328) 7,831
-------- --------
Benefit obligation at end of year 459,195 492,867
-------- --------
Change in plan assets:
Fair value of plan assets at beginning of year 474,385 473,922
Actual return on plan assets 60,375 18,296
Employer contributions 1,522 5,402
Benefits paid (28,506) (23,235)
-------- --------
Fair value of plan assets at end of year 507,776 474,385
-------- --------
Funded status 48,581 (18,482)
Unrecognized actuarial (gain) loss (54,773) 12,262
Unrecognized prior service cost (benefit) (5,205) (5,683)
-------- --------
Accrued pension expense $(11,397) $(11,903)
======== ========
Amounts recognized in the balance sheets:
Prepaid benefit cost $ 2,832 $ 488
Accrued benefit liability (14,229) (15,434)
Additional minimum pension liability - 3,043
-------- --------
Net amount recognized $(11,397) $(11,903)
======== ========
</TABLE>
As of March 31, 2000, the only pension plans with accumulated
benefit obligation in excess of plan assets were the unfunded
supplemental retirement plans. The projected benefit obligation
and accumulated benefit obligation for those plans were
$13.2 million and $13.0 million, respectively. The projected benefit
obligation, accumulated benefit obligation, and the fair value of
plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $57.0 million, $56.9 million, and
$43.1 million, respectively, as of March 31, 1999.
The provisions of SFAS No. 87, "Employers' Accounting for
Pensions," require the recognition of an additional minimum
liability and related intangible asset to the extent that
accumulated benefits exceed plan assets. As of March 31, 2000, the
Company's pension plans' assets exceeded the accumulated benefit
obligation and therefore no additional minimum liability was
recorded. The $3.0 million adjustment recorded as of March 31,
1999, relating to the plans' underfunded status, was reversed in
the current year.
F-23
<PAGE>
<PAGE>
The assumptions used to determine the above projected benefit
obligation at the end of each fiscal period were as follows:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Discount rate 8.1% 7.125%
Rate of compensation increase 4.25% 3.75%
Expected rate of return on plan assets 9.0% 9.0%
</TABLE>
Certain subsidiaries make contributions to multiemployer pension
plans, which provide defined benefits to substantially all hourly
coal production workers represented by the United Mine Workers of
America other than those covered by the Western Plan. Benefits
under the United Mine Workers of America plans are computed based
on service with the subsidiaries or other signatory employers. The
amounts contributed to the plans and included in operating costs
were $0.3 million for the year ended March 31, 2000, $1.1 million
for the period ended March 31, 1999, $0.6 million for the period
ended May 19, 1998 and $4.9 million for the year ended March 31,
1998.
The Company sponsors savings and long-term investment plans for
eligible salaried U.S. employees. The Company matches between 50.0
and 75.0 percent of voluntary contributions up to a maximum
matching contribution between 3.0 and 4.5 percent of a
participant's salary. Effective January 1, 2001, the Company will
increase the matching contribution to a maximum of 6.0 percent of
a participant's salary. The expense for these plans was $4.2
million for the year ended March 31, 2000, $4.1 million for the
period ended March 31, 1999, $0.6 million for the period ended May
19, 1998 and $4.2 million for the year ended March 31, 1998.
The amount contributed and expensed by Peabody Resources to
superannuation funds was $5.1 million for the year ended March 31,
2000, $0.9 million for the period ended March 31, 1999, $0.4
million for the period ended May 19, 1998 and $2.9 million for the
year ended March 31, 1998.
(13) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company currently provides health care and life insurance
benefits to qualifying salaried and hourly retirees and their
dependents from defined benefit plans established by the Company.
Employees of Gold Fields are only eligible for life insurance
benefits as provided by the Company. Plan coverage for the health
and life insurance benefits is provided to future hourly retirees
in accordance with the applicable labor agreement. The Company
accounts for postretirement benefits using the accrual method.
Retirees of Peabody Resources are provided similar benefits by
plans sponsored by the Australian government. As a result, no
liability is recorded for this plan.
Net periodic postretirement benefits costs for each fiscal period
included the following components:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Service cost for benefits earned $ 4,835 $ 4,750 $ 897 $ 6,569
Interest cost on accumulated
postretirement benefit obligation 70,029 60,519 10,075 69,614
Prior service cost amortization (2,488) (625) (242) (10,071)
------- ------- ------- -------
Net periodic postretirement
benefit costs $72,376 $64,644 $10,730 $66,112
======= ======= ======= =======
</TABLE>
F-24
<PAGE>
<PAGE>
The following table sets forth the plans' combined funded status
reconciled with the amounts shown in the balance sheets:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,008,702 $ 995,265
Service cost 4,835 4,750
Interest cost 70,029 60,519
Plan amendments (1,097) (21,777)
Benefits paid (57,586) (49,088)
Actuarial (gain) loss (60,503) 19,033
----------- -----------
Benefit obligation at end of year 964,380 1,008,702
----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year - -
Employer contributions 57,586 49,088
Benefits paid (57,586) (49,088)
----------- -----------
Fair value of plan assets at end of year - -
----------- -----------
Funded status (964,380) (1,008,702)
Unrecognized actuarial (gain) loss (41,420) 19,076
Unrecognized prior service cost (20,386) (21,777)
----------- -----------
Accrued postretirement benefit obligation $(1,026,186) $(1,011,403)
=========== ===========
</TABLE>
The assumptions used to determine the accumulated postretirement
benefit obligation at the end of each fiscal period were as
follows:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
------------------ ------------------
<S> <C> <C>
Discount rate 8.1% 7.125%
Salary increase rate for life insurance benefit 4.25% 3.75%
Health care trend rate:
Pre-65 6.95% down to 6.95% down to
4.75% over 4 years 4.75% over 4 years
Post-65 6.13% down to 6.13% down to
4.75% over 4 years 4.75% over 4 years
Medicare 5.68% down to 5.68% down to
4.75% over 4 years 4.75% over 4 years
</TABLE>
Assumed health care cost trend rates have a significant effect on
the amounts reported for health care plans. A one-percentage-point
change in the assumed health care cost trend would have the
following effects:
<TABLE>
<CAPTION>
One-Percentage- One-Percentage-
Point Increase Point Decrease
--------------- ---------------
<S> <C> <C>
Effect on total service and interest cost components $ 9,648 $ (9,213)
Effect on postretirement benefit obligation $123,238 $(103,059)
</TABLE>
F-25
<PAGE>
<PAGE>
Retirees formerly employed by certain subsidiaries and their
predecessors, who were members of the United Mine Workers of
America, last worked before January 1, 1976 and were receiving
health benefits on July 20, 1992, receive health benefits provided
by the Combined Fund, a fund created by the Coal Industry Retiree
Health Benefit Act of 1992 (the "Coal Act"). The Coal Act requires
former employers (including certain subsidiaries of the Company)
and their affiliates to contribute to the Combined Fund according
to a formula. In addition, certain Federal Abandoned Mine Lands
funds will be used to pay benefits to orphaned retirees through
2004.
The Company has recorded an actuarially determined liability
representing the amounts anticipated to be due for the Combined
Fund. The "Obligation to industry fund" reflected in the balance
sheets at March 31, 2000 and 1999 was $64.7 million and
$63.1 million, respectively. The current portion related to this
obligation reflected in "Accounts payable and accrued expenses" in
the balance sheets at March 31, 2000 and 1999 was $5.1 million and
$9.2 million, respectively.
Expense of $2.6 million was recognized for the period ended March
31, 2000 which includes interest discount of $4.8 million, net of
the amortization of an actuarial gain of $2.2 million. Expense of
$4.5 million was recognized for the period ended March 31, 1999
due to the interest discount accrual. A benefit of $0.9 million
was recognized for the period ended May 19, 1998 which included
amortization of an actuarial gain of $1.7 million, net of the
interest discount accrual of $0.8 million. A benefit of
$15.9 million was recognized for the year ended March 31, 1998 which
included amortization of an actuarial gain of $21.4 million, net
of the interest discount accrual of $5.5 million.
The Coal Act also established a multiemployer benefit plan ("1992
Plan") which will provide medical and death benefits to persons
who are not eligible for the Combined Fund, whose employer and any
affiliates are no longer in business and who retired prior to
October 1, 1994. A prior labor agreement established the 1993
United Mine Workers of America Benefit Trust ("1993 Plan") to
provide health benefits for retired miners not covered by the Coal
Act. The 1992 Plan and the 1993 Plan qualify under SFAS No. 106 as
multiemployer benefit plans, which allows the Company to continue
to recognize expense as contributions are made. The amounts
expensed related to these funds were $1.7 million for the year
ended March 31, 2000, $0.7 million for the period ended March 31,
1999, $0.2 million for the period ended May 19, 1998 and
$4.5 million for the year ended March 31, 1998.
Pursuant to the provisions of the Coal Act and the 1992 Plan, the
Company is required to provide security in an amount equal to
three times the cost of providing health care benefits for one
year for all individuals receiving benefits from the 1992 Plan who
are attributable to the Company, plus all individuals receiving
benefits from an individual employer plan maintained by the
Company who are entitled to receive such benefits. In accordance
with the Coal Act and the 1992 Plan, the Company has outstanding
surety bonds at March 31, 2000 of $103.7 million. The surety bonds
represent security for the postretirement liability included on
the balance sheets.
In October 1999, Powder River announced changes in its medical
plan for active employees and retirees. Employees who retired
prior to December 31, 1999 were not affected by these changes. The
changes included: 90/10 coinsurance, maximum out-of-pocket limits,
copay for prescription drugs and mandatory generic drug usage. The
effect of the change on the salaried retiree health care liability
is $1.1 million. Powder River is recognizing the effect of the
plan amendment over nine years.
In January 1999, the Company adopted reductions to the salaried
employee medical coverage levels for employees retiring before
January 1, 2003. For employees retiring on or after January 1,
2003, the current medical plan is replaced with a medical premium
reimbursement plan. This plan change does not apply to Powder
River or Lee Ranch salaried employees. The change in the retiree
health care plan resulted in a $22.4 million reduction to the
salaried retiree health care liability. The Company is recognizing
the effect of the plan amendment over nine years beginning January
1, 1999. Therefore, the effect for the year ended March 31, 2000
and the three months ended March 31, 1999 was $2.5 million and
$0.6 million, respectively.
F-26
<PAGE>
<PAGE>
(14) RESTRUCTURING LIABILITY
In conjunction with the acquisition of P&L Coal Group, the Company
established a $39.4 million liability for estimated costs
associated with a restructuring plan resulting from the business
combination. The estimate was comprised of costs associated with
exiting certain activities ("exit plan") and consolidating and
restructuring certain management and administrative functions
("restructuring plan") and included costs resulting from a plan to
terminate or relocate employees. Costs associated with the
restructuring and exit plans have been charged against the
liability as incurred. The total costs charged against the
liability were $6.4 million for the year ended March 31, 2000 and
$28.8 million for the period ended March 31, 1999, of which
$3.6 million represented noncash charges associated with the exit
plan for the period ended March 31, 1999.
The exit plan was completed in the third quarter of fiscal year
2000 and the liability was reduced by $3.8 million at that time to
reflect the most recent cost estimates. This amount was recorded
as an adjustment to the cost of the acquisition. The majority of
the adjustment related to lower exit plan costs than originally
estimated. The $0.3 million remaining liability relates to
residual spending, including continuing lease costs at
administrative offices that were vacated as part of the
restructuring plan. If the ultimate amount of cost expended is
less than the $0.3 million remaining liability, the cost of the
acquisition will be further reduced.
The following table displays a rollforward of the restructuring
liability from the acquisition date to March 31, 2000:
<TABLE>
<CAPTION>
Adjustment to
May 19, 1998 March 31, 1999 Cost of March 31, 2000
Balance Charges Balance Charges Acquisition Balance
------------ -------- -------------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Restructuring plan $26,154 $(20,536) $ 5,618 $(4,409) $ (880) $329
Exit plan 13,214 (8,296) 4,918 (1,995) (2,923) -
------- -------- ------- ------- ------- ----
Total $39,368 $(28,832) $10,536 $(6,404) $(3,803) $329
======= ======== ======= ======= ======= ====
</TABLE>
(15) STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has 10,000,000 authorized shares of $0.01 par value
preferred stock. The Board of Directors is authorized to issue any
or all of the preferred stock. Shares of preferred stock are
exchangeable into shares of Class A common stock upon resolution
by the Board of Directors.
COMMON STOCK
The Company has 30,000,000 authorized shares of $0.01 par value
Class A common stock, and 3,000,000 authorized shares of $0.01 par
value Class B common stock. Holders of the Class A and Class B
common stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders.
Subject to the rights of the holders of the preferred stock,
holders of Class A and Class B common stock are entitled to
ratably receive such dividends as may be declared by the Board of
Directors. In the event of liquidation, dissolution or winding up
of the Company, holders of the Class A common stock are entitled
to share ratably in the distribution of all assets remaining after
payment of liabilities, subject to the rights of the preferred
stockholders. Holders of Class B common stock have a junior
liquidation right to the holders of Class A common stock.
STOCK OPTION PLAN
Effective May 19, 1998, the Company adopted the "1998 Stock
Purchase and Option Plan for Key Employees of P&L Coal Holdings
Corporation" (the "Plan"), making 4,027,800 shares of the
Company's common stock available for grant. The Board of Directors
may provide such grants in the form of either non-qualified or
incentive stock options.
F-27
<PAGE>
<PAGE>
During the year ended March 31, 2000, the Company granted 201,625
options to purchase Class A common stock, 58,153 of which are
incentive stock options that vest at a rate of 20 percent for five
years (incentive options) and 143,472 of non-qualified stock
options that vest in full or in part at a rate of 20 percent per
year based upon the attainment of performance goals determined by
the Board of Directors (performance options). During the period
ended March 31, 1999, the Company granted 3,795,873 options to
purchase Class A common stock, 931,885 of which are incentive
options and 2,863,988 are performance options.
A summary of the outstanding options is as follows:
<TABLE>
<CAPTION>
Weighted Average
Weighted Average Fair Value of
Shares Exercise Price Options Granted
--------- ---------------- ----------------
<S> <C> <C> <C>
Beginning balance at May 19, 1998 -
Granted 3,795,873 $20.00 $6.60
Exercised - -
Forfeited - -
---------
Outstanding at March 31, 1999 3,795,873 20.00
Granted 201,625 20.00 6.60
Exercised - -
Forfeited (307,828) 20.00
---------
Outstanding at March 31, 2000 3,689,670 $20.00
========= ======
Options exercisable at:
March 31, 2000 348,589 $20.00
March 31, 1999 - -
</TABLE>
The Company applies APB Opinion No. 25 and related Interpretations
in accounting for the Plan. Accordingly, no compensation cost has
been recognized for non-qualified or incentive stock options
granted under the Plan. Had compensation cost been determined for
the Company's non-qualified or incentive stock options based on
the fair value at the grant dates consistent with the minimum
value method set forth under SFAS No. 123, "Accounting for Stock-
Based Compensation," the Company's net income would have decreased
by approximately $3.4 million and $3.3 million for the year ended
March 31, 2000 and the period ended March 31, 1999, respectively.
The weighted average fair value of options granted was $6.60 for
fiscal years 2000 and 1999. The fair value of fiscal year 2000 and
1999 options granted was estimated on each respective grant date
using the following assumptions: a risk-free interest rate of 5.7
percent, an expected life of seven years and a dividend yield of
zero percent. The weighted average remaining contractual life of
options outstanding as of March 31, 2000 was 8.3 years.
F-28
<PAGE>
<PAGE>
(16) COMPREHENSIVE INCOME
The after-tax components of accumulated other comprehensive income
(loss) are as follows:
<TABLE>
<CAPTION>
Total Accumulated
Foreign Currency Minimum Pension Other Comprehensive
Translation Adjustment Liability Adjustment Income/(Loss)
---------------------- -------------------- -------------------
<S> <C> <C> <C>
PREDECESSOR COMPANY
-------------------
Beginning balance March 31, 1997 $ (2,799) $ - $ (2,799)
Current period change (39,385) - (39,385)
-------- ------- --------
Ending balance March 31, 1998 (42,184) - (42,184)
Current period change (17,974) - (17,974)
-------- ------- --------
Ending balance May 19, 1998 $(60,158) $ - $(60,158)
======== ======= ========
------------------------------------------------------------------------------------------------------------------
Beginning balance May 20, 1998 $ - $ - $ -
Current period change 4,128 (1,795) 2,333
-------- ------- --------
Ending balance March 31, 1999 4,128 (1,795) 2,333
Current period change (16,795) 1,795 (15,000)
-------- ------- --------
Ending balance March 31, 2000 $(12,667) $ - $(12,667)
======== ======= ========
</TABLE>
The foreign currency translation adjustments are not currently
adjusted for income taxes since they relate to indefinite
investments in non-U.S. subsidiaries.
(17) RELATED PARTY TRANSACTIONS
For the year ended March 31, 1998, the Company paid a
$65.1 million dividend and provided a $141.0 million loan
to a subsidiary of The Energy Group with a five-year term
at a 5.0 percent interest rate.
(18) CONTRACT RESTRUCTURINGS
The Company has periodically agreed to terminate coal supply
agreements in return for payments by the customer. The amounts
included in "Other revenues" were $13.0 million for the year ended
March 31, 2000, $5.3 million for the period ended March 31, 1999
and $49.3 million for the year ended March 31, 1998. There were no
gains related to coal supply agreement terminations for the period
ended May 19, 1998.
(19) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company owns a 30.0 percent interest in a partnership that
leases a coal export terminal from the Peninsula Ports Authority
of Virginia under a 30-year lease that permits the partnership to
purchase the terminal at the end of the lease term for a nominal
amount. The partners have severally (but not jointly) agreed to
make payments under various agreements which in the aggregate
provide the partnership with sufficient funds to pay rents and to
cover the principal and interest payments on the floating-rate
industrial revenue bonds issued by the Peninsula Ports Authority,
and which are supported by letters of credit from a commercial
bank. The Company's reimbursement obligation to the commercial
bank is in turn supported by a letter of credit totaling $42.8 million.
In December 1999, the Company entered into a 49.0 percent interest
in a joint venture to develop and rehabilitate an underground mine
and prep plant facility. The partners have jointly and severally
agreed to guarantee the $28.8 million five-
F-29
<PAGE>
<PAGE>
year financing agreement provided by two commercial banks of which
49.0 percent ($14.1 million) is guaranteed by the Company. Principal
payments are due beginning December 1, 2000 at $0.3 million for
48 months with a final principal payment of $14.4 million due December
2005. Interest payments are due monthly and accrue at prime, which
was 9.0 percent at March 31, 2000.
Peabody Resources uses forward currency contracts to manage its
exposure against foreign currency fluctuations on sales
denominated in U.S. dollars. Realized gains and losses on these
contracts are recognized in the same period as the hedged
transactions. The Company had unrealized gains and (losses) of
($13.9 million) for the year ended March 31, 2000, $16.2 million
for the period ended March 31, 1999, $33.6 million for the period
ended May 19, 1998 and ($17.3 million) for the year ended March
31, 1998. The Company had forward currency contracts outstanding
at March 31, 2000 and 1999 of $215.0 million and $217.1 million,
respectively.
In the normal course of business, the Company is a party to
financial instruments with off-balance-sheet risk, such as bank
letters of credit, performance bonds and other guarantees, which
are not reflected in the accompanying balance sheets. Such
financial instruments are to be valued based on the amount of
exposure under the instrument and the likelihood of performance
being required. In the Company's past experience, virtually no
claims have been made against these financial instruments.
Management does not expect any material losses to result from
these off-balance-sheet instruments and, therefore, is of the
opinion that the fair value of these instruments is zero.
(20) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments," defines the fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents, accounts receivable, receivables
from affiliates, and accounts payable and accrued expenses
have carrying values which approximate fair value due to the
short maturity or the financial nature of these instruments.
Notes payable fair value estimates are based on estimated
borrowing rates to discount the cash flows to their present
value. The 5.0 percent Subordinated Note carrying amount is
net of unamortized note discount.
Other noncurrent liabilities include a deferred purchase
obligation related to the prior purchase of a mine facility.
The fair value estimate is based on the same assumption as
notes payable.
Investments and other assets include certain notes
receivable with customers at various interest rates. Notes
receivable fair value estimates are based on estimated
borrowing rates to discount the cash flows to their present
values.
The carrying amounts and estimated fair values of the
Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
---------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Notes receivable $ 10,620 $ 10,620 $ 4,754 $ 4,754
Interest rate swaps - 20,022 - 6,764
Long-term debt 2,066,231 1,943,440 2,532,858 2,629,601
Deferred purchase obligation 28,377 25,033 30,331 30,039
</TABLE>
F-30
<PAGE>
<PAGE>
The fair value of the financial instruments related to coal
trading activities as of March 31, 2000, which include energy
commodities, and average fair value of those instruments held are
set forth below:
Assets Liabilities
------- -----------
Forward contracts $75,797 $75,025
Option contracts 2,898 858
------- -------
Total $78,695 $75,883
======= =======
The approximate gross contract or notional amounts of financial
instruments are as follows:
Assets Liabilities
-------- -----------
Forward contracts $ 75,025 $ 58,968
Option contracts 147,206 116,010
The net gain arising from coal and emission allowance trading
activities was $1.3 million for the year ended March 31, 2000 and
$0.5 million for the period ended March 31, 1999. There was no net
gain or loss from coal and emission allowance trading activities
for the period ended May 19, 1998 and the year ended March 31,
1998. The change in unrealized gain from coal trading activities
for the year ended March 31, 2000 was $1.0 million.
(21) COMMITMENTS AND CONTINGENCIES
Environmental claims have been asserted against a subsidiary of
the Company at 18 sites in the United States. Some of these claims
are based on the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, and on similar state
statutes. The majority of these sites are related to activities of
former subsidiaries of the Company.
The Company's policy is to accrue environmental cleanup-related
costs of a noncapital nature when those costs are believed to be
probable and can be reasonably estimated. The quantification of
environmental exposures requires an assessment of many factors,
including changing laws and regulations, advancements in
environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site
investigation, preliminary findings and the length of time
involved in remediation or settlement. For certain sites, the
Company also assesses the financial capability of other
potentially responsible parties and, where allegations are based
on tentative findings, the reasonableness of the Company's
apportionment. The Company has not anticipated any recoveries from
insurance carriers or other potentially responsible third parties
in its balance sheets. The undiscounted liabilities for
environmental cleanup-related costs recorded as part of "Other
noncurrent liabilities" at March 31, 2000 and 1999 were $57.7
million and $61.8 million, respectively. This amount represents
those costs that the Company believes are probable and reasonably
estimable.
On June 18, 1999, The Navajo Nation served our subsidiaries,
Peabody Holding Company, Inc., Peabody Coal Company and Peabody
Western Coal Company, with a complaint that had been filed in the
U.S. District Court for the District of Columbia. Other defendants
in the litigation are two utilities, two current employees and one
former employee. The Navajo Nation has alleged sixteen claims
including civil Racketeer Influenced and Corrupt Organizations
Act, or RICO, claims, fraud and tortious interference with
contractual relationships. The plaintiff is seeking various
remedies including actual damages of at least $600 million which
could be trebled under the RICO counts, punitive damages of at
least $1 billion, a determination that Peabody Western Coal
Company's two coal leases for the Kayenta and Black Mesa mines
have terminated due to the failure of a condition and a
reformation of the two coal leases to adjust the royalty rate to
20 percent. All defendants have filed a motion to dismiss the
complaint.
In March 2000, the Hopi Tribe filed a motion to intervene in this
lawsuit. The Hopi Tribe has alleged seven claims, including fraud.
The Hopi Tribe is seeking various remedies, including unspecified
actual and punitive damages, reformation of its coal lease and a
termination of the coal lease. The federal court has not ruled on
the Hopi Tribe's motion.
F-31
<PAGE>
<PAGE>
The Company believes this matter will be resolved without a
material adverse effect on the financial condition or results of
operations.
In addition, the Company at times becomes a party to claims,
lawsuits, arbitration proceedings and administrative procedures in
the ordinary course of business. Management believes that the
ultimate resolution of pending or threatened proceedings will not
have a material effect on the financial position, results of
operations or liquidity of the Company.
At March 31, 2000, purchase commitments for capital expenditures
were approximately $110.5 million.
F-32
<PAGE>
<PAGE>
(22) SEGMENT INFORMATION
The Company operates primarily in the coal industry. "Other" data
represents an aggregation of the Company's other non-mining
entities including Gold Fields. Total assets for "Other" as of
March 31, 1999 includes amounts related to Citizens Power, a
discontinued operation. The Company's material operations outside
the U.S. are in Australia. The Company's industry and geographic
data for continuing operations are as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------
Year Ended Period Ended Period Ended Year Ended
March 31, 2000 March 31, 1999 May 19, 1998 March 31, 1998
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
U.S. Mining $ 2,462,166 $ 1,903,214 $ 269,597 $ 1,987,719
Non U.S. Mining 244,347 145,687 20,882 224,053
Other 3,987 7,931 179 6,250
---------------- ---------------- --------------- ----------------
$ 2,710,500 $ 2,056,832 $ 290,658 $ 2,218,022
================ ================ =============== ================
Operating profit (loss):
U.S. Mining $ 140,699 $ 132,027 $ 6,929 $ 211,967
Non U.S. Mining 48,355 32,676 2,950 44,812
Other 4,183 1,541 (554) 4,033
---------------- ---------------- --------------- ----------------
$ 193,237 $ 166,244 $ 9,325 $ 260,812
================ ================ =============== ================
Depreciation, depletion
and amortization:
U.S. Mining $ 216,327 $ 155,220 $ 22,475 $ 169,623
Non U.S. Mining 33,455 23,962 3,041 30,546
---------------- ---------------- --------------- ----------------
$ 249,782 $ 179,182 $ 25,516 $ 200,169
================ ================ =============== ================
Total assets:
U.S. Mining $ 5,038,423 $ 5,141,661
Non U.S. Mining 527,771 494,123
Other 260,655 1,388,147
---------------- ----------------
$ 5,826,849 $ 7,023,931
================ ================
Revenues:
United States $ 2,466,153 $ 1,911,145 $ 269,776 $ 1,993,969
Non U.S. 244,347 145,687 20,882 224,053
---------------- ---------------- --------------- ----------------
$ 2,710,500 $ 2,056,832 $ 290,658 $ 2,218,022
================ ================ =============== ================
Operating profit:
United States $ 144,882 $ 133,568 $ 6,375 $ 216,000
Non U.S. 48,355 32,676 2,950 44,812
---------------- ---------------- --------------- ----------------
$ 193,237 $ 166,244 $ 9,325 $ 260,812
================ ================ =============== ================
Depreciation, depletion
and amortization:
United States $ 216,327 $ 155,220 $ 22,475 $ 169,623
Non U.S. 33,455 23,962 3,041 30,546
---------------- ---------------- --------------- ----------------
$ 249,782 $ 179,182 $ 25,516 $ 200,169
================ ================ =============== ================
Total assets:
United States $ 5,299,078 $ 6,529,808
Non U.S. 527,771 494,123
---------------- ----------------
$ 5,826,849 $ 7,023,931
================ ================
</TABLE>
F-33
<PAGE>
<PAGE>
(23) SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
In accordance with the indentures governing the Senior Notes and
Senior Subordinated Notes, certain wholly owned U.S. subsidiaries
of the Company have fully and unconditionally guaranteed the debt
associated with the purchase on a joint and several basis.
Separate financial statements and other disclosures concerning the
Guarantor Subsidiaries are not presented because management
believes that such information is not material to holders of the
Senior Notes and the Senior Subordinated Notes. The following
condensed historical financial statement information is provided
for such Guarantor/Non-Guarantor Subsidiaries.
<TABLE>
Supplemental Condensed Statements of Consolidated Operations
For the Year Ended March 31, 2000
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $1,963,823 $ 777,165 $ (30,488) $2,710,500
Costs and expenses:
Operating costs and expenses - 1,651,477 557,675 (30,488) 2,178,664
Depreciation, depletion and amortization - 180,287 69,495 - 249,782
Selling and administrative expenses 1,251 72,093 21,912 - 95,256
Net gain on property and equipment
disposals - (6,034) (405) - (6,439)
Interest expense 174,949 73,330 21,080 (64,303) 205,056
Interest income (43,896) (23,933) (895) 64,303 (4,421)
----------- ------------ ------------- ------------ ------------
Income (loss) before income taxes and
minority interests (132,304) 16,603 108,303 - (7,398)
Income tax provision (benefit) (34,804) (136,307) 29,589 - (141,522)
Minority interests - - 15,554 - 15,554
Loss from discontinued operations,
net of income taxes - - 12,087 - 12,087
Loss from disposal of discontinued
operations, net of income taxes 783 77,490 - - 78,273
----------- ------------ ------------- ------------ -------------
Net income (loss) $ (98,283) $ 75,420 $ 51,073 $ - $ 28,210
=========== ============ ============= ============ =============
F-34
<PAGE>
<PAGE>
<CAPTION>
Supplemental Condensed Statements of Consolidated Operations
For the Period Ended March 31, 1999
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $1,829,438 $ 229,150 $ (1,756) $2,056,832
Costs and expenses:
Operating costs and expenses - 1,494,487 150,987 (1,756) 1,643,718
Depreciation, depletion and amortization - 150,584 28,598 - 179,182
Selling and administrative expenses 3,924 60,142 3,622 - 67,688
Interest expense 160,068 11,292 4,745 - 176,105
Interest income (5,716) (11,897) (914) - (18,527)
----------- ------------ ------------- ------------ ------------
Income (loss) before income taxes and
minority interest (158,276) 124,830 42,112 - 8,666
Income tax provision (benefit) (36,873) 31,213 8,672 - 3,012
Minority interest - - 1,887 - 1,887
Income from discontinued operations,
net of income taxes - - (6,442) - (6,442)
----------- ------------ ------------- ------------ ------------
Net income (loss) $(121,403) $ 93,617 $ 37,995 $ - $ 10,209
=========== ============ ============= ============ ============
</TABLE>
<TABLE>
Supplemental Condensed Statements of Combined Operations
For the Period Ended May 19, 1998
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Combined
-------------- ------------- ------------
<S> <C> <C> <C>
Total revenues $ 269,776 $ 20,882 $ 290,658
Costs and expenses:
Operating costs and expenses 229,711 14,417 244,128
Depreciation, depletion and amortization 22,475 3,041 25,516
Selling and administrative expenses 11,523 494 12,017
Net gain on property and equipment disposals (308) (20) (328)
Interest expense 3,856 366 4,222
Interest income (1,615) (52) (1,667)
-------------- ------------- ------------
Income before income taxes 4,134 2,636 6,770
Income tax provision 3,185 1,345 4,530
Loss from discontinued operations, net of income taxes - 1,764 1,764
-------------- ------------- ------------
Net income (loss) $ 949 $ (473) $ 476
============== ============= ============
F-35
<PAGE>
<PAGE>
<CAPTION>
Supplemental Condensed Statements of Combined Operations
For the Year Ended March 31, 1998
PREDECESSOR COMPANY
-------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Combined
-------------- ------------- -----------
<S> <C> <C> <C>
Total revenues $1,993,969 $224,053 $2,218,022
Costs and expenses:
Operating costs and expenses 1,552,176 143,040 1,695,216
Depreciation, depletion and amortization 169,623 30,546 200,169
Selling and administrative expenses 78,249 5,391 83,640
Net (gain) loss on property and equipment disposals (22,079) 264 (21,815)
Interest expense 30,684 2,726 33,410
Interest income (13,984) (559) (14,543)
-------------- ------------- -----------
Income before income taxes 199,300 42,645 241,945
Income tax provision 74,649 8,401 83,050
Income from discontinued operations, net of income taxes - (1,441) (1,441)
-------------- ------------- -----------
Net income $ 124,651 $ 35,685 $160,336
============== ============= ===========
</TABLE>
F-36
<PAGE>
<PAGE>
<TABLE>
Supplemental Condensed Consolidated Balance Sheets
As of March 31, 2000
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------------ -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 347 $ 45,931 $ 19,340 $ - $ 65,618
Accounts receivable 1,605 95,055 92,083 (35,722) 153,021
Inventories - 187,965 54,185 - 242,150
Assets from coal and emission allowance
trading activities - 78,695 - - 78,695
Deferred income taxes - 49,869 - - 49,869
Other current assets 1,282 14,351 27,559 - 43,192
------------ -------------- ------------- ------------ ------------
Total current assets 3,234 471,866 193,167 (35,722) 632,545
Property, plant, equipment and mine
development - at cost - 4,360,648 866,132 - 5,226,780
Less accumulated depreciation,
depletion and amortization - (323,870) (87,400) - (411,270)
------------ -------------- ------------- ------------ ------------
- 4,036,778 778,732 - 4,815,510
Net assets of discontinued operations 900 89,100 - - 90,000
Investments and other assets 1,883,781 1,444,307 208,095 (3,247,389) 288,794
------------ -------------- ------------- ------------ ------------
Total assets $1,887,915 $6,042,051 $1,179,994 $(3,283,111) $5,826,849
============ ============== ============= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ - $ 21,122 $ 36,855 $ - $ 57,977
Payable to affiliates, net (284,294) 319,473 (35,179) - -
Income taxes payable - 521 13,073 - 13,594
Liabilities from coal and emission allowance
trading activities - 75,883 - - 75,883
Accounts payable and accrued expenses 76,066 416,505 116,288 (35,722) 573,137
------------ -------------- ------------- ------------ ------------
Total current liabilities (208,228) 833,504 131,037 (35,722) 720,591
Long-term debt, less current maturities 1,587,717 162,116 268,356 - 2,018,189
Deferred income taxes - 567,918 57,206 - 625,124
Other noncurrent liabilities - 1,873,508 39,746 - 1,913,254
------------ -------------- ------------- ------------ ------------
Total liabilities 1,379,489 3,437,046 496,345 (35,722) 5,277,158
Minority interests - - 41,265 - 41,265
Stockholders' equity 508,426 2,605,005 642,384 (3,247,389) 508,426
------------ -------------- ------------- ------------ ------------
Total liabilities and stockholders'
equity $1,887,915 $6,042,051 $1,179,994 $(3,283,111) $5,826,849
============ ============== ============= ============ ============
F-37
<PAGE>
<PAGE>
<CAPTION>
Supplemental Condensed Consolidated Balance Sheets
As of March 31, 1999
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 130,861 $ 63,217 $ - $ 194,078
Accounts receivable - 220,287 107,770 (15,309) 312,748
Inventories - 202,749 47,148 - 249,897
Assets from power trading activities - - 1,037,300 - 1,037,300
Assets from coal and emission allowance
trading activities - 2,514 - - 2,514
Deferred income taxes - 8,496 - - 8,496
Other current assets - 13,283 14,145 - 27,428
----------- ------------ ------------- ------------ --------------
Total current assets - 578,190 1,269,580 (15,309) 1,832,461
Property, plant, equipment and mine
development - at cost - 4,298,203 693,234 - 4,991,437
Less accumulated depreciation,
depletion and amortization - (158,295) (35,197) - (193,492)
----------- ------------ ------------- ------------ --------------
- 4,139,908 658,037 - 4,797,945
Investments and other assets 2,461,362 1,464,147 158,912 (3,690,896) 393,525
----------- ------------ ------------- ------------ --------------
Total assets $2,461,362 $6,182,245 $2,086,529 $(3,706,205) $7,023,931
=========== ============ ============= ============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ 19,670 $ 21,666 $ 31,068 $ - $ 72,404
Payable to affiliates, net 152,364 (151,199) (1,165) - -
Income taxes payable - 229 7,079 - 7,308
Liabilities from power trading activities - - 638,062 - 638,062
Liabilities from coal and emission allowance
trading activities - 12 - - 12
Accounts payable and accrued expenses 56,562 440,319 146,150 (15,309) 627,722
----------- ------------ ------------- ------------ --------------
Total current liabilities 228,596 311,027 821,194 (15,309) 1,345,508
Long-term debt, less current maturities 1,737,536 173,364 559,075 - 2,469,975
Deferred income taxes - 711,932 68,243 - 780,175
Other noncurrent liabilities - 1,886,337 22,796 - 1,909,133
----------- ------------ ------------- ------------ --------------
Total liabilities 1,966,132 3,082,660 1,471,308 (15,309) 6,504,791
Minority interest - - 23,910 - 23,910
Stockholders' equity 495,230 3,099,585 591,311 (3,690,896) 495,230
----------- ------------ ------------- ------------ --------------
Total liabilities and stockholders'
equity $2,461,362 $6,182,245 $2,086,529 $(3,706,205) $7,023,931
=========== ============ ============= ============ ==============
</TABLE>
F-38
<PAGE>
<PAGE>
<TABLE>
Supplemental Condensed Statements of Consolidated Cash Flows
For the Year Ended March 31, 2000
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated
---------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net cash provided by (used in)
continuing operations $ (83,810) $ 283,472 $ 103,753 $ 303,415
Net cash used in discontinued operations - - (40,504) (40,504)
---------- ------------ ------------- ------------
Net cash provided by (used in)
operating activities (83,810) 283,472 63,249 262,911
---------- ------------ ------------- ------------
Additions to property, plant, equipment
and mine development - (106,593) (72,161) (178,754)
Additions to advance mining royalties - (7,475) (17,817) (25,292)
Acquisitions, net - - (63,265) (63,265)
Investment in joint venture - (4,325) - (4,325)
Proceeds from coal contract restructurings - 11,904 21,000 32,904
Proceeds from property and
equipment disposals - 9,637 9,647 19,284
Proceeds from sale-leaseback
transactions - 34,234 - 34,234
---------- ------------ ------------- ------------
Net cash used in continuing operations - (62,618) (122,596) (185,214)
Net cash used in discontinued operations - - (170) (170)
---------- ------------ ------------- ------------
Net cash used in investing activities - (62,618) (122,766) (185,384)
---------- ------------ ------------- ------------
Proceeds from short-term borrowings and
long-term debt - - 22,026 22,026
Payments of short-term borrowings and
long-term debt (171,088) (21,695) (17,202) (209,985)
Capital contribution (distribution) - (1,073) 1,073 -
Distributions to minority interests - - (3,353) (3,353)
Dividends (paid) received 121,903 15,422 (137,325) -
Other 133,342 (298,438) 165,096 -
---------- ------------ ------------- ------------
Net cash provided by (used in) continuing operations 84,157 (305,784) 30,315 (191,312)
Net cash used in discontinued operations - - (13,869) (13,869)
---------- ------------ ------------- ------------
Net cash provided by (used in) financing activities 84,157 (305,784) 16,446 (205,181)
Effect of exchange rate changes
on cash and equivalents - - (806) (806)
---------- ------------ ------------- ------------
Net increase (decrease) in cash and
cash equivalents 347 (84,930) (43,877) (128,460)
Cash and cash equivalents at
beginning of period - 130,861 63,217 194,078
---------- ------------ ------------- ------------
Cash and cash equivalents at
end of period $ 347 $ 45,931 $ 19,340 $ 65,618
========== ============ ============= ============
F-39
<PAGE>
<PAGE>
<CAPTION>
Supplemental Condensed Statements of Consolidated Cash Flows
For the Period Ended March 31, 1999
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net cash provided by (used in)
continuing operations $ (140,674) $ 407,889 $ 63,708 $ 330,923
Net cash used in discontinued operations - - (48,901) (48,901)
------------ ------------ ------------- ------------
Net cash provided by (used in)
operating activities (140,674) 407,889 14,807 282,022
------------ ------------ ------------- ------------
Additions to property, plant, equipment
and mine development - (108,186) (66,334) (174,520)
Additions to advance mining royalties - (8,836) (2,673) (11,509)
Acquisitions, net (1,933,178) (143,742) (33,480) (2,110,400)
Proceeds from coal contract restructurings - 2,515 - 2,515
Proceeds from property and equipment disposals - 10,494 954 11,448
------------ ------------ ------------- ------------
Net cash used in continuing operations (1,933,178) (247,755) (101,533) (2,282,466)
Net cash provided by discontinued operations - - 33,130 33,130
------------ ------------ ------------- ------------
Net cash used in investing activities (1,933,178) (247,755) (68,403) (2,249,336)
------------ ------------ ------------- ------------
Proceeds from short-term borrowings and
long-term debt 1,817,390 - 53,388 1,870,778
Payments of short-term borrowings and
long-term debt (158,263) (21,470) (42,982) (222,715)
Capital contribution 480,000 - - 480,000
Distributions to minority interests - 9,096 (12,176) (3,080)
Other (65,275) (16,899) 48,158 (34,016)
------------ ------------ ------------- ------------
Net cash provided by (used in) continuing operations 2,073,852 (29,273) 46,388 2,090,967
Net cash provided by discontinued operations - - 70,314 70,314
------------ ------------ ------------- ------------
Net cash provided by (used in) financing activities 2,073,852 (29,273) 116,702 2,161,281
Effect of exchange rate changes
on cash and equivalents - - 111 111
------------ ------------ ------------- ------------
Net increase in cash and cash equivalents - 130,861 63,217 194,078
Cash and cash equivalents at
beginning of period - - - -
------------ ------------ ------------- ------------
Cash and cash equivalents at
end of period $ - $ 130,861 $ 63,217 $ 194,078
============ ============ ============= ============
</TABLE>
F-40
<PAGE>
<PAGE>
<TABLE>
Supplemental Condensed Statements of Combined Cash Flows
For the Period Ended May 19, 1998
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Combined
-------------- ------------- -----------
<S> <C> <C> <C>
Net cash provided by (used in) continuing operations $ (41,999) $ 12,138 $ (29,861)
Net cash provided by discontinued operations - 1,704 1,704
-------------- ------------- -----------
Net cash provided by (used in) operating activities (41,999) 13,842 (28,157)
-------------- ------------- -----------
Additions to property, plant, equipment and mine development (13,582) (7,292) (20,874)
Additions to advance mining royalties (1,767) (535) (2,302)
Proceeds from coal contract restructurings 308 20 328
Proceeds from property and equipment disposals 1,374 - 1,374
-------------- ------------- -----------
Net cash used in continuing operations (13,667) (7,807) (21,474)
Net cash used in discontinued operations - (76) (76)
-------------- ------------- -----------
Net cash used in investing activities (13,667) (7,883) (21,550)
-------------- ------------- -----------
Proceeds from short-term borrowings and long-term debt - 53,597 53,597
Payments of short-term borrowings and long-term debt (464) (18,959) (19,423)
Dividends paid (141,000) (32,330) (173,330)
Other 141,831 (831) 141,000
-------------- ------------- -----------
Net cash provided by continuing operations 367 1,477 1,844
Net cash provided by discontinued operations - 21,693 21,693
-------------- ------------- -----------
Net cash provided by financing activities 367 23,170 23,537
Effect of exchange rate changes on cash and equivalents - (292) (292)
-------------- ------------- -----------
Net increase (decrease) in cash and cash equivalents (55,299) 28,837 (26,462)
Cash and cash equivalents at beginning of period 83,812 13,009 96,821
-------------- ------------- -----------
Cash and cash equivalents at end of period $ 28,513 $ 41,846 $ 70,359
============== ============= ===========
F-41
<PAGE>
<PAGE>
<CAPTION>
Supplemental Condensed Statements of Combined Cash Flows
For the Year Ended March 31, 1998
PREDECESSOR COMPANY
--------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Combined
-------------- ------------- -----------
<S> <C> <C> <C>
Net cash provided by (used in)
continuing operations $ 272,348 $ (5,318) $ 267,030
Net cash used in discontinued operations - (79,178) (79,178)
-------------- ------------- -----------
Net cash provided by (used in)
operating activities 272,348 (84,496) 187,852
-------------- ------------- -----------
Additions to property, plant, equipment
and mine development (112,383) (53,131) (165,514)
Additions to advance mining royalties (6,174) - (6,174)
Acquisitions, net (58,715) - (58,715)
Proceeds from coal contract restructurings 57,460 - 57,460
Proceeds from property and equipment disposals 36,948 775 37,723
-------------- ------------- -----------
Net cash used in continuing operations (82,864) (52,356) (135,220)
Net cash used in discontinued operations - (813) (813)
-------------- ------------- -----------
Net cash used in investing activities (82,864) (53,169) (136,033)
-------------- ------------- -----------
Proceeds from short-term borrowings and long-term debt 90,000 179,391 269,391
Payments of short-term borrowings and long-term debt (162,420) (188,317) (350,737)
Capital contribution (distribution) (50,230) 50,230 -
Dividends paid (65,109) - (65,109)
Other (184,529) 5,235 (179,294)
-------------- ------------- -----------
Net cash provided by (used in) continuing operations (372,288) 46,539 (325,749)
Net cash provided by discontinued operations - 90,360 90,360
-------------- ------------- -----------
Net cash provided by (used in) financing activities (372,288) 136,899 (235,389)
Effect of exchange rate changes
on cash and equivalents - (718) (718)
-------------- ------------- -----------
Net decrease in cash and cash equivalents (182,804) (1,484) (184,288)
Cash and cash equivalents at
beginning of period 266,616 14,493 281,109
-------------- ------------- -----------
Cash and cash equivalents at
end of period $ 83,812 $ 13,009 $ 96,821
============== ============= ===========
</TABLE>
F-42
<PAGE>
<PAGE>
P&L COAL HOLDINGS CORPORATION
8-7/8% Series B Senior
Notes due 2008 and
9-5/8% Series B Senior Subordinated
Notes due 2008
--------------
PROSPECTUS
--------------
LEHMAN BROTHERS
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that, among other things, a corporation may indemnify directors
and officers as well as other employees and agents of the corporation
against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement in connection with specified actions, suits
or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe their conduct was unlawful. A similar
standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions,
and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found
liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's by-laws,
disinterested director vote, stockholder vote, agreement or otherwise.
Article IV of the Registrant's By-laws requires indemnification to
the fullest extent permitted by Delaware law. The Registrant has also
obtained officers' and directors' liability insurance which insures
against liabilities that officers and directors of the Registrant, in
such capacities, may incur. The Registrant's Amended and Restated
Certificate of incorporation (the "Certificate of Incorporation")
requires the advancement of expenses incurred by officers or directors
in relation to any action, suit or proceeding.
Section 102(b)(7) of the DGCL permits a corporation to provide in
its certificate of incorporation that a director of the corporation
shall not be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duties as a director,
except for liability (i) for any transaction from which the director
derives an improper personal benefit, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (certain illegal
distributions) or (iv) for any breach of a director's duty of loyalty to
the Company or its stockholders. Article Seven of the Certificate of
Incorporation includes such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F**>1 Purchase Agreement dated as of May 13, 1998, between P&L
Coal Holdings Corporation and Lehman Brothers Inc.
<F**>2.1 Participation Agreement dated March 1, 1998 between Texas
Utilities Company and Lehman Brothers Merchant Banking
Partners II L.P.
<F**>2.2 Purchase Agreement between The Energy Group PLC and P&L Coal
Holdings Corporation as Purchaser.
<F**>3.1 Second Amended and Restated Certificate of Incorporation of
P&L Coal Holdings Corporation.
<F**>3.2 By-Laws of P&L Coal Holdings Corporation.
<F**>3.3 Certificate of Incorporation of Affinity Mining Company.
<F**>3.4 By-Laws of Affinity Mining Company.
<F**>3.5 Certificate of Incorporation of Arid Operations Inc.
<F**>3.6 By-Laws of Arid Operations Inc.
<F**>3.7 Certificate of Incorporation of Big Sky Coal Company.
<F**>3.8 By-Laws of Big Sky Coal Company.
<F**>3.9 Articles of Incorporation of Blackrock First Capital
Corporation.
<F**>3.10 By-Laws of Blackrock First Capital Corporation.
<F**>3.11 Certificate of Incorporation of Bluegrass Coal Company.
II-1
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F**>3.12 By-Laws of Bluegrass Coal Company.
<F**>3.13 Certificate of Incorporation of Caballo Coal Company.
<F**>3.14 By-Laws of Caballo Coal Company.
<F**>3.15 Certificate of Incorporation of Charles Coal Company.
<F**>3.16 By-Laws of Charles Coal Company.
<F**>3.17 Certificate of Incorporation of Coal Properties Corp.
<F**>3.18 By-Laws of Coal Properties Corp.
<F**>3.19 Exhibit Intentionally Omitted.
<F**>3.20 Amended and Restated Venture Agreement of Colony Bay Coal
Company.
<F**>3.21 Certificate of Incorporation of Cook Mountain Coal Company.
<F**>3.22 By-Laws of Cook Mountain Coal Company.
<F**>3.23 Certificate of Incorporation of Cottonwood Land Company.
<F**>3.24 By-Laws of Cottonwood Land Company.
<F**>3.25 Certificate of Incorporation of Orion Mines, Inc. (now known
as Darius Gold Mine Inc.)
<F**>3.26 By-Laws of Darius Gold Mine Inc.
<F**>3.27 Certificate of Incorporation of Koppers Recreation Camps
(now known as EACC Camps, Inc.)
<F**>3.28 By-Laws of Koppers Recreation Camps, Inc. (now known as EACC
Camps, Inc.)
<F**>3.29 Certificate of Incorporation of Eastern Associated Coal
Corp.
<F**>3.30 By-Laws of Eastern Associated Coal Corp.
<F**>3.31 Certificate of Incorporation of Eastern Royalty Corp.
<F**>3.32 By-Laws of Eastern Royalty Corp.
<F**>3.33 Certificate of Incorporation of Exploraciones y Minerales
Sierra Morena S.A. (now known as Gold Fields Chile, S.A.).
<F**>3.34 By-Laws of Exploraciones y Minerales Sierra Morena S.A. (now
known as Gold Fields Chile, S.A.).
<F**>3.35 Restated Certificate of Incorporation of Gold Fields Mining
Corporation.
<F**>3.36 By-Laws of Gold Fields Mining Corporation.
<F**>3.37 Certificate of Incorporation of East Tennessee Coal Company
(now known as Gold Fields Operating Co.--Ortiz).
<F**>3.38 By-Laws of Gold Fields Operating Co.--Ortiz.
<F**>3.39 Articles of Incorporation of Grand Eagle Mining, Inc.
<F**>3.40 By-Laws of Grand Eagle Mining, Inc.
<F**>3.41 Certificate of Incorporation of Hayden Gulch Terminal, Inc.
<F**>3.42 By-Laws of Hayden Gulch Terminal, Inc.
<F**>3.43 Certificate of Incorporation of Independence Material
Handling Company.
<F**>3.44 By-Laws of Independence Material Handling Company.
<F**>3.45 Certificate of Incorporation of Interior Holdings Corp.
<F**>3.46 By-Laws of Interior Holdings Corp.
<F**>3.47 Certificate of Incorporation of A.T. Two, Inc. (now known as
James River Coal Terminal Company).
<F**>3.48 Restated By-Laws of James River Coal Terminal Company.
<F**>3.49 Certificate of Incorporation of Juniper Coal Company.
II-2
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F**>3.50 By-Laws of Juniper Coal Company.
<F**>3.51 Certificate of Incorporation of Kayenta Mobile Home Park, Inc.
<F**>3.52 By-Laws of Kayenta Mobile Home Park, Inc.
<F**>3.53 Certificate of Incorporation of Martinka Coal Company.
<F**>3.54 By-Laws of Martinka Coal Company.
<F**>3.55 Articles of Incorporation of Midco Supply and Equipment
Corporation.
<F**>3.56 By-Laws of Midco Supply and Equipment Corporation.
3.57 Exhibit Intentionally Omitted
3.58 Exhibit Intentionally Omitted
<F**>3.59 Certificate of Incorporation of Nueast Mining Corp. (now
known as Mountain View Coal Company).
<F**>3.60 By-Laws of Nueast Mining Corp. (now known as Mountain View
Coal Company).
<F**>3.61 Articles of Incorporation of North Page Coal Corp.
<F**>3.62 By-Laws of North Page Coal Corp.
<F**>3.63 Articles of Incorporation of Ohio County Coal Company.
<F**>3.64 By-Laws of Ohio County Coal Company.
<F**>3.65 Certificate of Limited Partnership of Patriot Coal Company, L.P.
<F**>3.66 Limited Partnership Agreement of Patriot Coal Company, L.P.
<F**>3.67 Certificate of Incorporation of Peabody America, Inc.
<F**>3.68 By-Laws of Peabody America, Inc.
<F**>3.69 Certificate of Incorporation of Peabody Coal Company.
<F**>3.70 Restated By-Laws of Peabody Coal Company.
<F**>3.71 Certificate of Incorporation of Peabody COALSALES Company.
<F**>3.72 By-Laws of Peabody COALSALES Company.
<F**>3.73 Certificate of Incorporation of COALTRADE Inc. (now known as
Peabody COALTRADE, Inc.).
<F**>3.74 By-Laws of COALTRADE Inc. (now known as Peabody COALTRADE,
Inc.)
<F**>3.75 Certificate of Incorporation of Premier Coal Sales Company,
(now known as Peabody Development Company).
<F**>3.76 Restated By-Laws of Peabody Development Company.
<F**>3.77 Certificate of Incorporation of Peabody Powertrade, Inc.
(now known as Peabody Energy Solutions, Inc.).
<F**>3.78 By-Laws of Peabody Powertrade, Inc. (now known as Peabody
Energy Solutions, Inc.).
<F**>3.79 Restated Certificate of Incorporation of Peabody Holding
Company, Inc.
<F**>3.80 Restated By-Laws of Peabody Holding Company, Inc.
<F**>3.81 Exhibit Intentionally Omitted.
<F**>3.82 Second Amended and Restated Partnership Agreement re:
Peabody Natural Resources Company.
<F**>3.83 Certificate of Incorporation of Armco Terminal Company (now
known as Peabody Terminals, Inc.).
<F**>3.84 By-Laws of Peabody Terminals, Inc.
<F**>3.85 Certificate of Incorporation of Peabody Venezuela Coal Corp.
<F**>3.86 By-Laws of Peabody Venezuela Coal Corp.
<F**>3.87 Certificate of Incorporation of Peabody Western Coal Company.
<F**>3.88 By-Laws of Peabody Western Coal Company.
<F**>3.89 Certificate of Incorporation of Pine Ridge Coal Company.
II-3
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F**>3.90 By-Laws of Pine Ridge Coal Company.
<F**>3.91 Certificate of Incorporation of Powder River Coal Company.
<F**>3.92 Restated By-Laws of Powder River Coal Company.
<F**>3.93 Certificate of Incorporation of Rio Escondido Coal Corp.
<F**>3.94 By-Laws of Rio Escondido Coal Corp.
<F**>3.95 Certificate of Incorporation of Seneca Coal Company.
<F**>3.96 By-Laws of Seneca Coal Company.
<F**>3.97 Certificate of Incorporation of Sentry Mining Company.
<F**>3.98 By-Laws of Sentry Mining Company.
<F**>3.99 Certificate of Incorporation of Snowberry Land Company.
<F**>3.100 By-Laws of Snowberry Land Company.
<F**>3.101 Agreement of Incorporation of Low Volatile Coals, Inc.
(now known as Sterling Smokeless Company).
<F**>3.102 By-Laws of Sterling Smokeless Company.
<F**>3.103 Certificate of Formation of Thoroughbred, L.L.C.
<F**>3.104 Operating Agreement of Thoroughbred, L.L.C.
<F**>4.1 Senior Note Indenture dated as of May 18, 1998 between P&L
Coal Holdings Corporation and State Street Bank and Trust
Company, as Senior Note Trustee.
<F**>4.2 Senior Subordinated Note Indenture dated as of May 18,
1998 between P&L Coal Holdings Corporation and State
Street Bank and Trust Company, as Senior Subordinated Note
Trustee.
<F**>4.3 First Supplemental Senior Note Indenture dated as of
May 19, 1998 among the Guaranteeing Subsidiary (as defined
therein), P&L Coal Holdings Corporation the other Senior
Note Guarantors (as defined in the Senior Note Indenture)
and State Street Bank and Trust Company, as Senior Note
Trustee.
<F**>4.4 First Supplemental Senior Subordinated Note Indenture
dated as of May 19, 1998 among the Guaranteeing Subsidiary
(as defined therein), P&L Coal Holdings Corporation, the
other Senior Subordinated Note Guarantors (as defined in
the Senior Subordinated Note Indenture) and State Street
Bank and Trust Company, as Senior Subordinated Note
Trustee.
<F**>4.5 Notation of Senior Note Guarantee dated as of May 19, 1998
among the Senior Note Guarantors (as defined in the Senior
Note Indenture).
<F**>4.6 Notation of Subordinated Subsidiary Guarantee dated as of
May 19, 1998 among the Senior Subordinated Note Guarantors
(as defined in the Senior Subordinated Note Indenture).
<F**>4.7 Senior Note Registration Rights Agreement dated as of May
18, 1998 between P&L Coal Holdings Corporation and Lehman
Brothers Inc.
<F**>4.8 Senior Subordinated Note Registration Rights Agreement
dated as of May 18, 1998 between P&L Coal Holdings
Corporation and Lehman Brothers Inc.
<F***>4.9 Second Supplemental Senior Note Indenture dated as of
December 31, 1998 among the Guaranteeing Subsidiary (as
defined therein), P&L Coal Holdings Corporation, the other
Senior Note Guarantors (as defined in the Senior Note
Indenture) and State Street Bank and Trust Company, as
Senior Note Trustee.
<F***>4.10 Second Supplemental Senior Subordinated Note Indenture
dated as of December 31, 1998 among the Guaranteeing
Subsidiary (as defined therein), P&L Coal Holdings
Corporation, the other Senior Subordinated Note Guarantors
(as defined in the Senior Subordinated Note Indenture) and
State Street Bank and Trust Company, as Senior
Subordinated Note Trustee.
<F***>4.11 Third Supplemental Senior Note Indenture dated as of June
30, 1999 among the Guaranteeing Subsidiary (as defined
therein), P&L Coal Holdings Corporation, the other Senior
Note Guarantors (as defined in the Senior Note Indenture)
and State Street Bank and Trust Company, as Senior Note
Trustee.
II-4
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F***>4.12 Third Supplemental Senior Subordinated Note Indenture
dated as of June 30, 1999 among the Guaranteeing
Subsidiary (as defined therein), P&L Coal Holdings
Corporation, the other Senior Subordinated Note Guarantors
(as defined in the Senior Subordinated Note Indenture) and
State Street Bank and Trust Company, as Senior
Subordinated Note Trustee.
<F**>5 Opinion of Simpson Thacher & Bartlett.
<F**>10.1 Amended and Restated Credit Agreement dated as of June 9,
1998 among P&L Coal Holdings Corporation, as Borrower,
Lehman Brothers Inc., as Arranger, Lehman Commercial Paper
Inc., as Syndication Agent, Documentation Agent, and
Administrative Agent, and the lenders party thereto.
<F**>10.2 Guarantee and Collateral Agreement dated as of May 14,
1997 made by the Guarantors, in favor of Lehman Commercial
Paper, Inc., as Administrative Agent for the banks and
other financial institutions.
<F**>10.3 Federal Coal Lease WYW0321779: North Antelope/Rochelle
Mine.
<F**>10.4 Federal Coal Lease WYW119554: North Antelope/Rochelle
Mine.
<F**>10.5 Federal Coal Lease WYW5036: Rawhide Mine.
<F**>10.6 Federal Coal Lease WYW3397: Caballo Mine.
<F**>10.7 Federal Coal Lease WYW83394: Caballo Mine.
<F**>10.8 Federal Coal Lease WYW136142.
<F**>10.9 Royalty Prepayment Agreement by and among Peabody Natural
Resources Company, Gallo Finance Company and Chaco Energy
Company, dated September 30, 1998.
<F**>10.10 1998 Stock Purchase and Option Plan for Key Employees of
P&L Coal Holding Corporation.
<F**>10.11 Employment Agreement between Irl F. Engelhardt and the
Company dated May 19, 1998.
<F**>10.12 Employment Agreement between Richard M. Whiting and the
Company dated May 19, 1998.
<F**>10.13 Employment Agreement between W. Howard Carson and the
Company dated May 19, 1998.
<F**>10.14 Employment Agreement between Roger B. Walcott, Jr. and the
Company dated May 19, 1998.
<F**>10.15 Employment Agreement between Mark Maisto and the Company
dated May 19, 1998.
<F***>10.16 Receivables Sale Agreement dated as of March 31, 2000 by
and among Originators and P&L Coal Holdings Corporation,
as Purchaser.
<F***>10.17 Receivables Contribution Agreement dated as of March 31,
2000 by and between P&L Coal Holdings Corporation, as
Contributor, and P&L Receivables Company, LLC, as
Transferee.
<F***>10.18 Receivables Purchase Agreement dated as of March 31, 2000
by and among P&L Receivables Company LLC, as Seller, P&L
Receivables Company, LLC, as Servicer, International
Securitization Corporation, Bank One, NA, as Agent and the
Financial Institutions named therein.
<F*>10.19 Letter Agreement dated March 31, 2000 between P&L Coal
Holdings Corporation and Roger Walcott, Jr.
<F*>10.20 Letter Agreement dated March 31, 2000 between P&L Coal
Holdings Corporation and Mark Maisto.
<F*>12 Computation of Ratio of Earnings to Fixed Charges.
<F***>21 List of Subsidiaries.
<F**>23.1 Consent of Simpson Thacher & Bartlett (included as part of
its opinion filed as Exhibit 5 hereto).
<F*>23.2 Consent of Ernst & Young LLP, independent certified public
accountants, regarding P&L Coal Holdings Corporation and
P&L Coal Group.
<F**>23.4 Consent of John T. Boyd Company.
<F**>24 Powers of Attorney.
<PAGE>
<F**>25.1 Form T-1 Statement of Eligibility under Trust Indenture
Act of 1939 of State Street Bank and Trust Company, as
Senior Notes Trustee.
II-5
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
<F**>25.2 Form T-1 Statement of Eligibility under Trust Indenture
Act of 1939 of State Street Bank and Trust Company, as
Senior Subordinated Notes Trustee.
<FN>
-----------
<F*> Filed herewith.
<F**> Previously filed.
<F***> Incorporated by reference to the Registrant's Annual
Report on Form 10-K, for the fiscal year ended March 31,
2000, filed with the Securities and Exchange Commission on
June 28, 2000.
</TABLE>
II-6
<PAGE>
<PAGE>
(b) Financial Statement Schedule
REPORT OF INDEPENDENT AUDITORS
Board of Directors
P&L Coal Holdings Corporation
We have audited the consolidated financial statements of P&L Coal
Holdings Corporation (the Company) as of March 31, 2000 and 1999, and
for the year and period then ended, and the combined financial
statements of P&L Coal Group (the Predecessor Company) for the period
ended May 19, 1998 and the year ended March 31, 1998, and have issued
our report thereon dated April 27, 2000. Our audits also included the
financial statement schedule listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Ernst & Young LLP
April 27, 2000
St. Louis, Missouri
II-7
<PAGE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Schedule II - Valuation and Qualifying Accounts
<CAPTION>
(IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS<F1> OTHER PERIOD
----------------------------------------------- -------------- ------------ ------------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 2000
Reserves deducted from asset accounts:
Land and coal interests $54,277 $2,179 $(40,541) $ (2,716)<F2><F3> 13,199
Reserve for materials and supplies 16,558 -- (4,748) 590 <F2> 12,400
Allowance for doubtful accounts 177 1,213 (157) -- 1,233
PERIOD MAY 20, 1999 THROUGH MARCH 31, 1999
Reserves deducted from asset accounts:
Land and coal interests $51,455 $3,138 $ (316) -- $54,277
Reserve for materials and supplies 6,087 -- (1,037) 11,508 <F4> 16,558
Allowance for doubtful accounts 9,073 -- (8,980) 84 <F5> 177
==================================================================================================================================
(PREDECESSOR COMPANY)
Period April 1, 1998 through May 19, 1998
Reserves deducted from asset accounts:
Land and coal interests 67,884 124 (10) (16,543)<F2> 51,455
Reserve for materials and supplies 6,316 -- (229) -- 6,087
Allowance for doubtful accounts 9,100 -- (27) -- 9,073
Year ended March 31, 1998
Reserves deducted from asset accounts:
Land and coal interests $61,276 $9,256 $ (2,648) -- $67,884
Reserve for materials and supplies 9,433 35 (2,908) (244)<F6> 6,316
Allowance for doubtful accounts 5,525 -- (378) 3,953 <F2> 9,100
<FN>
<F1> Reserves utilized, unless otherwise indicated.
<F2> Balances transferred from other accounts.
<F3> Balance transferred as part of asset contribution to joint venture.
<F4> Balance recorded as part of the May 19, 1998 purchase accounting adjustments.
<F5> Balance acquired as part of controlling interest in Black Beauty Coal Company purchased January 1, 1999.
<F6> Balance disposed of as part of asset sale.
</TABLE>
II-8
<PAGE>
<PAGE>
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant
to the DGCL, the Certificate of Incorporation and By-laws, or otherwise,
the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
present change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-9
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
P&L COAL HOLDINGS CORPORATION
By: <F*>
--------------------------------
Irl F. Engelhardt
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of P&L COAL HOLDINGS
CORPORATION, do hereby constitute and appoint Felix Herlihy, Christopher
G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them,
our true and lawful attorneys and agents, to do any and all acts and
things in our name and on behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names
in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically,
but without limitation, power and authority to sign for us or any of us
in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and
confirm all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
<F*> Chairman, Chief Executive Officer and Director
---------------------------------
Irl F. Engelhardt
<F*> President, Chief Operating Officer and Director
---------------------------------
Richard M. Whiting
/s/ RICHARD A. NAVARRE Vice President and Chief Financial Officer
---------------------------------
Richard A. Navarre
<F*> Vice President, Assistant Secretary and Director
---------------------------------
Henry E. Lentz
<F*> Director
---------------------------------
Roger H. Goodspeed
<F*> Director
---------------------------------
Alan H. Washkowitz
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
</TABLE>
II-10
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
AFFINITY MINING COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President & Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-11
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
ARID OPERATIONS, INC.
By: <F*>
---------------------------------
William E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of ARID OPERATIONS,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ WILLIAM E. BROSHEARS President and Director
---------------------------------
William E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-12
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
BIG SKY COAL COMPANY
By: <F*>
--------------------------------
Robert D. Boone
Vice President & General Manager
POWER OF ATTORNEY
We, the undersigned directors and officers of BIG SKY COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ ROBERT D. BOONE Vice President & General Manager
---------------------------------
Robert D. Boone
<F*> Treasurer and Assistant Secretary
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
L. H. Fox
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-13
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
BLACKROCK FIRST CAPITAL CORPORATION
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No.1 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-14
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
BLUEGRASS COAL COMPANY
By: <F*>
--------------------------------
John C. Hill
President
POWER OF ATTORNEY
We, the undersigned directors and officers of BLUEGRASS COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
John C. Hill
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-15
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
CABALLO COAL COMPANY
By: <F*>
--------------------------------
L. H. Fox
President
POWER OF ATTORNEY
We, the undersigned directors and officers of CABALLO COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
L. H. Fox
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-16
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
CHARLES COAL COMPANY
By: <F*>
-------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-17
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
COAL PROPERTIES CORP.
By: <F*>
--------------------------------
J. A. Beck
President
POWER OF ATTORNEY
We, the undersigned directors and officers of COAL PROPERTIES
CORP., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-18
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
COLONY BAY COAL COMPANY
By Eastern Associated Coal Corp.,
its General Partner
By: <F*>
--------------------------------
J. A. Beck
President
of Eastern Associated Coal Corp.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
EASTERN ASSOCIATED COAL CORP.
A General Partner
By: <F*> President and Director of Eastern
--------------------------------- Associated Coal Corp.
J. A. Beck
<F*> Vice President and Treasurer of Eastern
--------------------------------- Associated Coal Corp.
T. L. Bethel
<F*> Director of Eastern Associated Coal Corp.
---------------------------------
R. B. Walcott Jr.
<F*> Director of Eastern Associated Coal Corp.
---------------------------------
R. M. Whiting
CHARLES COAL COMPANY
A General Partner
By: <F*> President and Director of Charles Coal Company
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer of Charles Coal
--------------------------------- Company
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
</TABLE>
II-19
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
COOK MOUNTAIN COAL COMPANY
By: <F*>
-------------------------------
J. A. Beck
President
POWER OF ATTORNEY
We, the undersigned directors and officers of COOK MOUNTAIN COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-20
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
COTTONWOOD LAND COMPANY
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of COTTONWOOD LAND
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-21
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
DARIUS GOLD MINE, INC.
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of DARIUS GOLD MINE,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
EACC CAMPS, INC.
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-23
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
EASTERN ASSOCIATED COAL CORP.
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-24
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
EASTERN ROYALTY CORP.
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-25
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
GOLD FIELDS CHILE, S.A.
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of GOLD FIELDS CHILE,
S.A., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS
---------------------------------
W. E. Broshears President and Director
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-26
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
GOLD FIELDS MINING CORPORATION
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of GOLD FIELDS MINING
CORPORATION, do hereby constitute and appoint Felix Herlihy, Christopher
G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them,
our true and lawful attorneys and agents, to do any and all acts and
things in our name and on behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names
in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically,
but without limitation, power and authority to sign for us or any of us
in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and
confirm all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-27
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
GOLD FIELDS OPERATING CO.--ORTIZ
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of GOLD FIELDS
OPERATING CO.--ORTIZ, do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-28
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
GRAND EAGLE MINING, INC.
By: <F*>
-------------------------------
John C. Hill
President
POWER OF ATTORNEY
We, the undersigned directors and officers of GRAND EAGLE MINING,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
John C. Hill
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-29
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
HAYDEN GULCH TERMINAL, INC.
By: /s/ J. L. WASIK
--------------------------------
J. L. Wasik
President
POWER OF ATTORNEY
We, the undersigned directors and officers of HAYDEN GULCH
TERMINAL, INC., do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ J. L. WASIK President and Director
---------------------------------
J. L. Wasik
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-30
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
INDEPENDENCE MATERIAL HANDLING COMPANY
By: /s/ W. E. BROSHEARS
-----------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of INDEPENDENCE
MATERIAL HANDLING COMPANY, do hereby constitute and appoint Felix
Herlihy, Christopher G. Farrand, Jeffery L. Klinger and Richard A.
Navarre, or any of them, our true and lawful attorneys and agents, to do
any and all acts and things in our name and on behalf in our capacities
as directors and officers and to execute any and all instruments for us
and in our names in the capacities indicated below, which said attorneys
and agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-31
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
INTERIOR HOLDINGS CORP.
By: <F*>
-------------------------------
I. F. Engelhardt
President
POWER OF ATTORNEY
We, the undersigned directors and officers of INTERIOR HOLDINGS
CORP., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and George J. Holway, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
I. F. Engelhardt
/s/ S. F. SCHAAB Vice President, Treasurer and Director
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-32
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
JAMES RIVER COAL TERMINAL COMPANY
By: /s/ P. H. VINING
-------------------------------
P. H. Vining
President
POWER OF ATTORNEY
We, the undersigned directors and officers of JAMES RIVER COAL
TERMINAL COMPANY, do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ P. H. VINING President and Director
---------------------------------
P. H. Vining
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-33
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
JUNIPER COAL COMPANY
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of JUNIPER COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
/s/ R. D. ROBISON Director
---------------------------------
R. D. Robison
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-34
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
KAYENTA MOBILE HOME PARK, INC.
By: <F*>
--------------------------------
J. L. Wasik
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. L. Wasik
<F*> Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-35
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
MARTINKA COAL COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-36
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
MIDCO SUPPLY AND EQUIPMENT CORPORATION
By: /s/ G. J. HOLWAY
----------------------------------
G. J. Holway
President
POWER OF ATTORNEY
We, the undersigned directors and officers of MIDCO SUPPLY AND
EQUIPMENT CORPORATION, do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ G. J. HOLWAY President
---------------------------------
G. J. Holway
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ W. E. BROSHEARS Director
---------------------------------
W. E. Broshears
/s/ R. A. Navarre Director
---------------------------------
R. A. Navarre
Director
---------------------------------
R. B. Walcott Jr.
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-37
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
MOUNTAIN VIEW COAL COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-38
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
NORTH PAGE COAL CORP.
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-39
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
OHIO COUNTY COAL COMPANY
By: <F*>
--------------------------------
J. C. Hill
President
POWER OF ATTORNEY
We, the undersigned directors and officers of OHIO COUNTY COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof. Pursuant to the requirements of the Securities
Act, this Post-Effective Amendment No. 2 to the Registration Statement
has been signed on the 31st day of July, 2000 by the following persons
in the capacities indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. C. Hill
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-40
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PATRIOT COAL COMPANY, L.P.
By: <F*>
-----------------------------------
Bluegrass Coal Company
Its Managing Partner
By: <F*>
-----------------------------------
John C. Hill
President of Bluegrass Coal Company
POWER OF ATTORNEY
We, the undersigned directors and officers of the Managing Partner
and Partner of PATRIOT COAL COMPANY, L.P., do hereby constitute and
appoint Felix Herlihy, Christopher G. Farrand, Jeffery L. Klinger and
Richard A. Navarre, or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on behalf in
our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below,
which said attorneys and agents, or either of them, may deem necessary
or advisable to enable said Corporation to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and
authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective
amendments) hereto and we do hereby ratify and confirm all that said
attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
BLUEGRASS COAL COMPANY
Its Managing Partner
By: <F*> President and Director of Bluegrass Coal
--------------------------------- Company
J. C. Hill
<F*> Vice President and Treasurer of Bluegrass Coal
--------------------------------- Company
S. F. Schaab
/s/ R. A. NAVARRE Director of Bluegrass Coal Company
---------------------------------
R. A. Navarre
SENTRY MINING COMPANY
A Partner
By: <F*> President and Director of Sentry Mining Company
---------------------------------
J. C. Hill
II-41
<PAGE>
<PAGE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ S. F. SCHAAB Vice President and Treasurer of Sentry Mining
--------------------------------- Company
S. F. Schaab
/s/ R. A. NAVARRE Director of Sentry Mining Company
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
</TABLE>
II-42
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY AMERICA, INC.
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY AMERICA,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-43
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY COALSALES COMPANY
By: /s/ P. H. VINING
--------------------------------
P. H. Vining
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY COALSALES
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ P. H. VINING President and Director
---------------------------------
P. H. Vining
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-44
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY COALTRADE, INC.
By: /s/ D. K. TICKNER
--------------------------------
D. K. Tickner
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY COALTRADE,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ D. K. TICKNER President and Director
---------------------------------
D. K. Tickner
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ P. H. VINING Director
---------------------------------
P. H. Vining
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-45
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY COAL COMPANY
By: /s/ JIRI NEMEC
--------------------------------
Jiri Nemec
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ JIRI NEMEC President and Director
---------------------------------
Jiri Nemec
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-46
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY DEVELOPMENT COMPANY
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY DEVELOPMENT
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-47
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY ENERGY SOLUTIONS, INC.
By: /s/ P. H. VINING
--------------------------------
P. H. Vining
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY ENERGY
SOLUTIONS, INC., do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ P. H. VINING President and Director
---------------------------------
P. H. Vining
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-48
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY HOLDING COMPANY, INC.
By: <F*>
----------------------------------
I. F. Engelhardt
Chairman & Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY HOLDING
COMPANY, INC., do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
<F*> Chairman, Chief Executive Officer and Director
---------------------------------
I. F. Engelhardt
/s/ R. A. NAVARRE Vice President and Chief Financial Officer
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. M. WHITING Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
</TABLE>
II-49
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement or to be signed on its behalf by the undersigned, thereunto
duly authorized, on July 31, 2000.
PEABODY NATURAL RESOURCES COMPANY
By:
------------------------------------------
Gold Fields Mining Corporation
Its General Partner
By: /s/ W. E. BROSHEARS
-------------------------------------------
W. E. Broshears
President of Gold Fields Mining Corporation
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY NATURAL
RESOURCES COMPANY, do hereby constitute and appoint Felix Herlihy,
Christopher G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or
any of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable
said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us
or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
GOLD FIELDS MINING CORPORATION
A General Partner
By: /s/ W. E. BROSHEARS President and Director of Gold Fields Mining
--------------------------------- Corporation
W. E. Broshears
/s/ R. A. NAVARRE Director of Gold Fields Mining Corporation
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director of Gold Fields Mining Corporation
---------------------------------
R. B. Walcott Jr.
PEABODY AMERICA, INC.
A General Partner
By: /s/ W. E. BROSHEARS President and Director of Peabody America, Inc.
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer of Peabody America, Inc.
---------------------------------
S. F. Schaab
II-50
<PAGE>
<PAGE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ R. A. NAVARRE Director of Peabody America, Inc.
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director of Peabody America, Inc.
---------------------------------
R. B. Walcott Jr.
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
</TABLE>
II-51
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY TERMINALS, INC.
By: /s/ P. H. VINING
--------------------------------
P. H. Vining
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY TERMINALS,
INC., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and George J. Holway, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ P. H. VINING President and Director
---------------------------------
P. H. Vining
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-52
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY VENEZUELA COAL CORP.
By: /s/ W. E. BROSHEARS
--------------------------------
W. E. Broshears
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY VENEZUELA
COAL CORP., do hereby constitute and appoint Felix Herlihy, Christopher
G. Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them,
our true and lawful attorneys and agents, to do any and all acts and
things in our name and on behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names
in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically,
but without limitation, power and authority to sign for us or any of us
in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and
confirm all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ W. E. BROSHEARS President and Director
---------------------------------
W. E. Broshears
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-53
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PEABODY WESTERN COAL COMPANY
By: /s/ J. L. WASIK
--------------------------------
J. L. Wasik
President
POWER OF ATTORNEY
We, the undersigned directors and officers of PEABODY WESTERN COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ J. L. WASIK President and Director
---------------------------------
J. L. Wasik
<F*> Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-54
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
PINE RIDGE COAL COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-55
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
POWDER RIVER COAL COMPANY
By: <F*>
--------------------------------
L. H. Fox
President
POWER OF ATTORNEY
We, the undersigned directors and officers of POWDER RIVER COAL
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
L. H. Fox
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-56
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
RIO ESCONDIDO COAL CORP.
By: /s/ J. L. WASIK
--------------------------------
J. L. Wasik
President
POWER OF ATTORNEY
We, the undersigned directors and officers of RIO ESCONDIDO COAL
CORP., do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ J. L. WASIK President and Director
---------------------------------
J. L. Wasik
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-57
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
SENECA COAL COMPANY
By: /s/ J. L. WASIK
--------------------------------
J. L. Wasik
President
POWER OF ATTORNEY
We, the undersigned directors and officers of SENECA COAL COMPANY,
do hereby constitute and appoint Felix Herlihy, Christopher G. Farrand,
Jeffery L. Klinger and Richard A. Navarre, or any of them, our true and
lawful attorneys and agents, to do any and all acts and things in our
name and on behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ J. L. WASIK President and Director
---------------------------------
J. L. Wasik
<F*> Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-58
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
SENTRY MINING COMPANY
By: <F*>
--------------------------------
J. C. Hill
President
POWER OF ATTORNEY
We, the undersigned directors and officers of SENTRY MINING
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. C. Hill
/s/ S. F. SCHAAB Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. A. NAVARRE Director
---------------------------------
R. A. Navarre
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-59
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
SNOWBERRY LAND COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
POWER OF ATTORNEY
We, the undersigned directors and officers of SNOWBERRY LAND
COMPANY, do hereby constitute and appoint Felix Herlihy, Christopher G.
Farrand, Jeffery L. Klinger and Richard A. Navarre, or any of them, our
true and lawful attorneys and agents, to do any and all acts and things
in our name and on behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either
of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection
with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names
in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ J. A. BECK President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
/s/ R. B. WALCOTT JR. Director
---------------------------------
R. B. Walcott Jr.
/s/ R. M. WHITING Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-60
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
STERLING SMOKELESS COAL COMPANY
By: <F*>
--------------------------------
J. A. Beck
President
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> President and Director
---------------------------------
J. A. Beck
<F*> Vice President and Treasurer
---------------------------------
T. L. Bethel
<F*> Director
---------------------------------
R. B. Walcott Jr.
<F*> Director
---------------------------------
R. M. Whiting
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-61
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on July 31, 2000.
THOROUGHBRED, L.L.C.
By: <F*>
--------------------------------
I. F. Engelhardt
Chairman
Pursuant to the requirements of the Securities Act, this Post-
Effective Amendment No. 2 to the Registration Statement has been signed
on the 31st day of July, 2000 by the following persons in the capacities
indicated:
SIGNATURE TITLE
--------- -----
<F*> Chairman
---------------------------------
I. F. Engelhardt
<F*> Vice President and Treasurer
---------------------------------
S. F. Schaab
<F*>By: /s/ JEFFERY L. KLINGER
---------------------------------
Jeffery L. Klinger
Attorney-In-Fact
II-62
