PERIOD ENDED DECEMBER 31, 2005 Annual ... - Peabody Energy

A summary of options outstanding and exercisable as ofDecember 31, 2005 is as follows:Options OutstandingOptions ExercisableWeighted-Average Weighted- Weighted-Remaining Average AverageRange of Contractual Exercise ExerciseExercise Prices Number Life Price Number Price$3.58 5,900,708 3.1 $ 3.58 504,500 $ 3.58$5.85 to $6.82 469,682 6.0 6.70 460,806 6.71$6.83 to $7.80 1,605,136 6.6 7.23 832,060 7.16$7.81 to $8.77 367,566 7.8 8.40 321,710 8.46$8.78 to $9.75 404,000 7.8 9.74 402,666 9.75$9.76 to $10.72 1,482,656 8.0 10.49 263,098 10.49$10.73 to $17.24 137,432 8.4 12.20 40,494 12.24$17.25 to $25.86 406,654 9.1 20.24$25.87 to $30.66 9,952 9.6 30.5110,783,786 2,825,334The weighted-average fair values of the Company’s stockoptions and the assumptions used in applying the Black-Scholes option pricing model (for grants during the yearsended December 31, 2005, 2004 and 2003) were as follows:December 31,2005 2004 2003Weighted-average fair value $8.03 $4.46 $3.38Risk-free interest rate 3.6% 3.9% 3.6%(21) ACCUMULATED OTHER COMPREHENSIVEINCOME (LOSS)The after-tax components of accumulated othercomprehensive income (loss) are as follows:TotalForeign Minimum AccumulatedCurrency Pension OtherTranslation Liability Cash Flow Comprehensive(Dollars in thousands) Adjustment Adjustment Hedges LossDecember 31, 2002 $ 15 $(77,642) $ – $(77,627)Net decrease in value ofcash flow hedges – – (4,955) (4,955)Reclassification from othercomprehensive income to earnings – – (2,086) (2,086)Current period change 3,138 (42) – 3,096December 31, 2003 3,153 (77,684) (7,041) (81,572)Net increase in value ofcash flow hedges – – 17,329 17,329Reclassification from othercomprehensive income to earnings – – (2,414) (2,414)Current period change – 6,039 – 6,039December 31, 2004 3,153 (71,645) 7,874 (60,618)Net increase in value ofcash flow hedges – – 36,154 36,154Reclassification from othercomprehensive income to earnings – – (24,733) (24,733)Current period change – 2,402 – 2,402December 31, 2005 $3,153 $(69,243) $ 19,295 $(46,795)Expected option life 5.7 years 5.9 years 6.6 yearsExpected volatility 40% 40% 42%Dividend yield 1.0% 1.0% 1.4%Employee Stock Purchase PlanDuring 2001, the Company adopted an employee stockpurchase plan. Total shares of common stock available forpurchase under the plan were 6.0 million. Eligible full-time andpart-time employees are able to contribute up to 15% of theirbase compensation into this plan, subject to a limit of $25,000per year. Employees are able to purchase Company commonstock at a 15% discount to the lower of the fair market valueof the Company’s common stock on the initial and endingdates of each offering period. Shares purchased under the planwere 0.2 million, 0.3 million and 0.3 million for the years endedDecember 31, 2005, 2004 and 2003, respectively.79