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Item 7. Management’s Discussion and Analysis

2022-02-18 compared with 2021-02-23 · 367 added, 800 removed, 368 unchanged (76% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

As of December 31, 2020, we report our results of operations primarily through the following reportable segments:

The Company’s discussion and analysis of the year ended December 31, 2021 compared to the year ended December 31, 2020 is included herein.

For discussion and analysis of the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Peabody’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 23, 2021 and is incorporated by reference herein.

Non-GAAP Financial Measures

The following discussion of Peabody’s results of operations includes references to and analysis of Adjusted EBITDA, which is a financial measure not recognized in accordance with U.S.

generally accepted accounting principles (U.S.

Adjusted EBITDA is used by management as the primary metric to measure each of its segments’ operating performance.

Peabody Energy Corporation 2021 Form 10-K

Also included in the following discussion of Peabody’s results of operations are references to Revenues per Ton, Costs per Ton and Adjusted EBITDA Margin per Ton for each mining segment.

These metrics are used by management to measure each of its mining segments’ operating performance.

Management believes Costs per Ton and Adjusted EBITDA Margin per Ton best reflect controllable costs and operating results at the mining segment level.

The Company considers all measures reported on a per ton basis to be operating/statistical measures;

however, the Company includes reconciliations of the related non-GAAP financial measures (Adjusted EBITDA and Total Reporting Segment Costs) in the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 7.

In its discussion of liquidity and capital resources, Peabody includes references to Free Cash Flow which is also a non-GAAP measure.

Free Cash Flow is used by management as a measure of its financial performance and its ability to generate excess cash flow from its business operations.

Peabody believes non-GAAP performance measures are used by investors to measure its operating performance and lenders to measure its ability to incur and service debt.

These measures are not intended to serve as alternatives to U.S.

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

Refer to the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 7 for definitions and reconciliations to the most comparable measures under U.S.

In 2021, Peabody produced and sold 126.9 million and 130.1 million tons of coal, respectively, from continuing operations.

As of December 31, 2021, 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 business of our seaborne operating platform is primarily export focused with customers spread across several countries, with a portion of our thermal and metallurgical coal sold within Australia.

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

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

We classify our seaborne mines within the Seaborne Thermal Mining or Seaborne Metallurgical Mining segments based on the primary customer base and coal reserve type of each mining operation.

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

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

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

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

Our Seaborne Thermal Mining operations consist of mines in New South Wales, Australia.

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

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

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

Our Seaborne Metallurgical Mining operations consist of mines in Queensland, Australia, one in New South Wales, Australia and one in Alabama.

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

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

The principal business of our thermal mining segments in the U.S.

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

The mines in that segment utilize both surface and underground extraction processes to mine various qualities of metallurgical coal.

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

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

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

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

Our Powder River Basin Mining operations consist of our mines in Wyoming.

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

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

Our Other U.S.

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

The Company’s Other U.S.

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

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

Geologically, our Powder River Basin Mining operations mine sub-bituminous coal deposits and our Other U.S.

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

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

Our Corporate and Other segment includes selling and administrative expenses, including our technical and shared services functions;

results from equity affiliates;

corporate hedging activities;

trading and brokerage activities;

results from certain mining and export/transportation joint ventures;

minimum charges on certain transportation-related contracts;

the closure of inactive mining sites;

and certain commercial matters.

The Company’s Corporate and Other segment includes selling and administrative expenses, results from equity affiliates, corporate hedging activities, trading and brokerage activities, minimum charges on certain transportation-related contracts, the closure of inactive mining sites and certain commercial matters.

Peabody Energy Corporation 2021 Form 10-K

Resource Management.

As of December 31, 2020, we controlled approximately 3.0 billion tons of proven and probable coal reserves and approximately 450,000 acres of surface property through ownership and lease agreements.

We have an ongoing asset optimization program whereby our property management group regularly reviews these reserves and surface properties for opportunities to generate earnings and cash flow through the sale or exchange of non-strategic coal reserves and surface lands.

These surface lands include acres where we have completed post-mining reclamation.

In addition, we generate revenue through royalties from coal reserves and oil and gas rights leased to third parties and farm income from surface lands under third-party contracts.

As of December 31, 2021, Peabody controlled approximately 2.5 billion tons of proven and probable coal reserves, 2.4 billion tons of resources and approximately 400,000 acres of surface property through ownership and lease agreements.

The Company has an ongoing asset optimization program whereby its property management group regularly reviews these reserves, resources and surface properties for opportunities to generate earnings and cash flow through the sale or exchange of non-strategic coal reserves, resources and surface lands.

These surface lands include acres where Peabody has completed post-mining reclamation.

In addition, the Company generates revenue through royalties from coal reserves and oil and gas rights leased to third parties and farm income from surface lands under third-party contracts.

Middlemount Mine.

We own a 50% equity interest in Middlemount, which owns the Middlemount Mine in Queensland, Australia.

The mine predominantly produces semi-hard coking coal and LV PCI coal for sale into seaborne coal markets through Abbot Point Coal Terminal, with some capacity also secured at Dalrymple Bay Coal Terminal.

Peabody owns a 50% equity interest in Middlemount, which owns the Middlemount Mine in Queensland, Australia.

The mine predominantly produces semi-hard coking coal and low-volatile pulverized coal injection (LV PCI) coal for sale into seaborne coal markets through Abbot Point Coal Terminal, with some capacity also secured at Dalrymple Bay Coal Terminal.

Mining operations first commenced at the Middlemount Mine in late 2011.

During the years ended December 31, 2020, 2019 and 2018, the mine sold 3.2 million, 2.9 million and 4.2 million tons of coal, respectively (on a 100% basis).

Peabody Energy Corporation 2020 Form 10-K

Coronavirus (COVID-19) Pandemic

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

The pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures and other measures.

In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic.

Coal mining in the U.S.

and Australia has been designated as an essential business to support coal-fueled electric power generation and critical steelmaking needs.

As part of Peabody’s commitment to the ongoing health and safety of our employees, vendors and communities, we are following advice from government authorities and taking precautions to manage the spread of COVID-19.

Peabody operations have implemented rigorous protocols, control and prevention measures, including mandatory temperature and health checks;

paid leave for recommended self-isolation periods;

enhanced cleaning and sterilization practices;

expanded use of personal protective equipment;

social distancing;

and working remotely when circumstances warrant.

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

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

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

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

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

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

During the year ended December 31, 2020, coal-fueled generation declined approximately 20% compared to the prior year period and now represents 19% of the overall generation mix.

Additionally, we have faced limited disruption to supply chain and distribution channels and adverse effects to our workforce.

Coal industry fundamentals, as well as known impacts specific to Peabody, are further addressed in the “Results of Operations” section contained within this Item 7.

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

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

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), a $2 trillion economic relief bill, was enacted in the U.S..

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

Pursuant to the CARES Act, we received approximately $24 million of accelerated refunds from the Internal Revenue Service and adjusted our current and deferred tax asset balances accordingly.

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

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

North Goonyella Mine

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

In 2020, we commenced a review of strategic alternatives for North Goonyella which is currently ongoing.

During the years ended December 31, 2019 and 2018, we recorded provisions for equipment losses of $83.2 million and $66.4 million, respectively, related to the fire, representing the best estimate of losses to date.

No additional provisions for equipment losses were recorded during the year ended December 31, 2020.

We have also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $32.3 million, $111.5 million and $58.0 million during the years ended December 31, 2020, 2019 and 2018, respectively.

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

We have collected the full amount of the recovery.

Peabody Energy Corporation 2020 Form 10-K

Results of Operations

Non-GAAP Financial Measures

The following discussion of our results of operations includes references to and analysis of Adjusted EBITDA, which is a financial measure not recognized in accordance with U.S.

generally accepted accounting principles (U.S.

Adjusted EBITDA is used by management as the primary metric to measure each of our segments’ operating performance.

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

Also included in the following discussion of our results of operations are references to Revenues per Ton, Costs per Ton and Adjusted EBITDA Margin per Ton for each mining segment.

These metrics are used by management to measure each of our mining segments’ operating performance.

Management believes Costs per Ton and Adjusted EBITDA Margin per Ton best reflect controllable costs and operating results at the mining segment level.

We consider all measures reported on a per ton basis to be operating/statistical measures;

however, we include reconciliations of the related non-GAAP financial measures (Adjusted EBITDA and Total Reporting Segment Costs) in the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 7.

In our discussion of liquidity and capital resources, we include references to Free Cash Flow which is also a non-GAAP measure.

Free Cash Flow is used by management as a measure of our financial performance and our ability to generate excess cash flow from our business operations.

We believe non-GAAP performance measures are used by investors to measure our operating performance and lenders to measure our ability to incur and service debt.

These measures are not intended to serve as alternatives to U.S.

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

Refer to the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 7 for definitions and reconciliations to the most comparable measures under U.S.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

During the years ended December 31, 2021 and 2020, the mine sold 2.0 million and 1.6 million tons of coal, respectively (on a 50% basis).

Spot pricing for premium low-vol hard coking coal (Premium HCC), premium low-vol pulverized coal injection (Premium PCI) coal, Newcastle index thermal coal and API 5 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the year ended December 31, 2021 is set forth in the table below.

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

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

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

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the year ended December 31, 2021 due to quality differentials and the majority of its seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

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

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the year ended December 31, 2021 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

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

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

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

High Low Average December 31, 2021

11 unchanged sentences

$ 92.00 $ 29.75 $ 51.95 $ 88.00

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

Peabody Energy Corporation 2020 Form 10-K

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

(1) Prices expressed per metric tonne.

(2) Prices expressed per short ton.

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

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

The global coal industry data for the year ended December 31, 2020 presented herein may not be indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration, and potential for continued weak demand for our products.

With respect to seaborne metallurgical coal, global steel production decreased approximately 1% during the year ended December 31, 2020 compared to the prior year, with significant declines in most regions due to the impacts of COVID-19, offset by another year of strong growth in China.

Excluding China, steel production was down approximately 10%, while Chinese steel production increased approximately 5% from 2019.

While global steel production remained lower year-over-year, there has been consistent improvement in steel production since July 2020 as COVID-19 related lockdown restrictions eased in key countries.

Improved steel demand has enabled steelmakers, including Peabody customers, to restart capacity and increase output, resulting in improvements in seaborne metallurgical coal demand.

For example, India seaborne metallurgical coal imports set a new all-time monthly volume record each month from October to December.

Elsewhere, the recovery continues steadily with most countries operating at or just below pre-COVID-19 levels.

A key risk to demand for Australian metallurgical coal in 2021 is China’s import policies, which have largely prohibited the buying of Australian products since October 2020 and an end date to the limitations is currently unclear.

Within the seaborne thermal coal market, demand has been below pre-pandemic levels in many key countries, and headwinds such as COVID-19, China import restrictions and competition from alternative fuel sources persist.

China thermal imports were up 6 million tonnes through the year ended December 31, 2020.

India has seen domestic power demand recover, but thermal imports are down by approximately 25 million tonnes through the year ended December 31, 2020 compared to the prior year.

In the United States, overall electricity demand has been negatively impacted year-over-year due to COVID-19 induced economic shutdowns and mild weather during the year ended December 31, 2020.

The reduction in thermal coal demand during that period has exceeded the reduction in overall electricity demand as continued coal plant retirements, and growth in natural gas and renewable generation negatively impacted coal’s share of electricity generation.

Lower total electricity demand driven by COVID-19 related curtailments has resulted in coal’s share of generation declining to approximately 19% for the year ended December 31, 2020, while natural gas and renewables increased.

Through the year ended December 31, 2020 utility consumption of PRB coal fell approximately 20% compared to the prior year period.

Our revenues for the year ended December 31, 2020 decreased compared to the same period in 2019 ($1,742.3 million) primarily due to lower sales volumes which were affected by the COVID-19 pandemic and lower realized prices.

Results from continuing operations, net of income taxes for the year ended December 31, 2020 decreased compared to the same period in the prior year ($1,671.5 million).

The decrease was driven by the unfavorable revenue variance described above, higher asset impairment charges recorded in the current period ($1,217.2 million) and a prior year insurance recovery related to the events at our North Goonyella Mine ($125.0 million).

These unfavorable variances were partially offset by reduced operating costs and expenses owing largely to the sales volume decline as well as production efficiencies and other cost improvements ($1,011.7 million) and lower depreciation, depletion and amortization ($255.0 million).

Adjusted EBITDA for the year ended December 31, 2020 reflected a year-over-year decrease of $624.2 million.

As of December 31, 2020, our available liquidity was approximately $729 million.

Refer to the “Liquidity and Capital Resources” section contained within this Item 7 for a further discussion of factors affecting our available liquidity.

The global coal industry data for the year ended December 31, 2021 presented herein may not be indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration.

Peabody Energy Corporation 2021 Form 10-K

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

The year ended December 31, 2021 saw China’s unofficial ban on Australian coal remain in place and several countries such as India, Brazil and Vietnam achieve record annual import volumes of seaborne metallurgical coal.

China’s unofficial ban on Australian coal has caused a redistribution of trade flows with Australian suppliers increasing market share in Europe, South America, India and North Asia while other suppliers targeted China, incentivized by a significant price advantage.

However, recent measures introduced by China to reduce steel production and increase domestic coal output have temporarily dampened seaborne demand and driven delivered China prices in line with or below the rest of the market.

Despite this, supply availability remains exceedingly tight with the spread of COVID-19 and weather impacts in Australia, Canada, Mongolia and Russia.

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

Within the seaborne thermal coal market, Newcastle thermal coal prices remained elevated for the year ended December 31, 2021, compared to the prior year, driven by a combination of tight supplies and elevated demand.

China’s domestic thermal coal supply was hampered by heightened safety inspections and mine suspensions through much of the year.

Thermal electricity generation in China was strong for the year ended December 31, 2021, and the relaxation of China’s import controls combined with tight domestic supply pushed import demand higher for the year.

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

Despite the strong demand, the supply response has been muted from key exporters such as Australia, Colombia and South Africa, keeping thermal coal prices elevated.

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

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

This has positively impacted coal’s share of electricity generation for the year ended December 31, 2021, with a rise to approximately 22% compared to approximately 19% in the prior year, while causing natural gas’s share to decline to approximately 38% compared to approximately 40% in the prior year.

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

Since December 2020, coal inventories have fallen by approximately 38 million tons, a 29% decline.

Through the year ended December 31, 2021, utility consumption of PRB coal rose approximately 22% compared to the prior year period.

Peabody’s North Goonyella Mine in Queensland, Australia experienced a fire in 2018 which resulted in the suspension of mining operations.

In 2020, the Company commenced a review of strategic alternatives for North Goonyella which is currently ongoing.

During the years ended December 31, 2019 and 2018, Peabody recorded provisions for equipment losses of $83.2 million and $66.4 million, respectively, related to the fire.

The Company has also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $13.0 million, $32.3 million and $111.5 million during the years ended December 31, 2021, 2020 and 2019, respectively.

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

The Company collected the settlement in 2019.

Results of Operations

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Peabody’s revenues for the year ended December 31, 2021 increased compared to the same period in 2020 ($437.2 million) primarily due to the impacts of higher seaborne thermal and metallurgical pricing, partially offset by lower seaborne volumes and net unrealized mark-to-market losses on derivative contracts related to forecasted sales and other financial trading.

Results from continuing operations, net of income taxes for the year ended December 31, 2021 increased compared to the same period in the prior year ($2,207.2 million) primarily due to the asset impairment charges recorded in the prior year ($1,487.4 million), the favorable revenue variance described above and improved results from equity affiliates ($142.2 million).

Adjusted EBITDA for the year ended December 31, 2021 reflected a year-over-year increase of $657.9 million.

As of December 31, 2021, Peabody’s available liquidity was approximately $996 million.

Refer to the “Liquidity and Capital Resources” section contained within this Item 7 for a further discussion of factors affecting the Company’s available liquidity.

Peabody Energy Corporation 2021 Form 10-K

The following table presents tons sold by operating segment:

12 unchanged sentences

The following table presents supplemental financial data by operating segment:

Year Ended December 31, (Decrease) Increase

Year Ended December 31, Increase (Decrease)

2021 2020 $ %

7 unchanged sentences

Seaborne Metallurgical 99.55 109.44 (9.89) (9.0) %

109.44 110.30 (0.86) (0.8) %

Powder River Basin 9.46 9.14 0.32 3.5 %

3 unchanged sentences

Seaborne Metallurgical 32.28 (23.11) 55.39 239.7 %

(23.11) 17.32 (40.43) (233.4) %

Powder River Basin 1.53 2.23 (0.70) (31.4) %

8 unchanged sentences

asset impairment;

provision for North Goonyella equipment loss and related insurance recovery;

amortization of take-or-pay contract-based intangibles;

and certain other costs related to post-mining activities.

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

Costs incurred at the North Goonyella Mine during the year ended December 31, 2019 remain within the Seaborne Metallurgical Mining segment and resulted in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton of $9.59.

Peabody Energy Corporation 2021 Form 10-K

The following table presents revenues by reporting segment:

Increase (Decrease)

Year Ended December 31, to Revenues

8 unchanged sentences

Seaborne Thermal Mining.

The decrease in our Seaborne Thermal Mining segment revenues for the year ended December 31, 2020 compared to the prior year was driven by unfavorable realized coal pricing ($220.3 million) and unfavorable volume and mix variances ($39.6 million).

The increase in segment revenues during the year ended December 31, 2021 compared to the prior year was due to favorable realized coal pricing ($280.8 million), partially offset by unfavorable volume and mix variances ($58.6 million).

Seaborne Metallurgical Mining.

Segment revenues decreased during the year ended December 31, 2020 compared to the prior year due to unfavorable volume and mix variances ($340.8 million) resulting from demand-based volume decreases across our mines and unfavorable realized coal pricing ($205.8 million).

Segment revenues increased during the year ended December 31, 2021 compared to the prior year due to favorable realized coal pricing ($257.7 million), partially offset by unfavorable volume and mix variances ($16.5 million).

Powder River Basin Mining.

Segment revenues decreased during the year ended December 31, 2020 compared to the prior year period due to demand-based volume decreases ($244.3 million) and the prior year benefit of a contract settlement with a PRB customer ($19.7 million).

These unfavorable variances were partially offset by favorable realized coal pricing ($26.4 million).

Segment revenues decreased during the year ended December 31, 2021 compared to the prior year primarily due to unfavorable realized coal pricing ($27.6 million), offset by increased demand ($7.7 million).

Thermal Mining.

The decrease in segment revenues for the year ended December 31, 2020 compared to the same period in the prior year was primarily due to volume decreases ($453.6 million) which were driven by the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Wildcat Hills Underground Mine during the second quarter of 2020, the prior year benefit of revenues associated with the final commercial negotiations for the Kayenta Mine ($127.8 million) and unfavorable realized coal pricing ($20.7 million).

The decrease in segment revenues during the year ended December 31, 2021 compared to the prior year was primarily due to lower volumes ($64.3 million), offset by favorable realized pricing ($46.1 million).

Corporate and Other.

Segment revenues decreased during the year ended December 31, 2020 compared to the prior year due to lower results on economic hedge activities.

Segment revenues increased during the year ended December 31, 2021 compared to the prior year due to primarily due to higher results from trading activities ($88.9 million), partially offset by net unrealized mark-to-market losses on derivative contracts related to forecasted coal sales and other financial trading ($79.2 million).

Adjusted EBITDA

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

(Decrease) Increase to

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

Increase (Decrease) to

Year Ended December 31, Adjusted EBITDA

11 unchanged sentences

Seaborne Thermal Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year as a result of lower realized net coal pricing ($202.4 million), unfavorable volume variances ($12.6 million) and the unfavorable impacts of a temporary shutdown at our Wambo Underground Mine ($12.2 million).

The decrease was partially offset by favorable mine sequencing impacts and lower costs for materials, services and repairs at our thermal surface mines ($35.6 million) and lower pricing for fuel ($14.0 million).

Peabody Energy Corporation 2020 Form 10-K

Segment Adjusted EBITDA increased during the year ended December 31, 2021 compared to the same period in the prior year as a result of higher realized net coal pricing ($258.7 million) and product mix ($27.7 million).

The increases were partially offset by unfavorable volume variances ($51.8 million), unfavorable foreign currency impacts ($31.5 million) and higher commodity pricing ($10.5 million).

Seaborne Metallurgical Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year due to lower realized net coal pricing ($188.0 million), unfavorable volume variances ($138.7 million) and higher costs at our Shoal Creek Mine, including those related to a conveyor upgrade ($51.1 million).

These negative variances were partially offset by the inclusion of North Goonyella Mine containment and holding costs within our Corporate and Other segment in the current year ($77.6 million) and lower pricing for fuel ($10.9 million).

Segment Adjusted EBITDA increased during the year ended December 31, 2021 compared to the same period in the prior year due to higher realized net coal pricing ($238.7 million), cost improvements across the operations ($80.7 million) and favorable volume variances ($26.8 million), offset by unfavorable foreign currency impacts ($41.8 million).

Peabody Energy Corporation 2021 Form 10-K

Powder River Basin Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year due to the impact of lower volumes ($43.6 million), the prior year net benefit of a contract settlement with a PRB customer ($24.0 million) and unfavorable mine sequencing impacts ($22.2 million).

These negative variances were partially offset by lower costs for materials, services, repairs and labor ($31.1 million), lower pricing for fuel and explosives ($23.5 million) and higher realized net coal pricing ($6.5 million).

Segment Adjusted EBITDA decreased during the year ended December 31, 2021 compared to the same period in the prior year due to the unfavorable impacts of higher commodity pricing ($28.4 million), lower realized net coal pricing ($23.0 million), higher costs for materials, services and repairs ($14.1 million) and unfavorable volume and mix variances ($12.6 million).

The decreases were partially offset by favorable mine sequencing impacts ($11.9 million) and lower leasing costs ($6.3 million).

Thermal Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year primarily due to the impact of lower volumes ($135.4 million) as described above, the prior year net benefit associated with the final commercial negotiations for the Kayenta Mine ($83.3 million), lower realized net coal pricing ($37.8 million) and unfavorable mine sequencing impacts ($12.9 million).

These unfavorable variances were partially offset by lower costs for materials, services, repairs and labor ($42.4 million) and lower pricing for fuel and explosives ($16.8 million).

Segment Adjusted EBITDA decreased during the year ended December 31, 2021 compared to the same period in the prior year due to higher costs for materials, services and repairs ($28.9 million) and higher commodity pricing ($23.7 million), offset by higher realized net coal pricing ($43.9 million) and favorable mine sequencing impacts ($7.5 million).

Corporate and Other Adjusted EBITDA.

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

(Decrease) Increase

Increase (Decrease)

Year Ended December 31, to Income

12 unchanged sentences

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $73.8 million and $29.9 million during the years ended December 31, 2021 and 2020, respectively.

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

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

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

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

The increase in Corporate and Other Adjusted EBITDA during the year ended December 31, 2020 compared to the same period in the prior year was due to lower selling and administrative expenses driven by lower personnel costs;

the favorable impact of changes made to one of our postretirement health care benefit plans during the third quarter of 2020 ($14.9 million);

resource management gains recorded in the current period ($14.8 million);

and favorable corporate hedging results ($10.7 million).

These favorable results were partially offset by current year containment and holding costs for our North Goonyella Mine ($32.3 million) and an unfavorable variance in Middlemount’s results due to the continuing impacts of lower sales pricing and a significant change to the mine plan following a highwall failure in mid-2019.

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

The increase in Corporate and Other Adjusted EBITDA during the year ended December 31, 2021 compared to the same period in the prior year was due to favorable trading results ($63.7 million);

the gain recognized in the current year on the sale of the Company’s Millennium Mine ($26.1 million) as discussed in Note 19.

“Other Events”;

a favorable variance in Middlemount’s results due to the combined impacts of higher sales pricing, improved production, cost improvements and the insurance settlement attributable to a business interruption and property damage claim from 2019;

lower postretirement health care costs ($38.5 million) primarily due to changes made to the Company’s postretirement health care benefit plans announced in 2021 and 2020;

and lower containment and holding costs for the Company’s North Goonyella Mine ($19.3 million).

Peabody Energy Corporation 2021 Form 10-K

Loss From Continuing Operations, Net of Income Taxes

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

(Decrease) Increase to Income

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

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

Increase (Decrease) to Income

Year Ended December 31,

8 unchanged sentences

Transaction costs related to joint ventures — (23.1) 23.1 100.0 %

Gain on formation of United Wambo Joint Venture — 48.1 (48.1) (100.0) %

Asset impairment — (1,487.4) 1,487.4 100.0 %

Provision for North Goonyella equipment loss — (83.2) 83.2 100.0 %

North Goonyella insurance recovery - equipment

— 91.1 (91.1) (100.0) %

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

1 unchanged sentence

Interest expense (183.4) (139.8) (43.6) (31.2) %

Net gain on early debt extinguishment 33.2 — 33.2 n.m.

Interest income 6.5 9.4 (2.9) (30.9) %

1 unchanged sentence

43.4 5.1 38.3 751.0 %

Unrealized (losses) gains on economic hedges (29.6) 42.2 (71.8) (170.1) %

Unrealized gains on non-coal trading derivative contracts 7.1 1.2 5.9 491.7 %

Unrealized losses on derivative contracts related to forecasted sales (115.1) (29.6) (85.5) (288.9) %

Unrealized (losses) gains on foreign currency option contracts (7.5) 7.1 (14.6) (205.6) %

Take-or-pay contract-based intangible recognition 4.3 8.2 (3.9) (47.6) %

1 unchanged sentence

(22.8) (8.0) (14.8) (185.0) %

Loss from continuing operations, net of income taxes $ (1,859.8) $ (188.3) $ (1,671.5) (887.7) %

Income (loss) from continuing operations, net of income taxes $ 347.4 $ (1,859.8) $ 2,207.2 118.7 %

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

2 unchanged sentences

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

Increase (Decrease)

(Decrease) Increase

Year Ended December 31, to Income

9 unchanged sentences

Total $ (308.7) $ (346.0) $ 37.3 10.8 %

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

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

Year Ended December 31,

4 unchanged sentences

Peabody Energy Corporation 2021 Form 10-K

Depreciation, depletion and amortization expense decreased during the year ended December 31, 2020 compared to the same period in the prior year primarily due to the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Millennium and Wildcat Hills Underground Mines during the second quarter of 2020 ($122.7 million), the impact of the asset impairment recorded at the North Antelope Rochelle Mine during the second quarter of 2020 ($52.6 million), decreased depletion driven by lower sales volumes ($22.5 million) and lower amortization of contract based intangibles ($21.8 million).

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the year ended December 31, 2020 compared to the same period in the prior year reflects the volume and mix variances which impacted our revenues as described above.

Depreciation, depletion and amortization expense decreased during the year ended December 31, 2021 compared to the same period in the prior year primarily due to the impact of the asset impairment recorded at the North Antelope Rochelle Mine during the second quarter of 2020 ($46.2 million).

The increase in the weighted-average depletion rate per ton for the Seaborne Thermal Mining segment during the year ended December 31, 2021 compared to the same period in the prior year reflects the impact of the transition to the United Wambo Joint Venture.

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the year ended December 31, 2021 compared to the same period in the prior year reflects the volume and mix variances which impacted the Company’s revenues as described above.

The decrease in the weighted-average depletion rate per ton for the Powder River Basin Mining segment during the year ended December 31, 2021 compared to the same period in the prior year reflects the asset impairment recorded during the second quarter of 2020.

Asset Retirement Obligation Expenses.

Asset retirement obligation expenses decreased during the year ended December 31, 2020 compared to the same period in the prior year as the result of favorable revisions to the estimates for our closed mines.

Restructuring Charges.

Restructuring charges increased during the year ended December 31, 2020 compared to the same period in the prior year as the result of workforce reductions made across the organization through the use of involuntary and voluntary reductions, as discussed in Note 1.

“Summary of Significant Accounting Policies” to the accompanying consolidated financial statements.

Restructuring charges decreased during the year ended December 31, 2021 compared to the same period in the prior year as the result of workforce reductions made across the organization during the prior year.

Transaction Costs Related to Joint Ventures.

The charges recorded during the current and prior year periods related to the proposed PRB Colorado joint venture with Arch Resources, Inc.

as further described in Note 20.

“Other Events” to the accompanying consolidated financial statements.

Gain on Formation of United Wambo Joint Venture.

During the year ended December 31, 2019, we recognized a $48.1 million gain upon the formation of the United Wambo Joint Venture.

Refer to Note 20.

“Other Events” to the accompanying consolidated financial statements for further information regarding the calculation of the gain, which information is incorporated herein by reference.

The charges recorded during the prior year period related to the proposed PRB Colorado joint venture with Arch Resources, Inc.

which was terminated during the third quarter of 2020.

Asset Impairment.

We recognized $1,487.4 million in aggregate asset impairment charges during the year ended December 31, 2020, primarily related to the fair value of our North Antelope Rochelle Mine in our Powder River Basin Mining segment.

During the year ended December 31, 2019, we recognized $270.2 million in aggregate asset impairment charges primarily related to the El Segundo/Lee Ranch and Wildcat Hills Underground Mines in our Other U.S.

Thermal Mining segment.

The Company recognized $1,487.4 million in aggregate asset impairment charges during the year ended December 31, 2020, primarily related to the fair value of its North Antelope Rochelle Mine in its Powder River Basin Mining segment.

Refer to Note 3.

“Asset Impairment” to the accompanying consolidated financial statements for further information regarding the nature and composition of those charges, which information is incorporated herein by reference.

Provision for North Goonyella Equipment Loss.

A provision for expected equipment losses related to the events at our North Goonyella Mine was recorded during the prior year as discussed in Note 20.

“Other Events” to the accompanying consolidated financial statements.

North Goonyella Insurance Recovery - Equipment.

During the year ended December 31, 2019, we entered into an insurance claim settlement agreement with our insurance providers related to North Goonyella equipment losses and recorded a $125.0 million insurance recovery, as discussed in Note 20.

“Other Events” to the accompanying consolidated financial statements.

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

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

Changes in Deferred Tax Asset Valuation Allowance and Reserves and Amortization of Basis Difference Related to Equity Affiliates.

During the year ended December 31, 2020, we established a valuation allowance on Middlemount’s net deferred tax position of approximately $33 million.

During the year ended December 31, 2019, we released a tax reserve of approximately $17 million.

During the year ended December 31, 2021, the Company reversed a valuation allowance of approximately $33 million that had been established in the prior year on Middlemount’s net deferred tax position.

The Company reversed the valuation allowance due to the realization of deferred tax assets as a result of pricing improvements.

Refer to Note 6.

“Equity Method Investments” to the accompanying consolidated financial statements for further information regarding these changes, which information is incorporated herein by reference.

Interest Income.

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

Peabody Energy Corporation 2020 Form 10-K

Interest Expense.

The increase in interest expense during the year ended December 31, 2021 compared to the prior year was the result of a series of refinancing transactions completed by the Company during the first quarter of 2021, partially offset by the impacts of debt reductions made throughout 2021 as described in Note 11.

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

Net Gain on Early Debt Extinguishment.

The gain recognized during the year ended December 31, 2021 was primarily related to debt retirements made through various open market purchases throughout the year as further discussed in Note 11.

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

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

The gain recorded during the year ended December 31, 2020 was driven by gains on pension and postretirement benefit plan assets ($73.7 million), the favorable impacts of a mortality update for all actuarially determined liabilities ($39.5 million) and changes related to claims for the postretirement benefit plans ($21.2 million).

These increases were offset by decreases to the discount rates for all actuarially determined liabilities ($116.5 million).

The expense recorded during the year ended December 31, 2019 was driven by decreases to the discount rates for all actuarially determined liabilities ($137.6 million) and the unfavorable impact of changes related to claims and an update to our census data for the postretirement benefits plans ($19.7 million).

These decreases were partially offset by actuarial gains on pension assets ($94.5 million).

Unrealized (Losses) Gains on Economic Hedges.

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

The gain recorded during the year ended December 31, 2021 was driven by increases to the discount rates for actuarially determined liabilities ($37.6 million);

the favorable impacts of changes for the postretirement benefit plans related to updated claims experience ($22.0 million) and a mortality update ($16.6 million);

and the favorable impact of an update to the Company’s census data for actuarially determined liabilities ($10.3 million).

These increases were offset by mark-to-market losses on pension and postretirement benefit plan assets ($43.1 million).

The gain recorded during the year ended December 31, 2020 was driven by gains on pension and postretirement benefit plan assets ($73.7 million), the favorable impacts of a mortality update for actuarially determined liabilities ($39.5 million) and changes related to claims for the postretirement benefit plans ($21.2 million).

These increases were offset by decreases to the discount rates for actuarially determined liabilities ($116.5 million).

Unrealized Losses on Derivative Contracts Related to Forecasted Sales.

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

For additional information, refer to Note 7.

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

Take-or-Pay Contract-Based Intangible Recognition .

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

For additional details, refer to Note 8.

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

Income Tax Provision .

The decrease in the income tax provision during the year ended December 31, 2020 compared to the prior year period was primarily due to year-over-year decreases in taxable income, partially offset by an increase in the provision related to the remeasurement of foreign income tax accounts.

Refer to Note 10.

“Income Taxes” to the accompanying consolidated financial statements for additional information.

Net Loss Attributable to Common Stockholders

The following table presents net loss attributable to common stockholders:

Year Ended December 31, to Income

2020 2019 $ %

(Dollars in millions)

Loss from continuing operations, net of income taxes $ (1,859.8) $ (188.3) $ (1,671.5) (887.7) %

(Loss) income from discontinued operations, net of income taxes (14.0) 3.2 (17.2) (537.5) %

Net loss (1,873.8) (185.1) (1,688.7) (912.3) %

Net (loss) income attributable to noncontrolling interests (3.5) 26.2 (29.7) (113.4) %

Net loss attributable to common stockholders $ (1,870.3) $ (211.3) $ (1,659.0) (785.1) %

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

The decrease in results from discontinued operations, net of income taxes during the year ended December 31, 2020 compared to the prior year period was primarily driven by decreases to the discount rates for black lung liabilities.

Net (Loss) Income Attributable to Noncontrolling Interests .

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

The following table presents diluted EPS:

Year Ended December 31, EPS

2020 2019 $ %

Diluted EPS attributable to common stockholders:

Loss from continuing operations $ (18.99) $ (2.07) $ (16.92) (817.4) %

(Loss) income from discontinued operations (0.15) 0.03 (0.18) (600.0) %

Net loss attributable to common stockholders $ (19.14) $ (2.04) $ (17.10) (838.2) %

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

Diluted EPS reflects weighted average diluted common shares outstanding of 97.7 million and 103.7 million for the years ended December 31, 2020 and 2019, respectively.

Peabody Energy Corporation 2020 Form 10-K

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Spot pricing for Premium HCC, Premium PCI coal, Newcastle index thermal coal and API 5 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the year ended December 31, 2019 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing we realized during the year ended December 31, 2019 due to quality differentials and the majority of our seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically.

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

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing we realized during the year ended December 31, 2019 since we generally sell coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

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

High Low Average December 31, 2019

Premium HCC (1)

$ 215.80 $ 127.30 $ 176.66 $ 136.10

Premium PCI coal (1)

$ 129.85 $ 85.50 $ 110.50 $ 86.65

Newcastle index thermal coal (1)

$ 99.78 $ 62.32 $ 77.74 $ 66.55

API 5 thermal coal (1)

$ 62.87 $ 48.00 $ 54.41 $ 51.30

PRB 8,800 Btu/Lb coal (2)

$ 12.60 $ 12.05 $ 12.22 $ 12.10

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

$ 47.50 $ 33.50 $ 38.83 $ 33.65

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

With respect to seaborne metallurgical coal, global steel production increased approximately 3% through the year ended December 31, 2019 as compared to the prior year period.

India imports increased approximately 5% through the year ended December 31, 2019, as compared to the prior year, amid domestic steel production growth of approximately 3% year-over-year.

Steel production in China increased approximately 7% through the year ended December 31, 2019 as compared to the prior year, resulting in an approximate 15% increase in coking coal imports during the same period.

Seaborne thermal coal demand and pricing was subdued due to restrictions in China and low gas prices coupled with elevated stockpiles in Europe, despite robust demand from India and other Asian regions.

Chinese thermal coal imports increased by approximately 8 million tonnes through the year ended December 31, 2019 as compared to the prior year.

Despite constraints by heightened mine safety inspections, China’s domestic production registered a 4.2% increase through the year ended December 31, 2019, as compared to the prior year period, supported by new mine approvals.

India’s domestic production declined approximately 1% through the year ended December 31, 2019, which was not sufficient to meet growing demand from its industrial and power sectors.

As a result, India’s thermal coal imports increased by approximately 6% or 10 million tonnes year-over-year through December 31, 2019.

Demand from countries comprising the Association of Southeast Asian Nations (ASEAN) increased 23 million tonnes through the year ended December 31, 2019 as compared to the prior year, primarily led by Vietnam.

In the United States, overall electricity demand was down year-over-year through the year ended December 31, 2019.

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

For the year ended December 31, 2019, utility consumption of PRB coal fell approximately 16% as compared to the prior year due to ongoing pressure from retirements, wind generation and regional natural gas prices that traded at a discount to quoted Henry Hub natural gas spot prices.

Our revenues for the year ended December 31, 2019 decreased as compared to the same period in 2018 ($958.4 million) primarily due to lower sales volumes and realized prices.

Our Seaborne Metallurgical Mining segment was adversely impacted by the events at our North Goonyella Mine described above, as well as other production factors, partially offset by the incremental volume provided by our Shoal Creek Mine.

Our Powder River Basin Mining segment was adversely impacted by lower demand and delays in rail shipments caused by severe flooding during the first half of 2019.

Peabody Energy Corporation 2020 Form 10-K

Results from continuing operations, net of income taxes for the year ended December 31, 2019 decreased as compared to the same period in the prior year ($834.0 million).

The decrease was driven by the unfavorable revenue variances described above, as well as asset impairment charges recorded in the current period ($270.2 million), the impact of a net mark-to-market loss on actuarially determined liabilities as compared to a gain in the prior year ($192.9 million) and approximately $20 million of expense in the current year related to the Monto litigation.

These unfavorable variances were partially offset by reduced operating costs and expenses owing largely to the sales volume decline as well as production efficiencies and other cost improvements ($534.8 million) and an insurance recovery related to the events at our North Goonyella Mine ($125.0 million).

The decrease in net results attributable to common stockholders during the year ended December 31, 2019 as compared to the same period in 2018 was partially offset by dividends ($102.5 million) recorded in the prior year period related to the convertible preferred stock issued in connection with our reorganization.

Adjusted EBITDA for the year ended December 31, 2019 reflected a year-over-year decrease of $504.9 million.

The following table presents tons sold by operating segment:

Increase (Decrease)

Year Ended December 31,

2019 2018 Tons %

(Tons in millions)

Seaborne Thermal Mining 19.5 19.1 0.4 2.1 %

Seaborne Metallurgical Mining 8.1 11.0 (2.9) (26.4) %

Powder River Basin Mining 108.1 120.3 (12.2) (10.1) %

Thermal Mining 27.9 33.6 (5.7) (17.0) %

Total tons sold from mining segments 163.6 184.0 (20.4) (11.1) %

Corporate and Other 1.9 2.7 (0.8) (29.6) %

Total tons sold 165.5 186.7 (21.2) (11.4) %

Peabody Energy Corporation 2020 Form 10-K

Supplemental Financial Data

The following table presents supplemental financial data by operating segment:

Year Ended December 31, (Decrease) Increase

2019 2018 $ %

Revenues per Ton - Mining Operations (1)

Seaborne Thermal $ 49.69 $ 57.58 $ (7.89) (13.7) %

Seaborne Metallurgical 127.62 141.06 (13.44) (9.5) %

Powder River Basin 11.37 11.84 (0.47) (4.0) %

Thermal 46.85 41.46 5.39 13.0 %

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

Seaborne Thermal $ 32.84 $ 33.90 $ (1.06) (3.1) %

Seaborne Metallurgical (3)

110.30 100.97 9.33 9.2 %

Powder River Basin 9.32 9.47 (0.15) (1.6) %

Thermal 33.91 32.81 1.10 3.4 %

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

Seaborne Thermal $ 16.85 $ 23.68 $ (6.83) (28.8) %

Seaborne Metallurgical (3)

17.32 40.09 (22.77) (56.8) %

Powder River Basin 2.05 2.37 (0.32) (13.5) %

Thermal 12.94 8.65 4.29 49.6 %

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

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

(2) Includes revenue-based production taxes and royalties;

excludes depreciation, depletion and amortization;

asset retirement obligation expenses;

selling and administrative expenses;

restructuring charges;

asset impairment;

provision for North Goonyella equipment loss and related insurance recovery;

amortization of take-or-pay contract-based intangibles;

and certain other costs related to post-mining activities.

(3) Includes the events at the North Goonyella Mine resulting in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton for Seaborne Metallurgical of $9.59 and $5.27 for the years ended December 31, 2019 and 2018, respectively.

The following table presents revenues by reporting segment:

Year Ended December 31, Decrease to Revenues

2019 2018 $ %

(Dollars in millions)

Seaborne Thermal Mining $ 971.7 $ 1,099.2 $ (127.5) (11.6) %

Seaborne Metallurgical Mining 1,033.1 1,553.0 (519.9) (33.5) %

Powder River Basin Mining 1,228.7 1,424.8 (196.1) (13.8) %

Thermal Mining 1,309.4 1,393.0 (83.6) (6.0) %

Corporate and Other 80.5 111.8 (31.3) (28.0) %

Revenues $ 4,623.4 $ 5,581.8 $ (958.4) (17.2) %

Seaborne Thermal Mining.

The decrease in our Seaborne Thermal Mining segment revenues for the year ended December 31, 2019 compared to the prior year was primarily driven by unfavorable realized coal pricing ($131.9 million), partially offset by favorable volume and mix variances ($4.4 million).

Seaborne Metallurgical Mining.

Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to unfavorable volumes (2.9 million tons, $441.1 million).

The unfavorable volume variance resulting from the transition to highwall mining at our Millennium Mine in September 2018, an extended longwall move at our Metropolitan Mine and various mine sequencing impacts (3.2 million tons, $424.4 million) and no volume from our North Goonyella Mine during 2019 (1.7 million tons, $337.6 million) was partially offset by incremental volume provided by our Shoal Creek Mine, acquired in December 2018 (2.0 million tons, $320.9 million).

Segment revenues were further impacted by lower realized pricing ($78.8 million).

Peabody Energy Corporation 2020 Form 10-K

Powder River Basin Mining.

Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year due to lower volume primarily attributable to lower demand and railroad closures and delays that resulted from severe flooding across the upper Great Plains during the first half of 2019 ($157.9 million) and unfavorable realized pricing ($57.9 million).

These unfavorable variances were partially offset by a favorable contract settlement with a PRB customer ($19.7 million).

Thermal Mining.

Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to unfavorable volume and mix variances ($200.2 million) and unfavorable realized pricing ($11.2 million).

These unfavorable variances were partially offset by revenues associated with the final commercial negotiations for the Kayenta Mine ($127.8 million).

Corporate and Other.

Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to lower results on economic hedges.

Adjusted EBITDA

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

Year Ended December 31, (Decrease) Increase to

Adjusted EBITDA

2019 2018 $ %

(Dollars in millions)

Seaborne Thermal Mining $ 329.4 $ 452.0 $ (122.6) (27.1) %

Seaborne Metallurgical Mining 140.2 441.4 (301.2) (68.2) %

Powder River Basin Mining 221.2 284.5 (63.3) (22.2) %

Thermal Mining 361.4 290.6 70.8 24.4 %

Corporate and Other (169.2) (80.6) (88.6) (109.9) %

Adjusted EBITDA (1)

$ 883.0 $ 1,387.9 $ (504.9) (36.4) %

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

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

Seaborne Thermal Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year as a result of lower realized net coal pricing ($121.7 million) and unfavorable mine sequencing impacts and higher equipment maintenance costs among our thermal surface mines ($48.1 million), offset by improved longwall performance at our Wambo Underground Mine ($30.2 million) and favorable foreign currency impacts ($24.1 million).

Seaborne Metallurgical Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year due to unfavorable volume variances described above ($231.9 million).

The impact of the negative volumes at our Australian mines ($356.8 million) was partially offset by the incremental volume provided by our Shoal Creek Mine ($124.9 million).

The decrease in Segment Adjusted EBITDA was further impacted by lower realized net coal pricing ($71.6 million), mine sequencing impacts among our metallurgical surface operations ($62.6 million) and the net containment and holding costs at our North Goonyella Mine ($19.6 million).

These negative variances were partially offset by favorable foreign currency impacts ($50.5 million).

Powder River Basin Mining.

Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year due to the impact of lower volume ($78.7 million) described above, lower realized net coal pricing ($10.7 million) and unfavorable mine sequencing impacts ($10.0 million), partially offset by the net impact of the favorable contract settlement with a PRB customer ($24.0 million) and lower lease expenses due to early lease buyouts ($8.6 million).

Thermal Mining.

Segment Adjusted EBITDA increased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to the net impact associated with the final commercial negotiations for the Kayenta Mine ($83.3 million) and higher realized net coal pricing ($13.0 million), partially offset by the unfavorable impact of lower volume ($25.7 million).

Peabody Energy Corporation 2020 Form 10-K

Corporate and Other Adjusted EBITDA.

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

Year Ended December 31, (Decrease) Increase

2019 2018 $ %

(Dollars in millions)

Middlemount (1)

$ (9.8) $ 51.1 $ (60.9) (119.2) %

Resource management activities (2)

8.2 44.7 (36.5) (81.7) %

Selling and administrative expenses

(145.0) (158.1) 13.1 8.3 %

Other items, net (3)

(22.6) (18.3) (4.3) (23.5) %

Corporate and Other Adjusted EBITDA $ (169.2) (80.6) $ (88.6) (109.9) %

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

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $25.1 million and $46.8 million during the years ended December 31, 2019 and 2018, respectively.

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

(3) Includes trading and brokerage activities, costs associated with post-mining activities, gains (losses) on certain asset disposals, minimum charges on certain transportation-related contracts, costs associated with suspended operations and expenses related to our other commercial activities.

The decrease in Corporate and Other Adjusted EBITDA during the year ended December 31, 2019 compared to the same period in the prior year was primarily driven by an unfavorable variance in Middlemount’s results due to the temporary suspension of operations and a significant change to the mine plan following a highwall failure mid-2019 and resource management gains recorded in the prior year period related to the sale of surplus land assets in Queensland’s Bowen Basin ($20.6 million) and the sale of surplus coal resources associated with the Millennium Mine ($20.5 million).

These unfavorable results were partially offset by lower selling and administrative expenses primarily related to outside services and lower personnel costs.

Peabody Energy Corporation 2020 Form 10-K

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

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

Year Ended December 31, (Decrease) Increase

2019 2018 $ %

(Dollars in millions)

Adjusted EBITDA (1)

$ 883.0 $ 1,387.9 $ (504.9) (36.4) %

Depreciation, depletion and amortization (601.0) (679.0) 78.0 11.5 %

Asset retirement obligation expenses (58.4) (53.0) (5.4) (10.2) %

Restructuring charges (24.3) (1.2) (23.1) (1,925.0) %

Transaction costs related to business combinations and joint ventures (21.6) (7.4) (14.2) (191.9) %

Gain on formation of United Wambo Joint Venture 48.1 — 48.1 n.m.

Asset impairment (270.2) — (270.2) n.m.

Provision for North Goonyella equipment loss

(83.2) (66.4) (16.8) (25.3) %

North Goonyella insurance recovery - equipment 91.1 — 91.1 n.m.

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

18.8 18.3 0.5 2.7 %

Interest expense (144.2) (151.3) 7.1 4.7 %

Interest income 27.0 33.6 (6.6) (19.6) %

Net mark-to-market adjustment on actuarially determined liabilities

(67.4) 125.5 (192.9) (153.7) %

Reorganization items, net — 12.8 (12.8) (100.0) %

Unrealized gains on economic hedges 42.2 18.3 23.9 130.6 %

Unrealized gains (losses) on non-coal trading derivative contracts 1.2 (0.7) 1.9 271.4 %

Take-or-pay contract-based intangible recognition 16.6 26.7 (10.1) (37.8) %

Income tax provision (46.0) (18.4) (27.6) (150.0) %

(Loss) income from continuing operations, net of income taxes $ (188.3) $ 645.7 $ (834.0) (129.2) %

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

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

Depreciation, Depletion and Amortization.

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

(Decrease) Increase

Year Ended December 31, to Income

2019 2018 $ %

(Dollars in millions)

Seaborne Thermal Mining $ (90.7) $ (88.4) $ (2.3) (2.6) %

Seaborne Metallurgical Mining

(125.3) (129.8) 4.5 3.5 %

Powder River Basin Mining (148.5) (183.4) 34.9 19.0 %

Thermal Mining (228.2) (268.8) 40.6 15.1 %

Corporate and Other

(8.3) (8.6) 0.3 3.5 %

Total $ (601.0) $ (679.0) $ 78.0 11.5 %

Peabody Energy Corporation 2020 Form 10-K

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

Year Ended December 31,

Seaborne Thermal Mining $ 1.84 $ 1.79

Seaborne Metallurgical Mining

Powder River Basin Mining 0.80 0.81

Thermal Mining 1.33 1.51

Depreciation, depletion and amortization expense decreased during the year ended December 31, 2019 as compared to the same period in the prior year primarily due to lower amortization of the fair value of certain U.S.

coal supply agreements ($65.9 million), decreased expense at our North Goonyella Mine after the fire due to lower sales volumes and asset impairments ($19.2 million) and decreased expense related to the closures of the Kayenta and Cottage Grove Mines during the third quarter of 2019 ($23.7 million).

The acquisition of the Shoal Creek Mine in the fourth quarter of 2018 partly offset the decrease in depreciation, depletion and amortization ($41.0 million) and was the driver of the year-over-year increase in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment.

Restructuring Charges.

Restructuring charges increased during the year ended December 31, 2019 compared to the same period in the prior year as the result of workforce reductions made during 2019 resulting from actions taken at the North Goonyella Mine, U.S.

mine closures and reductions in overhead and support functions.

Transaction Costs Related to Business Combinations and Joint Ventures.

The increase in transaction costs was primarily related to the proposed PRB Colorado joint venture with Arch Resources, Inc.

as further described in Note 20.

“Other Events” to the accompanying consolidated financial statements.

Gain on Formation of United Wambo Joint Venture .

During the year ended December 31, 2019, we recognized a $48.1 million gain upon the formation of the United Wambo Joint Venture.

Refer to Note 20.

“Other Events” to the accompanying consolidated financial statements for further information regarding the calculation of the gain, which information is incorporated herein by reference.

Asset Impairment.

We recognized $270.2 million in aggregate asset impairment charges during the year ended December 31, 2019.

Refer to Note 3.

Provision for North Goonyella Equipment Loss.

Provisions for equipment losses related to the events at our North Goonyella Mine were recorded during the years ended December 31, 2019 and 2018 as discussed in Note 20.

“Other Events” to the accompanying consolidated financial statements.

The provision recorded during 2019 was incremental to the provisions recorded during 2018 and represents the best estimate of potential loss associated with these events based on assessments made to date.

North Goonyella Insurance Recovery - Equipment.

“Other Events” to the accompanying consolidated financial statements.

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

Interest Income.

The decrease in interest income during the year ended December 31, 2019 as compared to the prior year was driven by lower cash balances.

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

These decreases were partially offset by actuarial gains on pension assets ($94.5 million).

The gain recorded during the year ended December 31, 2018 was driven by increases to the discount rates ($46.2 million), the favorable impact of changes related to claims ($54.2 million), updates to the Medicare law ($20.0 million) and an update to our census data ($7.7 million) for the postretirement benefit plans.

The impact on our pension plans was small as actuarial losses on pension assets were largely offset by an increase in discount rates.

Peabody Energy Corporation 2020 Form 10-K

Reorganization Items, Net.

The reorganization items recorded during the year ended December 31, 2018 were impacted by a favorable adjustment to our former bankruptcy claims accrual due to settlement of claims.

Unrealized Gains on Economic Hedges.

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

Unrealized (Losses) Gains on Foreign Currency Option Contracts.

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

For additional information, refer to Note 7.

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

Take-or-Pay Contract-Based Intangible Recognition.

During the years ended December 31, 2019 and 2018, we ratably recognized contract-based intangible liabilities for port and rail take-or-pay contracts.

For additional details, refer to Note 8.

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

Income Tax Provision .

The increase in the income tax provision during the year ended December 31, 2019 as compared to the prior year period was primarily related to the tax impact of the gain on formation of the United Wambo Joint Venture recognized during the fourth quarter of 2019, the year-over-year change in the benefit recorded in continuing operations under the exception provisions within ASC 740-20-45-7 and the prior year tax benefit related to the release of valuation allowance on refundable alternative minimum tax credits.

The increase in the income tax provision during the year ended December 31, 2021 compared to the prior year period was primarily due to year-over-year increases in taxable income, partially offset by a decrease in the provision related to the remeasurement of foreign income tax accounts.

Refer to Note 9.

“Income Taxes” to the accompanying consolidated financial statements for additional information.

Net (Loss) Income Attributable to Common Stockholders

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

(Decrease) Increase to

Peabody Energy Corporation 2021 Form 10-K

Net Income (Loss) Attributable to Common Stockholders

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

Year Ended December 31, to Income

1 unchanged sentence

(Dollars in millions)

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

$ (188.3) $ 645.7 $ (834.0) (129.2) %

Income from discontinued operations, net of income taxes

3.2 18.1 (14.9) (82.3) %

Net (loss) income (185.1) 663.8 (848.9) (127.9) %

Series A Convertible Preferred Stock dividends

— 102.5 (102.5) (100.0) %

Net income attributable to noncontrolling interests

26.2 16.9 9.3 55.0 %

Net (loss) income attributable to common stockholders

$ (211.3) $ 544.4 $ (755.7) (138.8) %

Income from Discontinued Operations, Net of Income Taxes .

The decrease in income from discontinued operations, net of income taxes during the year ended December 31, 2019 as compared to the prior year period was primarily driven by smaller actuarial gains associated with black lung liabilities.

Series A Convertible Preferred Stock Dividends .

The convertible preferred stock dividends for the year ended December 31, 2018 were comprised of the deemed dividends granted for all remaining shares of convertible preferred stock shares that were converted as of January 31, 2018.

Net Income Attributable to Noncontrolling Interests.

The increase in net income attributable to noncontrolling interests during the year ended December 31, 2019 was primarily driven by the gain on formation of the United Wambo Joint Venture recognized during the fourth quarter of 2019.

Income (loss) from continuing operations, net of income taxes $ 347.4 $ (1,859.8) $ 2,207.2 118.7 %

Income (loss) from discontinued operations, net of income taxes 24.0 (14.0) 38.0 271.4 %

Net income (loss) 371.4 (1,873.8) 2,245.2 119.8 %

Net income (loss) attributable to noncontrolling interests 11.3 (3.5) 14.8 422.9 %

Net income (loss) attributable to common stockholders $ 360.1 $ (1,870.3) $ 2,230.4 119.3 %

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

The increase in results from discontinued operations, net of income taxes during the year ended December 31, 2021 compared to the prior year period was primarily due to the gain of $24.6 million recognized on the sale of the Wilkie Creek Mine as discussed in Note 19.

“Other Events” and increases to the discount rates for black lung liabilities.

Net Income (Loss) Attributable to Noncontrolling Interests .

The increase in net results attributable to noncontrolling interests during the year ended December 31, 2021 compared to the prior year period was primarily due to higher results of Peabody’s majority-owned mines in which there is an outside non-controlling interest.

The following table presents diluted EPS:

2 unchanged sentences

Diluted EPS attributable to common stockholders:

(Loss) income from continuing operations

$ (2.07) $ 4.28 $ (6.35) (148.4) %

Income from discontinued operations 0.03 0.15 (0.12) (80.0) %

Net (loss) income attributable to common stockholders $ (2.04) $ 4.43 $ (6.47) (146.0) %

Income (loss) from continuing operations $ 3.00 $ (18.99) $ 21.99 115.8 %

Income (loss) from discontinued operations 0.22 (0.15) 0.37 246.7 %

Net income (loss) attributable to common stockholders $ 3.22 $ (19.14) $ 22.36 116.8 %

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

2 unchanged sentences

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA is defined as (loss) income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses, depreciation, depletion and amortization and reorganization items, net.

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

Adjusted EBITDA is defined as income (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 each of its segment’s operating performance, as displayed in the reconciliations below.

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

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

$ (1,859.8) $ (188.3) $ 645.7

Income (loss) from continuing operations, net of income taxes $ 347.4 $ (1,859.8)

Depreciation, depletion and amortization

346.0 601.0 679.0

Asset retirement obligation expenses 44.7 45.7

Restructuring charges 8.3 37.9

Transaction costs related to business combinations and joint ventures 23.1 21.6 7.4

Gain on formation of United Wambo Joint Venture — (48.1) —

Transaction costs related to joint ventures — 23.1

Asset impairment — 1,487.4

Provision for North Goonyella equipment loss

North Goonyella insurance recovery - equipment

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

30.9 (18.8) (18.3)

Interest expense 183.4 139.8

Net gain on early debt extinguishment (33.2) —

Interest income (6.5) (9.4)

Net mark-to-market adjustment on actuarially determined liabilities

(5.1) 67.4 (125.5)

Reorganization items, net — — (12.8)

Unrealized losses (gains) on economic hedges 29.6 (42.2) (18.3)

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

(7.1) (1.2) 0.7

Unrealized losses on derivative contracts related to forecasted sales 115.1 29.6

Unrealized losses (gains) on foreign currency option contracts 7.5 (7.1)

Take-or-pay contract-based intangible recognition (4.3) (8.2)

Income tax provision

8.0 46.0 18.4

Adjusted EBITDA $ 916.7 $ 258.8

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

Operating costs and expenses $ 2,553.1 $ 2,524.9

$ 2,524.9 $ 3,536.6 $ 4,071.4

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

7.1 1.2 (0.7)

Unrealized (losses) gains on foreign currency option contracts (7.5) 7.1

Take-or-pay contract-based intangible recognition 4.3 8.2

North Goonyella insurance recovery - cost recovery and business interruption

Net periodic benefit (credit) costs, excluding service cost (1.8) 19.4 18.1

Net periodic benefit credit, excluding service cost (38.3) (1.8)

Total Reporting Segment Costs $ 2,511.6 $ 2,538.4

$ 2,538.4 $ 3,539.9 $ 4,115.5

Peabody Energy Corporation 2020 Form 10-K

The following table presents Reporting Segment Costs by reporting segment:

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

2 unchanged sentences

Powder River Basin Mining 836.3 796.3

Mining 538.9 948.0 1,102.4

Thermal Mining 524.9 538.9

Corporate and Other 20.0 37.9

Total Reporting Segment Costs $ 2,511.6 $ 2,538.4

Peabody Energy Corporation 2021 Form 10-K

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

29 unchanged sentences

$ 8.59 $ (23.11) $ 2.23 $ 9.22

Peabody Energy Corporation 2020 Form 10-K

Year Ended December 31, 2018

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

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 19.1 11.0 120.3 33.6

Revenues $ 1,099.2 $ 1,553.0 $ 1,424.8 $ 1,393.0

Reporting Segment Costs 647.2 1,111.6 1,140.3 1,102.4

Adjusted EBITDA

452.0 441.4 284.5 290.6

Revenues per Ton

$ 57.58 $ 141.06 $ 11.84 $ 41.46

Costs per Ton

33.90 100.97 9.47 32.81

Adjusted EBITDA Margin per Ton

23.68 40.09 2.37 8.65

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

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

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

1 unchanged sentence

(Dollars in millions)

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash provided by (used in) operating activities $ 420.0 $ (9.7)

Net cash used in investing activities (131.5) (206.7)

Amount attributable to acquisition of Shoal Creek Mine

Free Cash Flow $ 288.5 $ (216.4)

As part of its normal planning and forecasting process, Peabody utilizes a broad approach to develop macroeconomic assumptions for key variables, including country-level gross domestic product, industrial production, fixed asset investment and third-party inputs, driving detailed supply and demand projections for key demand centers for coal, electricity generation and steel.

Specific to the U.S., the Company evaluates individual plant needs, including expected retirements, on a plant by plant basis in developing its demand models.

Supply models and cost curves concentrate on major supply regions/countries that impact the regions in which the Company operates.

Our estimates involve risks and uncertainties and are subject to change based on various factors as described more fully in the “Cautionary Notice Regarding Forward-Looking Statements” section contained within this Annual Report on Form 10-K.

Our near-term outlook is intended to coincide with the next 12 to 24 months, with subsequent periods addressed in our long-term outlook.

Peabody is continuing to monitor the rapidly evolving COVID-19 pandemic and any impacts related to both our near-term and long-term outlook.

Near-Term Outlook

The COVID-19 pandemic continues to impact the global economy, including demand and pricing for global coal markets.

Ultimately, demand for seaborne coal will be dependent on the timing and scale of a COVID-19 recovery.

Seaborne thermal coal markets have recently shown signs of improvement with Newcastle forward prices averaging over $80 per tonne in 2021.

Colder than expected weather across Asia and Europe has resulted in record high power generation in key markets, driving global liquefied natural gas prices significantly higher and supporting increased seaborne thermal coal demand.

In addition, seaborne thermal supply has been impacted by severe wet weather in Indonesia as well as COVID-related production disruptions in China and labor issues in Colombia.

Peabody’s seaborne thermal segment is well positioned to serve that demand.

Peabody Energy Corporation 2020 Form 10-K

While seaborne metallurgical coal pricing has improved from 2020 lows, disrupted metallurgical trade flows have contributed to short term pricing volatility.

In addition, limitations on Australian imports into China as well as the scope and scale of a steel recovery in traditional regions continue to weigh on markets.

China has continued to not import Australian coals even as the spread between Australian and non-Australian premium hard coking coals reached an all-time high in January 2021, resulting in China paying a significant premium for non-Australian metallurgical coal.

However, outside of China, demand has started to pick up in the traditional markets of Japan and Korea as well as India.

Peabody remains focused on improving its seaborne metallurgical segment cost profile, particularly at the Shoal Creek and Metropolitan Mines, and will continue to be cautious and deliberate in its actions to resume production at currently idled operations.

thermal coal markets continue to be heavily influenced by natural gas prices, growth in renewable generation and weather.

In 2020, coal's share of the generation mix declined to 19% from 23% in the prior year, while natural gas' share rose to 40% as prompt natural gas prices averaged $2.13 per mmBtu.

While current natural gas forward prices are above a key competitive mark of $2.50 per mmBtu, coal demand continues to be impacted by secular decline.

Peabody remains committed to continuing to serve its customers from its low-cost operations.

Long-Term Outlook

Current projections indicate a slow seaborne market recovery as the global economy continues to be impacted by COVID-19.

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

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

Seaborne Fundamentals .

Peabody projects global seaborne metallurgical demand to show consistent, albeit modest, growth over the next several years.

During this time, India is expected to account for the vast majority of overall demand growth amid significant steel capacity additions and lack of domestic reserves.

ASEAN countries are also projected to be a notable contributor to growth as demand in Japan and Korea remains largely stable.

Australia will continue to account for more than 50% of seaborne supply.

For seaborne thermal, Peabody expects ASEAN countries and India to be drivers for seaborne coal demand growth due to increased electrification and economic gains.

This growth is anticipated to more than offset declines from developed economies, including the U.S.

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

Fundamentals.

thermal coal demand continues to be pressured by the ongoing secular decline and is expected to continue to decline longer-term.

Future demand will be highly dependent on natural gas prices, growth in renewable generation and other competing fuels, general economic conditions, weather, and policy and regulations, among other factors.

Liquidity and Capital Resources

Our primary source of cash is proceeds from the sale of our coal production to customers.

We have also generated cash from the sale of non-strategic assets, including coal reserves and surface lands, borrowings under our credit facilities and, from time to time, the issuance of securities.

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

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

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

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

We have presently suspended the payment of dividends and share repurchases, as discussed in Part II, Item 5.

“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

The Company’s primary source of cash is proceeds from the sale of its coal production to customers.

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

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

Recently, the Company has also used cash for early debt retirements, and historically it has also used cash for dividends and share repurchases.

Peabody Energy Corporation 2021 Form 10-K

As of December 31, 2020, our cash balances totaled $709.2 million, including approximately $555 million held by U.S.

subsidiaries and $136 million held by Australian subsidiaries, approximately $107 million of which was held by the subsidiary which conducts the operations of our Wilpinjong Mine.

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

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

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

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

The Company has presently suspended the payment of dividends and share repurchases, as discussed in Part II, Item 5.

“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

As of December 31, 2021, the Company’s cash balances totaled $954.3 million, including approximately $542 million held by Australian subsidiaries, approximately $368 million held by U.S.

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

The subsidiaries that conduct the operations of the Wilpinjong Mine held cash of approximately $207 million at December 31, 2021.

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

This cash is generally used to support non-U.S.

liquidity needs, including capital and operating expenditures in Australia.

We experienced negative cash flows from operations during the year ended December 31, 2020.

Results from continuing operations, net of income taxes and Adjusted EBITDA for the year ended December 31, 2020 declined by $1,671.5 million and $624.2 million, respectively, compared to the year ended December 31, 2019.

Our total liquidity declined from $1,275.8 million at December 31, 2019 to $728.7 million at December 31, 2020.

Available liquidity as of December 31, 2020 and 2019 was comprised of the following:

December 31, 2020 December 31, 2019

The Company’s available liquidity increased from $728.7 million as of December 31, 2020 to $995.9 million as of December 31, 2021.

Available liquidity was comprised of the following:

(Dollars in millions)

Cash and cash equivalents $ 954.3 $ 709.2

Revolving credit facility availability 0.2 498.6

Credit facility availability 15.3 0.2

Accounts receivable securitization program availability 26.3 19.3

Total liquidity $ 995.9 $ 728.7

During the year ended December 31, 2020, the combined availability under our revolving credit facility and accounts receivable securitization program decreased as a result of $375.0 million of borrowings, $159.0 million of which was subsequently repaid, an additional $237.0 million of letters of credit issuances, a $46.1 million reduction in available receivable balances under the accounts receivable securitization program, and the maturity of a $25.0 million commitment under the revolving credit facility.

As further described in Note 23.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees,” we are party to various guarantees and financial instruments to provide support for our reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees.

At December 31, 2020, such instruments included $1,633.6 million face amount of surety bonds and $437.6 million of outstanding letters of credit.

As further described below, we have reached an agreement with the majority of our surety bond providers to limit future collateral requests related to surety bonding.

Existing Debt Financing

As described in Note 12.

“Long-term Debt” of the accompanying consolidated financial statements, during 2017, we entered into an indenture related to the issuance of $500.0 million of 6.000% senior secured notes due March 2022 and $500.0 million of 6.375% senior secured notes due March 2025.

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

Also during 2017, we entered into a credit agreement (the Credit Agreement) and related term loan under which we originally borrowed $950.0 million and have repaid $561.0 million through December 31, 2020.

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

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

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

During 2020, we utilized the revolving credit facility to borrow $315.0 million, of which we subsequently repaid $99.0 million.

At December 31, 2020, the revolving loan balance of $216.0 million bore interest at LIBOR plus 3.25%.

The revolving credit facility was also utilized for letters of credit, amounting to $323.8 million at December 31, 2020, which incur combined fees of 3.375%, while unused capacity bears a commitment fee of 0.5%.

Such letters of credit were primarily in support of our reclamation obligations.

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

We are also subject to customary affirmative and negative covenants.

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

Debt Instrument (defined below, as applicable) 2021 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 (2024 Peabody Notes) 62.6 —

10.000% Senior Secured Notes due December 2024 (2024 Co-Issuer Notes) 193.9 —

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

6.375% Senior Secured Notes due March 2025 (2025 Notes) 334.9 500.0

Senior Secured Term Loan due 2025, net of original issue discount (Senior Secured Term Loan) 322.8 388.2

Revolving credit facility — 216.0

Finance lease obligations 29.3 27.3

Debt issuance costs (34.8) (42.7)

1,137.8 1,547.8

Current portion of long-term debt 59.6 44.9

Long-term debt $ 1,078.2 $ 1,502.9

The Company’s Indebtedness will require estimated principal and interest payments, assuming interest rates in effect at December 31, 2021, of approximately $110 million in 2022, $85 million in 2023, $545 million in 2024, $660 million in 2025, and $10 million thereafter.

Peabody Energy Corporation 2021 Form 10-K

Refinancing and Related Transactions

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

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

Such agreements and related activities are described below.

Organizational Realignment

In July and August 2020, we effected certain changes to our corporate structure in contemplation of a debt-for-debt exchange, which included, among other steps, the formation of certain wholly-owned subsidiaries (the Co-Issuers) to indirectly own and conduct the operations of our Wilpinjong Mine in Australia and the designation of such entities as unrestricted subsidiaries under the Credit Agreement and our senior notes’ indenture (the Existing Indenture).

In connection with these actions, we contributed $100.0 million to the Co-Issuers to provide the Wilpinjong Mine with operating liquidity and address its capital needs over the next twelve months.

In July and August 2020, the Company effected certain changes to its corporate structure in contemplation of a debt-for-debt exchange, which included, among other steps, the formation of certain wholly-owned subsidiaries (the Co-Issuers).

In connection with the change in structure, the Company’s subsidiary which owns and operates its Wilpinjong Mine in Australia became a subsidiary of the Co-Issuers.

The Co-Issuers and the Wilpinjong subsidiary were designated as unrestricted subsidiaries under the Company’s credit agreement (Credit Agreement) and its senior notes’ indenture (the Existing Indenture).

Surety Agreement

In November 2020, we entered into a surety transaction support agreement (Surety Agreement) with the providers of 99% of our surety bond portfolio (Participating Sureties) to resolve approximately $800 million in additional collateral demands made by the Participating Sureties.

In accordance with the Surety Agreement, we initially provided $75.0 million of collateral, in the form of letters of credit.

In November 2020, the Company entered into a surety transaction support agreement (Surety Agreement) with the providers 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, as defined below, other provisions of the Surety Agreement became effective.

In particular, we 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 we generate more than $100.0 million of free cash flow (as defined in the Surety Agreement) in any twelve-month period or have asset sales in excess of $10.0 million.

Further, the Participating Sureties have agreed to a standstill through December 31, 2024, 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.

We will not pay dividends or make share repurchases during the standstill period, unless otherwise agreed between parties.

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, plus other amounts in accordance with the Surety 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.

Under the Surety Agreement, additional collateral postings are required if the Company generates more than $100.0 million of free cash flow in any twelve-month period.

As calculated in accordance with the agreement, the Company posted an additional $13 million of collateral in January 2022 in the form of letters of credit.

Refinancing Transactions

On January 29, 2021 (the Settlement Date), we completed a series of transactions (collectively, the Refinancing Transactions) to, among other things, provide us with maturity extensions and covenant relief, while allowing us to maintain sufficient 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 our existing debt agreements, as summarized below.

On January 29, 2021 (the Settlement Date), the Company completed a series of transactions (collectively, the Refinancing Transactions) to, among other things, provide it 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 its existing debt agreements, as summarized below.

Exchange Offer

On January 29, 2021, we settled an exchange offer (Exchange Offer) pursuant to which $398.7 million aggregate principal amount of our 6.000% Senior Secured Notes due March 2022 (2022 Notes) were validly tendered, accepted by us and exchanged for aggregate consideration consisting of (a) $193.9 million aggregate principal amount of new 10.000% Senior Secured Notes due 2024 issued by the Co-Issuers (New Co-Issuer Notes), (b) $195.1 million aggregate principal amount of new 8.500% Senior Secured Notes due 2024 issued by Peabody (New Peabody Notes), and (c) a cash payment of approximately $9.4 million.

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

Refer to Note 12.

“Long-term Debt” for additional information associated with the New Co-Issuer Notes and the New Peabody Notes.

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

In connection with the Exchange Offer, we must offer to purchase up to $22.5 million New Peabody Notes at 80% of their accreted value, plus accrued and unpaid interest, subsequent to the Settlement Date.

We expect to complete this purchase during the first quarter of 2021.

On the Settlement Date, the Company settled an exchange offer (Exchange Offer) pursuant to which $398.7 million aggregate principal amount of its 6.000% Senior Secured Notes due March 2022 (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 2024 issued by the Co-Issuers (2024 Co-Issuer Notes), (b) $195.1 million aggregate principal amount of new 8.500% Senior Secured Notes due 2024 issued by Peabody (Peabody Notes), and (c) a cash payment of approximately $9.4 million.

Concurrently with the exchange, the requisite number of holders of the 2022 Notes consented to amend the notes’ underlying indenture to render them unsecured and not subject to substantially all of the restrictive covenants.

The holders of $60.3 million of the 2022 Notes did not participate in the exchange offer.

In connection with the exchange requirements, the Company purchased $22.4 million of the 2024 Peabody Notes at 80% of their accreted value, plus accrued and unpaid interest, during the first quarter of 2021.

Peabody Energy Corporation 2021 Form 10-K

Consent Solicitation

Concurrently with the Exchange Offer, we solicited consents from holders of the 2022 Notes to certain proposed amendments to 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.

The 2024 Co-Issuer Notes and Co-Issuer Term Loans are subject to mandatory prepayment offers at the end of each six-month period whereby the Excess Cash Flow (as defined in the 2024 Co-Issuer Notes Indenture) generated by the Wilpinjong Mine during each such period may be applied to the principal of the 2024 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.

Such prepayments may be accepted or declined at the option of the debt holders.

Based upon the Wilpinjong Mine’s results for the six-month period ended December 31, 2021, a total offer to prepay $105.6 million of principal was made on a pro rata basis in February 2022, including $51.2 million of the Co-Issuer Notes and $54.4 million of the Co-Issuer Term Loan.

The offer for the Co-Issuer Notes expires March 14, 2022.

The Company expects to prepay $17.2 million of principal under the now-expired Co-Issuer Term Loan offer, which is reflected within the current portion of long-term debt in the accompanying consolidated balance sheet as of December 31, 2021.

There was no prepayment offer made with respect to the six-month period ended June 30, 2021.

Revolver Transactions

In connection with the Refinancing Transactions, we restructured the revolving loans under 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 (New Co-Issuer Term Loans, New Co-Issuer Term Loan Agreement), (iii) Peabody entering into a letter of credit facility (the New Company LC Agreement), and (iv) amending the Credit Agreement (collectively, the Revolver Transactions).

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

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

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

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

In connection with the Revolver Transactions, we amended the Credit Agreement to make certain changes in consideration of the New 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, effectively negating the compliance requirement at December 31, 2020.

The New Company LC Agreement requires that our 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 will be excluded from the calculation.

Considering the Refinancing Transactions, we expect to incur approximately $200 million of interest expense, including approximately $50 million of non-cash interest expense, during the year ended December 31, 2021.

In connection with the Refinancing Transactions, the Company restructured the revolving loans under 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) Peabody entering into a letter of credit facility (the Company LC Agreement), and (iv) amending the Credit Agreement (collectively, the Revolver Transactions).

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 of credit under the Credit Agreement were deemed to be issued.

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.

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 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.

Liquidity calculated in this manner amounted to $771.9 million at December 31, 2021.

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

(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).

Other Debt Financing

The Refinancing Transactions did not significantly impact the Company’s existing senior secured term loan under the Credit Facility (Senior Secured Term Loan), or its $500.0 million of 6.375% senior secured notes due March 2025 (2025 Notes), but these debt instruments were impacted by subsequent financing transactions described below.

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

The senior secured notes require semi-annual interest payments each March 31 and September 30 until maturity.

The Company’s debt agreements impose various restrictions and limits on certain categories of payments that the Company may make, such as those for dividends, investments, and stock repurchases.

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

The Company was compliant with all covenants under its debt agreements including the minimum liquidity covenant under the Company LC Agreement at December 31, 2021.

Subsequent Financing Transactions

Subsequent to the Refinancing Transactions, the Company completed a series of financing transactions intended to improve its capital structure.

During 2021, the Company announced an at-the-market equity offering program pursuant to which, as amended, the Company could offer and sell up to 32.5 million shares of its common stock.

Through December 31, 2021, the Company sold approximately 24.8 million shares for net cash proceeds of $269.8 million.

Peabody Energy Corporation 2021 Form 10-K

Through December 31, 2021, the Company retired $91.4 million of 2024 Peabody Notes, $117.8 million of 2025 Notes and $61.7 million of its Senior Secured Term Loan primarily through various open market purchases at an aggregate cost of $232.4 million.

During the year ended December 31, 2021, the Company recorded net gains on early debt extinguishment of $28.8 million related to these retirements.

Through December 31, 2021, the Company also completed multiple bilateral transactions with holders of the 2022 Notes, the 2025 Notes and the 2024 Peabody Notes in which the Company issued an aggregate 10.0 million shares of its common stock in exchange for $37.3 million aggregate principal amount of the 2022 Notes, $47.2 million aggregate principal amount of the 2025 Notes and $21.6 million aggregate principal amount of the 2024 Peabody Notes.

As a result of the Company’s open market purchases of its debt during the three months ended December 31, 2021, on January 14, 2022, the Company announced a Mandatory Repurchase Offer of up to $38.6 million of 2024 Peabody Notes, at 94.940% 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 March 4, 2022, unless extended by the Company.

Considering the Refinancing Transactions and the subsequent financing transactions described above, the Company expects to incur approximately $157 million of interest expense, including approximately $17 million of non-cash interest expense, during the year ended December 31, 2022.

Approximately $80 million of the total cash interest expense expected to be incurred in 2022 is related to the Company’s Indebtedness, and the remainder relates primarily to its surety bonding and securitization programs.

Refer to Note 11.

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

Accounts Receivable Securitization Program

As described in Note 22.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” of the accompanying consolidated financial statements, we entered into an amended accounts receivable securitization program during 2017 which currently expires in 2022.

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

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

At December 31, 2020, we had no outstanding borrowings and $112.3 million of letters of credit provided under the program.

The letters of credit are primarily in support of portions of our obligations for property and casualty insurance.

Capital Requirements

Additions to Property, Plant, Equipment and Mine Development.

For 2021, we are targeting capital expenditures of approximately $225 million, which includes approximately $135 million for ongoing extension projects primarily related to our Seaborne Thermal Mining segment.

We have no substantial future payment requirements under U.S.

federal coal reserve leases.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” of the accompanying consolidated financial statements, the Company entered into an accounts receivable securitization program during 2017.

The securitization program was amended in January 2022 to extend its maturity to January 2025 and reduce the available funding capacity from $250.0 million to $175.0 million, which better aligns with the current average borrowing base.

Funding capacity is limited to the availability of eligible receivables and is accounted for as a secured borrowing.

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

At December 31, 2021, the Company had no outstanding borrowings and $143.9 million of letters of credit issued under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company was not required to post cash collateral under the Securitization Program at December 31, 2021.

Collateralized Letter of Credit Agreement

In February 2022, the Company entered into a new agreement, which provides up to $250.0 million of capacity for irrevocable standby letters of credit in support of reclamation bonding.

The agreement requires the Company to provide cash collateral at a level of 103% of the aggregate amount of letters of credit outstanding under the arrangement (limited to $5.0 million total excess collateralization.) Outstanding letters of credit bear a fixed fee in the amount of 0.75% per annum.

The Company receives a deposit rate of 0.25% per annum on the amount of cash collateral posted in support of letters of credit, with the rate subject to increases over time.

The agreement has an initial expiration date of December 31, 2025.

Capital Expenditures

For 2022, the Company is targeting total capital expenditures of approximately $190 million, which includes approximately $80 million of major project and growth capital expenditures.

Other Requirements

The Company will incur significant future cash outflows for certain liabilities related to its prior mining activities and former employees.

Such cash flows pertain to postretirement benefit plans, work-related injuries and illnesses, defined benefit pension plans, mine reclamation and end-of-mine closure costs and exploration obligations and are estimated to amount to approximately $205 million in 2022, $155 million in 2023, $150 million in 2024, $145 million in 2025, $135 million in 2026, and $1,640 million thereafter.

The Company has various short- and long-term take-or-pay arrangements in Australia and the U.S.

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

The estimated future cash flows associated with such arrangements are approximately $85 million in 2022, $90 million in 2023, $95 million in 2024, $90 million in 2025, $85 million in 2026, and $710 million thereafter.

Peabody Energy Corporation 2021 Form 10-K

Historical Cash Flows and Free Cash Flow

The following table summarizes our cash flows for the year ended December 31, 2020 and 2019, as reported in the accompanying consolidated financial statements:

The Company’s operating lease commitments, excluding potential contingent rental amounts, will require cash payments of approximately $19 million in 2022, $17 million in 2023, and $13 million thereafter.

Cash Flows and Free Cash Flow

The following table summarizes the Company’s cash flows for the years ended December 31, 2021 and 2020, as reported in the accompanying consolidated financial statements.

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

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

Year Ended December 31,

(Dollars in millions)

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash provided by (used in) operating activities $ 420.0 $ (9.7)

Net cash used in investing activities (131.5) (206.7)

Net cash provided by (used in) financing activities 193.4 (701.3)

Net cash (used in) provided by financing activities (43.4) 193.4

Net change in cash, cash equivalents and restricted cash 245.1 (23.0)

1 unchanged sentence

Cash, cash equivalents and restricted cash at end of period $ 954.3 $ 709.2

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash provided by (used in) operating activities $ 420.0 $ (9.7)

Net cash used in investing activities (131.5) (206.7)

Amount attributable to acquisition of Shoal Creek Mine — 2.4

Free Cash Flow $ 288.5 $ (216.4)

Operating Activities.

The net decrease in net cash (used in) provided by operating activities for the year ended December 31, 2020 compared to the prior year was driven by a year-over-year decrease in cash from our mining operations, partially offset by a favorable change in net cash flows associated with our working capital ($108.0 million), and higher funding of our pension and retiree healthcare plans during 2019 ($16.7 million).

The net increase in net cash provided by (used in) operating activities for the year ended December 31, 2021 compared to the prior year was driven by a year-over-year increase in cash from the Company’s mining operations ($526.6 million) partially offset by increased cash utilized to satisfy the margin requirements associated with derivative financial instruments ($96.9 million).

Investing Activities.

The decrease in net cash used in investing activities for the year ended December 31, 2020 compared to the prior year was driven by lower capital expenditures ($87.8 million), partially offset by higher proceeds from insurance recoveries attributable to North Goonyella equipment in the prior year period ($23.2 million) and higher cash receipts from Middlemount in the prior year period ($14.7 million).

The decrease in net cash used in investing activities for the year ended December 31, 2021 compared to the prior year was compared to the same period in the prior year was driven by cash receipts from the Company’s equity method investee, Middlemount ($44.7 million), and lower advances to related parties ($22.7 million).

Financing Activities.

The increase in net cash provided by (used in) financing activities for the year ended December 31, 2020 compared to the prior year was driven by borrowings under our revolving credit facility and accounts receivable securitization program ($315.0 million and $60.0 million, respectively), greater common stock repurchases and dividends in the prior year ($329.9 million and $258.1 million, respectively), partially offset by higher long-term debt repayments in the current year ($98.4 million).

Peabody Energy Corporation 2020 Form 10-K

Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2020:

Payments Due By Year

Total Less than

Years More than

(Dollars in millions)

Long-term debt obligations (principal and interest) (1)

$ 1,787.3 $ 74.9 $ 781.8 $ 930.6 $ —

Finance lease obligations (principal and interest) 33.3 17.1 7.3 1.2 7.7

Operating lease obligations (2)

72.4 24.8 34.4 9.4 3.8

Unconditional purchase obligations (3)

37.0 29.3 7.7 — —

Coal reserve lease and royalty obligations 55.7 5.5 10.8 8.9 30.5

Take-or-pay obligations (4)

1,206.5 94.5 177.7 180.2 754.1

Other long-term liabilities (5)

2,756.0 243.3 346.1 325.0 1,841.6

Total contractual cash obligations $ 5,948.2 $ 489.4 $ 1,365.8 $ 1,455.3 $ 2,637.7

(1) Represents the original contractual maturities of our long-term debt obligations.

The related interest on long-term debt was calculated using rates in effect at December 31, 2020 for the remaining contractual term of the outstanding borrowings.

Following the completion of the Refinancing Transactions, our total long-term debt obligations (principal and interest) increased to $1,953.6 million.

(2) Excludes contingent rents.

Refer to Note 13.

“Leases” to the accompanying consolidated financial statements for additional discussion of contingent rental agreements.

(3) We routinely enter into purchase agreements with approved vendors for most types of operating expenses in the ordinary course of business.

Our specific open purchase orders (which have not been recognized as a liability) under these purchase agreements, combined with any other open purchase orders, are not material and though they are considered enforceable and legally binding, the related terms generally allow us the option to cancel, reschedule or adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

Accordingly, the commitments in the table above relate to orders to suppliers for capital purchases.

(4) Represents various short- and long-term take-or-pay arrangements in Australia and the U.S.

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

(5) Represents estimated cash outflows for long-term liabilities relating to our postretirement benefit plans, work-related injuries and illnesses, defined benefit pension plans, mine reclamation and end-of-mine closure costs and exploration obligations.

Also includes $15 million related to the settlement of the United Mine Workers of America (UMWA) 1974 Pension Plan Litigation described in Note 4.

“Discontinued Operations” to the accompanying consolidated financial statements.

We do not expect any of the $9.1 million of net unrecognized tax benefits reported in our consolidated financial statements to require cash settlement within the next year.

Beyond that, we are unable to make reasonably reliable estimates of periodic cash settlements with respect to such unrecognized tax benefits.

Off-Balance Sheet Arrangements

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

The decrease in net cash provided by financing activities for the year ended December 31, 2021 compared to the prior year was driven by $375.0 million of revolving loan and securitization borrowings in the prior year, higher repayments of debt principal ($115.9 million) and payments for deferred financing costs ($15.5 million) in the current year, partially offset by $269.8 million proceeds from the issuance of common stock in the current year.

Financial Assurances

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

At December 31, 2021, such instruments included $1,463.7 million of surety bonds and $452.6 million of letters of credit.

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

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

We do not expect any material losses to result from these guarantees or off-balance-sheet instruments in excess of liabilities provided for in our consolidated balance sheets.

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

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

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

Peabody Energy Corporation 2021 Form 10-K

5 unchanged sentences

Surety bonds and bank guarantees $ 1,294.7 $ 42.1 $ 79.9 $ 30.9 $ 16.1 $ 1,463.7

Letters of credit outstanding under revolving credit facility 220.9 90.4 7.5 5.0 — 323.8

Letters of credit outstanding under letter of credit facility 205.8 90.9 7.1 5.0 — 308.8

Letters of credit outstanding under accounts receivable securitization program 117.2 18.9 7.7 — — 143.8

Other letters of credit — 1.5 — — — 1.5

1,617.7 151.9 94.7 35.9 16.1 1,916.3

4 unchanged sentences

Obligations supported, net $ 1,286.8 $ 122.0 $ 94.7 $ 34.7 $ 16.1 $ 1,554.3

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

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

(2) Obligations pertain to customer and vendor contracts.

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(4) Serve as collateral for certain surety bonds at the request of surety bond providers.

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

The Company has also posted $8.8 million in incremental collateral directly with the beneficiary that is not supported by a surety bond.

Financial assurances associated with new reclamation bonding requirements, surety bonds or other obligations may require additional collateral in the form of cash or letters of credit causing a decline in the Company’s liquidity.

As described in Note 22.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to the accompanying consolidated financial statements, we are required to provide various forms of financial assurance in support of our mining reclamation obligations in the jurisdictions in which we operate.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to the accompanying consolidated financial statements, the Company is required to provide various forms of financial assurance in support of its mining reclamation obligations in the jurisdictions in which it operates.

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

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

Following our emergence from the Chapter 11 Cases, we shifted away from extensive self-bonding in the U.S.

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

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

At December 31, 2020, we had total asset retirement obligations of $728.2 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

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

Self-bonding in the U.S.

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

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

At December 31, 2021, the Company had total asset retirement obligations of $719.8 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

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

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

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to our accompanying consolidated financial statements for a discussion of our accounts receivable securitization program and guarantees and other financial instruments with off-balance sheet risk.

“Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to the accompanying consolidated financial statements for a discussion of the Company’s accounts receivable securitization program and guarantees and other financial instruments with off-balance sheet risk.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our financial statements, which have been prepared in accordance with U.S.

We are also required under U.S.

The Company’s discussion and analysis of its financial condition, results of operations, liquidity and capital resources is based upon its financial statements, which have been prepared in accordance with U.S.

The Company is also required under U.S.

GAAP to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

On an ongoing basis, the Company evaluates its estimates.

The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

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Impairment of Long-Lived Assets.

We evaluate our long-lived assets held and used in operations for impairment as events and changes in circumstances indicate that the carrying amount of such assets might not be recoverable.

The Company evaluates its long-lived assets held and used in operations for impairment as events and changes in circumstances indicate that the carrying amount of such assets might not be recoverable.

Factors that would indicate potential impairment to be present include, but are not limited to, a sustained history of operating or cash flow losses, an unfavorable change in earnings and cash flow outlook, prolonged adverse industry or economic trends and a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition.

We generally do not view short-term declines in thermal and metallurgical coal prices as a triggering event for conducting impairment tests because of historic price volatility.

However, we generally view a sustained trend of depressed coal pricing (for example, over periods exceeding one year) as an indicator of potential impairment.

Because of the volatile and cyclical nature of coal prices and demand, it is reasonably possible that coal prices may decrease and/or fail to improve in the near term, which, absent sufficient mitigation such as an offsetting reduction in our operating costs, may result in the need for future adjustments to the carrying value of our long-lived mining assets and mining-related investments.

The Company generally does not view short-term declines in thermal and metallurgical coal prices as a triggering event for conducting impairment tests because of historic price volatility.

However, the Company generally views a sustained trend of depressed coal pricing (for example, over periods exceeding one year) as an indicator of potential impairment.

Because of the volatile and cyclical nature of coal prices and demand, it is reasonably possible that coal prices may decrease and/or fail to improve in the near term, which, absent sufficient mitigation such as an offsetting reduction in the Company’s operating costs, may result in the need for future adjustments to the carrying value of its long-lived mining assets and mining-related investments.

Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

For our active mining operations, we generally group such assets at the mine level, or the mining complex level for mines that share infrastructure, with the exception of impairment evaluations triggered by mine closures.

For its active mining operations, the Company generally groups such assets at the mine level, or the mining complex level for mines that share infrastructure, with the exception of impairment evaluations triggered by mine closures.

In those cases involving mine closures, the related assets are evaluated at the individual asset level for remaining economic life based on transferability to ongoing operating sites or for expected salvage.

For our development and exploration properties and portfolio of surface land and coal reserve holdings, we consider several factors to determine whether to evaluate those assets individually or on a grouped basis for purposes of impairment testing.

For its development and exploration properties and portfolio of surface land and coal reserve and resource holdings, the Company considers several factors to determine whether to evaluate those assets individually or on a grouped basis for purposes of impairment testing.

Such factors include geographic proximity to one another, the expectation of shared infrastructure upon development based on future mining plans and whether it would be most advantageous to bundle such assets in the event of a sale to a third party.

When indicators of impairment are present, we evaluate our long-lived assets for recoverability by comparing the estimated undiscounted cash flows expected to be generated by those assets under various assumptions to their carrying amounts.

When indicators of impairment are present, the Company evaluates its long-lived assets for recoverability by comparing the estimated undiscounted cash flows in the LOM plan expected to be generated by those assets under various assumptions to their carrying amounts.

If such undiscounted cash flows indicate that the carrying value of the asset group is not recoverable, impairment losses are measured by comparing the estimated fair value of the asset group to its carrying amount.

As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of an expected present value technique based on the income approach, except for non-strategic coal reserves, surface lands and undeveloped coal properties excluded from our long-range mine planning.

As quoted market prices are unavailable for the Company’s individual mining operations, fair value is determined through the use of an expected present value technique based on the income approach, except for non-strategic coal reserves and resources, surface lands and undeveloped coal properties excluded from its long-range mine planning.

In those cases, a market approach is utilized based on the most comparable market multiples available.

The estimated future cash flows and underlying assumptions used to assess recoverability and, if necessary, measure the fair value of our long-lived mining assets are derived from those developed in connection with our planning and budgeting process.

We believe our assumptions to be consistent with those a market participant would use for valuation purposes.

The most critical assumptions underlying our projections and fair value estimates include those surrounding future tons sold, coal prices for unpriced coal, production costs (including costs for labor, commodity supplies and contractors), transportation costs, foreign currency exchange rates and a risk-adjusted, cost of capital (all of which generally constitute unobservable Level 3 inputs under the fair value hierarchy), in addition to market multiples for non-strategic coal reserves, surface lands and undeveloped coal properties excluded from our long-range mine planning (which generally constitute Level 2 inputs under the fair value hierarchy).

The estimated future cash flows and underlying assumptions used to assess recoverability and, if necessary, measure the fair value of the Company’s long-lived mining assets are derived from those developed in connection with its planning and budgeting process.

The Company believes its assumptions to be consistent with those a market participant would use for valuation purposes.

The most critical assumptions underlying its projections and fair value estimates include those surrounding future tons sold, coal prices for unpriced coal, production costs (including costs for labor, commodity supplies and contractors), transportation costs, foreign currency exchange rates and a risk-adjusted, cost of capital (all of which generally constitute unobservable Level 3 inputs under the fair value hierarchy), in addition to market multiples for non-strategic coal reserves and resources, surface lands and undeveloped coal properties excluded from the Company’s long-range mine planning (which generally constitute Level 2 inputs under the fair value hierarchy).

There were no impairment charges of long-lived assets recorded for the year ended December 31, 2021.

Impairment charges of $1,487.4 million of long-lived assets were recorded for the year ended December 31, 2020.

The assumptions used are based on our best knowledge at the time we prepare our analysis but can vary significantly due to the volatile and cyclical nature of coal prices and demand, regulatory issues, unforeseen mining conditions, commodity prices and cost of labor.

Additionally, the 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, was a significant consideration in our analysis.

These factors may cause us to be unable to recover all or a portion of the carrying value of our long-lived assets.

We conducted a review of all other long-lived assets for recoverability as of December 31, 2020 and determined that no further impairment charge was necessary as of that date.

“Asset Impairment” to our accompanying consolidated financial statements for additional information regarding impairment charges.

The assumptions used are based on the Company’s best knowledge at the time it prepare its analysis but can vary significantly due to the volatile and cyclical nature of coal prices and demand, regulatory issues, unforeseen mining conditions, commodity prices and cost of labor.

These factors may cause the Company to be unable to recover all or a portion of the carrying value of its long-lived assets.

The Company has identified certain assets with an aggregate carrying value of approximately $0.5 billion at December 31, 2021 in its 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 December 31, 2021 and determined that no further impairment charges were necessary as of that date.

“Asset Impairment” to the accompanying consolidated financial statements for additional information regarding impairment charges.

Peabody Energy Corporation 2021 Form 10-K

Income Taxes.

We account for income taxes in accordance with accounting guidance which requires deferred tax assets and liabilities to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.

Peabody accounts for income taxes in accordance with accounting guidance which requires deferred tax assets and liabilities to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.

The guidance also requires that deferred tax assets be reduced by a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.

In our evaluation of the need for a valuation allowance, we take into account various factors, including the expected level of future taxable income, available tax planning strategies, reversals of existing taxable temporary differences and taxable income in carryback years.

As of December 31, 2020, we had valuation allowances for income taxes totaling $2,287.3 million.

If actual results differ from the assumptions made in our annual evaluation of our valuation allowance, we may record a change in valuation allowance through income tax expense in the period such determination is made.

Peabody Energy Corporation 2020 Form 10-K

Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions.

We recognize the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

In its evaluation of the need for a valuation allowance, Peabody takes into account various factors, including the expected level of future taxable income, available tax planning strategies, reversals of existing taxable temporary differences and taxable income in carryback years.

As of December 31, 2021, the Company had valuation allowances for income taxes totaling $2,120.8 million.

If actual results differ from the assumptions made in the annual evaluation of its valuation allowance, Peabody may record a change in valuation allowance through income tax expense in the period such determination is made.

Peabody’s liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with its various filing positions.

Peabody recognizes the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position must be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As of December 31, 2020, we had net unrecognized tax benefits of $9.1 million included in recorded liabilities in the consolidated balance sheet.

We believe that our judgments and estimates are reasonable;

however, to the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our recorded liabilities, our effective tax rate in a given period could be materially affected.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code.

Key provisions of the Act that impact the Company include:

(i) repeal of the corporate alternative minimum tax system, (ii) reduction of the U.S.

federal corporate tax rate from 35% to 21% and (iii) the inclusion of foreign income from the new global intangible low-taxed income provision of the Act.

“Income Taxes” to the accompanying consolidated financial statements for additional information regarding valuation allowances, unrecognized tax benefits and the Act.

As of December 31, 2021, the Company had net unrecognized tax benefits of $11.0 million included in recorded liabilities in the consolidated balance sheet.

Peabody believes that its judgments and estimates are reasonable;

however, to the extent it prevails in matters for which liabilities have been established, or are required to pay amounts in excess of its recorded liabilities, the Company’s effective tax rate in a given period could be materially affected.

“Income Taxes” to the accompanying consolidated financial statements for additional information regarding valuation allowances and unrecognized tax benefits.

Postretirement Benefit and Pension Liabilities.

We have long-term liabilities for our employees’ postretirement benefit costs and defined benefit pension plans.

Our pension obligations are funded in accordance with the provisions of applicable laws and our policies.

Liabilities for postretirement benefit costs are funded at our discretion.

Expense for the year ended December 31, 2020 for postretirement benefit costs and pension liabilities totaled $1.1 million, while employer contributions were $36.3 million.

Peabody has long-term liabilities for its employees’ postretirement benefit costs and defined benefit pension plans.

Its pension obligations are funded in accordance with the provisions of applicable laws and the Company’s policies.

Liabilities for postretirement benefit costs are funded at its discretion.

For the year ended December 31, 2021 Peabody recorded a total benefit related to postretirement benefit costs and pension of $38.2 million, while employer contributions were $26.8 million.

An actuarial gain of $41.8 million was recorded for the year ended December 31, 2021.

Each of these liabilities is actuarially determined and we use various actuarial assumptions, including the discount rate, future cost trends, demographic assumptions and expected asset returns to estimate the costs and obligations for these items.

Our discount rate is determined by utilizing a hypothetical bond portfolio model which approximates the future cash flows necessary to service our liabilities.

We make assumptions related to future trends for medical care costs in the estimates of postretirement benefit costs.

Our medical trend assumption is developed by annually examining the historical trend of cost per claim data.

In addition, we make assumptions related to rates of return on plan assets.

If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could differ materially from our current estimates.

Moreover, regulatory changes could affect our obligation to satisfy these or additional obligations.

For our postretirement benefit obligation, assumed discount rates and health care cost trend rates have a significant effect on the expense and liability amounts reported for our health care plans.

Below we have provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

Each of these liabilities is actuarially determined and Peabody uses various actuarial assumptions, including the discount rate, future cost trends, mortality tables, demographic assumptions and expected asset returns to estimate the costs and obligations for these items.

Peabody’s discount rate is determined by utilizing a hypothetical bond portfolio model which approximates the future cash flows necessary to service its liabilities.

The Company makes assumptions related to future trends for medical care costs in the estimates of postretirement benefit costs.

Its medical trend assumption is developed by annually examining the historical trend of cost per claim data.

In deciding which mortality tables to use, the Company periodically reviews its population’s actual mortality experience and evaluates results against its current assumptions as well as consider recent mortality tables published by the Society of Actuaries Retirement Plans Experience Committee in order to select mortality tables for use in its year end valuations.

In addition, the Company makes assumptions related to rates of return on plan assets.

If its assumptions do not materialize as expected, actual cash expenditures and costs that Peabody incurs could differ materially from its current estimates.

Moreover, regulatory changes could affect Peabody’s obligation to satisfy these or additional obligations.

Peabody Energy Corporation 2021 Form 10-K

For the Company’s postretirement benefit obligation, assumed discount rates and health care cost trend rates have a significant effect on the expense and liability amounts reported for its health care plans.

Below the Company has provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

For Year Ended December 31, 2021

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Effect on total net periodic postretirement benefit cost $ (0.1) $ 0.1

Peabody Energy Corporation 2020 Form 10-K

For our pension obligation, assumed discount rates and expected returns on assets have a significant effect on the expense and funded status amounts reported for our defined benefit pension plans.

Below we have provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

For the Company’s pension obligation, assumed discount rates and expected returns on assets have a significant effect on the expense and funded status amounts reported for its defined benefit pension plans.

Below the Company has provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

For Year Ended December 31, 2021

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Effect on total net periodic pension cost $ (4.1) $ 4.1

As a result of discretionary contributions made in recent years, our defined benefit pension plans have become nearly fully funded.

As a result of discretionary contributions made in recent years, its defined benefit pension plans have become nearly fully funded.

As a result of the funding level, the asset allocation mix reflected Peabody’s target asset mix of 100% fixed income investments and the pensions plans’ assets provide a significant hedge to the funded status against interest rate movements.

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“Pension and Savings Plans” to the accompanying consolidated financial statements for additional information regarding postretirement benefit and pension plans.

Peabody Energy Corporation 2021 Form 10-K

Asset Retirement Obligations.

Our asset retirement obligations primarily consist of spending estimates for surface land reclamation and support facilities at both surface and underground mines in accordance with applicable reclamation laws and regulations in the U.S.

The Company’s asset retirement obligations primarily consist of spending estimates for surface land reclamation and support facilities at both surface and underground mines in accordance with applicable reclamation laws and regulations in the U.S.

and Australia as defined by each mining permit.

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As changes in estimates occur (such as mine plan revisions, changes in estimated costs or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted, risk-free rate.

If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could be materially different than currently estimated.

Moreover, regulatory changes could increase our obligation to perform reclamation and mine closing activities.

Amortization associated with our asset retirement obligation assets was $26.7 million for the year ended December 31, 2020.

Asset retirement obligation expenses for the year ended December 31, 2020 was $45.7 million and payments totaled $43.4 million.

“Asset Retirement Obligations” to the accompanying consolidated financial statements for additional information regarding our asset retirement obligations.

If the Company’s assumptions do not materialize as expected, actual cash expenditures and costs that it incurs could be materially different than currently estimated.

Moreover, regulatory changes could increase its obligation to perform reclamation and mine closing activities.

Amortization associated with the Company’s asset retirement obligation assets of $27.1 million for the year ended December 31, 2021 was included in “Depreciation, depletion and amortization” in the Company’s consolidated statements of operations.

Asset retirement obligation expense, consisting of both accretion expense and expense related to reclamation activities at the Company’s active locations, for the year ended December 31, 2021 was $44.7 million and payments totaled $39.3 million.

“Asset Retirement Obligations” to the accompanying consolidated financial statements for additional information regarding the Company’s asset retirement obligations.

Contingent liabilities.

From time to time, we are subject to legal and environmental matters related to our continuing and discontinued operations and certain historical, non-coal producing operations.

In connection with such matters, we are required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses.

From time to time, Peabody is subject to legal and environmental matters related to its continuing and discontinued operations and certain historical, non-coal producing operations.

In connection with such matters, the Company is required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses.

A determination of the amount of reserves required for these matters is made after considerable analysis of each individual issue.

We accrue for legal and environmental matters within “Operating costs and expenses” when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We provide disclosure surrounding loss contingencies when we believe that it is at least reasonably possible that a material loss may be incurred or an exposure to loss in excess of amounts already accrued may exist.

Peabody accrues for legal and environmental matters within “Operating costs and expenses” when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Peabody provides disclosure surrounding loss contingencies when it believes that it is at least reasonably possible that a material loss may be incurred or an exposure to loss in excess of amounts already accrued may exist.

Adjustments to contingent liabilities are made when additional information becomes available that affects the amount of estimated loss, which information may include changes in facts and circumstances, changes in interpretations of law in the relevant courts, the results of new or updated environmental remediation cost studies and the ongoing consideration of trends in environmental remediation costs.

Accrued contingent liabilities exclude claims against third parties and are not discounted.

The current portion of these accruals is included in “Accounts payables and accrued expenses” and the long-term portion is included in “Other noncurrent liabilities” in our consolidated balance sheets.

The current portion of these accruals is included in “Accounts payables and accrued expenses” and the long-term portion is included in “Other noncurrent liabilities” in the Company’s consolidated balance sheets.

In general, legal fees related to environmental remediation and litigation are charged to expense.

We include the interest component of any litigation-related penalties within “Interest expense” in our consolidated statements of operations.

“Commitments and Contingencies” to the accompanying consolidated financial statements for further discussion of our contingent liabilities.

Peabody Energy Corporation 2020 Form 10-K

The Company includes the interest component of any litigation-related penalties within “Interest expense” in its consolidated statements of operations.

“Commitments and Contingencies” to the accompanying consolidated financial statements for further discussion of the Company’s contingent liabilities.

Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

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

What changed 10-K

Item 7. Management’s Discussion and Analysis