What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-09 · 338 added, 753 removed, 528 unchanged (67% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in millions, except per share data)

2 unchanged sentences

Operating costs and expenses (exclusive of items shown separately below)

550.9 905.5 1,886.7 2,711.5

Depreciation, depletion and amortization 68.3 106.0

2 unchanged sentences

Restructuring charges

8.1 0.7 31.1 1.3

Transaction costs related to joint ventures

6.0 8.2 23.1 9.8

Other operating loss (income):

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

Asset impairment — 20.0 1,418.1 20.0

Provision for North Goonyella equipment loss — — — 24.7

North Goonyella insurance recovery — — — ( 125.0 )

Other operating (income) loss:

Net loss (gain) on disposals 0.6 ( 8.1 )

Loss from equity affiliates 0.9 9.1

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

Operating loss ( 40.8 ) ( 93.5 )

Interest expense 52.4 33.1

Gain on early debt extinguishment ( 3.5 ) —

Interest income ( 1.5 ) ( 3.1 )

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

Net periodic benefit (credit) costs, excluding service cost ( 8.7 ) 2.8

Loss from continuing operations before income taxes ( 79.5 ) ( 126.3 )

Income tax (benefit) provision ( 1.8 ) 3.0

(Loss) income from continuing operations, net of income taxes ( 64.8 ) ( 74.3 ) ( 1,739.4 ) 101.9

Loss from continuing operations, net of income taxes ( 77.7 ) ( 129.3 )

Loss from discontinued operations, net of income taxes ( 2.0 ) ( 2.2 )

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

Net loss ( 79.7 ) ( 131.5 )

Net income (loss) attributable to noncontrolling interests 0.4 ( 1.8 )

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

(Loss) income from continuing operations:

Basic (loss) income per share $ ( 0.66 ) $ ( 0.77 ) $ ( 17.76 ) $ 0.84

Diluted (loss) income per share $ ( 0.66 ) $ ( 0.77 ) $ ( 17.76 ) $ 0.83

Net (loss) income attributable to common stockholders:

Basic (loss) income per share $ ( 0.69 ) $ ( 0.81 ) $ ( 17.83 ) $ 0.74

Diluted (loss) income per share $ ( 0.69 ) $ ( 0.81 ) $ ( 17.83 ) $ 0.73

Net loss attributable to common stockholders $ ( 80.1 ) $ ( 129.7 )

Loss from continuing operations:

Basic loss per share $ ( 0.79 ) $ ( 1.31 )

Diluted loss per share $ ( 0.79 ) $ ( 1.31 )

Net loss attributable to common stockholders:

Basic loss per share $ ( 0.81 ) $ ( 1.33 )

Diluted loss per share $ ( 0.81 ) $ ( 1.33 )

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in millions)

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

Postretirement plans and workers’ compensation obligations (net of $ 0.0 tax provisions in each period)

Net loss $ ( 79.7 ) $ ( 131.5 )

Postretirement plans (net of $ 0.0 tax provisions in each period)

( 11.0 ) ( 2.2 )

Foreign currency translation adjustment ( 0.2 ) ( 6.8 )

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

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

Other comprehensive loss, net of income taxes ( 11.2 ) ( 9.0 )

Comprehensive loss ( 90.9 ) ( 140.5 )

Net income (loss) attributable to noncontrolling interests 0.4 ( 1.8 )

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

Comprehensive loss attributable to common stockholders $ ( 91.3 ) $ ( 138.7 )

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(Amounts in millions, except per share data)

1 unchanged sentence

Cash and cash equivalents $ 580.2 $ 709.2

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

Restricted cash

Accounts receivable, net of allowance for credit losses of $ 0.0 at March 31, 2021 and December 31, 2020

Inventories 241.4 261.6

20 unchanged sentences

Preferred Stock — $ 0.01 per share par value;

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

100.0 shares authorized, no shares issued or outstanding as of March 31, 2021 and December 31, 2020

Series Common Stock — $ 0.01 per share par value;

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

50.0 shares authorized, no shares issued or outstanding as of March 31, 2021 and December 31, 2020

Common Stock — $ 0.01 per share par value;

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

450.0 shares authorized, 141.2 shares issued and 98.3 shares outstanding as of March 31, 2021 and 140.5 shares issued and 97.8 shares outstanding as of December 31, 2020

Additional paid-in capital 3,366.4 3,364.6

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

Treasury stock, at cost — 42.9 and 42.7 common shares as of March 31, 2021 and December 31, 2020

( 1,369.5 ) ( 1,368.9 )

(Accumulated deficit) retained earnings ( 1,144.1 ) 597.0

Accumulated deficit ( 1,353.4 ) ( 1,273.3 )

Accumulated other comprehensive income 194.6 205.8

6 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions)

Cash Flows From Operating Activities

Net (loss) income $ ( 1,746.2 ) $ 91.3

Net loss $ ( 79.7 ) $ ( 131.5 )

Loss from discontinued operations, net of income taxes 2.0 2.2

(Loss) income from continuing operations, net of income taxes ( 1,739.4 ) 101.9

Adjustments to reconcile (loss) income from continuing operations, net of income taxes to net cash (used in) provided by operating activities:

Loss from continuing operations, net of income taxes ( 77.7 ) ( 129.3 )

Adjustments to reconcile loss from continuing operations, net of income taxes to net cash provided by (used in) operating activities:

Depreciation, depletion and amortization 68.3 106.0

3 unchanged sentences

Noncash share-based compensation 1.8 2.2

Asset impairment 1,418.1 20.0

Net gain on disposals ( 10.4 ) ( 2.8 )

Net loss (gain) on disposals 0.6 ( 8.1 )

Gain on early debt extinguishment ( 3.5 ) —

Loss from equity affiliates 0.9 9.1

Provision for North Goonyella equipment loss — 24.7

Foreign currency option contracts 2.9 0.9

4 unchanged sentences

Accounts payable and accrued expenses ( 15.4 ) ( 125.1 )

Collateral arrangements ( 5.3 ) —

Asset retirement obligations 8.1 6.4

3 unchanged sentences

Other, net — 0.2

Net cash (used in) provided by continuing operations ( 9.7 ) 577.8

Net cash provided by (used in) continuing operations 74.1 ( 1.6 )

Net cash used in discontinued operations ( 3.1 ) ( 3.1 )

Net cash (used in) provided by operating activities ( 32.1 ) 552.6

Net cash provided by (used in) operating activities 71.0 ( 4.7 )

PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Three Months Ended March 31,

(Dollars in millions)

Cash Flows From Investing Activities

1 unchanged sentence

Changes in accrued expenses related to capital expenditures ( 11.4 ) ( 11.4 )

Insurance proceeds attributable to North Goonyella equipment losses — 23.2

Proceeds from disposal of assets, net of receivables 0.9 10.5

Amount attributable to acquisition of Shoal Creek Mine — ( 2.4 )

Contributions to joint ventures ( 136.1 ) ( 96.3 )

4 unchanged sentences

Net cash used in investing activities ( 93.2 ) ( 37.1 )

See accompanying notes to unaudited condensed consolidated financial statements.

PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Nine Months Ended September 30,

(Dollars in millions)

Cash Flows From Financing Activities

Proceeds from long-term debt 360.0 —

Repayments of long-term debt ( 40.2 ) ( 7.2 )

Payment of debt issuance and other deferred financing costs ( 22.5 ) —

Common stock repurchases — ( 300.2 )

Repurchase of employee common stock relinquished for tax withholding ( 0.6 ) ( 0.8 )

Dividends paid — ( 243.9 )

Distributions to noncontrolling interests ( 0.1 ) ( 0.1 )

Other, net 0.1 0.2

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

Net cash used in financing activities ( 63.3 ) ( 7.9 )

Net change in cash, cash equivalents and restricted cash ( 85.5 ) ( 49.7 )

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in millions, except per share data)

Balance, beginning of period

$ 1.4 $ 1.4 $ 1.4 $ 1.4

Balance, end of period

1.4 1.4 1.4 1.4

Additional paid-in capital

1 unchanged sentence

3,364.6 3,351.1

Dividend equivalent units on dividends declared

Share-based compensation for equity-classified awards

3.8 8.6 9.9 30.2

Balance, end of period

3 unchanged sentences

( 1,368.9 ) ( 1,367.3 )

Common stock repurchases

— ( 144.2 ) — ( 300.2 )

Repurchase of employee common stock relinquished for tax withholding

5 unchanged sentences

( 1,273.3 ) 597.0

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)

— ( 15.0 ) — ( 251.7 )

Net loss attributable to common stockholders ( 80.1 ) ( 129.7 )

Balance, end of period

2 unchanged sentences

Balance, beginning of period

26.5 35.3 31.6 40.1

Postretirement plans and workers' compensation obligations (net of $ 0.0 tax provisions in each period)

Postretirement plans (net of $ 0.0 tax provisions in each period)

( 11.0 ) ( 2.2 )

2 unchanged sentences

Balance, end of period

201.3 31.8 201.3 31.8

Noncontrolling interests

Balance, beginning of period

50.0 49.7 58.7 56.0

Net income (loss) attributable to noncontrolling interests 0.4 ( 1.8 )

2 unchanged sentences

Balance, end of period

50.1 45.4 50.1 45.4

Total stockholders’ equity

14 unchanged sentences

Balance sheet information presented herein as of December 31, 2020 has been derived from the Company’s audited consolidated balance sheet at that date.

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

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

The global impact on economic activity has severely curtailed demand for numerous commodities.

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.

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).

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.

“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.

The Company’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2021.

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

Newly Adopted Accounting Standards

Financial Instruments - Credit Losses.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13 (Topic 326) related to the measurement of credit losses on financial instruments.

The new standard replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company adopted the standard on January 1, 2020 using the modified retrospective approach.

The Company will be required to use a forward-looking expected loss model for accounts receivables, loans and other financial instruments to record an allowance for the estimated contractual cash flows not expected to be collected.

The Company has not restated comparative information for 2019 and no adjustments to retained earnings were necessary as a result of adopting Topic 326.

Effective January 1, 2020, the Company recognizes an allowance for credit losses for financial assets carried at amortized cost to present the net amount expected to be collected as of the balance sheet date.

Such allowance is based on the credit losses expected to arise over the life of the asset (contractual term) which includes consideration of prepayments and is based on the Company’s expectations as of the balance sheet date.

Assets are written off when the Company determines that such financial assets are deemed uncollectible.

Write-offs are recognized as deductions from the allowance for credit losses.

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.

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

The Company also continuously evaluates such pooling decisions and adjusts as needed from period to period as risk characteristics change.

Fair Value Measurement.

In August 2018, the FASB issued ASU 2018-13, which amended the fair value measurement guidance by removing and modifying certain disclosure requirements, while also adding new disclosure requirements.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

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

Compensation - Retirement Benefits.

In August 2018, the FASB issued ASU 2018-14 to add, remove and clarify disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

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

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes.

In December 2019, the FASB issued ASU 2019-12 as part of its effort to reduce the complexity of accounting standards.

The ASU enhances and simplifies various aspects of the income tax accounting guidance in Accounting Standards Codification (ASC) 740, including requirements related to (1) hybrid tax regimes, (2) the tax basis step-up in goodwill obtained in a transaction that is not a business combination, (3) separate financial statements of entities not subject to tax, (4) the intraperiod tax allocation exception to the incremental approach, (5) recognition of a deferred tax liability after an investor in a foreign entity transitions to or from the equity method of accounting, (6) interim-period accounting for enacted changes in tax law and (7) the year-to-date loss limitation in interim-period tax accounting.

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

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.

In January 2020, the FASB issued ASU 2020-01, which clarifies the interactions between ASC 321, ASC 323 and ASC 815.

In January 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-01, which clarifies the interactions between Accounting Standards Codification (ASC) 321, ASC 323 and ASC 815.

The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments.

ASU 2020-01 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.

ASU 2020-01 is effective on January 1, 2021 for calendar year-end public companies.

The Company adopted the requirements effective January 1, 2021.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosures.

Accounting Standards Not Yet Implemented

Effects of Reference Rate Reform.

2 unchanged sentences

The guidance may be adopted over time as reference rate reform activities occur and should be applied on a prospective basis.

The Company is still completing its evaluation of the impact of ASU 2020-04 and plans to elect optional expedients as reference rate reform activities occur.

In January 2021, the FASB issued ASU 2021-01 to permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculation price alignment interest in connection with reference rate reform activities.

The Company is still completing its evaluation of the impact of ASU 2020-04 and ASU 2021-01 and plans to elect optional expedients as reference rate reform activities occur.

While the Company is still evaluating, it does not expect the guidance to have a material impact on its consolidated financial statements or disclosures.

(3) Revenue Recognition

The Company accounts for revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” Refer to Note 1.

“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, for the Company’s policies regarding “Revenues” and “Accounts receivable, net.” On January 1, 2020, the Company adopted Topic 326 using the modified retrospective approach.

“Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented” for further discussion of the adoption, including the impact on the Company’s opening balance sheet.

Refer to Note 1.

“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for the Company’s policies regarding “Revenues” and “Accounts receivable, net.”

PEABODY ENERGY CORPORATION

3 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 September 30, 2020

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

Domestic $ 37.1 $ — $ 264.3 $ 172.8 $ — $ 474.2

Export 125.7 — — — — 125.7

Total thermal 162.8 — 264.3 172.8 — 599.9

Metallurgical coal

Export — 78.4 — — — 78.4

Total metallurgical — 78.4 — — — 78.4

Other 0.2 0.4 0.5 7.0 ( 15.4 ) ( 7.3 )

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

Three Months Ended September 30, 2019

Three Months Ended March 31, 2021

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

5 unchanged sentences

Metallurgical coal

Export — 215.4 — — — 215.4

Total metallurgical — 215.4 — — — 215.4

Other 0.1 0.9 — 7.0 ( 19.4 ) ( 11.4 )

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

Nine Months Ended September 30, 2020

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

Domestic — 2.7 — — — 2.7

Export — 83.9 — — — 83.9

Total thermal 524.8 — 736.7 501.5 — 1,763.0

Metallurgical coal

Export — 362.3 — — — 362.3

Total metallurgical — 86.6 — — — 86.6

Other 1.3 1.3 0.5 22.6 ( 7.1 ) 18.6

0.4 0.9 — 2.5 9.7 13.5

Revenues $ 176.4 $ 87.5 $ 228.4 $ 149.3 $ 9.7 $ 651.3

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

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

7 unchanged sentences

Total metallurgical — 192.5 — — — 192.5

Other 1.1 2.3 0.1 20.2 79.3 103.0

Revenues $ 720.7 $ 831.7 $ 903.5 $ 970.8 $ 79.3 $ 3,506.0

Revenue by initial contract duration was as follows:

Three Months Ended September 30, 2020

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

One year or longer $ 93.6 $ 65.2 $ 257.4 $ 171.3 $ — $ 587.5

Less than one year 69.2 13.2 6.9 1.5 — 90.8

0.9 0.7 — 7.7 ( 7.0 ) 2.3

Revenues $ 201.1 $ 193.2 $ 266.6 $ 192.3 $ ( 7.0 ) $ 846.2

Three Months Ended September 30, 2019

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

One year or longer $ 158.5 $ 193.3 $ 287.8 $ 315.2 $ — $ 954.8

Less than one year 90.9 22.1 45.8 4.2 — 163.0

0.1 0.9 — 7.0 ( 19.4 ) ( 11.4 )

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

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2020

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

One year or longer $ 272.4 $ 269.4 $ 696.5 $ 498.0 $ — $ 1,736.3

Less than one year 252.4 92.9 40.2 3.5 — 389.0

1.3 1.3 0.5 22.6 ( 7.1 ) 18.6

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

Nine Months Ended September 30, 2019

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

One year or longer $ 480.2 $ 668.8 $ 837.6 $ 919.8 $ — $ 2,906.4

Less than one year 239.4 160.6 65.8 30.8 — 496.6

1.1 2.3 0.1 20.2 79.3 103.0

Revenues $ 720.7 $ 831.7 $ 903.5 $ 970.8 $ 79.3 $ 3,506.0

(1) Corporate and Other revenue includes gains and losses related to mark-to-market adjustments from economic hedge activities intended to hedge future coal sales.

1 unchanged sentence

“Derivatives and Fair Value Measurements” for additional information regarding the economic hedge activities.

(2) Other includes revenues from arrangements such as customer contract-related payments associated with volume shortfalls, royalties related to coal lease agreements, sales agency commissions, farm income and property and facility rentals, for which contract duration is not meaningful.

Committed Revenue from Contracts with Customers

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.

The Company expects to recognize revenue subsequent to March 31, 2021 of approximately $ 3.6 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at March 31, 2021.

Approximately 45 % of such amount is expected to be recognized over the next twelve months and the remainder thereafter.

1 unchanged sentence

This estimate of future revenue does not include any revenue related to contracts with variable prices per ton that cannot be reasonably estimated, such as the majority of seaborne metallurgical and seaborne thermal coal contracts where pricing is negotiated or settled quarterly or annually.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts Receivable

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

September 30, 2020 December 31, 2019

“Accounts receivable, net” at March 31, 2021 and December 31, 2020 consisted of the following:

March 31, 2021 December 31, 2020

(Dollars in millions)

2 unchanged sentences

Accounts receivable, net $ 167.8 $ 244.8

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.

Trade receivables, net included no allowance for credit losses as of both March 31, 2021 and December 31, 2020.

Miscellaneous receivables, net included no allowance for credit losses as of both March 31, 2021 and December 31, 2020.

No charges for credit losses were recognized during the three months ended March 31, 2021 and 2020 .

(4) Discontinued Operations

1 unchanged sentence

Thermal Mining segment assets that have ceased production and other previously divested legacy operations, including Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot).

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summarized Results of Discontinued Operations

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

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

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in millions)

2 unchanged sentences

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(Dollars in millions)

10 unchanged sentences

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.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Black Lung Occupational Disease Liabilities.

11 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 $ 85.9 million and $ 85.7 million at September 30, 2020 and December 31, 2019, respectively.

The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $ 89.8 million and $ 90.1 million at March 31, 2021 and December 31, 2020, 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.

1 unchanged sentence

The Company cannot reliably estimate the potential liabilities for Patriot’s workers employed by former subsidiaries of the Company that are presently active in the workforce because of the potential for such workers to continue to work for another coal operator that is a going concern.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Combined Benefit Fund (Combined Fund).

The Combined Fund was created by the Coal Act in 1992 as a multi-employer plan to provide health care benefits to a closed group of retirees who last worked prior to 1976, as well as orphaned beneficiaries of bankrupt companies who were receiving benefits as orphans prior to the passage of the Coal Act.

No new retirees will be added to this group, which includes retirees formerly employed by certain Patriot subsidiaries and their predecessors.

Former employers are required to contribute to the Combined Fund according to a formula.

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 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.

On July 16, 2015, a lawsuit was filed by the UMWA Plan, the UMWA 1974 Pension Trust (Trust) and the Trustees of the UMWA Plan and Trust (Trustees) in the United States District Court for the District of Columbia, against the Company, Peabody Holding Company, LLC, a subsidiary of the Company, and Arch Resources, Inc.

(Arch), known as Arch Coal, Inc.

prior to May 15, 2020.

The plaintiffs sought, pursuant to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Multiemployer Pension Plan Amendments Act of 1980, a declaratory judgment that the defendants were obligated to arbitrate any opposition to the Trustees’ determination that the defendants had statutory withdrawal liability as a result of the 2015 Patriot bankruptcy.

After a legal and arbitration process and with the approval of the U.S.

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 $ 13.2 million and $ 26.0 million at September 30, 2020 and December 31, 2019, respectively.

(5) Inventories

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

September 30, 2020 December 31, 2019

Inventories as of March 31, 2021 and December 31, 2020 consisted of the following:

March 31, 2021 December 31, 2020

(Dollars in millions)

3 unchanged sentences

Total $ 241.4 $ 261.6

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.

Materials and supplies inventories presented above have been shown net of reserves of $ 10.5 million and $ 10.4 million as of March 31, 2021 and December 31, 2020, respectively.

The coal inventory balances above are presented net of net realizable value adjustments of $ 5.5 million as of March 31, 2021.

(6) Equity Method Investments

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company had total equity method investments of $ 21.2 million and $ 24.6 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, 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 $ 0.9 million and $ 9.1 million during the three months ended March 31, 2021 and 2020, respectively.

The Company received cash payments from Middlemount of $ 2.3 million during the three months ended March 31, 2021.

No payments were received from from Middlemount during the three months ended March 31, 2020.

One of the Company’s Australian subsidiaries and the other shareholder of Middlemount are parties to an agreement, as amended from time to time, to provide a revolving loan (Revolving Loans) to Middlemount.

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

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

At March 31, 2021, the revolving loan limit was $ 160 million Australian dolla rs and the Revolving Loans were not fully drawn upon by Middlemount.

The Revolving Loans bear interest at 10 % per annum and expire on December 31, 2021.

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.

T he value of the portion of the Revolving Loans due to the Company’s Australian subsidiary was $ 43.3 million and $ 46.2 million as of March 31, 2021 and December 31, 2020, respectively, with the decreas e during the three months ended March 31, 2021 primarily attributable to payments made by Middlemount.

As of both March 31, 2021 and December 31, 2020, 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.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(7) Derivatives and Fair Value Measurements

2 unchanged sentences

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

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.

As of March 31, 2021, the Company had currency options outstanding with an aggregate notional amount of $ 575.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending December 31, 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 $ 0.76 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.

dollar exchange rate exceed amounts ranging from $ 0.76 to $ 0.81 over the nine-month period ending December 31, 2021.

As of March 31, 2021, the Company held coal-related financial contracts related to a portion of its forecasted sales for an aggregate notional volume of 1.5 million tonnes.

Such financial contracts include futures, forwards and options.

Of the aggregate notional volume, 0.5 million tonnes will settle in 2021 and the remainder will settle in 2022.

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

The Company had no diesel fuel or interest rate derivatives in place as of March 31, 2021.

Coal Trading Activities

1 unchanged sentence

Except those contracts for which the Company has elected to apply a normal purchases and normal sales exception, all derivative coal trading contracts are accounted for at fair value.

Coal brokering is conducted both as principal and agent in support of various coal production-related activities that may involve coal produced from the Company’s mines, coal sourcing arrangements with third-party mining companies or offtake agreements with other coal producers.

The Company also provides transportation-related services, which involve both financial derivative contracts and physical contracts.

Collectively, coal and freight-related hedging activities include both economic hedging and, from time to time, cash flow hedging in support of the Company’s coal trading strategy.

Revenues from such transactions include realized and unrealized gains and losses on derivative instruments, including those that arise from coal deliveries related to contracts accounted for on an accrual basis under the normal purchases and normal sales exception.

Offsetting and Balance Sheet Presentation

Tabular Derivatives Disclosures

The Company has master netting agreements with certain of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination.

1 unchanged sentence

For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the condensed consolidated balance sheets.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s coal trading assets and liabilities include financial instruments cleared through various exchanges, which involve the daily net settlement of open positions.

The Company must post cash collateral in the form of initial margin, in addition to variation margin, on exchange-cleared positions that are in a net liability position and receives variation margin when in a net asset position.

The Company also transacts in coal trading financial swaps and options through over-the-counter (OTC) markets with financial institutions and other non-financial trading entities under International Swaps and Derivatives Association (ISDA) Master Agreements, which contain symmetrical default provisions.

Certain of the Company’s coal trading agreements with OTC counterparties also contain credit support provisions that may periodically require the Company to post, or entitle the Company to receive, variation margin.

Physical coal and freight-related purchase and sale contracts included in the Company’s coal trading assets and liabilities are executed pursuant to master purchase and sale agreements that also contain symmetrical default provisions and allow for the netting and setoff of receivables and payables that arise during the same time period.

The Company offsets its coal trading asset and liability derivative positions, and variation margin related to those positions, on a counterparty-by-counterparty basis in the condensed consolidated balance sheets.

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Asset Derivative Liability Derivative Asset Derivative Liability Derivative

5 unchanged sentences

Effect of counterparty netting ( 44.1 ) 44.1 ( 30.2 ) 30.2

Variation margin held ( 11.1 ) — ( 22.1 ) —

Variation margin posted 13.6 — 6.5 —

Net derivatives and margin as classified in the balance sheets $ 3.7 $ — $ 10.9 $ ( 1.7 )

The net amount of asset derivatives, net of margin, are included in “Other current assets” and the net amount of liability derivatives, net of margin, are included in “Accounts payable and accrued expenses” in the accompanying condensed consolidated balance sheets.

Effects of Derivatives on Measures of Financial Performance

Currently, the Company does not seek cash flow hedge accounting treatment for its currency- or coal-related derivative financial instruments and thus changes in fair value are reflected in current earnings.

The Company had a current asset representing cash collateral held as initial margin for derivative positions primarily related to coal derivatives of $ 6.5 million and $ 3.0 million at March 31, 2021 and December 31, 2020, respectively.

These amounts are not included with the derivatives presented in the table above and are included in “Other current assets” in the accompanying condensed consolidated balance sheets.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Dollars in millions)

Foreign currency option contracts

$ 3.9 $ 3.2 $ 0.7

Coal contracts related to forecasted sales

( 16.7 ) ( 0.6 ) ( 16.1 )

Coal trading contracts

( 0.2 ) ( 0.2 ) —

Total $ ( 13.0 ) $ 2.4 $ ( 15.4 )

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

(Dollars in millions)

Foreign currency option contracts

$ ( 1.0 ) $ ( 1.3 ) $ 0.3

Coal contracts related to forecasted sales

( 22.7 ) ( 4.7 ) ( 18.0 )

Coal trading contracts

0.7 ( 1.3 ) 2.0

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

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

Three Months Ended March 31, 2021

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

Financial Instrument

4 unchanged sentences

Total $ 4.6 $ 17.1 $ ( 12.5 )

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

Three Months Ended March 31, 2020

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

Financial Instrument

4 unchanged sentences

Total $ ( 9.6 ) $ ( 3.3 ) $ ( 6.3 )

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.

During the three months ended March 31, 2021 and 2020, 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.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

4 unchanged sentences

and Level 3 - inputs are unobservable, or observable but cannot be market-corroborated, requiring the Company to make assumptions about pricing by market participants.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

September 30, 2020

March 31, 2021

Level 1 Level 2 Level 3 Total

20 unchanged sentences

Other Financial 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).

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of March 31, 2021 and December 31, 2020:

• 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.

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

Market risk associated with the Company’s fixed- and variable-rate long-term debt relates to the potential reduction in the fair value and negative impact to future earnings, respectively, from an increase in interest rates.

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.

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(Dollars in millions)

3 unchanged sentences

Estimated fair value $ 862.1 $ 987.6

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s risk management function, which is independent of the Company’s coal trading function, is responsible for valuation policies and procedures, with oversight from executive management.

Generally, the Company’s Level 3 instruments or contracts are valued using bid/ask price quotations and other market assessments obtained from multiple, independent third-party brokers or other transactional data incorporated into internally-generated discounted cash flow models.

Decreases in the number of third-party brokers or market liquidity could erode the quality of market information and therefore the valuation of the Company’s market positions.

The Company’s valuation techniques include basis adjustments to the foregoing price inputs for quality, such as sulfur and ash content, location differentials, expressed as port and freight costs, and credit risk.

The Company’s risk management function independently validates the Company’s valuation inputs, including unobservable inputs, with third-party information and settlement prices from other sources where available.

A daily process is performed to analyze market price changes and changes to the portfolio.

Further periodic validation occurs at the time contracts are settled with the counterparty.

These valuation techniques have been consistently applied in all periods presented, and the Company believes it has obtained the most accurate information available for the types of derivative contracts held.

Significant increases or decreases in the inputs in isolation could result in a significantly higher or lower fair value measurement.

The unobservable inputs do not have a direct interrelationship;

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 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.

Credit and Nonperformance Risk.

The fair value of the Company’s coal derivative assets and liabilities reflects adjustments for credit risk.

The Company’s exposure is substantially with electric utilities, energy marketers, steel producers and nonfinancial trading houses.

The Company’s policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to regularly monitor the credit extended.

If the Company engages in a transaction with a counterparty that does not meet its credit standards, the Company seeks to protect its position by requiring the counterparty to provide an appropriate credit enhancement.

Also, when appropriate (as determined by its credit management function), the Company has taken steps to reduce its exposure to customers or counterparties whose credit has deteriorated and who may pose a higher risk of failure to perform under their contractual obligations.

These steps include obtaining letters of credit or cash collateral (margin), requiring prepayments for shipments or the creation of customer trust accounts held for the Company’s benefit to serve as collateral in the event of a failure to pay or perform.

To reduce its credit exposure related to trading and brokerage activities, the Company seeks to enter into netting agreements with counterparties that permit the Company to offset asset and liability positions with such counterparties and, to the extent required, the Company will post or receive margin amounts associated with exchange-cleared and certain OTC positions.

The Company also continually monitors counterparty and contract non-performance risk, if present, on a case-by-case basis.

Performance Assurances and Collateral

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 $ 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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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.

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

The Company has recorded intangible assets and liabilities to reflect the fair value of certain U.S.

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 September 30, 2020 and December 31, 2019, are set forth in the following tables:

September 30, 2020

Assets Liabilities Net Total

(Dollars in millions)

Coal supply agreements $ 8.8 $ ( 18.1 ) $ ( 9.3 )

Take-or-pay contracts — ( 33.4 ) ( 33.4 )

Total $ 8.8 $ ( 51.5 ) $ ( 42.7 )

Balance sheet classification:

Investments and other assets $ 8.8 $ — $ 8.8

Accounts payable and accrued expenses — ( 4.4 ) ( 4.4 )

Other noncurrent liabilities — ( 47.1 ) ( 47.1 )

Total $ 8.8 $ ( 51.5 ) $ ( 42.7 )

December 31, 2019

Assets Liabilities Net Total

(Dollars in millions)

Coal supply agreements $ 20.7 $ ( 21.4 ) $ ( 0.7 )

Take-or-pay contracts — ( 40.0 ) ( 40.0 )

Total $ 20.7 $ ( 61.4 ) $ ( 40.7 )

Balance sheet classification:

Investments and other assets $ 20.7 $ — $ 20.7

Accounts payable and accrued expenses — ( 8.4 ) ( 8.4 )

Other noncurrent liabilities — ( 53.0 ) ( 53.0 )

Total $ 20.7 $ ( 61.4 ) $ ( 40.7 )

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $ 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 $ 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.

The Company had no transfers between Levels 1, 2 and 3 during the three months ended March 31, 2021 and 2020.

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

(8) Property, Plant, Equipment and Mine Development

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

The composition of property, plant, equipment and mine development, net, as of March 31, 2021 and December 31, 2020 is set forth in the table below:

March 31, 2021 December 31, 2020

(Dollars in millions)

5 unchanged sentences

Asset Impairment and Other At-Risk Assets

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.

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.

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

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

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.

The Company has identified certain assets with an aggregate carrying value of approximately $ 1.2 billion at March 31, 2021 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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company conducted a review of those assets for recoverability as of March 31, 2021 and determined that no impairment charges were necessary as of that date.

The Company has operating and finance leases for mining and non-mining equipment, office space and certain other facilities under various non-cancellable agreements.

4 unchanged sentences

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.

1 unchanged sentence

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.

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

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of lease expense during the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended March 31,

(Dollars in millions)

9 unchanged sentences

Total finance lease cost $ 1.1 $ 3.6

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

September 30, 2020 December 31, 2019

Supplemental balance sheet information related to leases at March 31, 2021 and December 31, 2020 was as follows:

March 31, 2021 December 31, 2020

(Dollars in millions)

17 unchanged sentences

Finance leases 10.1 %

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

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental cash flow information related to leases during the three months ended March 31, 2021 and 2020 was as follows:

Three Months Ended March 31,

(Dollars in millions)

6 unchanged sentences

Finance leases 3.6 0.1

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

The Company's leases have remaining lease terms ranging from less than 1 year to 21.0 years years, some of which include options to extend the terms deemed reasonably certain of exercise.

T he contractual maturities of lease liabilities were as follows:

Period Ending December 31, Operating Leases Finance Leases

3 unchanged sentences

2023 16.7 1.6

2023 12.1 0.7

2026 and thereafter 3.8 7.7

3 unchanged sentences

(10) Income Taxes

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.

The Company's effective tax rate before remeasurement for the three months ended March 31, 2021 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 $ 1.8 million and income tax provision of $ 3.0 million for the three months ended March 31, 2021 and 2020, respectively, included tax benefits of $ 0.2 million and $ 3.3 million, respectively, related to the remeasurement of foreign income tax accounts.

As described in Note 11.

“Long-term Debt,” the Company completed the Refinancing Transactions (as defined below), which included a senior notes exchange and related consent solicitation, a revolving credit facility exchange and various amendments to existing debt agreements.

Generally, absent an exception, for U.S.

tax purposes a debtor recognizes cancellation of debt income (CODI) upon discharge of its outstanding indebtedness for an amount of consideration less than the adjusted issue price of such indebtedness.

The Company will recognize CODI from the Refinancing Transactions of approximately $ 60 million, and the income will be offset by the Company’s operating losses.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(11) Long-term Debt

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

September 30, 2020 December 31, 2019

The Company’s total funded indebtedness (Indebtedness) as of March 31, 2021 and December 31, 2020 consisted of the following:

Debt Instrument (defined below, as applicable) March 31, 2021 December 31, 2020

(Dollars in millions)

6.000 % Senior Secured Notes due March 2022

6.000 % Senior Secured Notes due March 2022 (2022 Notes)

$ 60.3 $ 459.0

6.375 % Senior Secured Notes due March 2025

Senior Secured Term Loan due 2025, net of original issue discount 389.2 392.1

8.500 % Senior Secured Notes due December 2024 (Peabody Notes)

10.000 % Senior Secured Notes due December 2024 (Co-Issuer Notes)

6.375 % Senior Secured Notes due March 2025 (2025 Notes)

Senior Secured Term Loan due 2024 (Co-Issuer Term Loan) 206.0 —

Senior Secured Term Loan due 2025, net of original issue discount (Senior Secured Term Loan) 387.3 388.2

Revolving credit facility — 216.0

Secured borrowing under receivables securitization program 60.0 —

Finance lease obligations 17.3 27.3

3 unchanged sentences

Long-term debt $ 1,411.3 $ 1,502.9

As described in Note 1.

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

Refinancing Transactions

On January 29, 2021 (the Settlement Date), the Company completed a series of transactions (collectively, the Refinancing Transactions) to, among other things, provide the Company with maturity extensions and covenant relief, while allowing it to maintain near-term operating liquidity and financial flexibility.

The Refinancing Transactions included a senior notes exchange and related consent solicitation, a revolving credit facility exchange and various amendments to the Company’s existing debt agreements, as summarized below.

As further discussed in Note 16.

“Financial Instruments and Other Guarantees,” upon completion of the Refinancing Transactions, the surety transaction support agreement (Surety Agreement) entered into with the Company’s surety bond providers in November 2020 became effective.

On the Settlement Date, the Company settled an exchange offer (Exchange Offer) pursuant to which $ 398.7 million aggregate principal amount of the Company’s 6.000 % Senior Secured Notes due March 2022 (the 2022 Notes) were validly tendered, accepted by the Company and exchanged for aggregate consideration consisting of (a) $ 193.9 million aggregate principal amount of new 10.000 % Senior Secured Notes due December 2024 (Co-Issuer Notes) issued by certain wholly-owned subsidiaries of the Company (the Co-Issuers), (b) $ 195.1 million aggregate principal amount of new 8.500 % Senior Secured Notes due December 2024 issued by the Company (Peabody Notes) and (c) a cash payment of approximately $ 9.4 million.

In connection with the settlement of the Exchange Offer, the Company also paid early tender premiums totaling $ 4.0 million in cash.

The Company’s Wilpinjong Mine in Australia is owned and operated by a subsidiary of the Co-Issuers.

The Exchange Offer was accounted for as a debt modification based upon the relative similarity of the present value of the future cash flows of the instruments.

As such, no gain or loss was recorded in connection with the Exchange Offer.

Fees paid to third parties of $ 10.6 million were included in “Interest expense” in the accompanying unaudited condensed consolidated statements of operations during the three months ended March 31, 2021.

Following the settlement of the Exchange Offer, approximately $ 60.3 million aggregate principal amount of the 2022 Notes remain outstanding and are governed by the existing senior notes’ indenture (the Existing Indenture), as amended by the supplemental indenture described below.

Concurrently with the Exchange Offer, the Company solicited consents from holders of the 2022 Notes to certain proposed amendments to its Existing Indenture to (i) eliminate substantially all of the restrictive covenants, certain events of default applicable to the 2022 Notes and certain other provisions contained in the Existing Indenture and (ii) release the collateral securing the 2022 Notes and eliminate certain other related provisions contained in the Existing Indenture.

The Company received the requisite consents from holders of the 2022 Notes and entered into a supplemental indenture to the Existing Indenture, which became operative on January 29, 2021.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.000 % and 6.375 % Senior Secured Notes

On February 15, 2017, the Company entered into an indenture (the Indenture) with Wilmington Trust, National Association, as trustee, relating to its issuance of $ 500.0 million aggregate principal amount of 6.000 % senior secured notes due 2022 (the 2022 Notes) and $ 500.0 million aggregate principal amount of 6.375 % senior secured notes due 2025 (the 2025 Notes and, together with the 2022 Notes, the Senior Notes).

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

The Senior Notes were issued at par value.

The Company paid aggregate debt issuance costs of $ 49.5 million related to the offering, which are being amortized over the respective terms of the Senior Notes.

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 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 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.

On August 9, 2018, the Company executed an amendment to the Indenture following the solicitation of consents from the requisite majorities of holders of each series of Senior Notes.

The amendment permits a category of restricted payments at any time not to exceed the sum of $ 650.0 million, plus an additional $ 150.0 million per calendar year, commencing with calendar year 2019, with unused amounts in any calendar year carrying forward to and available for restricted payments in any subsequent calendar year.

The Company paid consenting Senior Note holders $ 10.00 in cash per $ 1,000 principal amount of 2022 Notes and $ 30.00 in cash per $ 1,000 principal amount of 2025 Notes, which amounted to $ 19.8 million.

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

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.

In connection with the purchases, the Company wrote off $ 1.3 million of debt issuance costs and charged $ 0.2 million to “Loss on early debt extinguishment.” The notes were subsequently canceled.

The Indenture contains customary conditions of default and imposes certain restrictions on the Company’s activities, including its ability to incur debt, incur liens, make investments, engage in fundamental changes such as mergers and dissolutions, dispose of assets, enter into transactions with affiliates and make certain restricted payments, such as cash dividends and share repurchases.

The Senior Notes rank senior in right of payment to any subordinated indebtedness and equally in right of payment with any senior indebtedness to the extent of the collateral securing that indebtedness.

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, subject to certain exceptions.

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.

In connection with the Refinancing Transactions, the Company restructured the revolving loans under its existing credit agreement (the Credit Agreement) by (i) making a pay down of revolving loans thereunder in the aggregate amount of $ 10.0 million, (ii) the Co-Issuers incurring $ 206.0 million of term loans under a credit agreement, dated as of the Settlement Date (Co-Issuer Term Loans, Co-Issuer Term Loan Agreement), (iii) the Company entering into a letter of credit facility (the Company LC Agreement) and (iv) amending the Credit Agreement (collectively, the Revolver Transactions).

Co-Issuer Notes

The terms of the Co-Issuer Notes are governed by an indenture, as amended and restated as of February 3, 2021, by and among the Co-Issuers, Wilmington Trust, National Association, as trustee, and, on a limited basis, the Company (Co-Issuer Notes Indenture).

The Co-Issuer Notes mature on December 31, 2024 and bear interest at an annual rate of 10.000 %.

The Company paid aggregate debt issuance costs of $ 5.6 million, which are being amortized over the terms of the notes.

Beginning March 31, 2021, interest is payable on March 31, June 30, September 30 and December 31 of each year.

During the three months ended March 31, 2021, the Company recorded interest expense of $ 3.6 million related to the Co-Issuer Notes.

The Co-Issuer Notes are subject to amortization at the end of each six-month period, beginning with June 30, 2021, whereby the Excess Cash Flow (as defined in the Co-Issuer Notes Indenture) generated by the Wilpinjong Mine during each such period will be applied to the principal of the Co-Issuer Notes and the Co-Issuer Term Loans on a pro rata basis, provided that the liquidity attributable to the Co-Issuers would not fall below $ 60.0 million.

The Co-Issuer Notes Indenture contains customary covenants that, among other things, limit the Co-Issuers’ and their subsidiaries’ ability to incur additional Indebtedness, pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, enter into agreements that restrict distributions from subsidiaries, sell or otherwise dispose of assets, enter into transactions with affiliates, create or incur liens, and merge, consolidate or sell all or substantially all of their assets, and place restrictions on the ability of subsidiaries to pay dividends or make other payments to the Co-Issuers.

The Co-Issuer Notes are not guaranteed by any of the Co-Issuers’ subsidiaries and thus are structurally subordinated to any existing or future Indebtedness or other liabilities, including trade payables, of any such subsidiaries.

The Co-Issuer Notes initially are secured by liens on substantially all of the assets of the Co-Issuers, including by (i) 100 % of the capital stock of PIC Acquisition Corp.

owned by PIC AU Holdings LLC and (ii) all other property subject or purported to be subject, from time to time, to a lien under the Co-Issuers’ collateral trust agreement (collectively, the Wilpinjong Collateral).

The Co-Issuers may redeem some or all of the Co-Issuer Notes at the redemption prices and on the terms specified in the Co-Issuer Notes Indenture.

The Co-Issuer Notes Indenture contains certain events of default, including, in certain circumstances, (i) specified events occurring at the Wilpinjong Mine, (ii) the termination or modification of the Surety Agreement, (iii) the Company’s failure to comply with any obligation under the transaction support agreement entered into prior to, and in contemplation of, the Refinancing Transactions and (iv) the termination of the management services agreements between the Company and the Co-Issuers.

If the Co-Issuer Notes are accelerated or otherwise become due and payable as a result of an event of default, certain additional premium amounts may become due and payable in addition to unpaid principal and interest at the time of acceleration.

In addition, the holders of the Co-Issuer Notes have the right, under certain circumstances specified in the Co-Issuer Notes Indenture, to exchange their Co-Issuer Notes for Peabody Notes.

Peabody Notes

The terms of the Peabody Notes are governed by an indenture, as amended and restated as of February 3, 2021, by and among Peabody, the guarantors party thereto, and Wilmington Trust, National Association, as trustee (the Peabody Notes Indenture).

The Peabody Notes mature on December 31, 2024.

The Company paid aggregate debt issuance costs of $ 5.7 million, which are being amortized over the terms of the notes.

The Peabody Notes bear interest at an annual rate of 8.500 %, consisting of 6.000 % per annum in cash and an additional 2.500 % per annum to be paid-in-kind through an increase of the principal amount of the outstanding Peabody Notes, which is payable on June 30 and December 31 of each year, commencing on June 30, 2021.

During the three months ended March 31, 2021, the Company recorded interest expense of $ 3.1 million related to the Peabody Notes, which included approximately $ 0.8 million of in-kind interest.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 plus 2.75 % per annum as of September 30, 2020.

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.

As a requirement of the Exchange Offer, during the three months ended March 31, 2021, the Company purchased $ 22.4 million of the Peabody Notes at 80 % of their accreted value, plus accrued and unpaid interest.

In connection with the purchases, the Company recognized a net gain of $ 3.5 million to “Gain on early debt extinguishment.” The notes were subsequently canceled.

The Peabody Notes Indenture contains customary covenants that, among other things, limit the Company’s and its restricted subsidiaries’ ability to incur additional Indebtedness, pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, enter into agreements that restrict distributions from restricted subsidiaries, sell or otherwise dispose of assets, enter into transactions with affiliates, create or incur liens, and merge, consolidate or sell all or substantially all of its assets, and place restrictions on the ability of subsidiaries to pay dividends or make other payments to the Company.

The Peabody Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by the Peabody Guarantors (as defined below) on the Peabody Collateral (as defined below).

The obligations are secured on a pari passu basis by the same collateral that secures the 6.375 % senior secured notes due 2025 (the 2025 Notes), the Credit Agreement and the Company LC Agreement described below.

Co-Issuer Term Loans

The Co-Issuer Term Loans mature on December 31, 2024 and bear interest at a rate of 10.00 % per annum.

The Company paid aggregate debt issuance costs of $ 7.1 million, that are being amortized over its term.

During the three months ended March 31, 2021, the Company recorded interest expense of $ 3.7 million related to the Co-Issuer Term Loans.

The Co-Issuer Term Loan Agreement contains customary covenants that, among other things, limit the Co-Issuers’ and their subsidiaries’ ability to incur additional Indebtedness, pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, enter into agreements that restrict distributions from subsidiaries, sell or otherwise dispose of assets, enter into transactions with affiliates, create or incur liens, and merge, consolidate or sell all or substantially all of their assets, and place restrictions on the ability of subsidiaries to pay dividends or make other payments to the Co-Issuers.

The Co-Issuer Term Loan Agreement is guaranteed and secured to the same extent as the Co-Issuer Notes as described above.

In addition, the Co-Issuer Term Loan Agreement contains events of default substantially similar to those described above for the Co-Issuer Notes Indenture.

Company LC Agreement

On the Settlement Date, the Company entered into the Company LC Agreement with the revolving lenders party to the Credit Agreement, pursuant to which the Company obtained a $ 324.0 million letter of credit facility under which its existing letters under the Credit Agreement were deemed to be issued.

The Company paid aggregate debt issuance costs of $ 4.1 million.

The commitments under the Company LC Agreement mature on December 31, 2024.

Undrawn letters of credit under the Company LC Agreement bear interest at 6.00 % per annum and unused commitments are subject to a 0.50 % per annum commitment fee.

During the three months ended March 31, 2021, the Company recorded interest expense and fees of $ 4.1 million related to the Company LC Agreement.

In connection with the Revolver Transactions, the Company amended its Credit Agreement to make certain changes in consideration of the Company LC Agreement.

After giving effect to the Revolver Transactions, there remain no revolving commitments or revolving loans under the Credit Agreement and the first lien net leverage ratio covenant was eliminated.

The Company LC Agreement requires that the Company’s restricted subsidiaries maintain minimum aggregate liquidity of $ 125.0 million at the end of each quarter through December 31, 2024.

As such, liquidity attributable to the Co-Issuers, its subsidiaries and other unrestricted subsidiaries will be excluded from the calculation.

The Company LC Agreement is guaranteed and secured to the same extent of the Peabody Notes as described above.

In addition, the Company LC Agreement contains events of default substantially similar to those described above for the Peabody Notes.

Under the Company LC Agreement, the Company is permitted to effectuate open market debt repurchases, subject to certain limitations, including, but not limited to:

(i) the Company’s unrestricted subsidiaries’ liquidity must be greater than or equal to $ 200.0 million after giving effect to such repurchases and (ii) for every $ 4 of principal repurchased in any fiscal quarter, the Company must make an offer on a pro rata basis to purchase $ 1 of principal amount of debt from holders of the Peabody Notes and Company LC Agreement within 30 days of the end of such fiscal quarter at a price equal to the weighted average repurchase price paid over that quarter.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.375 % Senior Secured Notes

On February 15, 2017, the Company entered into the Existing Indenture with Wilmington Trust, National Association, as trustee, relating to its issuance of $ 500.0 million aggregate principal amount of the 2025 Notes.

The 2025 Notes were issued on February 15, 2017 in a private transaction exempt from the registration requirements of the Securities Act of 1933.

The 2025 Notes were issued at par value.

The Company paid aggregate debt issuance costs of $ 25.1 million related to the offering, which are being amortized over the term of the 2025 Notes.

Interest payments on the 2025 Notes are scheduled to occur each year on March 31 and September 30 until maturity.

During the three months ended March 31, 2021 and 2020, the Company recorded interest expense of $ 9.2 million and $ 9.1 million, respectively, related to the 2025 Notes.

On August 9, 2018, the Company executed an amendment to the Existing Indenture following the solicitation of consents from the requisite majority of holders of the 2025 Notes.

The Company paid consent fees to 2025 Note holders which amounted to $ 14.9 million.

Such consent fees were capitalized as additional debt issuance costs to be amortized over the term of the 2025 Notes.

With respect to the 2025 Notes, the Existing Indenture contains customary conditions of default and imposes certain restrictions on the Company’s activities, including its ability to incur debt, incur liens, make investments, engage in fundamental changes such as mergers and dissolutions, dispose of assets, enter into transactions with affiliates and make certain restricted payments, such as cash dividends and share repurchases.

The 2025 Notes rank senior in right of payment to any subordinated Indebtedness and equally in right of payment with any senior Indebtedness to the extent of the collateral securing that Indebtedness.

The 2025 Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of the Company’s domestic restricted subsidiaries (the Peabody Guarantors) and secured by (a) first priority liens over (1) substantially all of the assets of the Company and the Peabody Guarantors, except for certain excluded assets, (2) 100 % of the capital stock of each domestic restricted subsidiary of the Company, (3) 100 % of the capital stock of each first tier foreign subsidiary of the Company or a foreign subsidiary holding company and (4) all intercompany debt owed to the Company or any Peabody Guarantor, in each case, subject to certain exceptions (the Peabody Collateral), and (b) second priority liens over the Wilpinjong Collateral.

The 2025 Notes are secured on a pari passu basis by the same collateral securing the Credit Agreement, and the other priority lien debt of the Company, including the Peabody Notes and the Company LC Agreement described above.

Credit Agreement

The Company originally entered into the Credit Agreement during 2017, which provided for a $ 950.0 million senior secured term loan (the Senior Secured Term Loan) due in 2022.

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.

The loan requires quarterly principal payments of $ 1.0 million and periodic interest payments through December 2024 with the remaining balance due in March 2025.

The loan principal was voluntarily prepayable at 101 % of the principal amount repaid if prepayment occurred prior to October 2018 (subject to certain exceptions, including prepayments made with internally generated cash) and is voluntarily prepayable at any time thereafter without premium or penalty.

The Senior Secured Term Loan may require mandatory principal prepayments of up to 75 % of Excess Cash Flow (as defined in the Credit Agreement) for any fiscal year if the Company’s Total Leverage Ratio (as defined in the Credit Agreement and calculated at December 31, net of any unrestricted cash) is greater than 2.00 :1.00.

The mandatory principal prepayment requirement changes to (i) 50 % of Excess Cash Flow if the Company’s Total Leverage Ratio is less than or equal to 2.00 :1.00 and greater than 1.50 :1.00, (ii) 25 % of Excess Cash Flow if the Company’s Total Leverage Ratio is less than or equal to 1.50 :1.00 and greater than 1.00 :1.00, or (iii) zero if the Company’s Total Leverage Ratio is less than or equal to 1.00 :1.00.

If required, mandatory prepayments resulting from Excess Cash Flows are payable within 100 days after the end of each fiscal year.

The calculation of mandatory prepayments would be reduced commensurately by the amount of previous voluntary prepayments.

In certain circumstances, the Senior Secured Term Loan requires that Excess Proceeds (as defined in the Credit Agreement) of $ 10.0 million or greater received from sales of Company assets be applied against the loan principal, unless such proceeds are reinvested within one year.

The Senior Secured Term Loan also requires that any net insurance proceeds be applied against the loan principal, unless such proceeds are reinvested within one year.

The Credit Agreement contains customary conditions of default and imposes certain restrictions on the Company’s activities, including its ability to incur liens, incur debt, make investments, engage in fundamental changes such as mergers and dissolutions, dispose of assets, enter into transactions with affiliates, and make certain restricted payments, such as cash dividends and share repurchases.

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 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 covenant 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.

In April 2018, the Company entered into another amendment to the Credit Agreement which lowered the interest rate on the Senior Secured Term Loan to its current level of LIBOR plus 2.75 % and eliminated an existing 1.0 % LIBOR floor.

The amendment also extended the maturity of the Senior Secured Term Loan by three years to 2025 and eliminated previous capital expenditure restriction covenants on both the Senior Secured Term Loan and the incremental revolving credit facility described below.

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

The Credit Agreement has been amended periodically over its term to add a revolving loan facility, to increase the capacity and extend the maturity date of the revolving loan facility, to extend the maturity date of the Senior Secured Term Loan to 2025 and to make various changes to terms such as those related to interest, fees and payment restrictions.

In connection with certain of the amendments, the Company voluntarily prepaid $ 46.0 million of Senior Secured Term Loan principal and incurred $ 10.4 million of deferred financing costs related to the revolving loan facility.

The Company also voluntarily repaid an additional $ 500.0 million of Senior Secured Term Loan principal in various installments.

At March 31, 2021 the Senior Secured Term Loan had a balance of $ 387.3 million.

The Senior Secured Term Loan requires quarterly principal payments of $ 1.0 million and periodic interest payments through December 2024 with the remaining balance due in March 2025.

During the three months ended March 31, 2021 and 2020, the Company recorded interest expense of $ 3.3 million and $ 4.9 million, respectively, related to the Senior Secured Term Loan, which bore interest at LIBOR plus 2.75 % per annum as of March 31, 2021.

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.

In September 2019, the Company entered into an amendment to the Credit Agreement which increased the aggregate commitment amount under the Revolver to $ 565.0 million and extended the maturity date on $ 540.0 million of the commitments from November 2020 to September 2023.

The maturity date for the remaining $ 25.0 million commitment is November 2020.

The Company incurred $ 5.7 million of additional debt issuance costs in connection with the amendment.

As a result of the amendment, such loans, letters of credit and unused capacity related to the $ 540.0 million of extended commitments bear interest and incur fees at rates dependent upon the Company’s First Lien Leverage Ratio (as defined in the Credit Agreement) beginning in 2020.

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.

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

In addition to the $ 450.0 million restricted payment basket provided for under the September 2017 amendment, the Credit Agreement provides a builder basket for additional restricted payments subject to a maximum Total Leverage Ratio of 2.00 :1.00 (as defined in the Credit Agreement).

In addition to the $ 650.0 million restricted payment basket, plus an additional $ 150.0 million per calendar year, provided under the August 2018 amendment, the Indenture provides a builder basket for restricted payments that is calculated based upon the Company’s Consolidated Net Income, and is subject to a Fixed Charge Coverage Ratio of at least 2.25 :1.00 (as defined in the Indenture).

Further, under both the Indenture and Credit Agreement, additional restricted payments are permitted through a $ 50.0 million general basket and an annual aggregate $ 25.0 million basket which allows dividends and common stock repurchases.

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.

In connection with the Revolver Transactions, the Company amended the Credit Agreement to make certain changes in consideration of the Company LC Agreement.

After giving effect to the Revolver Transactions, there remain no revolving commitments or revolving loans under the Credit Agreement.

Further, all covenants specific to the former revolving credit facility under the Credit Agreement were eliminated in connection with the Refinancing Transactions and were not applicable at March 31, 2021.

During the three months ended March 31, 2021 and 2020, the Company recorded interest expense and fees of $ 1.4 million and $ 1.7 million, respectively, related to the revolving loan facility.

The Credit Agreement contains customary conditions of default and imposes certain restrictions on the Company’s activities, including its ability to incur liens, incur debt, make investments, engage in fundamental changes such as mergers and dissolutions, dispose of assets, enter into transactions with affiliates and make certain restricted payments, such as cash dividends and share repurchases.

Obligations under the Credit Agreement are guaranteed by the Peabody Guarantors and are secured by first priority liens on the Peabody Collateral and second priority liens on the Wilpinjong Collateral.

The obligations are secured on a pari passu basis by the same collateral securing the 2025 Notes and the other priority lien debt of the Company, including the Peabody Notes and the Company LC Agreement described above.

The Company was compliant with all covenants under its debt agreements at March 31, 2021.

Finance Lease Obligations

1 unchanged sentence

“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)

(12) Pension and Postretirement Benefit Costs

The components of net periodic pension and postretirement benefit costs, excluding the service cost for benefits earned, are included in “Net periodic benefit costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

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

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

2020 2019 2020 2019

The components of net periodic pension and postretirement benefit costs, excluding the service cost for benefits earned, are included in “Net periodic benefit (credit) costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

Net periodic pension benefit included the following components:

Three Months Ended March 31,

(Dollars in millions)

Service cost for benefits earned $ 0.1 $ 0.5 $ 0.2 $ 1.5

Interest cost on projected benefit obligation $ 5.1 $ 7.0

Expected return on plan assets ( 5.7 ) ( 7.4 )

Net periodic pension (benefit) cost

$ ( 0.4 ) $ 1.0 $ ( 1.1 ) $ 3.1

Net periodic pension benefit $ ( 0.6 ) $ ( 0.4 )

Annual contributions to the qualified plans are made in accordance with minimum funding standards and the Company’s agreement with the Pension Benefit Guaranty Corporation.

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

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.

As of March 31, 2021, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds.

Minimum funding standards are legislated by the Employee Retirement Income Security Act of 1974 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, the Bipartisan Budget Act of 2015 and the American Rescue Plan Act of 2021.

The Company is not required to make any contributions to its qualified pension plans in 2021 based on minimum funding requirements and does not expect to make any discretionary contributions in 2021.

Net periodic postretirement benefit cost included the following components:

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

2020 2019 2020 2019

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

Three Months Ended March 31,

(Dollars in millions)

1 unchanged sentence

Interest cost on accumulated postretirement benefit obligation

5.4 6.3 16.3 18.9

Expected return on plan assets

2 unchanged sentences

( 11.0 ) ( 2.2 )

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.

“Postretirement Health Care and Life Insurance Benefits” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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.

Net periodic postretirement benefit (benefit) cost $ ( 8.1 ) $ 4.0

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 and plans to utilize VEBA assets to make benefit payments.

In September 2020, the Company announced changes to its postretirement health care benefit plans for non-represented employees and retirees which reduced its accumulated postretirement benefit obligation, as further described in Note 15.

“Postretirement Health Care and Life Insurance Benefits” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income” and is being amortized to earnings.

The Company has established two Voluntary Employees Beneficiary Association (VEBA) trusts to pre-fund a portion of benefits for non-represented and represented retirees.

The Company does not expect to make any discretionary contributions to either of the VEBA trusts in 2021 and plans to utilize VEBA assets to make benefit payments.

(13) Accumulated Other Comprehensive Income

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:

The following table sets forth the after-tax components of accumulated other comprehensive income and changes thereto recorded during the three months ended March 31, 2021:

Foreign Currency Translation

Adjustment Prior Service

Credit (Cost) Associated

Credit Associated

Postretirement

4 unchanged sentences

Current period change ( 0.2 ) — ( 0.2 )

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.

March 31, 2021 $ 1.6 $ 193.0 $ 194.6

Postretirement health care and life insurance benefits reclassified from other comprehensive income to earnings of $ 11.0 million and $ 2.2 million du ring the three months ended March 31, 2021 and 2020, respectively, are included in “Net periodic benefit (credit) costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

(14) Other Events

3 unchanged sentences

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 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

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

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.

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 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 fourth quarter of 2020.

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

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

PRB Colorado Joint Venture with Arch

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.

“Commitments and Contingencies,” on February 26, 2020, the U.S.

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

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

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

During 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 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.

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 included in 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.

Such charges included as “Restructuring charges” in the Company's unaudited condensed consolidated statements of operations amounted to $ 2.1 million and $ 6.5 million for the three months ended March 31, 2021 and 2020, respectively, and were associated with both involuntary and voluntary workforce reductions.

The Shoal Creek Mine remains idled as the Company continues activities to increase productivity, lower costs and improve yields from the operation in the future.

The restart of mine production and coal shipments is contingent upon successful completion of these initiatives and stable customer demand.

Included in the initiatives is a preparation plant upgrade project, which is anticipated to be commissioned by the middle of the third quarter of 2021.

Additionally, the Shoal Creek labor contract expired on April 1, 2021 and negotiations with the workforce are ongoing.

While discussions are ongoing with customers and workforce, the Metropolitan Mine full workforce returned to the mine in early May.

Development work at the mine has been ongoing through the idle period and longwall production is anticipated to restart in the second quarter of 2021, with ramp up to full production in the third quarter of 2021.

(15) Earnings per Share (EPS)

3 unchanged sentences

Dilutive securities are not included in the computation of loss per share when a company reports a net loss from continuing operations as the impact would be anti-dilutive.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For all but the performance units, the potentially dilutive impact of the Company’s share-based compensation awards is determined using the treasury stock method.

2 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.

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.

The computation of diluted EPS excluded aggregate share-based compensation awards of approximately 1.3 million and 3.0 million for the three months ended March 31, 2021 and 2020, 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.

1 unchanged sentence

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

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

2020 2019 2020 2019

Three Months Ended March 31,

(In millions, except per share data)

EPS numerator:

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

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

Loss from continuing operations, net of income taxes $ ( 77.7 ) $ ( 129.3 )

Net income (loss) attributable to noncontrolling interests 0.4 ( 1.8 )

(Loss) income from continuing operations attributable to common stockholders

( 64.9 ) ( 79.0 ) ( 1,734.3 ) 89.1

Loss from continuing operations attributable to common stockholders ( 78.1 ) ( 127.5 )

Loss from discontinued operations, net of income taxes

( 2.0 ) ( 2.2 )

Net (loss) income attributable to common stockholders

$ ( 67.2 ) $ ( 82.8 ) $ ( 1,741.1 ) $ 78.5

Net loss attributable to common stockholders $ ( 80.1 ) $ ( 129.7 )

EPS denominator:

Weighted average shares outstanding — basic

97.9 102.2 97.6 105.9

Impact of dilutive securities

Weighted average shares outstanding — diluted

97.9 102.2 97.6 107.4

Basic EPS attributable to common stockholders:

(Loss) income from continuing operations

$ ( 0.66 ) $ ( 0.77 ) $ ( 17.76 ) $ 0.84

Loss from discontinued operations

( 0.03 ) ( 0.04 ) ( 0.07 ) ( 0.10 )

Net (loss) income attributable to common stockholders

$ ( 0.69 ) $ ( 0.81 ) $ ( 17.83 ) $ 0.74

Diluted EPS attributable to common stockholders:

(Loss) income from continuing operations

$ ( 0.66 ) $ ( 0.77 ) $ ( 17.76 ) $ 0.83

Weighted average shares outstanding — basic and diluted 98.4 97.2

Basic and diluted EPS attributable to common stockholders:

Loss from continuing operations $ ( 0.79 ) $ ( 1.31 )

Loss from discontinued operations

( 0.02 ) ( 0.02 )

Net (loss) income attributable to common stockholders

$ ( 0.69 ) $ ( 0.81 ) $ ( 17.83 ) $ 0.73

Net loss attributable to common stockholders $ ( 0.81 ) $ ( 1.33 )

(16) Financial Instruments and Other Guarantees

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 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.

At March 31, 2021, such instruments included $ 1,570.8 million of surety bonds and $ 423.4 million of letters of credit.

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

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

The Company does not expect any material losses to result from these guarantees or off-balance-sheet instruments in excess of liabilities provided for in the accompanying condensed consolidated balance sheets.

In connection with the Refinancing Transactions described in Note 11.

“Long-term Debt,” at the Settlement Date, all letters of credit issued under the Company’s former revolving credit facility were deemed issued under the Company LC Agreement in support of the same obligations.

The Company is required to provide various forms of financial assurance in support of its mining reclamation obligations in the jurisdictions in which it operates.

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

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.

At March 31, 2021, the Company’s asset retirement obligations of $ 735.9 million were supported by surety bonds of $ 1,394.5 million, as well as letters of credit issued under the Company’s receivables securitization program and the Company LC Agreement.

Letters of credit issued at March 31, 2021 which served as collateral for surety bonds in support of asset retirement obligations amounted to $ 297.7 million.

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

The Company entered into the Sixth Amended and Restate d Receivables Purchase Agreement, as amended, dated as of April 3, 2017 (the Receivables Purchase Agreement) to extend the Company’s receivables securitization facility previously in place and expand that facility to include certain receivables from the Company’s Australian operations.

The receivables securitization program (Securitization Program) is subject to customary events of default set forth in the Receivables Purchase Agreement.

The Securitization Program expires April 1, 2022 and provides for up to $ 250.0 million in funding accounted for as a secured borrowing, limited to the availability of eligible receivables, and may be secured by a combination of collateral and the trade receivables underlying the program, from time to time.

The Company is party to an accounts receivable securitization agreement (Securitization Program) which expires in April 2022 and provides up to $ 250.0 million in funding, limited to the availability of eligible receivables, and may be secured by a combination of collateral and the trade receivables underlying the program, from time to time.

Funding capacity under the Securitization Program may also be utilized for letters of credit in support of other obligations.

During 2020, the Receivables Purchase Agreement was amended to reduce certain dilutive constraints on eligible receivables and modify the Company’s reporting requirements under the Securitization Program.

Under the terms of the Securitization Program, the Company contributes the trade receivables of its participating subsidiaries on a revolving basis to P&L Receivables, its wholly-owned, bankruptcy-remote subsidiary, which then sells the receivables to unaffiliated banks.

P&L Receivables retains the ability to repurchase the receivables in certain circumstances.

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 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 Securitization Program is subject to customary events of default.

Under the terms of the Securitization Program, the Company contributes the trade receivables of its participating subsidiaries on a revolving basis to a wholly-owned, bankruptcy-remote subsidiary, which then sells the receivables to unaffiliated banks.

The Securitization Program does not receive off-balance sheet accounting treatment due to the Company’s ability to repurchase the receivables in certain circumstances.

At March 31, 2021, the Com pany had no outstanding borrowings and $ 120.8 million o f 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.

Availability under the Securitizatio n Program, which is adjusted for certain ineligible receivables, was $ 0.8 million at March 31, 2021.

The Company had $ 43.5 million of collateral posted under the Securitization Program at March 31, 2021 and none at December 31, 2020 .

The Company incurred interest and fees associated with the Securitization Program of $ 0.7 million during the three months ended March 31, 2021 and 2020, respectively, which have been recorded as “Interest expense” in the accompanying 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 cash collateral or restricted cash requirements as of either September 30, 2020 or December 31, 2019.

At March 31, 2021, the Company had $ 43.5 million of cash collateral and restricted cash requirements due to outstanding letters of credit temporarily exceeding the balance of eligible receivables at quarter-end.

The Company had no such requirements at December 31, 2020 .

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)

(17) Commitments and Contingencies

Unconditional Purchase Obligations

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.

The change in commitments under take-or-pay arrangements since the year ended December 31, 2019 was largely driven by extensions to the Company’s commercial agreements for rail and port commitments, partially offset by reductions to near-term commitments related to its North Goonyella Mine.

For additional information regarding the Company’s commitments under take-or-pay arrangements, refer to Note 26.

As of March 31, 2021, purchase commitments for capital expenditures were $ 46.0 million, all of which is obligated within the next four years, with $ 38.4 million obligated within the next 12 months.

There were no other material changes to the Company’s commitments from the information provided in Note 24.

“Commitments and Contingencies” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

3 unchanged sentences

The Company discusses its significant legal proceedings below, including ongoing proceedings and those that impacted the Company’s results of operations for the periods presented.

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.

The Company was named as a defendant, along with numerous other companies, in three nearly identical lawsuits brought by municipalities in California on July 17, 2017.

The lawsuits seek to hold a wide variety of companies that produce fossil fuels liable for the alleged impacts of the greenhouse gas emissions attributable to those fuels and seek compensatory and punitive damages in an amount to be proven at trial, attorneys’ fees and costs, disgorgement of profits and equitable relief of abatement.

The lawsuits primarily assert that the companies’ products have caused a sea level rise that is damaging the plaintiffs.

The complaints specifically alleged that the defendants’ activities from 1965 to 2015 caused such damage.

The Company filed a motion to enforce the Company’s Second Amended Joint Plan of Reorganization of Debtors and Debtors in Possession as revised March 15, 2017 (the Plan) because it enjoins claims that arose before the effective date of the Plan.

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 District Court.

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

On December 19, 2017, the plaintiffs moved the District Court for a stay pending appeal.

The District Court denied the stay request on September 20, 2018, and the plaintiffs appealed that decision to the United States Court of Appeals for the Eighth Circuit (the Eighth Circuit).

On March 29, 2019, the District Court affirmed the Bankruptcy Court ruling enjoining the plaintiffs from proceeding with their lawsuits against the Company.

That ruling likewise was appealed.

On May 6, 2020, the Eighth Circuit denied the plaintiffs’ request for stay and affirmed the order compelling the plaintiffs to dismiss the Company.

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.

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 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.

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.

Litigation Relating to Continuing Operations

Securities Class Action.

On September 28, 2020, the Oklahoma Firefighters Pension and Retirement System brought a lawsuit, styled In Re Peabody Energy Corporation Securities Litigation No.

1:20-cv-08024 (PKC), against the Company and certain of its officers in the U.S.

District Court for the Southern District of New York (the Court) on behalf of a putative class of shareholders (Plaintiffs) who held Company stock between April 3, 2017 and October 28, 2019, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder (Securities Class Action).

Plaintiffs allege that the defendants 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 the events leading up to a fire at the 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 Company believes the lawsuit lacks merit and intends to vigorously defend against the allegations.

On January 12, 2021, the Court appointed the Oregon Public Employees Retirement Fund as lead plaintiff.

On January 25, 2021, the Court entered a scheduling order for this matter.

Plaintiffs filed their amended complaint on March 19, 2021.

The defendants filed a pre-motion letter on April 30, 2021 and the Plaintiffs’ response letter is due May 6, 2021.

The defendants must file their motion to dismiss by June 7, 2021.

Additional briefings at this phase of litigation should be completed by the end of August 2021.

Derivative Actions.

On December 22, 2020, a plaintiff (Phelps) , putatively on behalf of the Company, brought a shareholder derivative lawsuit, styled Phelps v.

Samantha Algaze, et al.

1:20-cv-01747-UNA (D.

22, 2020), in the United States District Court for the District of Delaware against certain directors and a former officer of the Company, as defendants.

The Company was also named as a nominal defendant.

The plaintiff did not make a demand on the Company’s board before instituting the lawsuit and alleges such demand would have been futile.

In the complaint, the plaintiff alleges that the defendants failed to disclose adverse facts relating to the safety practices at the Company’s North Goonyella Mine, thereby leading to a September 28, 2018 fire, and allegedly failed to disclose adverse facts pertaining to the feasibility of reopening the mine.

The derivative complaint alleges (i) contribution against certain current and former officers for securities fraud based on the Securities Class Action, and against all defendants, (ii) breach of fiduciary duties, (iii) waste of corporate assets for causing the Company to incur legal liability and (iv) unjust enrichment.

On February 10, 2021, a second plaintiff (Di Fusco), putatively on behalf of the Company, filed a similar shareholder derivative lawsuit, styled Di Fusco v.

Glenn Kellow, et al.

1:21-cv-00183-UNA (D.

10, 2021), in the United States District Court for the District of Delaware against the directors, two current officers and a former officer of the Company, as defendants.

The Company was named as a nominal defendant.

This suit makes claims similar to those made in the Phelps matter, but asserts a claim for alleged misstatements in a proxy statement under Section 14(a) of the Securities and Exchange Act of 1934.

In late March 2021, the parties filed a stipulation agreeing to consolidate and stay both derivative actions for judicial efficiency and cost until the United States District Court for the District of Delaware ruled on the motion to dismiss in the Securities Class Action.

The Company also believes that the derivative actions lack merit and intended to vigorously defend against the allegations.

Litigation Relating to Continuing Operations

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.

The Company reassesses the probability and estimability of contingent losses as new information becomes available.

(18) 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 fourth quarter 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.

The Company now reports its results of operations primarily through the following reportable segments:

The Company reports its results of operations primarily through the following reportable segments:

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

Thermal Mining and Corporate and Other.

Prior period results have been recast for comparability.

The business of the Company’s seaborne operating platform is primarily export focused with customers spread across several countries, with a portion of its thermal and metallurgical coal sold within Australia.

Generally, revenues from individual countries vary year by year based on electricity and steel demand, the strength of the global economy, governmental policies and several other factors, including those specific to each country.

The Company classifies its seaborne mines within the Seaborne Thermal Mining or Seaborne Metallurgical Mining segments based on the primary customer base and coal reserve type of each mining operation.

A small portion of the coal mined by the Seaborne Thermal Mining segment is of a metallurgical grade.

Similarly, a small portion of the coal mined by the Seaborne Metallurgical Mining segment is of a thermal grade.

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

The Company’s chief operating decision maker uses Adjusted EBITDA as the primary metric to measure the segments’ operating performance.

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.

The mines in that segment utilize both surface and underground extraction processes to mine low-sulfur, high Btu thermal coal.

The Company’s Seaborne Metallurgical Mining operations consist of mines in Queensland, Australia, one in New South Wales, Australia and one in Alabama.

The mines in that segment utilize both surface and underground extraction processes to mine various qualities of metallurgical coal (low-sulfur, high Btu coal).

The metallurgical coal qualities include hard coking coal, semi-hard coking coal, semi-soft coking coal and pulverized coal injection coal.

The principal business of the Company’s thermal mining segments in the U.S.

is the mining, preparation and sale of thermal coal, sold primarily to electric utilities in the U.S.

under long-term contracts, with a relatively small portion sold as international exports as conditions warrant.

The Company’s Powder River Basin Mining operations consist of its mines in Wyoming.

The mines in that segment are characterized by surface mining extraction processes, coal with a lower sulfur content and Btu and higher customer transportation costs (due to longer shipping distances).

The Company’s Other U.S.

Thermal Mining operations historically reflect the aggregation of its Illinois, Indiana, New Mexico, Colorado and Arizona mining operations.

The mines in that segment are characterized by a mix of surface and underground mining extraction processes, coal with a higher sulfur content and Btu and lower customer transportation costs (due to shorter shipping distances).

Geologically, the Company’s Powder River Basin Mining operations mine sub-bituminous coal deposits and its Other U.S.

Thermal Mining operations mine both bituminous and sub-bituminous coal deposits.

The Company’s Corporate and Other segment includes selling and administrative expenses, including its technical and shared services functions;

results from equity affiliates;

corporate hedging activities;

trading and brokerage activities;

results from certain mining and export/transportation joint ventures;

minimum charges on certain transportation-related contracts;

the closure of inactive mining sites;

and certain commercial matters.

The Company’s CODM uses Adjusted EBITDA as the primary metric to measure the segments’ operating performance.

Adjusted EBITDA is a non-GAAP financial measure defined as (loss) income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses and depreciation, depletion and amortization.

Adjusted EBITDA is a non-GAAP financial measure defined as loss from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses and depreciation, depletion and amortization.

Adjusted EBITDA is also adjusted for the discrete items that management excluded in analyzing the segments’ operating performance, as displayed in the reconciliation below.

The Company has retrospectively modified its calculation of Adjusted EBITDA to exclude restructuring charges and transaction costs related to joint ventures as management does not view these items as part of its normal operations.

Management believes non-GAAP performance measures are used by investors to measure the Company’s operating performance and lenders to measure the Company’s ability to incur and service debt.

2 unchanged sentences

Reportable segment results were as follows:

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

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in millions)

12 unchanged sentences

Total $ 61.1 $ 36.8

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 September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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

Three Months Ended March 31,

(Dollars in millions)

(Loss) income from continuing operations, net of income taxes $ ( 64.8 ) $ ( 74.3 ) $ ( 1,739.4 ) $ 101.9

Loss from continuing operations, net of income taxes $ ( 77.7 ) $ ( 129.3 )

Depreciation, depletion and amortization 68.3 106.0

2 unchanged sentences

Transaction costs related to joint ventures — 4.2

Asset impairment — 20.0 1,418.1 20.0

Provision for North Goonyella equipment loss — — — 24.7

North Goonyella insurance recovery - equipment (1)

— — — ( 91.1 )

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates ( 1.5 ) ( 0.7 )

Interest expense 52.4 33.1

Gain on early debt extinguishment ( 3.5 ) —

Interest income ( 1.5 ) ( 3.1 )

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 )

Unrealized losses on economic hedges 1.9 2.2

Unrealized losses (gains) on non-coal trading derivative contracts 7.6 ( 0.1 )

Take-or-pay contract-based intangible recognition ( 1.1 ) ( 2.6 )

1 unchanged sentence

Adjusted EBITDA $ 61.1 $ 36.8

(1) As described in Note 15.

“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 nine months ended September 30, 2020, as further described in Note 9.

“Property, Plant, Equipment and Mine Development.”

Asset details are included in the table below.

Asset details are reflected at the division level only for the Company’s mining segments and are not allocated between each individual segment as such information is not regularly reviewed by the Company's CODM.

Further, some assets service more than one segment within the division and an allocation of such assets would not be meaningful or representative on a segment by segment basis.

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

Assets as of September 30, 2020 were as follows:

Seaborne Mining U.S.

Thermal Mining Corporate and Other Consolidated

(Dollars in millions)

Total assets $ 1,786.1 $ 1,430.5 $ 1,644.3 $ 4,860.9

Property, plant, equipment and mine development, net

1,349.6 1,275.2 527.5 3,152.3

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:

Seaborne Mining U.S.

Thermal Mining Corporate and Other Consolidated

(Dollars in millions)

Total assets $ 2,001.3 $ 3,044.8 $ 1,496.7 $ 6,542.8

Property, plant, equipment and mine development, net

1,610.9 2,776.9 291.3 4,679.1

Operating lease right-of-use assets 32.1 30.3 20.0 82.4

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