A 2-for-1 split means the investor will have twice as many shares as they had before the split, at half the market price. For example: As of the record date (February 7, 2006) if an investor owned 100 shares of BTU and the market price was $100.00 per share, that investor's total value was $10,000. After the split, the investor had 200 shares of stock, and the market price was approximately $50.00 per share. The investor's total investment value in BTU remains the same, $10,000, until the share price changes.

 

The February 2006 2-for-1 stock split is Peabody's second split since its May 2001 initial public offering. The first split was in March 2005.

 

The decision to split the stock was made by Peabody's Board of Directors in the best interests of the shareholders, based on a number of factors including the decision to make the stock more accessible to a broader range of investors.

 

There are several key dates.

• The Record Date - February 7, 2006 - Determines which shareholders are entitled to receive additional shares due to the split;
• The Mailing or Payment Date - February 22, 2006 - The date when holders of record or brokers are mailed notification of the shares subject to split; and
• The Ex-split Date - February 23, 2006 - The date when BTU common shares begin trading on the New York Stock Exchange (NYSE) at the new split-adjusted price.

February 7, 2006. If you owned common shares on the record date, your shares were subject to the stock split.

 

February 22, 2006. On this the date Peabody's stock transfer agent will mail written notice to registered common shareholders indicating their split-adjusted share amounts. This is also called the distribution date.

 

February 23, 2006. On this date Peabody Energy's common stock begins trading at its split-adjusted price on the NYSE. This is also referred to as the "ex-date."

 

Most shareholders have their stock held in "street name" with a broker. On February 22, 2006, Peabody's stock transfer agent will mail a written notice to the listed broker indicating the split-adjusted holdings. You need to take no action except monitor that the change occurred, usually by reviewing the brokerage statement following the payable date of the split. This includes most shares owned by employees through Peabody's Employee Stock Purchase Plan (ESPP) and 401(k) programs.

 

Registered shareholders that are not restricted will have their holdings automatically adjusted. Peabody's transfer agent will mail a statement reflecting the split to the address on file. Any future sales of shares resulting from the split will require either conversion of the additional shares to certificate form or coordination of a sale through Peabody's transfer agent.

 

Registered shareholders that are also restricted automatically receive an additional certificate for each certificate currently held. The new certificate(s) will be mailed to the address on file with Peabody's transfer agent. New share certificates should be kept in a secure location with the existing certificates.

 

Statements for registered but not restricted shareholders and certificates for registered and restricted shareholders will be mailed to the address on file with Peabody's stock transfer agent.

 

Peabody's transfer agent will mail written notice to registered shareholders indicating their split-adjusted shares. If your stock is currently held in a brokerage account, the information will be sent directly to your broker.

 

All values and options are adjusted to reflect the split, so that the underlying value does not change. For instance, if you had 300 options with an exercise price of $41.95, following the split you had 600 options with an exercise price of $20.975. This also applies to participants who received a restricted stock awards and any shares owned through the 401k plan.

 

Both shares and options can be traded between the record and payable dates. For shares purchased on or after the record date and before the ex-split date, you will not receive the additional shares. If you own shares on the ex-split date, you will receive the additional split shares. Option transactions generally follow the same guidelines as share transactions. Settlements will continue to occur within three business days.

 

It is expected that the NYSE will authorize a "when issued" market for the new split shares under the "BTU wi" symbol. This will likely occur two trading days prior to the February 7, 2006 record date. Trading in the "when issued" market will reflect the anticipated split value of BTU shares. BTU has no involvement in when-issued trading. You should check with your broker if you are interested in when-issued trading.

 

Under current federal income tax law, the stock split does not result in a capital gain or loss or receipt of ordinary income to shareholders. The tax basis of each share of common stock received as a result of the split would be equal to one half of the tax basis of its corresponding share held immediately prior to the split. For capital gain purposes, the holding period of each share received as a result of the split will be the same as the holding period of its corresponding share held immediately before the spilt.

 

Peabody's per-share calculations will reflect the new split for all values, including historic reporting included in the 2005 annual report and Form 10K. For instance, Peabody's 2005 earnings will be restated from $3.15 per share to $1.58 per share post-split.

 

Peabody's stock transfer agent is American Stock Transfer & Trust Company (AST). The firm purchased Peabody's previous transfer agent, Wachovia Bank, N. A. effective December 2005. AST can be reached at:

 

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