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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 305 added, 306 removed, 546 unchanged (53% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

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

2022 2021 2022 2021

(Dollars in millions, except per share data)

2 unchanged sentences

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

825.6 611.4 1,524.6 1,194.0

Depreciation, depletion and amortization 73.8 77.1 146.7 145.4

2 unchanged sentences

Restructuring charges

0.2 2.1 1.8 4.2

Other operating (income) loss:

Net (gain) loss on disposals ( 4.9 ) 0.6

Net gain on disposals ( 12.8 ) ( 3.0 ) ( 17.7 ) ( 2.4 )

(Income) loss from equity affiliates ( 48.7 ) 3.5 ( 93.4 ) 4.4

Operating loss ( 70.6 ) ( 40.8 )

Operating profit (loss) 449.3 ( 4.2 ) 378.7 ( 45.0 )

Interest expense 37.6 45.4 77.0 97.8

2 unchanged sentences

Net periodic benefit credit, excluding service cost ( 12.3 ) ( 8.7 ) ( 24.5 ) ( 17.4 )

Loss from continuing operations before income taxes ( 120.8 ) ( 79.5 )

Income tax benefit ( 1.0 ) ( 1.8 )

Loss from continuing operations, net of income taxes ( 119.8 ) ( 77.7 )

Income (loss) from continuing operations before income taxes 422.6 ( 27.8 ) 301.8 ( 107.3 )

Income tax provision (benefit) 11.3 ( 4.8 ) 10.3 ( 6.6 )

Income (loss) from continuing operations, net of income taxes 411.3 ( 23.0 ) 291.5 ( 100.7 )

Loss from discontinued operations, net of income taxes ( 0.7 ) ( 2.3 ) ( 1.5 ) ( 4.3 )

Net loss ( 120.6 ) ( 79.7 )

Net (loss) income attributable to noncontrolling interests ( 1.1 ) 0.4

Net loss attributable to common stockholders $ ( 119.5 ) $ ( 80.1 )

Loss from continuing operations:

Basic loss per share $ ( 0.87 ) $ ( 0.79 )

Diluted loss per share $ ( 0.87 ) $ ( 0.79 )

Net loss attributable to common stockholders:

Basic loss per share $ ( 0.88 ) $ ( 0.81 )

Diluted loss per share $ ( 0.88 ) $ ( 0.81 )

Net income (loss) 410.6 ( 25.3 ) 290.0 ( 105.0 )

Net income attributable to noncontrolling interests 1.1 3.3 — 3.7

Net income (loss) attributable to common stockholders $ 409.5 $ ( 28.6 ) $ 290.0 $ ( 108.7 )

Income (loss) from continuing operations:

Basic income (loss) per share $ 2.85 $ ( 0.26 ) $ 2.08 $ ( 1.05 )

Diluted income (loss) per share $ 2.55 $ ( 0.26 ) $ 1.93 $ ( 1.05 )

Net income (loss) attributable to common stockholders:

Basic income (loss) per share $ 2.84 $ ( 0.28 ) $ 2.07 $ ( 1.09 )

Diluted income (loss) per share $ 2.54 $ ( 0.28 ) $ 1.93 $ ( 1.09 )

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

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

2022 2021 2022 2021

(Dollars in millions)

Net loss $ ( 120.6 ) $ ( 79.7 )

Net income (loss) $ 410.6 $ ( 25.3 ) $ 290.0 $ ( 105.0 )

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

2 unchanged sentences

Other comprehensive loss, net of income taxes ( 16.9 ) ( 11.2 ) ( 28.4 ) ( 22.4 )

Comprehensive loss ( 132.1 ) ( 90.9 )

Net (loss) income attributable to noncontrolling interests ( 1.1 ) 0.4

Comprehensive loss attributable to common stockholders $ ( 131.0 ) $ ( 91.3 )

Comprehensive income (loss) 393.7 ( 36.5 ) 261.6 ( 127.4 )

Net income attributable to noncontrolling interests 1.1 3.3 — 3.7

Comprehensive income (loss) attributable to common stockholders $ 392.6 $ ( 39.8 ) $ 261.6 $ ( 131.1 )

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(Amounts in millions, except per share data)

1 unchanged sentence

Cash and cash equivalents $ 1,120.7 $ 954.3

Restricted cash

Accounts receivable, net of allowance for credit losses of $ 0.0 at March 31, 2022 and December 31, 2021

Accounts receivable, net of allowance for credit losses of $ 0.0 at June 30, 2022 and December 31, 2021

Inventories, net 252.9 226.7

19 unchanged sentences

Preferred Stock — $ 0.01 per share par value;

100.0 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021

100.0 shares authorized, no shares issued or outstanding as of June 30, 2022 and December 31, 2021

Series Common Stock — $ 0.01 per share par value;

50.0 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021

50.0 shares authorized, no shares issued or outstanding as of June 30, 2022 and December 31, 2021

Common Stock — $ 0.01 per share par value;

450.0 shares authorized, 187.0 shares issued and 143.8 shares outstanding as of March 31, 2022 and 176.3 shares issued and 133.3 shares outstanding as of December 31, 2021

450.0 shares authorized, 187.1 shares issued and 143.9 shares outstanding as of June 30, 2022 and 176.3 shares issued and 133.3 shares outstanding as of December 31, 2021

Additional paid-in capital 3,972.9 3,745.6

Treasury stock, at cost — 43.2 and 43.0 common shares as of March 31, 2022 and December 31, 2021

Treasury stock, at cost — 43.2 and 43.0 common shares as of June 30, 2022 and December 31, 2021

( 1,372.9 ) ( 1,370.3 )

8 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions)

Cash Flows From Operating Activities

Net loss $ ( 120.6 ) $ ( 79.7 )

Net income (loss) $ 290.0 $ ( 105.0 )

Loss from discontinued operations, net of income taxes 1.5 4.3

Loss from continuing operations, net of income taxes ( 119.8 ) ( 77.7 )

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

Income (loss) from continuing operations, net of income taxes 291.5 ( 100.7 )

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

Depreciation, depletion and amortization 146.7 145.4

2 unchanged sentences

Noncash share-based compensation 5.4 3.9

Net (gain) loss on disposals ( 4.9 ) 0.6

Net gain on disposals ( 17.7 ) ( 2.4 )

Net loss (gain) on early debt extinguishment 25.8 ( 15.3 )

12 unchanged sentences

Other, net 3.3 —

Net cash (used in) provided by continuing operations ( 272.5 ) 74.1

Net cash provided by (used in) continuing operations 12.1 ( 18.0 )

Net cash used in discontinued operations ( 2.7 ) ( 4.8 )

Net cash (used in) provided by operating activities ( 273.7 ) 71.0

Net cash provided by (used in) operating activities 9.4 ( 22.8 )

PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions)

5 unchanged sentences

Distributions from joint ventures 280.8 252.6

Advances to related parties ( 1.2 ) ( 0.2 )

Cash receipts from Middlemount Coal Pty Ltd and other related parties 143.9 2.6

8 unchanged sentences

Distributions to noncontrolling interests ( 13.8 ) ( 0.1 )

Other, net 0.1 0.1

Net cash provided by (used in) financing activities 75.1 ( 41.9 )

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of period (1)

$ 1,133.3 $ 561.9

(1) The following table provides a reconciliation of “Cash, cash equivalents and restricted cash at end of period” at June 30, 2022

Cash and cash equivalents $ 1,120.7

Restricted cash included in “Investments and other assets” 12.6

Cash, cash equivalents and restricted cash at end of period $ 1,133.3

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31,

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

2022 2021 2022 2021

(Dollars in millions)

5 unchanged sentences

Share-based compensation for equity-classified awards 3.4 2.1 5.4 3.9

Common stock issued in exchange for debt retirement — 30.5 — 30.5

Common stock issuances, net of costs — 64.8 221.9 64.8

6 unchanged sentences

Balance, beginning of period ( 1,032.7 ) ( 1,353.4 ) ( 913.2 ) ( 1,273.3 )

Net loss attributable to common stockholders ( 119.5 ) ( 80.1 )

Net income (loss) attributable to common stockholders 409.5 ( 28.6 ) 290.0 ( 108.7 )

Balance, end of period ( 623.2 ) ( 1,382.0 ) ( 623.2 ) ( 1,382.0 )

7 unchanged sentences

Balance, beginning of period 44.1 52.0 59.0 51.7

Net (loss) income attributable to noncontrolling interests ( 1.1 ) 0.4

Net income attributable to noncontrolling interests 1.1 3.3 — 3.7

Distributions to noncontrolling interests — — ( 13.8 ) ( 0.1 )

15 unchanged sentences

Balance sheet information presented herein as of December 31, 2021 has been derived from the Company’s audited consolidated balance sheet at that date.

The Company’s results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2022.

The Company’s results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2022.

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

11 unchanged sentences

“Long-term Debt.” In particular, because the related senior notes have cash conversion features, bifurcation of the principal balance between debt and equity is no longer applicable.

Additionally, this guidance will require the application of the “if-converted” method to calculate the impact of convertible instruments on diluted earnings per share, which may increase their dilutive impact compared to the prior accounting model.

Additionally, this guidance requires the application of the “if-converted” method to calculate the impact of convertible instruments on diluted earnings per share, as reflected in the Company’s calculations within Note 11.

“Earnings per Share (EPS).”

Accounting Standards Not Yet Implemented

9 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Government Assistance.

In November 2021, ASU 2021-10 was issued, which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements.

The guidance is effective for annual periods beginning after December 15, 2021, with early application permitted.

The Company did not early adopt the guidance in ASU 2021-10 and does not expect the guidance to have a material impact on its disclosures.

(3) Revenue Recognition

4 unchanged sentences

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

9 unchanged sentences

Revenue $ 354.9 $ 533.8 $ 229.7 $ 224.9 $ ( 21.4 ) $ 1,321.9

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

9 unchanged sentences

Revenue $ 194.1 $ 121.0 $ 248.6 $ 162.1 $ ( 2.4 ) $ 723.4

(1) Corporate and Other revenue includes net losses related to unrealized mark-to-market adjustments on derivatives related to forecasted sales and other financial trading activity of $ 290.2 million and $ 4.9 million during the three months ended March 31, 2022 and 2021, respectively.

Refer to Note 7.

“Derivatives and Fair Value Measurements” for additional information.

Also included in Corporate and Other revenue is revenue with customers of $ 19.0 million and $ 17.9 million during the three months ended March 31, 2022 and 2021, respectively.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended June 30, 2022

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

Domestic $ 80.2 $ — $ 481.4 $ 422.7 $ — $ 984.3

Export 525.4 — — 1.0 — 526.4

Total thermal 605.6 — 481.4 423.7 — 1,510.7

Metallurgical coal

Export — 851.3 — — — 851.3

Total metallurgical — 851.3 — — — 851.3

0.5 3.8 ( 0.5 ) 4.3 ( 356.8 ) ( 348.7 )

Revenue $ 606.1 $ 855.1 $ 480.9 $ 428.0 $ ( 356.8 ) $ 2,013.3

Six Months Ended June 30, 2021

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

Thermal Mining Corporate and Other (1)

(Dollars in millions)

Domestic $ 91.6 $ — $ 477.2 $ 306.8 $ — $ 875.6

Export 278.3 — — 1.2 — 279.5

Total thermal 369.9 — 477.2 308.0 — 1,155.1

Metallurgical coal

Export — 207.0 — — — 207.0

Total metallurgical — 207.0 — — — 207.0

0.6 1.5 ( 0.2 ) 3.4 7.3 12.6

Revenue $ 370.5 $ 208.5 $ 477.0 $ 311.4 $ 7.3 $ 1,374.7

(1) Corporate and Other includes the following:

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

2022 2021 2022 2021

(Dollars in millions)

Unrealized loss on derivative contracts related to forecasted sales $ ( 24.5 ) $ ( 23.7 ) $ ( 325.5 ) $ ( 25.6 )

Realized loss on derivative contracts related to forecasted sales ( 122.6 ) ( 7.1 ) ( 190.6 ) ( 15.0 )

Revenue from physical sale of coal (3)

122.0 23.2 143.3 41.1

Trading revenue 0.3 1.4 10.4 0.7

3.4 3.8 5.6 6.1

Total Corporate and Other $ ( 21.4 ) $ ( 2.4 ) $ ( 356.8 ) $ 7.3

(2) Other includes revenue from arrangements such as customer contract-related payments associated with volume shortfalls, royalties related to coal lease agreements, sales agency commissions, farm income and property and facility rentals.

(3) Includes revenues recognized upon the physical sale of coal purchased from the Company’s operating segments, and sold to customers through the Company’s coal trading business as part of settling certain derivative contracts.

Primarily represents the difference between the price contracted with the customer and the price allocated to the operating segment.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recorded revenue related to delivered coal to customers of approximately $ 1,039 million and $ 656 million during the three months ended March 31, 2022 and 2021, respectively.

Such amounts exclude unrealized and realized gains and losses on derivative contracts related to forecasted sales and certain other revenue unrelated to delivered coal.

Committed Revenue from Contracts with Customers

The Company expects to recognize revenue subsequent to March 31, 2022 of approximately $ 5.1 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at March 31, 2022.

Approximately 48 % of such amount is expected to be recognized over the next twelve months and the remainder thereafter.

Actual revenue related to such contracts may differ materially for various reasons, including price adjustment features for coal quality and cost escalations, volume optionality provisions and potential force majeure events.

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

Accounts Receivable

“Accounts receivable, net” at March 31, 2022 and December 31, 2021 consisted of the following:

March 31, 2022 December 31, 2021

“Accounts receivable, net” at June 30, 2022 and December 31, 2021 consisted of the following:

June 30, 2022 December 31, 2021

(Dollars in millions)

2 unchanged sentences

Accounts receivable, net $ 530.4 $ 350.5

None of the above receivables included allowances for credit losses at March 31, 2022 or December 31, 2021.

No charges for credit losses were recognized during the three months ended March 31, 2022 or 2021.

(4) Discontinued Operations

Historically, discontinued operations included certain former Seaborne Thermal Mining and Other U.S.

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

In the third quarter of 2021, the Company executed the sale of the closed Wilkie Creek Mine, which reduced its closed mine reclamation liabilities and associated costs.

Summarized Results of Discontinued Operations

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

Three Months Ended March 31,

(Dollars in millions)

Loss from discontinued operations, net of income taxes $ ( 0.8 ) $ ( 2.0 )

Liabilities of Discontinued Operations

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

March 31, 2022 December 31, 2021

(Dollars in millions)

Accounts payable and accrued expenses $ 45.0 $ 45.0

Other noncurrent liabilities 58.7 59.0

Total liabilities classified as discontinued operations $ 103.7 $ 104.0

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Patriot-Related Matters

A significant portion of the liabilities in the table above relate to Patriot.

In 2012, Patriot filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S.

Code (the Bankruptcy Code).

In 2013, the Company entered into a definitive settlement agreement (2013 Agreement) with Patriot and the United Mine Workers of America (UMWA), on behalf of itself, its represented Patriot employees and its represented Patriot retirees, to resolve all then-disputed issues related to Patriot’s bankruptcy.

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

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

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

Black Lung Occupational Disease Liabilities.

Patriot had federal and state black lung occupational disease liabilities related to workers employed in periods prior to Patriot’s spin-off from the Company in 2007.

Upon spin-off, Patriot indemnified the Company against any claim relating to these liabilities, which amounted to approximately $ 150 million at that time.

The indemnification included any claim made by the U.S.

Department of Labor (DOL) against the Company with respect to these obligations as a potentially liable operator under the Federal Coal Mine Health and Safety Act of 1969.

The 2013 Agreement included Patriot’s affirmance of indemnities provided in the spin-off agreements, including the indemnity relating to such black lung liabilities;

however, Patriot rejected this indemnity in its May 2015 bankruptcy.

By statute, the Company had secondary liability for the black lung liabilities related to Patriot’s workers employed by former subsidiaries of the Company.

The Company’s accounting for the black lung liabilities related to Patriot is based on an interpretation of applicable statutes.

Management believes that inconsistencies exist among the applicable statutes, regulations promulgated under those statutes and the DOL’s interpretative guidance.

The Company has sought clarification from the DOL regarding these inconsistencies.

The amount of these liabilities could be reduced in the future.

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

The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $ 87.1 million and $ 87.2 million at March 31, 2022 and December 31, 2021, respectively.

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

The amount of the Company’s recorded liability reflects only Patriot workers employed by former subsidiaries of the Company that are presently retired, disabled or otherwise not actively employed.

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

None of the above receivables included allowances for credit losses at June 30, 2022 or December 31, 2021.

No charges for credit losses were recognized during the three and six months ended June 30, 2022 or 2021.

(4) Inventories

“ Inventories, net” as of March 31, 2022 and December 31, 2021 consisted of the following:

March 31, 2022 December 31, 2021

“ Inventories, net” as of June 30, 2022 and December 31, 2021 consisted of the following:

June 30, 2022 December 31, 2021

(Dollars in millions)

3 unchanged sentences

Inventories, net $ 252.9 $ 226.7

Materials and supplies inventories, net presented above have been shown net of reserves of $ 9.0 million as of both March 31, 2022 and December 31, 2021.

Materials and supplies inventories, net presented above have been shown net of reserves of $ 8.2 million and $ 9.0 million as of June 30, 2022 and December 31, 2021.

(5) Equity Method Investments

The Company had total equity method investments and financing receivables of $ 62.9 million and $ 62.2 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively, related to Middlemount Coal Pty Ltd (Middlemount).

Included in “(Income) loss from equity affiliates” in the unaudited condensed consolidated statements of operations were gains related to Middlemount of $ 45.1 million during the three months ended March 31, 2022, and losses of $ 0.9 million during the three months ended March 31, 2021.

The Company received cash payments from Middlemount of $ 47.0 million and $ 2.3 million during the three months ended March 31, 2022 and 2021, respectively.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The Company’s participation in the Revolving Loans will not, at any time, exceed its 50 % equity interest of the revolving loan limit, which was $ 50 million Australian dolla rs at March 31, 2022.

The Revolving Loans bear interest at 10 % per annum and expire on December 31, 2023.

T he Revolving Loans were not drawn upon by Middlemount as of either March 31, 2022 or December 31, 2021.

As of both March 31, 2022 and December 31, 2021, the financing receivables and Revolving Loans are accounted for as in-substance common stock due to the limited fair value attributed to Middlemount’s equi ty.

The Company had total equity method investments and financing receivables of $ 12.3 million and $ 62.2 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively, related to Middlemount Coal Pty Ltd (Middlemount).

Included in “(Income) loss from equity affiliates” in the unaudited condensed consolidated statements of operations was income related to Middlemount of $ 49.5 million and $ 95.2 million during the three and six months ended June 30, 2022, respectively, and losses of $ 3.5 million and $ 4.4 million during the three and six months ended June 30, 2021, respectively.

The Company received cash payments from Middlemount of $ 143.2 million and $ 2.3 million during the six months ended June 30, 2022 and 2021, respectively.

One of the Company’s Australian subsidiaries is party to an agreement to provide a revolving loan to Middlemount.

The Company’s participation in the revolving loan will not, at any time, exceed its 50 % equity interest of the revolving loan limit, which was $ 50 million Australian dolla rs at June 30, 2022.

The revolving loan bears interest at 10 % per annum and expires on December 31, 2023.

T here was no outstanding revolving loan at June 30, 2022 or December 31, 2021.

(6) Derivatives and Fair Value Measurements

3 unchanged sentences

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

The Company had no diesel fuel or interest rate derivatives in place as of March 31, 2022.

The Company had no diesel fuel or interest rate derivatives in place as of June 30, 2022.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Option Contracts

As of March 31, 2022, the Company had currency options outstanding with an aggregate notional amount of $ 705.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending December 31, 2022.

As of June 30, 2022, the Company had currency options outstanding with an aggregate notional amount of $ 758.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending March 31, 2023.

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

dollar exchange rate exceed amounts ranging from $ 0.76 to $ 0.80 over the nine-month period ending December 31, 2022.

dollar exchange rate exceed amounts ranging from $ 0.74 to $ 0.80 over the nine-month period ending March 31, 2023.

Derivative Contracts Related to Forecasted Sales

As of March 31, 2022, the Company held coal derivative contracts related to a portion of its forecasted sales with an aggregate notional volume of 1.6 million tonnes.

As of June 30, 2022, the Company held coal derivative contracts related to a portion of its forecasted sales with an aggregate notional volume of 1.0 million tonnes.

Such financial contracts may include futures, forwards and options.

3 unchanged sentences

Additionally, the Company classifies certain physical forward sales contracts as derivatives for which the normal purchase, normal sales exception does not apply.

During the three months ended March 31, 2022, the Company recorded an unrealized mark-to-market loss of $ 301.0 million on these coal derivative contracts, which includes approximately $ 237 million of unrealized mark-to-market losses on financial derivatives, and approximately $ 64 million on physical forward sales contracts.

During the three months ended June 30, 2022, the Company recorded a net unrealized mark-to-market loss of $ 24.5 million on these coal derivative contracts, which includes approximately $ 40 million of unrealized mark-to-market losses on financial derivatives and approximately $ 15 million of unrealized mark-to-market gains on physical forward sales contracts.

During the six months ended June 30, 2022, the Company recorded a net unrealized mark-to-market loss of $ 325.5 million on these coal derivative contracts, which includes approximately $ 306 million of unrealized mark-to-market losses on financial derivatives and approximately $ 20 million of unrealized mark-to-market losses on physical forward sales contracts.

Financial Trading Contracts

1 unchanged sentence

Such financial contracts may include futures, forwards and options.

The Company held nominal financial trading contracts as of March 31, 2022.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company held nominal financial trading contracts as of June 30, 2022.

Tabular Derivatives Disclosures

3 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Asset Derivative Liability Derivative Asset Derivative Liability Derivative

8 unchanged sentences

The Company generally posts or receives variation margin cash with its clearing broker on the majority of its financial derivatives as market values of the financial derivatives fluctuate.

As of March 31, 2022, the Company had posted $ 481.7 million aggregate margin cash, consisting of $ 347.1 million variation margin cash and $ 134.6 million initial margin.

As of June 30, 2022, the Company had posted $ 544.2 million aggregate margin cash, consisting of $ 427.4 million variation margin cash and $ 116.8 million initial margin.

As of December 31, 2021, the Company had posted $ 130.1 million aggregate margin cash, consisting of $ 91.8 million variation margin cash and $ 38.3 million initial margin.

To reduce exposure to additional margin requirements, subsequent to March 31, 2022, the Company converted 0.8 million metric tons of financial hedges into fixed price physical sales over the next 12 months, eliminating further margin requirements on these tons.

With these transactions, 1.4 million metric tons remain outstanding with 0.9 million metric tons projected to settle over the remainder of 2022.

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

The amounts of initial margin are not included with the derivatives presented in the tabular disclosures above and are included in “Other current assets” in the accompanying condensed consolidated balance sheets.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The tables below show the amounts of pre-tax gains and losses related to the Company’s derivatives and their classification within the accompanying unaudited condensed consolidated statements of operations.

Three Months Ended March 31, 2022

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

Three Months Ended June 30, 2022

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

Derivative Instrument Classification

4 unchanged sentences

Total $ ( 154.3 ) $ ( 122.9 ) $ ( 31.4 )

Three Months Ended March 31, 2021 (1)

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

Three Months Ended June 30, 2021 (1)

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

Derivative Instrument Classification

4 unchanged sentences

Total $ ( 30.6 ) $ ( 9.5 ) $ ( 21.1 )

(1) ‘Results realized in income on derivatives’ has been revised to exclude revenue arising from coal deliveries earned by the Company’s trading and brokerage function of $ 17.9 million for the three months ended March 31, 2021, to be comparable to the presentation of the 2022 amounts.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended June 30, 2022

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

Derivative Instrument Classification

(Dollars in millions)

Foreign currency option contracts Operating costs and expenses $ ( 5.2 ) $ ( 2.2 ) $ ( 3.0 )

Derivative contracts related to forecasted sales Revenue ( 516.1 ) ( 190.6 ) ( 325.5 )

Financial trading contracts Revenue 10.4 0.2 10.2

Total $ ( 510.9 ) $ ( 192.6 ) $ ( 318.3 )

Six Months Ended June 30, 2021 (1)

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

Derivative Instrument Classification

(Dollars in millions)

Foreign currency option contracts Operating costs and expenses $ ( 4.2 ) $ 4.6 $ ( 8.8 )

Derivative contracts related to forecasted sales Revenue ( 40.6 ) ( 15.0 ) ( 25.6 )

Financial trading contracts Revenue 0.7 ( 0.1 ) 0.8

Total $ ( 44.1 ) $ ( 10.5 ) $ ( 33.6 )

(1) ‘Results realized in income on derivatives’ has been revised to exclude revenue from the physical sale of coal by the Company’s trading and brokerage function of $ 23.2 million and $ 41.1 million for the three and six months ended June 30, 2021, respectively, to be comparable to the presentation of the 2022 amounts.

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

9 unchanged sentences

Variation margin cash associated with the derivative balances is excluded from this table.

March 31, 2022

June 30, 2022

Level 1 Level 2 Level 3 Total

20 unchanged sentences

Other Financial Instruments .

The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of March 31, 2022 and December 31, 2021:

The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of June 30, 2022 and December 31, 2021:

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

4 unchanged sentences

The fair value of debt, shown below, is principally based on reported market values and estimates based on interest rates, maturities, credit risk, underlying collateral and completed market transactions.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(Dollars in millions)

13 unchanged sentences

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

The Company had no transfers between Levels 1, 2 and 3 during the three months ended March 31, 2022 and 2021.

The Company had no transfers between Levels 1, 2 and 3 during the three and six months ended June 30, 2022 and 2021.

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

(7) Property, Plant, Equipment and Mine Development

The composition of property, plant, equipment and mine development, net, as of March 31, 2022 and December 31, 2021 is set forth in the table below:

March 31, 2022 December 31, 2021

The composition of property, plant, equipment and mine development, net, as of June 30, 2022 and December 31, 2021 is set forth in the table below:

June 30, 2022 December 31, 2021

(Dollars in millions)

5 unchanged sentences

Asset Impairment and Other At-Risk Assets

The Company has identified certain assets with an aggregate carrying value of approximately $ 0.5 billion at March 31, 2022 in its Other U.S.

The Company has identified certain assets with an aggregate carrying value of approximately $ 0.5 billion at June 30, 2022 in its Other U.S.

Thermal Mining and Corporate and Other segments whose recoverability is most sensitive to customer demand, customer concentration risk and future economic viability.

The Company conducted a review of those assets as of March 31, 2022 and determined that no impairment charges were necessary as of that date.

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

Historically, the majority of the Company’s leases have been accounted for as operating leases.

Refer to Note 1.

“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for the Company’s policies regarding “Leases.”

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company and certain of its subsidiaries have guaranteed other subsidiaries’ performance under various lease obligations.

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

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

The Company expects that losses with respect to leased property, if any, may be covered by insurance (subject to deductibles).

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

The components of lease expense during the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

(Dollars in millions)

Operating lease cost:

Operating lease cost $ 4.7 $ 6.0

Short-term lease cost 6.3 3.4

Variable lease cost 1.6 0.5

Sublease income ( 0.4 ) ( 0.5 )

Total operating lease cost $ 12.2 $ 9.4

Finance lease cost:

Amortization of right-of-use assets $ 1.5 $ 0.6

Interest on lease liabilities 0.6 0.5

Total finance lease cost $ 2.1 $ 1.1

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental balance sheet information related to leases at March 31, 2022 and December 31, 2021 was as follows:

March 31, 2022 December 31, 2021

(Dollars in millions)

Operating leases:

Operating lease right-of-use assets $ 33.0 $ 35.5

Accounts payable and accrued expenses $ 16.1 $ 16.4

Operating lease liabilities, less current portion 24.6 27.2

Total operating lease liabilities $ 40.7 $ 43.6

Finance leases:

Property, plant, equipment and mine development $ 32.4 $ 32.2

Accumulated depreciation ( 9.0 ) ( 7.4 )

Property, plant, equipment and mine development, net $ 23.4 $ 24.8

Current portion of long-term debt $ 15.0 $ 15.3

Long-term debt, less current portion 12.6 14.0

Total finance lease liabilities $ 27.6 $ 29.3

Weighted average remaining lease term (years)

Operating leases 2.9

Finance leases 6.7

Weighted average discount rate

Operating leases 7.0 %

Finance leases 8.2 %

Supplemental cash flow information related to leases during the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended March 31,

(Dollars in millions)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases $ 5.9 $ 8.3

Operating cash flows for finance leases 0.6 0.7

Financing cash flows for finance leases 2.2 1.3

Right-of-use assets obtained in exchange for lease obligations:

Operating leases 1.6 3.1

Finance leases — 3.6

The Company conducted a review of those assets as of June 30, 2022 and determined that no impairment charges were necessary as of that date.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company's leases have remaining lease terms ranging from less than 1 year to 19.8 years, and may include options to extend the terms, as applicable.

The contractual maturities of lease liabilities were as follows:

Period Ending December 31, Operating Leases Finance Leases

(Dollars in millions)

2022 $ 13.7 $ 8.7

2023 17.6 6.0

2027 and thereafter 0.8 7.2

Total lease payments 45.6 34.4

Less imputed interest ( 4.9 ) ( 6.8 )

Total lease liabilities $ 40.7 $ 27.6

(8) Income Taxes

The Company's effective tax rate before remeasurement for the three months ended March 31, 2022 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax provision, offset by foreign rate differential and changes in valuation allowance.

The Company’s income tax benefit of $ 1.0 million and $ 1.8 million for the three months ended March 31, 2022 and 2021, respectively, included a tax provision of $ 1.6 million and a tax benefit of $ 0.2 million, respectively, related to the remeasurement of foreign income tax accounts.

The Company's effective tax rate before remeasurement for the six months ended June 30, 2022 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax provision, offset by foreign rate differential and changes in valuation allowance.

The Company is expecting to utilize substantial net operating losses in Australia and the U.S.

in 2022 based on estimated pretax income.

The Company’s income tax provision of $ 11.3 million and income tax benefit of $ 4.8 million for the three months ended June 30, 2022 and 2021, respectively, included tax benefits of $ 3.5 million and $ 0.3 million, respectively, related to the remeasurement of foreign income tax accounts.

The Company’s income tax provision of $ 10.3 million and income tax benefit of $ 6.6 million for the six months ended June 30, 2022 and 2021, respectively, included tax benefits of $ 1.9 million and $ 0.5 million, respectively, related to the remeasurement of foreign income tax accounts.

(9) Long-term Debt

The Company’s total funded indebtedness (Indebtedness) as of March 31, 2022 and December 31, 2021 consisted of the following:

Debt Instrument (defined below, as applicable) March 31, 2022 December 31, 2021

The Company’s total indebtedness as of June 30, 2022 and December 31, 2021 consisted of the following:

Debt Instrument (defined below, as applicable) June 30, 2022 December 31, 2021

(Dollars in millions)

11 unchanged sentences

Long-term debt $ 869.2 $ 1,078.2

2021 Financing Activity

During the first quarter of 2021, the Company completed a series of transactions to, among other things, provide the Company with maturity extensions and covenant relief, while allowing it to maintain near-term operating liquidity and financial flexibility.

These transactions included a senior notes exchange and related consent solicitation, a revolving credit facility exchange, various amendments to the Company’s existing debt agreements, and completion of a related surety transaction support agreement with the Company’s surety bond providers.

2021 Financing Activity and Subsequent Repurchases

During the first quarter of 2021, the Company completed a series of financing transactions to provide the Company with maturity extensions and covenant relief, while allowing it to maintain near-term operating liquidity.

These transactions included a senior notes exchange, a revolving credit facility exchange, various amendments to the Company’s existing debt agreements, and a support agreement with the Company’s surety bond providers.

Subsequent to these transactions, the Company completed additional financing transactions which included the implementation of an at-the-market equity offering program pursuant to which the Company sold approximately 24.8 million shares of common stock for net cash proceeds of $ 269.8 million, the retirement of $ 270.9 million principal amount of existing debt through various open market purchases at an aggregate cost of $ 232.4 million, and the issuance of an aggregate 10.0 million shares of common stock in exchange for an additional $ 106.1 million principal amount of existing debt through multiple bilateral transactions with debt holders.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent to these transactions in the first quarter of 2021, the Company completed additional financing transactions during 2021 intended to improve its capital structure.

Such transactions included the implementation of an at-the-market equity offering program pursuant to which the Company sold approximately 24.8 million shares of common stock for net cash proceeds of $ 269.8 million, the retirement of $ 270.9 million principal amount of existing debt through various open market purchases at an aggregate cost of $ 232.4 million, and the issuance of an aggregate 10.0 million shares of common stock in exchange for an additional $ 106.1 million principal amount of existing debt through multiple bilateral transactions with debt holders.

In the event of allowable open market purchases of its debt, the terms of the 2024 Peabody Notes and the letter of credit facility entered into by the Company in connection with the 2021 financing activity (Company LC Agreement) require the Company to make a mandatory repurchase offer to those debt and lien holders.

In the event of open market purchases of its debt, the terms of the 2024 Peabody Notes - now redeemed as described below - required, and the letter of credit facility entered into by the Company in connection with the 2021 financing activity (Company LC Agreement) requires the Company to make repurchase offers to those debt and lien holders.

In general, the repurchase offers equate to 25 % of the principal amount of priority lien debt repurchased in the preceding quarter at a price equal to the weighted average repurchase price paid over that quarter.

2 unchanged sentences

The Company’s purchase of the principal and commitment amounts under the Company LC Agreement was effected by the posting of $ 28.5 million of collateral with the administrative agent and did not reduce the availability under the facility.

During the three months ended March 31, 2022, the Company made no other open market purchases of its debt.

The 2024 Co-Issuer Notes and the Co-Issuer Term Loans are also subject to mandatory prepayment offers at the end of each six-month period, beginning with June 30, 2021, whereby the Excess Cash Flow (as defined in the 2024 Co-Issuer Notes indenture) generated by the Wilpinjong Mine during each such period will be applied to the principal of such notes and loans on a pro rata basis, provided that the liquidity attributable to the Wilpinjong Mine would not fall below $ 60.0 million.

1 unchanged sentence

Based upon the Wilpinjong Mine’s results for the six-month period ended December 31, 2021, a required offer to prepay $ 105.6 million of total principal resulted in the prepayment of $ 17.2 million of Co-Issuer Term Loans principal, $ 0.3 million of 2024 Co-Issuer Notes principal, and a related loss on early debt extinguishment of $ 0.5 million during the three months ended March 31, 2022.

The 2021 financing activity and related agreements are more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S.

Securities and Exchange Commission on February 18, 2022.

Based upon the Wilpinjong Mine’s results for the six-month period ended June 30, 2022, the Company was required to offer to prepay $ 65.1 million of total principal subsequent to June 30, 2022.

The holders of the Co-Issuer Term Loans unanimously declined their $ 37.9 million pro rata portion of the offer and the $ 27.2 million pro rata portion of the offer to the holders of the 2024 Co-Issuer Notes will expire on August 29, 2022.

Voluntary repurchases of Co-Issuer Term Loans are permissible through a modified Dutch auction process.

During the three months ended June 30, 2022, the Company solicited bids under such process from all holders of Co-Issuer Term Loans for the repurchase of up to $ 50.0 million principal amount at prices acceptable to the Company.

The auction process resulted in the repurchase of $ 50.0 million principal amount at a weighted average price of 103.91 %, or $ 52.0 million.

The Company recorded a related loss on early debt extinguishment of $ 3.3 million during the three months ended June 30, 2022.

Additionally, the indenture which governs the 2024 Co-Issuer Notes requires that, within 30 business days following a repurchase of the Co-Issuer Term Loans such as that undertaken through the auction process described above, the Company must also offer to repurchase an equivalent principal amount of the 2024 Co-Issuer Notes at the equivalent purchase price.

As such, the required offer for $ 50.0 million aggregate principal amount was made by the Company on May 26, 2022 and subsequently increased to $ 93.9 million, at the Company’s discretion, subsequent to June 30, 2022.

Prior to expiration of the offer, an excess aggregate principal amount of 2024 Co-Issuer Notes had been validly tendered, but the terms of the offer limited the repurchase to $ 93.9 million.

Such amount was classified within “Current portion of long-term debt” in the accompanying condensed consolidated balance sheets at June 30, 2022.

The Company completed the repurchase on July 25, 2022 for $ 97.5 million.

The credit agreement which governs the Co-Issuer Term Loans requires parity between the holders of Co-Issuer Term Loans and holders of the 2024 Co-Issuer Notes with respect to repurchase offers.

Accordingly, the discretionary increase to the 2024 Co-Issuer Notes repurchase offer compelled the Company to offer to repurchase an additional $ 43.9 million of aggregate principal amount of Co-Issuer Term Loans at 103.91 % subsequent to June 30, 2022.

The offer will expire August 22, 2022.

Such amount was classified within “Current portion of long-term debt” in the accompanying condensed consolidated balance sheets at June 30, 2022.

Prior to June 30, 2022, the Company reached agreements to repurchase $ 22.6 million aggregate principal amount of its Senior Secured Term Loan for $ 21.3 million in open market transactions.

The repurchases settled subsequent to June 30, 2022, and the aggregate principal amount was classified within “Current portion of long-term debt” in the accompanying condensed consolidated balance sheets at June 30, 2022.

As a result of these repurchases, the Company will offer to repurchase $ 5.7 million of priority lien obligations under the Company LC Agreement at approximately 94% during the three months ending December 31, 2022.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.250 % Convertible Senior Notes due 2028

2 unchanged sentences

The Company used the proceeds of the offering of the 2028 Convertible Notes to redeem the remaining $ 62.6 million of its outstanding 2024 Peabody Notes and, together with available cash, approximately $ 257.4 million of its outstanding 2025 Notes, and to pay related premiums, fees and expenses relating to the offering of the 2028 Convertible Notes and the redemptions.

The redemption of existing notes was deemed a debt extinguishment for accounting purposes.

The Company capitalized $ 11.2 million of debt issuance costs related to the offering and recognized a loss on early debt extinguishment of $ 23.0 million during the three months ended March 31, 2022.

1 unchanged sentence

The 2028 Convertible Notes will bear interest from March 1, 2022 at a rate of 3.250 % per year payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2022.

During the three months ended March 31, 2022, the Company incurred interest expense of $ 1.0 million related to the 2028 Convertible Notes.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2028 Convertible Notes will be convertible at the option of the holders only in the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2022, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(1) during any calendar quarter commencing after the calendar quarter ended June 30, 2022, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the Measurement Period) in which the trading price per $ 1,000 principal amount of 2028 Convertible Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

13 unchanged sentences

If the Company undergoes a fundamental change (as defined in the indenture), noteholders may require the Company to repurchase their 2028 Convertible Notes at a cash repurchase price equal to 100 % of the principal amount of the 2028 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Margin Financing Arrangement

4 unchanged sentences

During the three months ended March 31, 2022, the Company borrowed and repaid $ 225.0 million under the Revolving Facility using net proceeds of $ 222.0 million from at-the-market issuances of 10.1 million shares of common stock and available cash.

The equity offering agreement limit was reached as a result of these issuances and may not be further utilized without amendment and approval by the sales agent.

The Company had no outstanding borrowings and no availability under the Revolving Facility at March 31, 2022.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company had no outstanding borrowings and no availability under the Revolving Facility at June 30, 2022.

The Company issued a notice to terminate the facility on August 1, 2022 with an effective date of August 4, 2022.

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

3 unchanged sentences

Interest Charges

The Company incurred total interest expense of $ 39.4 million and $ 52.4 million during the three months ended March 31, 2022 and 2021, respectively.

These amounts included $ 13.5 million and $ 10.9 million, respectively, related to financial assurance instruments such as surety bonds and letters of credit, with the remainder primarily related to the Company’s funded debt.

Of total interest expense incurred during the three months ended March 31, 2022 and 2021, $ 3.8 million and $ 4.9 million, respectively, was comprised of non-cash charges primarily related to the amortization of debt issuance costs.

Cash payments for interest amounted to $ 37.2 million and $ 56.3 million during the three months ended March 31, 2022 and 2021, respectively.

The Senior Secured Term Loan is the Company’s only outstanding variable rate debt, which bore interest at LIBOR plus 2.75 % per annum at March 31, 2022.

The following table presents the components of the Company’s interest expense related to its indebtedness and financial assurance instruments such as surety bonds and letters of credit.

Additionally, the table sets forth the amount of cash paid for interest and the amount of non-cash interest expense primarily related to the amortization of debt issuance costs.

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

2022 2021 2022 2021

(Dollars in millions)

Indebtedness $ 24.0 $ 31.5 $ 49.9 $ 73.1

Financial assurance instruments 13.6 13.9 27.1 24.7

Interest expense $ 37.6 $ 45.4 $ 77.0 $ 97.8

Cash paid for interest $ 40.6 $ 48.0 $ 77.8 $ 104.3

Non-cash interest expense $ 5.2 $ 5.9 $ 9.0 $ 10.8

The Senior Secured Term Loan is the Company’s only outstanding variable rate debt, which bore interest at LIBOR plus 2.75 % per annum ( 4.37 %) at June 30, 2022.

Covenant Compliance

The Company was compliant with all relevant covenants under its debt agreements at March 31, 2022, including the minimum aggregate liquidity requirement under the Company LC Agreement which requires the Company’s restricted subsidiaries to maintain minimum aggregate liquidity of $ 125.0 million at the end of each quarter through December 31, 2024.

Finance Lease Obligations

Refer to Note 9.

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

The Company was compliant with all relevant covenants under its debt agreements at June 30, 2022, including the minimum aggregate liquidity requirement under the Company LC Agreement which requires the Company’s restricted subsidiaries to maintain minimum aggregate liquidity of $ 125.0 million at the end of each quarter through December 31, 2024.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Pension and Postretirement Benefit Costs

1 unchanged sentence

Net periodic pension credit included the following components:

Three Months Ended March 31,

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

2022 2021 2022 2021

(Dollars in millions)

Service cost for benefits earned $ — $ 0.1 $ — $ 0.1

Interest cost on projected benefit obligation 5.4 5.1 10.7 10.2

1 unchanged sentence

Net periodic pension credit $ ( 0.6 ) $ ( 0.5 ) $ ( 1.2 ) $ ( 1.1 )

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

As of March 31, 2022, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds.

As of June 30, 2022, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds.

The Company is not required to make any contributions to its qualified pension plans in 2022 based on minimum funding requirements and does not expect to make any discretionary contributions in 2022 at this time.

6 unchanged sentences

In addition, there will be no material impact on discretionary contributions for the Plan in 2022 or on the Company’s earnings in 2022 as a result of this transaction.

In May 2022, the Board of Directors of Peabody Investments Corp.

approved commencing a standard Employee Retirement Income Security Act plan termination with an effective date of plan termination of July 31, 2022.

In June 2022, the Plan’s participants were notified of the plan termination.

Net periodic postretirement benefit credit included the following components:

Three Months Ended March 31,

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

2022 2021 2022 2021

(Dollars in millions)

9 unchanged sentences

The Company does not expect to make any discretionary contributions to the VEBA trust in 2022 and plans to utilize a portion of VEBA assets to make certain benefit payments.

(13) Accumulated Other Comprehensive Income

The following table sets forth the after-tax components of accumulated other comprehensive income and changes thereto recorded during the three months ended March 31, 2022:

Foreign Currency Translation

Adjustment Prior Service

Credit Associated

Postretirement

Plans Total Accumulated Other Comprehensive Income

(Dollars in millions)

December 31, 2021 $ 0.8 $ 297.1 $ 297.9

Reclassification from other comprehensive income to earnings — ( 13.4 ) ( 13.4 )

Current period change 1.9 — 1.9

March 31, 2022 $ 2.7 $ 283.7 $ 286.4

Postretirement health care and life insurance benefits reclassified from other comprehensive income to earnings of $ 13.4 million a nd $ 11.0 million du ring the three months ended March 31, 2022 and 2021, respectively, are included in “Net periodic benefit credit, excluding service cost” in the unaudited condensed consolidated statements of operations.

PEABODY ENERGY CORPORATION

4 unchanged sentences

As such, the Company includes the 2028 Convertible Notes and share-based compensation awards in its potentially dilutive securities.

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

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

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

4 unchanged sentences

For diluted EPS purposes, the potentially dilutive common stock is assumed to have been converted at the beginning of the period (or at the time of issuance, if later).

Since the 2028 Convertible Notes were issued on March 1, 2022, there were approximately 5.5 million shares of potentially dilutive common stock for the three months ended March 31, 2022.

These potentially dilutive shares were excluded from the computation of diluted EPS for the three months ended March 31, 2022, because to do so would have been anti-dilutive as the Company reported a net loss from continuing operations during the period.

In periods where the potentially dilutive common stock is included in the computation of diluted EPS, the numerator will be adjusted to add back tax adjusted interest expense related to the convertible debt.

The computation of diluted EPS excluded aggregate share-based compensation awards of approximately 1.2 million and 1.3 million for the three months ended March 31, 2022 and 2021, respectively, because to do so would have been anti-dilutive for those periods.

The computation of diluted EPS excluded aggregate share-based compensation awards of less than 0.1 million for both the three and six months ended June 30, 2022, and approximately 1.2 million for both the three and six months ended June 30, 2021, because to do so would have been anti-dilutive for those periods.

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

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

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended March 31,

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

2022 2021 2022 2021

(In millions, except per share data)

EPS numerator:

Loss from continuing operations, net of income taxes $ ( 119.8 ) $ ( 77.7 )

Net (loss) income attributable to noncontrolling interests ( 1.1 ) 0.4

Loss from continuing operations attributable to common stockholders ( 118.7 ) ( 78.1 )

Basic EPS numerator:

Income (loss) from continuing operations, net of income taxes $ 411.3 $ ( 23.0 ) $ 291.5 $ ( 100.7 )

Net income attributable to noncontrolling interests 1.1 3.3 — 3.7

Income (loss) from continuing operations attributable to common stockholders 410.2 ( 26.3 ) 291.5 ( 104.4 )

Loss from discontinued operations, net of income taxes ( 0.7 ) ( 2.3 ) ( 1.5 ) ( 4.3 )

Net loss attributable to common stockholders $ ( 119.5 ) $ ( 80.1 )

Net income (loss) attributable to common stockholders $ 409.5 $ ( 28.6 ) $ 290.0 $ ( 108.7 )

Diluted EPS numerator:

Income (loss) from continuing operations, net of income taxes $ 411.3 $ ( 23.0 ) $ 291.5 $ ( 100.7 )

Tax adjusted interest expense related to 2028 Convertible Notes 2.5 — 3.5 —

Net income attributable to noncontrolling interests 1.1 3.3 — 3.7

Income (loss) from continuing operations attributable to common stockholders 412.7 ( 26.3 ) 295.0 ( 104.4 )

Loss from discontinued operations, net of income taxes ( 0.7 ) ( 2.3 ) ( 1.5 ) ( 4.3 )

Net income (loss) attributable to common stockholders $ 412.0 $ ( 28.6 ) $ 293.5 $ ( 108.7 )

EPS denominator:

Weighted average shares outstanding — basic and diluted 136.2 98.4

Basic and diluted EPS attributable to common stockholders:

Loss from continuing operations $ ( 0.87 ) $ ( 0.79 )

Weighted average shares outstanding — basic

144.0 101.2 140.1 99.8

Dilutive impact of share-based compensation awards 1.8 — 1.5 —

Dilutive impact of 2028 Convertible Notes 16.1 — 10.9 —

Weighted average shares outstanding — diluted 161.9 101.2 152.5 99.8

Basic EPS attributable to common stockholders:

Income (loss) from continuing operations $ 2.85 $ ( 0.26 ) $ 2.08 $ ( 1.05 )

Loss from discontinued operations

Net loss attributable to common stockholders $ ( 0.88 ) $ ( 0.81 )

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

( 0.01 ) ( 0.02 ) ( 0.01 ) ( 0.04 )

Net income (loss) attributable to common stockholders $ 2.84 $ ( 0.28 ) $ 2.07 $ ( 1.09 )

Diluted EPS attributable to common stockholders:

Income (loss) from continuing operations $ 2.55 $ ( 0.26 ) $ 1.93 $ ( 1.05 )

Loss from discontinued operations

( 0.01 ) ( 0.02 ) — ( 0.04 )

Net income (loss) attributable to common stockholders $ 2.54 $ ( 0.28 ) $ 1.93 $ ( 1.09 )

(12) Financial Instruments and Other Guarantees

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

At March 31, 2022, such instruments included $ 1,484.9 million of surety bonds and $ 469.1 million of letters of credit.

At June 30, 2022, such instruments included $ 1,453.5 million of surety bonds and $ 475.1 million of letters of credit.

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

1 unchanged sentence

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

In November 2020, the Company entered into a surety agreement with the providers of its surety bond portfolio to resolve previous collateral demands.

In accordance with the surety agreement, the Company initially provided $ 75.0 million of collateral, in the form of letters of credit.

The Company subsequently granted second liens on $ 200.0 million of certain mining equipment and is further required to post an additional $ 25.0 million of collateral per year from 2021 through 2024 for the benefit of the surety providers.

The collateral postings further increase to the extent the Company generates more than $ 100.0 million of free cash flow (as defined in the surety agreement) in any twelve-month period or has cumulative asset sales in excess of $ 10.0 million, as of the last quarter end during the term of the agreement.

Based upon the Company’s free cash flow for the year ended December 31, 2021, additional collateral of $ 13.0 million was posted in January 2022 in the form of letters of credit.

No such additional collateral was required for the period ended March 31, 2022.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reclamation Bonding

1 unchanged sentence

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

At March 31, 2022, the Company’s asset retirement obligations of $ 724.5 million were supported by surety bonds of $ 1,312.1 million, as well as letters of credit issued under the Company’s receivables securitization program and the Company LC Agreement.

Letters of credit issued at March 31, 2022 which served as collateral for surety bonds in support of asset retirement obligations amounted to $ 340.0 million.

In November 2020, the Company entered into an agreement with the providers of its surety bond portfolio to resolve previous collateral demands.

In accordance with the agreement, the Company initially provided $ 75.0 million of collateral, in the form of letters of credit.

Based upon the Company’s free cash flow through June 30, 2022, additional collateral of $ 13.0 million was posted during the three months ended March 31, 2022 and $ 25.7 million was posted subsequent to June 30, 2022, in the form of cash-collateralized letters of credit.

At June 30, 2022, the Company’s asset retirement obligations of $ 725.1 million were supported by surety bonds of $ 1,276.9 million, as well as letters of credit issued under the Company’s receivables securitization program and the Company LC Agreement.

Letters of credit issued at June 30, 2022 which served as collateral for surety bonds in support of asset retirement obligations amounted to $ 346.4 million.

Accounts Receivable Securitization

5 unchanged sentences

Borrowings under the Securitization Program bear interest at BSBY plus 2.1 % per annum and remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables.

At March 31, 2022, the Com pany had no outstanding borrowings and $ 161.8 million o f letters of credit issued under the Securitization Program.

At June 30, 2022, the Com pany had no outstanding borrowings and $ 161.5 million o f letters of credit outstanding under the Securitization Program.

The letters of credit were primarily in support of reclamation obligations.

Availability under the Securitizatio n Program, which is adjusted for certain ineligible receivables, was $ 1.6 million at March 31, 2022.

The Company was required to post cash collateral under the Securitization Program of $ 24.7 million at March 31, 2022 and none at December 31, 2021.

The Company incurred interest and fees associated with the Securitization Program of $ 0.9 million and $ 0.7 million during the three months ended March 31, 2022 and 2021, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations.

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Availability under the Securitizatio n Program, which is adjusted for certain ineligible receivables, was $ 13.5 million at June 30, 2022.

The Company was not required to post cash collateral under the Securitization Program at June 30, 2022.

The Company incurred interest and fees associated with the Securitization Program of $ 0.9 million and $ 0.7 million during the three months ended June 30, 2022 and 2021, respectively, and $ 1.8 million and $ 1.4 million during the six months ended June 30, 2022 and 2021, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations.

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.

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, expected to primarily support reclamation bonding requirements.

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 0.35 % per annum on the amount of cash collateral posted in support of letters of credit, with the rate subject to increases over time.

The Company receives a deposit rate of 0.35 % per annum on the amount of cash collateral posted in support of letters of credit, with the rate subject to variation over time.

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

The Company did not utilize the collateralized letter of credit facility until subsequent to March 31, 2022.

At June 30, 2022, collateralized letters of credit of $ 12.3 million were outstanding under the agreement .

PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(13) Commitments and Contingencies

Unconditional Purchase Obligations

As of March 31, 2022, purchase commitments for capital expenditures were $ 43.9 million, all of which is obligated within the next three years, with $ 35.6 million obligated within the next 12 months.

As of June 30, 2022, purchase commitments for capital expenditures were $ 42.3 million, all of which is obligated within the next three years, with $ 35.4 million obligated within the next 12 months.

There were no other material changes to the Company’s commitments from the information provided in Note 23.

16 unchanged sentences

The Plaintiffs’ opposition brief to the motion to dismiss was filed on July 22, 2021.

The defendants filed their reply to Plaintiff’s opposition on August 23, 2021, completing briefing at this phase of the litigation.

The defendants filed their reply to Plaintiffs’ opposition on August 23, 2021, completing briefing at this phase of the litigation.

On March 7, 2022, the Court granted in part and denied in part the defendants’ motion to dismiss.

As a result of this decision, only Plaintiffs’ allegations relating to the Company’s September 25, 2018 statements remain in the case.

The Company believes the lawsuit lacks merit and intends to vigorously defend against the allegations.

On May 13, 2022, the Court entered a Case Management and Scheduling Order.

On August 2, 2022, Peabody and Plaintiffs agreed to settle all claims brought on behalf of all persons who purchased or otherwise acquired the Company’s shares between April 3, 2017 and October 28, 2019 in exchange for $ 4.6 million, to be paid by Peabody’s insurers.

The parties further agreed to negotiate in good faith and execute a definitive stipulation of settlement and related documents, which are subject to the Court’s approval.

The stipulation of settlement will not contain any admission of liability, wrongdoing, or responsibility by any of the parties and will provide that upon final approval of the settlement, the case will be dismissed with prejudice, with mutual releases by all parties.

Derivative Actions.

23 unchanged sentences

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

Claims, Litigation and Settlements Relating to Indemnities or Historical Operations

Patriot-Related Matters.

Included in the Company’s discontinued operations are the previously divested legacy operations of Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot).

In 2012, Patriot filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S.

Code (the Bankruptcy Code).

In 2013, the Company entered into a definitive settlement agreement (2013 Agreement) with Patriot and the United Mine Workers of America, on behalf of itself, its represented Patriot employees and its represented Patriot retirees, to resolve all then-disputed issues related to Patriot’s bankruptcy.