What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-07 compared with 2020-05-06 · 438 added, 247 removed, 473 unchanged (59% of the section changed)

4 unchanged sentences

Cautionary Notice Regarding Forward-Looking Statements

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and are intended to come within the safe harbor protection provided by those sections.

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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, including, without limitation, the section captioned “Outlook” in this Item 2.

27 unchanged sentences

• our global operations increase our exposure to risks unique to international mining and trading operations;

our proposed joint venture with Arch Coal, Inc.

(Arch) may not be completed;

• our proposed joint venture with Arch Resources, Inc.,(Arch), known as Arch Coal, Inc.

prior to May 15, 2020, may not be completed;

• joint ventures, partnerships or non-managed operations may not be successful and may not comply with our operating standards;

1 unchanged sentence

• we could be exposed to significant liability, reputational harm, loss of revenue, increased costs or other risks if we sustain cyber-attacks or other security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us, our employees, our customers or other third-parties;

our business, results of operations, financial condition and prospects could be materially and adversely affected by the recent COVID-19 pandemic and the related effects on public health, or by other global events;

• our business, results of operations, financial condition and prospects could be materially and adversely affected by the recent coronavirus (COVID-19) pandemic and the related effects on public health;

• our expenditures for postretirement benefit obligations could be materially higher than we have predicted if our underlying assumptions prove to be incorrect;

4 unchanged sentences

• the terms of our indenture governing our senior secured notes and the agreements and instruments governing our other indebtedness impose restrictions that may limit our operating and financial flexibility;

the number and quantity of viable financing alternatives available to us may be significantly impacted by unfavorable lending and investment policies by financial institutions and insurance companies associated with concerns about environmental impacts of coal combustion, and negative views around our efforts with respect to environmental and social matters and related governance considerations could harm the perception of our company by certain investors or result in the exclusion of our securities from consideration by those investors;

• the number and quantity of viable financing and insurance alternatives available to us may be significantly impacted by unfavorable lending and investment policies by financial institutions and insurance companies associated with concerns about environmental impacts of coal combustion, and negative views around our efforts with respect to environmental and social matters and related governance considerations could harm the perception of our company by certain investors or result in the exclusion of our securities from consideration by those investors;

• the price of our securities may be volatile;

13 unchanged sentences

In 2019, we produced and sold 164.7 million and 165.5 million tons of coal, respectively, from continuing operations.

As of March 31, 2020 , we owned interests in 21 coal mining operations located in the United States (U.S.) and Australia.

Since December 31, 2019, the Millennium Mine in the Seaborne Metallurgical Mining segment and the Wildcat Hills Underground Mine in the Other U.S.

Thermal Mining segment shipped their final tons.

As a result, we owned interests in 18 active coal mining operations located in the United States (U.S.) and Australia at June 30, 2020.

Included in that count is our 50% equity interest in Middlemount Coal Pty Ltd.

(Middlemount), which owns the Middlemount Mine in Queensland, Australia and our 50% proportional interest in the United Wambo Joint Venture with Glencore plc (Glencore).

(Middlemount), which owns the Middlemount Mine in Queensland, Australia.

In addition to our mining operations, we market and broker coal from other coal producers, both as principal and agent, and trade coal and freight-related contracts.

2 unchanged sentences

Thermal Mining.

During the year ended December 31, 2019, the Cottage Grove and Kayenta Mines shipped their final tons, and we announced the closures of the Wildcat HiIls Underground and Somerville Central Mines, with both of those operations expecting to ship their final tons in 2020.

Due to these changes, we have revised our segment reporting beginning with this report to reflect the manner in which our chief operating decision maker now views our businesses for purposes of reviewing performance, allocating resources and assessing future prospects and strategic execution.

Prior period results have been recast for comparability.

Refer to Note 19.

“Segment Information” to the accompanying unaudited condensed consolidated financial statements for further information regarding those segments and the components of our Corporate and Other segment.

From time to time, we initiate restructuring activities in connection with repositioning efforts to appropriately align our cost structure or optimize our coal production relative to prevailing market conditions.

As further described in the “Results of Operations” section contained within this Item 2, we incurred restructuring charges of $6.5 million during the three months ended March 31, 2020 related primarily to involuntary workforce reductions.

During April 2020, we further reduced our workforce by approximately 250 positions, primarily within our Powder River Basin Mining and Other U.S.

Thermal Mining operating segments, through the use of involuntary reductions and voluntary programs.

We will incur additional restructuring charges during the second quarter of 2020, the amount of which will be dependent upon the ultimate participation in ongoing voluntary programs.

Additionally, we have advanced a detailed mine-by-mine analysis to improve operating capabilities.

Our initial focus will be on the highest-value opportunities, and mines that cannot demonstrate a path to cash generation at lower pricing levels will be suspended.

Coronavirus Disease 2019 (COVID-19) Pandemic

From time to time, we initiate restructuring activities in connection with our repositioning efforts to appropriately align our cost structure or optimize our coal production relative to prevailing market conditions.

As further described in the “Results of Operations” section contained within this Item 2, we incurred restructuring charges of $16.5 million and $23.0 million during the three and six months ended June 30, 2020, respectively, related to workforce reductions made across the organization through the use of both involuntary and voluntary reductions.

Coronavirus (COVID-19) Pandemic

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization.

8 unchanged sentences

expanded use of personal protective equipment;

working remotely, where possible;

and social distancing.

social distancing;

and working remotely when circumstances warrant.

While our operations have been designated as essential, each operation will only continue to operate when it is safe and economic to do so.

1 unchanged sentence

Within the global coal industry, supply and demand disruptions have been widespread.

In the seaborne markets, thermal demand from non-power sectors remains weak and steel production has been curtailed.

In the seaborne metallurgical and thermal markets, demand remains weak as a result of curtailed steel production and reduced electricity generation.

Thermal coal demand in the U.S.

has been pressured by low natural gas prices, subsidized renewable energy and weak electric power sector consumption due to reduced industrial activity.

Supply risks have also emerged at a number of global and domestic producers.

has been pressured by low natural gas prices, increased renewable energy usage and weak electric power sector consumption due to reduced industrial activity.

Coal industry fundamentals, as well as known impacts specific to Peabody, are further addressed in the “Results of Operations” section contained within this Item 2.

While the ultimate impacts of the COVID-19 pandemic are unknown, we expect continued interference with general commercial activity, which may further negatively affect both demand and prices for our products.

We also face potential disruption to supply chain and distribution channels, potentially increasing costs of production, storage and distribution, and potential adverse effects to our workforce, each of which could have a material adverse effect on our business, financial condition or results of operations.

In addition, the COVID-19 pandemic could have an adverse impact on the timing of key events, including the timing of our litigation in the U.S.

While the ultimate impacts of the COVID-19 pandemic on our business are unknown, we expect continued interference with general commercial activity, which may further negatively affect both demand and prices for our products.

We also face disruption to supply chain and distribution channels, potentially increasing costs of production, storage and distribution, and potential adverse effects to our workforce, each of which could have a material adverse effect on our business, financial condition or results of operations.

In addition, the COVID-19 pandemic could continue to have an adverse impact on the timing of key events, including the timing of our litigation in the U.S.

federal court system as we pursue the completion of the proposed joint venture with Arch.

1 unchanged sentence

We have taken actions to mitigate our financial risk given the uncertainty in global markets caused by the COVID-19 pandemic, and we also made the decision during the first quarter to pause debt reduction activities.

In early April 2020, we borrowed $300.0 million under our revolving credit facility.

We are continuing to advance our program to reposition the cost structure of the corporate functions and mines to counter the impacts of reduced demand and low pricing.

These initiatives include temporarily idling production at some mines;

adjusting shift schedules to match demand;

reducing the number of units in operation;

offloading take-or-pay commitments;

and eliminating additional positions, among other items.

During the second quarter of 2020, we borrowed $300.0 million under our revolving credit facility.

The borrowing was made as part of our ongoing efforts to preserve financial flexibility in light of the current uncertainty in the global markets and related effects on our business resulting from the COVID-19 pandemic.

While we do not currently expect to use the proceeds from these borrowings for any near-term liquidity needs, we may use the proceeds for working capital and other general corporate purposes.

As described below in the “Liquidity and Capital Resources” section contained within this Item 2, we anticipate significant risk of noncompliance with the leverage ratio limitations under our credit agreement during the second half of 2020 unless we successfully take mitigating action.

This risk is driven by unfavorable trends in our results from continuing operations, net of income taxes, and our Adjusted EBITDA, as further described within the “Results of Operations” section below.

On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), a $2 trillion economic relief bill.

The CARES Act contains numerous tax provisions including a provision that provides for the acceleration of refunds of previously generated alternative minimum tax credits.

The CARES Act contains an income tax provision that provides for the acceleration of refunds of previously generated alternative minimum tax credits.

We have requested accelerated refunds of approximately $24 million from the Internal Revenue Service and have adjusted our current and deferred tax asset balances accordingly.

The CARES Act also contains a provision for deferred payment of 2020 employer payroll taxes after the date of enactment to future years.

We expect to defer a portion of our remaining 2020 employer payroll taxes to subsequent years.

We continue to evaluate the implications of the remaining provisions of the CARES Act.

We will defer a portion of our remaining 2020 employer payroll taxes to subsequent years.

United Wambo Joint Venture with Glencore

In December 2019, after receiving the requisite regulatory and permitting approvals, we formed an unincorporated joint venture with Glencore, in which we hold a 50% interest, to combine the existing operations of our Wambo Open-Cut Mine in Australia with the adjacent coal reserves of Glencore’s United Mine.

In December 2019, after receiving the requisite regulatory and permitting approvals, we formed an unincorporated joint venture with Glencore plc (Glencore), in which we hold a 50% interest, to combine the existing operations of our Wambo Open-Cut Mine in Australia with the adjacent coal reserves of Glencore’s United Mine.

We proportionally consolidate the entity based upon our economic interest.

1 unchanged sentence

Construction and development efforts are currently underway to combine operations.

The joint venture agreement specifies that we will continue to fully own and operate the existing Wambo Open-Cut Mine through December 1, 2020, at which point the development of the combined operations is expected to be completed, the parties will contribute mining equipment and other assets, and joint operations will commence.

The joint venture agreement specifies that we will continue to fully own and operate the existing Wambo Open-Cut Mine through the date that development of the combined operations is completed, which is currently expected to be during the second half of 2020.

The parties will then contribute mining equipment and other assets, and joint operations will commence.

Glencore is responsible for construction and development activities and will manage the mining operations of the joint venture.

8 unchanged sentences

Federal Trade Commission (FTC) sought a preliminary injunction to challenge our proposed joint venture.

We and Arch intend to continue to pursue creation of the joint venture and will litigate the FTC’s decision within the U.S.

federal court system.

Court proceedings are currently scheduled to begin on July 13, 2020, with a ruling expected shortly thereafter, subject to any potential changes to the court’s schedule as a result of the COVID-19 pandemic or other exigent circumstances.

We and Arch continue to pursue creation of the joint venture and are litigating the FTC’s decision in the U.S.

federal court in the Eastern District of Missouri.

Related hearings took place July 14, 2020 through July 24, 2020 and closing arguments are scheduled for August 10, 2020, with a ruling expected during the third quarter of 2020.

The FTC has also initiated an administrative proceeding on the merits, which is currently scheduled for hearing on October 27, 2020.

If the court denies the preliminary injunction, we plan to proceed with the joint venture.

Formation of the joint venture is subject to favorable resolution of the FTC’s challenge noted above and customary closing conditions, including the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of certain other required regulatory approvals and the absence of injunctions or other legal restraints preventing the formation of the joint venture.

In September 2019, we amended our credit agreement to expressly permit formation of the joint venture and we are currently addressing such formation under the indenture governing our senior secured notes.

In September 2019, we amended our credit agreement to expressly permit formation of the joint venture and intend to address such formation under the indenture governing our senior secured notes.

At such time as control over the existing operations is exchanged, we will account for our interest in the combined operations at fair value.

1 unchanged sentence

Our North Goonyella Mine in Queensland, Australia experienced a fire in a portion of the mine during September 2018 and mining operations have been suspended since then.

During 2019, we completed segmenting of the mine into multiple zones to facilitate a phased re-ventilation and re-entry of the mine, re-ventilation of the first zone of the mine and subsequently re-entered the area.

Following these activities and a detailed review and assessment, we determined that due to the time, cost and required regulatory approach to ventilate and re-enter the rest of the mine, we will not pursue attempts to access certain portions of the mine through existing mine workings, but instead will move to the southern panels.

We are in ongoing discussions with the Queensland Mines Inspectorate (QMI) regarding ventilation and re-entry of the second zone of the current mine configuration.

Based on the planned approach, we expect no meaningful production from North Goonyella for three or more years.

In 2020, we commenced a commercial process for North Goonyella in conjunction with the existing mine development.

The process comes in response to expressions of interest from potential strategic partners and other producers.

Commercial outcomes could include a strategic financial partner, a joint venture structure or the complete sale of North Goonyella.

Alternatively, the commercial process could be abandoned in the absence of an acceptable outcome.

Based on the success of discussions with QMI and/or progression of the commercial process being launched, we will determine the appropriate level, if any, and timing of capital expenditures.

We have entered into commercial agreements to reduce the rail and port commitments related to North Goonyella for the second half of 2020 through the first half of 2023, while maintaining sufficient capacity for future production.

As a result, we anticipate that ongoing holding costs will decrease to approximately $5 million per quarter by the second half of 2020.

During the three months ended March 31, 2020 and 2019, we recorded $10.1 million and $36.9 million , respectively, in containment and idling costs.

An additional provision of $24.7 million related to equipment losses was recorded during the three months ended March 31, 2019, which was incremental to amounts recorded in prior periods and represented the best estimate of loss based on the assessments made as of that date.

No provision for equipment losses was recorded during the three months ended March 31, 2020 .

During 2018 and 2019, we recorded provisions for equipment losses amounting to $149.6 million related to the fire, representing the best estimate of losses to date.

Of that amount, $24.7 million was recorded during the six months ended June 30, 2019.

No additional provisions for equipment losses were recorded during the three and six months ended June 30, 2020.

We have also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $11.3 million and $28.4 million during the three months ended June 30, 2020 and 2019, respectively, and $21.4 million and $65.3 million during the six months ended June 30, 2020 and 2019, respectively.

In March 2019, we entered into an insurance claim settlement agreement with our insurers and various re-insurers under a combined property damage and business interruption policy and recorded a $125 million insurance recovery, the maximum amount available under the policy above a $50 million deductible.

17 unchanged sentences

Refer to the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 2 for definitions and reconciliations to the most comparable measures under U.S.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

Spot pricing for premium low-vol hard coking coal (Premium HCC), premium low-vol pulverized coal injection (Premium PCI) coal, Newcastle index thermal coal and API 5 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the three months ended March 31, 2020 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing we realized during the three months ended March 31, 2020 due to quality differentials and the majority of our seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

Three and Six Months Ended June 30, 2020 Compared to the Three and Six Months Ended June 30, 2019

The seaborne pricing included in the table below is not necessarily indicative of the pricing we realized during the three months ended June 30, 2020 due to quality differentials and the majority of our seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

Our typical practice is to negotiate pricing for seaborne metallurgical coal contracts on a quarterly, spot or index basis and seaborne thermal coal contracts on an annual, spot or index basis.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing we realized during the three months ended March 31, 2020 since we generally sell coal under long-term contracts where pricing is determined based on various factors.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing we realized during the three months ended June 30, 2020 since we generally sell coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

may vary significantly in many respects, including price adjustment features, price reopener terms, coal quality requirements, quantity parameters, permitted sources of supply, treatment of environmental constraints, extension options, force majeure and termination and assignment provisions.

Competition from alternative fuels such as natural gas and other coal producers may also impact our realized pricing.

Subsequent to March 31, 2020, seaborne pricing decreased as a result of economic and industry conditions related to the COVID-19 pandemic as evidenced by the April 30, 2020 pricing provided in the table and as further discussed below.

March 31, 2020

April 30, 2020

Competition from alternative fuels such as natural gas and other fuel sources may also impact our realized pricing.

High Low Average June 30, 2020

Premium HCC (1)

$ 143.80 $ 108.30 $ 118.47 $ 113.70

Premium PCI coal (1)

84.75 66.60 71.22 70.15

Newcastle index thermal coal (1)

68.33 50.48 55.08 51.17

API 5 thermal coal (1)

52.80 37.70 43.44 37.70

PRB 8,800 Btu/Lb coal (2)

12.00 11.90 11.97 11.90

Illinois Basin 11,500 Btu/Lb coal (2)

31.15 28.00 30.41 28.00

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

Within the global coal industry, supply and demand disruptions have been widespread as the COVID-19 pandemic has forced country-wide lockdowns and regional restrictions, some of which occurred after March 31, 2020.

Future COVID-19 developments are unknown, including the duration, severity, scope and the necessary government actions to limit the spread.

The global coal industry data for the three months ended March 31, 2020 presented herein, is not indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration, the significant decline in prices for our products at the start of the second quarter and continued weak demand for our products.

With respect to seaborne metallurgical coal, global steel production decreased 1% through the three months ended March 31, 2020 as compared to the prior year period, and declined 6% year-over-year in the month of March as the impacts of the COVID-19 pandemic were beginning to materialize.

Steel production in China increased approximately 1% through the three months ended March 31, 2020 as compared to the prior year, and was down 2% year-over-year in the month of March.

Despite a strong start to the year, China’s coking coal imports have been pressured by reduced margins for steel producers and high steel inventories.

Steel production, excluding China, was down 4% through the three months ended March 31, 2020, and declined 11% year-over-year in the month of March due to COVID-19 related lockdowns.

Steel demand deterioration has caused producers, including Peabody customers, to idle capacity and restrict output, while steel prices continue to fall.

There is weakness in seaborne metallurgical coal demand which could continue given ongoing lockdowns in key demand centers, including India and Japan.

Seaborne thermal coal demand was impacted by the COVID-19 pandemic which further exacerbated the weak fundamentals and low gas prices in Europe, while significantly dampening Asian demand as major importers entered into lockdown.

Chinese thermal coal imports increased by approximately 17 million tonnes through the three months ended March 31, 2020 as compared to the prior year mainly reflecting carryover tonnes from port restrictions in 2019.

China’s domestic production, which had been constrained by COVID-19 lockdowns, declined 6% through the two months ended February 29, 2020, but increased 10% year-over-year in the month of March.

Meanwhile, Chinese thermal power generation declined 8% during the three months ended March 31, 2020 year-over-year leading to above average stockpiles at utilities, dampening the outlook for seaborne imports.

Seaborne demand outside of China has also been pressured by reduced industrial activity related to the COVID-19 pandemic, impacting global electric generation and coal consumption.

In the United States, overall electricity demand was down year-over-year through the three months ended March 31, 2020 as a result of milder weather.

Lower demand, continued coal plant retirements, growth in natural gas and renewable generation and weak natural gas prices negatively impacted coal generation.

Through the three months ended March 31, 2020 utility consumption of PRB coal fell over 30% compared to the prior year period.

Demand pressures related to COVID-19 related curtailments have reduced total electricity demand in April to the lowest levels in over 15 years, which has resulted in coal’s share of generation declining to 18% for the three months ended March 31, 2020, while gas, nuclear and renewables continue to gain.

Within the global coal industry, supply and demand disruptions have been widespread as the COVID-19 pandemic has forced country-wide lockdowns and regional restrictions.

Future COVID-19-related developments are unknown, including the duration, severity, scope and the necessary government actions to limit the spread.

The global coal industry data for the six months ended June 30, 2020 presented herein, is not indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration, the significant decline in prices for our products and continued weak demand for our products.

With respect to seaborne metallurgical coal, global steel production decreased approximately 6% through the six months ended June 30, 2020 compared to the prior year period, as the COVID-19 pandemic continued to have significant impacts on steel demand.

Steel production in China increased approximately 3% through the six months ended June 30, 2020 compared to the prior year, including a new monthly production record achieved in May as the country attempts to recover from the COVID-19 pandemic.

Despite a strong start to the year, China’s coking coal imports have been pressured recently by intensified import restrictions, which are likely to be a factor for the remainder of 2020.

Steel production, excluding China, was down approximately 14% through the six months ended June 30, 2020 compared to the prior year due to COVID-19 related lockdowns and economic weakness.

Steel demand deterioration has caused producers, including Peabody customers, to idle capacity and restrict output, which has pressured seaborne metallurgical coal demand.

This deterioration could continue given ongoing effects from the COVID-19 pandemic on economic conditions in key demand centers.

The recovery in India is underway with the restart of steel mills and improving blast furnace utilization rates, but is threatened by the increasing spread of COVID-19, and will likely be delayed by elevated inventories and the pending monsoon season.

European steel and metallurgical coal demand recovery is also underway, but is likely to lag behind the full reopening of the automotive sector.

Seaborne thermal coal demand continues to be impacted by the COVID-19 induced reduction in overall electric generation, along with competition from alternative fuel sources and low gas prices.

Chinese thermal coal imports increased by approximately 18 million tonnes through the six months ended June 30, 2020 compared to the prior year, mainly reflecting carryover tonnes from port restrictions in 2019 and China’s domestic production, which is flat through the six months ended June 30, 2020 due to COVID-19 related disruption and safety checks.

Meanwhile, Chinese thermal power generation declined approximately 2% year-over-year during the six months ended June 30, 2020 leading to above-average inventory at utilities.

Seaborne demand outside of China remains pressured as economies are at various phases of reopening.

India has seen domestic power demand recover, but thermal imports are down by approximately 20 million tonnes through the six months ended June 30, 2020 compared to the prior year and are likely to remain under pressure given inventory overhang, domestic production growth and subdued demand.

In the United States, overall electricity demand has been negatively impacted year-over-year due to COVID-19 induced economic shutdowns during the six months ended June 30, 2020.

The reduction in thermal coal demand during that period has outpaced the reduction in overall electricity demand as continued coal plant retirements, growth in natural gas and renewable generation and weak natural gas prices continue to negatively impact coal’s share of electricity generation.

COVID-19 related curtailments reduced total electricity demand in the second quarter, which has resulted in coal’s share of generation declining to approximately 17% for the six months ended June 30, 2020, while natural gas and renewables continue to gain.

Through the six months ended June 30, 2020 utility consumption of PRB coal fell over 30% compared to the prior year period.

Moreover, reduced coal consumption year-to-date has resulted in elevated coal inventories, pressuring the required coal shipments needed to meet demand.

customers’ 2020 volume nominations have declined approximately 8% from the beginning of the year.

Our revenues for the three months ended March 31, 2020 decreased as compared to the same period in 2019 ( $404.4 million ) primarily due to lower sales volumes and realized prices.

Results from continuing operations, net of income taxes for the three months ended March 31, 2020 decreased as compared to the same period in the prior year ( $262.6 million ).

The decrease was driven by the unfavorable revenue variance described above and a prior year insurance recovery related to the events at our North Goonyella Mine ($125.0 million).

These unfavorable variances were partially offset by lower operating costs and expenses due largely to the sales volume decline as well as production efficiencies and other cost improvements ( $168.7 million ), lower depreciation, depletion and amortization ( $66.5 million ) and a prior year provision for equipment losses at our North Goonyella Mine ( $24.7 million ).

Adjusted EBITDA for the three months ended March 31, 2020 reflected a year-over-year decrease of $217.3 million .

As of March 31, 2020 , our available liquidity was approximately $1.19 billion .

Our revenues for the three and six months ended June 30, 2020 decreased compared to the same periods in 2019 ($522.3 million and $926.7 million, respectively) primarily due to lower sales volumes which were affected by the COVID-19 pandemic and lower realized prices.

Results from continuing operations, net of income taxes for the three and six months ended June 30, 2020 decreased compared to the same periods in the prior year ($1,588.2 million and $1,850.8 million, respectively).

The decrease was driven by the asset impairment charges recorded in the current period (three and six months, $1,418.1 million), the unfavorable revenue variances described above and a prior year insurance recovery related to the events at our North Goonyella Mine (six months, $125.0 million).

These unfavorable variances were partially offset by lower operating costs and expenses due largely to the sales volume decline as well as production efficiencies and other cost improvements ($301.5 million and $470.2 million, respectively), lower depreciation, depletion and amortization ($77.1 million and $143.6 million, respectively) and lower selling and administrative expenses ($13.7 million and $25.5 million, respectively).

Adjusted EBITDA for the three and six months ended June 30, 2020 reflected a year-over-year decrease of $206.6 million and $423.9 million, respectively.

As of June 30, 2020, our available liquidity was approximately $926 million.

Refer to the “Liquidity and Capital Resources” section contained within this Item 2 for a further discussion of factors affecting our available liquidity.

The following table presents tons sold by operating segment:

Three Months Ended

Increase (Decrease)

(Tons in millions)

Three Months Ended (Decrease) Increase Six Months Ended (Decrease) Increase

June 30, to Volumes June 30, to Volumes

2020 2019 Tons % 2020 2019 Tons %

(Tons in millions) (Tons in millions)

Seaborne Thermal Mining 4.6 4.7 (0.1) (2) % 9.2 9.2 — — %

Seaborne Metallurgical Mining

1.1 2.1 (1.0) (48) % 3.1 4.4 (1.3) (30) %

Powder River Basin Mining 17.9 25.0 (7.1) (28) % 41.4 50.3 (8.9) (18) %

1 unchanged sentence

Total tons sold from mining segments

27.4 39.0 (11.6) (30) % 62.4 79.0 (16.6) (21) %

Corporate and Other 0.9 0.4 0.5 125 % 1.5 0.9 0.6 67 %

2 unchanged sentences

The following table presents supplemental financial data by operating segment:

Three Months Ended

Three Months Ended (Decrease) Six Months Ended (Decrease)

June 30, Increase June 30, Increase

2020 2019 $ % 2020 2019 $ %

Revenues per Ton - Mining Operations (1)

2 unchanged sentences

Powder River Basin 11.45 11.33 0.12 1 % 11.40 11.34 0.06 1 %

Thermal 39.81 43.04 (3.23) (8) % 39.49 42.60 (3.11) (7) %

Costs per Ton - Mining Operations (1)(2)

1 unchanged sentence

Seaborne Metallurgical (3)

120.72 111.12 9.60 9 % 115.00 107.77 7.23 7 %

Powder River Basin 9.26 9.72 (0.46) (5) % 9.84 9.82 0.02 — %

Thermal 31.22 31.47 (0.25) (1) % 31.31 32.08 (0.77) (2) %

Adjusted EBITDA Margin per Ton - Mining Operations (1)(2)

1 unchanged sentence

Seaborne Metallurgical (3)

(33.92) 27.30 (61.22) (224) % (22.39) 32.68 (55.07) (169) %

Powder River Basin 2.19 1.61 0.58 36 % 1.56 1.52 0.04 3 %

Thermal 8.59 11.57 (2.98) (26) % 8.18 10.52 (2.34) (22) %

(1) This is an operating/statistical measure not recognized in accordance with U.S.

10 unchanged sentences

(3) Costs incurred at the North Goonyella Mine from January 1, 2020 forward are included within the Corporate and Other segment.

Costs incurred at the North Goonyella Mine during the three months ended March 31, 2019 remain within the Seaborne Metallurgical segment and resulted in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton of $1.32.

Costs incurred at the North Goonyella Mine during the three and six months ended June 30, 2019 remain within the Seaborne Metallurgical Mining segment and resulted in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton of $13.51 and $7.17, respectively.

The following table presents revenues by reporting segment:

Three Months Ended

(Dollars in millions)

Three Months Ended Decrease Six Months Ended Decrease

June 30, to Revenues June 30, to Revenues

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

Seaborne Thermal Mining $ 162.0 $ 220.2 $ (58.2) (26) % $ 363.1 $ 471.2 $ (108.1) (23) %

Seaborne Metallurgical Mining

91.6 290.9 (199.3) (69) % 284.8 615.4 (330.6) (54) %

Powder River Basin Mining 205.8 282.6 (76.8) (27) % 472.4 569.9 (97.5) (17) %

1 unchanged sentence

Corporate and Other 15.3 45.7 (30.4) (67) % 8.3 98.7 (90.4) (92) %

Revenues $ 626.7 $ 1,149.0 $ (522.3) (45) % $ 1,472.9 $ 2,399.6 $ (926.7) (39) %

Seaborne Thermal Mining.

Segment revenues decreased during the three months ended March 31, 2020 compared to the same period in the prior year primarily due to unfavorable realized coal pricing ($50.7 million), partially offset by favorable volume and mix variances ($0.8 million).

Segment revenues decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year due to unfavorable realized coal pricing (three months, $47.0 million;

six months, $97.0 million) and unfavorable volume and mix variances (three months, $11.2 million;

six months, $11.1 million).

Seaborne Metallurgical Mining.

Segment revenues decreased during the three months ended March 31, 2020 compared to the same period in the prior year due to unfavorable realized coal pricing ($80.7 million) and unfavorable volume and mix variances (0.3 million tons;

$50.6 million).

The unfavorable volume variance resulting from the beginning of the upgrade project for the main line conveyor system at our Shoal Creek Mine (0.3 million tons) and an extended longwall move at our Metropolitan Mine (0.1 million tons) was partially offset by favorable volumes at our surface operations (0.2 million tons) due to sales deferrals from the previous quarter.

Segment revenues decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year due to unfavorable volume and mix variances (three months, $153.8 million;

six months, $203.7 million) and unfavorable realized coal pricing (three months, $45.5 million;

six months, $126.9 million).

The unfavorable volume variances primarily resulted from demand-based volume decreases across our mines and the impact of the conveyor upgrade at our Shoal Creek Mine.

Powder River Basin Mining.

Segment revenues decreased during the three months ended March 31, 2020 compared to the same period in the prior year due to demand-based volume decreases ($24.6 million), partially offset by favorable realized pricing.

Segment revenues decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year primarily due to demand-based volume decreases (three months, $79.4 million;

six months, $104.1 million).

Thermal Mining.

Segment revenues decreased during the three months ended March 31, 2020 compared to the same period in the prior year primarily due to demand-based volume decreases ($135.4 million) which were driven by the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and unfavorable realized pricing ($7.1 million).

Segment revenues decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year primarily due to volume decreases (three months, $153.2 million;

six months, $289.6 million) which were driven by the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Wildcat Hills Underground Mine during the second quarter of 2020 and unfavorable realized pricing (three months, $4.4 million;

six months, $10.5 million).

Corporate and Other.

Segment revenues decreased during the three months ended March 31, 2020 compared to the same period in the prior year primarily due to lower results on economic hedge activities.

Segment revenues decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year primarily due to lower results on economic hedge activities.

Adjusted EBITDA

The following table presents Adjusted EBITDA for each of our reporting segments:

Three Months Ended

to Segment Adjusted EBITDA

(Dollars in millions)

Three Months Ended Decrease Six Months Ended Decrease

June 30, to Segment Adjusted EBITDA June 30, to Segment Adjusted EBITDA

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

Seaborne Thermal Mining

$ 27.7 $ 74.4 $ (46.7) (63) % $ 82.8 $ 169.1 $ (86.3) (51) %

Seaborne Metallurgical Mining

(36.1) 57.4 (93.5) (163) % (68.8) 143.2 (212.0) (148) %

Powder River Basin Mining 39.3 40.2 (0.9) (2) % 64.7 76.6 (11.9) (16) %

2 unchanged sentences

Adjusted EBITDA (1)

$ 23.4 $ 230.0 $ (206.6) (90) % $ 60.2 $ 484.1 $ (423.9) (88) %

(1) This is a financial measure not recognized in accordance with U.S.

1 unchanged sentence

Seaborne Thermal Mining.

Segment Adjusted EBITDA decreased during the three months ended March 31, 2020 compared to the same period in the prior year as a result of lower realized net coal pricing ($46.6 million) and longwall performance issues at our Wambo Underground Mine ($16.3 million).

The decrease in Segment Adjusted EBITDA was offset by favorable mine sequencing impacts and lower costs for materials, services and repairs at our thermal surface mines ($11.3 million) and favorable foreign currency impacts ($9.0 million).

Segment Adjusted EBITDA decreased during the three months ended June 30, 2020 compared to the same period in the prior year as a result of lower realized net coal pricing ($43.2 million), unfavorable mine sequencing impacts and higher costs for materials, services and repairs at our thermal surface mines ($6.1 million) and unfavorable volume variances as described above ($6.0 million);

the decrease was partially offset by lower pricing for fuel ($5.9 million).

Segment Adjusted EBITDA decreased during the six months ended June 30, 2020 compared to the same period in the prior year as a result of lower realized net coal pricing ($89.2 million), longwall performance issues at our Wambo Underground Mine ($16.6 million) and unfavorable volume variances as described above ($7.3 million);

the decrease was partially offset by favorable foreign currency impacts ($12.1 million), favorable mine sequencing impacts and lower costs for materials, services and repairs at our thermal surface mines ($6.9 million) and lower pricing for fuel ($5.6 million).

Seaborne Metallurgical Mining.

Segment Adjusted EBITDA decreased during the three months ended March 31, 2020 compared to the same period in the prior year due to lower realized net coal pricing ($76.3 million), unfavorable volume variances as described above ($39.2 million) and the impact of a longwall move at our Metropolitan Mine during the current quarter ($25.6 million).

These negative variances were partially offset by favorable foreign currency impacts ($12.9 million)

Segment Adjusted EBITDA decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year due to unfavorable volume variances which included non-cash charges to record certain mines’ coal inventories to their net realizable values (three months, $65.1 million;

six months, $91.4 million), lower realized net coal pricing (three months, $42.9 million;

six months, $118.8 million), higher costs associated with the conveyor upgrade at our Shoal Creek Mine (three months, $18.4 million;

six months, $31.5 million), and the impact of a longwall move at our Metropolitan Mine during the current year (six months, $21.9 million).

These negative variances were partially offset by the exclusion of the current year containment and holding costs for our North Goonyella Mine (three months, $28.4 million;

six months, $31.4 million) and favorable foreign currency impacts (three months, $10.4 million;

six months, $22.3 million).

Powder River Basin Mining.

Segment Adjusted EBITDA decreased during the three months ended March 31, 2020 compared to the same period in the prior year as the result of unfavorable mine sequencing impacts ($11.2 million), the impact of lower volumes ($3.5 million) as described above and lower realized net coal pricing ($2.4 million), partially offset by lower pricing for fuel and explosives ($4.1 million) and lower costs for materials, services and repairs ($1.9 million).

Segment Adjusted EBITDA decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year as the result of unfavorable mine sequencing impacts (three months, $29.6 million;

six months, $36.8 million) and the impact of lower volumes (three months, $12.5 million;

six months, $17.0 million) as described above, partially offset by lower costs for materials, services, repairs and labor (three months, $27.5 million;

six months, $26.8 million) and lower pricing for fuel and explosives (three months, $9.2 million;

six months, $13.2 million).

Thermal Mining.

Segment Adjusted EBITDA decreased during the three months ended March 31, 2020 compared to the same period in the prior year due to the impact of lower volume ($45.2 million) which was primarily driven by the closure of the Kayenta Mine during the third quarter of 2019 and lower realized net coal pricing ($7.0 million), partially offset by lower costs for materials, services and repairs ($6.6 million) and lower pricing for fuel and explosives ($2.8 million).

Segment Adjusted EBITDA decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year due to the impact of lower volume (three months, $52.2 million;

six months, $93.8 million) which was primarily driven by the closure of the Kayenta Mine during the third quarter of 2019, unfavorable mine sequencing impacts (three months, $13.2 million;

six months, $15.4 million) and lower realized net coal pricing (three months, $5.6 million;

six months, $11.8 million), partially offset by lower costs for materials, services and repairs (three months, $12.5 million;

six months, $19.9 million) and lower pricing for fuel and explosives (three months, $6.5 million;

six months, $9.3 million).

Corporate and Other Adjusted EBITDA.

The following table presents a summary of the components of Corporate and Other Adjusted EBITDA:

Three Months Ended

(Decrease) Increase

to Adjusted EBITDA

(Dollars in millions)

Three Months Ended (Decrease) Increase Six Months Ended (Decrease) Increase

June 30, to Adjusted EBITDA June 30, to Adjusted EBITDA

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

Middlemount (1)

$ (6.4) $ 10.0 $ (16.4) (164) % $ (16.1) $ 13.9 $ (30.0) (216) %

Resource management activities (2)

0.8 1.7 (0.9) (53) % 8.8 3.7 5.1 138 %

Selling and administrative expenses

(25.2) (38.9) 13.7 35 % (50.1) (75.6) 25.5 34 %

Other items, net (3)(4)

(9.6) 2.1 (11.7) (557) % (32.5) (5.8) (26.7) (460) %

Corporate and Other Adjusted EBITDA

$ (40.4) $ (25.1) $ (15.3) (61) % $ (89.9) $ (63.8) $ (26.1) (41) %

(1) Middlemount’s results are before the impact of related changes in deferred tax asset valuation allowance and reserves and amortization of basis difference.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $4.4 million and $7.5 million during the three months ended March 31, 2020 and 2019 , respectively.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $8.8 million and $9.5 million during the three months ended June 30, 2020 and 2019, respectively, and $13.2 million and $17.0 million during the six months ended June 30, 2020 and 2019, respectively.

(2) Includes gains (losses) on certain surplus coal reserve and surface land sales and property management costs and revenues.

1 unchanged sentence

(4) North Goonyella costs incurred from January 1, 2020 forward are included within the Corporate and Other segment.

Costs incurred prior to January 1, 2020 remain within the Seaborne Metallurgical segment.

The decrease in Corporate and Other Adjusted EBITDA during the three months ended March 31, 2020 compared to the same period in the prior year was primarily driven by an unfavorable variance in Middlemount’s results due to the impacts of wet weather, current year containment and holding costs for our North Goonyella Mine ($10.1 million) and unfavorable results from trading and brokerage activities ($8.8 million).

These unfavorable variances results were partially offset by lower selling and administrative expenses ($11.8 million) driven by lower personnel costs and reduced expense associated with our share-based incentive plans and a gain on the sale of undeveloped Australian land tenements in the Bowen Basin ($7.5 million).

Costs incurred prior to January 1, 2020 remain within the Seaborne Metallurgical Mining segment.

The decrease in Corporate and Other Adjusted EBITDA during the three and six months ended June 30, 2020 compared to the same periods in the prior year was primarily driven by an unfavorable variance in Middlemount’s results due to the impacts of wet weather and lower sales pricing, current year containment and holding costs for our North Goonyella Mine (three months, $11.3 million;

six months, $21.4 million) and unfavorable results from trading and brokerage activities (three months, $2.3 million;

six months, $11.1 million).

These unfavorable variances were partially offset by lower selling and administrative expenses driven by lower personnel costs and reduced expense associated with our share-based incentive plans and a gain on the sale of undeveloped Australian land tenements in the Bowen Basin (six months, $7.5 million).

(Loss) Income From Continuing Operations, Net of Income Taxes

The following table presents (loss) income from continuing operations, net of income taxes:

Three Months Ended

(Decrease) Increase

(Dollars in millions)

Three Months Ended (Decrease) Increase Six Months Ended (Decrease) Increase

June 30, to Income June 30, to Income

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

Adjusted EBITDA (1)

$ 23.4 $ 230.0 $ (206.6) (90) % $ 60.2 $ 484.1 $ (423.9) (88) %

Depreciation, depletion and amortization

(88.3) (165.4) 77.1 47 % (194.3) (337.9) 143.6 42 %

Asset retirement obligation expenses

(14.1) (15.3) 1.2 8 % (31.7) (29.1) (2.6) (9) %

Restructuring charges

(16.5) (0.4) (16.1) (4,025) % (23.0) (0.6) (22.4) (3,733) %

Transaction costs related to joint ventures

(12.9) (1.6) (11.3) (706) % (17.1) (1.6) (15.5) (969) %

Asset impairment

(1,418.1) — (1,418.1) n.m.

Provision for North Goonyella equipment loss

— (24.7) 24.7 100 %

North Goonyella insurance recovery - equipment

— 91.1 (91.1) (100) %

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates

0.4 (0.3) 0.7 233 % 1.1 (0.3) 1.4 467 %

Interest expense (34.3) (36.0) 1.7 5 % (67.4) (71.8) 4.4 6 %

Interest income 2.4 7.2 (4.8) (67) % 5.5 15.5 (10.0) (65) %

Unrealized (losses) gains on economic hedges

Unrealized gains on non-coal trading derivative contracts

Unrealized gains on economic hedges

7.0 22.4 (15.4) (69) % 4.8 62.2 (57.4) (92) %

Unrealized gains (losses) on non-coal trading derivative contracts

2.8 (0.3) 3.1 1,033 % 2.9 (0.1) 3.0 3,000 %

Take-or-pay contract-based intangible recognition

Income tax provision

2.7 5.6 (2.9) (52) % 5.3 11.2 (5.9) (53) %

Income tax benefit (provision) 0.2 (3.0) 3.2 107 % (2.8) (21.8) 19.0 87 %

(Loss) income from continuing operations, net of income taxes

$ (1,545.3) $ 42.9 $ (1,588.2) (3,702) % $ (1,674.6) $ 176.2 $ (1,850.8) (1,050) %

(1) This is a financial measure not recognized in accordance with U.S.

2 unchanged sentences

The following table presents a summary of depreciation, depletion and amortization expense by segment:

Three Months Ended

Increase (Decrease)

(Dollars in millions)

Three Months Ended Increase (Decrease) Six Months Ended Increase (Decrease)

June 30, to Income June 30, to Income

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

Seaborne Thermal Mining

$ (20.5) $ (22.0) $ 1.5 7 % $ (42.7) $ (45.2) $ 2.5 6 %

Seaborne Metallurgical Mining

(20.5) (31.1) 10.6 34 % (45.3) (71.2) 25.9 36 %

Powder River Basin Mining

(28.3) (36.0) 7.7 21 % (63.5) (72.6) 9.1 13 %

Thermal Mining

(15.6) (73.7) 58.1 79 % (37.0) (144.5) 107.5 74 %

Corporate and Other

(3.4) (2.6) (0.8) (31) % (5.8) (4.4) (1.4) (32) %

Total $ (88.3) $ (165.4) $ 77.1 47 % $ (194.3) $ (337.9) $ 143.6 42 %

Additionally, the following table presents a summary of our weighted-average depletion rate per ton for active mines in each of our mining segments:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Seaborne Thermal Mining $ 2.08 $ 1.97 $ 1.99 $ 1.89

Seaborne Metallurgical Mining

1.81 3.47 2.38 3.01

Powder River Basin Mining 0.80 0.80 0.79 0.81

Thermal Mining

Depreciation, depletion and amortization expense decreased during the three months ended March 31, 2020 compared to the same period in the prior year primarily due to the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 ($40.9 million), lower amortization of the fair value of certain U.S.

coal supply agreements ($6.0 million) and decreased expense related to the upcoming closure of the Millennium Mine ($5.4 million).

0.96 1.50 1.02 1.51

Depreciation, depletion and amortization expense decreased during the three and six months ended June 30, 2020 compared to the same periods in the prior year primarily due to the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Millennium and Wildcat Hills Underground Mines during the second quarter of 2020 (three months, $47.9 million;

six months, $95.0 million), decreased depletion driven by lower sales volumes (three months, $11.5 million;

six months, $13.3 million) and lower amortization of the fair value of certain U.S.

coal supply agreements (three months, $5.4 million;

six months, $11.4 million).

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the three and six months ended June 30, 2020 compared to the same periods in the prior year reflects the volume and mix variances which impacted our revenues as described above.

Restructuring Charges.

Restructuring charges increased during the three months ended March 31, 2020 compared to the same period in the prior year as the result of involuntary workforce reductions made across the organization, as discussed in Note 15.

Restructuring charges increased during the three and six months ended June 30, 2020 compared to the same periods in the prior year as the result of workforce reductions made across the organization through the use of involuntary and voluntary reductions, as discussed in Note 15.

“Other Events” to the accompanying unaudited condensed consolidated financial statements.

Transaction Costs Related to Joint Ventures.

The charges recorded during the three months ended March 31, 2020 related to the proposed PRB Colorado joint venture with Arch as further described in Note 15.

The charges recorded during the three and six months ended June 30, 2020 related to the proposed PRB Colorado joint venture with Arch as further described in Note 15.

“Other Events” to the accompanying unaudited condensed consolidated financial statements.

Asset Impairment.

During the three and six months ended June 30, 2020, we recognized $1,418.1 million in aggregate asset impairment charges related to the fair value of our North Antelope Rochelle Mine as discussed in Note 9.

“Property, Plant, Equipment and Mine Development” to the accompanying unaudited condensed consolidated financial statements.

Provision for North Goonyella Equipment Loss.

2 unchanged sentences

North Goonyella Insurance Recovery - Equipment.

During the three months ended March 31, 2019 , we entered into an insurance claim settlement agreement with our insurance providers related to North Goonyella equipment losses and recorded a $125.0 million insurance recovery, as discussed in Note 15.

During the six months ended June 30, 2019, we entered into an insurance claim settlement agreement with our insurance providers related to North Goonyella equipment losses and recorded a $125.0 million insurance recovery, as discussed in Note 15.

“Other Events” to the accompanying unaudited condensed consolidated financial statements.

Of this amount, Adjusted EBITDA excludes an allocated amount applicable to total equipment losses recognized at the time of the insurance recovery settlement, which consisted of $24.7 million and $66.4 million recognized during the three months ended March 31, 2019 and the year ended December 31, 2018, respectively.

The remaining $33.9 million, applicable to incremental costs and business interruption losses, is included in Adjusted EBITDA for the three months ended March 31, 2019 .

Of this amount, Adjusted EBITDA excludes an allocated amount applicable to total equipment losses recognized at the time of the insurance recovery settlement, which consisted of $24.7 million and $66.4 million recognized during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively.

The remaining $33.9 million, applicable to incremental costs and business interruption losses, is included in Adjusted EBITDA for the six months ended June 30, 2019.

Interest Income.

The decrease in interest income during the three months ended March 31, 2020 compared to the same period in the prior year was driven by the conclusion of a contract during the fourth quarter of 2019 which contained an embedded financing element and by lower cash balances.

Unrealized (Losses) Gains on Economic Hedges.

Unrealized (losses) gains primarily relate to mark-to-market activity from economic hedge activities intended to hedge future coal sales.

The decrease in interest income during the three and six months ended June 30, 2020 compared to the same periods in the prior year was driven by the conclusion of a contract during the fourth quarter of 2019 which contained an embedded financing element and by lower cash balances.

Unrealized Gains on Economic Hedges.

Unrealized gains primarily relate to mark-to-market activity from economic hedge activities intended to hedge future coal sales.

For additional information, refer to Note 7.

1 unchanged sentence

Take-or-Pay Contract-Based Intangible Recognition.

During the three months ended March 31, 2020 and 2019 , we ratably recognized contract-based intangible liabilities for port and rail take-or-pay contracts.

During the three and six months ended June 30, 2020 and 2019, we ratably recognized contract-based intangible liabilities for port and rail take-or-pay contracts.

For additional details, refer to Note 8.

“Intangible Contract Assets and Liabilities” to the accompanying unaudited condensed consolidated financial statements.

Income Tax Provision .

The decrease in the income tax provision for the three months ended March 31, 2020 compared to the same period in the prior year was primarily due to changes in forecasted taxable income and an increase in the benefit related to the remeasurement of foreign income tax accounts.

Income Tax Benefit (Provision) .

The decrease in the income tax provision for the three and six months ended June 30, 2020 compared to the same periods in the prior year was primarily due to changes in forecasted taxable income, partially offset by an increase in the provision related to the remeasurement of foreign income tax accounts.

Refer to Note 11.

2 unchanged sentences

The following table presents net (loss) income attributable to common stockholders:

Three Months Ended

(Decrease) Increase

(Dollars in millions)

Three Months Ended (Decrease) Increase Six Months Ended (Decrease) Increase

June 30, to Income June 30, to Income

2020 2019 $ % 2020 2019 $ %

(Dollars in millions) (Dollars in millions)

(Loss) income from continuing operations, net of income taxes

$ (1,545.3) $ 42.9 $ (1,588.2) (3,702) % $ (1,674.6) $ 176.2 $ (1,850.8) (1,050) %

Loss from discontinued operations, net of income taxes

(2.3) (3.4) 1.1 32 % (4.5) (6.8) 2.3 34 %

Net (loss) income

Net (loss) income attributable to noncontrolling in terests

(1,547.6) 39.5 (1,587.1) (4,018) % (1,679.1) 169.4 (1,848.5) (1,091) %

Net (loss) income attributable to noncontrolling interests

(3.4) 2.4 (5.8) (242) % (5.2) 8.1 (13.3) (164) %

Net (loss) income attributable to common stockholders

$ (1,544.2) $ 37.1 $ (1,581.3) (4,262) % $ (1,673.9) $ 161.3 $ (1,835.2) (1,138) %

Net (Loss) Income Attributable to Noncontrolling Interests .

The decrease in net results attributable to noncontrolling interests during the three months ended March 31, 2020 compared to the prior year period was primarily due to lower results of our majority-owned mines in which there is an outside non-controlling interest.

The decrease in net results attributable to noncontrolling interests during the three and six months ended June 30, 2020 compared to the prior year periods was primarily due to lower results of our majority-owned mines in which there is an outside non-controlling interest.

Diluted Earnings per Share (EPS)

The following table presents diluted EPS:

Three Months Ended

(Decrease) Increase

Three Months Ended (Decrease) Increase Six Months Ended (Decrease) Increase

June 30, to EPS June 30, to EPS

2020 2019 $ % 2020 2019 $ %

Diluted EPS attributable to common stockholders:

(Loss) income from continuing operations

$ (15.76) $ 0.37 $ (16.13) (4,359) % $ (17.12) $ 1.54 $ (18.66) (1,212) %

Loss from discontinued operations

(0.02) (0.03) 0.01 33 % (0.04) (0.06) 0.02 33 %

Net (loss) income attributable to common stockholders

$ (15.78) $ 0.34 $ (16.12) (4,741) % $ (17.16) $ 1.48 $ (18.64) (1,259) %

Diluted EPS is commensurate with the changes in results from continuing operations and discontinued operations during that period.

Diluted EPS reflects weighted average diluted common shares outstanding of 97.2 million and 110.5 million for the three months ended March 31, 2020 and 2019 , respectively.

Diluted EPS reflects weighted average diluted common shares outstanding of 97.9 million and 108.1 million for the three months ended June 30, 2020 and 2019, respectively, and 97.5 million and 109.3 million for the six months ended June 30, 2020 and 2019, respectively.

Reconciliation of Non-GAAP Financial Measures

2 unchanged sentences

We have retrospectively modified our calculation of Adjusted EBITDA to exclude restructuring charges and transaction costs related to joint ventures as management does not view these items as part of our normal operations.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(Dollars in millions)

(Loss) income from continuing operations, net of income taxes

$ (1,545.3) $ 42.9 $ (1,674.6) $ 176.2

Depreciation, depletion and amortization

88.3 165.4 194.3 337.9

Asset retirement obligation expenses

14.1 15.3 31.7 29.1

Restructuring charges

16.5 0.4 23.0 0.6

Transaction costs related to joint ventures

12.9 1.6 17.1 1.6

Asset impairment

1,418.1 — 1,418.1 —

Provision for North Goonyella equipment loss

1 unchanged sentence

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates

(0.4) 0.3 (1.1) 0.3

Interest expense

34.3 36.0 67.4 71.8

Interest income

Unrealized losses (gains) on economic hedges

Unrealized gains on non-coal trading derivative contracts

(2.4) (7.2) (5.5) (15.5)

Unrealized gains on economic hedges

(7.0) (22.4) (4.8) (62.2)

Unrealized (gains) losses on non-coal trading derivative contracts

(2.8) 0.3 (2.9) 0.1

Take-or-pay contract-based intangible recognition

Income tax provision

(2.7) (5.6) (5.3) (11.2)

Income tax (benefit) provision

(0.2) 3.0 2.8 21.8

Total Adjusted EBITDA

$ 23.4 $ 230.0 $ 60.2 $ 484.1

Revenues per Ton and Adjusted EBITDA Margin per Ton are equal to revenues by segment and Adjusted EBITDA by segment, respectively, divided by segment tons sold.

Costs per Ton is equal to Revenues per Ton less Adjusted EBITDA Margin per Ton, and are reconciled to operating costs and expenses as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(Dollars in millions)

Operating costs and expenses

Unrealized gains on non-coal trading derivative contracts

$ 556.3 $ 857.8 $ 1,335.8 $ 1,806.0

Unrealized gains (losses) on non-coal trading derivative contracts

2.8 (0.3) 2.9 (0.1)

Take-or-pay contract-based intangible recognition

2.7 5.6 5.3 11.2

North Goonyella insurance recovery - cost recovery and business interruption

Net periodic benefit costs, excluding service cost

2.7 4.8 5.5 9.7

Total Reporting Segment Costs

$ 564.5 $ 867.9 $ 1,349.5 $ 1,792.9

The following table presents Reporting Segment Costs by reporting segment:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(Dollars in millions)

6 unchanged sentences

The following tables present tons sold, revenues, Reporting Segment Costs and Adjusted EBITDA by mining segment:

Three Months Ended March 31, 2020

Seaborne Thermal Mining

Seaborne Metallurgical Mining

Powder River Basin Mining

Three Months Ended June 30, 2020

Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S.

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 4.6 1.1 17.9 3.8

Revenues $ 162.0 $ 91.6 $ 205.8 $ 152.0

Reporting Segment Costs 134.3 127.7 166.5 119.1

Adjusted EBITDA

27.7 (36.1) 39.3 32.9

Revenues per Ton

$ 35.10 $ 86.80 $ 11.45 $ 39.81

Costs per Ton

29.19 120.72 9.26 31.22

Adjusted EBITDA Margin per Ton

Three Months Ended March 31, 2019

Seaborne Thermal Mining

Seaborne Metallurgical Mining

Powder River Basin Mining

5.91 (33.92) 2.19 8.59

Three Months Ended June 30, 2019

Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S.

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 4.7 2.1 25.0 7.2

Revenues $ 220.2 $ 290.9 $ 282.6 $ 309.6

Reporting Segment Costs 145.8 233.5 242.4 226.5

Adjusted EBITDA

74.4 57.4 40.2 83.1

Revenues per Ton

$ 46.41 $ 138.42 $ 11.33 $ 43.04

Costs per Ton

30.73 111.12 9.72 31.47

Adjusted EBITDA Margin per Ton

15.68 27.30 1.61 11.57

Six Months Ended June 30, 2020

Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S.

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 9.2 3.1 41.4 8.7

Revenues $ 363.1 $ 284.8 $ 472.4 $ 344.3

Reporting Segment Costs 280.3 353.6 407.7 272.9

Adjusted EBITDA 82.8 (68.8) 64.7 71.4

Revenues per Ton $ 39.58 $ 92.61 $ 11.40 $ 39.49

Costs per Ton 30.56 115.00 9.84 31.31

Adjusted EBITDA Margin per Ton 9.02 (22.39) 1.56 8.18

Six Months Ended June 30, 2019

Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S.

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 9.2 4.4 50.3 15.1

Revenues $ 471.2 $ 615.4 $ 569.9 $ 644.4

Reporting Segment Costs 302.1 472.2 493.3 485.4

Adjusted EBITDA 169.1 143.2 76.6 159.0

Revenues per Ton $ 51.18 $ 140.45 $ 11.34 $ 42.60

Costs per Ton 32.82 107.77 9.82 32.08

Adjusted EBITDA Margin per Ton 18.36 32.68 1.52 10.52

Free Cash Flow is defined as net cash (used in) provided by operating activities less net cash used in investing activities and excludes cash outflows related to business combinations.

See the table below for a reconciliation of Free Cash Flow to its most comparable measure under U.S.

Three Months Ended

Six Months Ended

(Dollars in millions)

11 unchanged sentences

Seaborne Thermal and Metallurgical Coal .

Within the global coal industry, supply and demand disruptions have been widespread due to the ongoing impacts of the COVID-19 pandemic, which has resulted in country-wide lockdowns and regional restrictions across the globe.

While outcomes remain highly uncertain, we believe that significant year-over-year demand declines are possible.

While recovery in China is occurring as major infrastructure projects recommence, thermal demand from non-power sectors remains weak.

At the same time, Japan and India - hubs for seaborne coal demand - have shut down non-essential services and slowed steel production.

In addition to demand impacts, supply risks continue to emerge.

A number of global and domestic producers have curtailed or suspended production due to precautionary measures and high levels of workforce absenteeism.

While the global economy continues to navigate through the COVID-19 pandemic, the scope and scale of the recovery remains uncertain.

Ongoing demand uncertainty driven by idled steel capacity in Europe and the Asia-Pacific, weak overall electricity generation and the implementation of Chinese import restrictions have all contributed to low seaborne coal prices.

In addition, based on current economic data, the Company would expect near-term seaborne coal demand to decline from prior-year levels.

The ultimate quantum of demand will be highly dependent upon the scope and scale of the eventual COVID-19 pandemic recovery.

Thermal Coal .

Within the U.S., coal demand has been further challenged by the effects of the COVID-19 pandemic.

The combination of weak total electric power sector consumption, depressed power prices, reduced industrial activity, as well as low natural gas prices and high utility stockpiles continues to pressure demand.

thermal coal conditions remain especially challenging given weak overall electricity demand, high customer inventory levels and continued low natural gas prices.

These factors have accelerated the secular decline already underway in the industry.

electricity generation year-to-date through June 30, 2020, was down approximately 4%, with coal generation falling 31% to 17% of the generation mix as natural gas and wind took market share, rising to 39% and 9%, respectively, of the generation mix.

Long-Term Outlook

There were no significant changes to our Long-Term Outlook subsequent to December 31, 2019.

Information regarding our Long-Term Outlook is outlined in Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Given widespread industry changes, in part due to the prolonged COVID-19 pandemic, we have updated our long-term outlook.

Current projections indicate a slow seaborne market recovery over the next 12 to 15 months.

Future demand will be impacted by economic conditions and public policy related to the COVID-19 pandemic in key demand centers.

Further, we believe coal demand and use will be adversely impacted by the policy decisions of various governments, regulatory bodies, financial institutions and others with respect to concerns over the environmental and social impacts of coal combustion.

Seaborne Fundamentals .

Longer-term, Peabody continues to anticipate that seaborne metallurgical coal demand will continue to grow as India increases steel production and lacks the quantity and quality of domestic metallurgical coal to meet its anticipated needs.

China will continue to have a significant influence on seaborne demand, which will be highly dependent on the scope and scale of the recovery from the COVID-19 pandemic and use and availability of domestic coal.

For seaborne thermal, Peabody expects longer-term demand growth from the Association of Southeast Asian Nations to continue, which is anticipated to help offset demand decline elsewhere, most notably, in the Atlantic markets.

The vast majority of seaborne thermal coal demand is projected to come from the Asia-Pacific region as Europe’s coal generation continues its secular decline.

Seaborne thermal coal will continue to be sourced primarily from seaborne exporters Indonesia and Australia, along with Russia, Colombia, South Africa and the U.S., among others.

Fundamentals .

thermal coal demand has been dramatically reduced in the first half of 2020, accelerating the secular demand decline already underway.

Future demand will be highly dependent on natural gas prices, growth in renewable generation and other competing fuels, and policy and regulations, among other things.

Regulatory Update

3 unchanged sentences

Regulatory Matters - U.S.

Temporary Enforcement Policy .

On March 26, 2020, the United States Environmental Protection Agency (EPA) announced a temporary policy regarding EPA enforcement of environmental legal obligations as a result of the COVID-19 pandemic.

Under the temporary policy, the EPA will exercise the enforcement discretion for certain noncompliance events covered by the temporary policy.

For noncompliance that occurs during the period of time that the temporary policy is in effect, and that results from the COVID-19 pandemic, the EPA’s temporary policy will apply to such noncompliance in lieu of an otherwise applicable EPA enforcement response policy.

The EPA’s temporary policy does not provide leniency for intentional criminal violations of law and does not apply to activities that are carried out under Superfund and Resource Conservation and Recovery Act (RCRA) Corrective Action enforcement instruments.

The EPA will address these matters in separate communications.

The EPA's temporary policy became retroactively effective on March 13, 2020.

The EPA will assess the continued need for and scope of this temporary policy on a regular basis and will update it if the EPA determines modifications are necessary.

(COVID-19 Implications for EPA’s Enforcement and Compliance Assurance Program).

Under the temporary policy, the EPA will exercise the enforcement discretion for certain noncompliance events that occur during the period of time that the temporary policy is in effect and that result from the COVID-19 pandemic.

The EPA’s temporary policy does not provide leniency for intentional criminal violations of law and imposes conditions on any violation that may result in “acute risk or an imminent threat to human health or the environment.” The policy also does not apply to activities that are carried out under Superfund and Resource Conservation and Recovery Act (RCRA) Corrective Action enforcement instruments.

The EPA's temporary policy became retroactively effective on March 13, 2020 and is in effect until August 31, 2020.

(COVID-19 Implications for EPA’s Enforcement and Compliance Assurance Program:

Addendum on Termination, June 29, 2020).

EPA Regulation of Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electricity Utility Generating Units (EGUs).

17 unchanged sentences

In October 2017, the EPA proposed to repeal the CPP (82 Fed.

In August 2018, the EPA issued a proposed rule to replace the CPP, the Affordable Clean Energy (ACE) Rule.

In August 2018, the EPA issued a proposed rule to replace the CPP with the Affordable Clean Energy (ACE) Rule.

44,746 (August 31, 2018)).

On June 19, 2019, the EPA issued a combined package that finalizes the CPP repeal rule as well as the replacement rule, ACE.

On June 19, 2019, the EPA issued a combined package that finalized the CPP repeal rule as well as the replacement rule, ACE.

(Repeal of the Clean Power Plan;

Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units;

Revisions to Emission Guidelines Implementing Regulations, EPA-HQ-OAR-2017-0355.

The final ACE rule sets emissions guidelines for greenhouse gas emissions from existing EGUs based on using efficiency heat rate improvements as “Best System of Emission Reduction” measures.

Revisions to Emission Guidelines Implementing Regulations, 84 Fed.

32,520 (July 8, 2019)).

The ACE rule sets emissions guidelines for greenhouse gas emissions from existing EGUs based on a determination that efficiency heat rate improvements constitute the Best System of Emission Reduction.

The EPA’s final rule also revises the CAA Section 111(d) regulations to give the states greater flexibility on the content and timing of their state plans.

Proposed revisions to the regulations under the New Source Review (NSR) program that were part of the ACE proposal were separated, and the EPA indicated that it intends to take final action on the proposed NSR program reforms at a later date.

Based on the EPA’s final rules repealing and replacing the CPP, petitioners in the D.C.

3 unchanged sentences

19-1140 (D.C.

Cir.)) is scheduled to conclude at the end of July 2020.

Cir.)) has concluded and oral argument has been scheduled for October 2020.

New Source Review (NSR).

The Clean Air Act imposes permitting requirements when a new source undergoes construction or when an existing source is reconstructed or undergoes a major modification.

These requirements are contained in the Clean Air Act’s Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR) programs, generally referred to as NSR.

On March 25, 2020, the EPA released a draft guidance document that would allow power plants, refineries and other sources of emissions to begin certain construction activities while still awaiting a permit under the NSR program.

Under the EPA’s revised interpretation, a source owner or operator may, prior to obtaining a NSR permit, undertake physical on-site activities- including activities that may significantly alter the site, and/or are permanent in nature- provided that those activities do not constitute physical construction on an emissions unit.

The EPA will take comment on the draft memo until May 11, 2020.

The comment period on the draft memo ended May 11, 2020.

The EPA has also taken action on a number of different rules and guidance affecting the interpretation and application of NSR.

In a final rule (83 Fed.

15, 2018), the EPA completed reconsideration of a 2009 petition to clarify when certain actions must be “aggregated” for purposes of determining whether these actions are part of a single project to which NSR applies.

The EPA has additionally published guidance on the definition of “ambient air” (Revised Policy on Exclusions from “Ambient Air,” Dec.

2, 2019) and guidance concerning when multiple air pollution-emitting activities may be considered to be “adjacent” so that they should be considered to be a single source (Interpreting “Adjacent” for New Source Review and Title V Source Determinations in All Industries Other Than Oil and Gas, Nov.

Additional memorandum and applicability determinations have also been made that address other NSR issues.

These rules, guidance and memorandum may therefore affect the construction, reconstruction and modification of sources and the level of pollution control requirements that will be necessary on a case-by-case basis.

Clean Water Act (CWA) Definition of “Waters of the United States”.

A final rule defining the scope of waters protected under the CWA (commonly called the Waters of the United States, or WOTUS) (WOTUS Rule), was published by the EPA and the U.S.

Army Corps of Engineers (Corps) in June 2015.

Several states and others subsequently filed lawsuits challenging the 2015 WOTUS Rule, and eventually that rule was preliminarily enjoined in over half of the country.

On October 22, 2019, the EPA and the Corps jointly published a final rule, which became effective on December 23, 2019, repealing the 2015 WOTUS Rule and recodifying the regulatory definitions of WOTUS that existed prior to the implementation of the WOTUS Rule.

On January 23, 2020, the EPA and the Corps finalized the Navigable Waters Protection Rule to revise the definition of “Waters of the United States” and thereby establish the scope of federal regulatory authority under the CWA.

A federal district judge in Colorado preliminarily enjoined the Navigable Waters Protection Rule in the State of Colorado on June 19, 2020.

The new rule took effect in all other states on June 22, 2020, but the pre-2015 definitions apply in Colorado.

National Environmental Policy Act (NEPA) .

2 unchanged sentences

The NEPA process involves public participation and can involve lengthy timeframes.

The White House Council on Environmental Quality (CEQ) issued a proposed rule that would comprehensively update and modernize its longstanding NEPA regulations on January 10, 2020.

The White House Council on Environmental Quality issued a proposed rule that would comprehensively update and modernize its longstanding NEPA regulations on January 10, 2020.

The comment period closed on March 10, 2020.

11 unchanged sentences

There are some differences in the application and detail of the laws, and mining operators, directors, officers and certain other employees are all subject to the obligations under this legislation.

Beginning in 2015, a small number of coal mine workers in Queensland and New South Wales were diagnosed with coal workers’ pneumoconiosis (CWP, also known as black lung) following decades of assumed eradication of the disease.

The Queensland government held a Parliamentary inquiry into the re-emergence of CWP in the state, which included public hearings with appearances by representatives of the coal mining industry, coal mine workers, the regulator and others.

The Queensland Parliamentary Committee conducting the inquiry issued its final report on May 29, 2017.

In finding that it is highly unlikely CWP was ever eradicated in Queensland, the Committee made 68 recommendations to ensure the safety and health of coal mine workers.

These include an immediate reduction to the occupational exposure limit for respirable coal dust equivalent to 1.5 mg/m 3 for coal dust and 0.05 mg/m 3 for silica and the establishment of a new and independent Mine Safety Authority to be funded by a dedicated proportion of coal and mineral royalties and overseeing the Mines Safety Inspectorate.

The Queensland government has instituted increased reporting requirements for dust monitoring results, broader coal mine worker health assessment requirements and voluntary retirement examinations for coal mine workers to be arranged by the relevant employer and further reform may follow.

Safe Work Australia (SWA) is currently reviewing the Workplace Exposure Standards (WES) for all airborne contaminants including welding fumes and diesel particulate matter and giving priority to the WES for coal dust and silica.

The review is expected to continue until June 2020.

In March 2020, SWA paused the release and public consultation for the WES review until further notice.

SWA’s draft evaluation reports will include recommendations for exposure limits.

1 unchanged sentence

SWA have recommended exposure limits of 1.5 mg/m 3 for coal dust and 0.05 mg/m 3 for silica.

Since August 2017, the Workers’ Compensation and Rehabilitation Act 2003 provides for a medical examination process for retired or former coal workers with suspected CWP and an additional lump sum compensation for workers with CWP, and additionally clarifies that a worker with CWP can access further workers’ compensation entitlements if they experience disease progression.

In October 2018 the Queensland government passed the Mines Legislation (Resources Safety) Amendment Act 2018, which introduces significant changes to the Coal Mining Safety and Health Act 1999 concerning, among other things, duties of officers, reporting requirements for coal mine worker diseases, reporting defects and hazards affecting plant and substances, contractor and service provider safety and health management plans, new powers to suspend or cancel an individual’s statutory certificate of competency and increasing penalties and inspector powers.

Following the re-identification of coal workers’ pneumoconiosis and six mining and quarrying fatalities that occurred over a 12-month period, the Resources Safety and Health Queensland Bill 2019 was introduced into Queensland Parliament in September 2019, was passed into law in March 2020 and will take effect on July 1, 2020.

It establishes Resources Safety and Health Queensland (RSHQ) as a statutory body designed to ensure independence of the mining safety and health regulator.

2 unchanged sentences

It also provides for an independent Work Health and Safety Prosecutor to prosecute serious offenses under resources safety legislation.

In February 2020, the Queensland government introduced into Parliament a bill to introduce the criminal offense of ‘industrial manslaughter’ for executive officers, individuals who are “senior officers” and companies in the mining industry.

Individuals would face a maximum prison sentence of 20 years and companies could be fined up to approximately $13 million Australian dollars.

The bill also introduces the requirement for statutory role holders to be employees of the coal mine operator entity with a 12-month transition period.

The bill is currently under review by a Parliamentary Committee.

On May 20, 2020, the Queensland Parliament passed a bill into law that introduces the criminal offense of ‘industrial manslaughter’ for executive officers, individuals who are “senior officers” and companies in the mining industry.

Individuals now face a maximum prison sentence of 20 years and companies could be fined up to approximately $13 million Australian dollars.

The new law also introduces the requirement for statutory role holders to be employees of the coal mine operator entity with an 18-month transition period ending November 25, 2021.

The new law became effective July 1, 2020.

On June 19, 2020, the Environmental Protection and Other Legislation Amendment Bill 2020 (EPOLA Bill) was introduced into Queensland Parliament.

The EPOLA Bill includes the establishment of the Rehabilitation Commissioner as an independent statutory position, which will be responsible for monitoring and reporting on rehabilitation performance and trends across Queensland, as well as amendments to the residual risk framework that aim to ensure that any remaining risks on former resource sites are appropriately identified, costed and managed.

Sydney Water Catchment Areas .

In November 2017, the New South Wales government established an independent expert panel (Panel) to advise the Department of Planning, Industry and Environment (DPIE) on the impact of underground mining activities in Sydney’s water catchment areas, including at our Metropolitan Mine.

The Panel issued an initial report to DPIE in November 2018, which was publicly released in December 2018 and only concerned mining activities at two mines, our Metropolitan Mine and a competitor’s Dendrobium Mine.

After consultation with stakeholders, including Peabody, a final report was released in October 2019.

The final report updates and finalizes the initial report and also makes findings and recommendations concerning mining activities and effects across the catchment as a whole.

The Panel’s reports acknowledge the major effort at the Metropolitan and Dendrobium Mines over the last decade to employ best practice modeling and assessment methods undertaken by suitable specialists, with expert peer review while recommending continued rigorous monitoring and impact assessment in order to build on the knowledge base regarding mining-induced subsidence and its impacts on groundwater and surface water.

The reports endorse the government taking an incremental approach to mining approvals that provides for considering existing and emerging information and knowledge gaps.

The Panel concluded in the final report that the average daily water inflow over the last three years at the Metropolitan Mine is generally less than 0.2 megaliters per day and shows no evidence of connected fracture regime to surface or correlation with rainfall.

It also concluded that the potential for water to be diverted out of Woronora Reservoir and into other catchments through valley closure shear planes and geological structures will require careful assessment in the future because it is planned that most of the remaining longwall panels in the approved mining area will pass beneath the reservoir.

A range of matters remain to be considered by the Panel, including the cumulative impacts of flow losses and the relative significance of these for water supplies as well as the practicalities associated with establishing a robust regional water balance model.

The DPIE will now consider the recommendations in the Panel’s final report and has said that in the meantime no new development applications for mining in the catchment will be determined.

We do not currently have any such applications awaiting determination.

In March 2020 the DPIE approved the extraction plans for longwalls 305-307.

We continue to conduct robust monitoring, data collection and reporting and have been actively consulting with the government on Metropolitan’s approval processes and mine design to ensure that operational impacts are appropriately managed and minimized as far as possible.

The Panel issued its final report in October 2019.

The final report makes findings and recommendations concerning mining activities and effects across the catchment as a whole.

The DPIE considered the recommendations in the Panel’s final report and in April 2020 announced that it had accepted all 50 recommendations in the Panel’s report, and that it has established an interagency taskforce to implement a detailed action plan during 2020.

The action plan includes:

ensuring there is a net gain for the metropolitan water supply by requiring more offsetting from mining companies;

establishing a new independent expert panel to advise on future mining applications in the catchment;

strengthening surface and groundwater monitoring;

improving access to and transparency of environmental data;

adopting a more stringent approach to the assessment and conditioning of future mining proposals to minimize subsidence impacts;

reviewing and updating current and potential future water losses from mining in line with the best available science;

introducing a licensing regime to properly account for any water losses;

and undertaking further research into mine closure planning to reduce potential long-term impacts.

Queensland Royalties .

As part of the Queensland Government’s 2019-20 Budget, the Government committed to freeze royalty rates on coal and minerals for three years, provided companies voluntarily contribute to a Resource Community Infrastructure Fund (the Fund) over this three-year period.

The Government contributes $30 million Australian dollars towards the Fund, with companies voluntarily contributing $70 million Australian dollars.

Peabody’s contribution to the Fund is approximately $750,000 Australian dollars for the first year and is expected to decrease in years two and three based on an expected reduction in production at our Queensland mines.

Liquidity and Capital Resources

3 unchanged sentences

We have also used cash for dividends, share repurchases and early debt retirements.

We believe that our capital structure allows us to satisfy our working capital requirements and fund capital expenditures and debt-service obligations with cash generated from operations and cash on hand.

Any future determinations to return capital to stockholders, such as dividends or share repurchases will be at the discretion of our Board of Directors and will depend on a variety of factors, including the restrictions set forth under our debt agreements, our net income or other sources of cash, liquidity position and potential alternative uses of cash, such as internal development projects or acquisitions, as well as economic conditions and expected future financial results.

Our ability to declare dividends, repurchase shares or early retire debt in the future will depend on our future financial performance, which in turn depends on the successful implementation of our strategy and on financial, competitive, regulatory, technical and other factors, general economic conditions, demand for and selling prices of coal and other factors specific to our industry, many of which are beyond our control.

As of March 31, 2020 , our available liquidity was $1,187.7 million , which was comprised of cash and cash equivalents and availability under our revolver and accounts receivable securitization program as described below.

As of March 31, 2020 , our cash balances totaled $682.5 million , including approximately $603 million held by U.S.

As of June 30, 2020, our cash balances totaled $848.5 million, including approximately $785 million held by U.S.

subsidiaries, $33 million held by Australian subsidiaries and the remaining balance held by other foreign subsidiaries in accounts predominantly domiciled in the U.S.

2 unchanged sentences

liquidity needs, including capital and operating expenditures in Australia.

On April 3, 2020, we borrowed $300.0 million under our revolving credit facility, which is further described below and in Note 12.

“Long-term Debt” of the accompanying unaudited condensed consolidated financial statements.

This borrowing provides us with additional financial flexibility in light of the current uncertainty in the global markets and related effects on our business resulting from the COVID-19 pandemic.

While we do not currently expect to use the proceeds from these borrowings for any near-term liquidity needs, we may use the proceeds for working capital and other general corporate purposes.

Our available liquidity has declined from $1,275.8 million as of December 31, 2019 to $926.1 million as of June 30, 2020.

Available liquidity was comprised of cash and cash equivalents of $732.2 million and $848.5 million as of December 31, 2019 and June 30, 2020, respectively, and combined availability under our revolving credit facility and accounts receivable securitization program of $543.6 million and $77.6 million as of December 31, 2019 and June 30, 2020, respectively.

We have experienced negative cash flows from operations during the first half of 2020, and results from continuing operations, net of income taxes and Adjusted EBITDA for the six months ended June 30, 2020 declined by $1,850.8 million and $423.9 million, respectively, compared to the corresponding prior year period.

During the six months ended June 30, 2020, the combined availability under our revolving credit facility and accounts receivable securitization program decreased as a result of borrowing $300.0 million under our revolving credit facility on April 3, 2020, which is further described in Note 12.

“Long-term Debt” of the accompanying unaudited condensed consolidated financial statements, an additional $83.0 million of letters of credit issuances, and a $83.0 million decrease in available receivable balances under the accounts receivable securitization program.

While we were in compliance with the restrictions and covenants under our debt agreements at June 30, 2020, as further described below, there is significant risk that we will not be in compliance with the first lien leverage ratio requirement under our credit agreement in the second half of 2020 without successfully taking mitigating action.

Noncompliance with the ratio covenant would constitute a default under the credit agreement, and the revolving lenders could elect to accelerate the maturity of the related indebtedness, and could potentially choose to exercise other rights and remedies under the agreement.

Further, our senior secured notes and certain lease agreements contain cross-default provisions which would be activated by a default under the credit agreement, which could result in a similar acceleration of maturity under those obligations.

We believe we could seek to avoid noncompliance by taking certain mitigating actions, such as obtaining a waiver of the default condition, executing an amendment to the credit agreement, or completing asset sales to generate additional liquidity, but can offer no assurance as to the likelihood of success of such actions.

If such actions were not successful, we could avoid noncompliance while maintaining operating liquidity beyond twelve months by repaying the amount currently outstanding under our revolving credit facility and replacing outstanding letters of credit with cash collateral.

Such actions would avoid default on the remaining indebtedness under the credit agreement and cross-default on the senior secured notes and lease agreements as described above, but would have negative impacts to our liquidity.

Any of these actions could have an adverse effect on our financial condition, results of operations or cash flows.

Our ability to maintain adequate liquidity depends on the successful operation of our business and appropriate management of operating expenses and capital spending.

Our anticipated liquidity needs are highly sensitive to changes in each of these and other factors, including the evolving impact of the COVID-19 pandemic.

At July 31, 2020, our available liquidity was approximately $822 million.

The decrease subsequent to June 30, 2020 was driven by a reduction in cash and cash equivalent balances and changes in availability under our accounts receivable securitization program and revolving credit facility, including the issuance of an additional $53.2 million of letters of credit.

Also during July 2020, we issued a bank guarantee for $50 million Australian dollars as a performance guarantee in favor of the largest customer of our Seaborne Thermal Mining segment.

Under the terms of our coal supply agreement, which is sourced from our Wilpinjong Mine, that customer may unilaterally demand such a guarantee at any time.

The coal supply agreement and an associated step-in deed also require us to maintain compliance with certain covenants and restrictions.

In the event of noncompliance, the customer may exercise contractual step-in rights to appoint a receiver to operate the mine within the parameters of the coal supply agreement and step-in deed.

As of August 7, 2020, we were in compliance with the terms of these contractual arrangements.

Debt Financing

2 unchanged sentences

We make semi-annual interest payments on the senior notes each March 31 and September 30 until maturity.

Also during 2017, we entered into a credit agreement and related term loan under which we originally borrowed $950.0 million and have repaid $558.0 million through March 31, 2020 .

Also during 2017, we entered into a credit agreement and related term loan under which we originally borrowed $950.0 million and have repaid $559.0 million through June 30, 2020.

The term loan requires quarterly principal payments of $1.0 million and periodic interest payments, currently at LIBOR plus 2.75%, through December 2024 with the remaining balance due in March 2025.

We also entered into a revolving credit facility allowable under our credit agreement during 2017 for an aggregate commitment of $350.0 million for general corporate purposes.

We entered into the revolving credit facility allowable under our credit agreement during 2017 for an aggregate commitment of $350.0 million for general corporate purposes.

In September 2019, we entered into an amendment to the credit agreement which increased the aggregate commitment amount under the revolver to $565.0 million and, beginning in 2020, made applicable interest rates and fees dependent upon our periodically-determined first lien leverage ratio, as defined in the credit agreement.

To date, we have utilized this revolving credit facility for the borrowing described above and for letters of credit which incur combined fees of 3.125%, while unused capacity bears a commitment fee of 0.4%.

As of March 31, 2020 , such letters of credit amounted to $72.6 million and were primarily in support of our reclamation obligations.

To date, we have utilized this revolving credit facility for the $300.0 million borrowing described above and for letters of credit which incur combined fees of 3.125%, while unused capacity bears a commitment fee of 0.4%.

As of June 30, 2020, such letters of credit amounted to $197.9 million and were primarily in support of our reclamation obligations.

At June 30, 2020, the remaining availability under the revolving credit facility was $67.1 million.

Our debt agreements impose various restrictions and limits on certain categories of payments that we may make, such as those for dividends, investments, and stock repurchases.

We are also subject to customary affirmative and negative covenants.

We were in compliance with all such restrictions and covenants at March 31, 2020 .

We are also subject to customary affirmative and negative covenants, such as the first lien leverage ratio requirement described above.

We were in compliance with all such restrictions and covenants at June 30, 2020.

As described in the “Overview” section contained within this Item 2, the September 2019 amendment to our credit facility made the formation of the PRB Colorado joint venture with Arch expressly permissible.

6 unchanged sentences

Funding capacity under the program may also be provided for letters of credit in support of other obligations.

At March 31, 2020 , we had no outstanding borrowings and $132.7 million of letters of credit provided under the program.

At June 30, 2020, we had no outstanding borrowings and $84.2 million of letters of credit provided under the program.

The letters of credit are primarily in support of portions of our obligations for reclamation, workers’ compensation and postretirement benefits.

Availability under the program, which is adjusted for certain ineligible receivables, was $12.8 million at March 31, 2020 and there was no cash collateral requirement.

Availability under the program, which is adjusted for certain ineligible receivables, was $10.5 million at June 30, 2020 and there was no cash collateral requirement.

Capital Requirements

There were no material changes to our targeted capital expenditures from the information previously provided in Item 2.

As a result of the deferral of certain capital project spending to subsequent periods, we revised our expected 2020 capital expenditures to approximately $200 million during the second quarter of 2020, as compared to approximately $250 million as disclosed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019.

There were no other material changes to our capital requirements.

Contractual Obligations

2 unchanged sentences

associated with rail and port commitments for the delivery of coal, including amounts relating to export facilities.

Due to changes in the foreign currency exchange rates, our estimated obligations are expected to be $11.1 million less for the remainder of 2020 than that provided in Item 7.

Due to extensions to our commercial agreements for rail and port commitments, partially offset by reductions to our near-term commitments related to our North Goonyella Mine, our estimated obligations are expected to be $5.0 million less for the remainder of 2020 than that provided in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019.

For the two-year period 2021 through 2022 and the two-year period 2023 through 2024, such obligations are comparatively reduced by $20.4 million and $18.2 million, respectively.

For periods thereafter, such obligations are reduced by $72.6 million.

For the two-year period 2021 through 2022, such obligations are comparatively reduced by $27.1 million.

For the two-year period 2023 through 2024, and periods thereafter, such obligations are comparatively increased by $10.8 million and $158.5 million, respectively.

Historical Cash Flows and Free Cash Flow

The following table summarizes our cash flows for the three months ended March 31, 2020 and 2019 , as reported in the accompanying unaudited condensed consolidated financial statements.

The following table summarizes our cash flows for the six months ended June 30, 2020 and 2019, as reported in the accompanying unaudited condensed consolidated financial statements.

Free Cash Flow is a financial measure not recognized in accordance with U.S.

Refer to the “Reconciliation of Non-GAAP Financial Measures” section above for definitions and reconciliations to the most comparable measures under U.S.

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions)

1 unchanged sentence

Net cash used in investing activities (115.6) (64.0)

Net cash used in financing activities

Net cash provided by (used in) in financing activities 285.0 (430.3)

Net change in cash, cash equivalents and restricted cash 116.3 (117.3)

6 unchanged sentences

Operating Activities.

The decrease in net cash provided by operating activities for the three months ended March 31, 2020 compared to the same period in the prior year was driven by the year-over-year decrease in cash from our mining operations and an unfavorable change in net cash flows associated with our working capital of $36.1 million.

The net decrease in net cash (used in) provided by operating activities for the six months ended June 30, 2020 compared to the same period in the prior year was driven by a year-over-year decrease in cash from our mining operations, partially offset by a favorable change in net cash flows associated with our working capital ($127.3 million).

Investing Activities.

Net cash used in investing activities for the three months ended March 31, 2020 was comparable to the same period in the prior year and in both periods was driven by capital expenditures to sustain operations.

The increase in net cash used in investing activities for the six months ended June 30, 2020 compared to the same period in the prior year was driven by higher advances to related parties and joint ventures, on a net basis, ($23.0 million) and insurance proceeds attributable to North Goonyella equipment losses in the prior year period ($23.2 million).

Financing Activities.

The decrease in net cash used in financing activities for the three months ended March 31, 2020 compared to the same period in the prior year was driven the prior year period payment of dividends of $214.4 million, including a supplemental dividend of $1.85 per share of common stock, and common stock repurchases of $98.8 million.

The increase in net cash provided by (used in) financing activities for the six months ended June 30, 2020 compared to the same period in the prior year was driven by the $300.0 million borrowing under our revolving credit facility and the prior year payment of dividends of $229.3 million, including a supplemental dividend of $1.85 per share of common stock, and common stock repurchases of $156.0 million.

We have presently suspended such payments, as discussed in Part II, Item 2.

2 unchanged sentences

In the normal course of business, we are a party to various guarantees and financial instruments that carry off-balance-sheet risk and are not reflected in the accompanying condensed consolidated balance sheets.

At March 31, 2020 , such instruments included $1,557.4 million of surety bonds and $206.8 million of letters of credit.

These financial instruments provide support for our reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees.

At June 30, 2020, such instruments inc luded $1,589.4 million of surety bonds and $283.6 million of letters of credit.

These financial instruments provide support for our reclamation bonding requirements, lease obligations, insu rance policies and various other performance guarantees.

We periodically evaluate the instruments for on-balance-sheet treatment based on the amount of exposure under the instrument and the likelihood of required performance.

1 unchanged sentence

We could experience a decline in our liquidity as financial assurances associated with reclamation bonding requirements, surety bonds or other obligations are required to be collateralized by cash or letters of credit.

Our surety providers have the ability to demand collateral up to the full amount of each surety bond.

As described in Note 17.

2 unchanged sentences

Historically, such assurances have taken the form of third-party instruments such as surety bonds, bank guarantees and letters of credit, as well as self-bonding arrangements in the U.S.

We have shifted away from extensive self-bonding in the U.S.

in favor of increased usage of surety bonds and similar third-party instruments.

Self-bonding in the U.S.

has become increasingly restricted in recent years, leading to our increased usage of surety bonds and similar third-party instruments.

This change in practice has had an unfavorable impact on our liquidity due to increased collateral requirements and surety and related fees.

At March 31, 2020 , we had total asset retirement obligations of $758.7 million which were backed by a combination of surety bonds and letters of credit.

Bonding requirement amounts may differ significantly from the related asset retirement obligation because such requirements are calculated under the assumption that reclamation begins currently, whereas our accounting liabilities are discounted from the end of a mine’s economic life (when final reclamation work would begin) to the balance sheet date.

At June 30, 2020, we had total asset retirement obligations of $757.5 million which were backed by a combination of surety bonds and letters of credit.

Bonding requirement amounts may differ significantly from the re lated asset retirement obligation because such requirements are calculated under the assumption that reclamation begins currently, whereas our accounting liabilities are discounted from the end of a mine’s economic life (when final reclamation work would begin) to the balance sheet date.

Guarantees and Other Financial Instruments with Off-Balance Sheet Risk.

7 unchanged sentences

Actual results may differ from these estimates.

At March 31, 2020, we have identified certain assets with an aggregate carrying value of approximately $2.1 billion in our Seaborne Metallurgical Mining, Powder River Basin Mining, Other U.S.

We recognized an asset impairment charge of $ 1,418.1 million during the three and six months ended June 30, 2020 related to our North Antelope Rochelle Mine of the Powder River Basin Mining segment.

The outlook for the mine has been negatively impacted by the accelerated decline of coal-fired electricity generation in the U.S., driven by the reduced utilization of plants and plant retirements, sustained low natural gas pricing, and the increased use of renewable energy sources.

These factors have led to the expectation of reduced future sales volumes.

The impairment charge was based upon the remaining estimated discounted cash flows of the mine.

Such cash flows were based upon estimates which generally constitute unobservable Level 3 inputs under the fair value hierarchy, including, but not limited to, future tons sold, coal prices for unpriced coal, production costs (including costs for labor, commodity supplies and contractors), transportation costs, and a risk-adjusted, cost of capital.

At June 30, 2020, we also identified certain assets with an aggregate carrying value of approximately $ 850 million in our Seaborne Metallurgical Mining, Powder River Basin Mining, Other U.S.

Thermal Mining and Corporate and Other segments whose recoverability is most sensitive to coal pricing, cost pressures, customer demand and customer concentration risk.

We conducted a review of those assets for recoverability as of March 31, 2020 and determined that no impairment charges were necessary as of that date.

We conducted a review of those assets for recoverability as of June 30, 2020 and determined that no further impairment charges were necessary as of that date.

“Property, Plant, Equipment and Mine Development” to our accompanying unaudited condensed consolidated financial statements for additional information regarding impairment charges.

Our critical accounting policies are discussed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our critical accounting policies remain unchanged at March 31, 2020 .

Our critical accounting policies remain unchanged at June 30, 2020.

Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis