What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-07 · 300 added, 242 removed, 981 unchanged (36% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

12 unchanged sentences

Other operating loss (income):

Net loss (gain) on disposals 0.2 ( 0.2 ) ( 7.9 ) ( 1.7 )

Net gain on disposals ( 2.5 ) ( 1.1 ) ( 10.4 ) ( 2.8 )

Asset impairment — 20.0 1,418.1 20.0

1 unchanged sentence

North Goonyella insurance recovery — — — ( 125.0 )

Loss (income) from equity affiliates 6.0 ( 9.7 ) 15.1 ( 13.2 )

Loss from equity affiliates 10.6 20.7 25.7 7.5

Operating (loss) profit ( 15.8 ) ( 36.8 ) ( 1,620.2 ) 227.2

2 unchanged sentences

Net periodic benefit costs, excluding service cost 2.8 4.9 8.3 14.6

Net mark-to-market adjustment on actuarially determined liabilities 13.0 — 13.0 —

(Loss) income from continuing operations before income taxes ( 64.9 ) ( 70.1 ) ( 1,736.7 ) 127.9

3 unchanged sentences

Net (loss) income ( 67.1 ) ( 78.1 ) ( 1,746.2 ) 91.3

Net (loss) income attributable to noncontrolling interests ( 3.4 ) 2.4 ( 5.2 ) 8.1

Net income (loss) attributable to noncontrolling interests 0.1 4.7 ( 5.1 ) 12.8

Net (loss) income attributable to common stockholders $ ( 67.2 ) $ ( 82.8 ) $ ( 1,741.1 ) $ 78.5

8 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

Other comprehensive income (loss), net of income taxes 174.8 ( 3.5 ) 169.7 ( 8.3 )

Comprehensive (loss) income ( 1,543.7 ) 36.8 ( 1,684.2 ) 164.6

Net (loss) income attributable to noncontrolling interests ( 3.4 ) 2.4 ( 5.2 ) 8.1

Comprehensive (loss) income attributable to common stockholders $ ( 1,540.3 ) $ 34.4 $ ( 1,679.0 ) $ 156.5

Comprehensive income (loss) 107.7 ( 81.6 ) ( 1,576.5 ) 83.0

Net income (loss) attributable to noncontrolling interests 0.1 4.7 ( 5.1 ) 12.8

Comprehensive income (loss) attributable to common stockholders $ 107.6 $ ( 86.3 ) $ ( 1,571.4 ) $ 70.2

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(Amounts in millions, except per share data)

1 unchanged sentence

Cash and cash equivalents $ 814.6 $ 732.2

Accounts receivable, net of allowance for credit losses of $0.0 at June 30, 2020 and December 31, 2019

Accounts receivable, net of allowance for credit losses of $ 0.0 at September 30, 2020 and December 31, 2019

Inventories 319.7 331.5

20 unchanged sentences

Preferred Stock — $ 0.01 per share par value;

100.0 shares authorized, no shares issued or outstanding as of June 30, 2020 and December 31, 2019

100.0 shares authorized, no shares issued or outstanding as of September 30, 2020 and December 31, 2019

Series Common Stock — $ 0.01 per share par value;

50.0 shares authorized, no shares issued or outstanding as of June 30, 2020 and December 31, 2019

50.0 shares authorized, no shares issued or outstanding as of September 30, 2020 and December 31, 2019

Common Stock — $ 0.01 per share par value;

450.0 shares authorized, 140.5 shares issued and 97.8 shares outstanding as of June 30, 2020 and 139.2 shares issued and 96.9 shares outstanding as of December 31, 2019

450.0 shares authorized, 140.5 shares issued and 97.8 shares outstanding as of September 30, 2020 and 139.2 shares issued and 96.9 shares outstanding as of December 31, 2019

Additional paid-in capital 3,361.0 3,351.1

Treasury stock, at cost — 42.7 and 42.3 common shares as of June 30, 2020 and December 31, 2019

Treasury stock, at cost — 42.7 and 42.3 common shares as of September 30, 2020 and December 31, 2019

( 1,368.9 ) ( 1,367.3 )

8 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions)

6 unchanged sentences

Noncash interest expense, net 12.0 11.4

Noncash coal inventory revaluation 20.7 —

Deferred income taxes 0.1 ( 0.4 )

2 unchanged sentences

Net gain on disposals ( 10.4 ) ( 2.8 )

Loss (income) from equity affiliates 15.1 ( 13.2 )

Loss from equity affiliates 25.7 7.5

Provision for North Goonyella equipment loss — 24.7

28 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions)

7 unchanged sentences

Distributions to noncontrolling interests ( 3.5 ) ( 23.4 )

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

Other, net — 0.1

Net cash provided by (used in) financing activities 273.9 ( 610.0 )

Net change in cash, cash equivalents and restricted cash 82.4 ( 205.0 )

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

24 unchanged sentences

( 1,076.9 ) 999.1 597.0 1,074.5

Net (loss) income

( 1,544.2 ) 37.1 ( 1,673.9 ) 161.3

Net (loss) income attributable to common stockholders ( 67.2 ) ( 82.8 ) ( 1,741.1 ) 78.5

Dividends declared ($ 0.000 , $ 0.145 , $ 0.000 , and $ 2.265 per share, respectively)

14 unchanged sentences

50.0 49.7 58.7 56.0

Net (loss) income

( 3.4 ) 2.4 ( 5.2 ) 8.1

Net income (loss) attributable to noncontrolling interests 0.1 4.7 ( 5.1 ) 12.8

Distributions to noncontrolling interests

18 unchanged sentences

Balance sheet information presented herein as of December 31, 2019 has been derived from the Company’s audited consolidated balance sheet at that date.

The Company’s results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2020.

The Company’s results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2020.

Coronavirus (COVID-19) Pandemic

2 unchanged sentences

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.

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, increased renewable energy usage and weak electric power sector consumption due to reduced industrial activity.

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

The Company also faces disruption to supply chain and distribution channels, potentially increasing its costs of production, storage and distribution, and potential adverse effects to the Company’s workforce, each of which could have a material adverse effect on the Company’s 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.

The global economy is showing improvement in industrial production, even as the timing of a recovery varies across countries and sectors.

However, in the seaborne metallurgical and thermal markets, demand remains below pre-pandemic levels.

In the U.S., the impacts of COVID-19 have accelerated a multi-year decline in coal demand.

During the nine months ended September 30, 2020, coal-fueled generation declined 24 % compared to the prior year period and now represents 19 % of the overall generation mix.

Additionally, the Company has faced disruption to supply chain and distribution channels and adverse effects to the Company’s workforce.

While the ultimate impacts of the COVID-19 pandemic on the Company’s business are unknown, the Company expects continued interference with general commercial activity, which may negatively affect both demand and prices for the Company’s products.

Given the uncertainties with respect to future COVID-19 developments, including the duration, severity and scope, as well as the necessary government actions to limit the spread, the Company is unable to estimate the full impact of the pandemic on its financial condition, results of operations or cash flows at this time.

In response to the COVID-19 pandemic, 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).

The Company has requested accelerated refunds of previously generated alternative minimum tax (AMT) credits from the Internal Revenue Service (IRS) as further described in Note 11.

Pursuant to the CARES Act, the Company has received accelerated refunds of previously generated alternative minimum tax (AMT) credits from the Internal Revenue Service (IRS) as further described in Note 11.

“Income Taxes” and will defer 2020 employer payroll taxes incurred after the date of enactment to future years.

Liquidity, Going Concern, and Management's Plan

The Company experienced negative cash flows from operations during the nine months ended September 30, 2020.

Results from continuing operations, net of income taxes and Adjusted EBITDA for the nine months ended September 30, 2020 declined by $ 1,841.3 million and $ 487.7 million, respectively, compared to the corresponding prior year period.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s available liquidity as of October 31, 2020, September 30, 2020 and December 31, 2019 consisted of the following:

October 31, 2020 September 30, 2020 December 31, 2019

(Dollars in millions)

Cash and cash equivalents $ 770.7 $ 814.6 $ 732.2

Revolving credit facility availability 11.5 5.1 498.6

Accounts receivable securitization program availability 45.8 40.4 45.0

Total liquidity $ 828.0 $ 860.1 $ 1,275.8

During the nine months ended September 30, 2020, the combined availability under the Company’s revolving credit facility and accounts receivable securitization program decreased as a result of $ 360.0 million of borrowings, $ 70.0 million of which was subsequently repaid, an additional $ 134.2 million of letters of credit issuances, and a $ 73.9 million reduction in available receivable balances under the accounts receivable securitization program.

As further described in Note 17.

“Long-term Debt,” during the second quarter of 2020, the Company borrowed $ 300.0 million under its revolving credit facility as part of its ongoing efforts to preserve financial flexibility in light of the current uncertainty in the global markets caused by the COVID-19 pandemic.

The Company experienced negative cash flows from operations during the first half of 2020.

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.

The Company’s available liquidity 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 the Company’s 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.

During the six months ended June 30, 2020, the combined availability under the Company’s revolving credit facility and accounts receivable securitization program decreased as a result of the $ 300.0 million borrowing described above, an additional $ 83.0 million of letters of credit issuances, and an $ 83.0 million decrease in available receivable balances under the accounts receivable securitization program.

There is significant risk of noncompliance with the leverage ratio limitations under the Company’s credit agreement in the second half of 2020 if the Company does not successfully take 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, the Company’s senior secured notes and certain lease agreements contain cross-default provisions that would be activated by a default under the credit agreement, which could result in a similar acceleration of maturity under those obligations.

The Company believes it 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, the Company could avoid noncompliance while maintaining operating liquidity beyond twelve months by repaying the amount currently outstanding under its 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 the Company’s liquidity.

Any of these actions could have an adverse effect on the Company’s financial condition, results of operations or cash flows.

“Financial Instruments and Other Guarantees,” the Company is a party to various guarantees and financial instruments to provide support for the Company’s reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees.

At September 30, 2020, such instruments included $ 1,628.7 million face amount of surety bonds and $ 334.8 million of outstanding letters of credit.

Since filing the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 with the Securities and Exchange Commission on August 7, 2020, the Company’s counterparties have made various additional demands for collateral amounting to approximately $ 800 million.

As further described below, the Company has reached an agreement with the majority of its surety bond providers to resolve these demands and limit future collateral requests.

While the Company was compliant with the restrictions and covenants under its debt agreements at September 30, 2020, noncompliance with the first lien leverage ratio covenant under the Company’s Credit Agreement (as defined in Note 12.

“Long-term Debt”) is probable as of December 31, 2020, if the Company does not successfully take mitigating actions.

Absent waivers from the lenders under the Credit Agreement or other successful mitigating actions, 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, or could potentially choose to exercise other rights and remedies under the agreement.

Further, the Company’s senior secured notes, accounts receivable securitization program and certain lease agreements contain cross-default or termination provisions that would be triggered by an Event of Default as defined under the Credit Agreement, which could result in similar accelerations of those obligations.

Accordingly, the Company has classified all such debt obligations and relevant lease liabilities as current in the accompanying condensed consolidated balance sheet as of September 30, 2020.

The combined risks associated with the Company’s recent financial results, market conditions, additional collateral demands and potential Credit Agreement noncompliance raise substantial doubt about whether the Company will meet its obligations as they become due within one year from the date of issuance of these unaudited condensed consolidated financial statements and its ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.

The Company is seeking to address the issues identified above by taking certain mitigating actions.

As part of this process, the Company entered into a transaction support agreement (TSA) in November 2020 with the providers of 99 % of the Company’s surety bond portfolio (Participating Sureties) to define their commitments to implementing a transaction resolving approximately $ 800 million in additional collateral demands made by the Participating Sureties.

Among other things, the TSA includes the following terms and conditions:

• Under the terms of the TSA, the Company will post $ 75.0 million of collateral, a minimum of $ 40.0 million of which will be in the form of letters of credit, and provide second liens on $ 200.0 million of certain mining equipment for the benefit of the Participating Sureties.

• In addition, the Company will post an additional $ 25.0 million of collateral per year through 2025 for the benefit of the Participating Sureties.

The collateral postings will also further increase to the extent the Company generates more than $ 100.0 million of free cash flow (as defined in the TSA) in any twelve-month period or has asset sales in excess of $ 10.0 million.

• The Participating Sureties have agreed to a standstill through the earlier of December 2025 or the maturity date of the Credit Agreement (as amended or refinanced).

During which time, the Participating Sureties agree not to demand any additional collateral, draw on letters of credit posted for the benefit of themselves, or cancel, or attempt to cancel, any existing surety bond.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In addition, the Company has been engaged in discussions with its revolving credit lenders and the holders of the 2022 Notes (as defined in Note 12.

“Long-term Debt”) (the 2022 Noteholders) with the primary objectives of covenant relief and the extension of maturity dates, while maintaining financial flexibility.

The TSA described above is contingent upon an agreement between the Company, its revolving credit lenders, and the 2022 Noteholders accomplishing those objectives by December 31, 2020, which can be extended at the Company’s discretion to January 29, 2021 for purposes of increasing participation.

Further, the Company is working to improve its liquidity and financial position through other means such as the sale of nonstrategic surplus land, coal reserves, and other assets, and driving cost improvements across the Company.

However, there can be no assurance that the Company will be able to obtain a waiver of noncompliance or otherwise amend the Credit Agreement to address covenant issues, reach agreement on the comprehensive approach to address its combined liquidity risks described above, or improve the Company’s overall liquidity and financial position through other means.

As a result, the Company’s ability to timely meet its obligations when due or satisfy additional collateral demands could be adversely affected.

If the Company is not able to timely, successfully, or efficiently implement the strategies that it is pursuing to address those risks and improve its liquidity and financial position, or otherwise meet its liquidity needs, the Company may need to voluntarily pursue an in-court restructuring.

(2) Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

11 unchanged sentences

Expected recoveries of amounts previously written off, not to exceed the aggregate of the amount previously written off, are included in determining the necessary reserve at the balance sheet date.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company pools its accounts receivable based on similar risk characteristics in estimating its expected credit losses.

8 unchanged sentences

The Company adopted the disclosure requirements effective January 1, 2020.

Accounting Standards Not Yet Implemented

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes.

2 unchanged sentences

ASU 2019-12 is effective on January 1, 2021 for calendar year-end public companies and early adoption is permitted.

The Company plans to adopt the requirements effective January 1, 2021.

The Company elected to early adopt ASU 2019-12 in the third quarter of 2020 and apply the guidance to the beginning of the annual period, effective January 1, 2020.

The singular current year impact of the adoption of this ASU is related to the intraperiod tax allocation exception.

Under this new guidance, the Company is no longer required to allocate income tax benefit to continuing operations to offset the tax effect of other comprehensive income in situations where there is a loss from continuing operations and income in all other sources of income.

Under the predecessor accounting guidance, the Company would have recorded approximately $ 38 million of incremental income tax benefit in continuing operations with an offsetting income tax expense in other comprehensive income.

Accounting Standards Not Yet Implemented

Equity Method Investments.

18 unchanged sentences

With respect to its seaborne mining segments, the Company classifies as “Export” certain revenue from domestically-delivered coal under contracts in which the price is derived on a basis similar to export contracts.

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

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

9 unchanged sentences

Revenues $ 163.0 $ 78.8 $ 264.8 $ 179.8 $ ( 15.4 ) $ 671.0

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

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

9 unchanged sentences

Revenues $ 249.5 $ 216.3 $ 333.6 $ 326.4 $ ( 19.4 ) $ 1,106.4

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

11 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

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

10 unchanged sentences

Revenue by initial contract duration was as follows:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

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

5 unchanged sentences

Revenues $ 163.0 $ 78.8 $ 264.8 $ 179.8 $ ( 15.4 ) $ 671.0

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

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

7 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

5 unchanged sentences

Revenues $ 526.1 $ 363.6 $ 737.2 $ 524.1 $ ( 7.1 ) $ 2,143.9

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

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

10 unchanged sentences

Committed Revenue from Contracts with Customers

The Company expects to recognize revenue subsequent to June 30, 2020 of approximately $ 4.1 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at June 30, 2020.

The Company expects to recognize revenue subsequent to September 30, 2020 of approximately $ 3.8 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at September 30, 2020.

Approximately 43 % of such amount is expected to be recognized over the next twelve months and the remainder thereafter.

2 unchanged sentences

Accounts Receivable

“Accounts receivable, net” at June 30, 2020 and December 31, 2019 consisted of the following:

June 30, 2020 December 31, 2019

“Accounts receivable, net” at September 30, 2020 and December 31, 2019 consisted of the following:

September 30, 2020 December 31, 2019

(Dollars in millions)

2 unchanged sentences

Accounts receivable, net $ 192.9 $ 329.5

Trade receivables, net included no allowance for credit losses as of both June 30, 2020 and December 31, 2019.

Miscellaneous receivables, net included no allowance for credit losses as of both June 30, 2020 and December 31, 2019.

No charges for credit losses were recognized during the three and six months ended June 30, 2020.

A reduction of previously recorded credit losses of $ 0.1 million for both the three and six months ended June 30, 2019 was included in “Operating costs and expenses” in the unaudited condensed consolidated statements of operations.

Trade receivables, net included no allowance for credit losses as of both September 30, 2020 and December 31, 2019.

Miscellaneous receivables, net included no allowance for credit losses as of both September 30, 2020 and December 31, 2019.

No charges for credit losses were recognized during the three months ended September 30, 2020 and 2019 nor the nine months ended September 30, 2020.

A reduction of previously recorded credit losses of $ 0.1 million for the nine months ended September 30, 2019 was included in “Operating costs and expenses” in the unaudited condensed consolidated statements of operations.

(4) Discontinued Operations

5 unchanged sentences

Results from discontinued operations were as follows during the periods presented below:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

Liabilities classified as discontinued operations included in the Company’s condensed consolidated balance sheets were as follows:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(Dollars in millions)

8 unchanged sentences

In May 2015, Patriot again filed voluntary petitions for relief under the Bankruptcy Code in the U.S.

District Court for the Eastern District of Virginia and subsequently initiated a process to sell some or all of its assets to qualified bidders.

District Court for the Eastern District of Virginia and subsequently initiated a process to sell substantially all of its assets to qualified bidders.

On October 9, 2015, Patriot’s bankruptcy court entered an order confirming Patriot’s plan of reorganization, which provided, among other things, for the sale of substantially all of Patriot’s assets to two different buyers.

12 unchanged sentences

Whether the Company will ultimately be required to fund certain of those obligations in the future as a result of Patriot’s May 2015 bankruptcy remains uncertain.

The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $ 85.7 million at both June 30, 2020 and December 31, 2019.

The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $ 85.9 million and $ 85.7 million at September 30, 2020 and December 31, 2019, respectively.

While the Company has recorded a liability, it intends to review each claim on a case-by-case basis and contest liability estimates as appropriate.

8 unchanged sentences

Under the terms of the Patriot spin-off, Patriot was primarily liable to the Combined Fund for the approximately $ 40 million of its subsidiaries’ obligations at that time.

Once Patriot ceased meeting its obligations, the Company was held responsible for these costs and, as a result, recorded “Loss from discontinued operations, net of income taxes” charges of $ 0.1 million during both the three months ended June 30, 2020 and 2019, and $ 0.2 million and $ 0.3 million during the six months ended June 30, 2020 and 2019, respectively.

The Company made payments into the fund of $ 0.4 million and $ 0.5 million during the three months ended June 30, 2020 and 2019, respectively, and $ 0.8 million and $ 1.0 million during the six months ended June 30, 2020 and 2019, respectively, and estimates that the annual cash cost to fund these potential Combined Fund liabilities will range between $ 1 million and $ 2 million in the near-term, with those premiums expected to decline over time because the fund is closed to new participants.

The liability related to the fund was $ 14.7 million and $ 15.2 million at June 30, 2020 and December 31, 2019, respectively.

Once Patriot ceased meeting its obligations, the Company was held responsible for these costs and, as a result, recorded “Loss from discontinued operations, net of income taxes” charges of $ 0.1 million and $ 0.2 million during the three months ended September 30, 2020 and 2019, respectively, and $ 0.3 million and $ 0.5 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company made payments into the fund of $ 0.4 million during both the three months ended September 30, 2020 and 2019, and $ 1.2 million and $ 1.4 million during the nine months ended September 30, 2020 and 2019, respectively, and estimates that the annual cash cost to fund these potential Combined Fund liabilities will range between $ 1 million and $ 2 million in the near-term, with those premiums expected to decline over time because the fund is closed to new participants.

The liability related to the fund was $ 14.4 million and $ 15.2 million at September 30, 2020 and December 31, 2019, respectively.

UMWA 1974 Pension Plan (UMWA Plan) Litigation.

5 unchanged sentences

Bankruptcy Court for the Eastern District of Missouri (Bankruptcy Court), on January 25, 2017, the UMWA Plan and the Company agreed to a settlement of the claim which entitled the UMWA Plan to $ 75 million to be paid by the Company in increments through 2021.

The balance of the liability, on a discounted basis, was $ 12.5 million and $ 26.0 million at June 30, 2020 and December 31, 2019, respectively.

The balance of the liability, on a discounted basis, was $ 13.2 million and $ 26.0 million at September 30, 2020 and December 31, 2019, respectively.

(5) Inventories

Inventories as of June 30, 2020 and December 31, 2019 consisted of the following:

June 30, 2020 December 31, 2019

Inventories as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30, 2020 December 31, 2019

(Dollars in millions)

3 unchanged sentences

Total $ 319.7 $ 331.5

Materials and supplies inventories presented above have been shown net of reserves of $ 9.3 million and $ 7.9 million as of June 30, 2020 and December 31, 2019, respectively.

Materials and supplies inventories presented above have been shown net of reserves of $ 9.6 million and $ 7.9 million as of September 30, 2020 and December 31, 2019, respectively.

The coal inventories presented above include net realizable value adjustments of $ 29.0 million and $ 8.3 million as of September 30, 2020 and December 31, 2019, respectively.

(6) Equity Method Investments

The Company had total equity method investments of $ 63.1 million and $ 56.9 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively, related to Middlemount Coal Pty Ltd (Middlemount).

Included in “Loss (income) from equity affiliates” in the unaudited condensed consolidated statements of operations were losses of $ 6.0 million and $ 15.1 million related to Middlemount during the three and six months ended June 30, 2020, respectively, and income of $ 9.7 million and $ 13.5 million during the three and six months ended June 30, 2019, respectively.

The Company received cash payments from Middlemount of $ 14.7 million during the six months ended June 30, 2019, related to financing receivables.

No paym ents were received from Middlemount during the six months ended June 30, 2020.

The Company had total equity method investments of $ 54.7 million and $ 56.9 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively, related to Middlemount Coal Pty Ltd (Middlemount).

Included in “Loss from equity affiliates” in the unaudited condensed consolidated statements of operations were losses related to Middlemount of $ 10.6 million and $ 18.8 million during the three months ended September 30, 2020 and 2019, respectively, and $ 25.7 million and $ 5.3 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company received cash payments from Middlemount of $ 14.7 million during the nine months ended September 30, 2019, related to financing receivables.

No paym ents were received from Middlemount during the nine months ended September 30, 2020.

PEABODY ENERGY CORPORATION

2 unchanged sentences

The Company’s participation in the Revolving Loans will not, at any time, exceed its 50 % equity interest of the revolving loan limit.

At June 30, 2020, the revolving loan limit was $ 120 million Australian dollars and the Revolving Loans were fully drawn upon by Middlemount.

At September 30, 2020, the revolving loan limit was $ 120 million Australian dolla rs and the Revolving Loans were fully drawn upon by Middlemount.

The Revolving Loans bear interest at 10 % per annum and expire on December 31, 2020.

The carrying value of the portion of the Revolving Loans due to the Company’s Australian subsidiary, which is included in the total investment balance, was $ 41.2 million and $ 17.5 million as of June 30, 2020 and December 31, 2019, respectively.

As of both June 30, 2020 and December 31, 2019, the financing receivables and Revolving Loans are accounted for as in-substance common stock due to the limited fair value attributed to Middlemount’s equi ty.

T he carrying value of the portion of the Revolving Loans due to the Company’s Australian subsidiary, which is included in the total investment balance, was $ 42.6 million and $ 17.5 million as of September 30, 2020 and December 31, 2019, respectively, with the increase during the nine months ended September 30, 2020 attributable to the Company’s share of additional funding.

Subsequent to September 30, 2020, the revolving loan limit was increased to $ 160 million Australian dollars and the maturity was extended to December 31, 2021.

As of both September 30, 2020 and December 31, 2019, the financing receivables and Revolving Loans are accounted for as in-substance common stock due to the limited fair value attributed to Middlemount’s equi ty.

(7) Derivatives and Fair Value Measurements

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These risk management activities are actively monitored for compliance with the Company’s risk management policies.

As of June 30, 2020, the Company had currency options outstanding with an aggregate notional amount of $ 613.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the six-month period ending December 31, 2020.

As of September 30, 2020, the Company had currency options outstanding with an aggregate notional amount of $ 600.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the remainder of 2020 and over the first six months of 2021.

The instruments are quarterly average rate options which entitle the Company to receive payment on the notional amount should the quarterly average Australian dollar-to-U.S.

dollar exchange rate exceed amounts ranging from $ 0.70 to $ 0.75 over the six-month period ending December 31, 2020.

As of June 30, 2020, the Company held coal-related financial contracts related to a portion of its forecasted sales for an aggregate notional volume of 1.2 million tonnes.

dollar exchange rate exceed amounts ranging from $ 0.70 to $ 0.76 over the remainder of 2020 and over the first six months of 2021.

As of September 30, 2020, the Company held coal-related financial contracts related to a portion of its forecasted sales for an aggregate notional volume of 1.1 million tonnes.

Such financial contracts include futures, forwards and options.

Of the aggregate notional volume, 0.8 million tonnes will settle in 2020 and the remainder will settle in 2021.

The Company had no diesel fuel or interest rate derivatives in place as of June 30, 2020.

The Company had no diesel fuel or interest rate derivatives in place as of September 30, 2020.

Coal Trading Activities

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The fair value of derivatives reflected in the accompanying condensed consolidated balance sheets are set forth in the table below.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Asset Derivative Liability Derivative Asset Derivative Liability Derivative

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Effect of counterparty netting ( 32.0 ) 32.0 ( 74.3 ) 74.3

Variation margin (held) posted ( 23.8 ) — ( 22.1 ) —

Variation margin held ( 11.1 ) — ( 22.1 ) —

Net derivatives and margin as classified in the balance sheets $ 8.3 $ ( 0.2 ) $ 5.9 $ —

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The tables below show the amounts of pre-tax gains and losses related to the Company’s derivatives.

Three Months Ended June 30, 2020

Total gain (loss) recognized in income (Loss) gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives

Three Months Ended September 30, 2020

Total gain (loss) recognized in income Gain (loss) realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives

Financial Instrument

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Coal contracts related to forecasted sales

( 16.7 ) ( 0.6 ) ( 16.1 )

Coal trading contracts

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Total $ ( 13.0 ) $ 2.4 $ ( 15.4 )

Three Months Ended June 30, 2019

Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized (loss) gain recognized in income on derivatives

Three Months Ended September 30, 2019

Total (loss) gain recognized in income Loss realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives

Financial Instrument

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Total $ ( 23.0 ) $ ( 7.3 ) $ ( 15.7 )

Six Months Ended June 30, 2020

Total gain (loss) recognized in income (Loss) gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives

Nine Months Ended September 30, 2020

Total gain (loss) recognized in income Gain (loss) realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives

Financial Instrument

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Total $ ( 7.8 ) $ 2.3 $ ( 10.1 )

Six Months Ended June 30, 2019

Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized (loss) gain recognized in income on derivatives

Nine Months Ended September 30, 2019

Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized gain recognized in income on derivatives

Financial Instrument

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Total $ 66.5 $ 10.6 $ 55.9

During the three and six months ended June 30, 2020 and 2019, gains and losses on foreign currency option contracts were included in “Operating costs and expenses,” and gains and losses on coal contracts related to forecasted sales and those related to coal trading contracts were included in “Revenues” in the accompanying unaudited condensed consolidated statements of operations.

During the three and nine months ended September 30, 2020 and 2019, gains and losses on foreign currency option contracts were included in “Operating costs and expenses,” and gains and losses on coal contracts related to forecasted sales and those related to coal trading contracts were included in “Revenues” in the accompanying unaudited condensed consolidated statements of operations.

The Company classifies the cash effects of its derivatives within the “Cash Flows From Operating Activities” section of the unaudited condensed consolidated statements of cash flows.

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The following tables set forth the hierarchy of the Company’s net financial asset positions for which fair value is measured on a recurring basis:

June 30, 2020

September 30, 2020

Level 1 Level 2 Level 3 Total

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Other Financial Instruments .

The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of June 30, 2020 and December 31, 2019:

• Cash and cash equivalents, restricted cash, accounts receivable, including those within the Company’s accounts receivable securitization program, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments.

The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of September 30, 2020 and December 31, 2019:

• Cash and cash equivalents, accounts receivable, including those within the Company’s accounts receivable securitization program, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments.

• Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2), and otherwise on estimated borrowing rates to discount the cash flows to their present value (Level 3).

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The fair value of debt, shown below, is principally based on reported market values and estimates based on interest rates, maturities, credit risk, underlying collateral and completed market transactions, which have been limited in recent history.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(Dollars in millions)

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therefore, a change in one unobservable input would not necessarily correspond with a change in another unobservable input.

The Company had no transfers between Levels 1, 2 and 3 during the three and six months ended June 30, 2020 and 2019.

The Company had no transfers between Levels 1, 2 and 3 during the three and nine months ended September 30, 2020 and 2019.

The Company’s policy is to value all transfers between levels using the beginning of period valuation.

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The Company is required by the exchanges upon which it transacts to post certain additional collateral, known as initial margin, which represents an estimate of potential future adverse price movements across the Company’s portfolio under normal market conditions.

The Company posted initial margin of $ 4.5 million and $ 7.9 million as of June 30, 2020 and December 31, 2019, respectively, which is reflected in “Other current assets” in the condensed consolidated balance sheets.

As of June 30, 2020 and December 31, 2019, respectively, the Company had posted $ 1.7 million and $ 1.3 million in excess of margin requirements.

The Company posted initial margin of $ 3.0 million and $ 7.9 million as of September 30, 2020 and December 31, 2019, respectively, which is reflected in “Other current assets” in the condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, respectively, the Company had posted $ 0.8 million and $ 1.3 million in excess of margin requirements.

PEABODY ENERGY CORPORATION

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The Company is required to post variation margin on positions that are in a net liability position and is entitled to receive and hold variation margin on positions that are in a net asset position with an exchange and certain of its OTC derivative contract counterparties.

As of June 30, 2020 and December 31, 2019, respectively, the Company was in receipt of $ 23.8 million and $ 22.1 million in variation margin.

As of September 30, 2020 and December 31, 2019, respectively, the Company was in receipt of $ 11.1 million and $ 22.1 million in variation margin.

Certain of the Company’s derivative trading instruments require the parties to provide additional performance assurances whenever a material adverse event jeopardizes one party’s ability to perform under the instrument.

If the Company was to sustain a material adverse event (using commercially reasonable standards), its counterparties could request collateralization on derivative trading instruments in which the Company holds a net liability position.

As of June 30, 2020 and December 31, 2019, the Company was not required to post collateral to counterparties for such positions.

Based on the aggregate fair values of such net liability positions at September 30, 2020 and December 31, 2019, the Company would have been required to post additional collateral of $ 0.1 million and less than $ 0.1 million, respectively.

As of September 30, 2020 and December 31, 2019, the Company was not required to post collateral to counterparties for such positions.

(8) Intangible Contract Assets and Liabilities

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coal supply agreements as a result of differences between contract terms and estimated market terms for the same coal products and also recorded intangible liabilities related to unutilized capacity under its port and rail take-or-pay contracts.

The balances, net of accumulated amortization, and respective balance sheet classifications at June 30, 2020 and December 31, 2019, are set forth in the following tables:

June 30, 2020

The balances, net of accumulated amortization, and respective balance sheet classifications at September 30, 2020 and December 31, 2019, are set forth in the following tables:

September 30, 2020

Assets Liabilities Net Total

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Amortization of the intangible assets and liabilities related to coal supply agreements occurs ratably based upon coal volumes shipped per contract and is recorded as a component of “Depreciation, depletion and amortization” in the accompanying unaudited condensed consolidated statements of operations.

Such amortization amounted to $ 1.3 million and $ 6.8 million during the three months ended June 30, 2020 and 2019, respectively, and $ 3.7 million and $ 11.6 million during the six months ended June 30, 2020 and 2019, respectively.

During the three and six months ended June 30, 2020, the Company also charged to expense intangible assets of $ 4.5 million related to a coal supply agreement deemed to have been impaired, as further described in Note 9.

“Property, Plant, Equipment and Mine Development.” The Company anticipates net amortization of sales contracts, based upon expected shipments, to be an expense of less than $ 1 million during the remaining six months of 2020, expense of less than $ 1 million for the year 2021 and credits of approximately $ 2 million per year for the years 2022 through 2024, and $ 3 million in total thereafter.

Such amortization amounted to $ 0.4 million and $ 5.3 million during the three months ended September 30, 2020 and 2019, respectively, and $ 4.1 million and $ 16.9 million during the nine months ended September 30, 2020 and 2019, respectively.

During the nine months ended September 30, 2020, the Company also charged to expense intangible assets of $ 4.5 million related to a coal supply agreement deemed to have been impaired, as further described in Note 9.

“Property, Plant, Equipment and Mine Development.” The Company anticipates net amortization of sales contracts, based upon expected shipments, to be credits of less than $ 1 million during both the remaining three months of 2020 and the year 2021, credits of approximately $ 2 million per year for the years 2022 through 2024, and credits of $ 3 million in total thereafter.

Future unutilized capacity and the amortization periods related to the take-or-pay contract intangible liabilities are based upon estimates of forecasted usage.

Such amortization, which is classified as a reduction to “Operating costs and expenses” in the accompanying unaudited condensed consolidated statements of operations, amounted to $ 2.7 million and $ 5.6 million during the three months ended June 30, 2020 and 2019, respectively, and $ 5.3 million and $ 11.2 million during the six months ended June 30, 2020 and 2019, respectively.

The Company anticipates net amortization of take-or-pay contract intangible liabilities to be approximately $ 3 million during the remaining six months of 2020, and for the years 2021 through 2024 to be approximately $ 4 million, $ 3 million, $ 3 million and $ 3 million, respectively, and $ 18 million thereafter.

Such amortization, which is classified as a reduction to “Operating costs and expenses” in the accompanying unaudited condensed consolidated statements of operations, amounted to $ 1.5 million and $ 2.7 million during the three months ended September 30, 2020 and 2019, respectively, and $ 6.8 million and $ 13.9 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company anticipates net amortization of take-or-pay contract intangible liabilities to be approximately $ 1 million during the remaining three months of 2020, and for the years 2021 through 2024 to be approximately $ 4 million, $ 3 million, $ 3 million and $ 3 million, respectively, and $ 19 million thereafter.

(9) Property, Plant, Equipment and Mine Development

The composition of property, plant, equipment and mine development, net, as of June 30, 2020 and December 31, 2019 is set forth in the table below:

June 30, 2020 December 31, 2019

The composition of property, plant, equipment and mine development, net, as of September 30, 2020 and December 31, 2019 is set forth in the table below:

September 30, 2020 December 31, 2019

(Dollars in millions)

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Asset Impairment and Other At-Risk Assets

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

During the nine months ended September 30, 2020, the Company recognized an asset impairment charge of $ 1,418.1 million related to its North Antelope Rochelle Mine of the Powder River Basin Mining segment.

Of this amount, $ 1,393.7 million related to the property, plant, equipment and mine development assets, $ 19.9 million related to operating lease right-of-use assets and $ 4.5 million related to contract-based intangible assets.

After giving effect to the impairment charge, the combined net book value of the property, plant, equipment and mine development assets, operating lease right-of-use assets, and contract-based intangible assets of the Powder River Basin Mining segment was $ 742.2 million at June 30, 2020.

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.

The outlook for the North Antelope Rochelle 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.

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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.

The Company also identified certain assets with an aggregate carrying value of approximately $ 850 million at June 30, 2020 in its 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.

The Company 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.

No asset impairment charges were recorded during the three months ended September 30, 2020.

During the three and nine months ended September 30, 2019, the Company recorded $ 20.0 million of asset impairment charges related to its Wildcat Hills Underground Mine, which shipped its final tons during the second quarter of 2020.

The Company also identified certain assets with an aggregate carrying value of approximately $ 1.1 billion at September 30, 2020 in its 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, customer concentration risk and future economic viability.

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

PEABODY ENERGY CORPORATION

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Certain lease agreements are subject to the restrictive covenants of the Company’s credit facilities and include cross-acceleration provisions, under which the lessor could require remedies including, but not limited to, immediate recovery of the present value of any remaining lease payments.

Accordingly, as previously described in Note 1.

“Basis of Presentation,” certain lease liabilities are classified as current in the accompanying condensed consolidated balance sheet as of September 30, 2020 due to the Company’s probable default under its Credit Agreement as of December 31, 2020, absent successful mitigating actions.

The Company typically agrees to indemnify lessors for the value of the property or equipment leased, should the property be damaged or lost during the course of the Company’s operations.

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Aside from indemnification of the lessor for the value of the property leased, the Company’s maximum potential obligations under its leases are equal to the respective future minimum lease payments, and the Company assumes that no amounts could be recovered from third parties.

One of the Company’s operating lease agreements for underground mining equipment in Australia entered into in 2013 requires contingent rent to be paid only if and when certain coal is mined at a specified margin as defined in the agreements.

There was no contingent expense related to that arrangement for the periods listed below.

The components of lease expense during the three and six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The components of lease expense during the three and nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental balance sheet information related to leases at June 30, 2020 and December 31, 2019 was as follows:

June 30, 2020 December 31, 2019

Supplemental balance sheet information related to leases at September 30, 2020 and December 31, 2019 was as follows:

September 30, 2020 December 31, 2019

(Dollars in millions)

17 unchanged sentences

Finance leases 6.2 %

Supplemental cash flow information related to leases during the three and six months ended June 30, 2020 and 2019 was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Supplemental cash flow information related to leases during the three and nine months ended September 30, 2020 and 2019 was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company's leases have remaining lease terms of 1 year to 21.5 years, some of which include options to extend the terms deemed reasonably certain of exercise.

Maturities of lease liabilities were as follows:

The Company's leases have remaining lease terms ranging from less than one year to 21.3 years, some of which include options to extend the terms deemed reasonably certain of exercise.

While certain amounts below are classified as current, the contractual maturities of lease liabilities were as follows:

Period Ending December 31, Operating Leases Finance Leases

9 unchanged sentences

(11) Income Taxes

The Company's effective tax rate before remeasurement for the six months ended June 30, 2020 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax provision, offset by foreign rate differential and changes in valuation allowance.

The Company’s income tax benefit of $ 0.2 million and income tax provision of $ 3.0 million for the three months ended June 30, 2020 and 2019, respectively, included a tax provision of $ 2.6 million and a tax benefit of $ 0.3 million, respectively, related to the remeasurement of foreign income tax accounts.

The Company’s income tax provision of $ 2.8 million and $ 21.8 million for the six months ended June 30, 2020 and 2019, respectively, included a tax benefit of $ 0.7 million and $ 0.3 million, respectively, related to the remeasurement of foreign income tax accounts.

In response to the COVID-19 pandemic, the United States ena cted the CARES Act.

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

The Company has requested accelerated refunds of approximately $ 24 million from the IRS and has adjusted its current and deferred tax asset balances accordingly.

The Company's effective tax rate before remeasurement for the nine months ended September 30, 2020 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax provision, offset by foreign rate differential and changes in valuation allowance.

The Company’s income tax benefit of $ 0.1 million and income tax provision of $ 4.2 million for the three months ended September 30, 2020 and 2019, respectively, included a tax provision of $ 1.1 million and $ 0.1 million, respectively, related to the remeasurement of foreign income tax accounts.

The Company’s income tax provision of $ 2.7 million and $ 26.0 million for the nine months ended September 30, 2020 and 2019, respectively, included a tax provision of $ 0.4 million and a tax benefit of $ 0.2 million, respectively, related to the remeasurement of foreign income tax accounts.

In response to the COVID-19 pandemic, the United States enacted the CARES Act.

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

Pursuant to the CARES Act, the Company has received approximately $ 24 million of accelerated refunds from the IRS and has adjusted its current and deferred tax asset balances accordingly.

(12) Long-term Debt

The Company’s total indebtedness as of June 30, 2020 and December 31, 2019 consisted of the following:

June 30, 2020 December 31, 2019

The Company’s total indebtedness as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30, 2020 December 31, 2019

(Dollars in millions)

6.000 % Senior Secured Notes due March 2022

$ 459.0 $ 459.0

6.375 % Senior Secured Notes due March 2025

1 unchanged sentence

Revolving credit facility 230.0 —

Secured borrowing under receivables securitization program 60.0 —

Finance lease obligations 8.0 15.2

3 unchanged sentences

Long-term debt $ — $ 1,292.5

As described in Note 1.

“Basis of Presentation,” the Company has classified all of its long-term debt as current.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.000 % and 6.375 % Senior Secured Notes

1 unchanged sentence

The Senior Notes were sold on February 15, 2017 in a private transaction exempt from the registration requirements of the Securities Act of 1933.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Senior Notes were issued at par value.

1 unchanged sentence

Interest payments on the Senior Notes are scheduled to occur each year on March 31 and September 30 until maturity.

During the three months ended June 30, 2020 and 2019, the Company recorded interest expense of $ 17.5 million and $ 18.6 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $ 35.0 million an d $ 36.1 million, respectively, related to the Senior Notes.

During the three months ended September 30, 2020 and 2019, the Company recorded interest expense of $ 17.5 million and $ 18.1 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $ 52.5 million and $ 54.2 million, respectively, related to the Senior Notes.

The 2022 Notes were redeemable beginning March 31, 2019, in whole or in part, at 103.0 % of par, beginning March 31, 2020 at 101.5 % of par and beginning March 31, 2021 and thereafter at par.

The 2025 Notes may be redeemed, in whole or in part, beginning March 31, 2020 at 104.8 % of par, beginning March 31, 2021 at 103.2 % of par, beginning March 31, 2022 at 101.6 % of par and beginning March 31, 2023 and thereafter at par.

The 2025 Notes were redeemable beginning March 31, 2020, in whole or in part, at 104.8 % of par, beginning March 31, 2021 at 103.2 % of par, beginning March 31, 2022 at 101.6 % of par and beginning March 31, 2023 and thereafter at par.

In addition, prior to the first date on which the Senior Notes were redeemable at the redemption prices noted above, the Company was entitled to redeem some or all of the Senior Notes at a calculated make-whole premium, plus accrued and unpaid interest.

3 unchanged sentences

Such consent payments were capitalized as additional debt issuance costs to be amortized over the respective terms of the Senior Notes.

The Company also expensed $ 1.5 million of other payments associated with the amendment to “Interest expense” in the accompanying unaudited condensed consolidated statements of operations during 2018.

During the fourth quarter of 2019, the Company made open-market purchases of $ 41.0 million of the 2022 Notes for $ 39.9 million, plus accrued interest.

3 unchanged sentences

The Senior Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of the Company’s material domestic subsidiaries and secured by first priority liens over (1) substantially all of the assets of the Company and the guarantors, except for certain excluded assets, (2) 100 % of the capital stock of each domestic restricted subsidiary of the Company, (3) 100 % of the non-voting capital stock of each first tier foreign subsidiary of the Company or a foreign subsidiary holding company and no more than 65 % of the voting capital stock of each first tier foreign subsidiary of the Company or a foreign subsidiary holding company, (4) a legal charge of 65 % of the voting capital stock and 100 % of the non-voting capital stock of Peabody Investments (Gibraltar) Limited and (5) all intercompany debt owed to the Company or any guarantor, in each case, subject to certain exceptions.

The obligations under the Senior Notes are secured on a pari passu basis by the same collateral securing the Credit Agreement (as defined below), subject to certain exceptions.

The obligations under the Senior Notes are secured on a pari passu basis by the same collateral securing the Credit Agreement, subject to certain exceptions.

Credit Agreement

The Company entered into a credit agreement on April 3, 2017 among the Company, as borrower, Goldman Sachs Bank USA, as administrative agent, and other lenders party thereto (the Credit Agreement).

The Company entered into an agreement on April 3, 2017 among the Company, as borrower, Goldman Sachs Bank USA, as administrative agent, and other lenders party thereto (the Credit Agreement).

The Credit Agreement originally provided for a $ 950.0 million senior secured term loan (the Senior Secured Term Loan), which was to mature in 2022 prior to the amendments described below.

Following the voluntary prepayments and amendments described below, the Credit Agreement provided for a $ 400.0 million first lien senior secured term loan, which bore interest at LIBOR pl us 2.92 % per an num as of June 30, 2020.

During the three months ended June 30, 2020 and 2019, the Company recorded interest expe nse of $ 3.8 million and $ 5.7 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company recorded interest expense of $ 8.7 million and $ 11.4 million, respectively, related to the Senior Secured Term Loan.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the three months ended September 30, 2020 and 2019, the Company recorded interest expense of $ 3.4 million and $ 5.6 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $ 12.1 million and $ 17.0 million, respectively, related to the Senior Secured Term Loan.

Proceeds from the Senior Secured Term Loan were received net of an original issue discount and deferred financing costs of $ 37.3 million that are being amortized over its term.

9 unchanged sentences

Obligations under the Credit Agreement are secured on a pari passu basis by the same collateral securing the Senior Notes.

Since entering into the Credit Agreement, the Company has repai d $ 559.0 million of the o riginal $ 950.0 million loan principal amount on the Senior Secured Term Loan in various installments, including $ 546.0 million which was voluntarily prepaid.

Since entering into the Credit Agreement, the Company has repaid $ 560.0 million of the original $ 950.0 million loan principal amount on the Senior Secured Term Loan in various installments, including $ 546.0 million which was voluntarily prepaid.

In September 2017, the Company entered into an amendment to the Credit Agreement which permitted the Company to add an incremental revolving credit facility in addition to the Company’s ability to add one or more incremental term loan facilities under the Credit Agreement.

The incremental revolving credit facility and/or incremental term loan facilities can be in an aggregate principal amount of up to $ 350.0 million plus additional amounts so long as the Company remains in compliance with Total Leverage Ratio requirements as set forth in the Credit Agreement.

The amendment also made available an additional restricted payment basket that permits additional repurchases, dividends or other distributions with respect to the Company’s common and preferred stock in an aggregate amount up to $ 450.0 million so long as the Company’s Fixed Charge Coverage Ratio (as defined in the Credit Agreement) is at least 2.00 :1.00 on a pro forma basis.

2 unchanged sentences

In connection with this amendment, the Company voluntarily repaid $ 46.0 million of principal on the Senior Secured Term Loan.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fourth quarter of 2017, the Company entered into the incremental revolving credit facility (the Revolver) for an aggregate commitment of $ 350.0 million for general corporate purposes and paid debt issuance costs of $ 4.7 million.

4 unchanged sentences

Specific to the Revolver, the Credit Agreement requires that the Company maintain a 2.00 :1.00 First Lien Leverage Ratio, calculated on a trailing twelve-month basis and modified to limit unrestricted cash netting to $ 800.0 million.

As previously described in Note 1.

“Basis of Presentation,” the Company anticipates significant risk of noncompliance with the First Lien Leverage Ratio requirement during the second half of 2020 without successfully taking mitigating action.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the second quarter of 2020, the Company borrowed $ 300.0 million under the Revolver.

The borrowing was made to preserve financial flexibility in light of the current uncertainty in the global markets and related effects on the Company resulting from the COVID-19 pandemic.

At June 30, 2020 , the Revolver was also utilized for letters of credit of $ 197.9 million, primarily in support of the Company’s reclamation obligations, as further described in Note 17.

“Financial Instruments and Other Guarantees.” At June 30, 2020, the remaining availability under the Revolver was $ 67.1 million.

At June 30, 2020, applicable Revolver rates were LIBOR plus 3.00 % for revolving loans, 0.4 % per annum for unused capacity, and 3.125 % per annum for letters of credit fees.

During the three months ended June 30, 2020 and 2019, the Company recorded interest expense and fees of $ 4.0 million and $ 1.5 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company recorded interest expense and fees of $ 5.7 million and $ 3.1 million, respe ctively, related to the Revolver.

The Company subsequently repaid $ 70.0 million of this amount during the third quarter of 2020.

At September 30, 2020, the Revolver was also utilized for letters of credit of $ 329.9 million, primarily in support of the Company’s reclamation obligations, as further described in Note 17.

“Financial Instruments and Other Guarantees.” At September 30, 2020, the remaining availability under the Revolver was $ 5.1 million.

At September 30, 2020, applicable Revolver rates were LIBOR plus 3.00 % for revolving loans, 0.4 % per annum for unused capacity, and 3.125 % per annum for letters of credit fees.

During the three months ended September 30, 2020 and 2019, the Company recorded interest expense and fees of $ 5.1 million and $ 1.4 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Company recorded interest expense and fees of $ 10.8 million and $ 4.5 million, respectively, related to the Revolver.

Restricted Payments Under the Senior Notes and Credit Agreement

3 unchanged sentences

The payment of dividends and purchases of common stock under this annual aggregate $ 25.0 million basket are permitted so long as the Company’s Total Leverage Ratio would not exceed 1.25 :1.00 on a pro forma basis (as defined in the Credit Agreement and Indenture).

Secured Borrowing under Receivables Securitization Program

As further described in Note 17.

“Financial Instruments and Other Guarantees,” the Company’s receivables securitization program provides for up to $ 250.0 million in funding accounted for as a secured borrowing, limited to the availability of eligible receivables.

During September 2020, the Company borrowed $ 60.0 million under the receivables securitization program.

These borrowings, which have a maturity date of April 2022 and bear an interest rate of LIBOR plus 1.50 %, may be secured by a combination of collateral and the trade receivables underlying the receivables securitization program, from time to time.

Finance Lease Obligations

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“Leases” for additional information associated with the Company’s finance leases, which pertain to the financing of mining equipment used in operations.

Comprehensive Plan to Restructure Debt and Related Obligations

As previously described in Note 1.

“Basis of Presentation,” the Company anticipates significant risk of noncompliance with the First Lien Leverage Ratio covenant as of December 31, 2020 without successfully taking mitigating actions.

One such potential action is the execution of a comprehensive agreement among the Company, the revolving lenders under its credit agreement, holders of its 2022 Notes and surety bond providers as described in Note 1.

“Basis of Presentation.”

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(13) Pension and Postretirement Benefit Costs

1 unchanged sentence

Net periodic pension (benefit) cost included the following components:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006 (generally 80%).

As of June 30, 2020, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds.

As of September 30, 2020, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds.

Minimum funding standards are legislated by ERISA and are modified by pension funding stabilization provisions included in the Moving Ahead for Progress in the 21st Century Act of 2012, the Highway and Transportation Funding Act of 2014 and the Bipartisan Budget Act of 2015.

The Company is not required to make any contributions to its qualified pension plans in 2020 based on minimum funding requirements and does not expect to make any discretionary contributions in 2020.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net periodic postretirement benefit cost included the following components:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

( 2.2 ) ( 2.2 ) ( 6.6 ) ( 6.6 )

Net actuarial loss 13.0 — 13.0 —

Net periodic postretirement benefit cost $ 17.0 $ 5.1 $ 24.9 $ 15.5

During September 2020, the Company announced changes to one of its postretirement health care benefit plans.

Effective January 1, 2021, the Company will no longer subsidize medical costs for Medicare eligible individuals or provide life insurance to retirees.

The Company will provide non-Medicare eligible retirees and eligible dependents a health reimbursement arrangement.

The changes triggered a remeasurement event that resulted in a mark-to-market loss of $ 13.0 million recorded to “Net mark-to-market adjustment on actuarially determined liabilities” during the three and nine months ended September 30, 2020, primarily due to the decrease in discount rate from 3.40 % at December 31, 2019 to 2.70 % at September 30, 2020.

The impact of the changes on future benefits reduced the Company’s accumulated postretirement benefit obligation by $ 174.5 million.

The reduction was attributable to the elimination of health care benefits upon covered individuals’ attainment of Medicare eligibility.

The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income,” which is being amortized to earnings over an average remaining service period to full eligibility for participating employees of 5.1 years .

In October 2018, the Company amended one of its postretirement health care benefit plans which reduced its accumulated postretirement benefit obligation, as further described in Note 17.

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The reduction in liability has been recorded with an offsetting balance in “Accumulated other comprehensive income,” net of a deferred tax provision, and is being amortized to earnings over an average remaining service period to full eligibility for participating employees.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2018, the Company established a Voluntary Employees Beneficiary Association (VEBA) trust to pre-fund a portion of benefits for non-represented retirees.

The Company does not expect to make any discretionary contributions to the VEBA in 2020.

The Company does not expect to make any discretionary contributions to the VEBA in 2020 and plans to utilize VEBA assets to make benefit payments.

(14) Accumulated Other Comprehensive Income

The following table sets forth the after-tax components of accumulated other comprehensive income and changes thereto recorded during the six months ended June 30, 2020:

The following table sets forth the after-tax components of accumulated other comprehensive income and changes thereto recorded during the nine months ended September 30, 2020:

Foreign Currency Translation

7 unchanged sentences

Current period change 1.8 174.5 176.3

June 30, 2020 $ ( 5.0 ) $ 31.5 $ 26.5

Postretirement health care and life insurance benefits reclassified from other comprehensive income to earnings of $ 2.2 million during both the three months ended June 30, 2020 and 2019 and $ 4.4 million du ring both the six months ended June 30, 2020 and 2019 are included in “Net periodic benefit costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

September 30, 2020 $ ( 2.5 ) $ 203.8 $ 201.3

Postretirement health care and life insurance benefits reclassified from other comprehensive income to earnings of $ 2.2 million during both the three months ended September 30, 2020 and 2019 and $ 6.6 million du ring both the nine months ended September 30, 2020 and 2019 are included in “Net periodic benefit costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

As previously described in Note 13.

“Pension and Postretirement Benefit Costs,” the Company recorded $ 174.5 million within accumulated other comprehensive income during the three and nine month period ended September 30, 2020 related to changes to one of its postretirement health care benefit plans.

(15) Other Events

Organizational Realignment

Cost Repositioning Program

From time to time, the Company initiates restructuring activities in connection with its repositioning efforts to appropriately align its cost structure or optimize its coal production relative to prevailing market conditions.

1 unchanged sentence

Costs associated with restructuring activities are recognized in the period incurred.

Such charges included as “Restructuring charges” in the Company's unaudited condensed consolidated statements of operations amoun ted to $ 16.5 million and $ 0.4 million for the three months ended June 30, 2020 and 2019, respectively, and $ 23.0 million and $ 0.6 million for the six months ended June 30, 2020 and 2019, respectively, and were associated with both involuntary and voluntary workforce reductions .

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Such charges included as “Restructuring charges” in the Company's unaudited condensed consolidated statements of operations amounted to $ 8.1 million and $ 0.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 31.1 million and $ 1.3 million for the nine months ended September 30, 2020 and 2019, respectively, and were associated with both involuntary and voluntary workforce reductions.

On October 5, 2020, the Company announced that it is temporarily idling its Shoal Creek Mine in Alabama over the next several months.

While steelmaking fundamentals, particularly in traditional markets, appear to be in the early stages of recovery from the COVID-19 pandemic, customer demand has been and continues to be impacted.

These market factors, combined with a currently elevated cost structure at the mine, have led to the decision to temporarily suspend production.

The Company will seek to implement productivity improvements during the idle period.

United Wambo Joint Venture with Glencore

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The Company proportionally consolidates the entity based upon its economic interest.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Both parties contributed mining tenements upon formation of the joint venture.

Construction and development efforts are currently underway to combine operations.

The joint venture agreement specifies that the Company 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.

During the nine months ended September 30, 2020, the Company contributed approximately $ 45 million towards construction and development, which is reflected as “Additions to property, plant, equipment and mine development” in the accompanying unaudited condensed consolidated statements of cash flows.

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

1 unchanged sentence

PRB Colorado Joint Venture with Arch

On June 18, 2019, the Company entered into a definitive implementation agreement (the Implementation Agreement) with Arch, to establish a joint venture that will combine the respective Powder River Basin (PRB) and Colorado operations of Peabody and Arch.

Pursuant to the terms of the Implementation Agreement, Peabody will hold a 66.5 % economic interest in the joint venture and Arch will hold a 33.5 % economic interest.

The Company expects to proportionally consolidate the entity based upon its economic interest.

Governance of the joint venture will be overseen by the joint venture’s board of managers, which will be comprised of Peabody and Arch representatives with voting powers proportionate with the companies’ economic interests, with the exception of certain specified matters which will require supermajority approval.

Peabody will manage the operations of the joint venture, subject to the supervision of the joint venture’s board of managers.

On June 18, 2019, the Company entered into a definitive implementation agreement with Arch, to establish a joint venture that would have combined the respective Powder River Basin (PRB) and Colorado operations of Peabody and Arch.

As further described in Note 18.

1 unchanged sentence

Federal Trade Commission (FTC) sought a preliminary injunction to challenge the Company’s proposed joint venture.

Peabody 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.

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, the Company amended its Credit Agreement to expressly permit formation of the joint venture and intends to address such formation under the Indenture governing the Senior Notes.

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

On September 29, 2020, the United States District Court for the Eastern District of Missouri (the District Court) granted the FTC’s request for a preliminary injunction.

Effective September 30, 2020, Peabody and Arch terminated their agreement to establish the joint venture.

North Goonyella

1 unchanged sentence

During 2018 and 2019, the Company 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.

The Company has 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.

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

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

The Company has also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $ 3.8 million and $ 29.3 million during the three months ended September 30, 2020 and 2019, respectively, and $ 25.2 million and $ 94.6 million during the nine months ended September 30, 2020 and 2019, respectively.

In March 2019, the Company entered into an insurance claim settlement agreement with its 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.

The Company has collected the full amount of the recovery.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company is currently evaluating various alternatives regarding the future utility of the mine.

In the event that no future mining occurs at the North Goonyella Mine or the Company is unable to find a commercial alternative, the Company may record additional charges for the remaining carrying value of the North Goonyella Mine of up to approximately $ 300 million, which is incremental to the at-risk value described in Note 9.

“Property, Plant, Equipment and Mine Development.” Incremental exposures above the aforementioned include take-or-pay obligations and other costs associated with idling or closing the mine.

Corporate Structure

The Company is undertaking a process to explore and evaluate various strategic financing alternatives.

In connection with considering various options to enhance its financial flexibility, the Company has made changes to its corporate structure by designating certain of its subsidiaries as unrestricted subsidiaries under the Indenture and the Credit Agreement.

The designated subsidiaries consist primarily of the entities through which the Company conducts the operations of its Wilpinjong Mine, which accounted for 74% of the Seaborne Thermal Mining segment’s Adjusted EBITDA for the six months ended June 30, 2020.

(16) Earnings per Share (EPS)

7 unchanged sentences

For the performance units, their contingent features result in an assessment for any potentially dilutive common stock by using the end of the reporting period as if it were the end of the contingency period for all units granted.

The computation of diluted EPS excluded aggregate share-based compensation awards of approximately 2.2 million and 0.7 million for the three months ended June 30, 2020 and 2019, respectively, and 2.5 million and 0.7 million for the six months ended June 30, 2020 and 2019, respectively, because to do so would have been anti-dilutive for those periods.

Because the potential dilutive impact of such share-based compensation awards is calculated under the treasury stock method, anti-dilution generally occurs when the exercise prices or unrecognized compensation cost per share of such awards are higher than the Company’s average stock price during the applicable period.

Anti-dilution also occurs when a company reports a net loss from continuing operations, and the dilutive impact of all share-based compensation awards are excluded accordingly.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The computation of diluted EPS excluded aggregate share-based compensation awards of approximately 2.1 million and 1.7 million for the three months ended September 30, 2020 and 2019, respectively, and 2.3 million and 0.6 million for the nine months ended September 30, 2020 and 2019, respectively, because to do so would have been anti-dilutive for those periods.

Anti-dilution also occurs when a company reports a net loss from continuing operations, and the dilutive impact of all share-based compensation awards are excluded accordingly.

The following illustrates the earnings allocation method utilized in the calculation of basic and diluted EPS.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

$ ( 64.8 ) $ ( 74.3 ) $ ( 1,739.4 ) $ 101.9

Net (loss) income attributable to noncontrolling interests

( 3.4 ) 2.4 ( 5.2 ) 8.1

Net income (loss) attributable to noncontrolling interests 0.1 4.7 ( 5.1 ) 12.8

(Loss) income from continuing operations attributable to common stockholders

26 unchanged sentences

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

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

At September 30, 2020, such instruments included $ 1,628.7 million of surety bonds and $ 334.8 million of letters of credit.

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

3 unchanged sentences

Such requirements are typically established by statute or under mining permits.

At June 30, 2020, the Company’s asset retirement obligations of $ 757.5 million were supported by surety bonds of $ 1,398.9 million, as well as letters of credit issued under the Company’s receivables securitization program and Revolver.

Letters of credit issued at June 30, 2020 amounted to $ 185.4 million, some of which were directly in support of asset retirement obligations and some of which were in support of other obligations.

At September 30, 2020, the Company’s asset retirement obligations of $ 762.8 million were supported by surety bonds of $ 1,439.8 million, as well as letters of credit issued under the Company’s receivables securitization program and Revolver.

Letters of credit issued at September 30, 2020 amounted to $ 235.9 million, which served as collateral for surety bonds in support of asset retirement obligations.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In October and November 2020, the Company was served with complaints filed in the District Court and in the Supreme Court of New South Wales at Sydney by Argonaut Insurance Company (Argonaut) against the Company and various of its subsidiaries, seeking (1) release of bonds in the amount of $ 202.9 million or, alternatively, an irrevocable letter of credit in the amount of $ 182.4 million and (2) payment of $ 48.3 million Australian dollars, respectively, representing collateral demands sought by Argonaut to secure certain bonding commitments, plus interest and indemnity costs under certain indemnity agreements entered into between Argonaut and the Company during 2017.

The New South Wales matter has been set for hearing in November 2020;

no hearing has been scheduled in the District Court matter.

Agronaut has agreed under the terms of the TSA more fully described in Note 1.

“Basis of Presentation,” to dismiss these claims.

Accounts Receivable Securitization

7 unchanged sentences

The assets and liabilities of P&L Receivables are consolidated with Peabody, and the Securitization Program is treated as a secured borrowing for accounting purposes, but the assets of P&L Receivables will be used first to satisfy the creditors of P&L Receivables, not Peabody’s creditors.

The borrowings under the Securitization Program remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables, by continuing to contribute trade receivables to P&L Receivables, unless an event of default occurs.

At June 30, 2020, the Com pany had no outstanding borrowings and $ 84.2 million of letters of credit issued under the Securitization Program.

The letters of credit were primarily in support of portions of the Company’s obligations for reclamation, workers’ compensation and postretirement benefits.

Availability under the Securitization Program, which is adjusted for certain ineligible receivables, was $ 10.5 million at June 30, 2020.

The Company had no collateral requirement under the Securitization Program at either June 30, 2020 or December 31, 2019.

The Company incurred fees associated with the Securitization Program of $ 0.8 million and $ 1.0 million during the three months ended June 30, 2020 and 2019, respectively, and $ 1.5 million and $ 2.6 million during the six months ended June 30, 2020 and 2019, respectively, which have been recorded as interest expense in the accompanyin g unaudited condensed consolidated statements of operations.

The borrowings under the Securitization Program bear interest at LIBOR plus 1.5 % per annum and remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables, by continuing to contribute trade receivables to P&L Receivables, unless an event of default occurs.

At September 30, 2020, the Com pany had $ 60.0 million in outstanding borrowings and $ 3.4 million of letters of credit issued under the Securitization Program.

The letters of credit were primarily in support of portions of the Company’s obligations for property and casualty insurance.

Availability under the Securitization Program, which is adjusted for certain ineligible receivables, was $ 40.4 million at September 30, 2020.

The Company had no collateral posted under the Securitization Program at either September 30, 2020 or December 31, 2019.

The Company incurred interest and fees associated with the Securitization Program of $ 0.8 million and $ 1.0 million during the three months ended September 30, 2020 and 2019, respectively, and $ 2.9 million and $ 3.6 million during the nine months ended September 30, 2020 and 2019, respectively, which have been recorded as interest expense in the accompanyin g unaudited condensed consolidated statements of operations.

Cash Collateral Arrangements and Restricted Cash

From time to time, the Company is required to remit cash to certain regulatory authorities and other third parties as collateral for financial assurances associated with a variety of long-term obligations and commitments surrounding employee related matters and the mining, reclamation and shipping of its production.

The Company had no such requirements as of either June 30, 2020 or December 31, 2019.

The Company had no such cash collateral or restricted cash requirements as of either September 30, 2020 or December 31, 2019.

Substantially all of the Company’s U.S.

1 unchanged sentence

The maximum amounts payable under the Company’s debt agreements are equal to the respective principal and interest payments.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(18) Commitments and Contingencies

Unconditional Purchase Obligations

As of June 30, 2020, purchase commitments for capital expenditures were $ 43.5 million, all of which is obligated within the next five years, with $ 27.2 million obligated within the next 12 months.

As of June 30, 2020, Australian and U.S.

As of September 30, 2020, purchase commitments for capital expenditures were $ 67.8 million, all of which is obligated within the next five years, with $ 57.0 million obligated within the next 12 months.

As of September 30, 2020, Australian and U.S.

commitments under take-or-pay arrangements totaled $ 1.2 billion, of which approximately $ 91 million is obligated within the next year.

2 unchanged sentences

“Commitments and Contingencies” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingencies

3 unchanged sentences

Litigation Relating to Continuing Operations

Securities Class Action.

On September 28, 2020, the Oklahoma Firefighters Pension and Retirement System (the Plaintiff) brought a securities lawsuit against the Company and certain of its officers in the U.S.

District Court for the Southern District of New York on behalf of the Plaintiff and a putative class for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

The Plaintiff alleges that the Company made false or misleading statements and/or failed to disclose certain adverse facts pertaining to safety practices at the Company’s North Goonyella Mine and that, after a September 28, 2018 fire at the mine, made false or misleading statements and/or failed to disclose certain adverse facts pertaining to the feasibility of the Company’s plan to restart the mine after the fire.

The Plaintiff further alleges that the false or misleading statements and/or failure to disclose adverse facts caused the Company’s stock price to trade at artificially inflated levels only to fall in value after the alleged adverse facts were subsequently revealed.

As a result of purchasing the Company’s stock between the asserted class period of April 3, 2017 and October 28, 2019, the Plaintiff and the putative class allegedly suffered economic loss and damages under federal securities laws.

The Plaintiff is seeking compensatory damages in an unspecified amount and reimbursement of expenses, including legal fees.

The Company does not believe the lawsuit is meritorious and intends to vigorously defend against the allegations.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

County of San Mateo, County of Marin, City of Imperial Beach.

5 unchanged sentences

The motion to enforce was granted on October 24, 2017, and the Bankruptcy Court ordered the plaintiffs to dismiss their lawsuits against the Company.

On November 26, 2017, the plaintiffs appealed the Bankruptcy Court’s October 24, 2017 order to the United States District Court for the Eastern District of Missouri (the District Court).

On November 26, 2017, the plaintiffs appealed the Bankruptcy Court’s October 24, 2017 order to the District Court.

On November 28, 2017, the plaintiffs sought a stay pending appeal from the Bankruptcy Court, which was denied on December 8, 2017.

5 unchanged sentences

The plaintiffs filed an application with the United States Supreme Court to recall the Eighth Circuit’s mandate, which the Supreme Court denied on June 24, 2020.

Plaintiffs have until October 5, 2020 to file a writ of certiorari with the Supreme Court.

On July 1, 2020, plaintiffs dismissed Peabody with prejudice from the underlying cases pending in California.

On July 1, 2020, the plaintiffs dismissed Peabody with prejudice from the underlying cases pending in California.

In the underlying cases pending in California, on May 26, 2020, the United States Court of Appeals for the Ninth Circuit decided that the cases should be heard in state court rather than federal court.

The Company does not believe the lawsuits are meritorious and, if the Company is brought back into these lawsuits, the Company would expect to vigorously defend them.

The plaintiffs did not file a petition for writ of certiorari with the Supreme Court by the October 5, 2020 deadline.

The Company believes that the lawsuits are concluded as to the Company.

FTC Complaint for Preliminary Injunction.

On February 26, 2020, the FTC brought a complaint against the Company and Arch in the District Court seeking a preliminary injunction enjoining the Company and Arch from consummating their proposed joint venture relating to their operations in Wyoming and Colorado.

Peabody and Arch continue to pursue creation of the joint venture and are litigating the FTC’s decision in the District Court.

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, Peabody plans to proceed with the joint venture.

On September 29, 2020, the District Court granted the FTC’s request for a preliminary injunction.

In light of the ruling, the Company and Arch have terminated their agreement to pursue the joint venture.

At times the Company becomes a party to other disputes, including those related to contract miner performance, claims, lawsuits, arbitration proceedings, regulatory investigations and administrative procedures in the ordinary course of business in the U.S., Australia and other countries where the Company does business.

Based on current information, the Company believes that such other pending or threatened proceedings are likely to be resolved without a material adverse effect on its financial condition, results of operations or cash flows.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(19) Segment Information

During the year ended December 31, 2019, the Cottage Grove and Kayenta Mines shipped their final tons, and the Company announced the closures of the Wildcat HiIls Underground Mine, which shipped its final tons during the second quarter of 2020 and the Somerville Central Mine, which is expected to ship its final tons during the second half of 2020.

Due to these changes, the Company revised its reportable segments beginning in the first quarter of 2020 to reflect the manner in which the chief operating decision maker (CODM) views the Company’s businesses going forward for purposes of reviewing performance, allocating resources and assessing future prospects and strategic execution.

9 unchanged sentences

Additionally, the Company may market some of its metallurgical coal products as a thermal coal product from time to time depending on market conditions.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s Seaborne Thermal Mining operations consist of mines in New South Wales, Australia.

28 unchanged sentences

GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reportable segment results were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

13 unchanged sentences

Total $ 95.4 $ 159.2 $ 155.6 $ 643.3

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of consolidated (loss) income from continuing operations, net of income taxes to Adjusted EBITDA follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

10 unchanged sentences

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates ( 0.5 ) — ( 1.6 ) 0.3

( 0.4 ) 0.3 ( 1.1 ) 0.3

Interest expense 34.9 35.4 102.3 107.2

Interest income ( 1.6 ) ( 7.0 ) ( 7.1 ) ( 22.5 )

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

Net mark-to-market adjustment on actuarially determined liabilities 13.0 — 13.0 —

Unrealized losses (gains) on economic hedges 16.1 18.0 11.3 ( 44.2 )

Unrealized gains on non-coal trading derivative contracts ( 0.7 ) ( 0.3 ) ( 3.6 ) ( 0.2 )

Take-or-pay contract-based intangible recognition ( 1.5 ) ( 2.7 ) ( 6.8 ) ( 13.9 )

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

Income tax (benefit) provision ( 0.1 ) 4.2 2.7 26.0

Adjusted EBITDA $ 95.4 $ 159.2 $ 155.6 $ 643.3

$ 23.4 $ 230.0 $ 60.2 $ 484.1

(1) As described in Note 15.

“Other Events,” the Company recorded a $ 125.0 million insurance recovery during the six months ended June 30, 2019 related to losses incurred at its North Goonyella Mine.

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.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

“Other Events,” the Company recorded a $ 125.0 million insurance recovery during the nine months ended September 30, 2019 related to losses incurred at its North Goonyella Mine.

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 nine months ended September 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 nine months ended September 30, 2019.

Total assets and property, plant equipment and mine development, net decreased during 2020 within the U.S.

Thermal Mining division primarily as a result of the asset impairment charge recognized during the three and six months ended June 30, 2020, as further described in Note 9.

Thermal Mining division primarily as a result of the asset impairment charge recognized during the nine months ended September 30, 2020, as further described in Note 9.

“Property, Plant, Equipment and Mine Development.”

3 unchanged sentences

Assets related to closed, suspended or otherwise inactive mines are included within the Corporate and Other category.

Assets as of June 30, 2020 were as follows:

Assets as of September 30, 2020 were as follows:

Seaborne Mining U.S.

5 unchanged sentences

Operating lease right-of-use assets 22.4 5.5 17.0 44.9

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assets as of December 31, 2019 were as follows:

7 unchanged sentences

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 1. Financial Statements