PEABODY ENERGY CORP 10-Q

Item 1. Financial Statements. PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions, except per share data) Revenues $ 679.0 $ 671.0 $ 2,053.7 $ 2,143.9 Costs and expenses Operating costs and expenses (exclusive of items shown separately below) 649.4 550.9 1,843.4 1,886.7 Depreciation, depletion and amortization 77.9 72.2 223.3 266.5 Asset retirement obligation expenses 14.3 14.3 45.3 46.0 Selling and administrative expenses 21.1 27.2 64.2 77.3 Restructuring charges 1.7 8.1 5.9 31.1 Transaction costs related to joint ventures — 6.0 — 23.1 Other operating (income) loss: Net gain on disposals ( 25.8 ) ( 2.5 ) ( 28.2 ) ( 10.4 ) Asset impairment — — — 1,418.1 (Income) loss from equity affiliates ( 15.8 ) 10.6 ( 11.4 ) 25.7 Operating loss ( 43.8 ) ( 15.8 ) ( 88.8 ) ( 1,620.2 ) Interest expense 45.5 34.9 143.3 102.3 Net gain on early debt extinguishment ( 16.0 ) — ( 31.3 ) — Interest income ( 1.4 ) ( 1.6 ) ( 4.2 ) ( 7.1 ) Net periodic benefit (credit) costs, excluding service cost ( 8.6 ) 2.8 ( 26.0 ) 8.3 Net mark-to-market adjustment on actuarially determined liabilities — 13.0 — 13.0 Loss from continuing operations before income taxes ( 63.3 ) ( 64.9 ) ( 170.6 ) ( 1,736.7 ) Income tax (benefit) provision ( 3.7 ) ( 0.1 ) ( 10.3 ) 2.7 Loss from continuing operations, net of income taxes ( 59.6 ) ( 64.8 ) ( 160.3 ) ( 1,739.4 ) Income (loss) from discontinued operations, net of income taxes 24.3 ( 2.3 ) 20.0 ( 6.8 ) Net loss ( 35.3 ) ( 67.1 ) ( 140.3 ) ( 1,746.2 ) Less: Net income (loss) attributable to noncontrolling interests 8.9 0.1 12.6 ( 5.1 ) Net loss attributable to common stockholders $ ( 44.2 ) $ ( 67.2 ) $ ( 152.9 ) $ ( 1,741.1 ) Loss from continuing operations: Basic loss per share $ ( 0.60 ) $ ( 0.66 ) $ ( 1.65 ) $ ( 17.76 ) Diluted loss per share $ ( 0.60 ) $ ( 0.66 ) $ ( 1.65 ) $ ( 17.76 ) Net loss attributable to common stockholders: Basic loss per share $ ( 0.38 ) $ ( 0.69 ) $ ( 1.46 ) $ ( 17.83 ) Diluted loss per share $ ( 0.38 ) $ ( 0.69 ) $ ( 1.46 ) $ ( 17.83 ) See accompanying notes to unaudited condensed consolidated financial statements. 1 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Net loss $ ( 35.3 ) $ ( 67.1 ) $ ( 140.3 ) $ ( 1,746.2 ) Postretirement plans (net of $ 0.0 tax provisions in each period) ( 11.0 ) 172.3 ( 33.0 ) 167.9 Foreign currency translation adjustment ( 0.8 ) 2.5 ( 1.2 ) 1.8 Other comprehensive (loss) income, net of income taxes ( 11.8 ) 174.8 ( 34.2 ) 169.7 Comprehensive (loss) income ( 47.1 ) 107.7 ( 174.5 ) ( 1,576.5 ) Less: Net income (loss) attributable to noncontrolling interests 8.9 0.1 12.6 ( 5.1 ) Comprehensive (loss) income attributable to common stockholders $ ( 56.0 ) $ 107.6 $ ( 187.1 ) $ ( 1,571.4 ) See accompanying notes to unaudited condensed consolidated financial statements. 2 Table of Contents PEABODY ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2021 December 31, 2020 (Amounts in millions, except per share data) ASSETS Current assets Cash and cash equivalents $ 587.0 $ 709.2 Accounts receivable, net of allowance for credit losses of $ 0.0 at September 30, 2021 and December 31, 2020 276.0 244.8 Inventories 224.5 261.6 Other current assets 223.8 204.7 Total current assets 1,311.3 1,420.3 Property, plant, equipment and mine development, net 2,952.0 3,051.1 Operating lease right-of-use assets 38.4 49.9 Investments and other assets 140.8 140.9 Deferred income taxes — 4.9 Total assets $ 4,442.5 $ 4,667.1 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current portion of long-term debt $ 59.5 $ 44.9 Accounts payable and accrued expenses 761.7 745.7 Total current liabilities 821.2 790.6 Long-term debt, less current portion 1,268.7 1,502.9 Deferred income taxes 13.0 35.0 Asset retirement obligations 641.9 650.5 Accrued postretirement benefit costs 402.2 413.2 Operating lease liabilities, less current portion 31.6 42.1 Other noncurrent liabilities 221.6 251.5 Total liabilities 3,400.2 3,685.8 Stockholders’ equity Preferred Stock — $ 0.01 per share par value; 100.0 shares authorized, no shares issued or outstanding as of September 30, 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, 2021 and December 31, 2020 — — Common Stock — $ 0.01 per share par value; 450.0 shares authorized, 165.3 shares issued and 122.3 shares outstanding as of September 30, 2021 and 140.5 shares issued and 97.8 shares outstanding as of December 31, 2020 1.6 1.4 Additional paid-in capital 3,605.1 3,364.6 Treasury stock, at cost — 43.0 and 42.7 common shares as of September 30, 2021 and December 31, 2020 ( 1,370.2 ) ( 1,368.9 ) Accumulated deficit ( 1,426.2 ) ( 1,273.3 ) Accumulated other comprehensive income 171.6 205.8 Peabody Energy Corporation stockholders’ equity 981.9 929.6 Noncontrolling interests 60.4 51.7 Total stockholders’ equity 1,042.3 981.3 Total liabilities and stockholders’ equity $ 4,442.5 $ 4,667.1 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2021 2020 (Dollars in millions) Cash Flows From Operating Activities Net loss $ ( 140.3 ) $ ( 1,746.2 ) (Income) loss from discontinued operations, net of income taxes ( 20.0 ) 6.8 Loss from continuing operations, net of income taxes ( 160.3 ) ( 1,739.4 ) Adjustments to reconcile loss from continuing operations, net of income taxes to net cash used in operating activities: Depreciation, depletion and amortization 223.3 266.5 Noncash interest expense, net 15.2 12.0 Deferred income taxes ( 22.0 ) 0.1 Noncash share-based compensation 5.6 9.9 Asset impairment — 1,418.1 Net gain on disposals ( 28.2 ) ( 10.4 ) Net gain on early debt extinguishment ( 31.3 ) — (Income) loss from equity affiliates ( 11.4 ) 25.7 Foreign currency option contracts 5.3 ( 5.2 ) Changes in current assets and liabilities: Accounts receivable ( 31.1 ) 136.6 Inventories 37.1 11.9 Other current assets ( 11.1 ) 0.3 Accounts payable and accrued expenses 42.5 ( 136.3 ) Collateral arrangements ( 5.0 ) — Asset retirement obligations 17.4 12.2 Workers’ compensation obligations — ( 1.3 ) Postretirement benefit obligations ( 43.9 ) ( 6.1 ) Pension obligations ( 1.8 ) 0.3 Other, net 0.2 ( 4.6 ) Net cash provided by (used in) continuing operations 0.5 ( 9.7 ) Net cash used in discontinued operations ( 18.9 ) ( 22.4 ) Net cash used in operating activities ( 18.4 ) ( 32.1 ) 4 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) Nine Months Ended September 30, 2021 2020 (Dollars in millions) Cash Flows From Investing Activities Additions to property, plant, equipment and mine development ( 123.6 ) ( 131.9 ) Changes in accrued expenses related to capital expenditures ( 3.3 ) ( 14.9 ) Proceeds from disposal of assets, net of receivables 12.7 15.4 Contributions to joint ventures ( 363.8 ) ( 275.2 ) Distributions from joint ventures 350.3 271.0 Advances to related parties ( 0.4 ) ( 23.1 ) Cash receipts from Middlemount Coal Pty Ltd and other related parties 8.4 — Other, net — ( 0.7 ) Net cash used in investing activities ( 119.7 ) ( 159.4 ) Cash Flows From Financing Activities Proceeds from long-term debt — 360.0 Repayments of long-term debt ( 133.6 ) ( 81.0 ) Payment of debt issuance and other deferred financing costs ( 22.5 ) — Proceeds from common stock issuances, net of costs 177.2 — Repurchase of employee common stock relinquished for tax withholding ( 1.3 ) ( 1.6 ) Distributions to noncontrolling interests ( 3.9 ) ( 3.5 ) Net cash provided by financing activities 15.9 273.9 Net change in cash, cash equivalents and restricted cash ( 122.2 ) 82.4 Cash, cash equivalents and restricted cash at beginning of period 709.2 732.2 Cash, cash equivalents and restricted cash at end of period $ 587.0 $ 814.6 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Common Stock Balance, beginning of period $ 1.5 $ 1.4 $ 1.4 $ 1.4 Common stock issuances, net of costs 0.1 — 0.2 — Balance, end of period 1.6 1.4 1.6 1.4 Additional paid-in capital Balance, beginning of period 3,463.8 3,357.2 3,364.6 3,351.1 Share-based compensation for equity-classified awards 1.7 3.8 5.6 9.9 Common stock issued in exchange for debt retirement 27.7 — 58.2 — Common stock issuances, net of costs 111.9 — 176.7 — Balance, end of period 3,605.1 3,361.0 3,605.1 3,361.0 Treasury stock Balance, beginning of period ( 1,370.2 ) ( 1,368.9 ) ( 1,368.9 ) ( 1,367.3 ) Repurchase of employee common stock relinquished for tax withholding — — ( 1.3 ) ( 1.6 ) Balance, end of period ( 1,370.2 ) ( 1,368.9 ) ( 1,370.2 ) ( 1,368.9 ) (Accumulated deficit) retained earnings Balance, beginning of period ( 1,382.0 ) ( 1,076.9 ) ( 1,273.3 ) 597.0 Net loss attributable to common stockholders ( 44.2 ) ( 67.2 ) ( 152.9 ) ( 1,741.1 ) Balance, end of period ( 1,426.2 ) ( 1,144.1 ) ( 1,426.2 ) ( 1,144.1 ) Accumulated other comprehensive income Balance, beginning of period 183.4 26.5 205.8 31.6 Postretirement plans (net of $ 0.0 tax provisions in each period) ( 11.0 ) 172.3 ( 33.0 ) 167.9 Foreign currency translation adjustment ( 0.8 ) 2.5 ( 1.2 ) 1.8 Balance, end of period 171.6 201.3 171.6 201.3 Noncontrolling interests Balance, beginning of period 55.3 50.0 51.7 58.7 Net income (loss) attributable to noncontrolling interests 8.9 0.1 12.6 ( 5.1 ) Distributions to noncontrolling interests ( 3.8 ) — ( 3.9 ) ( 3.5 ) Balance, end of period 60.4 50.1 60.4 50.1 Total stockholders’ equity $ 1,042.3 $ 1,100.8 $ 1,042.3 $ 1,100.8 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The condensed consolidated financial statements include the accounts of Peabody Energy Corporation (PEC) and its consolidated subsidiaries and affiliates (along with PEC, the Company or Peabody). Interests in subsidiaries controlled by the Company are consolidated with any outside stockholder interests reflected as noncontrolling interests, except when the Company has an undivided interest in a joint venture. In those cases, the Company includes its proportionate share in the assets, liabilities, revenues and expenses of the jointly controlled entities within each applicable line item of the unaudited condensed consolidated financial statements. All intercompany transactions, profits and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. In the opinion of management, these financial statements reflect all normal, recurring adjustments necessary for a fair presentation. 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, 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 Equity Method Investments. 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. 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 Reference Rate Reform. In March 2020, ASU 2020-04 was issued, which provides optional guidance for a limited period of time to ease the potential burden on accounting for contract modifications caused by reference rate reform (including reform of the London Interbank Offered Rate (LIBOR) or other reference rate reform). This guidance is effective for all entities as of March 12, 2020 through December 31, 2022. 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 the guidance and plans to elect optional expedients as reference rate reform activities occur. The Company does not expect the guidance to have a material impact on its consolidated financial statements or disclosures. (3) Revenue Recognition 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.” 7 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Disaggregation of Revenues Revenue by product type and market is set forth in the following tables. 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, 2021 Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S. Thermal Mining Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 41.1 $ — $ 247.3 $ 181.0 $ — $ 469.4 Export 219.4 — — 2.2 — 221.6 Total thermal 260.5 — 247.3 183.2 — 691.0 Metallurgical coal Export — 176.8 — — — 176.8 Total metallurgical — 176.8 — — — 176.8 Other (2) 0.2 2.7 ( 0.2 ) 1.4 ( 192.9 ) ( 188.8 ) Revenues $ 260.7 $ 179.5 $ 247.1 $ 184.6 $ ( 192.9 ) $ 679.0 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) Consolidated (Dollars in millions) Thermal coal 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 (2) 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 Nine Months Ended September 30, 2021 Seaborne Thermal Mining Seaborne Metallurgical Mining Powder River Basin Mining Other U.S. Thermal Mining Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 132.7 $ — $ 724.5 $ 487.8 $ — $ 1,345.0 Export 497.7 — — 3.4 — 501.1 Total thermal 630.4 — 724.5 491.2 — 1,846.1 Metallurgical coal Domestic — 2.7 — — — 2.7 Export — 381.1 — — — 381.1 Total metallurgical — 383.8 — — — 383.8 Other (2) 0.8 4.2 ( 0.4 ) 4.8 ( 185.6 ) ( 176.2 ) Revenues $ 631.2 $ 388.0 $ 724.1 $ 496.0 $ ( 185.6 ) $ 2,053.7 8 Table of Contents 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) Consolidated (Dollars in millions) Thermal coal Domestic $ 111.9 $ — $ 736.7 $ 501.5 $ — $ 1,350.1 Export 412.9 — — — — 412.9 Total thermal 524.8 — 736.7 501.5 — 1,763.0 Metallurgical coal Export — 362.3 — — — 362.3 Total metallurgical — 362.3 — — — 362.3 Other (2) 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 (1) Corporate and Other revenue includes net losses related to unrealized mark-to-market adjustments on derivatives related to forecasted sales and other financial trading activity of $ 238.4 million and $ 16.1 million during the three months ended September 30, 2021 and 2020, respectively, and $ 263.2 million and $ 13.7 million during the nine months ended September 30, 2021 and 2020, respectively. Refer to Note 7. “Derivatives and Fair Value Measurements” for additional information. Also included in Corporate and Other revenue are revenues with customers of $ 55.5 million and $ 97.3 million during the three and nine months ended September 30, 2021, respectively, and ($ 13.0 ) million and ($ 32.1 ) million during the three and nine months ended September 30, 2020, respectively. (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. The Company recorded revenue related to delivered coal to customers of approximately $ 923 million and $ 665 million during the three months ended September 30, 2021 and 2020, respectively, and approximately $ 2,327 million and $ 2,093 million during the nine months ended September 30, 2021 and 2020, respectively. Such amounts exclude unrealized and realized gains and losses on derivative contracts related to forecasted sales and certain other revenues unrelated to delivered coal. Committed Revenue from Contracts with Customers The Company expects to recognize revenue subsequent to September 30, 2021 of approximately $ 4.6 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at September 30, 2021. Approximately 42 % of such amount is expected to be recognized over the next twelve months and the remainder thereafter. Actual revenue related to such contracts may differ materially for various reasons, including price adjustment features for coal quality and cost escalations, volume optionality provisions and potential force majeure events. 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. Accounts Receivable “Accounts receivable, net” at September 30, 2021 and December 31, 2020 consisted of the following: September 30, 2021 December 31, 2020 (Dollars in millions) Trade receivables, net $ 237.2 $ 180.9 Miscellaneous receivables, net 38.8 63.9 Accounts receivable, net $ 276.0 $ 244.8 Trade receivables, net included no allowance for credit losses as of both September 30, 2021 and December 31, 2020. Miscellaneous receivables, net included no allowance for credit losses as of both September 30, 2021 and December 31, 2020. Charges for credit losses of less than $ 0.1 million were recognized during the nine months ended September 30, 2021. No charges for credit losses were recognized during the three months ended September 30, 2021 and 2020 or during the nine months ended September 30, 2020. 9 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (4) Discontinued Operations Discontinued operations include certain former Seaborne Thermal Mining and Other U.S. 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). In the third quarter of 2021, the Company executed the sale of the closed Wilkie Creek Mine, which reduced its closed mine reclamation liabilities and associated costs. Refer to Note 14. “Other Events” for additional information associated with the Company’s sale of the Wilkie Creek Mine. 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, 2021 2020 2021 2020 (Dollars in millions) Income (loss) from discontinued operations, net of income taxes $ 24.3 $ ( 2.3 ) $ 20.0 $ ( 6.8 ) Liabilities of Discontinued Operations Liabilities classified as discontinued operations included in the Company’s condensed consolidated balance sheets were as follows: September 30, 2021 December 31, 2020 (Dollars in millions) Liabilities: Accounts payable and accrued expenses $ 43.8 $ 62.3 Other noncurrent liabilities 66.0 91.4 Total liabilities classified as discontinued operations $ 109.8 $ 153.7 Patriot-Related Matters A significant portion of the liabilities in the table above relate to Patriot. In 2012, Patriot filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Code (the Bankruptcy Code). In 2013, the Company entered into a definitive settlement agreement (2013 Agreement) with Patriot and the United Mine Workers of America (UMWA), on behalf of itself, its represented Patriot employees and its represented Patriot retirees, to resolve all then-disputed issues related to Patriot’s bankruptcy. In May 2015, Patriot again filed voluntary petitions for relief under the Bankruptcy Code in the U.S. District Court for the Eastern District of Virginia and subsequently initiated a process to sell substantially all of its assets to qualified bidders. On October 9, 2015, Patriot’s bankruptcy court entered an order confirming Patriot’s plan of reorganization, which provided, among other things, for the sale of substantially all of Patriot’s assets to two different buyers. Black Lung Occupational Disease Liabilities. Patriot had federal and state black lung occupational disease liabilities related to workers employed in periods prior to Patriot’s spin-off from the Company in 2007. Upon spin-off, Patriot indemnified the Company against any claim relating to these liabilities, which amounted to approximately $ 150 million at that time. The indemnification included any claim made by the U.S. Department of Labor (DOL) against the Company with respect to these obligations as a potentially liable operator under the Federal Coal Mine Health and Safety Act of 1969. The 2013 Agreement included Patriot’s affirmance of indemnities provided in the spin-off agreements, including the indemnity relating to such black lung liabilities; however, Patriot rejected this indemnity in its May 2015 bankruptcy. 10 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) By statute, the Company had secondary liability for the black lung liabilities related to Patriot’s workers employed by former subsidiaries of the Company. The Company’s accounting for the black lung liabilities related to Patriot is based on an interpretation of applicable statutes. Management believes that inconsistencies exist among the applicable statutes, regulations promulgated under those statutes and the DOL’s interpretative guidance. The Company has sought clarification from the DOL regarding these inconsistencies. The amount of these liabilities could be reduced in the future. 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 $ 89.7 million and $ 90.1 million at September 30, 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. The amount of the Company’s recorded liability reflects only Patriot workers employed by former subsidiaries of the Company that are presently retired, disabled or otherwise not actively employed. 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. (5) Inventories Inventories as of September 30, 2021 and December 31, 2020 consisted of the following: September 30, 2021 December 31, 2020 (Dollars in millions) Materials and supplies $ 98.3 $ 102.6 Raw coal 53.5 70.5 Saleable coal 72.7 88.5 Total $ 224.5 $ 261.6 Materials and supplies inventories presented above have been shown net of reserves of $ 9.8 million and $ 10.4 million as of September 30, 2021 and December 31, 2020, respectively. (6) Equity Method Investments The Company had total equity method investments and financing receivables of $ 26.8 million and $ 24.6 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively, related to Middlemount Coal Pty Ltd (Middlemount). Included in “(Income) loss from equity affiliates” in the unaudited condensed consolidated statements of operations were gains related to Middlemount of $ 15.8 million and $ 11.4 million during the three and nine months ended September 30, 2021, respectively, and losses of $ 10.6 million and $ 25.7 million during the three and nine months ended September 30, 2020, respectively. The Company received cash payments from Middlemount of $ 7.6 million during the nine months ended September 30, 2021. No payments were received from from Middlemount during the nine months ended September 30, 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, 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 value of the portion of the Revolving Loans due to the Company’s Australian subsidiary was $ 35.7 million and $ 46.2 million as of September 30, 2021 and December 31, 2020, respectively, with the decreas e during the nine months ended September 30, 2021 primarily attributable to payments made by Middlemount. As of both September 30, 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. 11 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (7) Derivatives and Fair Value Measurements Derivatives From time to time, the Company may utilize various types of derivative instruments to manage its exposure to risks in the normal course of business, including (1) foreign currency exchange rate risk and the variability of cash flows associated with forecasted Australian dollar expenditures made in its Australian mining platform, (2) price risk of fluctuating coal prices related to forecasted sales or purchases of coal, or changes in the fair value of a fixed price physical sales contract, (3) price risk and the variability of cash flows related to forecasted diesel fuel purchased for use in its operations and (4) interest rate risk on long-term debt. These risk management activities are actively monitored for compliance with the Company’s risk management policies. On a limited basis, the Company engages in the direct and brokered trading of coal and freight-related contracts. 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. The Company had no diesel fuel or interest rate derivatives in place as of September 30, 2021. Foreign Currency Option Contracts As of September 30, 2021, the Company had currency options outstanding with an aggregate notional amount of $ 595.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending June 30, 2022. 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 $ 0.77 to $ 0.81 over the nine-month period ending June 30, 2022. Derivative Contracts Related to Forecasted Sales As of September 30, 2021, the Company held coal derivative contracts related to a portion of its forecasted sales with an aggregate notional volume of 2.9 million tonnes. Such financial contracts may include futures, forwards and options. Included in this total are 2.1 million tonnes related to financial derivatives entered to support the profitability of the Wambo Underground Mine as part of a strategy to extend the mine life through mid-2023. Of this total, 1.4 million tonnes will settle in 2022 and 0.7 million tonnes will settle in 2023 at expected average pricing of approximately $ 84 per tonne (Newcastle index). The remaining 0.8 million tonnes aggregate notional volume related to other coal financial contracts will settle in the fourth quarter of 2021 ( 0.2 million tonnes) and 2022 ( 0.6 million tonnes). Additionally, the Company classifies certain physical forward sales contracts as derivatives for which the normal purchase, normal sales exception does not apply. During the three months ended September 30, 2021, the Company recorded an unrealized mark-to-market loss of $ 238.4 million on these coal derivative contracts, which includes approximately $ 183 million of unrealized mark-to-market losses on financial derivatives, and approximately $ 55 million on physical forward sales contracts. Financial Trading Contracts On a limited basis, the Company may enter coal or freight derivative contracts for trading purposes. Such financial contracts may include futures, forwards and options. The Company held nominal financial trading contracts as of September 30, 2021. 12 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. 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. The fair value of derivatives reflected in the accompanying condensed consolidated balance sheets are set forth in the table below. September 30, 2021 December 31, 2020 (1) Asset Derivative Liability Derivative Asset Derivative Liability Derivative (Dollars in millions) Foreign currency option contracts $ 1.1 $ — $ 10.3 $ — Derivative contracts related to forecasted sales 113.0 ( 385.2 ) 16.7 ( 24.7 ) Financial trading contracts 1.5 — 0.4 — Total derivatives 115.6 ( 385.2 ) 27.4 ( 24.7 ) Effect of counterparty netting ( 113.0 ) 113.0 ( 16.2 ) 16.2 Variation margin (received) posted ( 1.5 ) 215.8 ( 0.3 ) 6.8 Net derivatives and variation margin as classified in the balance sheets $ 1.1 $ ( 56.4 ) $ 10.9 $ ( 1.7 ) (1) Certain comparative amounts have been reclassified to conform with the 2021 presentation. The reclassifications do not impact the prior year presentation of the accompanying condensed consolidated balance sheets. The Company generally posts or receives variation margin cash with its clearing broker on the majority of its financial derivatives as market values of the financial derivatives fluctuate. As of September 30, 2021, the Company had posted $ 239.6 million aggregate margin cash, consisting of $ 214.3 million variation margin cash and $ 25.3 million initial margin. As of December 31, 2020, the Company had posted $ 9.5 million aggregate margin cash, consisting of $ 6.5 million variation margin cash and $ 3.0 million initial margin. The net amount of asset derivatives, net of variation margin, are included in “Other current assets” and the net amount of liability derivatives, net of variation margin, are included in “Accounts payable and accrued expenses” in the accompanying condensed consolidated balance sheets. The amounts of initial margin are not included with the derivatives presented in the tabular disclosures above and are included in “Other current assets” in the accompanying condensed consolidated balance sheets. Currently, the Company does not seek cash flow hedge accounting treatment for its derivative financial instruments and thus changes in fair value are reflected in current earnings. The tables below show the amounts of pre-tax gains and losses related to the Company’s derivatives and their classification within the accompanying unaudited condensed consolidated statements of operations. 13 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Three Months Ended September 30, 2021 Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 1.0 ) $ ( 1.6 ) $ 0.6 Derivative contracts related to forecasted sales Revenues ( 251.5 ) ( 13.1 ) ( 238.4 ) Financial trading contracts Revenues 0.7 0.7 — Total $ ( 251.8 ) $ ( 14.0 ) $ ( 237.8 ) Three Months Ended September 30, 2020 (1) Total gain (loss) recognized in income Gain (loss) realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ 3.9 $ 3.2 $ 0.7 Derivative contracts related to forecasted sales Revenues ( 3.3 ) 12.8 ( 16.1 ) Financial trading contracts Revenues ( 0.2 ) ( 0.2 ) — Total $ 0.4 $ 15.8 $ ( 15.4 ) Nine Months Ended September 30, 2021 Total (loss) gain recognized in income Gain (loss) realized in income on derivatives Unrealized (loss) gain recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 5.3 ) $ 3.0 $ ( 8.3 ) Derivative contracts related to forecasted sales Revenues ( 292.1 ) ( 28.1 ) ( 264.0 ) Financial trading contracts Revenues 1.4 0.6 0.8 Total $ ( 296.0 ) $ ( 24.5 ) $ ( 271.5 ) Nine Months Ended September 30, 2020 (1) Total gain (loss) recognized in income Gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ 5.2 $ 1.6 $ 3.6 Derivative contracts related to forecasted sales Revenues 19.6 30.9 ( 11.3 ) Financial trading contracts Revenues ( 0.5 ) 1.9 ( 2.4 ) Total $ 24.3 $ 34.4 $ ( 10.1 ) (1) 2020 ‘gain/(loss) realized in income on derivatives’ has been revised to exclude revenues arising from coal deliveries earned by the Company’s trading and brokerage function of ($ 13.0 ) million and ($ 32.1 ) million for the three and nine month periods ending September 30, 2020, respectively, to be comparable to the presentation of the 2021 amounts. 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. 14 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Measurements The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. These levels include: Level 1 - inputs are quoted prices in active markets for the identical assets or liabilities; Level 2 - inputs are other than quoted prices included in Level 1 that are directly or indirectly observable through market-corroborated inputs; and Level 3 - inputs are unobservable, or observable but cannot be market-corroborated, requiring the Company to make assumptions about pricing by market participants. The following tables set forth the hierarchy of the Company’s net (liability) asset positions for which fair value is measured on a recurring basis. As noted below, variation margin cash associated with the derivative balances is excluded from this table. September 30, 2021 Level 1 Level 2 Level 3 Total (Dollars in millions) Foreign currency option contracts $ — $ 1.1 $ — $ 1.1 Derivative contracts related to forecasted sales — ( 272.2 ) — ( 272.2 ) Financial trading contracts — 1.5 — 1.5 Equity securities — — 4.0 4.0 Total net (liabilities) assets $ — $ ( 269.6 ) $ 4.0 $ ( 265.6 ) December 31, 2020 (1) Level 1 Level 2 Level 3 Total (Dollars in millions) Foreign currency option contracts $ — $ 10.3 $ — $ 10.3 Derivative contracts related to forecasted sales — ( 7.9 ) — ( 7.9 ) Financial trading contracts — 0.4 — 0.4 Equity securities — — 4.0 4.0 Total net assets $ — $ 2.8 $ 4.0 $ 6.8 (1) December 31, 2020 ‘total net assets’ has been revised to exclude $ 6.5 million variation margin cash for comparability to 2021 presentation. Variation margin cash was $ 214.3 million as of September 30, 2021. For Level 1 and 2 financial assets and liabilities, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, exchange indices, broker/dealer quotes, published indices, issuer spreads, benchmark securities and other market quotes. In the case of certain debt securities, fair value is provided by a third-party pricing service. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities: • Foreign currency option contracts are valued utilizing inputs obtained in quoted public markets (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3. • Derivative contracts related to forecasted sales and financial trading contracts are generally valued based on unadjusted quoted prices in active markets (Level 1) or a valuation that is corroborated by the use of market-based pricing (Level 2) except when credit and non-performance risk is considered to be a significant input (greater than 10 % of fair value), then the Company classifies as Level 3. • Investments in equity securities are based on observed prices in an inactive market (Level 3). 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, 2021 and December 31, 2020: • Cash and cash equivalents, accounts receivable, including those within the Company’s accounts receivable securitization program, margining cash, 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). 15 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. September 30, 2021 December 31, 2020 (Dollars in millions) Total debt at par value $ 1,373.8 $ 1,591.3 Less: Unamortized debt issuance costs and original issue discount ( 45.6 ) ( 43.5 ) Net carrying amount $ 1,328.2 $ 1,547.8 Estimated fair value $ 1,236.3 $ 987.6 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. 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 had no transfers between Levels 1, 2 and 3 during the three and nine months ended September 30, 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, 2021 and December 31, 2020 is set forth in the table below: September 30, 2021 December 31, 2020 (Dollars in millions) Land and coal interests $ 2,470.9 $ 2,482.9 Buildings and improvements 543.6 481.0 Machinery and equipment 1,436.0 1,408.5 Less: Accumulated depreciation, depletion and amortization ( 1,498.5 ) ( 1,321.3 ) Property, plant, equipment and mine development, net $ 2,952.0 $ 3,051.1 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 mine was 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 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 and nine months ended September 30, 2021 or the three months ended September 30, 2020. The Company has identified certain assets with an aggregate carrying value of approximately $ 1.1 billion at September 30, 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 as of September 30, 2021 and determined that no impairment charges were necessary as of that date. 16 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (9) Leases The Company has operating and finance leases for mining and non-mining equipment, office space and certain other facilities under various non-cancellable agreements. Historically, the majority of the Company’s leases have been accounted for as operating leases. 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 “Leases.” The Company and certain of its subsidiaries have guaranteed other subsidiaries’ performance under various lease obligations. 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. 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. The Company expects that losses with respect to leased property, if any, may be covered by insurance (subject to deductibles). 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, 2021 and 2020 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Operating lease cost: Operating lease cost $ 4.6 $ 6.3 $ 15.3 $ 23.3 Short-term lease cost 4.1 10.2 10.5 31.7 Variable lease cost 1.0 1.1 2.0 3.7 Sublease income ( 0.5 ) — ( 1.5 ) — Total operating lease cost $ 9.2 $ 17.6 $ 26.3 $ 58.7 Finance lease cost: Amortization of right-of-use assets $ 1.6 $ 0.8 $ 3.7 $ 5.2 Interest on lease liabilities 0.8 0.2 2.0 0.5 Total finance lease cost $ 2.4 $ 1.0 $ 5.7 $ 5.7 17 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Supplemental balance sheet information related to leases at September 30, 2021 and December 31, 2020 was as follows: September 30, 2021 December 31, 2020 (Dollars in millions) Operating leases: Operating lease right-of-use assets $ 38.4 $ 49.9 Accounts payable and accrued expenses $ 17.0 $ 24.5 Operating lease liabilities, less current portion 31.6 42.1 Total operating lease liabilities $ 48.6 $ 66.6 Finance leases: Property, plant, equipment and mine development $ 31.3 $ 20.4 Accumulated depreciation ( 5.8 ) ( 2.5 ) Property, plant, equipment and mine development, net $ 25.5 $ 17.9 Current portion of long-term debt $ 15.5 $ 21.5 Long-term debt, less current portion 14.9 5.8 Total finance lease liabilities $ 30.4 $ 27.3 Weighted average remaining lease term (years) Operating leases 3.1 Finance leases 6.7 Weighted average discount rate Operating leases 6.8 % Finance leases 8.8 % Supplemental cash flow information related to leases during the three and nine months ended September 30, 2021 and 2020 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 4.7 $ 6.8 $ 17.6 $ 26.4 Operating cash flows for finance leases 1.1 0.1 2.9 0.5 Financing cash flows for finance leases 2.8 0.2 5.6 8.1 Right-of-use assets obtained in exchange for lease obligations: Operating leases — 0.2 6.8 2.3 Finance leases 1.1 0.5 21.3 1.5 18 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's leases have remaining lease terms ranging from less than 1 year to 20.3 years, and may include options to extend the terms, as applicable. The contractual maturities of lease liabilities were as follows: Period Ending December 31, Operating Leases Finance Leases (Dollars in millions) 2021 $ 6.6 $ 2.8 2022 18.4 11.1 2023 16.8 5.6 2024 6.0 4.7 2025 3.4 4.5 2026 and thereafter 3.8 9.5 Total lease payments 55.0 38.2 Less imputed interest ( 6.4 ) ( 7.8 ) Total lease liabilities $ 48.6 $ 30.4 (10) Income Taxes The Company's effective tax rate before remeasurement for the nine months ended September 30, 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 $ 3.7 million and $ 0.1 million for the three months ended September 30, 2021 and 2020, respectively, included a tax benefit of $ 1.1 million and a tax provision of $ 1.1 million, respectively, related to the remeasurement of foreign income tax accounts. The Company’s income tax benefit of $ 10.3 million and income tax provision of $ 2.7 million for the nine months ended September 30, 2021 and 2020, respectively, included a tax benefit of $ 1.6 million and a tax provision of $ 0.4 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 recognized CODI from the Refinancing Transactions of approximately $ 60 million, and the income will be offset by the Company’s operating losses. (11) Long-term Debt The Company’s total funded indebtedness (Indebtedness) as of September 30, 2021 and December 31, 2020 consisted of the following: Debt Instrument (defined below, as applicable) September 30, 2021 December 31, 2020 (Dollars in millions) 6.000 % Senior Secured Notes due March 2022 (2022 Notes) $ 23.1 $ 459.0 8.500 % Senior Secured Notes due December 2024 (Peabody Notes) 128.8 — 10.000 % Senior Secured Notes due December 2024 (Co-Issuer Notes) 193.9 — 6.375 % Senior Secured Notes due March 2025 (2025 Notes) 462.4 500.0 Senior Secured Term Loan due 2024 (Co-Issuer Term Loans) 206.0 — Senior Secured Term Loan due 2025, net of original issue discount (Senior Secured Term Loan) 328.7 388.2 Revolving credit facility — 216.0 Finance lease obligations 30.4 27.3 Less: Debt issuance costs ( 45.1 ) ( 42.7 ) 1,328.2 1,547.8 Less: Current portion of long-term debt 59.5 44.9 Long-term debt $ 1,268.7 $ 1,502.9 19 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 nine months ended September 30, 2021. Concurrently with the Exchange Offer, the Company solicited consents from holders of the 2022 Notes to certain proposed amendments to its existing senior notes’ indenture (the 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. 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 and nine months ended September 30, 2021, the Company recorded interest expense of $ 5.4 million and $ 14.3 million, respectively, 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. 20 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 certain modifications 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 and nine months ended September 30, 2021, the Company recorded interest expense of $ 3.8 million and $ 10.8 million, respectively, related to the Peabody Notes, which included in-kind interest of approximately $ 0.8 million and $ 2.4 million, respectively. 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 “Net gain on early debt extinguishment” during the nine months ended September 30, 2021. 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 March 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 and nine months ended September 30, 2021, the Company recorded interest expense of $ 5.7 million and $ 14.9 million, respectively, related to the Co-Issuer Term Loans. 21 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 and nine months ended September 30, 2021, the Company recorded interest expense and fees of $ 6.0 million and $ 15.9 million, respectively, 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 is 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. The Peabody Notes Indenture and the Company LC Agreement allow the Company to make 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 the priority lien obligations under the 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 (Mandatory Repurchase Offer). 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, as amended (the Securities Act). 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. The Company recorded interest expense of $ 9.5 million and $ 9.2 million during the three months ended September 30, 2021 and 2020, respectively, and $ 27.9 million and $ 27.5 million during the nine months ended September 30, 2021 and 2020, respectively, related to 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. 22 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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 September 30, 2021 the Senior Secured Term Loan had a balance of $ 328.7 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. The Company recorded interest expense of $ 3.3 million and $ 3.4 million, during the three months ended September 30, 2021 and 2020, respectively, and $ 10.1 million and $ 12.1 million during the nine months ended September 30, 2021 and 2020, respectively, related to the Senior Secured Term Loan, which bore interest at LIBOR plus 2.75 % per annum as of September 30, 2021. 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 financial 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 September 30, 2021. The Company recorded interest expense and fees of $ 1.4 million during the nine months ended September 30, 2021, and $ 5.1 million and $ 10.8 million, during the three and nine months ended September 30, 2020, respectively, related to the revolving loan facility. No interest expense or fees related to the revolving loan facility were recorded during the three months ended September 30, 2021. 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, including the minimum liquidity covenant under the Company LC Agreement, at September 30, 2021. Subsequent Financing Transactions Subsequent to the Refinancing Transactions, the Company completed a series of financing transactions intended to improve its capital structure. 23 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. 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. 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 prospectus supplements dated June 4, 2021 and September 17, 2021, relating to the offer and sale of the shares. During the three and nine months ended September 30, 2021, the Company sold approximately 9.0 million shares and 17.1 million shares, respectively, for net cash proceeds of $ 112.1 million and $ 177.2 million, respectively. 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. During the three months ended September 30, 2021, the Company retired $ 22.1 million of Peabody Notes, $ 2.3 million of 2025 Notes and $ 38.9 million of its Senior Secured Term Loan primarily through various open market purchases at an aggregate cost of $ 46.7 million. The Company recorded a gain on early debt extinguishment of $ 15.0 million, net of debt issuance costs and original issue discount related to the retired debt of $ 1.6 million. During the nine months ended 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. The Company recorded a gain on early debt extinguishment of $ 26.9 million, net of debt issuance costs and original issue discount related to the retired debt of $ 3.7 million. Also during the three months ended September 30, 2021, the Company completed multiple bilateral transactions with holders of the 2022 Notes, the 2025 Notes and the Peabody Notes in which the Company issued an aggregate 2.2 million shares of its common stock in exchange for $ 6.4 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. Based upon the fair value of the Company’s common stock at the respective settlement dates, the Company recorded a net gain on early debt extinguishment of $ 1.0 million in connection with the transactions. During the nine months ended September 30, 2021, the Company 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. Based upon the fair value of the Company’s common stock at the respective settlement dates, the Company recorded a net gain on early debt extinguishment of $ 0.9 million in connection with the transactions. The issuance of shares of common stock in exchange for the 2022 Notes, the 2025 Notes and the Peabody Notes was made in reliance on the exemption from registration provided in Section 3(a)(9) under the Securities Act of 1933, based in part on representations of holders of the 2022 Notes, the 2025 Notes and the Peabody Notes, and 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. Prior to September 30, 2021, the Company reached agreements to retire an additional $ 17.0 million of aggregate principal, which will settle subsequent to September 30, 2021. This included $ 5.0 million of its Senior Secured Term Loan through similar open market purchases for an aggregate cost of $ 3.3 million, and by issuing an aggregate 0.8 million shares of its common stock in exchange for $ 12.0 million aggregate principal amount of the Peabody Notes in a similar manner as noted above. Such amounts are reflected within the current portion of long-term debt in the accompanying condensed consolidated balance sheet at September 30, 2021. Between October 1, 2021 and November 2, 2021, the Company reached additional agreements to issue an aggregate 1.1 million shares of its common stock in exchange for $ 19.0 million aggregate principal amount of the 2025 Notes, which was reflected within the long-term debt in the accompanying condensed consolidated balance sheet at September 30, 2021. 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. Finance Lease Obligations Refer to Note 9. “Leases” for additional information associated with the Company’s finance leases, which pertain to the financing of mining equipment used in operations. 24 Table of Contents 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 (credit) costs, excluding service cost” in the unaudited condensed consolidated statements of operations. Net periodic pension benefit included the following components: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Service cost for benefits earned $ — $ 0.1 $ 0.1 $ 0.2 Interest cost on projected benefit obligation 5.2 7.0 15.4 21.0 Expected return on plan assets ( 5.8 ) ( 7.5 ) ( 17.2 ) ( 22.3 ) Net periodic pension benefit $ ( 0.6 ) $ ( 0.4 ) $ ( 1.7 ) $ ( 1.1 ) 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, 2021, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds. 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 at this time. Net periodic postretirement benefit (benefit) cost included the following components: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Service cost for benefits earned $ 0.3 $ 1.1 $ 0.8 $ 3.3 Interest cost on accumulated postretirement benefit obligation 2.9 5.4 8.7 16.3 Expected return on plan assets ( 0.3 ) ( 0.3 ) ( 0.7 ) ( 1.1 ) Amortization of prior service credit ( 11.0 ) ( 2.2 ) ( 33.0 ) ( 6.6 ) Net actuarial loss — 13.0 — 13.0 Net periodic postretirement benefit (benefit) cost $ ( 8.1 ) $ 17.0 $ ( 24.2 ) $ 24.9 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 a portion of VEBA assets to make certain benefit payments. 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 million. The impact of the changes will reduce the Company’s postretirement benefit obligation during the fourth quarter of 2021. The liability is expected to be remeasured, with the resulting benefit of the plan changes recorded in “Accumulated other comprehensive income” and amortized to future earnings based upon the estimated remaining life expectancies of certain plan participants. 25 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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, 2021: Foreign Currency Translation Adjustment Prior Service Credit Associated with Postretirement Plans Total Accumulated Other Comprehensive Income (Dollars in millions) December 31, 2020 $ 1.8 $ 204.0 $ 205.8 Reclassification from other comprehensive income to earnings — ( 33.0 ) ( 33.0 ) Current period change ( 1.2 ) — ( 1.2 ) September 30, 2021 $ 0.6 $ 171.0 $ 171.6 Postretirement health care and life insurance benefits reclassified from other comprehensive income to earnings of $ 11.0 million and $ 2.2 million during the three months ended September 30, 2021 and 2020, respectively, and $ 33.0 million and $ 6.6 million du ring the nine months ended September 30, 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 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. Costs associated with restructuring actions can include the impact of early mine closures, voluntary and involuntary workforce reductions, office closures and other related activities. 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 $ 1.7 million and $ 5.9 million for the three and nine months ended September 30, 2021, respectively, and $ 8.1 million and $ 31.1 million for the three and nine months ended September 30, 2020, respectively, were associated with both involuntary and voluntary workforce reductions. 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. 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. The Millennium Mine was sold for minimal cash consideration and the assumption of the majority of the mine’s reclamation liabilities. The Company will remain responsible for $ 9.4 million of reclamation liabilities and retains certain royalty rights on future sales. The Company recorded a gain of $ 26.1 million in connection with the sale, and will recognize royalty revenue when it is deemed collectible. The gain is included within “Net gain on disposals” in the accompanying unaudited condensed consolidated statements of operations. The Wilkie Creek Mine was sold for minimal cash consideration and full assumption of the mine’s reclamation liabilities. The Company retains certain royalty rights on future sales. The Company recorded a gain of $ 24.6 million in connection with the sale, and will recognize royalty revenue when it is deemed collectible. The gain is included within “Income (loss) from discontinued operations, net of income taxes” in the accompanying unaudited condensed consolidated statements of operations. 26 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (15) Earnings per Share (EPS) Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding. As such, the Company includes the share-based compensation awards in its potentially dilutive securities. 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. For all but performance units, the potentially dilutive impact of the Company’s share-based compensation awards is determined using the treasury stock method. Under the treasury stock method, awards are treated as if they had been exercised with any proceeds used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and purchased is included in the diluted share computation. For performance units, their contingent features result in an assessment for any potentially dilutive common stock by using the end of the reporting period as if it were the end of the contingency period for all units granted. The computation of diluted EPS excluded aggregate share-based compensation awards of approximately 0.9 million and 2.1 million for the three months ended September 30, 2021 and 2020, respectively, and 0.8 million and 2.3 million for the nine months ended September 30, 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. Anti-dilution also occurs when a company reports a net loss from continuing operations, and the dilutive impact of all share-based compensation awards are excluded accordingly. The following illustrates the earnings allocation method utilized in the calculation of basic and diluted EPS. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In millions, except per share data) EPS numerator: Loss from continuing operations, net of income taxes $ ( 59.6 ) $ ( 64.8 ) $ ( 160.3 ) $ ( 1,739.4 ) Less: Net income (loss) attributable to noncontrolling interests 8.9 0.1 12.6 ( 5.1 ) Loss from continuing operations attributable to common stockholders ( 68.5 ) ( 64.9 ) ( 172.9 ) ( 1,734.3 ) Income (loss) from discontinued operations, net of income taxes 24.3 ( 2.3 ) 20.0 ( 6.8 ) Net loss attributable to common stockholders $ ( 44.2 ) $ ( 67.2 ) $ ( 152.9 ) $ ( 1,741.1 ) EPS denominator: Weighted average shares outstanding — basic and diluted 114.9 97.9 104.9 97.6 Basic and diluted EPS attributable to common stockholders: Loss from continuing operations $ ( 0.60 ) $ ( 0.66 ) $ ( 1.65 ) $ ( 17.76 ) Income (loss) from discontinued operations 0.22 ( 0.03 ) 0.19 ( 0.07 ) Net loss attributable to common stockholders $ ( 0.38 ) $ ( 0.69 ) $ ( 1.46 ) $ ( 17.83 ) (16) Financial Instruments and Other Guarantees 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, 2021, such instruments included $ 1,462.4 million of surety bonds and $ 443.2 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. Reclamation bonding requirements are typically established by statute or under mining permits. At September 30, 2021, the Company’s asset retirement obligations of $ 710.2 million were supported by surety bonds of $ 1,293.4 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 September 30, 2021 which served as collateral for surety bonds in support of asset retirement obligations amounted to $ 316.1 million. 27 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) In November 2020, the Company entered into a Surety Agreement with the providers of 99 % of its surety bond portfolio (Participating Sureties) to resolve previous collateral demands made by the Participating Sureties. In accordance with the Surety Agreement, the Company initially provided $ 75.0 million of collateral, in the form of letters of credit. Upon completion of the Refinancing Transactions described in Note 11. “Long-term Debt,” other provisions of the Surety Agreement became effective. In particular, the Company granted second liens on $ 200.0 million of certain mining equipment and will post an additional $ 25.0 million of collateral per year from 2021 through 2024 for the benefit of the Participating Sureties. The collateral postings may also further increase to the extent the Company generates more than $ 100.0 million of free cash flow (as defined in the Surety Agreement) in any twelve-month period or has cumulative asset sales in excess of $ 10.0 million, as of the last quarter end during the term of the agreement. Further, the Participating Sureties have agreed to a standstill through the earlier of December 31, 2025, or the maturity of the Credit Agreement (currently March 31, 2025), during which time, the Participating Sureties will not demand any additional collateral, draw on letters of credit posted for the benefit of themselves or cancel any existing surety bond. The Company will not pay dividends or make share repurchases during the standstill period, unless otherwise agreed between parties. In connection with the Refinancing Transactions, 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 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. Accounts Receivable Securitization 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. 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, unless an event of default occurs. 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 September 30, 2021, the Com pany had no outstanding borrowings and $ 133.6 million o f letters of credit issued under the Securitization Program. The letters of credit were primarily in support of reclamation obligations. Availability under the Securitizatio n Program, which is adjusted for certain ineligible receivables, was $ 12.6 million at September 30, 2021. The Company was not required to post cash collateral under the Securitization Program at either September 30, 2021 or December 31, 2020. The Company incurred interest and fees associated with the Securitization Program of $ 1.0 million and $ 0.8 million during the three months ended September 30, 2021 and 2020, respectively, and $ 3.0 million and $ 2.9 million during the nine months ended September 30, 2021 and 2020, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations. Other Substantially all of the Company’s U.S. subsidiaries provide financial guarantees under long-term debt agreements entered into by the Company. The maximum amounts payable under the Company’s debt agreements are equal to the respective principal and interest payments. 28 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (17) Commitments and Contingencies Commitments Unconditional Purchase Obligations As of September 30, 2021, purchase commitments for capital expenditures were $ 23.4 million, all of which is obligated within the next four years, with $ 16.2 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. Contingencies From time to time, the Company or its subsidiaries are involved in legal proceedings arising in the ordinary course of business or related to indemnities or historical operations. The Company believes it has recorded adequate reserves for these liabilities. 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 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 while the Plaintiffs’ response letter was filed on May 6, 2021. The defendants filed their motion to dismiss on June 7, 2021. The Plaintiffs’ opposition brief to the motion to dismiss was filed on July 22, 2021. The defendants filed their reply to Plaintiff’s opposition on August 23, 2021, completing briefing at this phase of the litigation. 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. , Case No. 1:20-cv-01747-UNA (D. Del. filed Dec. 22, 2020), in the U.S. District Court for the District of Delaware against certain directors and former officers 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. , Case No. 1:21-cv-00183-UNA (D. Del. filed Feb. 10, 2021), in the U.S. District Court for the District of Delaware against the directors and current and former officers 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 Court rules on the motion to dismiss in the Securities Class Action. The Company also believes that the derivative actions lack merit and intends to vigorously defend against the allegations. 29 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Other 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 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. The Company’s chief operating decision maker uses Adjusted EBITDA as the primary metric to measure the segments’ operating performance. 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. 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. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies. Reportable segment results were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Revenues: Seaborne Thermal Mining $ 260.7 $ 163.0 $ 631.2 $ 526.1 Seaborne Metallurgical Mining 179.5 78.8 388.0 363.6 Powder River Basin Mining 247.1 264.8 724.1 737.2 Other U.S. Thermal Mining 184.6 179.8 496.0 524.1 Corporate and Other ( 192.9 ) ( 15.4 ) ( 185.6 ) ( 7.1 ) Total $ 679.0 $ 671.0 $ 2,053.7 $ 2,143.9 Adjusted EBITDA: Seaborne Thermal Mining $ 104.4 $ 35.3 $ 204.3 $ 118.1 Seaborne Metallurgical Mining 57.4 ( 27.3 ) 8.6 ( 96.1 ) Powder River Basin Mining 37.0 78.3 112.6 143.0 Other U.S. Thermal Mining 45.1 51.6 125.6 123.0 Corporate and Other 45.2 ( 42.5 ) 21.2 ( 132.4 ) Total $ 289.1 $ 95.4 $ 472.3 $ 155.6 30 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation of consolidated loss from continuing operations, net of income taxes to Adjusted EBITDA follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Dollars in millions) Loss from continuing operations, net of income taxes $ ( 59.6 ) $ ( 64.8 ) $ ( 160.3 ) $ ( 1,739.4 ) Depreciation, depletion and amortization 77.9 72.2 223.3 266.5 Asset retirement obligation expenses 14.3 14.3 45.3 46.0 Restructuring charges 1.7 8.1 5.9 31.1 Transaction costs related to joint ventures — 6.0 — 23.1 Asset impairment — — — 1,418.1 Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates ( 6.4 ) ( 0.5 ) ( 8.4 ) ( 1.6 ) Interest expense 45.5 34.9 143.3 102.3 Net gain on early debt extinguishment ( 16.0 ) — ( 31.3 ) — Interest income ( 1.4 ) ( 1.6 ) ( 4.2 ) ( 7.1 ) 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 ( 1.0 ) ( 1.5 ) ( 3.2 ) ( 6.8 ) Income tax (benefit) provision ( 3.7 ) ( 0.1 ) ( 10.3 ) 2.7 Adjusted EBITDA $ 289.1 $ 95.4 $ 472.3 $ 155.6 31 Table of Contents