What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 236 added, 185 removed, 619 unchanged (40% of the section changed)

32 unchanged sentences

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

At June 30, 2022, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

At September 30, 2022, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

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

6 unchanged sentences

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

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 index thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the three months ended June 30, 2022 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended June 30, 2022 due to quality differentials and a portion 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, with spot, index and quarterly sales arrangements also utilized.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended September 30, 2022 due to quality differentials and a portion 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, with spot, index and quarterly sales arrangements also utilized.

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 three months ended June 30, 2022 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the three months ended September 30, 2022 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

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

High Low Average June 30, 2022 July 29, 2022

High Low Average September 30, 2022 October 31, 2022

Premium HCC (1)

13 unchanged sentences

Within the global coal industry, supply and demand for its products and the supplies used for mining have been impacted by the ongoing Russian-Ukrainian conflict and the coronavirus (COVID-19) pandemic.

Furthermore, inflationary pressures have contributed to rising costs and may continue to rise in future periods.

As future developments related to the Russian-Ukrainian conflict, the COVID-19 pandemic and rising inflation are unknown, the global coal industry data for the six months ended June 30, 2022 presented herein may not be indicative of their ultimate impacts.

Within the seaborne metallurgical coal market, the three months ended June 30, 2022 were characterized by significant volatility, primarily driven by a weakening global macroeconomic environment and trade disruptions following sanctions imposed on Russian coal imports.

Steel prices weakened in the three months ended June 30, 2022, causing some steelmakers to consider output cuts in the coming period.

This is influencing short-term incremental metallurgical coal demand;

however, it is being counteracted by steelmakers in Atlantic markets seeking to mitigate exposure to Russian coal imports, causing increased demand for supply from other regions such as Australia, the U.S.

Furthermore, inflationary pressures and supply chain constraints have contributed to rising costs and may continue to impact future periods.

As future developments related to the Russian-Ukrainian conflict, the COVID-19 pandemic and rising inflation are unknown, the global coal industry data for the nine months ended September 30, 2022 presented herein may not be indicative of their ultimate impacts.

Within the seaborne metallurgical coal market, the three months ended September 30, 2022 were characterized by ongoing volatility as a weakening global macroeconomic environment was counteracted by tight coal supply and continued trade flow disruptions following sanctions imposed on Russian coal imports.

Steel prices drifted lower in the three months ended September 30, 2022, causing some steelmakers to implement small-scale output cuts.

This is influencing short-term incremental metallurgical coal demand in some markets;

however, it is being more than offset by a transition of demand from many steelmakers mitigating exposure to Russian coal imports by seeking additional volumes from other regions such as Australia, the U.S.

This is particularly so for PCI, where Russia accounts for approximately 35% of global traded volumes.

China’s unofficial ban on Australian coal remains in place and continues to disrupt traditional trade flows.

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

China’s unofficial ban on Australian coal remains in place and continues to impede traditional trade flows.

The Company believes energy shortages and the worsening inflationary environment present a risk to industrial activity in some markets, but the underlying market fundamentals remain constructive with continuing themes of supply tightness, resilient demand and further economic stimulus.

Within the seaborne thermal coal market, global thermal coal prices continue to remain at near-record levels, fueled by broader energy supply security concerns.

These concerns have been driven by the Russian-Ukrainian conflict and the subsequent ban of Russian coal by European countries, as well as weather and COVID impacts limiting supply response out of Australia.

In China, domestic coal production and renewable generation growth have been strong during the six months ended June 30, 2022, which has lowered import demand to start the year.

In India, elevated domestic coal production has limited import demand, allowing coal buyers to wait for lower thermal seaborne prices.

These concerns have been driven by the Russian-Ukrainian conflict and the subsequent ban of Russian coal by European countries, as well as limited supply response out of Australia, Indonesia and South Africa due to weather and labor issues.

In China, domestic coal production and renewable generation growth have been strong during the nine months ended September 30, 2022, which has lowered import demand.

In India, strong total generation demand and growth in coal generation has supported increased import demand, despite elevated domestic coal production.

Overall, global thermal coal markets remain turbulent as supply remains tight and European coal importers look to replace Russian coal.

In the United States, overall electricity demand increased more than 3% year-over-year, positively impacted by weather and economic activity.

Through the six months ended June 30, 2022, electricity generation from thermal coal has declined year-over-year due to coal conservation by utilities to build coal stocks ahead of summer, strong year-over-year comparatives in February 2021 and record renewable generation.

Coal’s share of electricity generation has declined slightly to approximately 20% for the six months ended June 30, 2022, while wind generation’s share has increased to 11%.

Through the nine months ended September 30, 2022, electricity generation from thermal coal has declined year-over-year due to coal conservation by utilities to build coal stocks, transportation issues impacting coal deliveries and record renewable generation.

Coal’s share of electricity generation has declined slightly to approximately 20% for the nine months ended September 30, 2022, while wind and solar’s combined generation share has increased to 15%.

Coal inventories have continued to decline since December 2021, with a decline of approximately 19% or 18 million tons.

During the six months ended June 30, 2022, utility consumption of PRB coal declined approximately 2% compared to the prior year period.

During the nine months ended September 30, 2022, utility consumption of PRB coal declined approximately 6% compared to the prior year period.

Financing Transactions

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This both lowered the Company’s borrowing rates and extended debt maturities to 2028.

During the second quarter of 2022, Peabody continued to reduce it outstanding debt, with additional retirements pending settlement after the balance sheet date.

High demand and tight supply for coal globally has resulted in a substantial rise in seaborne thermal coal prices in the first half of 2022, which has been amplified by the Russian-Ukrainian conflict, resulting in unprecedented upward volatility in Newcastle coal pricing since late February.

As a result, Peabody posted additional cash margin of $414.1 million during the six months ended June 30, 2022 to satisfy the margin requirements for its derivative contracts.

Throughout 2022, Peabody has continued to reduce it outstanding debt.

In addition, the Company has the positive intent and ability to make additional retirements of its higher cost senior secured debt within the next twelve months.

All such amounts have been classified as current debt as of the balance sheet date.

High demand and tight supply for coal globally has resulted in a substantial rise in seaborne thermal coal prices during 2022, which has been amplified by the Russian-Ukrainian conflict, resulting in unprecedented upward volatility in Newcastle coal pricing since late February.

As a result, Peabody posted additional cash margin of $335.8 million during the nine months ended September 30, 2022 to satisfy the margin requirements for its derivative contracts.

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

North Goonyella Redevelopment

During the third quarter of 2022, the Company initiated the redevelopment of its North Goonyella Mine, a premium hard-coking coal longwall operation in Australia with over 70 million tons coal reserves.

The project will utilize substantial existing infrastructure and equipment at the mine, including a new 300-meter longwall system, a coal handling preparation plant, a dedicated rail loop for transport to the Dalrymple Bay Coal Terminal and an accommodation village with housing and service amenities for more than 400 workers.

North Goonyella is anticipated to increase the Company’s emphasis in its Seaborne Metallurgical Mining segment.

Initial redevelopment expenditures of $140 million have been approved by the Company’s board of directors and include ventilation, equipment, conveyance and infrastructure updates in anticipation of reaching development coal, subject to regulatory approvals, in the first quarter of 2024.

Cash flow from operations is expected to fund all redevelopment costs as the Company continues to strengthen its balance sheet.

Development costs in addition to the current approved amount are estimated to be $240 million, with longwall operations expected to commence in 2026.

In March 2022, the Company entered into a joint venture with unrelated partners to form R3 Renewables LLC (R3).

R3 was formed with the intent of developing various sites, including certain non-mining land held by the Company in the U.S., for utility-scale photovoltaic solar generation and battery storage.

During the second quarter of 2022, R3 advanced efforts with potential customers, finalized its management team and commenced site evaluations with project developer Treaty Oak Clean Energy, LLC.

During 2022, R3 has advanced efforts with potential customers, finalized its management team and commenced site evaluations with project developer Treaty Oak Clean Energy, LLC.

The Company’s interest in R3 is accounted for as an equity method investment.

The Company contributed $2.5 million to R3 and recorded an equity loss of $1.8 million from its operations during the six months ended June 30, 2022.

The Company contributed $10.9 million to R3 and recorded an equity loss of $2.8 million from its operations during the nine months ended September 30, 2022.

In March 2022, Peabody Investments Corp., a wholly owned subsidiary of the Company, entered into a commitment agreement relating to one of its qualified pension plans (the Plan) with an insurer.

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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.

approved the termination of the Plan effective July 31, 2022.

Refer to Note 10.

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Results of Operations

Three and Six Months Ended June 30, 2022 Compared to the Three and Six Months Ended June 30, 2021

The increases in results from continuing operations, net of income taxes for the three and six months ended June 30, 2022 compared to the same periods in the prior year ($434.3 million and $392.2 million, respectively), were primarily driven by higher revenue ($598.5 million and $638.6 million, respectively) due to higher realized prices;

Three and Nine Months Ended September 30, 2022 Compared to the Three and Nine Months Ended September 30, 2021

The increases in results from continuing operations, net of income taxes for the three and nine months ended September 30, 2022 compared to the same periods in the prior year ($444.0 million and $836.2 million, respectively), were primarily driven by higher revenue ($663.5 million and $1,302.1 million, respectively) due to higher realized prices;

improved results from equity affiliates ($11.7 million and $109.5 million, respectively);

and lower interest expense ($11.7 million and $32.5 million, respectively).

These favorable variances were partially offset by higher operating costs and expenses ($214.2 million and $330.6 million, respectively), which reflect increased sales sensitive costs, inflationary pressures for materials, services, repairs and labor;

These favorable variances were partially offset by higher operating costs and expenses ($189.0 million and $519.6 million, respectively), which reflect increased sales sensitive costs and inflationary pressures for commodities, materials, services, repairs and labor;

and net losses on early debt extinguishments in the current year ($24.7 million and $65.8 million, respectively).

Adjusted EBITDA for the three and six months ended June 30, 2022 reflected year-over-year increases of $455.7 million and $722.1 million, respectively.

Adjusted EBITDA for the three and nine months ended September 30, 2022 reflected year-over-year increases of $149.8 million and $871.9 million, respectively.

The following table presents tons sold by operating segment:

Three Months Ended June 30, (Decrease) Increase

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

Three Months Ended

September 30, (Decrease) Increase

to Volumes Nine Months Ended

September 30, (Decrease) Increase

2022 2021 Tons % 2022 2021 Tons %

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The following table presents supplemental financial data by operating segment:

Three Months Ended June 30, Increase

(Decrease) Six Months Ended June 30, Increase

Three Months Ended

September 30, Increase Nine Months Ended

September 30, Increase

2022 2021 $ % 2022 2021 $ %

25 unchanged sentences

The following table presents revenue by reporting segment:

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

Three Months Ended

September 30, Increase to Revenue Nine Months Ended

September 30, Increase (Decrease) to Revenue

2022 2021 $ % 2022 2021 $ %

8 unchanged sentences

Seaborne Thermal Mining.

Segment revenue increased during the three months ended June 30, 2022 compared to the same period in the prior year due to favorable realized prices ($156.8 million) and favorable mix variances ($4.0 million) resulting from higher export volumes.

Segment revenue increased during the six months ended June 30, 2022 compared to the same period in the prior year primarily due to favorable realized prices ($271.9 million), offset by unfavorable volumes ($36.3 million) which were impacted by a longwall move at the Wambo Underground Mine, wet weather and COVID-19-related staffing shortages.

Segment revenue increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year due to favorable realized prices ($154.1 million and $421.9 million, respectively), partially offset by unfavorable volumes ($61.6 million and $93.8 million, respectively) which were impacted by wet weather and a longwall move at the Wambo Underground Mine in the first half of 2022.

Seaborne Metallurgical Mining.

Segment revenue increased during the three and six months ended June 30, 2022 compared to the same periods in the prior year due to favorable realized prices ($279.8 million and $470.0 million, respectively) and favorable volume and mix variances ($133.0 million and $176.6 million, respectively).

Segment revenue increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year due to favorable realized prices at the Australian operations ($89.7 million and $559.7 million, respectively), the resumption of sales at the Shoal Creek Mine ($33.1 million and $189.4 million, respectively) and favorable volume and mix variances at the Australian operations ($8.4 million and $28.7 million, respectively).

Powder River Basin Mining.

Segment revenue decreased during the three months ended June 30, 2022 compared to the same period in the prior year due to unfavorable volumes ($43.2 million) resulting from rail performance issues, partially offset by favorable realized prices ($24.3 million).

Segment revenue increased during the six months ended June 30, 2022 compared to the same period in the prior year due to favorable realized coal pricing ($51.3 million), offset by unfavorable volumes ($47.4 million).

Segment revenue increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year due to favorable realized prices ($53.8 million and $105.0 million, respectively), offset by unfavorable volumes ($10.4 million and $57.7 million, respectively) resulting from rail performance issues.

Thermal Mining.

Segment revenue increased during the three and six months ended June 30, 2022 compared to the same periods in the prior year due to favorable realized prices ($48.6 million and $88.6 million, respectively) and favorable volumes ($14.2 million and $28.0 million, respectively).

Segment revenue increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year due to favorable realized prices ($65.7 million and $154.7 million, respectively) and favorable volumes ($11.1 million and $38.7 million, respectively).

Corporate and Other.

Segment revenue decreased during the three months ended June 30, 2022 compared to the same period in the prior year primarily due to lower results from trading activities ($22.5 million).

Segment revenue decreased during the six months ended June 30, 2022 compared to the same period in the prior year due to increased net unrealized mark-to-market losses on derivative contracts related to forecasted coal sales ($299.9 million) and lower results from trading activities ($70.6 million).

Segment revenue increased during the three months ended September 30, 2022 compared to the same period in the prior year due to net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales in the current year compared to net unrealized mark-to-market losses in the prior year ($328.8 million), partially offset by lower results from trading activities ($10.9 million).

Segment revenue decreased during the nine months ended September 30, 2022 compared to the same period in the prior year due to lower results from trading activities ($74.6 million), offset by lower net unrealized mark-to-market losses on derivative contracts related to forecasted coal sales ($28.9 million).

Adjusted EBITDA

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

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

Three Months Ended

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

September 30, Increase (Decrease) to Segment Adjusted EBITDA

2022 2021 $ % 2022 2021 $ %

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Seaborne Thermal Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2022 compared to the same periods in the prior year as a result of higher realized prices net of sales sensitive costs ($143.8 million and $249.7 million, respectively), partially offset by unfavorable operational costs ($48.5 million and $87.5 million, respectively) resulting from the impacts of wet weather, COVID-19-related staffing shortages, the longwall move at the Wambo Underground Mine and inflationary pressures.

Segment Adjusted EBITDA increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year as a result of higher realized prices net of sales sensitive costs ($141.3 million and $387.0 million, respectively), partially offset by lower volumes ($40.3 million and $26.7 million, respectively) due to wet weather impacts and unfavorable operational costs ($27.5 million and $122.2 million, respectively) resulting from the impacts of wet weather, COVID-19-related staffing shortages, the longwall move at the Wambo Underground Mine in the first half of 2022 and inflationary pressures on supplies and outside services.

Seaborne Metallurgical Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2022 compared to the same periods in the prior year due to higher realized prices net of sales sensitive costs ($241.8 million and $408.2 million, respectively) and favorable volumes, offset by higher costs resulting from longwall panel transitions at the Shoal Creek Mine and inflationary pressures across the segment.

Segment Adjusted EBITDA increased during the three and nine months ended September 30, 2022 compared to the same periods in the prior year due to higher realized prices net of sales sensitive costs at the Australian operations ($66.3 million and $474.0 million, respectively) and favorable volumes from the resumption of sales at the Shoal Creek Mine ($12.6 million and $111.1 million, respectively), offset by unfavorable operational costs at the Australian operations ($27.1 million and $13.5 million, respectively) resulting from higher costs for repair and maintenance and inflationary pressures.

Powder River Basin Mining.

Segment Adjusted EBITDA decreased during the three and six months ended June 30, 2022 compared to the same periods in the prior year due to lower volumes ($23.4 million in both periods) resulting from rail performance issues;

the unfavorable impacts of higher commodity pricing ($19.0 million and $33.6 million, respectively) and higher costs for materials, services, repairs and labor ($18.7 million and $42.8 million, respectively), both of which were impacted by inflationary pressures;

and elevated overburden removal costs.

These decreases were partially offset by higher prices net of sales sensitive costs ($24.8 million and $51.9 million, respectively).

Segment Adjusted EBITDA increased during the three months ended September 30, 2022 compared to the same period in the prior year as a result of higher realized prices net of sales sensitive costs ($49.0 million), offset by the unfavorable impacts of higher commodity pricing ($17.5 million), elevated overburden removal costs ($17.1 million) and higher costs for materials, services, repairs and labor ($9.1 million, respectively).

Segment Adjusted EBITDA decreased during the nine months ended September 30, 2022 compared to the same period in the prior year due to elevated overburden removal costs ($55.5 million);

the unfavorable impacts of higher commodity pricing ($51.2 million) and higher costs for materials, services, repairs and labor ($41.9 million) both of which were impacted by inflationary pressures;

and lower volumes ($13.2 million) resulting from rail performance issues.

These decreases were partially offset by higher realized prices net of sales sensitive costs ($100.8 million).

Thermal Mining.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2022 compared to the same periods in the prior year due to higher realized prices net of sales sensitive costs ($50.1 million and $91.5 million, respectively) and favorable volumes ($6.2 million and $13.0 million, respectively).

These increases were offset by higher costs for materials, services, repairs and labor ($23.5 million and $49.4 million, respectively) and the unfavorable impacts of higher commodity pricing ($14.5 million and $24.4 million, respectively), both of which were impacted by inflationary pressures.

These increases were offset by higher costs for materials, services, repairs and labor ($26.0 million and $73.7 million, respectively) and the unfavorable impacts of higher commodity pricing ($11.7 million and $36.2 million, respectively), both of which were impacted by inflationary pressures and elevated overburden removal costs ($6.2 million and $8.1 million, respectively).

Corporate and Other Adjusted EBITDA.

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

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

Three Months Ended

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

September 30, Increase (Decrease) to Adjusted EBITDA

2022 2021 $ % 2022 2021 $ %

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

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $23.3 million and $3.7 million during the three months ended June 30, 2022 and 2021, respectively, and $43.5 million and $7.9 million during the six months ended June 30, 2022 and 2021, respectively.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $12.9 million and $10.4 million during the three months ended September 30, 2022 and 2021, respectively, and $56.4 million and $18.3 million during the nine months ended September 30, 2022 and 2021, respectively.

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

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

Corporate and Other Adjusted EBITDA benefited during the three and six months ended June 30, 2022 compared to the same period in the prior year from favorable variances in Middlemount’s results due to the impact of higher sales pricing ($53.0 million and $100.4 million, respectively) and gains on various land sales in both the U.S.

and Australia ($11.5 million and $12.6 million, respectively).

This benefit was largely offset by unfavorable trading results ($12.1 million and $54.0 million, respectively).

The decrease in Corporate and Other Adjusted EBITDA during the three months ended September 30, 2022 compared to the same period in the prior year was driven by the gain recognized in the prior year on the sale of the Company’s Millennium Mine ($26.1 million) as discussed in Note 15.

“Other Events,” largely offset by the favorable variance in Middlemount’s results due to the impact of higher sales pricing ($18.6 million) and gains on various land sales primarily in the U.S.

($3.9 million).

Corporate and Other Adjusted EBITDA benefited during the nine months ended September 30, 2022 compared to the same period in the prior year from favorable variances in Middlemount’s results due to the impact of higher sales pricing ($119.0 million) and gains on various land sales in both the U.S.

and Australia ($16.5 million).

This benefit was offset by unfavorable trading results ($54.0 million) and the prior year gain on the sale of the Millennium Mine referenced above.

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

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

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

Three Months Ended

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

September 30, Increase (Decrease) to Income

2022 2021 $ % 2022 2021 $ %

5 unchanged sentences

Restructuring charges (1.0) (1.7) 0.7 41 % (2.8) (5.9) 3.1 53 %

Asset impairment (1.7) — (1.7) n.m.

(1.7) — (1.7) n.m.

Changes in deferred tax asset valuation allowance and reserves and amortization of basis difference related to equity affiliates 0.5 6.4 (5.9) (92) % 1.7 8.4 (6.7) (80) %

2 unchanged sentences

Interest income 4.9 1.4 3.5 250 % 6.3 4.2 2.1 50 %

Unrealized losses on derivative contracts related to forecasted sales

Unrealized gains (losses) on derivative contracts related to forecasted sales

90.4 (238.4) 328.8 138 % (235.1) (264.0) 28.9 11 %

Unrealized losses on foreign currency option contracts (6.3) (1.2) (5.1) (425) % (3.0) (8.8) 5.8 66 %

Unrealized (losses) gains on foreign currency option contracts (1.4) 0.6 (2.0) (333) % (4.4) (8.2) 3.8 46 %

Take-or-pay contract-based intangible recognition 0.8 1.0 (0.2) (20) % 2.2 3.2 (1.0) (31) %

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Depreciation, Depletion and Amortization.

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

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

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

Three Months Ended

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

September 30, (Decrease) Increase to Income

2022 2021 $ % 2022 2021 $ %

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

1.26 1.18 1.23 1.16

The increase in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the three and six months ended June 30, 2022 compared to the same period in the prior year reflects the impact of the resumption of sales at the Shoal Creek Mine.

The increase in the weighted-average depletion rate per ton for the Seaborne Thermal Mining segment during the three and nine months ended September 30, 2022 compared to the same periods in the prior year reflects the impact of volume and mix variances across the segment.

The increase in the Seaborne Metallurgical Mining segment during the three and nine months ended September 30, 2022 compared to the same periods in the prior year reflects the resumption of sales at the Shoal Creek Mine in December 2021.

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

The income reflected for the three and nine months ended September 30, 2021 includes the release of valuation allowance previously recorded on Middlemount’s deferred tax assets as a result of taxable income generated during 2021.

As of December 31, 2021, no valuation allowance remained related to Middlemount’s deferred tax assets so there is no release reflected in 2022.

The current year income activity relates only to the amortization of basis differences which is comparable to prior periods.

Interest Expense.

The decrease in interest expense during the three and six months ended June 30, 2022 primarily reflects the impacts of debt retirements completed by the Company during 2022 and 2021 and prior year fees related to a series of refinancing transactions completed by the Company (six months, $10.6 million) as further described in Note 9.

The decrease in interest expense during the three and nine months ended September 30, 2022 primarily reflects the impacts of debt retirements completed by the Company during 2022 and 2021 and prior year fees related to a series of refinancing transactions completed by the Company (nine months, $10.6 million) as further described in Note 9.

“Long-term Debt” to the accompanying unaudited condensed consolidated financial statements and Note 11.

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Net (Loss) Gain on Early Debt Extinguishment.

The losses recognized during the three and six months ended June 30, 2022 were primarily related to the redemption of existing notes during the periods as further discussed in Note 9.

The losses recognized during the three and nine months ended September 30, 2022 were primarily related to the redemption of existing notes during the periods as further discussed in Note 9.

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

Unrealized Losses on Derivative Contracts Related to Forecasted Sales.

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

Unrealized Gains (Losses) on Derivative Contracts Related to Forecasted Sales.

Unrealized gains (losses) primarily relate to mark-to-market activity on derivative contracts related to forecasted coal sales.

For additional information, refer to Note 6.

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

Unrealized Losses on Foreign Currency Option Contracts.

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

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 6.

1 unchanged sentence

Income Tax (Provision) Benefit.

The increase in the income tax provision during the three and six months ended June 30, 2022 compared to the same periods in the prior year was primarily due to changes in forecasted taxable income, partially offset by an increase in the benefit related to the remeasurement of foreign income tax accounts.

The increase in the income tax provision during the three and nine months ended September 30, 2022 compared to the same periods in the prior year was primarily due to an increase in taxable income, partially offset by an increase in the benefit related to the remeasurement of foreign income tax accounts.

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

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

Three Months Ended June 30, Increase (Decrease)

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

Three Months Ended

September 30, Increase (Decrease)

to Income Nine Months Ended

September 30, Increase (Decrease)

2022 2021 $ % 2022 2021 $ %

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Income (loss) from continuing operations, net of income taxes $ 384.4 $ (59.6) $ 444.0 745 % $ 675.9 $ (160.3) $ 836.2 522 %

Loss from discontinued operations, net of income taxes (0.7) (2.3) 1.6 70 % (1.5) (4.3) 2.8 65 %

(Loss) income from discontinued operations, net of income taxes (0.8) 24.3 (25.1) (103) % (2.3) 20.0 (22.3) (112) %

Net income (loss) 383.6 (35.3) 418.9 1,187 % 673.6 (140.3) 813.9 580 %

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Net income (loss) attributable to common stockholders $ 375.1 $ (44.2) $ 419.3 949 % $ 665.1 $ (152.9) $ 818.0 535 %

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

The decrease in the results from discontinued operations during the three and nine months ended September 30, 2022 compared to the same periods in the prior year was primarily due to the prior year gain of $24.6 million recognized on the sale of the Wilkie Creek Mine.

Refer to Note 15.

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

Diluted Earnings per Share (EPS)

The following table presents diluted EPS:

Three Months Ended June 30, Increase

to EPS Six Months Ended June 30, Increase

Three Months Ended

September 30, Increase (Decrease)

to EPS Nine Months Ended

September 30, Increase (Decrease)

2022 2021 $ % 2022 2021 $ %

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Income (loss) from continuing operations $ 2.34 $ (0.60) $ 2.94 490 % $ 4.33 $ (1.65) $ 5.98 362 %

Loss from discontinued operations (0.01) (0.02) 0.01 50 % — (0.04) 0.04 100 %

(Loss) income from discontinued operations (0.01) 0.22 (0.23) (105) % (0.02) 0.19 (0.21) (111) %

Net income (loss) attributable to common stockholders $ 2.33 $ (0.38) $ 2.71 713 % $ 4.31 $ (1.46) $ 5.77 395 %

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 161.9 million and 101.2 million for the three months ended June 30, 2022 and 2021, respectively, and 152.5 million and 99.8 million for the six months ended June 30, 2022 and 2021, respectively.

Diluted EPS reflects weighted average diluted common shares outstanding of 161.9 million and 114.9 million for the three months ended September 30, 2022 and 2021, respectively, and 155.6 million and 104.9 million for the nine months ended September 30, 2022 and 2021, respectively.

Reconciliation of Non-GAAP Financial Measures

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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1.0 1.7 2.8 5.9

Asset impairment

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

5 unchanged sentences

(4.9) (1.4) (6.3) (4.2)

Unrealized losses on derivative contracts related to forecasted sales 24.5 23.7 325.5 25.6

Unrealized losses on foreign currency option contracts 6.3 1.2 3.0 8.8

Unrealized (gains) losses on derivative contracts related to forecasted sales (90.4) 238.4 235.1 264.0

Unrealized losses (gains) on foreign currency option contracts 1.4 (0.6) 4.4 8.2

Take-or-pay contract-based intangible recognition

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Total Reporting Segment Costs is defined as operating costs and expenses adjusted for the discrete items that management excluded in analyzing each of its segments’ operating performance, as displayed in the reconciliations below.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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$ 838.4 $ 649.4 $ 2,363.0 $ 1,843.4

Unrealized losses on foreign currency option contracts (6.3) (1.2) (3.0) (8.8)

Unrealized (losses) gains on foreign currency option contracts (1.4) 0.6 (4.4) (8.2)

Take-or-pay contract-based intangible recognition

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Total Reporting Segment Costs $ 825.6 $ 642.4 $ 2,324.1 $ 1,812.4

$ 807.7 $ 602.6 $ 1,498.5 $ 1,170.0

The following table presents Total Reporting Segment Costs by reporting segment:

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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Adjusted EBITDA Margin per Ton $ 46.32 $ 65.45 $ 1.70 $ 15.18

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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Adjusted EBITDA Margin per Ton $ 38.08 $ 129.66 $ 0.71 $ 13.82

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

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

Six Months Ended June 30,

Nine Months Ended

September 30,

(Dollars in millions)

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On June 30, 2022, the Supreme Court issued its opinion in West Virginia v.

20-1530 ( West Virginia ).

The Supreme Court ruled that the EPA does not have Congressional authority under section 111(d) of the CAA to limit emissions at existing power plants through generation shifting to other fuels and/or renewable energy, but still can regulate emissions at plants by emissions reductions technologies as the EPA has done in the past.

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National Ambient Air Quality Standards (NAAQS) .

The CAA requires the EPA to review national ambient air quality standards every five years to determine whether revision to current standards are appropriate.

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

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

The CAA requires the EPA to review national ambient air quality standards (NAAQS) every five years to determine whether revision to current standards are appropriate.

As part of this recurring review process, the EPA in 2020 proposed to retain the ozone NAAQS promulgated in 2015, including both the primary (public health) and secondary (public welfare) standards.

The EPA subsequently promulgated final standards to this effect.

In 2021, fifteen states and other petitioners filed a petition for review of the rule in the D.C.

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

The EPA also proposed in 2020 to retain the particulate matter (PM) standards last revised in 2012.

The EPA also proposed in 2020 to retain the particulate matter (PM) NAAQS last revised in 2012.

On December 18, 2020, the EPA issued a final rule to retain both the primary annual and 24-hour PM standards for fine particulate matter (PM 2.5 ) and the primary 24-hour standard for coarse particulate matter (PM 10 ) and secondary PM 10 standards.

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

Briefing is completed and oral arguments have been scheduled for September 28, 2022, but this does not stay the effectiveness of the rule.

Briefing is completed and oral arguments were held September 28, 2022, but this does not stay the effectiveness of the rule.

On April 6, 2022, the EPA proposed FIPs to address regional ozone transport for the 2015 ozone NAAQS.

The proposed rule would result in new ozone season emission budgets for NO x in 25 states, including four Western states, and the proposed rule additionally contains provisions that would require daily “backstop” emission limits for coal-fired power plants over 100 megawatts.

The proposed rule would result in new ozone season emission budgets for NO x in 25 states, including four Western states, and additionally contains provisions that would require daily “backstop” emission limits for coal-fired power plants over 100 megawatts.

The proposed rule would also set first-time limits on certain industrial sources.

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The EPA issued another proposal in June 2022 that would supersede the 2020 rule and expand state and tribal regulators’ authority to review activities that require federal permits or licenses and to impose conditions they believe are necessary to ensure compliance with water quality requirements.

Comments for this rule were due August 8, 2022 and final rule is expected in Spring 2023.

National Environmental Policy Act (NEPA) .

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On April 20, 2022, however, the CEQ published the final Phase 1 rule that partially amended the 2020 rule by restoring key provisions of the pre-2020 NEPA regulations.

The CEQ plans to propose a Phase 2 rule in August 2022 that makes broader changes to the 2020 rule.

The CEQ plans to propose a Phase 2 rule in the near future that makes broader changes to the 2020 rule.

Black Lung Benefits Act Self-Insurance Requirements .

The Department of Labor’s Office of Workers’ Compensation Programs (OWCP) is scheduled to propose a rule this year establishing requirements for Black Lung Benefits Act self-insurance.

The Act requires each coal mine operator to secure the payment of its potential benefits liability by either qualifying as a self-insurer or by purchasing and maintaining a commercial insurance contract.

The OWCP is responsible for authorizing coal mine operators to self-insure and for setting the appropriate security amounts.

Appropriate security helps protect the Black Lung Disability Trust Fund, which pays benefits when operators fail to make payments due to bankruptcy or other reasons.

As part of its ongoing efforts to reform the self-insurance program to ensure that operators are adequately securing their liabilities, OWCP proposes to update its regulations for authorizing operators to self-insure and for determining appropriate security amounts.

On August 30, 2022, OWCP forwarded the draft rule to the Office of Management and Budget (OMB) for review.

SEC Climate-Related Disclosures.

On March 21, 2022, the SEC proposed rules that would require public companies to disclose extensive climate-related information in certain SEC filings.

Specifically, the proposed rules would add new Subpart 1500 to Regulation S-K and new Article 14 to Regulation S-X to require disclosure of climate-related risks that are reasonably likely to have a material impact on a public company’s business, results of operations, or financial condition;

GHG emissions associated with a public company that includes, in many cases, an attestation report by a GHG emissions attestation provider;

and climate-related financial metrics to be included in a company’s audited financial statements.

The Company is currently assessing the potential impact of the proposed rules.

The public comment period on the proposed rules has concluded and final rules are expected late 2022 or early 2023.

Inflation Reduction Act of 2022 .

The Inflation Reduction Act of 2022 was signed into law on August 16, 2022.

Among its many provisions are programs that provide grants and other forms of direct and indirect financial assistance for the deployment of zero emission technologies as well as other actions that could affect energy markets and the future use of coal.

The legislation also implements a 15% minimum tax on book income of certain large corporations and a 1% excise tax on net stock repurchases.

The Company is currently assessing the potential impacts of the legislation.

Regulatory Matters - Australia

Australia’s federal election on May 21, 2022 resulted in the Labor Party replacing the former Coalition administration.

Australian federal election.

On May 21, 2022, Australia’s federal election resulted in the Labor Party replacing the former Coalition administration.

The new Labor government plans several reforms to federal environmental and industrial relations laws that have the potential to negatively impact Australian mining operations;

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The Australian federal government has also committed to provide an official response to an independent review of Australia’s overarching environmental law, the Environment Protection and Biodiversity Conservation (EPBC) Act, by the end of 2022, with the aim of developing strengthened environmental legislation in 2023.

Sharma v Minister for the Environment.

On March 15, 2022, the Full Court of the Federal Court of Australia overturned the decision in Sharma v Minister for the Environment [2021] FCA 560 (Sharma), a case which found in 2021 that the Federal Minister for the Environment had a duty to avoid causing personal injury or death to children in Australia as a result of carbon emissions when deciding an application to approve a coal mine expansion.

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However, an application by Sharma for special leave to appeal to the High Court of Australia remains probable, and the duty could be reinstated.

Queensland royalties.

On and from July 1, 2022, the Queensland Government introduced three new royalty tiers for coal produced and sold from the state.

25 unchanged sentences

• Uncertainty and inconsistency in rulemaking processes related to periodic governmental administrative and policy changes;

• Unfavorable costs of capital and access to financial markets and products due to the policies of financial institutions;

• Unfavorable costs of capital and limited or no available access to financial markets and products due to the policies of financial institutions;

• Disruption to operations or markets due to anti-coal activism and litigation;

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Such analyses cannot be relied upon to reasonably predict the quantitative impact that future laws, regulations or other policies may have on the Company’s results of operations, financial condition or cash flows.

On March 21, 2022, the SEC proposed rules that would require public companies to disclose extensive climate-related information in certain SEC filings.

GHG emissions associated with a public company that includes, in many cases, an attestation report by a GHG emissions attestation provider;

and climate-related financial metrics to be included in a company’s audited financial statements.

The Company is currently assessing the potential impact of the proposed rules.

Liquidity and Capital Resources

7 unchanged sentences

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

As of June 30, 2022, the Company’s cash balances totaled $1,120.7 million, including approximately $386 million held by U.S.

As of September 30, 2022, the Company’s cash balances totaled $1,354.5 million, including approximately $742 million held by U.S.

subsidiaries, $578 million held by Australian subsidiaries, and the remainder held by other foreign subsidiaries in accounts predominantly domiciled in the U.S.

The Australian subsidiaries that conduct the operations of the Wilpinjong Mine held cash of approximately $202 million at June 30, 2022.

The Australian subsidiaries that conduct the operations of the Wilpinjong Mine held cash of approximately $203 million at September 30, 2022.

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

2 unchanged sentences

From time to time, the Company may repatriate excess cash from its foreign subsidiaries to the U.S.

During the first half of 2022, the Company repatriated approximately $200 million.

During the nine months ended September 30, 2022, the Company repatriated approximately $1.1 billion.

If additional foreign-held cash is repatriated in the future, the Company does not expect restrictions or potential taxes will have a material effect to its near-term liquidity.

The Company’s available liquidity increased from $995.9 million as of December 31, 2021 to $1,134.2 million as of June 30, 2022.

The Company’s available liquidity increased from $995.9 million as of December 31, 2021 to $1,369.2 million as of September 30, 2022.

Available liquidity was comprised of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(Dollars in millions)

3 unchanged sentences

Total liquidity $ 1,369.2 $ 995.9

During the three months ended June 30, 2022, the Company executed an amendment to its credit facility to reduce its capacity by approximately $17 million and to make allowable certain previously restricted payments for joint venture investments.

During the nine months ended September 30, 2022, the Company executed an amendment to its credit facility and mandatorily reduced its capacity by approximately $22 million to make allowable certain previously restricted payments for joint venture investments.

The amendment creates an investment basket which allows payments of $30.0 million per year specifically limited to investment in renewable energy-related projects.

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If the fair value of its exchange-cleared hedge portfolio moves significantly, the Company could be required to post additional margin, which could negatively impact its liquidity.

At March 4, 2022, the Company held coal derivative contracts in aggregate of 2.3 million metric tons.

The majority of these contracts were entered into in the first half of 2021 and related to 1.9 million metric tons of production at the Wambo Underground Mine in the Company’s Seaborne Thermal Mining segment, which were expected to be mined and settled at a rate of 1.2 million metric tons in 2022 (with 0.4 million metric tons settling in the first half of 2022 and 0.8 million settling in the second half of 2022) and 0.7 million metric tons in 2023.

These hedge contracts were put in place to support the profitability of the mine, securing anticipated average prices of $84 per metric ton through mid-2023.

The remaining hedges relate to brokered coal transactions and other blending and optimization activities, which will settle throughout 2022.

High demand and tight supply for coal globally has resulted in a substantial rise in seaborne thermal coal prices, which has been amplified by the Russian-Ukrainian conflict resulting in unprecedented upward volatility in Newcastle coal pricing since late February.

The Newcastle financial price for March closed at $419.50 per metric ton on March 4, 2022, which was 148% above the closing index price of $169.17 per metric ton on December 31, 2021.

As a result, the Company’s total initial and variation margin requirements reached approximately $750 million during March 2022, and were $544.2 million at June 30, 2022.

During 2022, the Company’s margin requirements have been driven primarily by coal derivative contracts entered into in the first half of 2021 related to 1.9 million metric tons of production at the Wambo Underground Mine in the Company’s Seaborne Thermal Mining segment.

Based on planned production, the contracts were expected to settle at a rate of 1.2 million metric tons in 2022 and 0.7 million metric tons in 2023.

High demand and tight supply for coal globally during 2022 has resulted in a substantial rise in seaborne thermal coal prices, which has been amplified by the Russian-Ukrainian conflict resulting in unprecedented upward volatility in Newcastle coal pricing since late February.

The Newcastle financial price has reached over $450 per metric ton during 2022, compared to approximately $169 per metric ton on December 31, 2021.

As a result, the Company’s total initial and variation margin requirements reached approximately $750 million during March 2022.

Margin is returned to the Company upon reductions in the underlying market coal price or, absent such reductions, cash is recovered as the Company delivers coal into the market at spot prices.

On March 7, 2022, the Company entered into a credit agreement, by and among the Company, as borrower, Goldman Sachs Lending Partners LLC, as administrative agent, and the lenders party thereto (the Credit Agreement).

The Credit Agreement provides for a $150 million unsecured revolving credit facility (the Revolving Facility), which will mature on April 1, 2025 and bears interest at a rate of 10.0% per annum on drawn amounts.

The Revolving Facility is intended to support the Company’s near-term liquidity requirements, particularly with respect to the cash margin requirements associated with the Company’s coal derivative contracts.

Concurrently with the Credit Agreement, the Company entered into an agreement with Goldman Sachs & Company LLC to act as sales agent for at-the-market equity offerings of up to $225.0 million of the Company’s common stock.

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 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.

To reduce exposure to additional margin requirements, during the six months ended June 30, 2022, the Company converted 0.8 million metric tons of financial hedges into fixed price physical sales over the next 12 months.

As of June 30, 2022, 0.9 million metric tons remain outstanding with 0.4 million metric tons projected to settle over the remainder of 2022.

On July 29, 2022, the Company had $529.2 million of margin posted.

In order to meet its near-term liquidity requirements, particularly with respect to cash margin, the Company entered into a $150 million unsecured revolving credit facility in March 2022.

Concurrently with this agreement, the Company entered into an agreement for at-the-market equity offerings of up to $225.0 million of the Company’s common stock.

During the three months ended March 31, 2022, the Company borrowed and repaid $225.0 million under the revolving credit 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 Company made no additional borrowings and terminated the facility prior to its scheduled 2025 maturity, on August 4, 2022.

To reduce exposure to additional margin requirements, during the nine months ended September 30, 2022, the Company converted 0.8 million metric tons of financial hedges into fixed price physical sales through the first half of 2023.

As of September 30, 2022, 0.9 million metric tons remain outstanding with 0.3 million metric tons projected to settle over the remainder of 2022.

On September 30, 2022, the Company had $465.9 million of margin posted.

On October 31, 2022, the Company had $361.7 million of margin posted.

For additional information regarding the Company’s coal derivative contracts, refer to Part I, Item 3.

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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 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.

Based upon the Company’s free cash flow since entering into the surety agreement, additional collateral of $38.7 million was posted during the nine months ended September 30, 2022 and $57.4 million was posted subsequent to September 30, 2022, in the form of cash-collateralized letters of credit.

The Company is unable to accurately estimate future additional collateral postings due to the sensitivity of free cash flow to external market factors such as coal pricing.

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

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

The Company’s total indebtedness as of June 30, 2022 and December 31, 2021 is presented in the table below.

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

At September 30, 2022, letters of credit of $43.2 million were outstanding under the agreement, which were collateralized by cash of $44.5 million.

Capital Expenditures

The Company increased its targeted capital expenditures for 2022 from approximately $190 million to $210 million, which includes an increase of major project and growth capital expenditures from approximately $80 million to $100 million.

The Company’s total indebtedness as of September 30, 2022 and December 31, 2021 is presented in the table below.

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

(Dollars in millions)

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Long-term debt $ 322.3 $ 1,078.2

The Company’s indebtedness requires estimated contractual principal and interest payments, assuming interest rates in effect at June 30, 2022, of approximately $40 million during the six months ending December 31, 2022, and approximately $70 million in 2023, $400 million in 2024, $405 million in 2025, and $355 million thereafter.

However, as further described below, certain pending transactions to repurchase debt principal could alter the timing and amount of principal and interest payments.

Cash payments for interest related to the Company’s indebtedness and financial assurance instruments amounted to $40.6 million and $48.0 million during the three months ended June 30, 2022 and 2021, respectively, and $77.8 million and $104.3 million during the six months ended June 30, 2022 and 2021, respectively.

2021 Financing Activity and Subsequent Repurchases

The Company’s indebtedness requires estimated contractual principal and interest payments, assuming interest rates in effect at September 30, 2022, of approximately $20 million during the three months ending December 31, 2022, and approximately $65 million in 2023, $260 million in 2024, $360 million in 2025, and $355 million thereafter.

However, certain pending transactions, as further described below, and the Company’s positive intent and ability to repurchase additional debt principal in advance of contractual maturity dates could alter the timing and amount of principal and interest payments.

In the accompanying condensed consolidated balance sheets, the Company classified all debt, with the exception of the 2028 Convertible Notes and finance lease obligations, as current obligations at September 30, 2022.

Cash payments for interest related to the Company’s indebtedness and financial assurance instruments amounted to $26.4 million and $40.0 million during the three months ended September 30, 2022 and 2021, respectively, and $104.2 million and $144.3 million during the nine months ended September 30, 2022 and 2021, respectively.

2021 Financing Activity and Subsequent Debt Repurchases

During the first quarter of 2021, the Company completed a series of 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.

Subsequent to these transactions, the Company completed additional financing transactions during 2021 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.

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.

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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 September 30, 2022, the Company repurchased $48.8 million aggregate principal amount of its Senior Secured Term Loan and 2025 Notes for $46.6 million in various open market transactions.

As a result of these repurchases, the Company made a mandatory offer to repurchase $12.2 million of priority lien obligations under the Company LC Agreement at 95.57% on October 17, 2022.

The offer will expire on November 16, 2022.

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.

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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.

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.

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 on August 22, 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.

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.

The holders of the Co-Issuer Term Loans unanimously declined their $37.9 million pro rata portion of the offer and the holders of the 2024 Co-Issuer Notes tendered for prepayment $18.2 millon principal amount of their $27.2 million pro rata portion of the offer.

The Company completed the prepayment during the three months ended September 30, 2022.

Voluntary repurchases of Co-Issuer Term Loans are permissible through various methods, including a modified Dutch auction process in which the Company may solicit acceptable prices from holders.

During the three months ended June 30, 2022, the Company solicited bids from all holders of Co-Issuer Term Loans for the repurchase of up to $50.0 million principal amount, resulting in that full amount of principal being repurchased at a weighted average price of 103.91%, or $52.0 million in total.

During the three months ended September 30, 2022, the Company solicited bids from all holders of Co-Issuer Term Loans for the repurchase of up to $75.0 million principal amount, resulting in $20.4 million of principal being repurchased at a weighted average price of 105.91%, or $21.6 million in total.

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 processes described above, the Company must also offer to repurchase an equivalent principal amount of the 2024 Co-Issuer Notes at the equivalent purchase price.

Further, 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.

As a result of the modified Dutch auction process completed during the three months ended June 30, 2022, the required equivalent offer to purchase $50.0 million aggregate principal amount of 2024 Co-Issuer Notes was made by the Company on May 26, 2022 and was subsequently increased to $93.9 million, at the Company’s discretion.

The offer was fully tendered and the Company completed the repurchase on July 25, 2022 for $97.5 million.

The discretionary increase to the 2024 Co-Issuer Notes repurchase offer compelled the Company to offer to repurchase an additional $43.9 million principal amount of Co-Issuer Term Loans at 103.91% which resulted in the valid tender and purchase of $3.8 million principal for $4.0 million during the three months ended September 30, 2022.

As a result of the modified Dutch auction process completed during the three months ended September 30, 2022, the Company offered to repurchase the outstanding $81.6 million principal amount of 2024 Co-Issuer Notes at 105.91% on September 19, 2022, which exceeded the required offer amount.

To maintain parity with respect to the holders of the Co-Issuer Term Loans, the Company simultaneously offered to repurchase $61.2 million principal amount of Co-Issuer Term Loans at 105.91%.

Both offers will expire on November 18, 2022.

Retirement of 2022 Notes

5 unchanged sentences

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.

The 2028 Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in accordance with their terms.

The 2028 Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in accordance with their terms, as described in Note 9.

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

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.

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 ended 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;

(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;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(4) if the Company calls any 2028 Convertible Notes for redemption;

and (5) at any time from, and including, September 1, 2027 until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the indenture.

The initial conversion rate for the 2028 Convertible Notes will be 50.3816 shares of the Company’s common stock per $1,000 principal amount of 2028 Convertible Notes, which represents an initial conversion price of approximately $19.85 per share of the Company’s common stock.

The initial conversion price represents a premium of approximately 32.5% to the $14.98 per share closing price of the Company’s common stock on February 24, 2022.

The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the indenture.

If certain corporate events described in the indenture occur prior to the maturity date, or the Company delivers a notice of redemption (as described below), the conversion rate will be increased for a holder who elects to convert its 2028 Convertible Notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances.

The Company may not redeem the 2028 Convertible Notes prior to March 1, 2025.

The Company may redeem for cash all or any portion of the 2028 Convertible Notes, at its option, on or after March 1, 2025 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to 100% of the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and (2) the trading day immediately before the date the Company sends such notice.

However, the Company may not redeem less than all of the outstanding 2028 Convertible Notes unless at least $75 million aggregate principal amount of 2028 Convertible Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

No sinking fund is provided for the 2028 Convertible Notes.

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.

Covenant Compliance

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.

The Company’s restricted subsidiaries’ relevant liquidity amounted to $930.7 million at June 30, 2022.

The Company was compliant with all relevant covenants under its debt agreements at September 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.

The Company’s restricted subsidiaries’ relevant liquidity amounted to $1,160.9 million at September 30, 2022.

Accounts Receivable Securitization Program

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

At June 30, 2022, the Company had no outstanding borrowings and $161.5 million of letters of credit outstanding 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 June 30, 2022.

At September 30, 2022, the Company had no outstanding borrowings and $164.1 million of letters of credit outstanding under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company was not required to post cash collateral under the securitization program at September 30, 2022.

Cash Flows and Free Cash Flow

The following table summarizes the Company’s cash flows for the six months ended June 30, 2022 and 2021, as reported in the accompanying unaudited condensed consolidated financial statements.

The following table summarizes the Company’s cash flows for the nine months ended September 30, 2022 and 2021, as reported in the accompanying unaudited condensed consolidated financial statements.

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

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

Six Months Ended June 30,

Nine Months Ended

September 30,

(Dollars in millions)

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Net cash provided by (used in) investing activities 61.1 (119.7)

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

Net cash (used in) provided by financing activities (120.5) 15.9

Net change in cash, cash equivalents and restricted cash 444.7 (122.2)

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Operating Activities.

The increase in net cash provided by operating activities for the six months ended June 30, 2022 compared to the same period in the prior year was driven by a year-over-year increase in operating cash flow, primarily from Company’s mining operations ($446.3 million), partially offset by cash utilized to satisfy the margin requirements associated with derivative financial instruments ($414.1 million).

The increase in net cash provided by operating activities for the nine months ended September 30, 2022 compared to the same period in the prior year was driven by a year-over-year increase in operating cash flow, primarily from Company’s mining operations ($858.3 million), partially offset by cash utilized to satisfy the unfavorable margin requirements associated with derivative financial instruments ($335.8 million).

Investing Activities.

The increase in net cash provided by investing activities for the six months ended June 30, 2022 compared to the same period in the prior year was driven by higher cash receipts from Middlemount ($140.9 million) and lower capital expenditures and payments of capital accruals ($25.2 million).

The increase in net cash provided by investing activities for the nine months ended September 30, 2022 compared to the same period in the prior year was driven by higher cash receipts from Middlemount ($146.5 million), increased proceeds from disposal of assets ($17.9 million) and lower capital expenditures and payments of capital accruals ($14.1 million).

Financing Activities.

The increase in net cash provided by financing activities for the six months ended June 30, 2022 compared to the same period in the prior year was driven by higher cash proceeds from long-term debt and common stock issuances ($545.0 million and $156.9 million, respectively), partially offset by higher repayments of debt principal ($571.7 million) and higher distributions to non-controlling interests ($13.7 million).

The increase in net cash used in financing activities for the nine months ended September 30, 2022 compared to the same period in the prior year was driven by higher repayments of debt principal ($712.7 million) and higher distributions to non-controlling interests ($13.6 million), partially offset by higher cash proceeds from long-term debt and common stock issuances ($545.0 million and $44.8 million, respectively).

Off-Balance-Sheet Arrangements

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

At June 30, 2022, such instruments inc lude d $1,453.5 million of surety bonds and $475.1 million o f letters of credit.

At September 30, 2022, such instruments inc lude d $1,380.5 million of surety bonds and $505.4 million o f letters of credit.

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

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

As of June 30, 2022, the Company was party to financial instruments with off-balance-sheet risk in support of the following obligations:

As of September 30, 2022, the Company was party to financial instruments with off-balance-sheet risk in support of the following obligations:

Reclamation Health and welfare (1)

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(369.9) (30.8) (2.8) (1.2) — (404.7)

Cash collateral in support of surety bonds (4)

(15.0) — — — — (15.0)

Obligations supported, net $ 1,240.4 $ 120.1 $ 67.4 $ 37.1 $ 16.2 $ 1,481.2

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

The Company has also posted $9.1 million in incremental cash collateral directly with the beneficiary that is not supported by a surety bond.

Not presented in the above table is approximately $105 million of cash collateral posted by the Company and included in the accompanying condensed consolidated balance sheets at September 30, 2022.

Such collateral is primarily in support of the financial instruments noted above, including in relation to the Company’s collateralized letter of credit agreement, mandatory repurchases of credit facility capacity, additional collateral in support of certain surety bonds, and amounts held directly with beneficiaries which are not supported by surety bonds.

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.

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

At June 30, 2022, the Company had total asset retirement obligations of $725.1 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

At September 30, 2022, the Company had total asset retirement obligations of $725.8 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

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

8 unchanged sentences

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K for the year ended December 31, 2021.

The Company’s critical accounting policies remain unchanged at June 30, 2022, and there have been no material changes in the Company’s critical accounting estimates.

The Company’s critical accounting policies remain unchanged at September 30, 2022, and there have been no material changes in the Company’s critical accounting estimates.

Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis