|
Why did Peabody spin off its West Virginia and Kentucky coal operations?
We believe the spin-off unlocks long-term value for shareholders, who retain ownership in the world's largest private-sector coal company and also have ownership in a leading Eastern U.S. producer with a major metallurgical and steam coal position. With the spin-off, both companies are able to pursue their distinct growth plans and business focus.
What can you tell me about the Patriot Coal spin-off?
On April 19, 2007, Peabody announced the initiation of a strategic review of West Virginia and Kentucky coal operations. The expected result was a spin-off or other transaction involving these assets to enhance long-term shareholder value. Securities and Exchange Commission (SEC) filings were made as part of a potential spin-off of these assets into a new company, Patriot Coal Corporation. On October 10, 2007, Peabody's Board of Directors approved the spin-off of Patriot Coal Corporation via a stock dividend to Peabody shareholders and on October 15, 2007 Patriot Coal's registration statement was declared effective by the SEC. Patriot Coal became its own company and began trading on the NYSE under the symbol "PCX" on November 1.
What did Peabody's shareholders receive as a result of the spin-off of Patriot Coal?
Holders of Peabody stock received one share of Patriot Coal Corporation for every 10 shares of Peabody that they owned. The Patriot Coal Corporation shares were distributed after the close of business on October 31, 2007.
Where are Patriot Coal Corporation shares traded and what is its ticker symbol?
Patriot Coal Corporation is traded on the New York Stock Exchange (NYSE) under the ticker symbol "PCX."
What was the dollar value of the spin-off? How was the value calculated?
The value of Patriot Coal shares was determined by trading activity on the NYSE.
What was the record date for the spin-off?
The record date was October 22, 2007, with ownership determined as of 5:00 p.m. Eastern Time on that date.
When were the shares of Patriot Coal distributed?
Shares of Patriot Coal Corporation (NYSE: PCX) were distributed to Peabody shareholders after the close of business on October 31, 2007, the distribution date.
What happened if I owned shares of Peabody on the record date but sold my shares prior to the distribution date?
To qualify for the benefits of the stock dividend distribution of Patriot Coal shares, you must have owned your shares on the distribution date, October 31, 2007.
Was it possible to effectively trade Peabody or Patriot Coal on a post-spin basis before the spin-off?
The NYSE authorized a "when issued" market for both Peabody and Patriot Coal under the symbols "BTU wi" and "PCX wi", respectively, which began October 18, 2007. Trading in the "when issued" market allowed investors to initiate post-spin trades in either Peabody or Patriot Coal, prior to the actual spin-off occurring. The trades were conditional on the spin's planned completion on October 31, 2007. BTU wi shares were not entitled to the benefits of the Patriot Coal distribution.
Are there any transition agreements between Peabody and Patriot Coal now that the spin-off is complete?
There are a number of transition services between Peabody and Patriot Coal. Additional details regarding these services can be found in Patriot Coal's registration statement filed on Form 10 with the SEC.
Back
How did my ownership in Peabody change as a result of the spin-off?
The number of shares of Peabody stock that you own did not change as a result of the spin-off, but the dollar value of those shares may have.
What happens if the shares that I owned were not evenly divisible? How were fractional shares treated in the spin-off?
If you were entitled to receive fractional shares of Patriot Coal stock in the spin-off, you received a taxable cash payment in lieu of the fractional shares. Fractional shares of Patriot Coal stock were not issued.
Back
I am not a registered shareholder; I own my shares through a broker. How was I credited with my Patriot Coal shares?
To receive the benefits of the stock dividend distribution of Patriot Coal shares, you must have owned Peabody stock at the close of business on the distribution date, October 31, 2007. You should receive notification of your Patriot Coal shares and/or cash settlement of any fractional shares via a statement from your broker. Any questions about shares held in street name should be directed to your broker or account representative.
I am a registered shareholder. Will I receive Patriot Coal stock certificates?
Registered holders of Peabody stock entitled to the distribution will receive a book-entry account statement reflecting their ownership in Patriot Coal. A cash payment in lieu of fractional shares will be mailed along with the statements. For additional information, registered shareholders should contact Peabody's transfer agent.
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Telephone: 1-800-937-5449 for residents of the U.S. or Canada
 1-718-921-8124 for residents outside the U.S. and Canada
www.amstock.com
If I invest in a mutual fund that holds Peabody common stock, was I entitled to receive Patriot Coal common stock?
If you hold a mutual fund that owns Peabody common stock, you need to check with the mutual fund advisor to see how the distribution was treated by the mutual fund.
I owned Peabody shares through the ESPP. Did the spin-off impact these shares?
Holdings within the ESPP program received the same treatment as any other shareholding. For questions about your ESPP accounts, please contact the plan administrator, A.G. Edwards, at (800) 925-5051.
Do I need to do anything with my Peabody stock certificates? Should I send them to the transfer agent or to Peabody?
No action is required. You should retain your Peabody stock certificates.
Who is the transfer agent for Patriot Coal?
Patriot Coal selected Peabody's transfer agent, American Stock Transfer & Trust Company, as its transfer agent.
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Telephone: 1-800-937-5449 for residents of the U.S. or Canada
1-718-921-8124 for residents outside the U.S. and Canada
www.amstock.com
Back
How will the conversion ratio on the 4.75% convertible bonds be adjusted and when will I be notified?
A revised conversion ratio has been calculated as required by the terms of the bond indenture based on the daily closing prices of Peabody and Patriot stocks for the ten-day trading period between November 8 through the close of business on November 21. The ratio has been adjusted to equal 17.1078, effective November 23, 2007. Bondholders were notified by the bond trustee, U.S. Bank, N.A., of this change in the conversion ratio. For those holding the bonds in street name, notification from their broker may take an additional one to two weeks to be delivered.
Back
Why was this called a tax-free spin-off, and what are the tax consequences to Peabody shareholders?
Peabody received a favorable ruling from the IRS and a favorable opinion from the company's auditor, Ernst & Young LLP, confirming the spin-off's tax-free status. Any cash received in lieu of fractional shares will be taxable.
As a result of the spin-off, how do I calculate the tax basis of my Peabody and Patriot Coal stock?
There are multiple ways to allocate your tax basis between your Peabody shares and your new Patriot shares. One such method is to determine the tax basis based on the fair value of both Peabody and Patriot stock as of the open of trading on November 1, 2007, the first day of "regular" way trading for Patriot. Using this basis and the ten Peabody shares to one Patriot distribution ratio, Peabody believes that 93.72% of your pre-distribution Federal income tax basis in your Peabody common stock would be allocated to your Peabody common stock and that 6.28% of such basis would be allocated to your Patriot common stock. For example, assume you originally purchased 1,000 shares of Peabody at $25.00 per share for $25,000 total.
How is the Patriot spin-off treated for Canadian tax purposes?
The Canadian Revenue Agency has ruled that the Patriot spin-off qualifies for tax deferral treatment under section 86.1(2)(e) of the Canada Income Tax Act.
Canadian resident shareholders of Peabody Energy stock can elect to defer taxation on the Patriot shares until sold rather than being taxed as a foreign dividend in the year of spin. The election can be made by including a letter with their 2007 income tax return (electronic filing cannot be used for such year).
The letter must contain the following information:
- written notification that the shareholder is electing to defer taxation on the Patriot shares (including a description of both the Peabody and Patriot shares);
- the number of shares, cost basis, and fair market value of the Peabody shares immediately before and after the distribution;
- and the number and fair market value of the Patriot shares immediately after distribution.
If the election is made, the adjusted cost basis of the Patriot shares will be determined by allocating a portion of the cost basis from the Peabody Energy shares to the Patriot shares. Examples for computing the adjusted cost basis of the Patriot shares as well as the notice of qualification for section 86.1 treatment can be found on the Canada Revenue Agency website under "foreign spin-offs" at www.cra-arc.gc.ca/tx/bsnss/tpcs/frgn-eng.html.
Is the Patriot Coal spin-off tax free for foreign shareholders?
Certain non-U.S. jurisdictions may choose to subject this type of corporate reorganization to taxation even though the distribution of Patriot Coal common shares is not taxable under U.S. Federal law. You should consult your own tax advisor regarding the particular consequences of the spin-off to you, including the applicability and effect of any U.S. federal, state, local and foreign tax laws.
Back
How did the Patriot Coal spin-off affect the composition of the Board of Directors for Peabody?
Irl F. Engelhardt and B. R. Brown resigned from Peabody's Board of Directors to become Directors of Patriot Coal. Peabody's President and Chief Executive Officer, Greg Boyce, was appointed Chairman.
How did the Patriot Coal spin-off affect the management structure and leadership of Peabody?
Select members of Peabody management transfered to Patriot Coal. Patriot Coal's management team was identified in its registration statement filed on Form 10 with the SEC.
Was a shareholder vote required to complete the Patriot Coal spin-off?
Shareholder approval was not required for the spin-off in accordance with Peabody's corporate charter.
Back
Will Peabody continue to pay the same dividend as before the spin-off?
The company's dividend policy was unaffected by the spin-off. On October 18, 2007, Peabody announced a $0.06 dividend payable on November 23, 2007 to record holders of Peabody stock on November 7, 2007.
Will Peabody report Patriot Coal as a "discontinued operation" in its financial results for the current year?
The assets transferred to Patriot Coal will be reported as a "discontinued operation" on Peabody's year-end 2007 financials.
How can I get more information about the spin-off?
If you have questions about Peabody, please continue checking the website, PeabodyEnergy.com.
If you have questions about Patriot Coal, you may visit PatriotCoal.com or contact Patriot Coal's Investor Relations at (314) 275-3680.
Back
| 
Patriot Spin-off FAQs
