What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-06 · 230 added, 241 removed, 594 unchanged (44% of the section changed)

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These factors are difficult to accurately predict and may be beyond the Company’s control.

Factors that could affect its results or an investment in its securities include, but are not limited to:

• the Company’s profitability depends upon the prices it receives for its coal;

• if a substantial number of the Company’s long-term coal supply agreements, including those with its largest customers, terminate, or if the pricing, volumes or other elements of those agreements materially adjust, its revenues and operating profits could suffer if the Company is unable to find alternate buyers willing to purchase its coal on comparable terms to those in its contracts;

• risks inherent to mining could increase the cost of operating the Company’s business, and events and conditions that could occur during the course of its mining operations could have a material adverse impact on the Company;

• the Company’s take-or-pay arrangements could unfavorably affect its profitability;

• the Company may not recover its investments in its mining, exploration and other assets, which may require the Company to recognize impairment charges related to those assets;

• the Company could be negatively affected if it fails to maintain satisfactory labor relations;

• the Company could be adversely affected if it fails to appropriately provide financial assurances for its obligations;

• the Company’s mining operations are extensively regulated, which imposes significant costs on it, and future regulations and developments could increase those costs or limit its ability to produce coal;

• the Company’s operations may impact the environment or cause exposure to hazardous substances, and its properties may have environmental contamination, which could result in material liabilities to the Company;

• the Company may be unable to obtain, renew or maintain permits necessary for its operations, or the Company may be unable to obtain, renew or maintain such permits without conditions on the manner in which it runs its operations, which would reduce its production, cash flows and profitability;

• concerns about the impacts of coal combustion on global climate are increasingly leading to consequences that have affected and could continue to affect demand for the Company’s products or its securities and its ability to produce, including increased governmental regulation of coal combustion and unfavorable investment decisions by electricity generators;

• numerous activist groups are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation, domestically and internationally, thereby further reducing the demand and pricing for coal, and potentially materially and adversely impacting the Company’s future financial results, liquidity and growth prospects;

• the Company’s trading and hedging activities do not cover certain risks and may expose it to earnings volatility and other risks;

• if the assumptions underlying the Company’s asset retirement obligations for reclamation and mine closures are materially inaccurate, its costs could be significantly greater than anticipated;

• the Company’s future success depends upon its ability to continue acquiring and developing coal reserves that are economically recoverable;

• the Company faces numerous uncertainties in estimating its economically recoverable coal reserves and inaccuracies in its estimates could result in lower than expected revenues, higher than expected costs and decreased profitability;

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

• the Company may undertake further repositioning plans that would require additional charges;

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

• the Company’s expenditures for postretirement benefit obligations could be materially higher than it has predicted if its underlying assumptions prove to be incorrect;

• the Company is subject to various general operating risks which may be fully or partially outside of its control;

• the Company’s financial performance could be adversely affected by its funded indebtedness (Indebtedness);

• despite the Company’s Indebtedness, it may still be able to incur more debt, which could further increase the risks associated with its Indebtedness;

• the terms of the indentures governing the Company’s senior secured notes and the agreements and instruments governing its other Indebtedness and surety bonding obligations impose restrictions that may limit its operating and financial flexibility;

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

• the price of Peabody’s securities may be volatile and could fall below the minimum allowed by New York Stock Exchange listing requirements;

• Peabody’s common stock is subject to dilution and may be subject to further dilution in the future;

• there may be circumstances in which the interests of a significant stockholder could be in conflict with other stakeholders’ interests;

• the payment of dividends on Peabody’s stock or repurchase of its stock is dependent on a number of factors, and future payments and repurchases cannot be assured;

• the Company may not be able to fully utilize its deferred tax assets;

• acquisitions and divestitures are a potentially important part of the Company’s long-term strategy, subject to its investment criteria, and involve a number of risks, any of which could cause the Company not to realize the anticipated benefits;

• Peabody’s certificate of incorporation and by-laws include provisions that may discourage a takeover attempt;

• diversity in interpretation and application of accounting literature in the mining industry may impact the Company’s reported financial results;

• other risks and factors detailed in this report, including, but not limited to, those discussed in “Legal Proceedings,” set forth in Part II, Item 1 and in “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q.

When considering these forward-looking statements, you should keep in mind the cautionary statements in this document and in the Company’s other Securities and Exchange Commission (SEC) filings, including, but not limited to, the more detailed discussion of these factors and other factors that could affect its results contained in Item 1A.

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These forward-looking statements speak only as of the date on which such statements were made, and the Company undertakes no obligation to update these statements except as required by federal securities laws.

Peabody is a leading coal producer.

In 2020, the Company produced and sold 128.8 million and 132.6 million tons of coal, respectively, from continuing operations.

At June 30, 2021, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

Included in that count is Peabody’s 50% equity interest in Middlemount Coal Pty Ltd.

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

In addition to its mining operations, the Company markets and brokers coal from other coal producers, both as principal and agent, and trades coal and freight-related contracts.

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.

Refer to Note 18.

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

Financing and Surety Transactions

During the fourth quarter of 2020 and the first quarter of 2021, the Company entered into a series of interrelated agreements with its surety bond providers, the revolving lenders under its credit agreement and certain holders of its senior secured notes to extend a significant portion of its near-term debt maturities to December 2024 and to stabilize collateral requirements for its existing surety bond portfolio.

During the second quarter of 2021, and continuing into the third quarter of 2021, the Company completed a series of additional financing transactions intended to improve its capital structure.

These transactions included at-the-market common stock issuances for cash proceeds, common stock issuances for the retirement of long-term debt and the retirement of long-term debt primarily through open market purchases.

Refer to the “Liquidity and Capital Resources” section contained within this Item 2 for a further discussion of these financing and surety transactions.

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

As further described in the “Results of Operations” section contained within this Item 2, the Company incurred restructuring charges of $2.1 million and $16.5 million during the three months ended June 30, 2021 and 2020, respectively, and $4.2 million and $23.0 million during the six months ended June 30, 2021 and 2020, respectively, related to workforce reductions made across the organization through both involuntary and voluntary 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 preparation plant upgrade project remains on schedule with completion expected in the middle of the third quarter of 2021.

The Shoal Creek labor contract expired in April 2021, and negotiations with the workforce are ongoing.

The Metropolitan Mine full workforce returned to the mine in early May.

Development work at the mine has been ongoing and longwall production restarted late in the second quarter of 2021, with a ramp up to planned production levels in the third quarter of 2021.

The underground workforce enterprise agreement expired in January 2021 and after a period of ongoing negotiation, an application was made to terminate the underground labor agreement.

That application is pending.

Subsequent to June 30, 2021, the Company executed transactions to sell its closed Millennium and Wilkie Creek Mines to reduce its closed mine reclamation liabilities and associated costs.

The Company is in process of assessing the financial impacts of the sales, but anticipates recording cumulative gains of $40 million to $50 million in the third quarter of 2021, with minimal cash consideration received.

Results of Operations

Non-GAAP Financial Measures

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

Three and Six Months Ended June 30, 2021 Compared to the Three and Six Months Ended June 30, 2020

Spot pricing for premium low-vol hard coking coal (Premium HCC), premium low-vol pulverized coal injection (Premium PCI) coal, Newcastle index thermal coal and API 5 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the three months ended June 30, 2021 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended June 30, 2021 due to quality differentials and the majority of its seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

Peabody is a leading coal producer.

In 2020, the Company produced and sold 128.8 million and 132.6 million tons of coal, respectively, from continuing operations.

At September 30, 2021, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

Included in that count is Peabody’s 50% equity interest in Middlemount Coal Pty Ltd.

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

In addition to its mining operations, the Company markets and brokers coal from other coal producers, both as principal and agent, and trades coal and freight-related contracts.

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.

Refer to Note 18.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended September 30, 2021 due to quality differentials and the majority of its seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

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

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the three months ended June 30, 2021 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the three months ended September 30, 2021 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

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Competition from alternative fuels such as natural gas and other fuel sources may also impact the Company’s realized pricing.

High Low Average June 30, 2021

High Low Average September 30, 2021

Premium HCC (1)

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66.00 41.00 53.28 66.00

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

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

(1) Prices expressed per metric tonne.

(2) Prices expressed per short ton.

Within the global coal industry, supply and demand disruptions were widespread as the coronavirus (COVID-19) pandemic forced country-wide lockdowns and regional restrictions.

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

The global coal industry data for the six months ended June 30, 2021 presented herein may not be indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration.

Within the seaborne metallurgical coal market, record steel production and tight coal availability have driven Australian spot prices to the highest level in two years.

China’s unofficial ban on Australian coal remains in place and continues to support delivered China prices above those of all other markets.

This is incentivizing producers in Russia, the U.S.

and Canada to supply China with additional volumes, providing opportunities for Australia to supply customers typically serviced by these countries.

COVID-19 remains an ongoing risk to seaborne metallurgical coal demand and has recently impacted import volumes to India and Japan.

Within the seaborne thermal coal market, tight supplies and elevated demand have driven Newcastle thermal coal pricing to levels not seen in over 10 years.

China’s domestic thermal coal supply remains hampered by heightened safety inspections and mine suspensions.

The relaxation of China’s import controls combined with tight domestic supply has pushed import demand higher.

In addition, India’s thermal coal imports improved ahead of the monsoon season.

However, supply response to elevated demand has been muted year-to-date, sending thermal coal prices higher.

In the United States, overall electricity demand increased 4% year-over-year, positively impacted by weather and the prior year economic impacts of COVID.

The global coal industry data for the nine months ended September 30, 2021 presented herein may not be indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration.

Within the seaborne metallurgical coal market, a combination of robust steel production, decade-high steel margins and tight coal availability have driven Australian spot prices to record levels.

China’s unofficial ban on Australian coal remains in place and continues to support delivered China prices well above those of all other markets as domestic, Mongolian and seaborne coal supply from other sources continues to lag overall demand.

The high prices being paid by China are incentivizing producers in Russia, the U.S.

and Canada to supply China with incremental volumes, providing opportunities for Australia to supply customers typically serviced by these countries.

The supply response to the record prices remains muted sending metallurgical coal prices higher.

The Company believes energy shortages in some markets present a risk to industrial activity but the underlying market fundamentals remain constructive.

Within the seaborne thermal coal market, a combination of tight supplies and elevated demand have driven Newcastle thermal coal pricing to record levels.

China’s domestic thermal coal supply remains hampered by heightened safety inspections and mine suspensions, as well as flooding.

Thermal electricity generation in China has been strong year-to-date, and the relaxation of China’s import controls combined with tight domestic supply has pushed import demand higher.

Both India and China are experiencing rolling power outages, as multi-year low stockpile levels and high coal prices are pushing power plants into load shedding.

In Europe, gas supply constraints and low wind generation have pushed standby coal plants to resume operation to help supply strong electricity demand.

Despite the strong demand, the supply response has been muted, sending thermal coal prices higher.

Heavy rains in Indonesia, rail issues in Russia, production issues in Colombia and hampered domestic supply in China have all combined to pressure the global thermal market.

In the United States, overall electricity demand increased 3% year-over-year, positively impacted by weather and the prior year economic impacts of the COVID-19 pandemic.

Electricity generation from thermal coal has notably improved year-over-year as a result of higher natural gas prices and stronger overall electricity demand.

This has positively impacted coal’s share of electricity generation, with a rise to approximately 22% for the six months ended June 30, 2021, while causing natural gas’s share to decline to approximately 36%.

Stronger coal use has contributed to decreasing coal stockpile levels.

Since December 2020, coal inventories have fallen by approximately 17 million tons.

Through the six months ended June 30, 2021, utility consumption of PRB coal rose approximately 35% compared to the prior year period.

The Company’s revenues for the three months ended June 30, 2021 increased compared to the same period in 2020 ($96.7 million) primarily due to the impact of higher sales volumes and higher seaborne thermal pricing.

Revenues for the six months ended June 30, 2021 decreased compared to the same period in 2020 ($98.2 million) primarily due to lower realized prices and lower sales volumes.

Results from continuing operations, net of income taxes for the three months ended June 30, 2021 increased compared to the same period in the prior year ($1,522.3 million) primarily due to the asset impairment charges recorded in the prior year period ($ 1,418.1 million) and the favorable revenue variance described above.

Results from continuing operations, net of income taxes for the six months ended June 30, 2021 increased compared to the same period in the prior year ($1,573.9 million) primarily due to the asset impairment charges recorded in the prior year period ($ 1,418.1 million), lower operating costs and expenses driven by the sales volume decline as well as production efficiencies and other cost improvements ($141.8 million) and lower depreciation, depletion and amortization ($48.9 million).

This has positively impacted coal’s share of electricity generation, with a rise to approximately 23% for the nine months ended September 30, 2021, while causing natural gas’s share to decline to approximately 37%.

Stronger coal use and a limited supply response in coal production has contributed to decreasing coal stockpile levels.

Since December 2020, coal inventories have fallen by approximately 54 million tons, a 40% decline.

Through the nine months ended September 30, 2021, utility consumption of PRB coal rose approximately 30% compared to the prior year period.

Financing and Surety Transactions

During the second and third quarters of 2021, and continuing into the fourth quarter of 2021, the Company completed a series of additional financing transactions intended to improve its capital structure.

Refer to the “Liquidity and Capital Resources” section contained within this Item 2 for a further discussion of these financing and surety transactions.

During July 2021, the Company executed transactions to sell its closed Millennium and Wilkie Creek Mines, which reduced its closed mine reclamation liabilities and associated costs.

Both mines were sold for minimal cash consideration and gains of $26.1 million and $24.6 million, respectively, were recorded in connection with the sales.

In September 2021, the Company reached a new collective bargaining agreement with the UMWA on behalf of the hourly workforce of its Shoal Creek Mine.

The Company idled the mine in the fourth quarter of 2020 due to market conditions.

During the idle period the Company undertook activities, including a preparation plant upgrade project, to increase productivity, lower costs and improve yields from the operation in the future.

The Company expects to begin production at Shoal Creek Mine in the second half of the fourth quarter of 2021, with ramp up through the first quarter of 2022.

The full workforce of the Metropolitan Mine, which was idled in December 2020, returned to the mine in May 2021.

Development work at the mine has been ongoing and longwall production restarted late in the second quarter of 2021, with a ramp up to planned production levels in the fourth quarter of 2021.

The underground workforce enterprise agreement expired in January 2021 and was renegotiated in October 2021.

In October 2021, the Company announced changes to its postretirement health care benefit plan for certain represented retirees.

Effective January 1, 2022, the Company will not provide medical coverage to certain existing retirees but will continue to offer a life insurance benefit to eligible retirees.

As of September 30, 2021, the health care benefit obligation attributed to these certain existing retirees is approximately $160.0 million.

The impact of the changes will reduce the Company’s postretirement benefit obligation during the fourth quarter of 2021.

Results of Operations

Three and Nine Months Ended September 30, 2021 Compared to the Three and Nine Months Ended September 30, 2020

The Company’s revenues for the three months ended September 30, 2021 increased compared to the same period in 2020 ($8.0 million) due to the impacts of higher seaborne thermal and metallurgical pricing and higher seaborne metallurgical volumes, offset by net unrealized mark-to-market losses on derivative contracts related to forecasted sales and other financial trading ($222.3 million).

Revenues for the nine months ended September 30, 2021 decreased compared to the same period in 2020 ($90.2 million) primarily due to the net unrealized mark-to-market losses on derivative contracts related to forecasted sales and other financial trading ($249.5 million) and lower sales volumes, partially offset by higher seaborne thermal and metallurgical pricing.

Results from continuing operations, net of income taxes for the three months ended September 30, 2021 increased compared to the same period in the prior year ($5.2 million) primarily due to improved results from equity affiliates ($26.4 million), net gains from asset disposals in the current year ($23.3 million) driven by the sale of the Millennium Mine, net gains on early debt extinguishments in the current year ($16.0 million), net mark-to-market losses on actuarially determined liabilities recorded in the prior year period ($13.0 million) and lower postretirement health care costs ($11.4 million).

These favorable variances were offset by higher operating costs and expenses ($98.5 million).

Results from continuing operations, net of income taxes for the nine months ended September 30, 2021 increased compared to the same period in the prior year ($1,579.1 million) primarily due to the asset impairment charges recorded in the prior year period ($ 1,418.1 million), lower operating costs and expenses driven by the sales volume decline as well as production efficiencies and other cost improvements ($43.3 million), lower depreciation, depletion and amortization ($43.2 million), improved results from equity affiliates ($37.1 million), lower postretirement health care costs ($34.3 million) and net gains on early debt extinguishments in the current year ($31.3 million).

These favorable variances were offset by the unfavorable revenue variance described above and increased interest expense ($41.0 million) primarily resulting from fees and higher borrowing rates related to new debt arrangements entered into during the first quarter of 2021.

Adjusted EBITDA for the three and six months ended June 30, 2021 reflected a year-over-year increase of $98.7 million and $123.0 million, respectively.

As of June 30, 2021, the Company’s available liquidity was approximately $564 million.

Adjusted EBITDA for the three and nine months ended September 30, 2021 reflected a year-over-year increase of $193.7 million and $316.7 million, respectively.

As of September 30, 2021, the Company’s available liquidity was approximately $615 million.

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

The following table presents tons sold by operating segment:

Three Months Ended June 30, (Decrease ) Increase

to Volumes Six Months Ended June 30, (Decrease ) Increase

Three Months Ended September 30, (Decrease ) Increase

to Volumes Nine Months Ended September 30, (Decrease ) Increase

2021 2020 Tons % 2021 2020 Tons %

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The following table presents supplemental financial data by operating segment:

Three Months Ended June 30, Increase

(Decrease) Six Months Ended June 30, Increase

Three Months Ended September 30, Increase

(Decrease) Nine Months Ended September 30, Increase

2021 2020 $ % 2021 2020 $ %

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The following table presents revenues by reporting segment:

Three Months Ended June 30, Increase (Decrease) to Revenues Six Months Ended June 30, Increase (Decrease) to Revenues

Three Months Ended September 30, Increase (Decrease) to Revenues Nine Months Ended September 30, Increase (Decrease) to Revenues

2021 2020 $ % 2021 2020 $ %

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Seaborne Thermal Mining.

Segment revenues increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year due to favorable realized coal pricing (three months, $46.6 million;

six months, $40.9 million), offset by unfavorable volume and mix variances (three months, $14.5 million;

six months, $33.5 million).

Segment revenues increased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year due to favorable realized coal pricing (three months, $105.5 million;

nine months, $144.8 million), offset by unfavorable volume and mix variances (three months, $7.8 million;

nine months, $39.7 million).

Seaborne Metallurgical Mining.

Segment revenues increased during the three months ended June 30, 2021 compared to the same period in the prior year due to favorable volume and mix variances ($33.2 million), partially offset by unfavorable realized coal pricing ($3.8 million).

Segment revenues decreased during the six months ended June 30, 2021 compared to the same period in the prior year due to unfavorable volume and mix variances ($66.7 million) and unfavorable realized coal pricing ($9.6 million).

The unfavorable volume variances resulted from the Shoal Creek Mine being idled through the first half of 2021, the Metropolitan Mine being idled through the first quarter of 2021 and the closure of the Millennium Mine during the second quarter of 2020.

Segment revenues increased during the three months ended September 30, 2021 compared to the same period in the prior year due to favorable realized coal pricing ($67.0 million) and favorable volume and mix variances ($33.7 million).

Segment revenues increased during the nine months ended September 30, 2021 compared to the same period in the prior year due to favorable realized coal pricing ($52.3 million), partially offset by unfavorable volume and mix variances ($27.9 million).

The unfavorable volume variances resulted from the Shoal Creek Mine being idled through the first nine months of 2021, the Metropolitan Mine being idled through the first quarter of 2021 and the closure of the Millennium Mine during the second quarter of 2020.

These unfavorable volume variances were partially offset by improved demand at the Coppabella and Moorvale Mines.

Powder River Basin Mining.

Segment revenues increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year primarily due to increased demand (three months, $47.3 million;

six months, $15.8 million), partially offset by unfavorable realized coal pricing (three months, $4.5 million;

six months, $11.2 million).

Segment revenues decreased during the three months ended September 30, 2021 compared to the same period in the prior year primarily due to decreased production ($9.7 million) and unfavorable realized coal pricing ($8.0 million).

Segment revenues decreased during the nine months ended September 30, 2021 compared to the same period in the prior year primarily due to unfavorable realized coal pricing ($19.3 million), partially offset by increased demand ($6.2 million).

Thermal Mining.

Segment revenues increased during the three months ended June 30, 2021 compared to the same period in the prior year due to favorable realized pricing ($5.9 million) and higher demand ($4.2 million).

Segment revenues decreased during the six months ended June 30, 2021 compared to the same period in the prior year due to primarily due to lower demand ($38.0 million), partially offset by favorable realized pricing ($5.1 million).

Segment revenues increased during the three months ended September 30, 2021 compared to the same period in the prior year due to favorable realized pricing ($18.9 million), offset by lower volumes attributable to decreased production and rail performance issues ($14.1 million).

Segment revenues decreased during the nine months ended September 30, 2021 compared to the same period in the prior year primarily due to lower volumes attributable to decreased production and rail performance issues ($52.0 million), partially offset by favorable realized pricing ($23.9 million).

Corporate and Other.

Segment revenues decreased during the three months ended June 30, 2021 compared to the same period in the prior year primarily due to lower results from trading activities.

Segment revenues decreased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year primarily due to net unrealized mark-to-market losses on derivative contracts related to forecasted coal sales and other financial trading (three months, $222.3 million;

nine months, $249.5 million), partially offset by higher results from trading activities.

Adjusted EBITDA

The following table presents Adjusted EBITDA for each of the Company’s reporting segments:

Three Months Ended June 30, Increase to Segment Adjusted EBITDA Six Months Ended June 30, Increase to Segment Adjusted EBITDA

Three Months Ended September 30, Increase (Decrease) to Segment Adjusted EBITDA Nine Months Ended September 30, Increase (Decrease) to Segment Adjusted EBITDA

2021 2020 $ % 2021 2020 $ %

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Seaborne Thermal Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year as a result of higher realized net coal pricing (three months, $42.9 million;

six months, $37.6 million) and cost improvements across the operations and product mix (three months, $27.2 million;

six months, $33.6 million).

The increases were partially offset by unfavorable foreign currency impacts (three months, $9.7 million;

six months, $26.7 million) and unfavorable volume variances (three months, $9.7 million;

six months, $23.4 million).

Segment Adjusted EBITDA increased during the three months ended September 30, 2021 compared to the same period in the prior year as a result of higher realized net coal pricing ($97.5 million), partially offset by unfavorable mine sequencing impacts ($14.7 million), unfavorable sales volume variances ($5.1 million) and higher commodity pricing ($4.0 million).

Segment Adjusted EBITDA increased during the nine months ended September 30, 2021 compared to the same period in the prior year as a result of higher realized net coal pricing ($133.2 million) and cost improvements across the operations and product mix ($21.3 million).

The increases were partially offset by unfavorable volume variances ($29.1 million) and unfavorable foreign currency impacts ($28.7 million).

Seaborne Metallurgical Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year due to favorable volume variances (three months, $18.0 million;

six months, $13.4 million) and cost improvements at certain mines (three months, $12.0 million;

six months, $42.0 million), offset by unfavorable foreign currency impacts (three months, $15.0 million;

six months, $40.3 million).

Segment Adjusted EBITDA increased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year due to higher realized net coal pricing (three months, $62.3 million;

nine months, $48.8 million), cost improvements at certain mines (three months, $23.1 million;

nine months, $71.9 million) and favorable volume variances (three months, $3.5 million;

nine months, $19.8 million), offset by unfavorable foreign currency impacts (three months, $2.2 million;

nine months, $41.9 million).

Powder River Basin Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year due to favorable mine sequencing impacts (three months, $21.8 million;

six months, $27.5 million) and favorable volume variances (three months, $9.9 million).

The increases were offset by higher costs for materials, services, repairs and labor (three months, $12.5 million;

six months, $5.9 million) and the unfavorable impacts of higher commodity pricing (three months, $10.3 million;

six months, $10.2 million).

Segment Adjusted EBITDA decreased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year due to lower realized net coal pricing (three months, $12.6 million;

nine months, $17.7 million), higher costs for materials, services, repairs and labor (three months, $12.6 million;

nine months, $16.7 million) and the unfavorable impacts of higher commodity pricing (three months, $8.1 million;

nine months, $18.1 million).

The decreases were offset by favorable mine sequencing impacts (nine months, $16.5 million).

Thermal Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year due to favorable volume variances (three months, $15.0 million;

six months, $16.9 million) and favorable mine sequencing impacts (three months, $10.0 million;

six months, $9.9 million), offset by the unfavorable impacts of higher commodity pricing (three months, $7.9 million;

six months, $9.5 million) and higher costs for materials, services, repairs and labor (three months, $7.3 million;

six months, $4.9 million).

Segment Adjusted EBITDA decreased during the three months ended September 30, 2021 compared to the same period in the prior year due to higher costs for materials, services, repairs and labor ($12.9 million) and the unfavorable impacts of higher commodity pricing ($7.0 million), offset by higher realized net coal pricing ($17.9 million).

Segment Adjusted EBITDA increased during the nine months ended September 30, 2021 compared to the same period in the prior year due to higher realized net coal pricing ($21.2 million) and favorable mine sequencing impacts ($16.9 million), offset by the unfavorable impacts of higher commodity pricing ($13.6 million).

Corporate and Other Adjusted EBITDA.

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

Three Months Ended June 30, Increase to Adjusted EBITDA Six Months Ended June 30, Increase (Decrease) to Adjusted EBITDA

Three Months Ended September 30, Increase (Decrease) to Adjusted EBITDA Nine Months Ended September 30, Increase (Decrease) to Adjusted EBITDA

2021 2020 $ % 2021 2020 $ %

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

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $11.1 million and $8.8 million during the three months ended June 30, 2021 and 2020, respectively, and $22.8 million and $13.2 million during the six months ended June 30, 2021 and 2020, respectively.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $17.9 million and $8.6 million during the three months ended September 30, 2021 and 2020, respectively, and $40.7 million and $21.8 million during the nine months ended September 30, 2021 and 2020, respectively.

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

(3) Includes trading and brokerage activities, costs associated with post-mining activities, gains (losses) on certain asset disposals, minimum charges on certain transportation-related contracts, costs associated with suspended operations including the North Goonyella Mine and expenses related to the Company’s other commercial activities.

The increase in Corporate and Other Adjusted EBITDA during the three and six months ended June 30, 2021 compared to the same periods in the prior year was driven by lower postretirement healthcare costs (three months, $11.2 million;

six months, $22.4 million) primarily due to changes made to one of the Company’s postretirement health care benefit plans announced in 2020;

lower containment and holding costs for the Company’s North Goonyella Mine (three months, $8.2 million;

six months, $14.4 million);

favorable trading results (six months, $11.8 million);

a favorable variance in Middlemount’s results due to the combined impact of improved production and cost improvements;

and favorable corporate hedging results (six months, $6.2 million).

The increase in Corporate and Other Adjusted EBITDA during the three and nine months ended September 30, 2021 compared to the same periods in the prior year was driven by favorable trading results (three months, $27.4 million;

nine months, $39.1 million);

the gain recognized in the current year on the sale of the Company’s Millennium Mine (three and nine months, $26.1 million) as discussed in Note 14.

“Other Events”;

a favorable variance in Middlemount’s results due to the combined impacts of higher sales pricing, improved production and cost improvements;

lower postretirement health care costs (three months, $11.2 million;

nine months, $33.6 million) primarily due to changes made to one of the Company’s postretirement health care benefit plans announced in 2020;

and lower containment and holding costs for the Company’s North Goonyella Mine (nine months, $15.4 million).

Loss From Continuing Operations, Net of Income Taxes

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

Three Months Ended June 30, Increase (Decrease) to Income Six Months Ended June 30, Increase (Decrease) to Income

Three Months Ended September 30, Increase (Decrease) to Income Nine Months Ended September 30, Increase (Decrease) to Income

2021 2020 $ % 2021 2020 $ %

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Transaction costs related to joint ventures — (6.0) 6.0 100 % — (23.1) 23.1 100 %

Asset impairment — (1,418.1) 1,418.1 100 % — (1,418.1) 1,418.1 100 %

Asset impairment — — — n.m.

— (1,418.1) 1,418.1 100 %

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates 6.4 0.5 5.9 1,180 % 8.4 1.6 6.8 425 %

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Interest income 1.4 1.6 (0.2) (13) % 4.2 7.1 (2.9) (41) %

Unrealized (losses) gains on economic hedges (23.7) 7.0 (30.7) (439) % (25.6) 4.8 (30.4) (633) %

Unrealized (losses) gains on non-coal trading derivative contracts (1.2) 2.8 (4.0) (143) % (8.8) 2.9 (11.7) (403) %

Net mark-to-market adjustment on actuarially determined liabilities — (13.0) 13.0 100 % — (13.0) 13.0 100 %

Unrealized losses on derivative contracts related to forecasted sales

(238.4) (16.1) (222.3) (1,381) % (264.0) (11.3) (252.7) (2,236) %

Unrealized gains (losses) on foreign currency option contracts 0.6 0.7 (0.1) (14) % (8.2) 3.6 (11.8) (328) %

Take-or-pay contract-based intangible recognition 1.0 1.5 (0.5) (33) % 3.2 6.8 (3.6) (53) %

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

Three Months Ended June 30, (Decrease) Increase to Income Six Months Ended June 30, (Decrease) Increase to Income

Three Months Ended September 30, (Decrease) Increase to Income Nine Months Ended September 30, (Decrease) Increase to Income

2021 2020 $ % 2021 2020 $ %

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

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

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

2021 2020 2021 2020

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1.18 1.11 1.16 1.05

Depreciation, depletion and amortization expense decreased during the three and six months ended June 30, 2021 compared to the same periods in the prior year primarily due to the impact of the asset impairment recorded at the North Antelope Rochelle Mine during the second quarter of 2020 (three months, $18.8 million;

six months, $44.0 million).

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the three and six months ended June 30, 2021 compared to the same periods in the prior year reflects the volume and mix variances which impacted the Company’s revenues as described above.

The decrease in the weighted-average depletion rate per ton for the Powder River Basin Mining segment during the three and six months ended June 30, 2021 compared to the same periods in the prior year reflects the asset impairment recorded during the second quarter of 2020.

Depreciation, depletion and amortization expense decreased during the nine months ended September 30, 2021 compared to the same period in the prior year primarily due to the impact of the asset impairment recorded at the North Antelope Rochelle Mine during the second quarter of 2020 (nine months, $45.3 million).

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the three and nine months ended September 30, 2021 compared to the same periods in the prior year reflects the volume and mix variances which impacted the Company’s revenues as described above.

The decrease in the weighted-average depletion rate per ton for the Powder River Basin Mining segment during the nine months ended September 30, 2021 compared to the same period in the prior year reflects the asset impairment recorded during the second quarter of 2020.

Restructuring Charges.

Restructuring charges decreased during the three and six months ended June 30, 2021 compared to the same periods in the prior year as the result of workforce reductions made across the organization during the prior year.

Restructuring charges decreased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year as the result of workforce reductions made across the organization during the prior year.

Transaction Costs Related to Joint Ventures.

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Asset Impairment.

During the three and six months ended June 30, 2020, the Company recognized $1,418.1 million in aggregate asset impairment charges related to the fair value of its North Antelope Rochelle Mine in its Powder River Basin Mining segment as discussed in Note 8.

During the nine months ended September 30, 2020, the Company recognized $1,418.1 million in aggregate asset impairment charges related to the fair value of its North Antelope Rochelle Mine in its Powder River Basin Mining segment as discussed in Note 8.

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

Interest Expense.

Interest expense increased during the three and six months ended June 30, 2021 compared to the same periods in the prior year as the result of a series of refinancing transactions completed by the Company during the first quarter of 2021 as described in Note 11.

Interest expense increased during the three and nine months ended September 30, 2021 compared to the same periods in the prior year as the result of a series of refinancing transactions completed by the Company during the first quarter of 2021 as described in Note 11.

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

Net Gain on Early Debt Extinguishment.

The gain recognized during the three and six months ended June 30, 2021 was primarily related to debt retirements made through various open market purchases during the second quarter of 2021 and the senior notes exchange completed during the first quarter of 2021 as further discussed in Note 11.

The gain recognized during the three and nine months ended September 30, 2021 was primarily related to debt retirements made through various open market purchases during the second and third quarters of 2021 and the senior notes exchange completed during the first quarter of 2021 as further discussed in Note 11.

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

Unrealized (Losses) Gains on Economic Hedges.

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

Net Mark-to-Market Adjustment on Actuarially Determined Liabilities.

The expense recorded during the three and nine months ended September 30, 2020 related to changes made to one of the Company’s postretirement health care benefit plans which triggered a remeasurement event.

Unrealized Losses on Derivative Contracts Related to Forecasted Sales.

Unrealized losses primarily relate to mark-to-market activity on derivatives related to forecasted sales.

For additional information, refer to Note 7.

“Derivatives and Fair Value Measurements” to the accompanying unaudited condensed consolidated financial statements.

Unrealized (Losses) Gains on Non-Coal Trading Derivative Contracts.

Unrealized (losses) gains primarily relate to mark-to-market activity from economic hedge activities intended to hedge foreign currency option contracts.

Unrealized Gains (Losses) on Foreign Currency Option Contracts.

Unrealized gains (losses) primarily relate to mark-to-market activity on foreign currency option contracts.

For additional information, refer to Note 7.

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Income Tax Benefit (Provision) .

The increase in the income tax benefit for the three months ended June 30, 2021 compared to the same period in the prior year was primarily due to differences in forecasted taxable income and a decrease in the provision related to the remeasurement of foreign income tax accounts.

The increase in the income tax benefit for the six months ended June 30, 2021 compared to the same period in the prior year was primarily due to differences in forecasted taxable income, partially offset by an increase in the provision related to the remeasurement of foreign income tax accounts.

The increase in the income tax benefit for the three and nine months ended September 30, 2021 compared to the same periods in the prior year was primarily due to differences in forecasted taxable income and an increase in the benefit related to the remeasurement of foreign income tax accounts.

Refer to Note 10.

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The following table presents net loss attributable to common stockholders:

Three Months Ended June 30, Increase

to Income Six Months Ended June 30, Increase

Three Months Ended September 30, Increase

to Income Nine Months Ended September 30, Increase

2021 2020 $ % 2021 2020 $ %

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Loss from continuing operations, net of income taxes $ (59.6) $ (64.8) $ 5.2 8 % $ (160.3) $ (1,739.4) $ 1,579.1 91 %

Loss from discontinued operations, net of income taxes

(2.3) (2.3) — — % (4.3) (4.5) 0.2 4 %

Income (loss) from discontinued operations, net of income taxes 24.3 (2.3) 26.6 1,157 % 20.0 (6.8) 26.8 394 %

Net loss (35.3) (67.1) 31.8 47 % (140.3) (1,746.2) 1,605.9 92 %

1 unchanged sentence

Net loss attributable to common stockholders $ (44.2) $ (67.2) $ 23.0 34 % $ (152.9) $ (1,741.1) $ 1,588.2 91 %

Income (Loss) from Discontinued Operations, Net of Income Taxes .

The increase in the results from discontinued operations for the three and nine months ended September 30, 2021 compared to the same periods in the prior year was primarily due to the gain of $24.6 million recognized on the sale of the Wilkie Creek Mine.

Refer to Note 14.

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

Diluted Earnings per Share (EPS)

The following table presents diluted EPS:

Three Months Ended June 30, Increase

to EPS Six Months Ended June 30, Increase

Three Months Ended September 30, Increase

to EPS Nine Months Ended September 30, Increase

2021 2020 $ % 2021 2020 $ %

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Loss from continuing operations $ (0.60) $ (0.66) $ 0.06 9 % $ (1.65) $ (17.76) $ 16.11 91 %

Loss from discontinued operations

(0.02) (0.02) — — % (0.04) (0.04) — — %

Income (loss) from discontinued operations 0.22 (0.03) 0.25 833 % 0.19 (0.07) 0.26 371 %

Net loss attributable to common stockholders $ (0.38) $ (0.69) $ 0.31 45 % $ (1.46) $ (17.83) $ 16.37 92 %

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

Diluted EPS reflects weighted average diluted common shares outstanding of 101.2 million and 97.9 million for the three months ended June 30, 2021 and 2020, respectively, and 99.8 million and 97.5 million for the six months ended June 30, 2021 and 2020, respectively.

Diluted EPS reflects weighted average diluted common shares outstanding of 114.9 million and 97.9 million for the three months ended September 30, 2021 and 2020, respectively, and 104.9 million and 97.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Reconciliation of Non-GAAP Financial Measures

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Adjusted EBITDA is also adjusted for the discrete items that management excluded in analyzing each of its segment’s operating performance, as displayed in the reconciliations below.

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

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

2021 2020 2021 2020

8 unchanged sentences

Transaction costs related to joint ventures

— 12.9 — 17.1

Asset impairment

7 unchanged sentences

(1.4) (1.6) (4.2) (7.1)

Unrealized losses (gains) on economic hedges 23.7 (7.0) 25.6 (4.8)

Unrealized losses (gains) on non-coal trading derivative contracts 1.2 (2.8) 8.8 (2.9)

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

Unrealized losses on derivative contracts related to forecasted sales 238.4 16.1 264.0 11.3

Unrealized (gains) losses on foreign currency option contracts (0.6) (0.7) 8.2 (3.6)

Take-or-pay contract-based intangible recognition

6 unchanged sentences

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

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

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

2021 2020 2021 2020

2 unchanged sentences

$ 649.4 $ 550.9 $ 1,843.4 $ 1,886.7

Unrealized (losses) gains on non-coal trading derivative contracts (1.2) 2.8 (8.8) 2.9

Unrealized gains (losses) on foreign currency option contracts 0.6 0.7 (8.2) 3.6

Take-or-pay contract-based intangible recognition

4 unchanged sentences

The following table presents Reporting Segment Costs by reporting segment:

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

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

2021 2020 2021 2020

7 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

8 unchanged sentences

Adjusted EBITDA Margin per Ton $ 23.44 $ 38.37 $ 1.63 $ 10.00

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

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

8 unchanged sentences

Adjusted EBITDA Margin per Ton $ 7.69 $ (24.99) $ 3.33 $ 10.68

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

8 unchanged sentences

Adjusted EBITDA Margin per Ton $ 16.14 $ 2.20 $ 1.71 $ 10.18

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

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

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions)

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As part of this recurring review process, the EPA in 2020 proposed to retain the ozone standards promulgated in 2015, including current secondary standards, and subsequently promulgated final standards to this effect.

Fifteen states and other petitioners have filed a petition for review of the rule in the D.C.

Fifteen states and other petitioners have filed a petition for review of the rule in the United States Court of Appeals for the D.C.

Circuit (D.C.

The litigation is currently in abeyance following a motion filed by the EPA to allow for review of the standards.

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More stringent PM or ozone standards would require new state implementation plans to be developed and filed with the EPA and may trigger additional control technology for mining equipment or result in additional challenges to permitting and expansion efforts.

This could also be the case with respect to other NAAQS for nitrogen dioxide (NO 2 ) and sulfur dioxide (SO 2 ), although there is no significant pending EPA rulemaking with respect to those pollutants.

This could also be the case with respect to other NAAQS for nitrogen dioxide (NO 2 ) and sulfur dioxide (SO 2 ), although these standards are not subject to a statutorily-required review until 2023 for NO 2 and 2024 for SO 2.

EPA Regulation of Greenhouse Gas Emissions from Existing Fossil Fuel-Fired EGUs .

On October 23, 2015, the EPA published a final rule in the Federal Register regulating greenhouse gas emissions from existing fossil fuel-fired EGUs under Section 111(d) of the CAA (80 Fed.

On October 23, 2015, the EPA published a final rule in the Federal Register regulating greenhouse gas emissions from existing fossil fuel-fired electric generation units (EGUs) under Section 111(d) of the CAA (80 Fed.

The rule (known as the Clean Power Plan or CPP) established emission guidelines for states to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel-fired EGUs.

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Circuit vacated and remanded the ACE Rule to the EPA, including its repeal of the CPP and amendments to the implementing regulations that extended the compliance timeline.

On October 29, 2021, the Supreme Court granted certiorari in four matters seeking review of the D.C.

Circuit’s opinion invalidating the repeal of the CPP.

In granting certiorari, the Supreme Court consolidated the cases to consider the breadth of the EPA’s scope pursuant to 42 U.S.C.

Section 7411(d) of the CAA, specifically, whether it is limited to issuing standards for existing sources achievable through demonstrated technology and methods, or if it may also issue industry wide systems (such as cap and trade) which effectively seek to shift energy generation.

The Company will continue to monitor the consolidated matters.

Cross State Air Pollution Rule (CSAPR) and CSAPR Update Rule .

In 2011, the EPA finalized the CSAPR, which requires the District of Columbia and 27 states from Texas eastward (not including the New England states or Delaware) to reduce power plant emissions that cross state lines and significantly contribute to ozone and/or fine particle pollution in other states.

In 2016, the EPA published the final CSAPR Update Rule which imposed additional reductions in nitrogen oxide emissions beginning in 2017 in 22 states subject to CSAPR.

In 2016, the EPA published the final CSAPR Update Rule which imposed additional reductions in nitrogen oxides (NO x ) beginning in 2017 in 22 states subject to CSAPR.

In October 2020, the EPA proposed a rule to address a previous D.C.

Circuit remand of the CSAPR Update Rule.

On March 15, 2021, the EPA signed a final rule which imposed further reductions of NOx emmissions in 12 states while determining that 9 states did not significantly contribute to downwind nonattainment and/or maintenance issues and therefore did not require additional emission reductions.

Circuit remand of the CSAPR Update Rule and in April 2021, the EPA published a final rule in the Federal Register which imposed further reductions of NO x emissions in 12 states that were subject to the original 2016 rule.

In the same rule, the EPA determined that 9 states did not significantly contribute to downwind nonattainment and/or maintenance issues and therefore did not require additional emission reductions.

In order to implement reductions in the 12 identified states, the EPA issued Federal Implementation Plans to lower state ozone season NO x budgets in 2021 to 2024, although limited emission trading can be used for compliance and states have the ability to replace federal plans with revised state plans that are no less stringent.

A petition for review challenging the 2021 rule has been filed in the D.C.

Circuit, but this does not stay the effectiveness of the rule.

Mercury and Air Toxic Standards (MATS) .

The EPA published the final MATS rule in the Federal Register in 2012.

The MATS rule revised the NSPS for nitrogen oxides, SO 2 and PM for new and modified coal-fueled electricity generating plants, and imposed MACT emission limits on hazardous air pollutants (HAPs) from new and existing coal-fueled and oil-fueled electric generating plants.

The MATS rule revised the new source performance standards (NSPS) for NO x , SO 2 and PM for new and modified coal-fueled electricity generating plants, and imposed maximum achievable control technology (MACT) emission limits on hazardous air pollutants (HAPs) from new and existing coal-fueled and oil-fueled electric generating plants.

MACT standards limit emissions of mercury, acid gas HAPs, non-mercury HAP metals and organic HAPs.

1 unchanged sentence

This rule also finalized residual risk and technology review standards for the coal- and oil-fired EGU source category.

Both actions have been challenged in the D.C.

Circuit and placed in abeyance.

Both actions were challenged in the D.C.

Circuit but this litigation was placed in abeyance.

In August 2020, the EPA sent a draft rule to the Office of Management and Budget for review regarding reconsideration of the “appropriate and necessary” finding as well as standards for coal- and oil-fired EGUs.

CWA Definition of “Waters of the United States ”.

In January 2020 the EPA and the Army Corps of Engineers (Corps) finalized the Navigable Waters Protection Rule to revise the definition of “Waters of the United States” and thereby establish the scope of federal regulatory authority under the CWA.

The Navigable Waters Protection Rule is currently in effect in all fifty states, but on June 9, 2021, the EPA and the Corps announced their intent to initiate a new rulemaking proceeding to replace the rule with a new definition of “Waters of the United States.” Litigation over the 2020 Navigable Waters Protection Rule remains pending in several federal district courts.

On August 30, 2021, a federal court in Arizona vacated the Navigable Waters Protection Rule, and on September 3, 2021, the EPA and the Corps announced that they had “halted implementation” of the rule nationwide and that they are interpreting “Waters of the United States” consistent with the pre-2015 regulatory framework.

The agencies reaffirmed that they are moving forward on two rulemaking proceedings to formally repeal the Navigable Waters Protection Rule and then to build upon the pre-2015 regulatory framework.

Effluent Limitations Guidelines for the Steam Electric Power Generating Industry .

On September 30, 2015, the EPA published a final rule setting new or additional requirements for various wastewater discharges from steam electric power plants.

The rule set zero discharge requirements for some waste streams, as well as new, more stringent limits for arsenic, mercury, selenium and nitrogen applicable to certain other waste streams.

On October 13, 2020, the EPA issued a final rule revising the technology-based effluent limitations guidelines and standards for the steam electric power generating point source category applicable to flue gas desulfurization wastewater and bottom ash transport water.

However, on August 3, 2021, the EPA announced it is undertaking a supplemental rulemaking to “strengthen certain discharge limits” applicable to steam electric power plants.

As finalized, the revised effluent limitations guidelines could significantly increase costs for many coal-fired steam electric power plants.

Regulatory Matters - Australia

2 unchanged sentences

Industrial relations are regulated under both federal and state laws.

Australian state governments also require coal companies to post deposits or give other security against land which is being used for mining, with those deposits being returned or security released after satisfactory reclamation is completed.

Australian state governments also require coal companies to post deposits or give other security against land which is being used for mining, with those deposits being incrementally returned or security released after satisfactory reclamation is progressively completed.

Safe Work Australia (SWA).

9 unchanged sentences

and establish an Environment Assurance Commissioner to monitor and audit bilateral agreements and other processes under the EPBC Act.

The bill passed the Australian Parliament’s House of Representatives in June 2021 and will now be considered by the Australian Senate during its August sittings.

The bill passed the Australian Parliament’s House of Representatives in June 2021 and is now under consideration by the Australian Senate.

Native Title and Cultural Heritage.

8 unchanged sentences

Congress did include climate legislation, the American Innovation and Manufacturing Act of 2020, within a large appropriations bill for the 2021 fiscal year.

This legislation was enacted in December, 2020, and will require phasedown of the production and use of hydrofluorocarbons (HFCs) in the United States.

This legislation was enacted in December 2020, and final regulations were promulgated in September 2021.

The law requires the phasedown of the production and use of hydrofluorocarbons (HFCs) in the United States.

While it is possible that the U.S.

will adopt broader legislation in the future, the timing and specific requirements of any such legislation are uncertain.

Congress is considering several measures to address climate issues and greenhouse gas emissions as part of the U.S.

budgetary process, including reconciliation legislation that could create financial incentives and penalties as part of a “clean electricity standard” applying to electric generation.

In the absence of new U.S.

5 unchanged sentences

the ACE Rule and the EPA’s repeal of the CPP) were vacated and remanded back to the EPA by the D.C.

Circuit Court of Appeals.

Greenhouse gas requirements for new, reconstructed and modified fossil fuel fired power plants remain in effect.

1 unchanged sentence

The NSR program provides for the pre-construction review of new, reconstructed and modified stationary sources and results in determinations concerning the emission control technology that must be installed and operated at a source.

Clean Air Act standards, known as new source performance standards, generally serve as a “floor” level of control for sources subject to NSR review;

NSPS generally serve as a “floor” level of control for sources subject to NSR review;

the final level of control is determined through the permitting process.

In certain cases, performance standards or controls regarding greenhouse gas emissions may be required through the NSR process.

Because NSR review is undertaken both pursuant to applicable regulations and guidance and performed on a “case-by-case” basis, requirements imposed through this permitting process are subject to variation.

At the same time, a number of states in the U.S.

31 unchanged sentences

Recently, the U.S.

has announced the goal of a completely emissions-free power grid by 2035, but has not provided specificity for a regulatory framework to achieve that goal.

The Company anticipates a series of executive actions and/or orders from the current presidential administration aimed at curbing emission levels as well as associated rulemaking using the CAA and potentially other statutory authorities.

has announced the goal of a completely emissions-free power grid by 2035, but has not provided additional, more specific information with regard to how the goal will be achieved.

In October 2017, the Australian Federal Government released a plan aimed at delivering an affordable and reliable energy system that meets Australia’s international commitments to emissions reduction.

8 unchanged sentences

The potential financial impact on the Company of such future laws, regulations or other policies will depend upon the degree to which any such laws or regulations force electricity generators to diminish their reliance on coal as a fuel source.

That, in turn, will depend on a number of factors, including the specific requirements imposed by any such laws, regulations or other policies, the time periods over which those laws, regulations or other policies would be phased in, the state of development and deployment of CCUS technologies as well as acceptance of CCUS technologies to meet regulations and the alternative uses for coal.

That, in turn, will depend on a number of factors, including the specific requirements imposed by any such laws, regulations or other policies, the time periods over which those laws, regulations or other policies would be phased in, the state of development and deployment of carbon capture, utilization and storage (CCUS) technologies as well as acceptance of CCUS technologies to meet regulations and the alternative uses for coal.

Higher-efficiency coal-fired power plants may also be an option for meeting laws or regulations related to emissions from coal use.

6 unchanged sentences

The Company has also generated cash from the sale of non-strategic assets, including coal reserves and surface lands, and, from time to time, borrowings under its credit facilities and the issuance of securities.

The Company’s primary uses of cash include the cash costs of coal production, capital expenditures, coal reserve lease and royalty payments, debt service costs, capital and operating lease payments, postretirement plans, take-or-pay obligations, post-mining reclamation obligations, and selling and administrative expenses.

The Company has also used cash for dividends, share repurchases and early debt retirements.

3 unchanged sentences

“Unregistered Sales of Equity Securities and Use of Proceeds.”

As of June 30, 2021, the Company’s cash balances totaled $548.3 million, including approximately $366 million held by U.S.

subsidiaries and $153 million held by Australian subsidiaries, approximately $102 million of which was held by the subsidiaries that conduct the operations of its Wilpinjong Mine.

The remaining cash balance was held by other foreign subsidiaries in accounts predominantly domiciled in the U.S.

As of September 30, 2021, the Company’s cash balances totaled $587.0 million, including approximately $265 million held by U.S.

subsidiaries, $294 million held by Australian subsidiaries, and the remainder held by other foreign subsidiaries in accounts predominantly domiciled in the U.S.

The subsidiaries that conduct the operations of the Wilpinjong Mine held cash of approximately $145 million at September 30, 2021.

A significant majority of the cash held by the Company’s foreign subsidiaries is denominated in U.S.

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liquidity needs, including capital and operating expenditures in Australia.

The Company’s available liquidity declined from $728.7 million as of December 31, 2020 to $564.1 million as of June 30, 2021.

Available liquidity, which excluded $13.6 million of restricted cash as of June 30, 2021, was comprised of the following:

June 30, 2021 December 31, 2020

The Company’s available liquidity declined from $728.7 million as of December 31, 2020 to $615.4 million as of September 30, 2021.

Available liquidity was comprised of the following:

September 30, 2021 December 31, 2020

(Dollars in millions)

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Total liquidity $ 615.4 $ 728.7

The Company’s total funded indebtedness (Indebtedness) as of June 30, 2021 and December 31, 2020 is presented in the table below.

Debt Instrument (defined below, as applicable) June 30, 2021 December 31, 2020

The Company’s total funded indebtedness (Indebtedness) as of September 30, 2021 and December 31, 2020 is presented in the table below.

Debt Instrument (defined below, as applicable) September 30, 2021 December 31, 2020

(Dollars in millions)

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

Liquidity calculated in this manner amounted to $444.9 million at June 30, 2021.

Liquidity calculated in this manner amounted to $452.2 million at September 30, 2021.

The indenture which governs the Peabody Notes and the Company LC Agreement allow the Company to make open market debt repurchases, subject to certain limitations, including, but not limited to:

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The Company is also subject to customary affirmative and negative covenants.

The Company was compliant with all covenants under its debt agreements including the minimum liquidity covenant under the Company LC Agreement at June 30, 2021.

The Company was compliant with all covenants under its debt agreements including the minimum liquidity covenant under the Company LC Agreement at September 30, 2021.

Subsequent Financing Transactions

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In June 2021, the Company announced an at-the-market equity offering program pursuant to which the Company could offer and sell up to 12.5 million shares of its common stock.

Such sales are allowed using methods permissible under Rule 415 of the Securities Act.

The shares are offered and sold pursuant to the Company’s Registration Statement on Form S-3, which was declared effective by the Securities and Exchange Commission on April 23, 2021, as supplemented by a prospectus supplement dated June 4, 2021, relating to the offer and sale of the shares.

During the three months ended June 30, 2021, the Company sold approximately 8.1 million shares for net cash proceeds of $65.1 million.

Subsequent to June 30, 2021, the Company settled sales of an additional 2.7 million shares for net proceeds of $21.5 million.

During the three months ended June 30, 2021, the Company retired $18.0 million of Peabody Notes, $17.4 million of 2025 Notes and $17.8 million of its Senior Secured Term Loan primarily through various open market purchases at an aggregate cost of $39.2 million.

The Company recorded a gain on early debt extinguishment of $11.9 million, net of debt issuance costs and original issue discount related to the retired debt of $2.1 million.

Also during the three months ended June 30, 2021, the Company completed multiple bilateral transactions with holders of the 2022 Notes in which the Company issued an aggregate 4.5 million shares of its common stock in exchange for $30.9 million aggregate principal amount of the 2022 Notes.

Based upon the fair value of the Company’s common stock at the respective settlement dates, the Company recorded a net loss on early debt extinguishment of $0.1 million in connection with the transactions.

The issuance of shares of common stock in exchange for the 2022 Notes was exempt from registration under the Securities Act, on the basis that the exchange was completed with existing holders of the Company’s securities, and no commission or other remuneration was paid or given for soliciting the exchange.

The Company also reached agreements to retire an additional $49.5 million of aggregate principal, which will settle subsequent to June 30, 2021.

This included $44.0 million of its Senior Secured Term Loan due 2025 and $1.5 million of 2025 Notes through similar open market purchases for an aggregate cost of $30.2 million, and by issuing an aggregate 0.5 million shares of its common stock in exchange for $4.0 million aggregate principal amount of the 2022 Notes in a similar manner noted above.

Such amounts are reflected within the current portion of long-term debt in the accompanying condensed consolidated balance sheets at June 30, 2021.

As a result of the Company’s open market purchases of its debt during the three months ended June 30, 2021, on July 7, 2021, the Company announced a Mandatory Repurchase Offer of up to $13.3 million of its 2024 Peabody Notes, at 73.840% of their aggregate accreted value, plus accrued and unpaid interest, and a concurrent repurchase offer of priority lien obligations under the Company LC Agreement.

The offers expire on August 6, 2021, unless extended by the Company.

During September 2021, the Company announced that it could offer and sell up to an additional 12.5 million shares, for a total of 25.0 million shares authorized through the at-the-market offering program.

Through September 30, 2021, the Company sold approximately 17.1 million shares for net cash proceeds of $177.2 million.

Between October 1, 2021 and November 2, 2021, the Company settled sales of an additional 3.2 million shares for net proceeds of $43.4 million.

Through September 30, 2021, the Company retired $40.1 million of Peabody Notes, $19.7 million of 2025 Notes and $56.7 million of its Senior Secured Term Loan primarily through various open market purchases at an aggregate cost of $85.9 million.

During the nine months ended September 30, 2021, the Company recorded net gains on early debt extinguishment of $26.9 million related to these retirements.

Subsequent to September 30, 2021, the Company retired an additional $5.0 million of its Senior Secured Term Loan through similar open market purchases for an aggregate cost of $3.3 million.

Through September 30, 2021, the Company also completed multiple bilateral transactions with holders of the 2022 Notes, the 2025 Notes and the Peabody Notes in which the Company issued an aggregate 6.7 million shares of its common stock in exchange for $37.3 million aggregate principal amount of the 2022 Notes, $17.9 million aggregate principal amount of the 2025 Notes and $5.5 million aggregate principal amount of the Peabody Notes.

Between October 1, 2021 and November 2, 2021, the Company issued an additional 1.9 million shares of its common stock in exchange for $31.0 million aggregate principal amount of a combination of Peabody Notes and 2025 Notes.

As a result of the Company’s open market purchases of its debt during the three months ended September 30, 2021, on October 22, 2021, the Company announced a Mandatory Repurchase Offer of up to $15.8 million of Peabody Notes, at 73.590% of their aggregate accreted value, plus accrued and unpaid interest, and a concurrent repurchase offer of priority lien obligations under the Company LC Agreement.

The offers expire on November 22, 2021, unless extended by the Company.

Considering the Refinancing Transactions and the subsequent financing transactions described above, the Company expects to incur approximately $190 million of interest expense, including approximately $45 million of non-cash interest expense, during the year ended December 31, 2021.

Refer to Note 11.

“Long-term Debt” of the accompanying unaudited condensed consolidated financial statements for additional information related to the subsequent financing transactions described above.

Accounts Receivable Securitization Program

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“Financial Instruments and Other Guarantees” of the accompanying unaudited condensed consolidated financial statements, the Company entered into an accounts receivable securitization program during 2017 which currently matures in 2022.

The Company intends to renew the facility prior to maturity.

The Company is in discussions to renew the facility prior to maturity.

The program provides for up to $250.0 million in funding, limited to the availability of eligible receivables, accounted for as a secured borrowing.

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

At June 30, 2021, the Company h a d no outstanding borrowings and $125.5 million of letters of credit issued under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company had $13.6 million of cash collateral posted under the Securitization Program at June 30, 2021 due to outstanding letters of credit temporarily exceeding the balance of eligible receivables at quarter-end.

At September 30, 2021, the Company h a d no outstanding borrowings and $133.6 million of letters of credit issued under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company was not required to post cash collateral under the Securitization Program at September 30, 2021.

Capital Requirements

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Cash Flows and Free Cash Flow

The following table summarizes the Company’s cash flows for the six months ended June 30, 2021 and 2020, as reported in the accompanying unaudited condensed consolidated financial statements.

The following table summarizes the Company’s cash flows for the nine months ended September 30, 2021 and 2020, as reported in the accompanying unaudited condensed consolidated financial statements.

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

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

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions)

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Net cash used in investing activities (119.7) (159.4)

Net cash (used in) provided by financing activities (41.9) 285.0

Net cash provided by financing activities 15.9 273.9

Net change in cash, cash equivalents and restricted cash (122.2) 82.4

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Operating Activities.

The decrease in net cash used in operating activities for the six months ended June 30, 2021 compared to the same period in the prior year was driven by a year-over-year increase in cash generated by Company’s mining operations, partially offset by an unfavorable change in net cash flows associated with its working capital ($67.2 million).

The decrease in net cash used in operating activities for the nine months ended September 30, 2021 compared to the same period in the prior year was driven by a year-over-year increase in operating cash flow, primarily from the Company’s mining operations ($237.7 million), partially offset by increased cash utilized to satisfy the margin requirements associated with derivative financial instruments ($224.0 million).

Investing Activities.

The decrease in net cash used in investing activities for the six months ended June 30, 2021 compared to the same period in the prior year was driven by lower advances to related parties and joint ventures, on a net basis ($34.8 million).

The decrease in net cash used in investing activities for the nine months ended September 30, 2021 compared to the same period in the prior year was driven by lower capital expenditures ($19.9 million) and lower advances to related parties and joint ventures, on a net basis ($13.4 million).

Financing Activities.

The decrease in net cash provided by financing activities for the six months ended June 30, 2021 compared to the same period in the prior year was driven by $300.0 million of revolving loan borrowings in the prior year, higher repayments of debt principal ($73.2 million) and payments for deferred financing costs ($22.5 million) in the current year, partially offset by $65.1 million proceeds from the issuance of common stock in the current year.

The decrease in net cash provided by financing activities for the nine months ended September 30, 2021 compared to the same period in the prior year was driven by $360.0 million of revolving loan and securitization borrowings in the prior year, higher repayments of debt principal ($52.6 million) and payments for deferred financing costs ($22.5 million) in the current year, partially offset by $177.2 million proceeds from the issuance of common stock in the current year.

Off-Balance-Sheet Arrangements

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

At June 30, 2021, such instruments inc lude d $1,555.0 million of surety bonds and $435.4 million o f letters of credit.

At September 30, 2021, such instruments inc lude d $1,462.4 million of surety bonds and $443.2 million o f letters of credit.

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

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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 its condensed consolidated balance sheets.

As of June 30, 2021, the Company was party to financial instruments with off-balance-sheet risk in support of the following obligations:

As of September 30, 2021, the Company was party to financial instruments with off-balance-sheet risk in support of the following obligations:

Reclamation Health and welfare (1)

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Obligations supported, net $ 1,284.8 $ 123.0 $ 91.0 $ 34.7 $ 16.4 $ 1,549.9

(1) Obligations include pension and healthcare plans, workers’ compensation, and property and casualty insurance

(1) Obligations include pension and health care plans, workers’ compensation, and property and casualty insurance

(2) Obligations pertain to customer and vendor contracts

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

At June 30, 2021, the Company had total asset retirement obligations of $741.8 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

At September 30, 2021, the Company had total asset retirement obligations of $710.2 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

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

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Actual results may differ from these estimates.

At June 30, 2021, the Company identified certain assets with an aggregate carrying value of approximately $1.2 billion in its Seaborne Metallurgical Mining, Powder River Basin Mining, Other U.S.

At September 30, 2021, the Company identified certain assets with an aggregate carrying value of approximately $1.1 billion 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 June 30, 2021 and determined that no impairment charges were necessary as of that date.

The Company conducted a review of those assets as of September 30, 2021 and determined that no impairment charges were necessary as of that date.

The Company’s critical accounting policies are discussed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K for the year ended December 31, 2020.

The Company’s critical accounting policies remain unchanged at June 30, 2021.

The Company’s critical accounting policies remain unchanged at September 30, 2021.

Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis