424B5
Filed pursuant to Rule 424(b)(5)
(File No. 333-136108)
PROSPECTUS SUPPLEMENT
(To Prospectus Dated
July 28, 2006)
$900,000,000
Peabody Energy
Corporation
$650,000,000
73/8%
SENIOR NOTES DUE 2016
$250,000,000
77/8%
SENIOR NOTES DUE 2026
Interest Payable on May 1 and November 1
We may redeem some or all of the 2016 and 2026 notes at
any time at a redemption price equal to 100% of the principal
amount of the notes being redeemed plus a make-whole premium and
accrued and unpaid interest to the redemption date.
The notes will be senior unsecured obligations of Peabody
and will rank equally with all of our other senior unsecured
indebtedness.
In certain circumstances, we will deposit with an escrow
agent funds in an amount equal to the gross proceeds of the
offering of the notes plus accrued and unpaid interest to, but
excluding, the latest possible special mandatory redemption
date. Under those circumstances, the escrowed property would be
released by the escrow agent only in connection with our
expected consummation, in whole or in part, of the acquisition
of Excel Coal Limited, and the notes would be subject to a
special mandatory redemption in the event that the acquisition
is not consummated.
For a more detailed description of the notes, see
Description of the Notes beginning on
page S-33.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-13.
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Underwriting
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Price to
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Discounts and
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Proceeds to
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Public(1)
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Commissions
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Peabody
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Per 73/8% Senior
Note due 2016
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100
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%
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1.20
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%
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98.80
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%
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Total
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$
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650,000,000
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$
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7,800,000
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$
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642,200,000
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(1)
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Plus accrued interest, if any, from
October 12, 2006.
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Underwriting
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Price to
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Discounts and
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Proceeds to
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Public(1)
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Commissions
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Peabody
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Per 77/8% Senior
Note due 2026
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98.753
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%
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1.20
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%
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97.553
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%
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Total
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$
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246,882,500
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$
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3,000,000
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$
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243,882,500
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(1)
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Plus accrued interest, if any, from
October 12, 2006.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities, or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the notes to purchasers on
October 12, 2006.
Joint Book-Running Managers
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MORGAN
STANLEY |
LEHMAN
BROTHERS |
Co-Managers
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ABN AMRO INCORPORATED
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BANC OF AMERICA SECURITIES LLC
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BMO CAPITAL MARKETS
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BNP PARIBAS
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CALYON SECURITIES (USA)
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CITIGROUP
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CREDIT SUISSE
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HSBC
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PNC CAPITAL MARKETS
LLC RBS
GREENWICH
CAPITAL WELLS
FARGO SECURITIES
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October 5, 2006
TABLE OF
CONTENTS
Prospectus Supplement
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S-2
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S-13
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S-26
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S-28
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S-29
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S-30
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S-33
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S-48
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S-50
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S-52
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S-52
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S-53
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S-53
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Prospectus
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3
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3
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3
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4
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9
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15
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16
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17
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18
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18
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18
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18
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This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering.
The second part is the accompanying prospectus, which gives more
general information, some of which may not apply to this
offering.
If the description of the offering varies between the prospectus
supplement and the accompanying prospectus, you should rely on
the information in the prospectus supplement.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, any
free writing prospectus prepared by us and the accompanying
prospectus. We have not authorized anyone to provide you with
additional or different information. If anyone provides you with
additional, different or inconsistent information, you should
not rely on it. We are offering to sell the notes, and seeking
offers to buy the notes, only in jurisdictions where offers and
sales are permitted. You should not assume that the information
we have included in this prospectus supplement, any free writing
prospectus prepared by us or the accompanying prospectus is
accurate as of any date other than the date of this prospectus
supplement, any free writing prospectus prepared by us or the
accompanying prospectus or that any information we have
incorporated by reference is accurate as of any date other than
the date of the document incorporated by reference. Our
business, financial condition, results of operations and
prospects may have changed since those dates.
Unless otherwise indicated, the exchange rate used in
translating Australian dollars into U.S. dollars was
determined by reference to an assumed exchange rate of A$1 =
US$0.7540, which was based on prevailing rates on
September 18, 2006.
S-1
PROSPECTUS
SUPPLEMENT SUMMARY
This summary does not contain all of the information that you
should consider before investing in the notes. You should read
the entire prospectus supplement, any free writing prospectus
prepared by us and the accompanying prospectus carefully,
including the matters discussed under the caption Risk
Factors, Cautionary Notice Regarding Forward-Looking
Statements and the detailed information and financial
statements included or incorporated by reference in this
prospectus supplement and the accompanying prospectus. When used
in this prospectus supplement and the accompanying prospectus,
the terms we, our, and us,
except as otherwise indicated or as the context otherwise
indicates, refer to Peabody Energy Corporation
and/or its
applicable subsidiary or subsidiaries.
Peabody
Energy Corporation
We are the largest private-sector coal company in the world. In
the first six months of 2006, we sold 122.1 million tons of
coal. During 2005, our sales of 239.9 million tons of coal
included sales to approximately 350 electricity generating
and industrial plants in 15 countries. Our coal products fuel
approximately 10% of all U.S electricity generation and 3%
of worldwide electricity generation. At December 31, 2005,
we had 9.8 billion tons of proven and probable coal
reserves, more than double the reserves of any other
U.S. coal producer. Financial results for 2005 included
$4.6 billion in revenues, $518.4 million in operating
profit, $422.7 million in net income and
$870.4 million in Adjusted EBITDA. Financial results for
the six months ended June 30, 2006 included
$2.6 billion in revenues, $346.9 million in operating
profit, $283.7 million in net income and
$538.2 million in Adjusted EBITDA. See Summary
Historical and Pro Forma Financial Data for the definition
of Adjusted EBITDA, which is a non-GAAP measure, and a
discussion of its usefulness as a measure of our overall
financial and operating performance and a reconciliation of
income from continuing operations to Adjusted EBITDA.
We own, through our subsidiaries, majority interests in 34 coal
operations located throughout all major U.S. coal producing
regions and in Australia. Additionally, we own a minority
interest in one mine through a joint venture arrangement. During
2005, we shipped 75% of our U.S. mining operations
coal sales from the western United States and the remaining 25%
from the eastern United States. Most of our production in the
western United States is low-sulfur coal from the Powder River
Basin. Our overall western U.S. coal production has
increased from 37 million tons in fiscal year 1990 to
154.3 million tons during 2005, representing a compounded
annual growth rate of 10%. In the West, we own and operate mines
in Arizona, Colorado, New Mexico and Wyoming. In the East, we
own and operate mines in Illinois, Indiana, Kentucky and West
Virginia. We also own five mines in Queensland, Australia. Most
of our Australian production is metallurgical coal. We generated
81% of our 2005 production from non-union mines. We expect full
year 2006 production of approximately 230 million tons and
total sales of 250 to 260 million tons, including 12 to
14 million tons of metallurgical coal.
During 2005, 87% of our sales (by volume) were to
U.S. electricity generators, 9% were to customers outside
the United States and 4% were to the U.S. industrial
sector. Coal continues to fuel more U.S. electricity
generation than all other energy sources combined. In 2005,
coal-fueled plants generated an estimated 51.3% of the
nations electricity, followed by nuclear (20.1%),
gas-fired (17.4%) and hydroelectric (6.7%) units. We believe
that growing demand for energy will strengthen the use of coal.
We also believe that U.S. and global coal consumption will
continue to increase as coal-fueled generating plants utilize
their existing excess capacity and as new coal-fueled plants are
constructed. Coal is an attractive fuel for electricity
generation because it is:
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Abundant: Coal makes up more than 85% of
fossil fuel reserves in the United States. The nation has an
estimated
250-year
supply of coal, based on current usage rates.
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Low-Cost: At an average delivered price of
$1.48 per million British thermal units, or Btu, to
U.S. generating plants in 2005, coals cost advantage
over natural gas is significant. The delivered price of natural
gas averaged $6.74 per million Btu in 2005.
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Increasingly Clean: Aggregate emissions from
U.S. coal-fueled plants have declined significantly since
1970, even as coal consumption by electricity generators has
more than tripled.
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S-2
Approximately 90% of our coal sales during 2005 were under
long-term contracts (one year or greater). As of
December 31, 2005, our sales backlog, including backlog
subject to price reopener
and/or
extension provisions, was over one billion tons, and the average
volume-weighted remaining term of our long-term contracts was
approximately 3.2 years, with remaining terms ranging from
one to 19 years. As of June 30, 2006, we had 60 to
70 million tons and 130 to 140 million tons for 2007
and 2008, respectively, of expected production (including steam
and metallurgical coal) available for pricing. We have an annual
metallurgical coal production capacity of 12 to 14 million
tons.
In addition to our mining operations, we market, broker and
trade coal. Our total tons traded were 36.2 million during
2005. In 2005, we opened a business development, sales and
marketing office in Beijing, China to pursue potential long-term
growth opportunities in this market. Our other energy-related
commercial activities include the development of mine-mouth,
coal-fueled generating plants, the management of our vast coal
reserve and real estate holdings, transportation services and,
more recently, participation in projects that convert coal into
natural gas and transportation fuels.
Competitive
Strengths
We believe our strengths will enable us to continue to grow and
increase financial value.
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We are the worlds largest private-sector producer and
marketer of coal and the largest reserve holder of any
private-sector coal company.
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We are the largest producer and marketer of low-sulfur coal in
the United States.
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We have a large portfolio of long-term coal supply agreements
that is complemented by available production in attractive
markets for sale at market prices.
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We are one of the safest and most productive producers of coal
in the United States.
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We serve a broad range of high quality customers with mining
operations located throughout all major U.S. coal producing
regions and in Australia.
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We have received numerous awards for our reclamation excellence.
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Our management team has a proven record of success.
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Risk
Factors
While we strive to maintain these strengths, our industry and
company are subject to risks that could adversely affect our
business. For example, we cannot assure you that in the future
we will be able to sell coal as profitably as at present. Supply
chain, transportation and geology are uncertain. Additionally,
our company and our customers are subject to extensive
governmental regulations that create significant costs and
restrictions and that could become more onerous in the future.
For a more complete discussion of the risks related to our
company, you should read the information presented under the
heading Risk Factors in this prospectus supplement
and in our periodic reports.
Business
Strategy
We utilize four core business strategies to create value:
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Executing the Basics Safe, low-cost
operations provide us the foundation to grow and create value.
We achieve improvements in both safety and productivity by
targeting cost and productivity improvements that require little
or no additional capital. Eight of our mines set new production
records in 2005, and our Rawhide, Caballo and North Antelope
Rochelle mines were the three most productive coal mines in the
nation based on tons per worker hours according to
U.S. Department of Labor Mine Safety & Health
Administration data. In 2005, our emphasis on safe, low-cost
operations resulted in a 33% improvement to our already-low
accident rate. Our safety record has improved 48% in the past
three years. We also use the same methods to achieve
environmental excellence. In 2005, we were recognized with 11
awards, including five top awards from the U.S. Department
of the Interior.
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S-3
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Capitalizing on Organic Growth Opportunities
We control the most proven and probable coal reserves of any
private-sector coal company in the world, which enables low-cost
development to serve growing customer demand. We have an
industry-leading track record of being able to construct,
develop and deliver on organic growth initiatives. Over the past
five years, we have developed new and expanded capacity that is
equivalent to two-thirds of U.S. coal industry growth.
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Expanding into High Growth Global Markets The
United States, China and India represent nearly 90% of the
forecasted growth in the worlds coal industry through
2030. We sell coal to customers in 15 countries on six
continents. We also have opened an office in Beijing, increased
import activities for South American coal into the United
States, and recently entered the European trading markets.
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Participating in New Generation and Btu Conversion
Projects We are developing mine mouth
electricity generating plants using our coal reserves. We have
entered into several agreements to develop
coal-to-liquids
and
coal-to-natural
gas facilities. We have entered into a joint development
agreement with Rentech to evaluate sites near our coal reserves
for
coal-to-liquids
projects that would transform coal into diesel and jet fuel. We
are exploring the development of a commercial-scale coal
gasification project. The facility is expected to use technology
from ConocoPhillips to transform coal into pipeline-quality
synthetic natural gas.
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Coal
Market Outlook
We believe long-term coal market fundamentals are strong
worldwide, as the U.S., China, India and other nations increase
coal demand for electricity generation and steelmaking.
The U.S. economy grew at an annual rate of 3.5% in 2005 and
an annual rate of 2.5% in the second quarter of 2006 as reported
by the U.S. Commerce Department, and the CIA World Factbook
reports that Chinas economy grew 9.9% in 2005. We expect
that demand for coal and coal-based electricity generation in
the United States will be driven by the growing economy,
capacity constraints of nuclear generation and high prices of
natural gas and oil. The Energy Information Administration
(EIA) projects that the high price of oil will lead
to an increase in demand for unconventional sources of
transportation fuel, including
coal-to-liquids,
and that coal will begin to displace natural gas-fired
generation of electricity, including the addition of
coal-to-liquids
plants.
Demand for Powder River Basin coal is increasing, particularly
for our ultra-low sulfur products. The Powder River Basin
represents more than half of our production. We control
approximately 3.5 billion tons of proven and probable
reserves in the Southern Powder River Basin and we sold
68.0 million tons of coal from this region in the first
half of 2006, an increase of 11.9% over the comparable period in
the prior year.
Global coal markets continue to grow, also driven by increased
demand from growing economies. Chinas economy grew 10.9%
in the second quarter of 2006 as reported by the National Bureau
of Statistics of China. Metallurgical coal continues to sell at
a significant premium to steam coal, and metallurgical markets
remain strong as global steel production grew more than 10%
through August 2006. We expect to capitalize on the strong
global market for metallurgical coal primarily through
production and sales of metallurgical coal from our Appalachia
operations and our Australian operations. See Risk
Factors for additional considerations regarding the coal
market.
The
Transactions
Excel Acquisition. On July 5, 2006, we
announced that we signed a merger implementation agreement to
acquire Excel Coal Limited (Excel), one of the
largest independent coal companies in Australia. On
September 20, 2006, we purchased 19.99% of the outstanding
shares of Excel at a price of A$9.50 per share (US$7.16)
(the Advance Purchase). Under the terms of the
merger implementation agreement, as amended on
September 18, 2006, we will pay A$9.50 per share
(US$7.16) in cash for the remaining outstanding shares of Excel,
representing a total acquisition price, including the Advance
Purchase, of approximately US$1.54 billion plus assumed
debt of approximately US$193 million (net of cash) as of
June 30, 2006. The acquisition of Excel (the Excel
Acquisition) will be financed out of the net proceeds from
this offering and borrowings under our senior unsecured credit
facility.
S-4
Excels major assets include:
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Wambo Open-Cut Mine This Hunter Valley
operation produces a premium thermal coal and serves export
customers from the Port of Newcastle. Wambo produced
3.5 million tons in 2005.
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North Wambo Underground Mine This operation
is under development and is expected to begin shipments in 2007,
with production targeted to reach approximately 3 million
tons per year over the next several years. The mine plans to
produce thermal and semi-soft coking coal for shipment to
customers through the Port of Newcastle.
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Metropolitan Mine This longwall operation
produced 1.6 million tons of hard and semi-hard coking coal
in 2005. Metropolitan serves domestic and export steel
producers, shipping from Port Kembla.
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Wilpinjong Mine This new open-cut mine is
expected to produce 5 million tons of thermal coal in 2007,
and is scheduled to ramp up to more than 7 million tons per
year within two years that will be shipped to export customers
through the Port of Newcastle in addition to serving a domestic
electricity generator.
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Millennium Mine This open-cut mine is in the
Bowen Basin near our existing metallurgical coal mines.
Millennium is expected to begin shipments of its coking coal
later this year, with 2007 production targeted at 2 million
tons and targeting 3 million tons per year over the next
several years. Millennium offers rail and port synergies with
our existing operations.
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Conarco Farm-In Agreement Through a farm-in
agreement with the Conarco Group, Excel may earn up to a 75%
interest by the staged spending of up to A$12 million
(US$9 million) over the next several years in two areas
that cover a combined 1.65 million acres in Queensland near
existing coal mines and infrastructure.
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Reserves Excel Coal controls more than
500 million tons of proven and probable metallurgical and
thermal coal reserves, and substantial additional coal
resources, in Queensland and New South Wales, Australia.
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Our rationale for the Excel Acquisition is:
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The Excel Acquisition is expected to triple our annual
production capacity in the worlds largest coal-exporting
nation. Australia provides nearly one-third of the worlds
exports, serving primarily the fast-growth markets of Asia. The
U.S. Energy Information Administration projects demand for
Australian metallurgical and thermal coal products will grow 55%
by 2030.
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The combination of our Australian operations and Excels
assets creates a major new player in the Australian coal sector,
with substantial market diversity, a broad portfolio of
metallurgical and thermal coal products, both domestic and
seaborne customers and the capacity to utilize multiple rail
lines and ports.
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We currently produce nine million tons per year of mostly
metallurgical coal in Queensland. The Excel Acquisition provides
us with extensive growth opportunities from existing operations,
along with major metallurgical and thermal coal mines in the
latter stages of development. Excel produced approximately
5.6 million tons of coal in 2005. These operations are
expected to produce up to 15 million tons in 2007, and up
to 20 million tons in 2008, from coal mines in New South
Wales and Queensland. The Excel Acquisition also provides
substantial synergies in the areas of sales and trading,
and reserve holdings in Queensland near our existing operations.
Excel has more than 500 million tons of metallurgical and
thermal coal reserves.
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The Excel Acquisition will expand our existing Queensland base.
In the past five years, we purchased the Wilkie Creek thermal
coal mine, acquired the Burton and North Goonyella metallurgical
coal mines, developed the Eaglefield metallurgical mine, and
developed the Baralaba thermal and PCI mine. It also marks a
return to New South Wales, where we have significant experience
and prior success.
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The Excel Acquisition was approved by Excel shareholders on
October 4, 2006. The Excel Acquisition remains subject to
the satisfaction or waiver of certain closing conditions
including approvals by an Australian court, the absence of a
material adverse change with respect to Excel and other
conditions. Excels directors have agreed not to solicit
alternative proposals or competing transactions and not to
respond to unsolicited approaches,
S-5
subject to certain limited exceptions to permit the board of
directors to comply with its fiduciary duties. However, we
cannot assure you that a competing bid will not be made for
Excel. If such a bid is made, it may be higher than ours. While
we expect to consummate the Excel Acquisition pursuant to the
merger implementation agreement, circumstances may arise that
cause us to decide to pursue the Excel Acquisition by means of a
takeover offer or by other lawful means under the laws of
Australia. We expect the closing to occur in October of 2006.
New Senior Unsecured Credit Facility. To
accommodate our increased working capital needs, and to
partially finance the Excel Acquisition, on September 15,
2006 we amended and restated our existing $1.35 billion
senior secured credit facilities. The Companys amended and
restated credit facility is unsecured and provides borrowing
capacity of $2.75 billion, consisting of a
$1.8 billion revolving credit facility and a
$950.0 million term loan facility. The term loan facility
consists of a $440.0 million tranche, which was drawn at
closing to replace the existing term loan facility, and up to a
$510.0 million delayed draw term loan sub-facility
available, subject to the satisfaction of certain conditions, to
fund the Excel Acquisition. For a more detailed discussion of
the senior unsecured credit facility, see Description of
Other Indebtedness.
We may, subsequent to this offering, undertake permanent
financing to pay down a portion of our senior unsecured credit
facility.
As used in this prospectus supplement, the term
Transactions means, collectively, the Excel
Acquisition, this offering and the related financings described
above.
Sources
and Uses of Funds
The estimated sources and uses of funds for the Transactions
(assuming the Transactions had closed on June 30,
2006) are shown on the table below. Actual amounts will
vary from estimated amounts depending on several factors.
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Sources
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Uses
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(dollars in thousands)
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Senior unsecured credit facility:
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Term loan
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$
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440,000
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Refinance existing term loan
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$
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437,500
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Delayed draw term loan sub-facility
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510,000
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Advance purchase
price(3)
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307,692
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Revolving credit
facility(1)
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369,614
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Remaining purchase
price(4)
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1,232,188
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2026 Senior notes offered
hereby(2)
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250,000
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Existing Excel
debt(5)
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193,234
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2016 Senior notes offered
hereby(2)
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650,000
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Estimated fees and expenses
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49,000
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Total sources
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$
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2,219,614
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Total uses
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$
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2,219,614
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(1)
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The revolving credit facility
provides for borrowings of up to $1.8 billion.
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(2)
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Any proceeds remaining after the
financing of the Excel Acquisition will be used for general
corporate purposes.
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(3)
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Reflects the amount of cash paid to
fund the Advance Purchase.
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(4)
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Reflects the amount of total cash
consideration to be paid to holders of outstanding shares of
Excels common stock (excluding Peabody holdings). As of
September 18, 2006, there were approximately
172.0 million Excel shares outstanding after giving effect
to the Advance Purchase.
|
(5)
|
|
Part of the proceeds from the
financing sources described above may be used to repay all or a
portion of the assumed Excel debt, which was $193.2 million
(net of cash) as of June 30, 2006. As of September 29,
2006, Excel had long-term debt of $274.4 million and
short-term debt of $41.1 million. We expect to refinance
the incremental debt with borrowings under our revolving credit
facility.
|
Recent
Developments
On September 6, 2006, we announced that we were
experiencing equipment problems at the Twentymile Mine in
Colorado, where a new longwall system that was installed in May
2006 has failed to operate consistently due to
manufacturers issues, and the early closing of a
third-party coal supplier in Appalachia, which was expected to
produce coal through the first half of 2007. We are taking
measures to mitigate these problems. See Risk
Factors for additional considerations.
During the third quarter of 2006, we repurchased approximately
$88.3 million of shares of our common stock, bringing the
total repurchases to $100.0 million under our authorized
program to repurchase up to 5% of our shares of common stock
from time to time.
S-6
THE
OFFERING
|
|
|
Issuer |
|
Peabody Energy Corporation (the Company) |
|
Notes Offered |
|
$900,000,000 in aggregate principal amount of notes, consisting
of: |
|
|
|
$650,000,000 in aggregate principal amount of
7.375% Senior Notes due 2016 (the 2016 notes);
and
|
|
|
|
$250,000,000 in aggregate principal amount of
7.875% Senior Notes due 2026 (the 2026 notes).
|
|
Maturity |
|
The 2016 notes will mature on November 1, 2016. |
|
|
|
The 2026 notes will mature on November 1, 2026. |
|
Interest Payment Dates |
|
May 1 and November 1 of each year, commencing on
May 1, 2007. |
|
Guarantees |
|
Subject to certain exceptions, our obligations under the notes
will be jointly and severally guaranteed on a senior unsecured
basis by all our existing domestic subsidiaries. In addition,
any domestic subsidiary that executes a guarantee under our
senior unsecured credit facility will be required to guarantee
the notes. See Description of the Notes
Subsidiary Guarantees. |
|
|
|
For the year ended December 31, 2005, on a pro forma basis
after giving effect to the Transactions (as defined below), the
entities that will guarantee the notes as of the issue date
would have generated approximately 73.0% and 65.3% of our
revenues and Adjusted EBITDA, respectively, and our
non-guarantor subsidiaries would have generated approximately
27.0% and 34.7% of our revenues and Adjusted EBITDA,
respectively. |
|
Rankings |
|
The notes and subsidiary guarantees are senior obligations of
ours and our subsidiary guarantors. Accordingly, they will rank: |
|
|
|
senior in right of payment to any of our
subordinated indebtedness, including $60 million principal
amount of our 5.0% Subordinated Notes due 2007;
|
|
|
|
pari passu in right of payment with any of
our senior indebtedness, including $650 million principal
amount of our
67/8%
Senior Notes due 2013, $231.8 million principal amount of
our
57/8% Senior
Notes due 2016 and borrowings under our senior unsecured credit
facility;
|
|
|
|
effectively junior in right of payment to our
existing and future secured indebtedness, to the extent of the
value of the collateral securing that indebtedness; and
|
|
|
|
effectively junior to all the indebtedness and other
liabilities of our subsidiaries that do not guarantee the notes. |
|
|
|
As of June 30, 2006, on a pro forma basis after giving
effect to the Transactions (as defined below), we would have had
approximately $3,163 million of indebtedness outstanding on
a consolidated basis (including the notes) and our non-guarantor
subsidiaries would have had $273.6 million of indebtedness
and other liabilities. |
|
Optional Redemption |
|
We may redeem some or all of the notes at any time at a
redemption price equal to 100% of the principal amount of the
notes being redeemed plus a make-whole premium and accrued and
unpaid interest, |
S-7
|
|
|
|
|
to the redemption date. See Description of the
Notes Optional Redemption. |
|
Change of Control |
|
If we experience specific kinds of changes in control and the
credit rating assigned to the notes declines below specified
levels within 90 days of that time, we must offer to
repurchase the notes at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of
redemption. |
|
Covenants |
|
We will issue the notes under an indenture among us, the
guarantors and the trustee. The indenture will (among other
things) limit our ability and that of our restricted
subsidiaries to: |
|
|
|
create liens; and
|
|
|
|
enter into sale and lease-back transactions.
|
|
|
|
Each of the covenants is subject to a number of important
exceptions and qualifications. See Description of the
Notes Certain Covenants. |
|
Use of Proceeds |
|
We intend to use the net proceeds of the offering, together with
the proceeds of other sources of financing, to consummate the
Excel Acquisition, with any remaining proceeds being used for
general corporate purposes. |
|
Escrow of Proceeds; Special Mandatory Redemption |
|
Unless the Australian court has approved the scheme of
arrangement prior to the closing of this offering, we will
deposit with an escrow agent funds in an amount equal to the
gross proceeds of the offering of the notes plus accrued and
unpaid interest to, but excluding, the latest possible special
mandatory redemption date. In order to cause the escrow agent to
release the escrowed property, we must provide to the escrow
agent on or before January 31, 2007 a certificate relating
to the expected consummation, in whole or in part, of the Excel
Acquisition and certain other matters. |
|
|
|
If we have not provided the certificate described above to the
escrow agent by January 31, 2007, then we will, on a day
not more than 10 business days thereafter, redeem all of the
notes at a price equal to 100% of the principal amount of the
notes, plus accrued and unpaid interest on the notes to, but
excluding, the redemption date. See Description of the
Notes Escrow of Proceeds; Special Mandatory
Redemption. |
S-8
SUMMARY
HISTORICAL AND PRO FORMA FINANCIAL DATA
We have derived the summary historical financial data for our
company for the years ended and as of December 31, 2003,
2004 and 2005 from our audited financial statements. We have
derived the summary historical financial data for our company
for the six months ended and as of June 30, 2005 and 2006
from our unaudited interim financial statements. In the opinion
of management, the unaudited interim financial statements
include all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of
this information. The results of operations for interim periods
are not necessarily indicative of the results that may be
expected for the entire year. You should read the following
table in conjunction with the financial statements, the related
notes to those financial statements, and Managements
Discussion and Analysis of Financial Condition and Results of
Operations, which are incorporated by reference in this
prospectus supplement.
On April 15, 2004, we acquired three coal operations from
RAG Coal International AG. Our results of operations for the
year ended December 31, 2004 include the results of
operations of the two mines in Queensland, Australia and the
results of operations for the Twentymile Mine in Colorado from
the April 15, 2004 purchase date. The acquisition was
accounted for as a purchase.
Results of operations for the year ended December 31, 2003
include early debt extinguishment costs of $53.5 million
pursuant to our debt refinancing in the first half of 2003. In
addition, results included expense relating to the cumulative
effect of accounting changes, net of income taxes, of
$10.1 million. This amount represents the aggregate amount
of the recognition of accounting changes pursuant to the
adoption of Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement
Obligations, the change in method of amortization of
actuarial gains and losses related to net periodic
postretirement benefit costs and the effect of the rescission of
Emerging Issues Task Force Issue
No. 98-10,
Accounting for Contracts Involved in Energy Trading and
Risk Management Activities. These accounting changes are
further discussed in Note 7 to our financial statements,
which are incorporated by reference into this prospectus
supplement.
In anticipation of the sale of Citizens Power, which occurred in
August 2000, we classified Citizens Power as a discontinued
operation as of March 31, 2000. Results in 2004 include a
$2.8 million loss, net of taxes, from discontinued
operations related to the settlement of a Citizens Power
indemnification claim. Citizens Power is presented as a
discontinued operation for all periods presented.
The summary unaudited pro forma combined financial data give
effect to the Transactions. The unaudited pro forma combined
balance sheet as of June 30, 2006 is presented as if the
Transactions had occurred on that date. The unaudited pro forma
combined statement of operations for the year ended
December 31, 2005, the six months ended June 30, 2005
and the six months ended June 30, 2006 is presented as if
the Transactions had occurred on January 1, 2005. The pro
forma financial data are for informational purposes only and are
not necessarily indicative of the financial position that would
have been obtained or the results of operations that would have
occurred if the acquisition and the related financings had been
consummated on the dates indicated, nor are they necessarily
indicative of the financial position or results of operations in
the future. The following data should be read in conjunction
with (i) the unaudited pro forma financial information,
(ii) our historical audited financial statements and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report
on
Form 10-K
for the year ended December 31, 2005, (iii) our
historical unaudited financial statements and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Quarterly
Reports on
Form 10-Q
for the six months ended June 30, 2006 and 2005, and
(iv) the historical audited financial statements of Excel,
each of which is incorporated by reference in this prospectus
supplement.
S-9
|
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|
|
|
|
|
|
|
|
|
|
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(Unaudited)
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
Pro forma
|
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Pro forma
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
(dollars in thousands)
|
|
|
Results of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
2,729,323
|
|
|
$
|
3,545,027
|
|
|
$
|
4,545,323
|
|
|
$
|
2,152,338
|
|
|
$
|
2,582,564
|
|
|
$
|
4,871,531
|
|
|
$
|
2,296,342
|
|
|
$
|
2,783,740
|
|
Other revenues
|
|
|
85,973
|
|
|
|
86,555
|
|
|
|
99,130
|
|
|
|
33,928
|
|
|
|
45,634
|
|
|
|
101,260
|
|
|
|
34,398
|
|
|
|
48,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,815,296
|
|
|
|
3,631,582
|
|
|
|
4,644,453
|
|
|
|
2,186,266
|
|
|
|
2,628,198
|
|
|
|
4,972,791
|
|
|
|
2,330,740
|
|
|
|
2,831,935
|
|
Costs and expenses
|
|
|
2,670,510
|
|
|
|
3,384,884
|
|
|
|
4,126,070
|
|
|
|
1,976,154
|
|
|
|
2,281,262
|
|
|
|
4,401,767
|
|
|
|
2,092,463
|
|
|
|
2,436,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
144,786
|
|
|
$
|
246,698
|
|
|
$
|
518,383
|
|
|
$
|
210,112
|
|
|
$
|
346,936
|
|
|
$
|
571,024
|
|
|
$
|
238,277
|
|
|
$
|
395,050
|
|
Interest
expense(1)
|
|
|
98,540
|
|
|
|
96,793
|
|
|
|
102,939
|
|
|
|
50,761
|
|
|
|
52,738
|
|
|
|
229,417
|
|
|
|
114,000
|
|
|
|
115,977
|
|
Early debt extinguishment costs
|
|
|
53,513
|
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(4,086
|
)
|
|
|
(4,917
|
)
|
|
|
(10,641
|
)
|
|
|
(3,183
|
)
|
|
|
(4,140
|
)
|
|
|
(10,641
|
)
|
|
|
(3,183
|
)
|
|
|
(4,140
|
)
|
Income tax provision (benefit)
|
|
|
(47,708
|
)
|
|
|
(26,437
|
)
|
|
|
960
|
|
|
|
14,586
|
|
|
|
8,248
|
|
|
|
(20,167
|
)
|
|
|
3,569
|
|
|
|
5,179
|
|
Minority interests
|
|
|
3,035
|
|
|
|
1,282
|
|
|
|
2,472
|
|
|
|
804
|
|
|
|
6,434
|
|
|
|
7,227
|
|
|
|
4,963
|
|
|
|
9,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
41,492
|
|
|
$
|
178,226
|
|
|
$
|
422,653
|
|
|
$
|
147,144
|
|
|
$
|
283,656
|
|
|
$
|
365,188
|
|
|
$
|
118,928
|
|
|
$
|
268,597
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(2,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting
changes
|
|
|
(10,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
31,348
|
|
|
$
|
175,387
|
|
|
$
|
422,653
|
|
|
$
|
147,144
|
|
|
$
|
283,656
|
|
|
$
|
365,188
|
|
|
$
|
118,928
|
|
|
$
|
268,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
188,861
|
|
|
$
|
283,760
|
|
|
$
|
702,759
|
|
|
$
|
253,594
|
|
|
$
|
213,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
(192,280
|
)
|
|
|
(705,030
|
)
|
|
|
(584,202
|
)
|
|
|
(190,166
|
)
|
|
|
(349,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
48,598
|
|
|
|
693,404
|
|
|
|
(4,915
|
)
|
|
|
6,303
|
|
|
|
(48,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons sold (unaudited, in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
201.9
|
|
|
|
221.1
|
|
|
|
231.6
|
|
|
|
112.8
|
|
|
|
117.8
|
|
|
|
231.6
|
|
|
|
112.8
|
|
|
|
117.8
|
|
Australia
|
|
|
1.3
|
|
|
|
6.1
|
|
|
|
8.3
|
|
|
|
4.1
|
|
|
|
4.3
|
|
|
|
14.2
|
|
|
|
6.8
|
|
|
|
7.8
|
|
Operating profit (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
143,438
|
|
|
$
|
209,700
|
|
|
$
|
353,405
|
|
|
$
|
165,918
|
|
|
$
|
252,492
|
|
|
$
|
353,405
|
|
|
$
|
165,918
|
|
|
$
|
252,492
|
|
Australia
|
|
|
1,348
|
|
|
|
36,998
|
|
|
|
164,978
|
|
|
|
44,194
|
|
|
|
94,444
|
|
|
|
217,619
|
|
|
|
72,359
|
|
|
|
142,558
|
|
Depreciation, depletion and
amortization (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
233,455
|
|
|
$
|
261,060
|
|
|
$
|
285,990
|
|
|
$
|
141,140
|
|
|
$
|
153,687
|
|
|
$
|
285,990
|
|
|
$
|
141,140
|
|
|
$
|
153,687
|
|
Australia
|
|
|
881
|
|
|
|
9,099
|
|
|
|
30,124
|
|
|
|
14,122
|
|
|
|
18,752
|
|
|
|
66,563
|
|
|
|
32,653
|
|
|
|
39,799
|
|
Adjusted
EBITDA(2)
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
408,053
|
|
|
$
|
508,872
|
|
|
$
|
667,816
|
|
|
$
|
320,166
|
|
|
$
|
424,534
|
|
|
$
|
667,816
|
|
|
$
|
320,166
|
|
|
$
|
424,534
|
|
Australia
|
|
|
2,225
|
|
|
|
50,372
|
|
|
|
202,582
|
|
|
|
61,565
|
|
|
|
113,684
|
|
|
|
295,941
|
|
|
|
110,729
|
|
|
|
184,307
|
|
Capital expenditures (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
155,050
|
|
|
$
|
132,279
|
|
|
$
|
298,969
|
|
|
$
|
86,644
|
|
|
$
|
162,470
|
|
|
$
|
298,969
|
|
|
$
|
86,644
|
|
|
$
|
162,470
|
|
Australia
|
|
|
1,393
|
|
|
|
19,665
|
|
|
|
85,335
|
|
|
|
37,466
|
|
|
|
37,665
|
|
|
|
202,982
|
|
|
|
77,075
|
|
|
|
169,024
|
|
Federal coal lease expenditures
|
|
$
|
|
|
|
$
|
114,653
|
|
|
$
|
118,364
|
|
|
$
|
63,540
|
|
|
$
|
123,369
|
|
|
$
|
118,364
|
|
|
$
|
63,540
|
|
|
$
|
123,369
|
|
Purchase of mining assets
|
|
|
|
|
|
|
|
|
|
|
141,195
|
|
|
|
56,500
|
|
|
|
|
|
|
|
141,195
|
|
|
|
56,500
|
|
|
|
|
|
Ratio of earnings to fixed
charges(3)
(unaudited)
|
|
|
0.98
|
|
|
|
2.04
|
|
|
|
3.86
|
|
|
|
3.19
|
|
|
|
4.98
|
|
|
|
2.27
|
|
|
|
1.92
|
|
|
|
3.03
|
|
Balance Sheet Data (at end of
period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,280,265
|
|
|
$
|
6,178,592
|
|
|
$
|
6,852,006
|
|
|
$
|
6,404,661
|
|
|
$
|
6,841,602
|
|
|
|
|
|
|
|
|
|
|
$
|
9,155,597
|
|
Total debt
|
|
|
1,196,539
|
|
|
|
1,424,965
|
|
|
|
1,405,506
|
|
|
|
1,414,910
|
|
|
|
1,380,653
|
|
|
|
|
|
|
|
|
|
|
|
3,162,767
|
|
Total stockholders equity
|
|
|
1,132,057
|
|
|
|
1,724,592
|
|
|
|
2,178,467
|
|
|
|
1,902,808
|
|
|
|
2,333,277
|
|
|
|
|
|
|
|
|
|
|
|
2,333,277
|
|
S-10
|
|
|
(1)
|
|
Represents pro forma interest
expense resulting from our new capital structure using, in the
case of revolving and term loan borrowings, an assumed LIBOR
rate of 5.38%:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
(dollars in thousands, unaudited)
|
|
|
Revolving credit
facility(a)
|
|
$
|
24,981
|
|
|
$
|
12,492
|
|
|
$
|
12,492
|
|
Term loan
facility(b)
|
|
|
52,089
|
|
|
|
25,335
|
|
|
|
28,650
|
|
2026 Senior notes offered
hereby(c)
|
|
|
20,139
|
|
|
|
10,069
|
|
|
|
10,069
|
|
2016 Senior notes offered
hereby(d)
|
|
|
48,660
|
|
|
|
24,330
|
|
|
|
24,330
|
|
67/8% Senior
notes(e)
|
|
|
47,746
|
|
|
|
23,815
|
|
|
|
23,815
|
|
57/8% Senior
notes(f)
|
|
|
14,879
|
|
|
|
7,440
|
|
|
|
7,355
|
|
Subordinated
note(g)
|
|
|
6,656
|
|
|
|
3,423
|
|
|
|
3,026
|
|
Surety bond
expense(h)
|
|
|
11,095
|
|
|
|
5,292
|
|
|
|
4,165
|
|
Other long-term
debt(i)
|
|
|
3,172
|
|
|
|
1,804
|
|
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pro forma interest expense
|
|
$
|
229,417
|
|
|
$
|
114,000
|
|
|
$
|
115,977
|
|
Less historical interest expense
|
|
|
102,939
|
|
|
|
50,761
|
|
|
|
52,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net adjustment to interest expense
|
|
$
|
126,478
|
|
|
$
|
63,239
|
|
|
$
|
63,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects pro forma interest expense
on our revolving unsecured credit facility at an assumed LIBOR
plus 1% interest rate of 6.38%. A portion of the revolving
credit facility is expected to be drawn at closing.
|
|
(b)
|
|
Reflects pro forma interest expense
on our term loan facility at an assumed LIBOR plus 1% interest
rate of 6.38%. A portion of the term loan facility is expected
to be drawn at closing.
|
|
(c)
|
|
Reflects pro forma interest expense
on the 2026 senior notes offered hereby at an interest rate
of 7.88%.
|
|
(d)
|
|
Reflects pro forma interest expense
on the 2016 senior notes offered hereby at an interest rate
of 7.38%.
|
|
(e)
|
|
Reflects historical interest
expense on our
67/8% senior
notes.
|
|
(f)
|
|
Reflects historical interest
expense on our
57/8% senior
notes.
|
|
(g)
|
|
Reflects historical interest
expense on our 5% subordinated note.
|
|
(h)
|
|
Reflects historical fees for surety
bonds outstanding.
|
|
(i)
|
|
Reflects historical letter of
credit fees, interest on capital leases and the effect of
interest rate swaps.
|
|
|
|
(2)
|
|
Adjusted EBITDA is defined as
income from continuing operations before deducting early debt
extinguishment costs, net interest expense, income taxes,
minority interests, asset retirement obligation expense and
depreciation, depletion and amortization. Adjusted EBITDA is
used by management to measure operating performance, and
management also believes it is a useful indicator of our ability
to meet debt service and capital expenditure requirements. We
believe that the amounts shown for Adjusted EBITDA as presented
in this prospectus supplement are not materially different from
the amounts calculated under the definition of Consolidated Cash
Flow used in the indentures for our existing senior notes and in
calculating Consolidated EBITDA under our senior unsecured
credit facility, such measures being necessary to calculate our
Fixed Charge Coverage Ratio and Consolidated Leverage Ratio. In
order to incur debt under our existing indentures, the Fixed
Charge Coverage Ratio must be at least 2.0 to 1.0, and under the
senior unsecured credit facility we must maintain a Consolidated
Leverage Ratio of 3.75x for each period of four consecutive
fiscal quarters ending on or prior to December 31, 2007,
3.50x for each period of four consecutive fiscal quarters ending
after January 1, 2008 and on or prior to December 31,
2008 and 3.25x for each period of four consecutive fiscal
quarters ending after January 1, 2009 and thereafter, as
tested at the end of each such four consecutive fiscal quarter
period. Adjusted EBITDA is not a recognized term under
U.S. generally accepted accounting principles
(GAAP) and does not purport to be an alternative to
operating income, net income or cash flows from operating
activities as determined in accordance with GAAP as a measure of
profitability or liquidity. Because Adjusted EBITDA is not
calculated identically by all companies, our calculation may not
be comparable to similarly titled measures of other companies.
|
S-11
Adjusted EBITDA is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
Pro forma
|
|
|
Pro forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Year
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
(dollars in thousands, unaudited)
|
|
|
Income from continuing operations
|
|
$
|
41,492
|
|
|
$
|
178,226
|
|
|
$
|
422,653
|
|
|
$
|
147,144
|
|
|
$
|
283,656
|
|
|
$
|
365,188
|
|
|
$
|
118,928
|
|
|
$
|
268,597
|
|
Income tax provision (benefit)
|
|
|
(47,708
|
)
|
|
|
(26,437
|
)
|
|
|
960
|
|
|
|
14,586
|
|
|
|
8,248
|
|
|
|
(20,167
|
)
|
|
|
3,569
|
|
|
|
5,179
|
|
Depreciation, depletion and
amortization
|
|
|
234,336
|
|
|
|
270,159
|
|
|
|
316,114
|
|
|
|
155,262
|
|
|
|
172,439
|
|
|
|
352,553
|
|
|
|
173,793
|
|
|
|
193,486
|
|
Asset retirement obligation expense
|
|
|
31,156
|
|
|
|
42,387
|
|
|
|
35,901
|
|
|
|
16,357
|
|
|
|
18,843
|
|
|
|
40,180
|
|
|
|
18,825
|
|
|
|
20,305
|
|
Interest expense
|
|
|
98,540
|
|
|
|
96,793
|
|
|
|
102,939
|
|
|
|
50,761
|
|
|
|
52,738
|
|
|
|
229,417
|
|
|
|
114,000
|
|
|
|
115,977
|
|
Early debt extinguishment costs
|
|
|
53,513
|
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
(4,086
|
)
|
|
|
(4,917
|
)
|
|
|
(10,641
|
)
|
|
|
(3,183
|
)
|
|
|
(4,140
|
)
|
|
|
(10,641
|
)
|
|
|
(3,183
|
)
|
|
|
(4,140
|
)
|
Minority interests
|
|
|
3,035
|
|
|
|
1,282
|
|
|
|
2,472
|
|
|
|
804
|
|
|
|
6,434
|
|
|
|
7,227
|
|
|
|
4,963
|
|
|
|
9,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
410,278
|
|
|
$
|
559,244
|
|
|
$
|
870,398
|
|
|
$
|
381,731
|
|
|
$
|
538,218
|
|
|
$
|
963,757
|
|
|
$
|
430,895
|
|
|
$
|
608,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Earnings were insufficient to cover
fixed charges by $3.2 million for the year ended
December 31, 2003. Excluding $53.5 million of early
debt extinguishment costs incurred for the year ended
December 31, 2003, the ratio of earnings to fixed charges
would have been 1.34x during this period.
|
S-12
RISK
FACTORS
An investment in our notes involves risks. Before deciding to
invest in the notes, you should carefully consider, in addition
to the other information contained in or incorporated by
reference into this prospectus supplement, the following risk
factors:
Risks
Related to our Business
If a
substantial portion of our long-term coal supply agreements
terminate, our revenues and operating profits could suffer if we
were unable to find alternate buyers willing to purchase our
coal on comparable terms, including price, to those in our
contracts.
Most 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. For the year ended December 31, 2005, 90% of our
sales volume was sold under long-term coal supply agreements. At
December 31, 2005, our coal supply agreements had remaining
terms ranging from one to 19 years and an average
volume-weighted remaining term of approximately 3.2 years.
Many of our coal supply agreements contain provisions that
permit the parties to adjust the contract price upward or
downward at specified times. We may adjust these contract prices
based on inflation or deflation
and/or
changes in the factors affecting the cost of producing coal,
such as taxes, fees, royalties and changes in the laws
regulating the mining, production, sale or use of coal. In a
limited number of contracts, failure of the parties to agree on
a price under those provisions may allow either party to
terminate the contract. We sometimes experience a reduction in
coal prices in new long-term coal supply agreements replacing
some of our expiring contracts. 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 meeting quality thresholds for certain
characteristics such as Btu, sulfur content, ash content,
grindability and ash fusion temperature. Failure to meet these
specifications could result in economic penalties, including
price adjustments, the rejection of deliveries or termination of
the contracts. Moreover, some of these agreements permit the
customer to terminate the contract if transportation costs,
which our customers typically bear, increase substantially. In
addition, some of these contracts allow our customers to
terminate their contracts in the event of changes in regulations
affecting our industry that increase the price of coal beyond
specified limits.
The operating profits we realize from coal sold under supply
agreements depend on a variety of factors. In addition, price
adjustment and other provisions may increase our exposure to
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. Market
prices for coal vary by mining region and country. As a result,
we cannot predict the future strength of the coal market overall
or by mining region and cannot assure you that we will be able
to replace existing long-term coal supply agreements at the same
prices or with similar profit margins when they expire. In
addition, one of our largest coal supply agreements is the
subject of ongoing litigation and arbitration.
The
loss of, or significant reduction in, purchases by our largest
customers could adversely affect our revenues.
For the year ended December 31, 2005, we derived 21% of our
total coal revenues from sales to our five largest customers. At
December 31, 2005, we had 79 coal supply agreements with
these customers expiring at various times from 2006 to 2011. We
are currently discussing the extension of existing agreements or
entering into new long-term agreements with some of these
customers, but these negotiations may not be successful and
those customers may not continue to purchase coal from us under
long-term coal supply agreements. If a number of these customers
significantly reduce their purchases of coal from us, or if we
are unable to sell coal to them on terms as favorable to us as
the terms under our current agreements, our financial condition
and results of operations could suffer materially.
S-13
We had been supplying coal to the Mohave Generating Station
pursuant to a long-term coal supply agreement through our Black
Mesa Mine. The mine suspended its operations on
December 31, 2005, and the coal supply agreement expired on
that date. As a part of an alternate dispute resolution, our
subsidiary, Peabody Western is participating in mediation with
the Navajo Nation, the Hopi Tribe and the owners of the Mohave
Generating Station and the Navajo Generating Station to resolve
the complex issues surrounding groundwater and other disputes
involving the two generating stations. On June 19, 2006,
the owners of the Mohave Generating Station announced that they
were halting efforts to reopen the plant and that they would try
to sell it. There is no assurance that the Mohave Generating
Station will resume operations. The Mohave plant was the sole
customer of the Black Mesa Mine, which sold 4.6 million
tons of coal in 2005. During 2005, the mine generated
$29.8 million of Adjusted EBITDA (reconciled to its most
comparable measure under GAAP in Note 27 of the
consolidated financial statements), which represented 3.4% of
our total 2005 Adjusted EBITDA of $870.4 million.
If
transportation for our coal becomes unavailable or uneconomic
for our customers, our ability to sell coal could
suffer.
Transportation costs represent a significant portion of the
total cost of coal, and the cost of transportation is a critical
factor in a customers purchasing decision. Increases in
transportation costs and the lack of sufficient rail and port
capacity could lead to reduced coal sales. As of
December 31, 2005, certain coal supply agreements, which
account for less than 5% of our tons sold, permit the customer
to terminate the contract if the cost of transportation
increases by an amount over specified levels in any given
12-month
period.
Coal producers depend upon rail, barge, trucking, overland
conveyor and ocean-going vessels to deliver coal to markets.
While our coal customers typically arrange and pay for
transportation of coal from the mine or port to the point of
use, disruption of these transportation services because of
weather-related problems, infrastructure damage, strikes,
lock-outs, lack of fuel or maintenance items, transportation
delays 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, two primary railroads serve
the Powder River Basin mines. Due to the high volume of coal
shipped from all Powder River Basin mines, the loss of access to
rail capacity could create temporary congestion on the rail
systems servicing that region.
Risks
inherent to mining could increase the cost of operating our
business.
Our mining operations are subject to conditions that can impact
the safety of our workforce, or delay coal deliveries or
increase the cost of mining at particular mines for varying
lengths of time. These conditions include fires and explosions
from methane gas or coal dust; accidental minewater discharges;
weather, flooding 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 geologic conditions. We maintain insurance
policies that provide limited coverage for some of these risks,
although there can be no assurance that these risks would be
fully covered by our insurance policies. Despite our efforts,
significant mine accidents could occur and have a substantial
impact.
Our
mining operations are extensively regulated, which imposes
significant costs on us, and future regulations and developments
could increase those costs or limit our ability to produce
coal.
Federal, state and local authorities regulate the coal mining
industry with respect to 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,
significant legislation mandating specified benefits for retired
coal miners affects our industry. Numerous governmental permits
and approvals are required for mining operations. We are
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.
The possibility exists that new legislation
and/or
regulations and orders related to the environment or employee
health and safety may be adopted and may materially adversely
S-14
affect our mining operations, our cost structure
and/or our
customers ability to use coal. New legislation or
administrative regulations (or judicial interpretations of
existing laws and regulations), including proposals related to
the protection of the environment that would further regulate
and tax the coal industry, may also require us or our customers
to change operations significantly or incur increased costs. The
majority of our coal supply agreements contain provisions that
allow a purchaser to terminate its contract if legislation is
passed that either restricts the use or type of coal permissible
at the purchasers plant or results in specified increases
in the cost of coal or its use. These factors and legislation,
if enacted, could have a material adverse effect on our
financial condition and results of operations.
In addition, the United States, Australia and more than 160
other nations are signatories to the 1992 Framework Convention
on Climate Change, which addresses 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 in the U.S., these restrictions,
whether through ratification of the emission targets or other
efforts to stabilize or reduce greenhouse gas emissions, could
adversely affect the price and demand for coal. According to the
Department of Energys Energy Information Administration,
Emissions of Greenhouse Gases in the United States
2003, coal accounts for 31% of greenhouse gas emissions in
the United States, and efforts to control greenhouse gas
emissions could result in reduced use of coal if electricity
generators switch to lower carbon sources of fuel. Legislation
was introduced in Congress in 2006 to reduce greenhouse gas
emissions in the United States. Such or similar federal
legislative action could be taken in 2007 or later years. In
addition, a number of states in the United States have taken
steps to regulate greenhouse gas emissions. For example, seven
northeastern states (New York, Vermont, New Hampshire, Maine,
Connecticut, Delaware and New Jersey) entered into the Regional
Greenhouse Gas Initiative (RGGI) agreement in December, 2005 to
reduce carbon dioxide emissions from power plants, and in August
2006 finalized a model rule to help implement the agreement;
Maryland has approved legislation that may result in its joining
the RGGI in 2007; the California legislature in August 2006
approved legislation supported by the governor of California
allowing the imposition of statewide caps on and cuts in carbon
dioxide emissions; and Arizonas governor signed an
executive order in September 2006 that calls for the state to
reduce carbon dioxide emissions. Although the manner in which
such state limits will be implemented is uncertain, further
developments in connection with legislation, regulations or
other limits on carbon dioxide emissions could have a material
adverse effect on our financial condition or results of
operations.
A number of laws, including in the U.S. the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA
or Superfund), impose liability relating to contamination by
hazardous substances. Such liability may involve the costs of
investigating or remediating contamination and damages to
natural resources, as well as claims seeking to recover for
property damage or personal injury caused by hazardous
substances. Such liability may arise from conditions at formerly
as well as currently owned or operated properties, and at
properties to which hazardous substances have been sent for
treatment, disposal, or other handling. Liability under CERCLA
and similar state statutes is without regard to fault, and
typically is joint and several, meaning that a person may be
held responsible for more than its share, or even all of, the
liability involved. Our mining operations involve some use of
hazardous materials. In addition, we have accrued for liability
arising out of contamination associated with Gold Fields Mining,
LLC (Gold Fields), a dormant, non-coal-producing subsidiary of
ours that was previously managed and owned by Hanson PLC, or
with Gold Fields former affiliates. A predecessor owner of
ours, Hanson PLC transferred ownership of Gold Fields to us in
the February 1997 spin-off of its energy business. Gold Fields
is currently a defendant in several lawsuits and has received
notices of several other potential claims arising out of lead
contamination from mining and milling operations it conducted in
northeastern Oklahoma. Gold Fields is also involved in
investigating or remediating a number of other contaminated
sites. Although we have accrued for many of these liabilities
known to us, the amounts of other potential losses cannot be
estimated. Significant uncertainty exists as to whether 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 our accrual. Although we
believe many of these liabilities are likely to be resolved
without a material adverse effect on us, future developments,
such as new information concerning areas known to be or
suspected of being contaminated for which we may be responsible,
the discovery of new contamination for which we may be
responsible, or the inability to share costs with other parties
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that may be responsible for the contamination, could have a
material adverse effect on our financial condition or results of
operations.
Our
expenditures for postretirement benefit and pension obligations
could be materially higher than we have predicted if our
underlying assumptions prove to be incorrect.
We provide postretirement health and life insurance benefits to
eligible union and non-union employees. We calculated the total
accumulated postretirement benefit obligation under Statement of
Financial Accounting Standards No. 106,
Employers Accounting for Postretirement Benefits
Other Than Pensions, which we estimate had a present value
of $1,034.3 million as of December 31, 2005,
$75.0 million of which was a current liability. We have
estimated these unfunded obligations based on assumptions
described in the notes to our consolidated financial statements.
If our assumptions do not materialize as expected, cash
expenditures and costs that we incur could be materially higher.
Moreover, regulatory changes could increase our obligations to
provide these or additional benefits.
We are party to an agreement with the Pension Benefit Guaranty
Corporation (the PBGC) and TXU Europe Limited, an
affiliate of our former parent corporation, under which we are
required to make specified contributions to two of our defined
benefit pension plans and to maintain a $37.0 million
letter of credit in favor of the PBGC. If we or the PBGC give
notice of an intent to terminate one or more of the covered
pension plans in which liabilities are not fully funded, or if
we fail to maintain the letter of credit, the PBGC may draw down
on the letter of credit and use the proceeds to satisfy
liabilities under the Employee Retirement Income Security Act of
1974, as amended. The PBGC, however, is required to first apply
amounts received from a $110.0 million guaranty in place
from TXU Europe Limited in favor of the PBGC before it draws on
our letter of credit. On November 19, 2002 TXU Europe
Limited was placed under the administration process in the
United Kingdom (a process similar to bankruptcy proceedings in
the United States) and continues under this process.
In addition, certain of our subsidiaries participate in two
defined benefit multi-employer pension funds that were
established as a result of collective bargaining with the United
Mine Workers of America (the UMWA) pursuant to the
National Bituminous Coal Wage Agreement as periodically
negotiated. The UMWA 1950 Pension Plan provides pension and
disability pension benefits to qualifying represented employees
retiring from a participating employer where the employee last
worked prior to January 1, 1976. This is a closed group of
beneficiaries with no new entrants. The UMWA 1974 Pension Plan
provides pension and disability pension benefits to qualifying
represented employees retiring from a participating employer
where the employee last worked after December 31, 1975.
Contributions to these funds could increase as a result of
future collective bargaining with the UMWA, a shrinking
contribution base as a result of the insolvency of other coal
companies who currently contribute to these funds, lower than
expected returns on pension fund assets, higher medical and drug
costs or other funding deficiencies.
The United Mine Workers of America Combined Fund was created by
federal law in 1992. This multi-employer fund provides health
care benefits to a closed group of our retired former employees
who last worked prior to 1976, as well as orphaned beneficiaries
of bankrupt companies who were receiving benefits as orphans
prior to the 1992 law. No new retirees will be added to this
group. The liability is subject to increases or decreases in per
capita health care costs, offset by the mortality curve in this
aging population of beneficiaries. Another fund, the 1992
Benefit Plan created by the same federal law in 1992, provides
benefits to qualifying retired former employees of bankrupt
companies who have defaulted in providing their former employees
with retiree medical benefits. Beneficiaries continue to be
added to this fund as employers default in providing their
former employees with retiree medical benefits, but the overall
exposure for new beneficiaries into this fund is limited to
retirees covered under their employers plan who retired
prior to October 1, 1994. A third fund, the 1993 Benefit
Fund, was established through collective bargaining and provides
benefits to qualifying retired former employees who retired
after September 30, 1994 of certain signatory companies who
have gone out of business and have defaulted in providing their
former employees with retiree medical benefits. Beneficiaries
continue to be added to this fund as employers go out of
business.
S-16
Based upon the enactment of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, we estimated future
cash savings which allowed us to reduce our projected
postretirement benefit obligations and related expense. Failure
to achieve these estimated future savings under all benefit
plans could adversely affect our financial condition, results of
operations and cash flows.
A
decrease in the availability or increase in costs of key
supplies or commodities such as diesel fuel, steel, explosives
and tires could decrease our anticipated
profitability.
Our mining operations require a reliable supply of replacement
parts, explosives, fuel, tires, steel-related products
(including roof control) and lubricants. If the cost of any of
these inputs increased significantly, or if a source for these
supplies or mining equipment were unavailable to meet our
replacement demands, our profitability could be reduced from our
current expectations. Recent consolidation of suppliers of
explosives has limited the number of sources for these
materials, and our current supply of explosives is concentrated
with one supplier. Further, our purchases of some items of
underground mining equipment are concentrated with one principal
supplier. In the past year, industry wide demand growth has
exceeded supply growth for certain surface and underground
mining equipment and
off-the-road
tires. As a result, lead times for some items have increased
significantly.
Our
future success depends upon our ability to continue acquiring
and developing coal reserves that are economically
recoverable.
Our recoverable reserves decline as we produce coal. We have not
yet applied for the permits required or developed the mines
necessary to use all of our reserves. Furthermore, we may not be
able to mine all of our reserves as profitably as we do at our
current operations. Our future success depends upon our
conducting successful exploration and development activities or
acquiring properties containing economically recoverable
reserves. Our current strategy includes increasing our reserves
through acquisitions of government and other leases and
producing properties and continuing to use our existing
properties. The federal government also leases natural gas and
coalbed methane reserves in the West, including in the Powder
River Basin. Some of these natural gas and coalbed methane
reserves are located on, or adjacent to, some of our Powder
River Basin reserves, potentially creating conflicting interests
between us and lessees of those interests. Other lessees
rights relating to these mineral interests could prevent, delay
or increase the cost of developing our coal reserves. These
lessees may also seek damages from us based on claims that our
coal mining operations impair their interests. Additionally, the
federal government limits the amount of federal land that may be
leased by any company to 150,000 acres nationwide. As of
December 31, 2005, we leased a total of 62,330 acres
from the federal government. The limit could restrict our
ability to lease additional federal lands.
Our planned mine development projects and acquisition activities
may not result in significant additional reserves and we may not
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, in order to develop our reserves,
we must receive various governmental permits. We cannot predict
whether we will continue to receive the permits necessary for us
to operate profitably in the future. We may not be able to
negotiate new leases from the government or from private parties
or obtain 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. From time to time, we have experienced litigation with
lessors of our coal properties and with royalty holders.
A
decrease in the price or our production of metallurgical coal
could decrease our anticipated profitability.
We have annual capacity to produce approximately 12 to
14 million tons of metallurgical coal. Prices for
metallurgical coal at the end of 2005 and during 2006 are near
historically high levels. As a result, our projected margins
from these sales have increased significantly, and will
represent a larger percentage of our overall revenues and
profits in the future. To the extent we experience either
production or transportation difficulties that impair our
ability to ship metallurgical coal to our customers at
anticipated levels, our profitability will be reduced in 2006.
S-17
After the first quarter of 2007, the majority of our
metallurgical coal production has not yet been priced. As a
result, a decrease in metallurgical coal prices could decrease
our profitability.
An
inability of contract miner or brokerage sources to fulfill the
delivery terms of their contracts with us could reduce our
profitability.
In conducting our trading, brokerage and mining operations, we
utilize third party sources of coal production, including
contract miners and brokerage sources, to fulfill deliveries
under our coal supply agreements. Recently, certain of our
brokerage sources and contract miners have experienced adverse
geologic mining
and/or
financial difficulties that have made their delivery of coal to
us at the contractual price difficult or uncertain. Our
profitability or exposure to loss on transactions or
relationships such as these is dependent upon the reliability
(including financial viability) and price of the third-party
supply, our obligation to supply coal to customers in the event
that adverse geologic mining conditions restrict deliveries from
our suppliers, our willingness to participate in temporary cost
increases experienced by our third-party coal suppliers, our
ability to pass on temporary cost increases to our customers,
the ability to substitute, when economical, third-party coal
sources with internal production or coal purchased in the
market, and other factors.
If the
coal industry experiences overcapacity in the future, our
profitability could be impaired.
During the mid-1970s and early 1980s, a growing coal market and
increased demand for coal attracted new investors to the coal
industry, spurred the development of new mines and resulted in
production capacity in excess of market demand throughout the
industry. Similarly, increases in future coal prices could
encourage the development of expanded capacity by new or
existing coal producers.
We
could be negatively affected if we fail to maintain satisfactory
labor relations.
As of December 31, 2005, we had approximately 8,300
employees. As of December 31, 2005, approximately 39% of
our hourly employees were represented by unions and they
generated 19% of our 2005 coal production. Relations with our
employees and, where applicable, organized labor are important
to our success. The labor contract for the majority of our
represented employees expires on December 31, 2006. We
could incur the risk of strikes and higher labor costs if the
labor negotiations are not completed on mutually acceptable
terms. In addition, the UMWA has identified Peabody as a target
for union organizing activities.
Due to the higher labor costs and the increased risk of strikes
and other work-related stoppages that may be associated with
union operations in the coal industry, our competitors who
operate without union labor may have a competitive advantage in
areas where they compete with our unionized operations. If some
or all of our current non-union operations were to become
unionized, we could incur an increased risk of work stoppages,
reduced productivity and higher labor costs.
United
States
Approximately 64% of our U.S. miners are non-union and are
employed in the states of Wyoming, Colorado, Indiana, New
Mexico, Illinois and Kentucky. The UMWA represented
approximately 30% of our subsidiaries hourly employees,
who generated 14% of our domestic production during the year
ended December 31, 2005. An additional 6% of our hourly
employees are represented by labor unions other than the UMWA.
These employees generated 2% of our production during the year
ended December 31, 2005. Hourly workers at our mine in
Arizona are represented by the UMWA under the Western Surface
Agreement of 2000, which is effective through September 1,
2007. Our union labor east of the Mississippi River is primarily
represented by the UMWA and the majority of union mines are
subject to the National Bituminous Coal Wage Agreement. The
current five-year labor agreement is effective through
December 31, 2006. Our subsidiaries withdrew from the
Bituminous Coal Operators Association in early 2006 and
will be negotiating their own labor agreement with the UMWA for
mines located east of the Mississippi River.
S-18
Australia
The Australian coal mining industry is highly unionized and the
majority of workers employed at our Australian Mining Operations
are members of trade unions. The Construction Forestry Mining
and Energy Union represents our hourly production employees. Our
Australian hourly employees are approximately 4% of our hourly
workforce and generated 4% of our total production in the year
ended December 31, 2005. Negotiations are underway to renew
the labor agreement at our Wilkie Creek Mine. The Eaglefield
Mine operates under a labor agreement that expires in May 2007.
The Burton and North Goonyella Mines operate under agreements
due to expire in 2008.
Our
operations could be adversely affected if we fail to
appropriately secure our obligations.
U.S. federal and state laws and Australian laws require us to
secure certain of our obligations to reclaim lands used for
mining, to pay federal and state workers compensation, to
secure coal lease obligations and to satisfy other miscellaneous
obligations. The primary method for us to meet those obligations
is to post a corporate guarantee (i.e. self bond) or to provide
a third-party surety bond. As of June 30, 2006, we had
$682.8 million of self bonds in place primarily for our
reclamation obligations. As of June 30, 2006, we also had
outstanding surety bonds with third parties of
$496.8 million, of which $356.8 million was for
post-mining reclamation, $80.6 million was for coal lease
obligations and $59.4 million was for workers
compensation and other obligations. These bonds are typically
renewable on a yearly basis. Surety bond issuers and holders may
not continue to renew the bonds or may demand additional
collateral upon those renewals. Our failure to maintain, or
inability to acquire, surety bonds or to provide a suitable
alternative would have a material adverse effect on us. That
failure could result from a variety of factors including the
following:
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lack of availability, higher expense or unfavorable market terms
of new surety bonds;
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restrictions on the availability of collateral for current and
future third-party surety bond issuers under the terms of our
indentures or senior unsecured credit facility; and
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the exercise by third-party surety bond issuers of their right
to refuse to renew the surety.
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Our ability to self bond reduces our costs of providing
financial assurances. To the extent we are unable to maintain
our current level of self bonding, due to legislative or
regulatory changes or changes in our financial condition, our
costs would increase.
Our
ability to operate our company effectively could be impaired if
we lose key personnel or fail to attract qualified
personnel.
We manage our business with a number of key personnel, the loss
of a number of whom 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 do not have
key person life insurance to cover our executive
officers. Failure to retain or attract key personnel could have
a material adverse effect on us.
Due to the current demographics of our mining workforce, a high
portion of our current hourly employees are eligible to retire
over the next decade. Failure to attract new employees to the
mining workforce could have a material adverse effect on us.
Terrorist
attacks and threats, escalation of military activity in response
to such attacks or acts of war may negatively affect our
business, financial condition and results of
operations.
Terrorist attacks and threats, escalation of military activity
in response to such attacks or acts of war may negatively affect
our business, financial condition and results of operations. Our
business is affected by general economic conditions,
fluctuations in consumer confidence and spending, and market
liquidity, which can decline as a result of numerous factors
outside of our control, such as terrorist attacks and acts of
war. Future terrorist attacks against U.S. targets, rumors
or threats of war, actual conflicts involving the United States
or its allies, or military or
S-19
trade disruptions affecting our customers may materially
adversely affect our operations. As a result, there could be
delays or losses in transportation and deliveries of coal to our
customers, decreased sales of our coal and extension of time for
payment of accounts receivable from our customers. Strategic
targets such as energy-related assets may be at greater risk of
future terrorist attacks than other targets in the United
States. In addition, disruption or significant increases in
energy prices could result in government-imposed price controls.
It is possible that any, or a combination, of these occurrences
could have a material adverse effect on our business, financial
condition and results of operations.
Our
ability to collect payments from our customers could be impaired
if their creditworthiness deteriorates.
Our ability to receive payment for coal sold and delivered
depends on the continued creditworthiness of our customers. Our
customer base has changed with deregulation as utilities have
sold power plants to their non-regulated affiliates or third
parties. These new power plant owners or other customers may
have credit ratings that are below investment grade. If
deterioration of the creditworthiness of our customers occurs,
our $225.0 million accounts receivable securitization
program and our business could be adversely affected.
Our
certificate of incorporation and by-laws include provisions that
may discourage a takeover attempt.
Provisions contained in our certificate of incorporation and
by-laws and Delaware law could make it more difficult for a
third party to acquire us, even if doing so might be beneficial
to our stockholders. Provisions of our by-laws and certificate
of incorporation impose various procedural and other
requirements that could make it more difficult for stockholders
to effect certain corporate actions. For example, a change of
control of our company may be delayed or deterred as a result of
the stockholders rights plan adopted by our board of
directors. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of
our common stock and may have the effect of delaying or
preventing a change in control.
The
pending Excel Acquisition is subject to closing conditions that
could delay or prevent us from acquiring Excel.
We entered into a merger implementation agreement to acquire
Excel Coal Limited on July 5, 2006, which was approved by
Excel shareholders on October 4, 2006. Under the agreement,
the Excel Acquisition remains subject to the satisfaction or
waiver of certain closing conditions including approvals by an
Australian court, the absence of a material adverse change with
respect to Excel and other conditions.
We and Excel each may, following a good faith consultation as to
whether to extend the termination date, terminate the agreement
if the scheme of arrangement has not become effective under
Australian law by December 1, 2006. We and Excel each may
terminate the agreement, following a good faith consultation to
determine whether the transaction may proceed by alternative
means, if any event occurs that would prevent any of the closing
conditions from being satisfied. In addition, at any time prior
to 8:00 a.m. on the first day application is made to an
Australian court for an order approving the scheme of
arrangement (the Second Court Date), we and Excel each may
terminate the agreement if: the other party is in material
breach of any provision of the merger implementation agreement;
or a governmental authority has taken any action permanently
restraining or otherwise prohibiting the transaction, or has
refused to do anything necessary to permit the transaction, and
such action or refusal is final. Prior to 8:00 a.m. on the
Second Court Date, we may terminate the agreement if the board
of directors of Excel changes, withdraws or modifies its
recommendation that Excel shareholders vote in favor of the
scheme of arrangement or makes a public statement indicating
that it no longer supports the transaction or that it supports
another transaction, or if Excel breaches its no-shop or no-talk
obligations with respect to the transaction. Excel may also,
following a period of notice and provided it has paid us the
reimbursement fee specified in the agreement, terminate the
agreement if, pursuant to the specified limited exceptions
permitting the Excel board of directors to comply with its
fiduciary duties, the Excel board has changed, withdrawn or
modified its recommendation that Excel shareholders vote in
favor of the scheme of arrangement.
We cannot assure you that a competing bid will not be made for
Excel. If such a bid is made, it may be higher than our bid.
S-20
We have the right to waive certain closing conditions. If we
elect to waive any of those closing conditions and consummate
the transaction, despite a failure by Excel to meet those
conditions, our business, financial condition and results of
operations could be adversely affected. In addition, our senior
unsecured credit facility may not be available to finance the
Excel acquisition if certain funding conditions are not met. See
The Transactions.
We may
be unable to successfully integrate the acquired operations and
realize the full cost savings we anticipate.
The process of integrating the operations of the Excel coal
mines could cause an interruption of, or loss of momentum in,
the activities of the business or the development of new mines.
Among the factors considered by our board of directors in
approving the Excel Acquisition were anticipated cost savings
and synergies that could result from such transaction. We cannot
give any assurance that these savings and synergies will be
realized within the time periods contemplated or at the expected
costs or that they will be realized at all.
There
may be unknown environmental or other risks inherent in the
Excel Acquisition.
We may not be aware of all of the risks associated with the
Excel Acquisition. Any discovery of adverse information
concerning the coal mines after the closing of the Excel
Acquisition could have a material adverse effect on our
business, financial condition and results of operations.
Following completion of the Excel Acquisition, we will need to
make capital expenditures that may be significant to maintain
the assets we acquire and to comply with regulatory
requirements, including environmental laws.
Risks
Related to the Notes
Our
financial performance could be adversely affected by our
substantial debt.
Our financial performance could be affected by our substantial
indebtedness. As of June 30, 2006, on a pro forma basis
after giving effect to the Transactions, we would have had
approximately $3,163 million of indebtedness outstanding on
a consolidated basis (including the notes offered hereby). The
indenture governing the notes offered hereby will not limit the
amount of indebtedness that we may issue, and the indentures
governing our existing senior notes permit the incurrence of
additional indebtedness.
The degree to which we are leveraged could have important
consequences, including, but not limited to:
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making it more difficult for us to pay interest and satisfy our
debt obligations;
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increasing our vulnerability to general adverse economic and
industry conditions;
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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 the cash flow to fund working capital, capital expenditures,
research and development or other general corporate uses;
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limiting our ability to obtain additional financing to fund
future working capital, capital expenditures, research and
development or other general corporate requirements;
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limiting our flexibility in planning for, or reacting to,
changes in our business and in the coal industry; and
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placing us at a competitive disadvantage compared to less
leveraged competitors.
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In addition, our indebtedness subjects us to financial and other
restrictive covenants. Failure by us to comply with these
covenants could result in an event of default that, if not cured
or waived, could have a material adverse effect on us.
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to sell assets,
seek additional capital or seek to restructure or refinance our
indebtedness. These alternative measures may not be successful
and may not permit us to meet our scheduled debt service
obligations. In the absence of such operating results and
resources, we could face substantial liquidity problems and
might be required to sell material assets or operations to
attempt to meet our debt service and other obligations. The
senior unsecured credit facility and the indentures governing
our existing notes restrict our ability to sell assets and use
the proceeds from the sales.
S-21
We may not be able to consummate those sales or to obtain the
proceeds which we could realize from them and these proceeds may
not be adequate to meet any debt service obligations then due.
We
will require a significant amount of cash to service our
indebtedness. Our ability to generate cash depends on many
factors beyond our control.
Our ability to pay principal and interest on and to refinance
our debt, including these notes, and our existing senior notes,
depends upon the operating performance of our subsidiaries,
which will be affected by, among other things, general economic,
financial, competitive, legislative, regulatory and other
factors, some of which are beyond our control.
Based on our current level of operations, we believe our cash
flow from operations, available cash and available borrowings
under our senior unsecured credit facility will be adequate to
meet our future liquidity needs for at least the next year,
barring any unforeseen circumstances that are beyond our
control. We cannot assure you, however, that our business will
generate sufficient cash flow from operations or that future
borrowings will be available to us under our senior unsecured
credit facility or otherwise in an amount sufficient to enable
us to pay our indebtedness, including the notes, or to fund our
other liquidity needs. We may need to refinance all or a portion
of our indebtedness, including the notes, on or before maturity.
We cannot assure you that we will be able to refinance any of
our indebtedness, including our senior unsecured credit facility
and the notes, on commercially reasonable terms, on terms
acceptable to us or at all.
The
notes and the guarantees will be unsecured and effectively
subordinated to our and our subsidiary guarantors existing
and future secured indebtedness.
The notes and the guarantees will be general unsecured
obligations ranking effectively junior in right of payment to
all existing and future secured debt of ours and that of each
subsidiary guarantor, respectively, to the extent of the value
of the assets securing such obligations. In addition, the
indenture governing the notes offered hereby will not limit, and
the indenture governing our existing senior notes permits, the
incurrence of additional debt, some of which may be secured debt.
In the event that we or a subsidiary guarantor is declared
bankrupt, becomes insolvent or is liquidated or reorganized, our
assets, or those of a subsidiary guarantor, that serve as
collateral under such secured debt would be made available to
satisfy the obligations under the secured debt before those
assets may be used to satisfy our obligations with respect to
the notes or the affected guarantees. Holders of the notes will
participate ratably with all holders of our unsecured
indebtedness that is deemed to be of the same class as the
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 will be sufficient
assets to pay amounts due on the notes. As a result, holders of
the notes may receive less, ratably, than holders of secured
indebtedness.
The
notes will be structurally subordinated to all indebtedness of
our subsidiaries that are not guarantors of the
notes.
You will not have any claim as a creditor against our
subsidiaries that are not guarantors of the notes, and
indebtedness and other liabilities, including trade payables,
whether secured or unsecured, of those subsidiaries will
effectively be senior to your claims against those subsidiaries.
We derive substantially all of our revenue from our
subsidiaries. All obligations of our non-guarantor subsidiaries
will have to be satisfied before any of the assets of such
subsidiaries would be available for distribution, upon a
liquidation or otherwise, to us or a guarantor of the notes. As
of June 30, 2006, on a pro forma basis after giving effect
to the Transactions, our non-guarantor subsidiaries would have
had $273.6 million of indebtedness and other liabilities
outstanding. For the year ended December 31, 2005, on a pro
forma basis after giving effect to the Transactions, our
non-guarantor subsidiaries would have generated approximately
27.0% and 34.7% of our revenues and Adjusted EBITDA,
respectively.
We also have joint ventures and subsidiaries in which we own
less than 100% of the equity so that, in addition to the
structurally senior claims of creditors of those entities, the
equity interests of our joint venture partners or
S-22
other shareholders in any dividend or other distribution made by
these entities would need to be satisfied on a proportionate
basis with us. These joint ventures and less than wholly-owned
subsidiaries may also be subject to restrictions on their
ability to distribute cash to us in their financing or other
agreements and, as a result, we may not be able to access their
cash flow to service our debt obligations, including in respect
of the notes.
Despite
our and our subsidiaries current level of indebtedness, we
may still be able to incur substantially more debt. This could
further exacerbate the risks associated with our substantial
indebtedness.
We and our subsidiaries may be able to incur substantial
additional indebtedness in the future. The terms of our new and
existing indentures do not prohibit us or our subsidiaries from
doing so. Our senior unsecured credit facility includes a
revolving credit facility that provides commitments of up to
$1,800 million, of which $718 million will be utilized
immediately after this offering (including $406 million for
letters of credit) and $1,082 million of which will be
immediately available for future borrowings. In addition, we
have a delayed draw term loan sub-facility of $510 million
available until January 31, 2007, which may be drawn in
order to partially fund the Excel Acquisition. If we incur any
additional indebtedness that ranks equally with the senior
notes, the holders of that debt will be entitled to share
ratably with the holders of these senior notes and our existing
senior notes in any proceeds distributed in connection with any
insolvency, liquidation, reorganization, dissolution or other
winding-up
of us. This may have the effect of reducing the amount of
proceeds paid to you. If new debt is added to our current debt
levels, the related risks that we and our subsidiaries now face
could intensify.
The
covenants in our senior unsecured credit facility and the
indentures governing our senior notes impose restrictions that
may limit our operating and financial flexibility.
Our senior unsecured credit facility, the indentures governing
our existing senior notes and the notes offered hereby and the
instruments governing our other indebtedness contain a number of
significant restrictions and covenants that limit our ability
and our subsidiaries ability to:
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incur liens and debt or provide guarantees in respect of
obligations of any other person;
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issue redeemable preferred stock and non-guarantor subsidiary
preferred stock;
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increase our common stock dividends above specified levels;
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make redemptions and repurchases of capital stock;
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make loans and investments;
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prepay, redeem or repurchase debt;
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engage in mergers, consolidations and asset dispositions;
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engage in affiliate transactions;
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amend certain debt and other material agreements, and issue and
sell capital stock of subsidiaries; and
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restrict distributions from subsidiaries.
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Operating results below current levels or other adverse factors,
including a significant increase in interest rates, could result
in our being unable to comply with the financial covenants
contained in our senior unsecured credit facility. If we violate
these covenants and are unable to obtain waivers from our
lenders, our debt under these agreements would be in default and
could be accelerated by our lenders. If our indebtedness is
accelerated, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if we are able to obtain
new financing, it may not be on commercially reasonable terms,
on terms that are acceptable to us or at all. If our debt is in
default for any reason, our business, financial condition and
results of operations could be materially and adversely
affected. In addition, complying with these covenants may also
cause us to take actions that are not favorable to holders of
the notes and may make it more difficult for us to successfully
execute our business strategy and compete against companies who
are not subject to such restrictions.
S-23
Federal
and state fraudulent transfer laws permit a court to void the
notes and the guarantees, and, if that occurs, you may not
receive any payments on the notes.
The issuance of the notes and the guarantees may be subject to
review under federal and state fraudulent transfer and
conveyance statutes. While the relevant laws may vary from state
to state, under such laws the payment of consideration will be a
fraudulent conveyance if (1) we paid the consideration with
the intent of hindering, delaying or defrauding creditors or
(2) we or any of our guarantors, as applicable, received
less than reasonably equivalent value or fair consideration in
return for issuing either the notes or a guarantee, and, in the
case of (2) only, one of the following is also true:
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we were or any of our guarantors was insolvent or rendered
insolvent by reason of the incurrence of the
indebtedness; or
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payment of the consideration left us or any of our guarantors
with an unreasonably small amount of capital to carry on the
business; or
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we or any of our guarantors intended to, or believed that we or
it would, incur debts beyond our or its ability to pay as they
mature.
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If a court were to find that the issuance of the notes or a
guarantee was a fraudulent conveyance, the court could void the
payment obligations under the notes or such guarantee or further
subordinate the notes or such guarantee to presently existing
and future indebtedness of ours or such guarantor, or require
the holders of the notes to repay any amounts received with
respect to the notes or such guarantee. In the event of a
finding that a fraudulent conveyance occurred, you may not
receive any repayment on the notes. Further, the voidance of the
notes could result in an event of default with respect to our
and our subsidiaries other debt that could result in
acceleration of that debt.
Generally, an entity would be considered insolvent if, at the
time it incurred indebtedness:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all its assets; or
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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 and liabilities, including contingent
liabilities, as they become absolute and mature; or
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it could not pay its debts as they become due.
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We cannot be certain as to the standards a court would use to
determine whether or not we or the guarantors were solvent at
the relevant time, or regardless of the standard that a court
uses, that the issuance of the notes and the guarantees would
not be further subordinated to our or any of our
guarantors other debt.
If the guarantees were legally challenged, any guarantee could
also be subject to the claim that, since the guarantee was
incurred for our benefit, and only indirectly for the benefit of
the guarantor, the obligations of the applicable guarantor were
incurred for less than fair consideration. A court could thus
void the obligations under the guarantees, subordinate them to
the applicable guarantors other debt or take other action
detrimental to the holders of the notes.
Your
ability to transfer the notes may be limited by the absence of
an active trading market.
We do not intend to apply for listing or quotation of the notes
on any securities exchange or stock market, although we expect
that the notes will be eligible for trading in DTCs
same-day funds settlement system. The liquidity of any market
for the notes will depend on a number of factors, including:
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the number of holders of notes;
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our operating performance and financial condition;
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the market for similar securities;
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the interest of securities dealers in making a market in the
notes; and
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prevailing interest rates.
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S-24
We may
be unable to purchase the notes upon a change of control coupled
with a ratings decline.
Upon a change of control, if the credit rating assigned to the
notes declines beyond specified levels within 90 days of
the change of control, we will be required to offer to purchase
all of the notes then outstanding for cash at 101% of the
principal amount thereof plus accrued and unpaid interest. If a
change of control/ratings trigger were to occur, we may not have
sufficient funds to pay the change of control purchase price and
we may be required to secure third-party financing to do so.
However, we may not be able to obtain such financing on
commercially reasonable terms, on terms acceptable to us or at
all. A change of control/ratings trigger under the indentures
governing the notes and our existing notes would also result in
an event of default under our senior unsecured credit facility,
which may cause the acceleration of our other indebtedness, in
which case, we would be required to repay in full our secured
indebtedness before we repay the notes. Our future indebtedness
may also contain restrictions on our ability to repurchase the
notes upon certain events, including transactions that could
constitute a change of control/ratings trigger under the
indentures. Our failure to repurchase the notes upon a change of
control/ratings trigger would constitute an event of default
under the indentures and would have a material adverse effect on
our financial condition.
The change of control/ratings trigger provision in the
indentures may not protect you in the event we consummate a
highly leveraged transaction, reorganization, restructuring,
merger or other similar transaction, unless such transaction
constitutes a change of control and results in a ratings decline
under the indentures. Such a transaction may not involve a
ratings decline or a change in voting power or beneficial
ownership or, even if it does, may not involve a change of the
magnitude required under the definition of change of control
triggering event in the indentures to trigger our obligation to
repurchase the notes. Except as described above, the indentures
do not contain provisions that permit the holders of the notes
to require us to repurchase or redeem the notes in an event of a
takeover, recapitalization or similar transaction.
S-25
THE
TRANSACTIONS
On July 5, 2006 we signed a merger implementation agreement
with Excel Coal Limited. On September 20, 2006, we
purchased 19.99% of the outstanding shares of Excel at a price
of A$9.50 per share (US$7.16) (the Advance
Purchase). The following is a brief summary of the
material provisions of the merger implementation agreement (as
amended on September 18, 2006). This summary is qualified
in its entirety by reference to the merger implementation
agreement.
While we expect to consummate the Excel Acquisition pursuant to
the merger implementation agreement, circumstances may arise
that cause us to decide to pursue the Excel Acquisition by means
of a takeover offer or by other lawful means under the laws of
Australia.
Structure
and Purchase Price
The merger implementation agreement contemplates that one of our
wholly-owned subsidiaries will acquire Excel by means of a
scheme of arrangement transaction under Australian law, pursuant
to which we will pay A$9.50 per share (US$7.16) in cash for
all remaining outstanding shares of Excel, representing a total
acquisition price, including the Advance Purchase, of
approximately US$1.54 billion plus assumed debt of
approximately US$193 million (net of cash) as of
June 30, 2006 (totaling approximately $1.73 billion).
The acquisition will be financed through the net proceeds of
this offering and borrowings under our senior unsecured credit
facility.
Closing
and Closing Conditions
The Excel Acquisition was approved by Excel shareholders on
October 4, 2006. The Excel Acquisition remains subject to
the satisfaction or waiver of certain closing conditions
including approvals by an Australian court, the absence of a
material adverse change with respect to Excel and other
conditions.
We expect the closing to occur in October of 2006.
Representations
and Warranties; Covenants; Termination
In the merger implementation agreement, Excel makes
representations, warranties and covenants to us that are
customary in Australia for a seller of shares of a public
company or companies; and we make representations, warranties
and covenants to Excel that are customary in Australia for a
buyer of shares of a public company or companies. In addition,
the merger implementation agreement contains various covenants
regarding the conduct of Excels business prior to the
closing of the transaction.
Excel has agreed not to solicit alternative proposals or
competing transactions and not to respond to unsolicited
approaches, subject to certain limited exceptions to permit the
board of directors to comply with its fiduciary duties. However,
we cannot assure you that a competing bid will not be made for
Excel. If such a bid is made, it may be higher than ours.
Under the merger implementation agreement, the Excel board of
directors must unanimously recommend that the Excel shareholders
vote in favor of the scheme of arrangement in the absence of a
superior proposal, and the Excel board of directors may not
change, withdraw or modify its recommendation in favor of the
scheme of arrangement, subject to certain limited exceptions to
permit the board of directors to comply with its fiduciary
duties. Following court approval of the scheme of arrangement,
Excel must cause the appointment to the Excel board of such
number of our director nominees as will give our nominees
control of the Excel board.
We have covenanted, assuming due completion of the Excel
Acquisition, to ensure that, for a period of seven years from
the closing, the Excel entities continue to maintain provisions
in their organizational documents providing for each of them to
indemnify each of their officers against liability incurred by
that officer in his or her capacity. We have also agreed to
ensure that the Excel entities comply with their respective
indemnity, access and insurance obligations made by them in
favor of their respective directors and officers and, without
limiting the foregoing, to ensure that directors and
officers run-off insurance coverage is maintained for six
years from the closing, provided that the cost of such coverage
does not exceed twice the cost of such coverage previously paid
by Excel per annum.
S-26
We and Excel each may, following a good faith consultation as to
whether to extend the termination date, terminate the agreement
if the scheme of arrangement contemplated by the merger
implementation agreement has not become effective under
Australian law by December 1, 2006. We and Excel each may
terminate the agreement, following a good faith consultation to
determine whether the transaction may proceed by alternative
means, if any event occurs that would prevent any of the closing
conditions from being satisfied. In addition, at any time prior
to 8:00 a.m. on the first day application is made to an
Australian court for an order approving the scheme of
arrangement (the Second Court Date), we and Excel each may
terminate the agreement if: the other party is in material
breach of any provision of the merger implementation agreement,
or of representations and warranties subject to materiality
thresholds; or a governmental authority has taken any action
permanently restraining or otherwise prohibiting the
transaction, or has refused to do anything necessary to permit
the transaction, and such action or refusal is final. Prior to
8:00 a.m. on the Second Court Date, we may terminate the
agreement if the board of directors of Excel changes, withdraws
or modifies its recommendation that Excel shareholders vote in
favor of the scheme of arrangement or makes a public statement
indicating that it no longer supports the transaction or that it
supports another transaction; or if there is an Excel Prescribed
Occurrence as defined therein, or if Excel breaches its no-shop
or no-talk obligations with respect to the transaction. Excel
may also, following a period of notice and provided it has paid
us the reimbursement fee specified in the agreement, terminate
the agreement if, pursuant to the specified limited exceptions
permitting the Excel board of directors to comply with its
fiduciary duties, the Excel board has changed, withdrawn or
modified its recommendation that Excel shareholders vote in
favor of the scheme of arrangement.
Indemnification
We and Excel have each agreed to indemnify the other, and
certain of our respective representatives, for losses arising
out of any breach of our respective representations and
warranties. The representations, warranties and indemnification
obligations of us and Excel survive the termination of the
merger implementation agreement. Subject to any applicable
restriction under the Australia Corporations Act, we and Excel
have each released any claims against the other, as well as
against certain of that partys representatives, with
respect to any breach of the representations, warranties and
covenants under the merger implementation agreement, or any
false or misleading disclosures, except where the other party,
or such representative, has not acted in good faith or has
engaged in willful misconduct.
New
Senior Unsecured Credit Facility
To accommodate our increased working capital needs, and to
partially finance the Excel Acquisition, on September 15,
2006 we amended and restated our existing $1.35 billion
senior secured credit facilities. The Companys amended and
restated credit facility is unsecured and provides borrowing
capacity of $2.75 billion, consisting of a
$1.8 billion revolving credit facility and a
$950.0 million term loan facility. The term loan facility
consists of a $440.0 million tranche, which was drawn at
closing to replace the existing term loan facility, and up to a
$510.0 million delayed draw term loan sub-facility
available, subject to the satisfaction of certain conditions, to
fund the Excel Acquisition. For a more detailed discussion of
the senior unsecured credit facility, see Description of
Other Indebtedness.
We may, subsequent to this offering, undertake permanent
financing to pay down a portion of our senior unsecured credit
facility.
S-27
USE OF
PROCEEDS
The estimated sources and uses of funds for the Transactions
(assuming the Transactions had closed on June 30,
2006) are shown on the table below. Actual amounts will
vary from estimated amounts depending on several factors. If
this offering is consummated prior to the consummation of the
Excel Acquisition, the gross proceeds from this offering will be
placed in escrow pending the consummation of the Excel
Acquisition. If the Excel Acquisition does not occur on or prior
to January 31, 2007, the notes will be subject to a special
mandatory redemption. The special mandatory redemption price is
100% of the principal amount of the notes outstanding on such
date plus accrued and unpaid interest. Concurrent with the
consummation of the Excel Acquisition, the escrowed funds will
be released to us. The net proceeds from this offering, together
with the other sources referred to in the table below, will be
used to consummate the Excel Acquisition, with any remaining
proceeds being used for general corporate purposes.
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Sources
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Uses
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(dollars in thousands)
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Senior unsecured credit facility:
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Term loan
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$
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440,000
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Refinance existing term loan
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$
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437,500
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Delayed draw term loan sub-facility
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510,000
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Advance purchase
price(3)
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307,692
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Revolving credit
facility(1)
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369,614
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Remaining purchase
price(4)
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1,232,188
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2026 Senior notes offered
hereby(2)
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250,000
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Existing Excel
debt(5)
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193,234
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2016 Senior notes offered
hereby(2)
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650,000
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Estimated fees and expenses
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49,000
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Total sources
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$
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2,219,614
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Total
uses
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$
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2,219,614
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(1)
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The revolving credit facility
provides for borrowings of up to $1.8 billion.
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(2)
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Any proceeds remaining after the
financing of the Excel Acquisition will be used for general
corporate purposes.
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(3)
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Reflects the amount of cash paid to
fund the Advance Purchase.
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(4)
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Reflects the amount of total cash
consideration to be paid to holders of outstanding shares of
Excels common stock (excluding Peabody holdings). As of
September 18, 2006, there were approximately
172.0 million Excel shares outstanding after giving effect
to the Advance Purchase.
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(5)
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Part of the proceeds from the
financings described above may be used to repay all or a portion
of the assumed Excel debt, which was $193.2 million (net of
cash) as of June 30, 2006. As of September 29, 2006,
Excel had long-term debt of $274.4 million and short-term
debt of $41.1 million. We expect to refinance the
incremental debt with borrowings under our revolving credit
facility.
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S-28
CAPITALIZATION
The following table sets forth our consolidated historical
capitalization at June 30, 2006 on an actual basis and as
adjusted to give effect to the Transactions. The calculations
under the Adjustments and Pro Forma as
Adjusted columns of the table assume the successful
completion of this offering and the application of the net
proceeds as described in Use of Proceeds.
You should read this table in conjunction with our financial
statements and the notes to those statements appearing elsewhere
in this prospectus supplement, Summary Historical and Pro
Forma Financial Data, Use of Proceeds and the
unaudited pro forma financial information and
Managements Discussion and Analysis of Financial
Condition and Results of Operations incorporated by
reference in this prospectus supplement.
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As of June 30, 2006
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Pro Forma
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Actual
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Adjustments
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as Adjusted
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(dollars in thousands)
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(unaudited)
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Cash and cash equivalents
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$
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318,736
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$
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$
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318,736
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Prior revolving credit
facility(1)
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$
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$
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$
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Term loan under prior senior
secured credit facilities
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437,500
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(437,500
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)
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New revolving credit
facility(2)
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369,614
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369,614
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Term loan under senior unsecured
credit facility
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440,000
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440,000
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Delayed draw term loan under
senior unsecured credit facility
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510,000
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510,000
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2026 Senior Notes offered
hereby
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250,000
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250,000
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2016 Senior Notes offered
hereby
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650,000
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650,000
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67/8% Senior
Notes due
2013(3)
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624,136
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624,136
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57/8% Senior
Notes due 2016
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231,845
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231,845
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5% Subordinated Note
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58,136
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58,136
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Other long-term debt
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29,036
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29,036
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Total debt
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1,380,653
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1,782,114
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3,162,767
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Minority interests
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12,828
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17,254
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30,082
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Stockholders equity:
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Preferred stock
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Common stock
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2,661
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2,661
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Additional paid-in capital
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1,546,985
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1,546,985
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Retained earnings
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830,648
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|
|
|
|
830,648
|
|
Accumulated other comprehensive
loss
|
|
|
(31,625
|
)
|
|
|
|
|
|
|
(31,625
|
)
|
Treasury stock
|
|
|
(15,392
|
)
|
|
|
|
|
|
|
(15,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,333,277
|
|
|
|
|
|
|
|
2,333,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
3,726,758
|
|
|
$
|
1,799,368
|
|
|
$
|
5,526,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
As of June 30, 2006, the prior
revolving credit facility provided for maximum borrowings
and/or
letters of credit of up to $900.0 million. As of
June 30, 2006, we had no loans outstanding and we had
letters of credit of $406.5 million outstanding under our
prior revolving credit facility.
|
(2)
|
|
Our revolving credit facility
provides for maximum borrowings
and/or
letters of credit of up to $1.8 billion. As of
September 25, 2006, we had $312.0 million of loans
outstanding and we had letters of credit of $398.8 million
under our revolving credit facility. In connection with the
Excel Acquisition, any refinancing of incremental Excel debt
incurred after June 30, 2006 will be with borrowings under
our revolving credit facility.
|
(3)
|
|
Includes $25.9 million for the
fair value of interest rate swaps related to the
67/8% Senior
Notes.
|
S-29
DESCRIPTION
OF OTHER INDEBTEDNESS
The following are summaries of the material terms and conditions
of our principal indebtedness.
Credit
Facilities
On September 15, 2006, we entered into a third amended and
restated credit agreement (as amended or otherwise modified from
time to time) with Bank of America, N.A., as administrative
agent, Citibank, N.A., as syndication agent, and the lenders
named therein, which amends and restates in full our existing
second amended and restated credit agreement, dated as of
March 21, 2003 (as amended or otherwise modified from time
to time), with Fleet National Bank, as administrative agent,
Wachovia Bank N.A. and Lehman Commercial Paper Inc., each as
syndication agent, Fleet Securities, Inc., Wachovia Securities,
Inc. and Lehman Brothers Inc., each as arranger, Morgan Stanley
Senior Funding, Inc. and U.S. Bank N.A., each as
documentation agents and the lenders from time to time party
thereto.
Our senior unsecured credit facility under the third amended and
restated credit agreement provides for a $1.8 billion
revolving credit facility and a $950.0 million term loan
facility. The revolving credit facility includes capacity
available for borrowing and the issuance of letters of credit
and also includes a $50.0 million sub-facility available
for same-day swingline loan borrowings. The term loan facility
consists of a $440.0 million portion, which was drawn at
closing, and up to a $510.0 million delayed draw term loan
sub-facility available, subject to the satisfaction of certain
conditions precedent, to fund the Excel Acquisition. Loans under
the senior unsecured credit facility are available to us in
U.S. dollars, with a sub-facility under the revolving
credit facility available to us in Australian dollars, pounds
sterling and Euros. Letters of Credit under the revolving credit
facility are available to us and our subsidiaries in
U.S. dollars with a sub-facility available in Australian
dollars, pounds sterling and Euros. Extensions of credit under
the senior unsecured credit facility are available to finance
the Excel Acquisition and related fees and expenses, the
financing of other capital expenditures, the refinancing of
obligations under our existing credit facilities and our ongoing
working capital and other corporate purposes. Availability of
the delayed draw term loan sub-facility is limited to the
financing of the Excel Acquisition. The revolving credit
facility commitment is scheduled to terminate and the loans
thereunder are scheduled to mature in September 2011. The
delayed draw term loan commitment is scheduled to terminate in
January 2007. The term loan facility is scheduled to mature in
September 2011.
Availability of the revolving credit facility is subject to
satisfaction of certain customary conditions. Availability of
the delayed draw term loan sub-facility is subject to
satisfaction of certain limited conditions, including without
limitation a reaffirmation of certain representations and
warranties and satisfaction of certain closing conditions under
the merger implementation agreement for the Excel Acquisition,
or, in the event the Excel Acquisition is pursued by means of a
takeover offer or other lawful means in connection therewith,
satisfaction of the conditions thereunder.
All borrowings under the senior unsecured credit facility (other
than swingline borrowings and borrowing denominated in
currencies other than U.S. dollars) bear interest, at our
option, at either: (A) a base rate equal to,
for any day, the higher of: (a) 0.50% per year above
the overnight federal funds effective rate, as published by the
Federal Reserve Bank of New York, as in effect from time to
time; and (b) the annual rate of interest in effect for
that day as publicly announced by the administrative agent under
the senior unsecured credit facility as its prime
rate or (B) a eurocurrency rate equal to
the rate (adjusted for reserve requirements, deposit insurance
assessment rates and other regulatory costs for eurocurrency
liabilities) at which eurocurrency deposits in the relevant
currency for the relevant interest period (which will be one,
two, three, six or, subject to availability, nine or
12 months, as selected by us) are offered in the interbank
eurodollar market, as determined by the administrative agent
under the senior unsecured credit facility, plus in each case a
rate, dependent on the ratio of our debt as compared to our
adjusted consolidated EBITDA, ranging from 0.50% to 0% per
year for borrowings bearing interest at the base
rate and from 1.50% to 0.50% per year for borrowings
bearing interest at the Eurocurrency Rate. Swingline
borrowings will bear interest at a BBA LIBOR rate
equal to the rate (adjusted for reserve requirements, deposit
insurance assessment rates and other regulatory costs for
eurocurrency liabilities) at which deposits in the relevant
currency for a one month term are offered in the interbank
eurodollar market, as determined by the administrative agent,
plus a rate, dependent on the ratio of our debt as compared to
our adjusted consolidated EBITDA, ranging
S-30
from 1.50% to 0.50% per year. Borrowings denominated in
currencies other than U.S. dollars will bear interest at
the Eurocurrency Rate.
We will be required to pay interest on borrowings bearing
interest at the eurocurrency rate at the end of the
selected interest period but no less frequently than quarterly.
For borrowings bearing interest at the base rate, we
will be required to pay interest quarterly.
We pay a usage-dependent commitment fee on the available unused
commitment under the revolving credit facility. The fee is
dependent upon the ratio of our debt compared to our adjusted
consolidated EBITDA and ranges from 0.125% to 0.300% of the
available unused commitment. For purposes of calculating the
commitment fee, swingline loans are not considered usage of the
revolving credit facility. The fee accrues quarterly in arrears
and is payable on the last business day of each March, June,
September and December.
We also pay a letter of credit fee calculated at a rate,
dependent on the ratio of our debt as compared to our adjusted
consolidated EBITDA, ranging from 1.50% to 0.50% per year
of the undrawn amount of each letter of credit and a fronting
fee equal to the greater of $150 and 0.125% per year of the
undrawn amount of each letter of credit. These fees are payable
quarterly in arrears on the first business day of each March,
June, September and December. In addition, we will also pay
customary transaction charges in connection with any letters of
credit.
We will also pay on October 15, 2006, each
30-day
anniversary thereafter, and on each date the delayed draw term
loan sub-facility is drawn to fund the Excel Acquisition, a
commitment fee of 0.125% per year of the available unused
delayed draw term loan commitment.
The rates that depend on the ratio of our debt as compared to
our adjusted consolidated EBITDA range from the high rate
specified if the ratio is greater than or equal to 3.25 to 1.0
to the low rate specified if the ratio is less than 1.0 to 1.0.
The $950.0 million term loan facility is subject to
quarterly amortization of 5.0% per year commencing on
March 31, 2007, with the final payment of all amounts
outstanding (including accrued interest) being due in September
2011.
The third amended and restated credit agreement imposes certain
restrictions on us, including restrictions on our ability to:
incur or suffer to exist debt or provide guarantees; grant or
suffer to exist liens; enter into agreements with negative
pledge clauses; pay dividends or make other distributions in
respect of capital stock; make loans, investments, advances and
acquisitions; sell our assets; make redemptions and repurchases
of capital stock or otherwise return capital; liquidate or
dissolve; engage in mergers or consolidations; engage in
affiliate transactions; change our business; and restrict
distributions from subsidiaries. In addition, the senior
unsecured credit facility provides that we must meet or exceed
certain interest coverage ratios and must not exceed certain
leverage ratios. The senior unsecured credit facility also
includes customary events of default.
If an event of default under our senior unsecured credit
facility occurs and is continuing, the commitments thereunder
may be terminated and the principal amount outstanding
thereunder, together with all accrued unpaid interest and other
amounts owed thereunder, may be declared immediately due and
payable and any letters of credit outstanding may be required to
be cash collateralized.
A substantial number of our direct and indirect domestic
subsidiaries guarantee our obligations under the senior
unsecured credit facility.
Our obligations under the senior unsecured credit facility and
the related guarantee obligations of our subsidiaries are
unsecured.
57/8% Senior
Notes due 2016
As of June 30, 2006, we had outstanding $231.8 million
aggregate principal amount in senior notes, which bear interest
at
57/8%
and are due in April, 2016. Interest on the notes is payable
each April 15 and October 15. The notes, which are
unsecured, are guaranteed by our restricted
subsidiaries as defined in the indenture governing the
senior notes. The indenture contains covenants that, among other
things, limit our ability to incur additional indebtedness and
issue preferred stock, pay dividends or make other
distributions, make other restricted payments and
S-31
investments, create liens, sell assets and merge or consolidate
with other entities. Many of these covenants will terminate if
two specified ratings agencies assign the senior notes
investment grade ratings and no event of default exists under
the indenture governing these senior notes. The notes are
redeemable prior to April 15, 2009 at a redemption price
equal to 100% of the principal amount plus a make-whole premium
(as defined in the indenture) and on or after April 15,
2009 at fixed redemption prices as set forth in the indenture.
67/8% Senior
Notes due 2013
As of June 30, 2006, we had outstanding $650 million
aggregate principal amount in senior notes, which bear interest
at
67/8%
and are due in March 2013. Interest on the notes is payable each
March 15 and September 15. The notes, which are unsecured,
are guaranteed by our restricted subsidiaries as
defined in the indenture governing the senior notes. The
indenture contains covenants that, among other things, limit our
ability to incur additional indebtedness and issue preferred
stock, pay dividends or make other distributions, make other
restricted payments and investments, create liens, sell assets
and merge or consolidate with other entities. Many of these
covenants will terminate if two specified ratings agencies
assign the senior notes investment grade ratings and no event of
default exists under the indenture governing these senior notes.
The notes are redeemable prior to March 15, 2008 at a
redemption price equal to 100% of the principal amount plus a
make-whole premium (as defined in the indenture) and on or after
March 15, 2008 at fixed redemption prices as set forth in
the indenture.
5.0% Subordinated
Note
The 5.0% subordinated note, which had an original face
value of $400.0 million and had a face value of
$60.0 million as of June 30, 2006, is recorded net of
discount at an imputed annual interest rate of approximately
12.0%, resulting in a long-term debt carrying amount of
$58.1 million as of June 30, 2006. Interest and
principal are payable each March 1, and the remaining
$60.0 million is due March 1, 2007. The note is a
subordinated and unsecured obligation of our subsidiary, Peabody
Holding Company, LLC. The terms of the note permit the merger,
consolidation or the sale of assets of Peabody Holding Company,
LLC, as long as the successor corporation following the merger
or consolidation (if Peabody Holding Company, LLC does not
survive) expressly assumes payment of principal and interest on
and performance of the covenants and conditions of the note.
Off
Balance Sheet Arrangements
Surety Bonds. Federal and state laws require
surety bonds to secure our obligations to reclaim lands
disturbed for mining, to pay federal and state workers
compensation and to satisfy other miscellaneous obligations. The
amount of these bonds varies constantly, depending upon the
amount of acreage disturbed and the degree to which each
property has been reclaimed. Under federal law, partial bond
release is provided as mined lands (1) are backfilled and
graded to approximate original contour, (2) are
re-vegetated and (3) achieve pre-mining vegetative
productivity levels on a sustained basis for a period of five to
10 years.
We use a combination of surety bonds, corporate guarantees (i.e.
self bonds) and letters of credit to secure our financial
obligations for post-mining reclamation, workers
compensation, postretirement healthcare benefits, leases and
pensions. As of June 30, 2006 we had outstanding surety
bonds with third parties for these obligations totaling
$496.8 million, letters of credit of $406.6 million,
and an additional $682.8 million in self-bonding
obligations.
Accounts Receivable Securitization Program. In
March 2000, we established an accounts receivable securitization
program. Under the program, undivided interests in a pool of
eligible trade receivables that have been contributed to our
wholly-owned, bankruptcy-remote subsidiary (Seller)
are sold, without recourse, to a multi-seller, asset-backed
commercial paper conduit (Conduit). Purchases by the
Conduit are financed with the sale of highly rated commercial
paper. On September 16, 2004, we closed on an expansion of
the accounts receivable securitization facility. Under the terms
of the amended agreement, the total facility capacity was
increased from $140 million to $225 million and the
receivables of additional wholly-owned subsidiaries of ours are
now eligible to participate in the facility. The maturity of the
facility was also extended to September 2009. The amount of
undivided interests in accounts receivable sold to the Conduit
were $225.0 million as of June 30, 2006.
S-32
DESCRIPTION
OF THE NOTES
You can find the definitions of certain terms used in this
description below under Certain Definitions. In this
description, the words we and Company
refer only to Peabody Energy Corporation and not to any of its
Subsidiaries.
The Company will issue the 2016 notes and the 2026 notes under a
senior indenture (the base indenture) among itself,
the Subsidiary Guarantors and US Bank National Association, as
trustee, dated March 19, 2004, as supplemented by
supplemental indentures relating to each series of notes (each a
supplemental indenture and, together with the base
indenture, the indenture). The issuance of the notes
will occur in connection with the acquisition of Excel Coal
Limited (Excel) by a wholly owned subsidiary of the
Company.
The terms of the notes include those stated in the indenture and
those made part of the indenture by reference to the Trust
Indenture Act of 1939 (the Trust Indenture Act). The
following description of the particular terms of the notes
supplements, and to the extent inconsistent therewith replaces,
the description of the debt securities set forth in the
accompanying prospectus under the heading Description of
Debt Securities and together therewith is a summary of the
provisions of the indenture that we consider material. It does
not restate the indenture in its entirety. We urge you to read
the indenture because it, and not this description, defines your
rights as a holder of the notes. You may request copies of the
indenture at our address set forth under Incorporation of
Certain Documents By Reference. Defined terms used in this
description but not defined below under Certain
Definitions have the meanings assigned to them in the
indenture. The registered holder of a note will be treated as
the owner of it for all purposes. Only registered holders will
have rights under the indenture.
Brief
Description of the Notes and the Guarantees
The
Notes
The notes will be:
|
|
|
|
|
general unsecured obligations of the Company;
|
|
|
|
senior in right of payment to any subordinated indebtedness of
the Company, including $60 million principal amount of its
5.0% Subordinated Note due 2007;
|
|
|
|
pari passu in right of payment with any senior
indebtedness of the Company, including $650.0 million
principal amount of its
67/8% Senior
Notes due 2013 and $231.8 million principal amount of its
57/8% Senior
Notes due 2016;
|
|
|
|
effectively junior in right of payment to the Companys
existing and future secured indebtedness, to the extent of the
value of the collateral securing that indebtedness; and
|
|
|
|
guaranteed by all of the Companys existing Subsidiaries
that are Domestic Subsidiaries, other than the Specified
Subsidiaries. In addition, any Domestic Subsidiary of the
Company that executes a Guarantee under the Credit Agreement
will be required to guarantee the notes.
|
The
Subsidiary Guarantees
Each Subsidiary Guarantee of the notes will be:
|
|
|
|
|
a senior unsecured obligation of each Subsidiary Guarantor;
|
|
|
|
senior in right of payment to all subordinated indebtedness of
that Subsidiary Guarantor;
|
|
|
|
pari passu in right of payment with all indebtedness of
that Subsidiary Guarantor that is not by its terms expressly
subordinated to the guarantee of the Notes; and
|
|
|
|
effectively junior in right of payment to the existing and
future secured indebtedness of that Subsidiary Guarantor, to the
extent of the value of the collateral securing that indebtedness.
|
S-33
As of June 30, 2006, on a pro forma basis after giving
effect to the Transactions, the Company would have had
approximately $3,163 million of indebtedness outstanding on
a consolidated basis (including the notes). The indenture does
not limit the amount of indebtedness that we may issue.
The operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the
cash flow of its Subsidiaries to meet its obligations, including
its obligations under the notes. The notes will be effectively
subordinated to all indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of
the Companys Subsidiaries that do not guarantee the notes.
Any right of the Company to receive assets of any of its
Subsidiaries upon the latters liquidation or
reorganization (and the consequent right of the holders of the
notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiarys creditors,
except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the
Company would still be subordinate to any security interest in
the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by the Company. See Risk
Factors Risks Relating to the Notes The
notes and the guarantees will be unsecured and effectively
subordinated to our and our subsidiary guarantors existing
and future secured indebtedness.
Principal,
Maturity and Interest
The Company will issue in this offering the 2016 notes in an
aggregate principal amount of $650 million and the 2026
notes in an aggregate principal amount of $250 million. The
Company may issue an unlimited amount of additional notes under
the indenture from time to time after this offering. Each series
of the notes and any additional notes of such series
subsequently issued under the indenture will be treated as a
single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers
to purchase. The Company will issue notes in denominations of
$1,000 and integral multiples of $1,000. The 2016 notes will
mature on November 1, 2016 and the 2026 notes will mature
on November 1, 2026. Interest on the notes will accrue at
the rate of 7.375% per annum, in the case of the 2016
notes, and 7.875% per annum, in the case of the 2026 notes,
and will be payable semi-annually in arrears on May 1 and
November 1, commencing on May 1, 2007. The Company
will make each interest payment to the holders of record on the
immediately preceding April 15 and October 15.
Interest on the notes will accrue from October 12, 2006 or,
if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a
360-day year
comprised of twelve
30-day
months.
Methods
of Receiving Payments on the Notes
If a holder has given wire transfer instructions to the Company,
it will pay all principal, interest and premium, if any, on that
holders notes in accordance with those instructions. All
other payments on the notes will be made at the office or agency
of the paying agent and registrar within the City and State of
New York unless the Company elects to make interest payments by
check mailed to the holders at their addresses set forth in the
register of holders.
Paying
Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar.
The Company may change the paying agent or registrar without
prior notice to the holders of the notes, and the Company or any
of its Subsidiaries may act as paying agent or registrar.
Transfer
and Exchange
A holder may transfer or exchange notes in accordance with the
indenture. The registrar and the trustee may require a holder to
furnish appropriate endorsements and transfer documents in
connection with a transfer of notes. Holders will be required to
pay all taxes due on transfer. The Company is not required to
transfer or exchange any note selected for redemption. Also, the
Company is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be
redeemed. See Book-Entry, Delivery and
Form below for additional information.
S-34
Subsidiary
Guarantees
The Companys payment obligations under the notes will be
fully and unconditionally, and jointly and severally, guaranteed
by the Subsidiary Guarantors. In addition, any Domestic
Subsidiary of the Company that executes a Guarantee under the
Credit Agreement will be required to Guarantee the notes. The
obligations of each Subsidiary Guarantor under its Subsidiary
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 Federal and state fraudulent transfer laws
permit a court to void the guarantees, and, if that occurs, you
may not receive any payments on the notes.
The notes will not be guaranteed by the Specified Subsidiaries
or any Foreign Subsidiaries of the Company. As of June 30,
2006 on a pro forma basis after giving effect to the
Transactions, the Subsidiaries of the Company not guaranteeing
the notes would have had $273.6 million of indebtedness and
other liabilities outstanding. For the fiscal year ended
December 31, 2005, the non-Guarantor Subsidiaries would
have accounted for 27.0% and 34.7%, respectively, of the
Companys revenues and Adjusted EBITDA on a pro forma basis.
No Subsidiary Guarantor may consolidate with or merge with or
into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not
affiliated with such Subsidiary Guarantor unless
(i) subject to the provisions of the following paragraph,
the Person formed by or surviving any such consolidation or
merger (if other than such Subsidiary Guarantor) assumes all the
obligations of such Subsidiary Guarantor pursuant to a
supplemental indenture under the notes and the indenture; and
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be
continuing.
In the event of (a) the release or discharge of the
Guarantee of the Credit Agreement by a Subsidiary Guarantor,
except a discharge or release by or as a result of payment under
such Guarantee, or (b) a sale or other disposition by way
of such a merger, consolidation or otherwise, of all of the
capital stock of any Subsidiary Guarantor, then such Subsidiary
Guarantor (in the event of a sale or other disposition of all of
the capital stock of such Subsidiary Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee.
Optional
Redemption
The notes will be subject to redemption at any time at the
option of the Company, in whole at any time or in part from time
to time, upon not less than 30 nor more than 60 days
notice at a redemption price equal to the greater of
(1) 100% of the principal amount of the notes to be
redeemed and (2) the sum of the present values of the
remaining principal and interest payments on the applicable
notes (exclusive of interest accrued to the date of redemption)
discounted to the redemption date, calculated on a semi-annual
basis (assuming a
360-day year
of twelve
30-day
months), at the Treasury Rate plus 50 basis points, in the case
of the 2016 notes, and 50 basis points, in the case of the 2026
notes, in each case together with accrued and unpaid interest if
any, to the date of redemption.
Treasury Rate means, with respect to any
redemption date, the rate per annum equal to the semi-annual
equivalent yield to maturity or interpolated (on a day count
basis) of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for
such redemption date.
Comparable Treasury Issue means United States
Treasury security or securities selected by the Independent
Investment Banker as having an actual or interpolated maturity
comparable to the remaining term of the applicable notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to
the remaining term of those notes.
Independent Investment Banker means one of
the Reference Treasury Dealers appointed by us.
Comparable Treasury Price means, with respect
to any redemption date, (1) the average of the Reference
Treasury Dealer Quotations for that redemption date after
excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (2) if the trustee obtains fewer than
four such Reference Treasury Dealer Quotations, then the average
of the available Reference Treasury Dealer Quotations for the
redemption date, or (3) if only one is available on that
date, then that Reference Treasury Dealer Quotation.
S-35
Reference Treasury Dealer Quotation means,
with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount)
quoted in writing to the trustee by that Reference Treasury
Dealer at 3:30 p.m. (New York time) on the third business
day preceding that redemption date.
Reference Treasury Dealer means Morgan
Stanley & Co. Incorporated and Lehman Brothers Inc., or
their affiliates, plus three other Primary Treasury Dealers (as
defined below) appointed by us, and their respective successors;
provided, however, that if any of the foregoing ceases to be a
primary U.S. Government securities dealer in The City of
New York (a Primary Treasury Dealer), we will
substitute therefor another Primary Treasury Dealer, if
available.
Escrow of
Proceeds; Special Mandatory Redemption
Concurrently with the closing of this offering, unless the
Australian court has approved the scheme of arrangement prior to
the closing of this offering, we will enter into an escrow
agreement (the Escrow Agreement) with the trustee
and US Bank National Association, as escrow agent (the
Escrow Agent), pursuant to which we will deposit
with the Escrow Agent an amount equal to the gross proceeds of
the offering of the notes plus accrued and unpaid interest to,
but excluding the latest possible Special Mandatory
Redemption Date (as defined below) (collectively, with any
other property from time to time held by the Escrow Agent, the
Escrowed Property). In order to cause the Escrow
Agent to release the Escrowed Property to us or such other
Person as we shall designate (the Release), the
Escrow Agent shall have received from us, at a time that is on
or before the Deadline (as defined below), a certificate
relating to the expected consummation, in whole or in part, of
the acquisition of Excel, the application of the proceeds of the
offering of the notes and the absence of a Default or an Event
of Default. The Release shall occur promptly upon, but in no
event later than two business days following, the delivery of
the foregoing certificate. Upon the Release, the escrow account
under the Escrow Agreement shall be reduced to zero and the
Escrowed Property and interest thereon paid out in accordance
with the Escrow Agreement. The Deadline is
January 31, 2007.
From the issue date until the Release, the Escrow Agent shall,
for the benefit of the Escrow Agent and the holders of the
notes, be granted an exclusive first-priority Lien on the
Escrowed Property. Upon the Release, the Lien of the Escrow
Agent on the Escrowed Property shall be extinguished. If the
Escrow Agreement is effective and the certificate described
above has not been delivered on or before 5:00 p.m., New
York City time, on the Deadline, then the Issuer will, on a day
not more than 10 Business Days following the Deadline (such
date, the Special Mandatory Redemption Date),
redeem all of the notes (the Special Mandatory
Redemption) at a price equal to 100% of the principal
amount of the notes, plus accrued and unpaid interest on the
notes to, but excluding the Special Mandatory
Redemption Date (the Special Mandatory
Redemption Price).
Notice of the Special Mandatory Redemption will be mailed
promptly to each holder of notes at its registered address, to
the Trustee and to the Escrow Agent. Upon receipt of the notice
of Special Mandatory Redemption, the Escrow Agent will liquidate
all Escrowed Property held by it no later than the Business Day
prior to the Special Mandatory Redemption Date. On the
Special Mandatory Redemption Date, the Escrow Agent shall
pay to a paying agent for payment to each holder of notes the
Special Mandatory Redemption Price for such holders
Notes and, concurrently with the payment to such holders,
deliver any excess Escrowed Property to the Company.
Certain provisions relating to our obligation to redeem the
notes in a Special Mandatory Redemption may not be waived or
modified without the written consent of the holders of all notes.
Repurchase
at the Option of Holders Upon Change of Control Triggering
Event
Upon the occurrence of a Change of Control Triggering Event,
each holder of notes will have the right to require the Company
to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such holders 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, if
any, to the date of purchase (the Change of Control
Payment). Within ten days following any Change of Control
Triggering Event, the Company will mail a notice to each holder
describing the transaction or transactions that constitute the
Change of Control Triggering Event and offering to repurchase
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),
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pursuant to the procedures required by the indenture and
described in such notice. The 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 notes as
a result of a Change of Control Triggering Event. To the extent
that the provisions of any securities laws or regulations
conflict with the Change of Control Triggering Event provisions
of the indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control Triggering
Event provisions of the indenture by virtue of such conflict.
On the Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all 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 notes or
portions thereof so tendered and (3) deliver or cause to be
delivered to the trustee the notes so accepted together with an
officers certificate stating the aggregate principal
amount of notes or portions thereof being purchased by the
Company. The paying agent will promptly mail to each holder of
notes so tendered the Change of Control Payment for such notes,
and the trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each holder a new note equal in
principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in
a principal amount of $1,000 or an integral multiple of $1,000.
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 Triggering Event provisions described
above will be applicable whether or not any other provisions of
the indenture are applicable. Except as described above with
respect to a Change of Control Triggering Event, the indenture
will not contain provisions that permit the holders of the notes
to require that the Company repurchase or redeem the notes in
the event of a takeover, recapitalization or similar transaction.
The Companys other senior Indebtedness contains, or in the
future may contain, prohibitions on certain events that would
constitute a Change of Control. In addition, the exercise by the
holders of notes of their right to require the Company to
repurchase the 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 the
Company. Finally, the Companys ability to pay cash to the
holders of notes upon a repurchase may be limited by the
Companys then existing financial resources. See Risk
Factors Risks Relating to the Notes We
may be unable to purchase the notes upon a change of control
coupled with a ratings decline. The Credit Agreement will
restrict the Company from purchasing the notes, and also will
provide that certain change of control events with respect to
the Company would constitute a default thereunder. Indebtedness
incurred by the Company in the future may contain similar
restrictions and provisions. In the event a Change of Control
Triggering Event occurs at a time when the Company is prohibited
from purchasing notes, the Company could seek the consent of its
lenders to the purchase of notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company
does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing notes. In such
case, the Companys failure to purchase tendered notes
would constitute an Event of Default under the indenture which
would, in turn, constitute a default under the Credit Agreement.
The Company will not be required to make a Change of Control
Offer upon a Change of Control Triggering Event if a third party
makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in
the indenture applicable to a Change of Control Offer made by
the Company and purchases all notes validly tendered and not
withdrawn under such Change of Control Offer or if the Company
exercises its option to purchase the notes.
Change of Control means the occurrence of any
of the following: (i) 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 the 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),
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) 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), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power
rather than number of shares) or
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(iv) the first day on which a majority of the members of
the Board of Directors of the 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 the Company and its Subsidiaries taken as a whole.
Although there is a limited 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 notes to require the
Company to repurchase such notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries taken as a whole
to another Person or group may be uncertain.
Change of Control Triggering Event means the
occurrence of both a Change of Control and a Rating Decline with
respect to the notes.
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who (i) was a member of such Board of directors on
the original issue date of the notes or (ii) 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 executive officers of the
Company as of the original issue date of the notes.
Rating Date means the date which is
90 days prior to the earlier of: (a) a Change of
Control, and (b) public notice of the occurrence of a
Change of Control or of the intention of the Company to effect a
Change of Control.
Rating Decline means the occurrence of the
following on, or within, 90 days before or after the
earlier of: (i) the date of public notice of the occurrence
of a Change of Control or (ii) public notice of the
intention of the Company to effect a Change of Control (which
90-day
period shall be extended so long as the rating of the Notes is
under publicly announced consideration for possible downgrade by
any of the Rating Agencies): (a) in the event the Notes are
assigned an Investment Grade Rating by both Rating Agencies on
the Rating Date, the rating of the Notes by one of the Rating
Agencies shall be below an Investment Grade Rating; or
(b) in the event the Notes are rated below an Investment
Grade Rating by at least one of the Rating Agencies on the
Rating Date, the rating of the Notes by at least one of the
Rating Agencies shall be decreased by one or more gradations
(including gradations within rating categories as well as
between rating categories).
Related Party with respect to any Principal
means (A) any spouse or immediate family member 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).
Selection
and Notice
If less than all of the notes are to be redeemed at any time,
the trustee will select notes for redemption as follows:
(1) if the notes are listed on any national securities
exchange, in compliance with the requirements of the principal
national securities exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by such method as the
trustee deems fair and appropriate. No notes of $1,000 principal
amount can be redeemed in part. Notices of redemption will be
mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of notes
to be redeemed at its registered address, except that redemption
notices may be mailed more than 60 days prior to a
redemption date if the notice is issued in connection with a
defeasance of the notes or a satisfaction and discharge of the
indenture. Notices of redemption may not be conditional. If any
note is to be redeemed in part only, the notice of redemption
that relates to that note will state the portion of the
principal amount of that note that is to be redeemed. A new note
in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and
after the redemption date, interest will cease to accrue on
notes or portions of them called for redemption.
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Certain
Covenants
The indenture will contain the following covenants:
Limitation
on Liens
The indenture will provide that, except as otherwise provided
below, we will not, and will not permit any Restricted
Subsidiary to, issue, incur, create, assume, guarantee or
otherwise have outstanding any Indebtedness secured by any
mortgage, deed of trust, security interest, pledge, lien, charge
or other encumbrance, each a Lien and collectively
Liens, upon any Principal Property or shares of
Capital Stock or Indebtedness of a Restricted Subsidiary, except
the Lien of the Escrow Agent on the Escrowed Property and any
Lien contemplated under the Escrow Agreement, unless the notes
(and, at our option, any other indebtedness or guarantee ranking
equally with the notes) are secured equally and ratably with (or
at our option, prior to) such secured Indebtedness. This
restriction will not apply to Indebtedness secured by:
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Liens on property, shares of Capital Stock or Indebtedness of a
person existing at the time it becomes a Restricted Subsidiary
or Liens on any Principal Property created prior to the time
such property became a Principal Property, provided, in each
case, that such Liens were not created in anticipation of the
transaction in which such entity becomes a Restricted Subsidiary;
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Liens on property (and on any proceeds from the disposition of
such property) acquired by the Company or a Restricted
Subsidiary existing at the time of acquisition by the Company or
a Restricted Subsidiary, whether or not assumed by the Company
or such Restricted Subsidiary; provided that no such Lien will
extend to any other Principal Property of the Company or any
Restricted Subsidiary;
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Liens on property (and on any proceeds from the disposition of
such property) acquired by the Company or a Restricted
Subsidiary and created prior to, at the time of, or within
360 days after the acquisition of such property, or the
completion of construction, the completion of improvements or
the commencement of substantial commercial operation of such
property, for the purpose of financing all or any part of the
purchase price of such property, such construction or the making
of such improvements; provided that such Liens will not extend
to any other Principal Property of the Company or any Restricted
Subsidiary other than, in the case of such construction or
improvement, any theretofore unimproved real property on which
the Principal Property so constructed, or the improvement, is
located;
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Liens in favor of the Company or a Restricted Subsidiary to
secure Indebtedness owing to the Company or a Restricted
Subsidiary;
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Liens existing on the date of the initial issuance of the notes;
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Liens on property (and on any proceeds from the disposition of
such property), shares of Capital Stock or Indebtedness of a
Person existing at the time such Person is merged into or
consolidated with the Company or a Restricted Subsidiary or at
the time of a sale, lease or other disposition of all or
substantially all of the properties of a Person as an entirety
or substantially as an entirety to the Company or a Restricted
Subsidiary, provided that the Lien was not incurred in
contemplation of such merger or consolidation or sale, lease or
other disposition;
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Liens on property of the Company or a Restricted Subsidiary in
favor of governmental bodies to secure payments of amounts owed
under any contract or statute;
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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;
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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;
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Liens incurred or deposits made in the ordinary course of
business in connection with workers compensation,
unemployment insurance or other kinds of social security;
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judgment Liens 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;
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Liens created in connection with a project financed with, and
created to secure, Non-Recourse Debt; and
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any extension, renewal or replacement of any Lien referred to
above or any Indebtedness secured by that Lien, provided that
such extension, renewal or replacement Lien will secure no
larger an amount of Indebtedness than that existing at the time
of such extension, renewal or replacement and will be limited to
all or part of the same property and improvements thereon which
secured the Loan extended, renewed or replaced.
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In addition, the Company or a Restricted Subsidiary may issue,
incur, create, assume or guarantee Indebtedness secured by a
Lien which would otherwise be subject to the foregoing
restrictions without equally and ratably securing the notes,
provided that after giving effect to the Indebtedness secured by
such Lien, the aggregate principal amount of all Indebtedness so
secured by Liens (not including Liens permitted above) and the
Attributable Debt of Sale and Lease-Back Transactions permitted
by the provision described below under Limitation on Sale
and Lease-Back Transactions does not exceed 15% of
Consolidated Net Tangible Assets.
Limitation
on Sale and Lease-Back Transactions
The indenture will provide that Sale and Lease-Back Transactions
by the Company or any Restricted Subsidiary of any Principal
Property, other than any such transaction involving a lease for
a term of not more than three years or any such transaction
between the Company and one of its Restricted Subsidiaries or
between Restricted Subsidiaries, are prohibited unless at the
effective time of such transaction:
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the Company or the Restricted Subsidiary would be entitled,
pursuant to the covenant described above under the caption
Limitation on Liens, without equally and
ratably securing the notes, to incur Indebtedness secured by a
Lien in an amount at least equal to the Attributable Debt with
respect to such Sale and Lease-Back Transaction; or
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the Company or the Restricted Subsidiary applies, within
360 days of the closing date of the Sale and Lease-Back
Transaction, an amount equal to the greater of (1) the net
proceeds of such sale or (2) the Attributable Debt with
respect to such Sale and Lease-Back Transaction, to either (or a
combination of) (x) the prepayment, defeasance or
retirement (other than any mandatory retirement, mandatory
prepayment or sinking fund payment or payment at maturity) of
Indebtedness of the Company or a Restricted Subsidiary maturing
after, or renewable or extendable at the option of the Company
or the relevant Restricted Subsidiary beyond, twelve months from
the date of determination (other than debt subordinate to the
notes or any Guarantee or debt to the Company or a Restricted
Subsidiary); provided, however, the amount to be applied to the
prepayment or retirement of any such Indebtedness shall be
reduced by the principal amount of any debt securities of the
Company or a Restricted Subsidiary delivered within
360 days after such Sale and Lease-Back Transaction to the
trustee or paying agent for retirement and cancellation; or
(y) the purchase, construction or development of other
property, facilitates or equipment.
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Additional
Subsidiary Guarantees
If the Company or any of its Domestic Subsidiaries shall acquire
or create another Domestic Subsidiary after the initial issue
date of the notes and such Domestic Subsidiary provides a
guarantee under the Credit Agreement, then such newly acquired
or created Domestic Subsidiary shall execute a supplemental
indenture in form and substance reasonably satisfactory to the
trustee providing that such Domestic Subsidiary shall become a
Subsidiary Guarantor under the indenture.
Events of
Default and Remedies
Each of the following constitutes an Event of
Default: (i) default for 30 days in the payment
when due of interest on the notes; (ii) default in payment
when due of the principal of or premium, if any, on the notes;
(iii) failure by the Company or any of its Subsidiaries to
make the offer required or to purchase any of the notes as
required
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under the provisions described under the caption
Repurchase at the Option of Holders Change of Control
Triggering Event, (iv) failure by the Company or any
of its Subsidiaries for 60 days after notice to comply with
any of its agreements in the indenture or the notes;
(v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness by the Company or any of its
Restricted Subsidiaries (or the payment of which is Guaranteed
by the Company or any of its Restricted Subsidiaries) whether
such Indebtedness or Guarantee now exists, or is created after
the date of the 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; (vi) except as permitted by the
indenture, any Subsidiary 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
Subsidiary Guarantor, or any Person acting on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee; and (vii) certain events of
bankruptcy or insolvency with respect to the 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.
If any Event of Default occurs and is continuing, the trustee or
the holders of at least 25% in principal amount of the then
outstanding notes may declare all the notes to be due and
payable immediately. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to the 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 notes will become due
and payable without further action or notice. Holders of the
notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the then
outstanding notes may direct the trustee in its exercise of any
trust or power. The trustee may withhold from holders of the
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.
The holders of a majority in aggregate principal amount of the
notes then outstanding by notice to the trustee may on behalf of
the holders of all of the notes waive any existing Default or
Event of Default and its consequences under the indenture except
a continuing Default or Event of Default in the payment of
interest on, or the principal of, the notes.
The Company is required to deliver to the trustee annually a
statement regarding compliance with the indenture, and the
Company is required upon becoming aware of any Default or Event
of Default, to deliver to the 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
the Company or any Person controlling such Person, as such,
shall have any liability for any obligations of the Company
under the notes, the Subsidiary Guarantees, the indenture or for
any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting
a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes.
Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such
a waiver is against public policy.
Legal
Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding notes and all obligations of the Subsidiary
Guarantors discharged with respect to their Subsidiary
Guarantees (Legal Defeasance) except for:
(i) the rights of holders of outstanding notes to receive
payments in respect of the principal of, interest or premium, if
any, on such notes when such payments are due solely out of the
trust referred to below; (ii) the Companys
obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed,
lost or stolen notes and the maintenance of an office or agency
for payment and money for security payments held in trust;
(iii) the rights, powers, trusts, duties and immunities of
the trustee, and the Companys and the Subsidiary
Guarantors obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the indenture. In
addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to
substantially all of the restrictive covenants that are
described
S-41
in the indenture (Covenant Defeasance) and
thereafter any omission to comply with those covenants will not
constitute a Default or Event of Default with respect to the
notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under
Events of Default and Remedies will no longer
constitute an Event of Default with respect to the notes. In
order to exercise either Legal Defeasance or Covenant
Defeasance: (i) the Company must irrevocably deposit with
the trustee, in trust, for the benefit of the holders of the
applicable notes, cash in U.S. dollars, Government
Securities, or a combination of cash in U.S. dollars and
Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, interest or premium, if
any, on such outstanding notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company
must specify whether such notes are being defeased to maturity
or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee (subject
to customary exceptions and exclusions) confirming that
(a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or
(b) since the date of the 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
will confirm that, the holders of the outstanding 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; (iii) in the case of Covenant
Defeasance, the Company shall deliver to the trustee an opinion
of counsel reasonably acceptable to the trustee (subject to
customary exceptions and exclusions) confirming that the holders
of the outstanding 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;
(iv) 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 the granting of Liens in connection
therewith); (v) 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 indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered
to the trustee, at or prior to the effective date of such
defeasance, an opinion of counsel to the effect that, assuming
no intervening bankruptcy of the Company between the date of
deposit and the 91st day following the deposit and assuming
that no holder is an insider of the Company under
applicable bankruptcy law and subject to customary exceptions
and exclusions, after the 91st day following the deposit,
the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors rights generally; (vii) the
Company must deliver to the trustee an officers
certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of notes over the
other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding any creditors of the Company
or others; and (viii) the Company must deliver to the
trustee an officers certificate and an opinion of counsel,
each stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have
been complied with.
Amendment,
Supplement and Waiver
Generally, our rights and obligations and the holders
rights may be modified with the consent of holders of a majority
of the outstanding notes of each series affected by such
modification as described in the accompanying prospectus. In
addition, without the consent of each holder affected, an
amendment or waiver may not (with respect to any notes held by a
non-consenting holder) make any change to the provisions of the
indenture providing for the Special Mandatory Redemption that
would adversely affect the rights of any holders of the notes to
receive Escrowed Property.
Book-Entry,
Delivery and Form
We will initially issue the notes in the form of one or more
global notes (the Global Notes). Except as set forth
below, notes will be issued in registered, global form in
minimum denominations of $1,000 and integral multiples of
$1,000. Notes will be issued at the closing of this offering
only against payment in immediately available funds. The Global
Notes will be deposited upon issuance with the trustee as
custodian for The Depository
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Trust Company (DTC), in New York, New York, and
registered in the name of Cede & Co., as nominee of DTC
(such nominee being referred to herein as the Global
Note Holder), in each case for credit to an account
of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global 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 Notes may not be exchanged for notes in certificated form
except in the limited circumstances described in the
accompanying prospectus. Except in the limited circumstances
described in the accompanying prospectus, owners of beneficial
interests in the Global Notes will not be entitled to receive
physical delivery of notes in certificated form.
Transfers of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its
direct or indirect participants (including, if applicable, those
of Euroclear System (Euroclear) and Clearstream
Banking S.A. (Clearstream), which may change from
time to time.
Depository
Procedures
The following description of the operations and procedures of
DTC, Euroclear and Clearstream 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. The 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 the 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 include securities brokers
and dealers (including the underwriters), banks, trust
companies, clearing corporations and certain other
organizations. Access to DTCs 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 the Company that, pursuant to
procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the
accounts of Participants designated by the underwriters with
portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will
be shown on, and the transfer of ownership of these interests
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 Notes).
Euroclear and Clearstream may hold interests in the Global Notes
on behalf of their participants through customers
securities accounts in their respective names on the books of
their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear,
and Citibank, N.A., as operator of Clearstream. All interests in
a Global Note, including those held through Euroclear or
Clearstream, may be subject to the procedures and requirements
of DTC. Those interests held through Euroclear or Clearstream
may also be subject to the procedures and requirements of such
systems. 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 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, the
ability of a Person having beneficial interests in a Global Note
to pledge such interests to Persons 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
Notes will not have notes registered in their names, will not
receive physical delivery of notes in certificated form and will
not be considered the registered owners or holders
thereof under the indenture for any purpose.
S-43
Payments in respect of the principal of, and interest and
premium, if any, on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the
registered holder under the indenture. Under the terms of the
indenture, the Company and the trustee will treat the Persons in
whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of
receiving payments and for all other purposes. Consequently,
neither the Company, the trustee nor any agent of the Company or
the trustee has or will have any responsibility or liability for:
(1) any aspect of DTCs records or any
Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or
reviewing any of DTCs records or any Participants or
Indirect Participants records relating to the beneficial
ownership interests in the Global 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 the Company that its current practice, upon receipt
of any payment in respect of securities such as the notes
(including principal and interest), is to credit the accounts of
the relevant Participants with the payment on the payment date
unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest
in the principal amount of the relevant security as shown on the
records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of 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 trustee or the
Company. Neither the Company nor the trustee will be liable for
any delay by DTC or any of its Participants in identifying the
beneficial owners of the notes, and the Company and the trustee
may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day funds, and transfers between participants in Euroclear
and Clearstream will be effected in accordance with their
respective rules and operating procedures. Subject to compliance
with the transfer restrictions applicable to the notes described
herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or Clearstream participants, on
the other hand, will be effected through DTC in accordance with
DTCs rules on behalf of Euroclear or Clearstream, as the
case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time)
of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or
receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures
for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver
instructions directly to the depositories for Euroclear or
Clearstream.
DTC has advised the Company that it will take any action
permitted to be taken by a holder of notes only at the direction
of one or more Participants to whose account DTC has
credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the notes
as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under
the notes, DTC reserves the right to exchange the Global Notes
for legended notes in certificated form, and to distribute such
notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the
foregoing to facilitate transfers of interests in the Global
Notes among participants in DTC, Euroclear and Clearstream, they
are under no obligation to perform or to continue to perform
such procedures, and may discontinue such procedures at any
time. Neither the Company nor the trustee nor any of their
respective agents will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective
participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
S-44
Certain
Definitions
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a description of all
defined terms used in it and in the notes, including any other
capitalized terms used in this Description of the
Notes for which no definition is provided below.
Attributable Debt means, in respect of a Sale
and Lease-Back Transaction, at the time of determination, the
present value (discounted at a rate per annum equivalent to the
rate inherent in such lease (as determined in good faith by the
Company), compounded semiannually) of the obligation of the
lessee for rental payments during the remaining term of the
lease included in such transaction, including any period for
which such lease had been extended or may, at the option of the
lessor, be extended or, if earlier, until the earliest date on
which the lessee may terminate such lease upon payment of a
penalty (in which case the obligation of the lessee for rental
payments will include such penalty), after excluding all amounts
required to be paid on account of maintenance and repairs,
insurance, taxes, assessments, water and utility rates and
similar charges.
Capital Stock means (i) in the case of a
corporation, corporate stock, (ii) in the case of an
association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated)
of corporate stock, (iii) in the case of a partnership or
limited liability company, partnership or membership interests
(whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets
of, the issuing Person.
Consolidated Net Tangible Assets means, as of
any particular time, the total of all the assets appearing on
the most recent consolidated balance sheet prepared in
accordance with GAAP of the Company and its Subsidiaries as of
the end of the last fiscal quarter for which financial
information is available (less applicable reserves and other
properly deductible items) after deducting from such amount:
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all current liabilities, including current maturities of
long-term debt and current maturities of obligations under
capital leases (other than any portion thereof maturing after,
or renewable or extendable at the option of the Company or the
relevant Subsidiary beyond, twelve months from the date of
determination); and
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the total of the net book values of all assets of the Company
and its Subsidiaries properly classified as intangible assets
under U.S. generally accepted accounting principles
(including goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangible
assets).
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Credit Agreement means that certain Third
Amended and Restated Credit Agreement, dated as of
September 15, 2006 by and among the Company, as borrower,
Bank of America, N.A., as administrative agent, Citibank, N.A.,
as syndication 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, annexes, exhibits or
schedules to any of the foregoing), and in each case as amended,
restated, amended and restated, modified, supplemented, renewed,
refunded, replaced, restructured, repaid or refinanced from time
to time (whether with the original agents, arrangers and lenders
or other agents, arrangers and lenders or otherwise, whether
provided under the original credit agreement or other Credit
Facilities or otherwise, whether for a greater or lesser
principal amount, whether with greater or lesser interest and
fees and whether or not including collateral or guarantors).
Indebtedness under the Credit Agreement outstanding on the date
on which notes are first issued and authenticated under the
indenture shall be deemed to have been incurred on such date.
Credit Facilities means, with respect to the
Company or any of its Restricted Subsidiaries, one or more debt
facilities (including, without limitation, the Credit Agreement)
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, amended and
restated, modified, supplemented, renewed, refunded, replaced,
refinanced, repaid or restructured in whole or in part from time
to time.
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.
S-45
Domestic Subsidiary means a Subsidiary that
is (i) formed under the laws of the United States of
America or a state or territory thereof or (ii) 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.
Foreign Subsidiaries means Subsidiaries of
the Company that are not Domestic Subsidiaries.
GAAP means generally accepted accounting
principles set forth 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 indenture.
Government Securities means securities that
are (i) direct obligations of the United States for the
payment of which its full faith and credit is pledged, or
(ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States
the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States, which, in
either case under clauses (i) or (ii), are not callable or
redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company
as custodian with respect to any such Government Security or a
specific payment of interest on or principal of any such
Government Security held by such custodian for the account of
the holder of a depository receipt; provided that (except as
required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the Government Security or the specific payment of
interest on or principal of the Government Security evidenced by
such depository receipt.
Guarantee means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner
(including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
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.
Investment Grade Rating means a rating equal
to or higher than Baa3 (or the equivalent) by Moodys or
BBB− (or the equivalent) by S&P.
Moodys means Moodys Investors
Service, Inc., or any successor to the rating agency business
thereof.
Non-Recourse Debt means Indebtedness to
finance the creation, development, construction or acquisition
of properties or assets and any increases in or extensions,
renewals or refinancings of such Indebtedness; provided that the
recourse of the lender thereof (including any agent, trustee,
receiver or other Person acting on behalf of such entity) in
respect of such Indebtedness is limited in all circumstances to
the properties or assets created, developed, constructed or
acquired in respect of which such Indebtedness has been
incurred, to the Capital Stock and debt securities of the
Restricted Subsidiary that acquires or owns such properties or
assets and to the receivables, inventory, equipment, chattels,
contracts, intangibles and other assets, rights or collateral
connected with the properties or assets created, developed,
constructed or acquired and to which such lender has recourse.
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Principal Property means any real property
interests (all such interests forming an integral part of a
single development or operation being considered as one
interest), including any mining claims and leases, and any
plants, buildings or other improvements thereon, and any part
thereof, located in the United States that is held by the
Company or any Restricted Subsidiary and has a gross book value
(without deduction of any depreciation reserves), on the date as
of which the determination is being made, exceeding 1% of
Consolidated Net Tangible Assets (other than any such interest
that the Board of Directors of the Company determines by
resolution is not material to the business of the Company and
its Subsidiaries taken as a whole).
Rating Agency means each of S&P and
Moodys, or if S&P or Moodys or both shall not
make a rating on the applicable notes publicly available, a
nationally recognized statistical rating agency or agencies, as
the case may be,
S-46
selected by the Company (as certified by a resolution of its
Board of Directors) which shall be substituted for S&P or
Moodys or both, as the case may be.
Restricted Subsidiary means any Subsidiary
(a) substantially all of the property of which is located
in the United States or substantially all of the business of
which is carried on, in the United States and that owns or
leases a Principal Property or (b) is engaged primarily in
the business of owning or holding Capital Stock of one or more
Restricted Subsidiaries.
Sale and Lease-Back Transaction means any
arrangement with any person providing for the leasing by the
Company or any Restricted Subsidiary of any Principal Property,
whether owned at the date of the issuance of the notes or
thereafter acquired, that has been or is to be sold or
transferred by the Company or any Restricted Subsidiary to such
person with the intention of taking back a lease of this
property.
S&Ps means Standard &
Poors Rating Group, Inc., or any successor to the rating
agency business thereof.
Significant Subsidiary means any Subsidiary
that would be a significant subsidiary as defined in
Article 1,
Rule 1-02
of
Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.
Specified Subsidiaries means Newhall Funding
Company, CL Hartford, L.L.C., CL Power Sales Three, L.L.C., CP
Power Sales Sixteen, L.L.C., PG Power Sales Two, L.L.C., PG
Power Sales Three, L.L.C., PG Power Sales Four, L.L.C., PG Power
Sales Five, L.L.C., PG Power Sales Six, L.L.C., PG Power Sales
Seven, L.L.C., PG Power Sales Eight, L.L.C., PG Power Sales
Nine, L.L.C., PG Power Sales Ten, L.L.C., PG Power Sales Eleven,
L.L.C., PG Power Sales Twelve, L.L.C., PG Investments Four,
L.L.C., PG Investments Five, L.L.C., PG Investments Six, L.L.C.,
PG Investments Eight, L.L.C., P&L Receivables Company LLC,
United Minerals Company, LLC, HCR Holdings, LLC, Kanawha River
Ventures I, LLC, KE Ventures, LLC, Kentucky United Coal,
LLC, Mountain Holdings, LLC, Mustang Clean Energy, LLC, Peabody
China, LLC, Big Eagle Rail, LLC, Big Eagle, LLC, Eagle Corner,
LLC, Kanawha Eagle Coal, LLC, Newtown Energy, Inc., Kanawha
Eagle Coal Sales, LLC and Winifred Dock Limited Liability
Company.
Subsidiary means, with respect to any Person,
(i) 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
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
(ii) 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).
Subsidiary Guarantee means the Guarantee of
the applicable notes by each of the Subsidiary Guarantors
pursuant to the indenture and any additional Guarantee of the
notes to be executed by any Subsidiary of the Company pursuant
to the covenant described above under Certain
Covenants Additional Subsidiary Guarantees.
Subsidiary Guarantors means all of the
Companys existing Domestic Subsidiaries, except for the
Specified Subsidiaries, and any other Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the
indenture, and their respective successors and assigns.
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.
S-47
CERTAIN
UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO
NON-U.S. HOLDERS
The following is a summary of certain United States federal
income and estate tax consequences of the purchase, ownership
and disposition of the notes as of the date hereof. Except where
noted, this summary deals only with notes that are held as
capital assets by a
non-U.S. holder
who acquires the notes upon original issuance at their initial
offering price.
A
non-U.S. holder
means a holder of the notes (other than a partnership) that is
not for United States federal income tax purposes any of the
following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
United States federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or
the District of Columbia;
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an estate the income of which is subject to United States
federal income taxation regardless of its source;
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person.
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This summary is based upon provisions of the Internal Revenue
Code of 1986, as amended (the Code), and
regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively,
so as to result in United States federal income tax consequences
different from those summarized below. This summary does not
address all aspects of United States federal income and estate
taxes and does not deal with foreign, state, local or other tax
considerations that may be relevant to
non-U.S. holders
in light of their personal circumstances. In addition, it does
not represent a detailed description of the United States
federal income and estate tax consequences applicable to you if
you are subject to special treatment under the United States
federal income tax laws (including if you are a United States
expatriate, controlled foreign corporation,
passive foreign investment company or a partnership
or other pass-through entity for United States federal income
tax purposes). We cannot assure you that a change in law will
not alter significantly the tax considerations that we describe
in this summary.
If a partnership holds the notes, the tax treatment of a partner
will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a
partnership holding the notes, you should consult your tax
advisors.
If you are considering the purchase of notes, you should
consult your own tax advisors concerning the particular United
States federal income and estate tax consequences to you of the
ownership of the notes, as well as the consequences to you
arising under the laws of any other taxing jurisdiction.
United
States Federal Withholding Tax
The 30% United States federal withholding tax will not apply to
any payment of interest on the notes under the portfolio
interest rule, provided that:
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interest paid on the notes is not effectively connected with
your conduct of a trade or business in the United States;
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you do not actually (or constructively) own 10% or more of the
total combined voting power of all classes of our voting stock
within the meaning of the Code and applicable United States
Treasury regulations;
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you are not a controlled foreign corporation that is related to
us through stock ownership;
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you are not a bank whose receipt of interest on the notes is
described in Section 881(c)(3)(A) of the Code; and
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either (a) you provide your name and address on an Internal
Revenue Service (IRS)
Form W-8BEN
(or other applicable form), and certify, under penalties of
perjury, that you are not a United States person as defined
under the Code or (b) you hold your notes through certain
foreign intermediaries and satisfy the certification
requirements of applicable United States Treasury regulations.
Special certification rules apply to
non-U.S. holders
that are pass-through entities rather than corporations or
individuals.
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S-48
If you cannot satisfy the requirements described above, payments
of interest made to you will be subject to the 30% United States
federal withholding tax, unless you provide us with a properly
executed:
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IRS
Form W-8BEN
(or other applicable form) claiming an exemption from or
reduction in withholding under the benefit of an applicable
income tax treaty; or
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IRS
Form W-8ECI
(or other applicable form) stating that interest paid on the
notes is not subject to withholding tax because it is
effectively connected with your conduct of a trade or business
in the United States (as discussed below under United
States Federal Income Tax).
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The 30% United States federal withholding tax generally will not
apply to any payment of principal or gain that you realize on
the sale, exchange, retirement or other disposition of a note.
United
States Federal Income Tax
If you are engaged in a trade or business in the United States
and interest on the notes is effectively connected with the
conduct of that trade or business (and, if required by an
applicable income tax treaty, is attributable to a United States
permanent establishment), then you will be subject to United
States federal income tax on that interest on a net income basis
(although you will be exempt from the 30% United States federal
withholding tax, provided the certification requirements
discussed above in United States Federal Withholding
Tax are satisfied) in the same manner as if you were a
United States person as defined under the Code. In addition, if
you are a foreign corporation, you may be subject to a branch
profits tax equal to 30% (or lower applicable income tax treaty
rate) of such interest, subject to adjustments.
Any gain realized on the disposition of a note generally will
not be subject to United States federal income tax unless:
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the gain is effectively connected with your conduct of a trade
or business in the United States (and, if required by an
applicable income tax treaty, is attributable to a United States
permanent establishment); or
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you are an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met.
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United
States Federal Estate Tax
Your estate will not be subject to United States federal estate
tax on notes beneficially owned by you at the time of your
death, provided that any payment to you on the notes would be
eligible for exemption from the 30% United States federal
withholding tax under the portfolio interest rule
described above under United States Federal Withholding
Tax without regard to the statement requirement described
in the fifth bullet point of that section.
Information
Reporting and Backup Withholding
Generally, we must report to the IRS and to you the amount of
interest paid to you and the amount of tax, if any, withheld
with respect to those payments. Copies of the information
returns reporting such interest payments and any withholding may
also be made available to the tax authorities in the country in
which you reside under the provisions of an applicable income
tax treaty.
In general, you will not be subject to backup withholding with
respect to payments on the notes that we make to you provided
that we do not have actual knowledge or reason to know that you
are a United States person as defined under the Code, and we
have received from you the statement described above in the
fifth bullet point under United States Federal Withholding
Tax.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of notes
within the United States or conducted through certain United
States-related financial intermediaries, unless you certify
under penalties of perjury that you are a
non-U.S. holder
(and the payor does not have actual knowledge or reason to know
that you are a United States person as defined under the Code),
or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your United States
federal income tax liability provided the required information
is furnished to the IRS.
S-49
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus
supplement, Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc. and the other underwriters, for whom Morgan
Stanley & Co. Incorporated and Lehman Brothers Inc. are
acting as representatives and joint book-running managers, have
agreed to purchase, and we have agreed to sell to them, the
principal amount of the notes set forth opposite each
underwriters name below.
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Principal Amount
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Principal Amount
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of Senior Notes
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of Senior Notes
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Underwriters
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due 2016
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due 2026
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Morgan Stanley & Co.
Incorporated
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$
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232,141,000
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$
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89,285,000
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Lehman Brothers Inc.
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165,815,000
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63,775,000
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Banc of America Securities LLC
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86,224,000
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33,163,000
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Citigroup Global Markets Inc.
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66,327,000
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25,510,000
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BNP Paribas Securities Corp.
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16,582,000
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6,378,000
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Calyon Securities (USA) Inc.
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16,582,000
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6,378,000
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HSBC Securities (USA) Inc.
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16,582,000
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6,378,000
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Greenwich Capital Markets,
Inc.
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16,582,000
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6,378,000
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ABN AMRO Incorporated
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6,633,000
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2,551,000
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BMO Capital Markets Corp.
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|
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6,633,000
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|
|
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2,551,000
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Credit Suisse Securities (USA) LLC
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|
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6,633,000
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|
|
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2,551,000
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PNC Capital Markets LLC
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|
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6,633,000
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|
|
|
2,551,000
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Wells Fargo Securities, LLC
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|
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6,633,000
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|
|
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2,551,000
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Total
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$
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650,000,000
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$
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250,000,000
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The underwriting agreement provides that the underwriters are
obligated to purchase all of the notes if any are purchased.
The underwriters propose to offer the notes initially at the
respective public offering prices on the cover page of this
prospectus supplement. After the initial public offering of the
notes, the underwriters may change the public offering price and
discount to broker/dealers.
The notes are a new issue of securities with no established
trading market. The underwriters intend to make a secondary
market for the notes. However, they are not obligated to do so
and may discontinue making a secondary market for the notes at
any time without notice. If a trading market develops, no
assurance can be given as to how liquid that trading market for
the notes will be.
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that the
underwriters may be required to make in that respect.
In connection with the offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act.
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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Over-allotment involves sales by the underwriters of notes in
excess of the principal amount of the notes the underwriters are
obligated to purchase, which creates a syndicate short position.
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Syndicate covering transactions involve purchases of the notes
in the open market after the distribution has been completed in
order to cover syndicate short positions. A short position is
more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the notes in the
open market after pricing that could adversely affect investors
who purchase in the offering.
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S-50
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Penalty bids permit the underwriters to reclaim a selling
concession from a broker/dealer when the notes originally sold
by such broker/dealer are purchased in a stabilizing or covering
transaction to cover short positions.
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These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of the notes or preventing or retarding a
decline in the market price of the notes. As a result, the price
of the notes may be higher than the price that might otherwise
exist in the open market. These transactions, if commenced, may
be discontinued at any time.
It is expected that delivery of the notes will be made against
payment therefor on the date specified on the cover page of this
prospectus supplement, which will be the fourth business day
following the date of pricing of the notes. Under
Rule 15c6-1
under the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the
parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the notes on the date
of pricing will be required by virtue of the fact that the notes
initially will settle in four business days, to specify an
alternate settlement cycle at the time of any such trade to
prevent failed settlement. Purchasers of the notes who wish to
trade the notes on the date of pricing should consult their own
advisor.
Certain of our directors, Messrs. James, Lentz, Schlesinger
and Washkowitz, have been employed by or served as consultants
to Lehman Brothers Inc. within the past three years. The Board
has determined that these employment and consulting
relationships involve matters unrelated to us, and that these
relationships are not material to us.
In the ordinary course of business, Morgan Stanley &
Co. Incorporated and Lehman Brothers Inc. and their affiliates
have provided financial advisory, investment banking and general
financing and banking services for us and our subsidiaries for
customary fees. The underwriters
and/or their
affiliates may provide such services to us in the future. Morgan
Stanley & Co. Incorporated served as a co-manager in
connection with the initial public offering of our common stock,
and the April 2002, May 2003, and July 2003 offerings of our
common stock by certain selling stockholders. Morgan
Stanley & Co. Incorporated also served as a joint
book-running manager in connection with our March 2003 and March
2004 offerings of senior notes and our March 2004 equity
offering. Morgan Stanley & Co. Incorporated served as
our financial advisor in connection with the acquisitions of RAG
in 2004 and Excel. Lehman Brothers Inc. served as sole lead
manager in connection with the initial public offering of our
common stock, led the April 2002, May 2003 and July 2003
offerings of our common stock by certain selling shareholders,
served as a joint book-running manager in connection with our
March 2003 offering of senior notes and our March 2004 equity
offering, and served as lead underwriter in connection with our
sale in a public offering of limited partnership interests of
Penn Virginia Resource Partners, L.P.
European
Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive, each underwriter
has represented and agreed that with effect from and including
the date on which the Prospectus Directive is implemented in
that Member State it has not made and will not make an offer of
notes to the public in that Member State, except that it may,
with effect from and including such date, make an offer of notes
to the public in that Member State:
(a) at any time to legal entities which are authorised or
regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose is solely to
invest in securities;
(b) at any time to any legal entity which has two or more
of (1) an average of at least 250 employees during the last
financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts; or
(c) at any time in any other circumstances which do not
require the publication by us of a prospectus pursuant to
Article 3 of the Prospectus Directive.
S-51
For the purposes of the above, the expression an offer of
notes to the public in relation to any notes in any Member
State means the communication in any form and by any means of
sufficient information on the terms of the offer and the notes
to be offered so as to enable an investor to decide to purchase
or subscribe the notes, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in
that Member State and the expression Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in that Member State.
United
Kingdom
Each underwriter has represented and agreed that it has only
communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of the notes in
circumstances in which Section 21(1) of such Act does not
apply to us and it has complied and will comply with all
applicable provisions of such Act with respect to anything done
by it in relation to any notes in, from or otherwise involving
the United Kingdom.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the Securities and Exchange Commission, or SEC.
You may access and read our SEC filings, through the SECs
Internet site at www.sec.gov. This site contains reports and
other information that we file electronically with the SEC. You
may also read and copy any document we file at the SECs
public reference room located at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our
filings with the SEC are also available to the public on our
website at http://www.peabodyenergy.com. Information contained
on our website is not part of this prospectus or any prospectus
supplement. In addition, reports, proxy statements and other
information concerning us may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
We have filed with the SEC a registration statement under the
Securities Act with respect to the securities offered by this
prospectus supplement and the accompanying prospectus. This
prospectus supplement and the accompanying prospectus, which
constitutes part of the registration statement, do not contain
all of the information presented in the registration statement
and its exhibits and schedules. Our descriptions in this
prospectus supplement and the accompanying prospectus of the
provisions of documents filed as exhibits to the registration
statement or otherwise filed with the SEC are only summaries of
the terms of those documents that we consider material. If you
want a complete description of the content of the documents, you
should obtain the documents yourself by following the procedures
described above.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
We have elected to incorporate by reference certain
information into this prospectus supplement and the accompanying
prospectus, which means we can disclose important information to
you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to
be part of this prospectus supplement and the accompanying
prospectus.
We incorporate by reference our:
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Annual report on
Form 10-K
for the year ended December 31, 2005, as filed on
March 6, 2006 (as amended by the
Form 10-K/A
filed on March 7, 2006);
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Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2006, as filed on
May 9, 2006, and June 20, 2006, as filed on
August 7, 2006; and
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Current Reports on
Form 8-K
filed with the SEC on January 25, 2006, July 7, 2006,
September 7, 2006, September 15, 2006,
September 18, 2006, September 19, 2006,
October 2, 2006 and October 5, 2006.
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S-52
We are also incorporating by reference all other reports that we
file in the future with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the date of the
completion of this offering; provided, however, that we are not
incorporating any information furnished under either
Item 2.02 or Item 7.01 of any current report on
Form 8-K.
Any statement contained in a document incorporated or deemed to
be incorporated by reference in this prospectus supplement
and/or the
accompanying prospectus will be deemed to be modified or
superseded for purposes of this prospectus supplement and the
accompanying prospectus to the extent that a statement contained
in this prospectus supplement, the accompanying prospectus or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference in this prospectus supplement
and/or the
accompanying prospectus modifies or supersedes that statement.
Any statement that is modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of
this prospectus supplement or the accompanying prospectus.
You may request copies of the filings, at no cost, by telephone
at
(314) 342-3400
or by mail at: Peabody Energy Corporation, 701 Market Street,
Suite 700, St. Louis, Missouri 63101, attention:
Investor Relations.
LEGAL
MATTERS
Certain legal matters with respect to the notes and the
guarantees will be passed upon for us by our counsel, Simpson
Thacher & Bartlett LLP, New York, New York.
Shearman & Sterling LLP advised the underwriters in
connection with this offering.
EXPERTS
The consolidated financial statements of Peabody Energy
Corporation incorporated by reference in Peabody Energy
Corporations Annual Report on
Form 10-K
for the year ended December 31, 2005 (including schedules
appearing therein), and Peabody Energy Corporations
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2005
included and incorporated by reference therein, have been
audited by Ernst &Young LLP, independent registered
public accounting firm, as set forth in their reports thereon,
included and incorporated by reference therein, and incorporated
herein by reference. Such consolidated financial statements and
managements assessment are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Excel Coal Limited and
its subsidiaries as of 30 June 2006, and for the year then
ended, have been incorporated by reference herein in reliance
upon the report of KPMG, independent auditors, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing. The audit report covering the
30 June 2006 financial statements refers to the adoption of
new accounting standards for financial instruments.
S-53
PROSPECTUS
Peabody Energy
Corporation
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
PREFERRED STOCK PURCHASE
RIGHTS
WARRANTS
UNITS
SUBSIDIARY GUARANTORS
GUARANTEED DEBT
SECURITIES
Peabody Energy Corporation may offer and sell from time to
time, in one or more series, any one of the following
securities:
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unsecured debt securities consisting of notes, debentures
or other evidences of indebtedness which may be senior debt
securities, senior subordinated debt securities or subordinated
debt securities,
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common stock,
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preferred stock,
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warrants, and
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units,
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or any combination of these securities. Peabody Energy
Corporations debt securities may be guaranteed by
substantially all of its domestic subsidiaries.
The common stock of Peabody Energy Corporation is traded
on the New York Stock Exchange under the symbol BTU.
We will provide more specific information about the terms of an
offering of any securities in supplements to this
prospectus.
You should read this prospectus and the applicable prospectus
supplement, as well as the risks contained or described in the
documents incorporated by reference in this prospectus or any
accompanying prospectus supplement, before you invest.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is July 28, 2006
TABLE OF
CONTENTS
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ABOUT
THIS PROSPECTUS
This prospectus describes the general terms of the securities to
be offered hereby. A prospectus supplement that will describe
the specific amounts, prices and other terms of the securities
being offered will be provided to you in connection with each
sale of securities offered pursuant to this prospectus. The
prospectus supplement or any free writing prospectus prepared by
or on behalf of us may also add, update or change information
contained in this prospectus. To understand the terms of
securities offered pursuant to this prospectus, you should
carefully read this document with the applicable prospectus
supplement or any free writing prospectus prepared by or on
behalf of us. Together, these documents will give the specific
terms of the offered securities. You should also read the
documents we have incorporated by reference in this prospectus
described below under Incorporation of Certain Documents
By Reference.
You should rely only on the information incorporated by
reference or provided in this prospectus, any prospectus
supplement or any free writing prospectus prepared by or on
behalf of us. We have not authorized anyone else to provide you
with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus, any
prospectus supplement or any free writing prospectus is accurate
as of any date other than the date on the front of those
documents.
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information included in this prospectus and the
documents we have incorporated by reference include statements
of our 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 of 1934, as
amended, and are intended to come within the safe harbor
protection provided by those sections. These statements relate
to future events or our future financial performance. We use
words such as anticipate, believe,
expect, may, intend,
plan, project, will or other
similar words to identify forward-looking statements.
Without limiting the foregoing, all statements relating to our
future outlook, anticipated capital expenditures, future cash
flows and borrowings, and sources of funding are forward-looking
statements. These forward-looking statements are based on
numerous assumptions that we believe are reasonable, but they
are open to a wide range of uncertainties and business risks and
actual results may differ materially from those discussed in
these statements.
Among the factors that could cause actual results to differ
materially are:
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growth of domestic and international coal and power markets;
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coals market share of electricity generation;
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prices of fuels which compete with or impact coal usage, such as
oil or natural gas;
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future worldwide economic conditions;
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economic strength and political stability of countries in which
we have operations or serve customers;
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weather;
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success in integrating new acquisitions;
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transportation performance and costs, including demurrage;
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ability to renew sales contracts;
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successful implementation of business strategies;
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legislation, regulations and court decisions;
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new environmental requirements affecting the use of coal
including mercury and carbon dioxide related limitations;
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variation in revenues related to synthetic fuel production;
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changes in postretirement benefit and pension obligations;
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negotiation of labor contracts, employee relations and workforce
availability;
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availability and costs of credit, surety bonds and letters of
credit;
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the effects of changes in currency exchange rates;
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price volatility and demand, particularly in higher-margin
products and in our trading and brokerage businesses;
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risks associated with customer contracts, including credit and
performance risk;
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availability and costs of key suppliers or commodities such as
diesel fuel, steel, explosives and tires;
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reductions of purchases by major customers;
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geology, equipment and other risks inherent to mining;
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terrorist attacks or threats;
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performance of contractors, third party coal suppliers or major
suppliers of mining equipment or supplies;
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replacement of coal reserves;
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risks associated with developing new mines, expanded capacity
and our Btu conversion or generation development initiatives;
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implementation of new accounting standards and Medicare
regulations;
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inflationary trends, including those impacting materials used in
our business;
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the effects of interest rate changes;
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litigation, including claims not yet asserted;
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the effects of acquisitions or divestitures;
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impacts of pandemic illness; and
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changes to contribution requirements to multi-employer benefit
funds.
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When considering these forward-looking statements, you should
keep in mind the cautionary statements in this document and the
documents incorporated by reference. We will not update these
statements unless the securities laws require us to do so.
ii
SUMMARY
This summary highlights selected information from this
prospectus and does not contain all of the information that may
be important to you. This prospectus provides you with a general
description of the securities we may offer. Each time we sell
securities, we will provide you with a prospectus supplement
that will describe the specific amounts, prices and other terms
of the securities being offered. The prospectus supplement may
also add, update or change information contained in this
prospectus. To understand the terms of our securities, you
should carefully read this document with the applicable
prospectus supplement and any free writing prospectus prepared
by or on behalf of us. Together, these documents will give the
specific terms of the securities we are offering. You should
also read the documents we have incorporated by reference in
this prospectus described below under Incorporation of
Certain Documents by Reference. When used in this
prospectus, the terms we, our, and
us, except as otherwise indicated or as the context
otherwise indicates, refer to Peabody Energy Corporation
and/or its
applicable subsidiary or subsidiaries.
The
Securities We May Offer
We may offer and sell from time to time:
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common stock;
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debt securities;
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preferred stock;
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warrants; and
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units.
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In addition, we may offer and sell from time to time debt
securities that may be guaranteed by substantially all of our
domestic subsidiaries.
Common
Stock
We may issue shares of our common stock, par value
$0.01 per share. Holders of common stock are entitled to
receive ratably dividends if, as and when dividends are declared
from time to time by our board of directors out of funds legally
available for that purpose, after payment of dividends required
to be paid on outstanding preferred stock or series common
stock. Holders of common stock are entitled to one vote per
share and vote together, as one class, with the holders of our
Series A Junior Participating Preferred Stock. Holders of
common stock have no cumulative voting rights in the election of
directors.
Debt
Securities
We may offer debt securities, which may be either senior, senior
subordinated or subordinated, may be guaranteed by substantially
all of our domestic subsidiaries, and may be convertible into
shares of our common stock. We may issue debt securities either
separately, or together with, upon conversion of or in exchange
for other securities. The debt securities that we issue will be
issued under one of two indentures among us, U.S. Bank
National Association, as trustee and, if guaranteed, the
subsidiary guarantors thereto. We have summarized general
features of the debt securities that we may issue under
Description of Debt Securities. We encourage you to
read the indentures, which are included as exhibits to the
registration statement of which this prospectus forms a part.
Preferred
Stock
We may issue shares of our preferred stock, par value
$0.01 per share, in one or more series. Our board of
directors will determine the dividend, voting, conversion and
other rights of the series of preferred stock being offered.
1
Warrants
We may issue warrants for the purchase of preferred stock or
common stock or debt securities of our company. We may issue
warrants independently or together with other securities.
Warrants sold with other securities as a unit may be attached to
or separate from the other securities. We will issue warrants
under one or more warrant agreements between us and a warrant
agent that we will name in the applicable prospectus supplement.
Units
We may also issue units comprised of one or more of the other
securities described in this prospectus in any combination. Each
unit may also include debt obligations of third parties, such as
U.S. Treasury securities. Each unit will be issued so that
the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security.
Peabody
Energy Corporation
We are the largest private-sector coal company in the world.
During the year ended December 31, 2005, we sold
239.9 million tons of coal. During this period, we sold
coal to over 350 electricity generating and industrial plants in
15 countries. Our coal products fuel approximately 10% of all
U.S. electricity generation and 3% of worldwide electricity
generation. At December 31, 2005, we had 9.8 billion
tons of proven and probable coal reserves.
We are engaged in the production, distribution and sale of coal
to electricity generating and industrial plants throughout the
world. We own, through our subsidiaries, majority interests in
coal operations located throughout all major U.S. coal
producing regions and in Australia. Additionally, we own
minority interests in mines through joint venture arrangements.
Most of our production in the western United States is
low-sulfur coal from the Powder River Basin. In the West, we own
and operate mines in Arizona, Colorado, New Mexico and Wyoming.
In the East, we own and operate mines in Illinois, Indiana,
Kentucky and West Virginia. We also own mines in Queensland,
Australia. Most of our Australian production is low-sulfur,
metallurgical coal. We generate most of our production from
non-union mines.
In addition to our mining operations, we market, broker and
trade coal. In 2005, we opened a business development, sales and
marketing office in Beijing, China to pursue potential long-term
growth opportunities in this market. Our other energy related
commercial activities include the development of mine-mouth
coal-fueled generating plants, the management of our vast coal
reserve and real estate holdings, coalbed methane production,
transportation services, and, more recently, BTU conversion. Our
BTU conversion initiatives include participation in technologies
that convert coal into natural gas, liquids and hydrogen.
Our principal executive offices are located at 701 Market
Street, St. Louis, Missouri
63101-1826,
telephone
(314) 342-3400.
2
RATIO OF
EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges presented below should be
read together with the financial statements and the notes
accompanying them and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in our Annual Report on
Form 10-K
for the year ended December 31, 2005 and Quarterly Report
for the quarter ended March 31, 2006 incorporated by
reference into this prospectus. For purposes of the computation
of the ratio of earnings to fixed charges, earnings consist of
income before income taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense on all
indebtedness plus the interest component of lease rental
expense. A ratio of combined fixed charges and preferred stock
dividends to earnings will be included as necessary in the
applicable prospectus supplement if we issue and sell preferred
stock thereunder.
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Year
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Nine Months
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Year
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Year
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Year
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Year
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Quarter
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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March 31,
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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March 31,
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2001
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2001
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2002
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2003
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2004
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2005
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2006
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Ratio of Earnings to Fixed
Charges(1)
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1.59x
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0.92x
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1.50x
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0.98x
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2.04x
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3.86x
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4.85x
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(1)
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Earnings were insufficient to cover
fixed charges by $9.6 million and $3.2 million for the
nine months ended December 31, 2001 and the year ended
December 31, 2003, respectively. Excluding
$38.6 million and $53.5 million of early debt
extinguishment costs incurred in the nine months ended
December 31, 2001 and the year ended December 31,
2003, respectively, the ratio of earnings to fixed charges was
1.23x and 1.34x during the respective periods.
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USE OF
PROCEEDS
Unless otherwise indicated in the prospectus supplement, we will
use all or a portion of the net proceeds from the sale of our
securities offered by this prospectus and the prospectus
supplement for general corporate purposes. General corporate
purposes may include repayment of other debt, capital
expenditures, possible acquisitions and any other purposes that
may be stated in any prospectus supplement. The net proceeds may
be invested temporarily or applied to repay short-term or
revolving debt until they are used for their stated purpose.
DIVIDEND
POLICY
We currently declare and pay quarterly dividends of
$0.06 per share. The declaration and payment of dividends
and the amount of dividends will depend on our results of
operations, financial condition, cash requirements, future
prospects, any limitations imposed by our debt instruments and
other factors deemed relevant by our board of directors;
however, we presently expect that dividends will continue to be
paid.
3
DESCRIPTION
OF DEBT SECURITIES
The following description of the terms of the debt securities
summarizes certain general terms that will apply to the debt
securities offered by us. The description is not complete, and
we refer you to the indentures, which are included as exhibits
to the registration statement of which this prospectus is a
part. In addition, the terms described below may be amended,
supplemented or otherwise modified pursuant to one or more
supplemental indentures. Any such amendments, supplements or
modifications will be set forth in the applicable prospectus
supplement. Capitalized items have the meanings assigned to them
in the indentures. The referenced sections of the indentures and
the definitions of capitalized terms are incorporated by
reference in the following summary.
The debt securities that we may issue will be senior, senior
subordinated or subordinated debt, may be guaranteed by
substantially all of our domestic subsidiaries, and may be
convertible into shares of our common stock.
The senior, senior subordinated or subordinated debt securities
that we may issue will be issued under separate indentures among
us, U.S. Bank National Association, as trustee and, if
guaranteed, the subsidiary guarantors thereto. Senior debt
securities will be issued under a Senior Indenture,
senior subordinated debt securities and subordinated debt
securities will be issued under a Subordinated
Indenture. Collectively, we refer to the Senior Indenture
and the Subordinated Indenture as the Indentures.
For purposes of the summary set forth below, obligor
refers to Peabody Energy Corporation. This summary of the
Indentures is qualified by reference to the Indentures. You
should refer to the Indentures in addition to reading this
summary. The summary is not complete and is subject to the
specific terms of the Indentures.
General
Under the Indentures, we will be able to issue from time to
time, in one or more series, an unlimited amount of debt
securities. Each time that we issue a new series of debt
securities, the supplement to the prospectus relating to that
new series will specify the terms of those debt securities,
including:
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designation, amount and denominations;
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percentage of principal amount at which the debt securities will
be issued;
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maturity date;
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interest rate and payment dates;
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terms and conditions of exchanging or converting debt securities
for other securities;
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the currency or currencies in which the debt securities may be
issued;
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redemption terms;
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whether the debt securities will be guaranteed by our
subsidiaries;
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whether the debt securities
and/or any
guarantees will be senior, senior subordinated or
subordinated; and
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any other specific terms of the debt securities, including any
deleted, modified or additional events of default or remedies or
additional covenants provided with respect to the debt
securities, and any terms that may be required by or advisable
under applicable laws or regulations.
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Unless otherwise specified in any prospectus supplement, the
debt securities will be issuable in registered form without
coupons and in denominations of $1,000 and any integral multiple
thereof. No service charge will be made for any transfer or
exchange of any debt securities, but the issuer may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Debt securities may bear interest at a fixed rate or a floating
rate. Debt securities bearing no interest or interest at a rate
that at the time of issuance is below the prevailing market rate
may be sold at a discount below their stated principal amount.
Special U.S. federal income tax considerations applicable
to discounted debt securities or to some debt securities issued
at par that are treated as having been issued at a discount for
U.S. federal income tax purposes will be described in the
applicable prospectus supplement.
4
In determining whether the holders of the requisite aggregate
principal amount of outstanding debt securities of any series
have given any request, demand, authorization, direction,
notice, consent or waiver under the Indentures, the principal
amount of any series of debt securities originally issued at a
discount from their stated principal amount that will be deemed
to be outstanding for such purposes will be the amount of the
principal thereof that would be due and payable as of the date
of the determination upon a declaration of acceleration of the
maturity thereof.
Payments relating to the debt securities generally will be paid
by us, at U.S. Bank National Associations corporate
trust office. However, we may elect to pay interest by mailing
checks directly to the registered holders of the debt
securities. You can transfer your debt securities at
U.S. Bank National Associations corporate trust
office.
Ranking
Unless otherwise described in the prospectus supplement for any
series, the debt securities that we issue will be unsecured and
will rank on a parity with all of our other unsecured and
unsubordinated indebtedness.
We conduct a material amount of our operations through our
subsidiaries. Our right to participate as a shareholder in any
distribution of assets of any of our subsidiaries (and thus the
ability of holders of the debt securities that we issue to
benefit as creditors of Peabody Energy Corporation from such
distribution) is junior to creditors of that subsidiary. As a
result, claims of holders of the debt securities that we issue
will generally have a junior position to claims of creditors of
our subsidiaries, except to the extent that we may be recognized
as a creditor of those subsidiaries or those subsidiaries
guarantee the debt securities.
Reopening
of Issue
We may, from time to time, reopen an issue of debt securities
without the consent of the holders of the debt securities and
issue additional debt securities with the same terms (including
maturity and interest payment terms) as debt securities issued
on an earlier date. After such additional debt securities are
issued they will be fungible with the previously issued debt
securities to the extent specified in the applicable prospectus
supplement.
Debt
Guarantees
Our debt securities may be guaranteed by substantially all of
our domestic subsidiaries, the subsidiary
guarantors. If debt securities are guaranteed by
subsidiary guarantors, that guarantee will be set forth in the
applicable Indenture or a supplemental indenture.
Payments with respect to subsidiary guarantees of our senior
subordinated debt securities and subordinated debt securities
will be subordinated in right of payment to the prior payment in
full of all senior indebtedness of each such subsidiary
guarantor to the same extent and manner that payments with
respect to our senior subordinated debt securities and
subordinated debt securities are subordinated in right of
payment to the prior payment in full of all of our senior
indebtedness.
Merger
and Consolidation
Unless otherwise described in the prospectus supplement of any
series, we may, under the applicable Indenture, without the
consent of the holders of debt securities, consolidate with,
merge with or into or transfer all or substantially all of our
assets to any other corporation organized under the laws of the
United States or any of its political subdivisions provided that:
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the surviving corporation assumes all of our obligations under
the applicable Indenture;
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at the time of such transaction, no event of default, and no
event that, after notice or lapse of time, would become an event
of default, shall have happened and be continuing; and
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certain other conditions are met.
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Modification
Generally, our rights and obligations and the holders
rights may be modified with the consent of holders of a majority
of the outstanding debt securities of each series affected by
such modification. However, unless otherwise described in the
prospectus supplement of any series, no modification or
amendment may occur without the consent of the affected holder
of a debt security if that modification or amendment would do
any of the following:
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change the stated maturity date of the principal of, or any
installment of interest on, any of the holders debt
securities;
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reduce the principal amount of, or the interest (or premium, if
any) on, the debt security (including, in the case of a
discounted debt security, the amount payable upon acceleration
of maturity or provable in bankruptcy);
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change the currency of payment of the debt security;
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impair the right to institute suit for the enforcement of any
payment on the debt security or adversely affect the right of
repayment, if any, at the option of the holder;
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reduce the percentage of holders of debt securities necessary to
modify or amend the applicable Indenture or to waive any past
default;
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release a guarantor from its obligations under its guarantee,
other than in accordance with the terms thereof; or
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modify our obligations to maintain an office or agency in New
York City.
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A modification that changes a covenant or provision expressly
included solely for the benefit of holders of one or more
particular series will not affect the rights of holders of debt
securities of any other series.
Each Indenture provides that the obligor and U.S. Bank
National Association, as trustee, may make modifications without
the consent of the debt security holders in order to do the
following:
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evidence the assumption by a successor entity of the obligations
of the obligor under the applicable Indenture;
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convey security for the debt securities to U.S. Bank
National Association;
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add covenants, restrictions or conditions for the protection of
the debt security holders;
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provide for the issuance of debt securities in coupon or fully
registered form;
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establish the form or terms of debt securities of any series;
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cure any ambiguity or correct any defect in an Indenture that
does not adversely affect the interests of a holder;
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evidence the appointment of a successor trustee or more than one
trustee;
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surrender any right or power conferred upon us;
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comply with the requirements of the SEC in order to maintain the
qualification of the applicable Indenture under the Trust
Indenture Act of 1939, as amended;
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add or modify any other provisions with respect to matters or
questions arising under an Indenture that we and U.S. Bank
National Association may deem necessary or desirable and that
will not adversely affect the interests of holders of debt
securities;
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modify the existing covenants and events of default solely in
respect of, or add new covenants or events of default that apply
solely to, debt securities not yet issued and
outstanding; or
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to provide for guarantees of the debt securities and to specify
the ranking of the obligations of the guarantors under their
respective guarantees.
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6
Events of
Default
Under the Indentures, an event of default means, unless
otherwise described in the prospectus supplement of any series,
any one of the following:
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failure to pay interest on a debt security for 30 days;
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failure to pay principal and premium, if any, when due;
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failure to pay or satisfy a sinking fund installment when due;
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by Peabody Energy Corporation or by a guarantor of the debt
securities to perform any other covenant in the applicable
Indenture that continues for 60 days after receipt of
notice;
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certain events in bankruptcy, insolvency or
reorganization; or
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a guarantee being held in any judicial proceeding to be
unenforceable or invalid.
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An event of default relating to one series of debt securities
does not necessarily constitute an event of default with respect
to any other series issued under the applicable Indenture. If an
event of default exists with respect to a series of debt
securities, U.S. Bank National Association or the holders
of at least 25% of the then-outstanding debt securities of that
series may declare the principal of that series due and payable.
Any event of default with respect to a particular series of debt
securities may be waived by the holders of a majority of the
then-outstanding debt securities of that series, except for a
failure to pay principal premium or interest on the debt
security.
U.S. Bank National Association may withhold notice to the
holder of the debt securities of any default (except in payment
of principal, premium, interest or sinking fund payment) if
U.S. Bank National Association thinks that withholding such
notice is in the interest of the holders.
Subject to the specific duties that arise under the applicable
Indenture if an event of default exists, U.S. Bank National
Association is not obligated to exercise any of its rights or
powers under the applicable Indenture at the request of the
holders of the debt securities unless they provide reasonable
indemnity satisfactory to it. Generally, the holders of a
majority of the then-outstanding debt securities can direct the
proceeding for a remedy available to U.S. Bank National
Association or for exercising any power conferred on
U.S. Bank National Association as the trustee.
Trustees
Relationship
U.S. Bank National Association or its affiliates may from
time to time in the future provide banking and other services to
us in the ordinary course of its business. The Indentures
provide that we will indemnify U.S. Bank National
Association against any and all loss, liability, claim, damage
or expense incurred that arises from the trust created by the
applicable Indenture unless the loss, liability, claim, damage
or expense results from U.S. Bank National
Associations negligence or willful misconduct.
Global
Securities
We may issue some of the debt securities as global securities
that will be deposited with a depository identified in a
prospectus supplement. Global securities may be issued in
registered form and may be either temporary or permanent. A
prospectus supplement will contain additional information about
depository arrangements.
Registered global securities will be registered in the
depositorys name or in the name of its nominee. When we
issue a global security, the depository will credit that amount
of debt securities to the investors that have accounts with the
depository or its nominee. The underwriters or the debt security
holders agent will designate the accounts to be credited,
unless the debt securities are offered and sold directly by us,
in which case, we will designate the appropriate account to be
credited.
Investors who have accounts with a depository, and people who
have an interest in those institutions, are the beneficial
owners of global securities held by that particular depository.
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We will not maintain records regarding ownership or the transfer
of global securities held by a depository or to nominee. If you
are the beneficial owner of global securities held by a
depository, you must get information directly from the
depository.
As long as a depository is the registered owner of a global
security, that depository will be considered the sole owner of
the debt securities represented by that global security. Except
as set forth below, beneficial owners of global securities held
by a depository will not be entitled to:
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register the represented debt securities in their names;
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receive physical delivery of the debt securities; or
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be considered the owners or holders of the global security under
the applicable Indenture.
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Payments on debt securities registered in the name of a
depository or its nominee will be made to the depositary or its
nominee.
When a depository receives a payment, it must immediately credit
the accounts in amounts proportionate to the account
holders interests in the global security. The beneficial
owners of a global security should, and are expected to,
establish standing instructions and customary practices with
their investors that have an account with the depository, so
that payments can be made with regard to securities beneficially
held for them, much like securities held for the accounts of
customers in bearer form or registered in street
name.
A global security can only be transferred in whole by the
depository to a nominee of such depository or to another nominee
of a depository. If a depository is unwilling or unable to
continue as a depository and we do not appoint a successor
depository within ninety days, we will issue certificated debt
securities in exchange for all of the global securities held by
that depository. In addition, we may eliminate all global
securities at any time and issue certificated debt securities in
exchange for them. Further, we may allow a depository to
surrender a global security in exchange for certificated debt
securities on any terms that are acceptable to us and the
depository. Finally, an interest in the global security is
exchangeable for a certificated debt security if an event of
default has occurred as described above under Events of
Default.
If any of these events occur, we will execute, and
U.S. Bank National Association will authenticate and
deliver to the beneficial owners of the global security in
question, a new registered security in an amount equal to and in
exchange for that persons beneficial interest in the
exchange global security. The depository will receive a new
global security in an amount equal to the difference, if any,
between the amount of the surrendered global security and the
amount of debt securities delivered to the beneficial owners.
Debt securities issued in exchange for global securities will be
registered in the same names and in the same denominations as
indicated by the depositorys records and in accordance
with the instructions from its direct and indirect participants.
The laws of certain jurisdictions require some people who
purchase securities to actually take physical possession of
those securities. The limitations imposed by these laws may
impair your ability to transfer your beneficial interests in a
global security.
Conversion
Rights
The terms and conditions, if any, upon which the debt securities
are convertible into shares of our common stock will be set
forth in the prospectus supplement relating thereto. These terms
will include the conversion price, the conversion period,
provisions as to whether conversion will be at the option of the
Holder or us, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the
event of the redemption of those debt securities.
8
DESCRIPTION
OF CAPITAL STOCK
Our authorized capital stock consists of
(1) 800 million shares of common stock, par value
$0.01 per share, of which 264.5 million shares were
outstanding on March 31, 2006, (2) 10 million
shares of preferred stock, par value $0.01 per share
(1.5 million of which are reserved for Series A Junior
Participating Preferred Stock), of which no shares are issued or
outstanding, (3) 40 million shares of series common
stock, par value $0.01 per share, of which no shares are
issued or outstanding and (4) 1.5 million shares of
Series A Junior Participating Preferred Stock of which no
shares are issued or outstanding. As of March 31, 2006,
there were 744 holders of record of our common stock. The
following description of our capital stock and related matters
is qualified in its entirety by reference to our certificate of
incorporation and by-laws.
The following summary describes elements of our certificate of
incorporation and by-laws.
Common
Stock
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders and vote
together, as one class, with the holders of our Series A
Junior Participating Preferred Stock. The holders of common
stock do not have cumulative voting rights in the election of
directors. Holders of common stock are entitled to receive
ratably dividends if, as and when dividends are declared from
time to time by our board of directors out of funds legally
available for that purpose, after payment of dividends required
to be paid on outstanding preferred stock or series common
stock, as described below. Upon liquidation, dissolution or
winding up, any business combination or a sale or disposition of
all or substantially all of the assets, the holders of common
stock are entitled to receive ratably the assets available for
distribution to the stockholders after payment of liabilities
and accrued but unpaid dividends and liquidation preferences on
any outstanding preferred stock or series common stock. The
common stock has no preemptive or conversion rights and is not
subject to further calls or assessment by us. There are no
redemption or sinking fund provisions applicable to the common
stock.
Series A
Junior Participating Preferred Stock
Holders of shares of Series A Junior Participating
Preferred Stock (Series A Preferred Stock) are
entitled to receive quarterly dividend payments equal to the
greater of $1.00 per share or 400 times the per share
dividend declared on our common stock. Holders of Series A
Preferred Stock are entitled to 400 votes per share on all
matters to be voted upon by the stockholders and vote together,
as one class, with the holders of common stock. Upon
liquidation, dissolution or winding up, holders of our
Series A Preferred Stock are entitled to a liquidation
preference of $100 per share plus all accrued and unpaid
dividends and distributions on the Series A Preferred Stock
or 400 times the amount to be distributed per share on our
common stock, whichever is greater. Liquidation distributions
will be made ratably with all shares ranking on parity with the
Series A Preferred Stock. In the event of any merger,
consolidation, combination or other transaction in which shares
of our common stock are exchanged for other securities, cash or
property, each share of the Series A Preferred Stock will
be exchanged for 400 times the amount received per share on our
common stock. Each of these rights of our Series A
Preferred Stock is protected by customary anti-dilution
provisions. The Series A Preferred Stock is not redeemable
and it will rank junior to any other series of our preferred
stock with respect to the payment of dividends and the
distribution of assets.
Preferred
Stock and Series Common Stock
Our certificate of incorporation authorizes our board of
directors to establish one or more series of preferred stock or
series common stock. With respect to any series of preferred
stock or series common stock, our board of directors is
authorized to determine the terms and rights of that series,
including:
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the designation of the series;
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the number of shares of the series, which our board may, except
where otherwise provided in the preferred stock or series common
stock designation, increase or decrease, but not below the
number of shares then outstanding;
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whether dividends, if any, will be cumulative or non-cumulative
and the dividend rate of the series;
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the dates at which dividends, if any, will be payable;
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the redemption rights and price or prices, if any, for shares of
the series;
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the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the series;
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the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or
winding-up
of the affairs of our company;
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whether the shares of the series will be convertible into shares
of any other class or series, or any other security, of our
company or any other corporation, and, if so, the specification
of the other class or series or other security, the conversion
price or prices or rate or rates, any rate adjustments, the date
or dates as of which the shares will be convertible and all
other terms and conditions upon which the conversion may be made;
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restrictions on the issuance of shares of the same series or of
any other class or series; and
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the voting rights, if any, of the holders of the series.
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Unless required by law or by any stock exchange, the authorized
shares of preferred stock and series common stock, as well as
shares of common stock, are available for issuance without
further action by our stockholders.
Although we have no intention at the present time of doing so,
we could issue a series of preferred stock or series common
stock that could, depending on the terms of the series, impede
the completion of a merger, tender offer or other takeover
attempt. We will make any determination to issue preferred stock
or series common stock based on our judgment as to the best
interests of the company and our stockholders. We, in so acting,
could issue preferred stock or series common stock having terms
that could discourage an acquisition attempt or other
transaction that some, or a majority, of stockholders might
believe to be in their best interests or in which they might
receive a premium for their common stock over the market price
of the common stock.
Authorized
but Unissued Capital Stock
Delaware law does not require stockholder approval for any
issuance of authorized shares. However, the listing requirements
of the New York Stock Exchange, which would apply so long as the
common stock remains listed on the New York Stock Exchange,
require stockholder approval of certain issuances equal to or
exceeding 20% of the then-outstanding voting power or
then-outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved
common stock, preferred stock or series common stock may be to
enable our board of directors to issue shares to persons
friendly to current management, which issuance could render more
difficult or discourage an attempt to obtain control of our
company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of our management
and possibly deprive the stockholders of opportunities to sell
their shares of common stock at prices higher than prevailing
market prices.
Anti-Takeover
Effects of Provisions of Delaware Law and Our Charter and
By-laws
Delaware
Law
Our company is a Delaware corporation subject to
Section 203 of the Delaware General Corporation Law.
Section 203 provides that, subject to certain exceptions
specified in the law, a Delaware corporation shall not engage in
certain business combinations with any
interested stockholder for a three-year period
following the time that the stockholder became an interested
stockholder unless:
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prior to such time, our board of directors approved either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
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upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of our voting stock outstanding
at the time the transaction commenced, excluding certain
shares; or
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at or subsequent to that time, the business combination is
approved by our board of directors and by the affirmative vote
of holders of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
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Generally, a business combination includes a merger,
asset or stock sale or other transaction resulting in a
financial benefit to the interested stockholder. Subject to
certain exceptions, an interested shareholder is a
person who together with that persons affiliates and
associates owns, or within the previous three years did own, 15%
or more of our voting stock.
Under certain circumstances, Section 203 makes it more
difficult for a person who would be an interested
stockholder to effect various business combinations with a
corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring
our company to negotiate in advance with our board of directors
because the stockholder approval requirement would be avoided if
our board of directors approves either the business combination
or the transaction which results in the stockholder becoming an
interested stockholder. These provisions also may have the
effect of preventing changes in our board of directors and may
make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.
Certificate
of Incorporation; By-laws
Our certificate of incorporation and by-laws contain provisions
that could make more difficult the acquisition of the company by
means of a tender offer, a proxy contest or otherwise.
Classified Board. Our certificate of
incorporation provides that our board of directors will be
divided into three classes of directors, with the classes to be
as nearly equal in number as possible. As a result,
approximately one-third of the board of directors will be
elected each year. The classification of directors will have the
effect of making it more difficult for stockholders to change
the composition of our board. Our certificate of incorporation
provides that, subject to any rights of holders of preferred
stock or series common stock to elect additional directors under
specified circumstances, the number of directors will be fixed
in the manner provided in our by-laws. Our certificate of
incorporation and by-laws provide that the number of directors
will be fixed from time to time exclusively pursuant to a
resolution adopted by the board, but must consist of not less
than three directors. In addition, our certificate of
incorporation provides that, subject to any rights of holders of
preferred stock or series common stock and unless the board
otherwise determines, any vacancies will be filled only by the
affirmative vote of a majority of the remaining directors,
though less than a quorum.
Removal of Directors. Under Delaware General
Corporation Law, unless otherwise provided in our certificate of
incorporation, directors serving on a classified board may only
be removed by the stockholders for cause. In addition, our
certificate of incorporation and by-laws provide that directors
may be removed only for cause and only upon the affirmative vote
of holders of at least 75% of the voting power of all the
outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class.
Stockholder Action. Our certificate of
incorporation and by-laws provide that stockholder action can be
taken only at an annual or special meeting of stockholders and
may not be taken by written consent in lieu of a meeting. Our
certificate of incorporation and by-laws provide that special
meetings of stockholders can be called only by our chief
executive officer or pursuant to a resolution adopted by our
board of directors. Stockholders are not permitted to call a
special meeting or to require that the board of directors call a
special meeting of stockholders.
Advance Notice Procedures. Our by-laws
establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors, or bring
other business before an annual or special meeting of our
stockholders. This notice procedure provides that only persons
who are nominated by, or at the direction of our board of
directors, the chairman of the board, or by a stockholder who
has given timely written notice to the secretary of our company
prior to the meeting at which directors are to be elected, will
be eligible for election as directors. This procedure also
requires that, in order to raise matters at an annual or special
meeting, those matters
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be raised before the meeting pursuant to the notice of meeting
we deliver or by, or at the direction of, our chairman or by a
stockholder who is entitled to vote at the meeting and who has
given timely written notice to the secretary of our company of
his intention to raise those matters at the annual meeting. If
our chairman or other officer presiding at a meeting determines
that a person was not nominated, or other business was not
brought before the meeting, in accordance with the notice
procedure, that person will not be eligible for election as a
director, or that business will not be conducted at the meeting.
Amendment. Our certificate of incorporation
provides that the affirmative vote of the holders of at least
75% of the voting power of the outstanding shares entitled to
vote, voting together as a single class, is required to amend
provisions of our certificate of incorporation relating to the
prohibition of stockholder action without a meeting, the number,
election and term of our directors and the removal of directors.
Our certificate of incorporation further provides that our
by-laws may be amended by our board or by the affirmative vote
of the holders of at least 75% of the outstanding shares
entitled to vote, voting together as a single class.
Rights
Agreement
On July 23, 2002, our board of directors adopted a
preferred share purchase rights plan. In connection with the
rights plan, our board of directors declared a dividend of one
preferred share purchase right for each outstanding share of our
common stock. The rights dividend was paid on August 12,
2002 to the stockholders of record on that date.
Purchase Price. Each right entitles the
registered holder to purchase from us one quarter of one
one-hundredth of a share of our Series A Junior
Participating Preferred Stock, or preferred shares, par value
$0.01 per share, at a price of $27.50 per one quarter
of one one-hundredth of a preferred share, subject to adjustment.
Flip-In. In the event that any person or group
of affiliated or associated persons acquires beneficial
ownership of 15% or more of our outstanding common stock, each
holder of a right, other than rights beneficially owned by the
acquiring person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number
of shares of our common stock having a market value of two times
the exercise price of the right.
Flip-Over. If we are acquired in a merger or
other business combination transaction, or 50% or more of our
consolidated assets or earning power are sold after a person or
group acquires beneficial ownership of 15% or more of our
outstanding common stock, each holder of a right (other than
rights beneficially owned by the acquiring person, which will be
void) will thereafter have the right to receive that number of
shares of common stock of the acquiring company which at the
time of such transaction will have a market value of two times
the exercise price of the right.
Distribution Date. The distribution date is
the earlier of:
(1) 10 days following a public announcement that a
person or group of affiliated or associated persons have
acquired beneficial ownership of 15% or more of our outstanding
common stock; or
(2) 10 business days (or such later date as may be
determined by action of our board of directors prior to such
time as any person or group of affiliated persons acquires
beneficial ownership of 15% or more of our outstanding common
stock) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership
by a person or group of 15% or more of our outstanding common
stock.
Transfer and Detachment. Until the
distribution date, the rights will be evidenced either by book
entry in our direct registration system or, with respect to any
of our common stock certificates outstanding as of
August 12, 2002, by such common stock certificate with a
copy of the Summary of Rights attached thereto. Until the
distribution date (or earlier redemption or expiration of the
rights), the rights will be transferred with and only with the
common stock, and transfer of those shares will also constitute
transfer of the rights.
As soon as practicable following the distribution date, separate
certificates evidencing the rights will be mailed to holders of
record of our common stock as of the close of business on the
distribution date and the separate certificates evidencing the
rights alone will thereafter evidence the rights.
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Exercisability. The rights are not exercisable
until the distribution date. The rights will expire at the
earliest of (1) August 11, 2012, unless that date is
extended, (2) the time at which we redeem the rights, as
described below, or (3) the time at which we exchange the
rights, as described below.
Adjustments. The purchase price payable, and
the number of preferred shares or other securities or property
issuable, upon exercise of the rights are subject to adjustment
from time to time to prevent dilution in the event of stock
dividends, stock splits, reclassifications, or certain
distributions with respect to the preferred shares. The number
of outstanding rights and the number of one quarter of one
one-hundredths of a preferred share issuable upon exercise of
each right are also subject to adjustment if, prior to the
distribution date, there is a stock split of our common stock or
a stock dividend on our common stock payable in common stock or
subdivisions, consolidations or combinations of our common stock.
With certain exceptions, no adjustment in the purchase price
will be required until cumulative adjustments require an
adjustment of at least 1% in the purchase price. No fractional
preferred shares will be issued (other than fractions which are
integral multiples of one quarter of one one-hundredth of a
preferred share, which may, at our election, be evidenced by
depositary receipts) and, in lieu thereof, an adjustment in cash
will be made based on the market price of the preferred shares
on the last trading day prior to the date of exercise.
Preferred Shares. Preferred shares purchasable
upon exercise of the rights will not be redeemable. Each
preferred share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but will be
entitled to an aggregate dividend of 400 times the dividend
declared per share of common stock. In the event of liquidation,
the holders of the preferred shares will be entitled to a
minimum preferential liquidation payment of $100 per share
but will be entitled to an aggregate payment of 400 times the
payment made per share of common stock. Each preferred share
will have 400 votes, voting together with the common stock.
Finally, in the event of any merger, consolidation or other
transaction in which shares of our common stock are exchanged,
each preferred share will be entitled to receive 400 times the
amount received per share of common stock. These rights are
protected by customary anti-dilution provisions.
The value of the one quarter of one one-hundredth interest in a
preferred share purchasable upon exercise of each right should,
because of the nature of the preferred shares dividend,
liquidation and voting rights, approximate the value of one
share of our common stock.
Exchange. At any time after any person or
group acquiring beneficial ownership of 15% or more of our
outstanding common stock, and prior to the acquisition by such
person or group of beneficial ownership of 50% or more of our
outstanding common stock, our board of directors may exchange
the rights (other than rights owned by the acquiring person,
which will have become void), in whole or in part, at an
exchange ratio of one share of our common stock, or one quarter
of one one-hundredth of a preferred share (subject to
adjustment).
Redemption. At any time prior to any person or
group acquiring beneficial ownership of 15% or more of our
outstanding common stock, our board of directors may redeem the
rights in whole, but not in part, at a price of $0.001 per
right. The redemption of the rights may be made effective at
such time on such basis with such conditions as our board of
directors in its sole discretion may establish. Immediately upon
any redemption of the rights, the right to exercise the rights
will terminate and the only right of the holders of rights will
be to receive the redemption price.
Amendments. The terms of the rights may be
amended by our board of directors without the consent of the
holders of the rights, including an amendment to lower certain
thresholds described above to not less than the greater of
(1) the sum of .001% and the largest percentage of our
outstanding common stock then known to us to be beneficially
owned by any person or group of affiliated or associated persons
and (2) 10%, except that from and after such time as any
person or group of affiliated or associated persons acquires
beneficial ownership of 15% or more of our outstanding common
stock, no such amendment may adversely affect the interests of
the holders of the rights.
Rights and Holders. Until a right is
exercised, the holder thereof, as such, will have no rights as a
stockholder of our company, including, without limitation, the
right to vote or to receive dividends.
Anti-takeover Effects. The rights have certain
anti-takeover effects. The rights will cause substantial
dilution to a person or group that attempts to acquire us on
terms not approved by our board of directors, except pursuant to
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any offer conditioned on a substantial number of rights being
acquired. The rights should not interfere with any merger or
other business combination approved by our board of directors
since the rights may be redeemed by us at the redemption price
prior to the time that a person or group has acquired beneficial
ownership of 15% or more of our common stock.
Registrar
and Transfer Agent
The registrar and transfer agent for the common stock is
American Stock Transfer & Trust Company.
Listing
The common stock is listed on the New York Stock Exchange under
the symbol BTU.
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DESCRIPTION
OF WARRANTS
The following description of the warrant agreements summarizes
certain general terms that will apply to the warrants that we
may offer. The description is not complete, and we refer you to
the warrant agreements, which will be filed with the SEC
promptly after the offering of any warrants and will be
available as described under the heading Incorporation of
Certain Documents by Reference in this prospectus.
We may issue warrants to purchase debt securities, common stock,
preferred stock or other securities. We may issue warrants
independently or as part of a unit with other securities.
Warrants sold with other securities as a unit may be attached to
or separate from the other securities. We will issue warrants
under one or more warrant agreements between us and a warrant
agent that we will name in the applicable prospectus supplement.
The prospectus supplement relating to any warrants we are
offering will include specific terms relating to the offering,
including a description of any other securities sold together
with the warrants. These terms will include some or all of the
following:
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the title of the warrants;
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the aggregate number of warrants offered;
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the price or prices at which the warrants will be issued;
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the currency or currencies, including composite currencies, in
which the prices of the warrants may be payable;
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the designation, number and terms of the debt securities, common
stock, preferred stock or other securities or rights, including
rights to receive payment in cash or securities based on the
value, rate or price of one or more specified commodities,
currencies or indices, purchasable upon exercise of the warrants
and procedures by which those numbers may be adjusted; the
exercise price of the warrants and the currency or currencies,
including composite currencies, in which such price is payable;
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the dates or periods during which the warrants are exercisable;
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the designation and terms of any securities with which the
warrants are issued as a unit;
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if the warrants are issued as a unit with another security, the
date on and after which the warrants and the other security will
be separately transferable;
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if the exercise price is not payable in U.S. dollars, the
foreign currency, currency unit or composite currency in which
the exercise price is denominated;
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any minimum or maximum amount of warrants that may be exercised
at any one time;
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any terms relating to the modification of the warrants; and
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any other terms of the warrants, including terms, procedures and
limitations relating to the transferability, exchange, exercise
or redemption of the warrants.
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Warrants issued for securities other than our debt securities,
common stock or preferred stock will not be exercisable until at
least one year from the date of sale of the warrant.
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DESCRIPTION
OF UNITS
The following descriptions of the units and any applicable
underlying security or pledge or depository arrangements
summarizes certain general terms that will apply to the
applicable agreements. These descriptions do not restate those
agreements in their entirety. We urge you to read the applicable
agreements because they, and not the summaries, define your
rights as holders of the units. We will make copies of the
relevant agreements available as described under the heading
Incorporation of Certain Documents by Reference in
this prospectus.
As specified in the applicable prospectus supplement, we may
issue units comprised of one or more of the other securities
described in this prospectus in any combination. Each unit may
also include debt obligations of third parties, such as
U.S. Treasury securities. Each unit will be issued so that
the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security.
The prospectus supplement will describe:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what
circumstances the securities comprising the units may be held or
transferred separately;
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a description of the terms of any unit agreement governing the
units;
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a description of the provisions for the payment, settlement,
transfer or exchange of the units; and
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whether the units will be issued in fully registered or global
form.
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PLAN OF
DISTRIBUTION
We may sell the securities offered by this prospectus:
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to or through underwriting syndicates represented by managing
underwriters;
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through one or more underwriters without a syndicate for them to
offer and sell to the public;
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through dealers or agents; or
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to one or more purchasers directly.
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The applicable prospectus supplement will describe that
offering, including:
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the name or names of any underwriters, dealers or agents
involved in the sale of the offered securities;
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the purchase price and the proceeds to us from that sale;
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any underwriting discounts, commissions agents fees and
other items constituting underwriters or agents
compensation;
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any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers; and
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any securities exchanges on which the offered securities may be
listed.
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If underwriters are used in the sale, the offered securities
will be acquired by the underwriters for their own account. The
underwriters may resell the offered securities in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the
time of sale. The offered securities may be offered through an
underwriting syndicate represented by many underwriters. The
obligations of the underwriters to purchase the offered
securities will be subject to certain conditions. The
underwriters will be obligated to purchase all of the offered
securities if any are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The offered securities may be sold directly by us or through
agents. Any agent will be named, and any commissions payable to
that agent will be set forth in the prospectus supplement.
Unless otherwise indicated in the prospectus supplement, any
agent will be acting on a best efforts basis.
We may authorize agents, underwriters or dealers to solicit
offers by specified institutions to purchase securities offered
by this prospectus pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the
future. These contracts will be subject only to those conditions
set forth in the prospectus supplement. The prospectus
supplement will set forth the commission payable for soliciting
such contracts.
We may agree to indemnify underwriters, dealers or agents
against certain civil liabilities, including liabilities under
the Securities Act, and may also agree to contribute to payments
which the underwriters, dealers or agents may be required to
make.
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LEGAL
MATTERS
The validity of each of the securities offered by this
prospectus will be passed upon for us by Simpson
Thacher & Bartlett LLP, New York, New York.
EXPERTS
The consolidated financial statements of Peabody Energy
Corporation incorporated by reference in Peabody Energy
Corporations Annual Report on
Form 10-K
for the year ended December 31, 2005 (including schedules
appearing therein), and Peabody Energy Corporations
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2005
included and incorporated by reference therein, have been
audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their reports thereon,
included and incorporated by reference therein, and incorporated
herein by reference. Such consolidated financial statements and
managements assessment are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the Securities and Exchange Commission, or SEC.
You may access and read our SEC filings, through the SECs
Internet site at www.sec.gov. This site contains reports and
other information that we file electronically with the SEC. You
may also read and copy any document we file at the SECs
public reference room located at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our
filings with the SEC are also available to the public on our
website at http://www.peabodyenergy.com. Information contained
on our website is not part of this prospectus or any prospectus
supplement. In addition, reports, proxy statements and other
information concerning us may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
We have filed with the SEC a registration statement under the
Securities Act with respect to the securities 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 terms of
those documents that we consider material. If you want a
complete description of the content of the documents, you should
obtain the documents yourself by following the procedures
described above.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
We have elected to incorporate by reference certain
information into this prospectus, which means we can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this
prospectus.
We incorporate by reference our:
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Annual report on
Form 10-K
for the year ended December 31, 2005, as filed on
March 6, 2006 (as amended by the
Form 10-K/A
filed on March 7, 2006);
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Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006, as filed on
May 9, 2006;
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Current Reports on
Form 8-K
filed with the SEC on May 10, 2006 and July 7,
2006; and
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Form 8-A
filed with the SEC on May 1, 2001, including any amendments
or supplements thereto.
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We are also incorporating by reference all other reports that we
file in the future with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the date of the
completion of this offering; provided, however, that we are not
incorporating any information furnished under either
Item 2.02 or Item 7.01 of any current report on
Form 8-K.
Any statement contained in a document incorporated or deemed to
be incorporated by
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reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus modifies or
supersedes that statement. Any statement that is modified or
superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
You may request copies of the filings, at no cost, by telephone
at
(314) 342-3400
or by mail at: Peabody Energy Corporation, 701 Market Street,
Suite 700, St. Louis, Missouri 63101, attention:
Investor Relations.
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