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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-18 · 314 added, 260 removed, 475 unchanged (55% of the section changed)

3 unchanged sentences

Non-GAAP Financial Measures

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

The following discussion of Peabody’s results of operations includes references to and analysis of Adjusted EBITDA and Total Reporting Segment Costs, which are financial measures not recognized in accordance with U.S.

generally accepted accounting principles (U.S.

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

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

Total Reporting Segment Costs is also used by management as a component of a metric to measure each of its segments’ operating performance.

Peabody Energy Corporation 2022 Form 10-K

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

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

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

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

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

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

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

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

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

Peabody believes non-GAAP performance measures are used by investors to measure its operating performance.

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

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

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

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

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

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

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

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

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

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The Company’s Other U.S.

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

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

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

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

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

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

Middlemount Mine.

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During the years ended December 31, 2022 and 2021, the mine sold 1.6 million and 2.0 million tons of coal, respectively (on a 50% basis).

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

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

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

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 year ended December 31, 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 year ended December 31, 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 quarterly, spot or index basis and seaborne thermal coal contracts on an annual, spot or index basis.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the year ended December 31, 2022 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

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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 December 31, 2021

High Low Average December 31, 2022 February 17, 2023

Premium HCC (1)

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$ 452.81 $ 201.54 $ 362.78 $ 398.50 $ 187.27

API 5 thermal coal (1)

API 5 index thermal coal (1)

$ 284.20 $ 109.66 $ 176.44 $ 133.38 $ 117.72

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(2) Prices expressed per short ton.

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

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

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

Within the 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 COVID-19 pandemic.

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 year ended December 31, 2022 presented herein may not be indicative of their ultimate impacts.

Peabody Energy Corporation 2022 Form 10-K

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company collected the settlement in 2019.

Within the seaborne metallurgical coal market, the year ended December 31, 2022 was characterized by significant volatility as a weakened global macroeconomic environment was counteracted by tight coal supply and continued trade flow disruptions following sanctions imposed on Russian coal imports.

Steel prices trended lower during the year ended December 31, 2022, causing some steelmakers to implement small-scale output cuts.

The reduction in steel output is partially influencing short-term incremental metallurgical coal demand in some markets;

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

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

In early January 2023, China partially restarted imports of Australian coal for the first time in two years, providing additional market depth and further support for prices.

The Company believes energy shortages and the global 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 and improving demand in some markets and further economic stimulus in China and elsewhere.

Within the seaborne thermal coal market, global thermal coal prices ended the year at elevated 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 limited supply response out of Australia and Columbia due to weather and labor issues.

In China, domestic coal production and renewable generation have been strong during the year ended December 31, 2022, which has lowered import demand.

In India, strong 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 year ended December 31, 2022, electricity generation from thermal coal has declined year-over-year due to coal conservation by utilities, transportation issues impacting coal deliveries and stronger renewable generation.

Coal’s share of electricity generation has declined to approximately 19% for the year ended December 31, 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 6% or 5 million tons.

During the year ended December 31, 2022, utility consumption of PRB coal declined approximately 5% compared to the prior year period.

Financing Transactions

During the first quarter of 2022, Peabody issued convertible senior unsecured notes and used the proceeds of the offering to retire nearer term higher cost senior secured debt.

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

Throughout 2022, Peabody continued to reduce its outstanding debt, and at December 31, 2022, all senior secured debt had been retired.

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 2022.

As a result, Peabody posted additional cash margin of $125.4 million during the year ended December 31, 2022 to satisfy the margin requirements for its derivative contracts.

Refer to the “Liquidity and Capital Resources” section contained within this Item 7 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 of 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 production in its Seaborne Metallurgical Mining segment.

The Company’s board of directors has approved redevelopment expenditures of $120 million for 2023, which 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.

Future decisions about the redevelopment of North Goonyella may be impacted by Queensland’s increased royalty tiers.

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

Peabody Energy Corporation 2022 Form 10-K

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 reclaimed mining land held by the Company in the U.S., for utility-scale photovoltaic solar generation and battery storage.

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 $10.9 million to R3 and recorded an equity loss of $3.9 million from its operations during the year ended December 31, 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.

Under the commitment agreement, the Plan purchased a buy-in group annuity contract for approximately $500 million and the insurer will reimburse the Plan for benefit payments to be made to the Plan’s participants.

Under the terms of this transaction, the Plan continues to administer and pay the retirement benefits of Plan participants and is reimbursed by the insurer for the payment of all benefits covered by the group annuity contract.

In May 2022, the board of directors of Peabody Investments Corp.

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

Refer to Note 14.

“Pension and Savings Plans” to the accompanying consolidated financial statements for a further discussion of this transaction.

Results of Operations

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

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

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

The increase in income from continuing operations, net of income taxes for the year ended December 31, 2022 compared to the same period in 2021 ($970.0 million) was primarily driven by higher revenue ($1,663.6 million) due to higher realized prices and a 20% increase in metallurgical sales volumes;

improved results from equity affiliates ($49.1 million);

and lower interest expense ($43.1 million).

These favorable variances were partially offset by higher operating costs and expenses ($737.7 million), which reflect increased sales price sensitive costs, the impacts of challenging weather conditions and inflationary pressures for commodities, materials, services, repairs and labor;

and net losses on early debt extinguishments in the current year ($91.1 million).

Adjusted EBITDA for the year ended December 31, 2022 reflected a 101% year-over-year increase of $928.0 million.

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

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

Peabody Energy Corporation 2021 Form 10-K

The following table presents tons sold by operating segment:

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Thermal Mining 18.4 16.9 1.5 8.9 %

Total tons sold from mining segments 128.1 130.1 (2.0) (1.5) %

Total tons sold from operating segments 123.2 128.1 (4.9) (3.8) %

Corporate and Other 0.5 2.0 (1.5) (75.0) %

Total tons sold 123.7 130.1 (6.4) (4.9) %

Peabody Energy Corporation 2022 Form 10-K

Supplemental Financial Data

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2022 2021 $ %

Revenues per Ton - Mining Operations (1)

Revenue per Ton - Mining Operations (1)

Seaborne Thermal $ 86.07 $ 54.09 $ 31.98 59.1 %

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and certain other costs related to post-mining activities.

Peabody Energy Corporation 2021 Form 10-K

The following table presents revenues by reporting segment:

Increase (Decrease)

Year Ended December 31, to Revenues

The following table presents revenue by reporting segment:

Year Ended December 31, to Revenue

2022 2021 $ %

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Corporate and Other 1.7 (3.7) 5.4 145.9 %

Revenues $ 3,318.3 $ 2,881.1 $ 437.2 15.2 %

Revenue $ 4,981.9 $ 3,318.3 $ 1,663.6 50.1 %

Seaborne Thermal Mining.

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

The increase in segment revenue during the year ended December 31, 2022 compared to the prior year was due to favorable realized prices ($540.4 million), partially offset by unfavorable volumes ($128.8 million) which were impacted by wet weather in the current year and mine plan considerations which included a longwall move at the Wambo Underground Mine in the first half of 2022.

Seaborne Metallurgical Mining.

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

Segment revenue increased during the year ended December 31, 2022 compared to the prior year due to favorable realized prices at the Australian operations ($583.1 million), the resumption of sales at the Shoal Creek Mine ($236.6 million) and favorable volume and mix variances at the Australian operations ($69.5 million).

Sales volumes increased by 20% from the prior year.

Powder River Basin Mining.

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

Segment revenue increased during the year ended December 31, 2022 compared to the prior year due to favorable realized prices ($168.5 million), offset by unfavorable volumes ($74.2 million) resulting from rail performance issues.

Peabody Energy Corporation 2022 Form 10-K

Thermal Mining.

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

The increase in segment revenue during the year ended December 31, 2022 compared to the prior year was due to favorable realized prices ($209.2 million) and favorable volumes ($53.9 million).

Corporate and Other.

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

Segment revenue increased during the year ended December 31, 2022 compared to the prior year due to lower net unrealized mark-to-market losses on derivative contracts related to forecasted coal sales ($79.3 million), offset by lower results from trading activities ($74.5 million) due to net realized losses on derivative contracts related to forecasted coal sales exceeding the higher margins recognized on the physical sale of coal.

Adjusted EBITDA

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Seaborne Thermal Mining.

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

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

Segment Adjusted EBITDA increased during the year ended December 31, 2022 compared to the same period in the prior year as a result of higher realized prices net of sales sensitive costs ($495.5 million) and favorable foreign currency impacts ($25.2 million).

The increases were offset by unfavorable operational costs ($119.8 million) 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;

lower volumes ($64.7 million);

higher port and demurrage costs ($21.7 million) and higher commodity pricing ($18.6 million).

Seaborne Metallurgical Mining.

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

Peabody Energy Corporation 2021 Form 10-K

Segment Adjusted EBITDA increased during the year ended December 31, 2022 compared to the same period in the prior year due to higher realized prices net of sales sensitive costs at the Australian operations ($466.9 million), favorable volumes from the resumption of sales at the Shoal Creek Mine ($111.6 million) and favorable foreign currency impacts ($36.3 million).

Powder River Basin Mining.

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

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

Segment Adjusted EBITDA decreased during the year ended December 31, 2022 compared to the same period in the prior year as a result of increased overburden removal costs as the workforce focused on preparatory efforts in light of rail performance issues ($63.3 million);

higher costs for materials, services, repairs and labor ($55.3 million) due in part to increased repairs for an aging equipment fleet and inflationary pressures on materials and services;

the unfavorable impacts of higher commodity pricing ($53.9 million);

and lower volumes ($19.9 million) resulting from rail performance issues.

These decreases were offset by higher realized prices net of sales sensitive costs ($146.7 million).

Thermal Mining.

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

Segment Adjusted EBITDA increased during the year ended December 31, 2022 compared to the same period in the prior year due to higher realized prices net of sales sensitive costs ($210.4 million) and favorable volumes ($19.2 million).

These increases were offset by higher costs for materials, services, repairs and labor ($104.8 million) due in part to increased equipment repairs and headcount resulting from increasing volume demands and inflationary pressures on materials and services;

and the unfavorable impacts of higher commodity pricing ($44.2 million).

Peabody Energy Corporation 2022 Form 10-K

Corporate and Other Adjusted EBITDA.

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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 $62.7 million and $42.0 million during the years ended December 31, 2022 and 2021, respectively.

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

(2) Includes gains (losses) on certain surplus coal reserve, resource 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 other commercial activities.

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

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

Corporate and Other Adjusted EBITDA benefited during the year ended December 31, 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 ($84.6 million) and gains on various land sales in both the U.S.

and Australia ($20.0 million).

This benefit was offset by unfavorable trading results ($61.6 million) and a gain recognized in the prior year on the sale of the Company’s Millennium Mine ($26.1 million) as discussed in Note 17.

“Other Events.”

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

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

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

Peabody Energy Corporation 2021 Form 10-K

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

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

Income From Continuing Operations, Net of Income Taxes

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

Increase (Decrease) to Income

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Restructuring charges (2.9) (8.3) 5.4 65.1 %

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

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

Asset impairment (11.2) — (11.2) n.m.

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

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Interest expense (140.3) (183.4) 43.1 23.5 %

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

Net (loss) gain on early debt extinguishment (57.9) 33.2 (91.1) (274.4) %

Interest income 18.4 6.5 11.9 183.1 %

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Unrealized losses on derivative contracts related to forecasted sales (35.8) (115.1) 79.3 68.9 %

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

Unrealized losses on foreign currency option contracts (2.3) (7.5) 5.2 69.3 %

Take-or-pay contract-based intangible recognition 2.8 4.3 (1.5) (34.9) %

Income tax provision

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

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

Income tax benefit (provision) 38.8 (22.8) 61.6 270.2 %

Income from continuing operations, net of income taxes $ 1,317.4 $ 347.4 $ 970.0 279.2 %

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

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

Peabody Energy Corporation 2022 Form 10-K

Depreciation, Depletion and Amortization.

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

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

(Decrease) Increase

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Total $ (317.6) $ (308.7) $ (8.9) (2.9) %

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:

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

Year Ended December 31,

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Thermal Mining 1.23 1.15

Peabody Energy Corporation 2021 Form 10-K

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

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

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

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

Restructuring Charges.

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

Transaction Costs Related to Joint Ventures.

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

which was terminated during the third quarter of 2020.

The increase in the weighted-average depletion rate per ton for the Seaborne Thermal Mining segment during the year ended December 31, 2022 compared to the same period 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 year ended December 31, 2022 compared to the same period in the prior year reflects the resumption of sales at the Shoal Creek Mine.

Asset Impairment.

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

The Company recognized $11.2 million in aggregate asset impairment charges during the year ended December 31, 2022 related to the sale of certain land interests and an investment in equity securities.

Refer to Note 3.

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

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

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

During the year ended December 31, 2021, the Company released a valuation allowance of approximately $33 million 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.

Refer to Note 5.

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Interest Expense.

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

The decrease in interest expense during the year ended December 31, 2022 compared to the prior year primarily reflects 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 as further described in Note 10.

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

Net Gain on Early Debt Extinguishment.

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

Net (Loss) Gain on Early Debt Extinguishment.

The net loss (gain) on early debt extinguishment was primarily related to the redemption of existing notes during the years ended December 31, 2022 and 2021, as further discussed in Note 10.

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

Interest Income.

The increase in interest income during the year ended December 31, 2022 compared to the prior year was primarily due to higher cash balances and interest rates in the current year.

Peabody Energy Corporation 2022 Form 10-K

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

The gain recorded during the year ended December 31, 2022 was driven by increases to the discount rates for actuarially determined liabilities ($190.1 million) and the favorable impacts of changes for the postretirement benefit plans related to updated claims experience ($28.6 million).

These increases were offset by mark-to-market losses on pension and postretirement benefit plan assets ($162.1 million);

the unfavorable impact of the premium paid for the purchase of a buy-in group annuity contract for a qualified pension plan ($17.6 million) and the unfavorable impacts of medical trend updates for the postretirement benefit plans ($15.7 million).

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

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

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

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

Unrealized Losses on Derivative Contracts Related to Forecasted Sales.

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

Unrealized 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 consolidated financial statements.

Unrealized (Losses) Gains on Foreign Currency Option Contracts.

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

Unrealized Losses on Foreign Currency Option Contracts.

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

For additional information, refer to Note 6.

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

Income Tax Provision .

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

Income Tax Benefit (Provision) .

The income tax benefit recorded during the year ended December 31, 2022 was primarily due to the release of valuation allowance related to Australian NOLs, partially offset by year-over-year increases in pretax income.

Refer to Note 8.

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

Peabody Energy Corporation 2021 Form 10-K

Net Income (Loss) Attributable to Common Stockholders

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

Net Income Attributable to Common Stockholders

The following table presents net income attributable to common stockholders:

Increase (Decrease)

Year Ended December 31, to Income

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(Dollars in millions)

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

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

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

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

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

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

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

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

Net Income (Loss) Attributable to Noncontrolling Interests .

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

Income from continuing operations, net of income taxes $ 1,317.4 $ 347.4 $ 970.0 279.2 %

Income from discontinued operations, net of income taxes 1.7 24.0 (22.3) (92.9) %

Net income 1,319.1 371.4 947.7 255.2 %

Net income attributable to noncontrolling interests 22.0 11.3 10.7 94.7 %

Net income attributable to common stockholders $ 1,297.1 $ 360.1 $ 937.0 260.2 %

Income from Discontinued Operations, Net of Income Taxes .

The decrease in income from discontinued operations, net of income taxes during the year ended December 31, 2022 compared to the prior year period was primarily driven by the prior year gain of $24.6 million recognized on the sale of the Wilkie Creek Mine as discussed in Note 17.

“Other Events” to the accompanying consolidated financial statements.

Net Income Attributable to Noncontrolling Interests .

The increase in net income attributable to noncontrolling interests during the year ended December 31, 2022 compared to the prior year period was primarily due to stronger financial results of Peabody’s majority-owned mines in which there is an outside non-controlling interest.

The following table presents diluted EPS:

Increase (Decrease) to

Year Ended December 31, EPS

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Diluted EPS attributable to common stockholders:

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

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

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

Income from continuing operations $ 8.29 $ 3.00 $ 5.29 176.3 %

Income from discontinued operations 0.02 0.22 (0.20) (90.9) %

Net income attributable to common stockholders $ 8.31 $ 3.22 $ 5.09 158.1 %

Peabody Energy Corporation 2022 Form 10-K

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 157.2 million and 112.0 million for the years ended December 31, 2022 and 2021, respectively.

Peabody Energy Corporation 2021 Form 10-K

Reconciliation of Non-GAAP Financial Measures

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

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

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

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(Dollars in millions)

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

Income from continuing operations, net of income taxes $ 1,317.4 $ 347.4

Depreciation, depletion and amortization

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Restructuring charges 2.9 8.3

Transaction costs related to joint ventures — 23.1

Asset impairment 11.2 —

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Interest expense 140.3 183.4

Net gain on early debt extinguishment (33.2) —

Net loss (gain) on early debt extinguishment 57.9 (33.2)

Interest income (18.4) (6.5)

Net mark-to-market adjustment on actuarially determined liabilities

(27.8) (43.4)

Unrealized losses on derivative contracts related to forecasted sales 35.8 115.1

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

Unrealized losses on foreign currency option contracts 2.3 7.5

Take-or-pay contract-based intangible recognition (2.8) (4.3)

Income tax provision

Income tax (benefit) provision (38.8) 22.8

Adjusted EBITDA $ 1,844.7 $ 916.7

Revenues per Ton and Adjusted EBITDA Margin per Ton are equal to revenues by segment and Adjusted EBITDA by segment, respectively, divided by segment tons sold.

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

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:

Year Ended December 31,

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Operating costs and expenses $ 3,290.8 $ 2,553.1

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

Unrealized losses on foreign currency option contracts (2.3) (7.5)

Take-or-pay contract-based intangible recognition 2.8 4.3

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Total Reporting Segment Costs $ 3,242.3 $ 2,511.6

The following table presents Reporting Segment Costs by reporting segment:

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

Year Ended December 31,

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Peabody Energy Corporation 2022 Form 10-K

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

Revenue per Ton and Adjusted EBITDA Margin per Ton are equal to revenue by segment and Adjusted EBITDA by segment, respectively, divided by segment tons sold.

Costs per Ton is equal to Revenue per Ton less Adjusted EBITDA Margin per Ton.

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

Year Ended December 31, 2022

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Tons sold 15.6 6.6 82.6 18.4

Revenues $ 934.0 $ 727.7 $ 971.2 $ 689.1

Reporting Segment Costs 580.9 549.5 836.3 524.9

Revenue $ 1,345.6 $ 1,616.9 $ 1,065.5 $ 952.2

Total Reporting Segment Costs 698.0 835.2 997.3 709.8

Adjusted EBITDA

$ 647.6 $ 781.7 $ 68.2 $ 242.4

Revenues per Ton

$ 54.09 $ 131.83 $ 10.99 $ 40.75

Revenue per Ton $ 86.07 $ 243.78 $ 12.89 $ 51.82

Costs per Ton

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Tons sold 17.3 5.5 88.4 16.9

Revenues $ 711.8 $ 486.5 $ 991.1 $ 707.3

Reporting Segment Costs 548.6 616.7 796.3 538.9

Revenue $ 934.0 $ 727.7 $ 971.2 $ 689.1

Total Reporting Segment Costs 580.9 549.5 836.3 524.9

Adjusted EBITDA

$ 353.1 $ 178.2 $ 134.9 $ 164.2

Revenues per Ton

$ 37.46 $ 86.33 $ 11.37 $ 38.73

Revenue per Ton $ 54.09 $ 131.83 $ 10.99 $ 40.75

Costs per Ton

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$ 20.45 $ 32.28 $ 1.53 $ 9.71

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

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

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

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(Dollars in millions)

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

Net cash provided by operating activities $ 1,173.6 $ 420.0

Net cash used in investing activities (28.7) (131.5)

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

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

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

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

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

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

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

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

As of December 31, 2022, the Company’s cash balances totaled $1,307.3 million, including approximately $412 million held by U.S.

subsidiaries, approximately $863 million held by Australian subsidiaries, and the remainder held by other foreign subsidiaries in accounts predominantly domiciled in the U.S.

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

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liquidity needs, including capital and operating expenditures in Australia.

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

During the year ended December 31, 2022, the Company repatriated approximately $1.3 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 $1,317.8 million as of December 31, 2022.

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Total liquidity $ 1,317.8 $ 995.9

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

Collateral Requirements

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.

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 since entering into the surety agreement, additional collateral of $102.4 million was posted during the year ended December 31, 2022 and $74.4 million was posted in January 2023, 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.

Under the agreement, the relevant surety providers agreed to a standstill through December 31, 2025, during which time, the surety providers will not demand collateral incremental to that described above, draw on letters of credit posted for the benefit of themselves or cancel any existing surety bond.

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

The Company is currently in negotiations with its surety providers to amend the existing agreement, including a modification to permit shareholder returns.

Peabody Energy Corporation 2022 Form 10-K

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, 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 variable deposit rate on the amount of cash collateral posted in support of letters of credit.

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

At December 31, 2022, letters of credit of $103.3 million were outstanding under the agreement, which were collateralized by cash of $111.0 million, which includes interest earned on deposits.

Margin Requirements

From time to time, the Company enters into hedging arrangements, including economic hedging arrangements, to manage various risks, including coal price volatility.

Most hedging arrangements require the Company to post margin with its clearing broker based on the value of the related instruments and other credit factors.

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.

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 2022.

The Newcastle financial price reached over $450 per metric ton during 2022, compared to approximately $166 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.

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 2022, the Company converted 0.8 million metric tons of financial hedges into fixed price physical sales.

As of December 31, 2022, 0.6 million metric tons remain outstanding and are projected to settle during the first half of 2023.

On December 31, 2022, the Company had $255.5 million of margin posted.

On February 17, 2023, the Company had $80.5 million of margin posted.

For additional information regarding the Company’s coal derivative contracts, refer to Part II, Item 7A.

“Quantitative and Qualitative Disclosures About Market Risk.”

Peabody Energy Corporation 2022 Form 10-K

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

Debt Instrument (defined below, as applicable) 2022 2021

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

Revolving credit facility — 216.0

3.250% Convertible Senior Notes due March 2028 (2028 Convertible Notes) 320.0 —

Finance lease obligations 23.6 29.3

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Long-term debt $ 320.6 $ 1,078.2

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

Peabody Energy Corporation 2021 Form 10-K

Refinancing and Related Transactions

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

Such agreements and related activities are described below.

Organizational Realignment

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

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

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

Surety Agreement

In November 2020, the Company entered into a surety transaction support agreement (Surety Agreement) with the providers of its surety bond portfolio (Participating Sureties) to resolve previous collateral demands made by the Participating Sureties.

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

Upon completion of the Refinancing Transactions, as defined below, other provisions of the Surety Agreement became effective.

In particular, the Company granted second liens on $200.0 million of certain mining equipment and will post an additional $25.0 million of collateral per year from 2021 through 2024 for the benefit of the Participating Sureties, plus other amounts in accordance with the Surety Agreement.

Further, the Participating Sureties have agreed to a standstill through the earlier of December 31, 2025, or the maturity of the Credit Agreement (currently March 31, 2025), during which time, the Participating Sureties will not demand any additional collateral, draw on letters of credit posted for the benefit of themselves or cancel any existing surety bond.

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

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

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

Refinancing Transactions

On January 29, 2021 (the Settlement Date), the Company completed a series of transactions (collectively, the Refinancing Transactions) to, among other things, provide it with maturity extensions and covenant relief, while allowing it to maintain near-term operating liquidity and financial flexibility.

The Refinancing Transactions included a senior notes exchange and related consent solicitation, a revolving credit facility exchange and various amendments to its existing debt agreements, as summarized below.

Exchange Offer

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

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

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

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

As further described below, during 2021, the Company completed a significant debt restructuring to extend maturities on its existing debt and obtain covenant relief.

Subsequent to these restructuring activities, the Company utilized various methods allowable or required under its relevant debt agreements to retire all of its senior secured long-term debt by December 31, 2022, as only the 2028 Convertible Notes, which are further described below, and finance lease obligations remain outstanding.

The Company’s remaining indebtedness requires estimated contractual principal and interest payments, assuming interest rates in effect at December 31, 2022, of approximately $25 million in 2023, $16 million in 2024, $14 million in 2025, $13 million in 2026, $11 million in 2027 and $322 million thereafter.

Cash interest payments amounted to $118.5 million, $174.9 million and $126.9 million during the years ended December 31, 2022, 2021, and 2020, respectively.

2021 Debt Restructuring

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.

These transactions were preceded by an organizational realignment in which the Company formed certain wholly-owned subsidiaries (the Co-Issuers) to indirectly own and conduct the operations of the Company’s Wilpinjong Mine in Australia and the designation of such entities as unrestricted subsidiaries under the Company’s then-existing credit agreement (Credit Agreement) and senior notes’ indenture.

The senior notes exchange involved the tender of $398.7 million aggregate principal amount of the Company’s 2022 Notes for aggregate consideration consisting of (a) $193.9 million aggregate principal amount of new 2024 Co-Issuer Notes, (b) $195.1 million aggregate principal amount of new 2024 Peabody Notes issued by the Company and (c) a cash payment of approximately $9.4 million.

Concurrently with the senior notes exchange, the Company solicited consents from holders of the 2022 Notes to certain proposed amendments to its existing senior notes’ indenture to (i) eliminate substantially all of the restrictive covenants, certain events of default applicable to the 2022 Notes and certain other provisions contained in their indenture and (ii) release the collateral securing the 2022 Notes and eliminate certain other related provisions.

The Company received the requisite consents from holders of the 2022 Notes and entered into a supplemental indenture to reflect such amendments.

Peabody Energy Corporation 2022 Form 10-K

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

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

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

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

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

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

Revolver Transactions

In connection with the Refinancing Transactions, the Company restructured the revolving loans under the Credit Agreement by (i) making a pay down of revolving loans thereunder in the aggregate amount of $10.0 million, (ii) the Co-Issuers incurring $206.0 million of term loans under a credit agreement, dated as of the Settlement Date (Co-Issuer Term Loans, Co-Issuer Term Loan Agreement), (iii) Peabody entering into a letter of credit facility (the Company LC Agreement), and (iv) amending the Credit Agreement (collectively, the Revolver Transactions).

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

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

The Company also restructured $216.0 million of existing revolving loans under the Credit Agreement by (i) paying down $10.0 million aggregate principal amount of such loans, (ii) compelling the Co-Issuers to incur $206.0 million of Co-Issuer Term Loans under a separate credit agreement, (iii) entering into a letter of credit facility (the Company LC Agreement) and (iv) amending the Credit Agreement.

Under the Company LC Agreement, the Company obtained a $324.0 million letter of credit facility under which its existing letters of credit under the Credit Agreement were deemed to be issued.

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

In connection with the Revolver Transactions, the Company amended the Credit Agreement to make certain changes in consideration of the Company LC Agreement.

After giving effect to the Revolver Transactions, there remain no revolving commitments or revolving loans under the Credit Agreement and the first lien net leverage ratio covenant was eliminated.

The Company LC Agreement requires that the Company’s restricted subsidiaries maintain minimum aggregate liquidity of $125.0 million at the end of each quarter through December 31, 2024.

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

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

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

(i) the Company’s unrestricted subsidiaries’ liquidity must be greater than or equal to $200.0 million after giving effect to such repurchases and (ii) for every $4 of principal repurchased in any fiscal quarter, the Company must make an offer on a pro rata basis to purchase $1 of principal amount of debt from holders of the Peabody Notes and the priority lien obligations under the Company LC Agreement within 30 days of the end of such fiscal quarter at a price equal to the weighted average repurchase price paid over that quarter (Mandatory Repurchase Offer).

Other Debt Financing

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

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

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

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

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

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

Subsequent Financing Transactions

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

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

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

The Company LC Agreement was subsequently amended during 2022 to mandatorily reduce 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.

The Company has no contractual commitment for such project investment.

Unused portions of the basket carryover from year-to-year, and the total amount of investment will further reduce the credit facility capacity by a like amount, or a minimum of $10.0 million per year, through the maturity of the credit facility.

In February 2023, the Company LC Agreement was further amended to reduce its capacity by an additional $65.0 million, accelerate its expiration date to December 31, 2023 from December 31, 2024, and eliminate the prepayment premium due upon any reduction of commitments thereunder prior to July 29, 2023.

The Company expects to utilize its collateralized letter of credit agreement to offset reductions in the capacity of the Company LC Agreement.

Completion of the 2021 debt restructuring transactions allowed the Company to finalize the surety transaction support agreement described above.

2021 Debt Retirements

During the remainder of 2021, the Company retired $293.3 million of debt principal for cash at an aggregate cost of $250.3 million, and $106.1 million of debt principal in exchange for 10.0 million shares of its common stock, as further described below.

In March 2021, as a requirement of the senior notes exchange, the Company purchased $22.4 million of the 2024 Peabody Notes at 80% of their accreted value, plus accrued and unpaid interest.

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

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

Such proceeds were utilized, in part, for the retirement of debt as described below.

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

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

2022 Debt Retirements

During 2022, the Company retired $1,143.8 million of debt principal for cash at an aggregate cost of $1,172.0 million, as further described below.

Such amounts exclude the $225.0 million principal amount borrowed and repaid under the now-terminated revolving facility described above.

On March 31, 2022, the Company retired the remaining principal balance of 2022 Notes upon maturity for $23.1 million.

Peabody Energy Corporation 2022 Form 10-K

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

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

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

As a result of the Company’s open market purchases of its debt during the three months ended December 31, 2021, on January 14, 2022, the Company announced a Mandatory Repurchase Offer of up to $38.6 million of 2024 Peabody Notes, at 94.940% of their aggregate accreted value, plus accrued and unpaid interest, and a concurrent repurchase offer of priority lien obligations under the Company LC Agreement.

The offers expire on March 4, 2022, unless extended by the Company.

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

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

Refer to Note 11.

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

During the three months ended March 31, 2022, $62.5 million principal amount of the 2024 Peabody Notes was retired using proceeds from the offering of 2028 Convertible Notes, as further described below, and the remaining $0.1 million principal amount was retired through a mandatory repurchase offer required under the terms of their indenture and the Company LC Agreement.

Such mandatory repurchase offers were required when the Company made open market repurchases of its debt.

In general, the repurchase offers equated 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.

In addition to the $0.1 million principal amount of 2024 Peabody Notes repurchased through such offers, the Company repurchased $42.2 million of aggregate priority lien obligations under the Company LC Agreement during 2022 at approximately 95%.

The repurchases of Company LC Agreement commitments were effected by the posting of $40.1 million of collateral with the administrative agent and did not reduce the availability under the facility.

In March 2022, $257.4 million principal amount of the 2025 Notes was retired using proceeds from the offering of 2028 Convertible Notes, as further described below.

The remaining 2025 Notes were retired through an open market repurchase of $11.4 million principal amount at 98.00% in September 2022 and, in accordance with the notes’ indenture, a voluntary prepayment of $66.1 million principal amount at 101.59% in December 2022.

The Senior Secured Term Loan was retired through various open market purchases of $44.1 million principal amount throughout 2022 at an aggregate cost of $42.1 million, scheduled quarterly principal amortization payments of $3.0 million, and, in accordance with the terms of the Credit Agreement, a voluntary prepayment of $276.2 million principal amount at par in December 2022.

The 2024 Co-Issuer Notes and the Co-Issuer Term Loans were 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 could 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.

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

Based upon the Wilpinjong Mine’s results for the six-month periods ended December 31, 2021 and June 30, 2022 and the resultant mandatory prepayment offers, during 2022, the Company prepaid $18.5 million principal amount of 2024 Co-Issuer Notes at an aggregate cost of $19.2 million and $17.2 million principal amount of Co-Issuer Term Loans at par.

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

During the year ended December 31, 2022, the Company solicited bids from all holders of Co-Issuer Term Loans at various dates for the repurchase of the remaining outstanding principal amount, resulting in the valid tender and purchase of $185.9 million principal amount at an aggregate cost of $195.8 million.

The underlying terms of the 2024 Co-Issuer Notes and Co-Issuer Term Loans required parity between the holders of Co-Issuer Term Loans and holders of the 2024 Co-Issuer Notes with respect to repurchase offers such as those undertaken through the auction processes described above.

As such, the Company solicited commensurate bids from all holders of 2024 Co-Issuer Notes at various dates during the year ended December 31, 2022 for the repurchase of the remaining outstanding principal amount, resulting in the valid tender and purchase of $147.3 million principal amount at an aggregate cost of $154.1 million.

Subsequent to the modified Dutch auction processes and related transactions, during the fourth quarter of 2022, the Company voluntarily prepaid the remaining $28.1 million principal amount of 2024 Co-Issuer Notes and $2.9 million principal amount of Co-Issuer Term Loans at an aggregate cost of $32.8 million, including certain make whole premium amounts.

3.250% Convertible Senior Notes due 2028

On March 1, 2022, through a private offering, the Company issued $320.0 million in aggregate principal amount of 3.250% Convertible Senior Notes due 2028 (the 2028 Convertible Notes).

The 2028 Convertible Notes are senior unsecured obligations of the Company and are governed under an indenture.

The Company used the proceeds of the offering of the 2028 Convertible Notes to redeem the remaining $62.5 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 2028 Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in accordance with their terms, as described in Note 10.

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

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

Peabody Energy Corporation 2022 Form 10-K

During the fourth quarter of 2022, the Company’s reported common stock prices reached levels which prompted the conversion feature of the 2028 Convertible Notes.

As a result, the 2028 Convertible Notes are convertible at the option of the holders during the first quarter of 2023.

The Company cannot currently satisfy the conversion obligation in cash because the terms of the Credit Agreement generally prohibit the Company from retiring unsecured debt with cash.

It is the Company’s current intent and policy to settle any conversions of notes through shares of its common stock.

Through February 17, 2023, the Company has not received any conversion requests and does not anticipate receiving any conversion requests in the near term as the market value of the 2028 Convertible Notes exceeds their conversion value.

Covenant Compliance

The Company was compliant with all relevant covenants under its debt agreements at December 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, 2023.

The Company’s restricted subsidiaries’ relevant liquidity amounted to $1,250.4 million at December 31, 2022.

Accounts Receivable Securitization Program

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

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

The securitization program was amended in January 2022 to extend its maturity to January 2025 and reduce the available funding capacity from $250.0 million to $175.0 million.

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

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

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

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

Collateralized Letter of Credit Agreement

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

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

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

At December 31, 2022, the Company had no outstanding borrowings and $168.0 million of letters of credit outstanding under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company had no cash collateral posted under the Securitization Program at December 31, 2022.

The securitization program was amended again in February 2023 to increase the available funding capacity to $225.0 million and adjust the relevant interest rate for borrowings to a secured overnight financing rate (SOFR).

Capital Expenditures

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

For 2023, the Company is targeting total capital expenditures of approximately $325 million.

Approximately $200 million of such amount is appropriated to major projects and growth capital expenditures, including approximately $120 million for the initial redevelopment of the Company’s North Goonyella mine.

Other Requirements

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The estimated future cash flows associated with such arrangements are approximately $100 million in 2023, $110 million in 2024, $105 million in 2025, $100 million in 2026, $100 million in 2027 and $875 million thereafter.

Peabody Energy Corporation 2021 Form 10-K

The Company’s operating lease commitments, excluding potential contingent rental amounts, will require cash payments of approximately $19 million in 2023, $7 million in 2024 and $4 million thereafter.

Peabody Energy Corporation 2022 Form 10-K

Cash Flows and Free Cash Flow

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(Dollars in millions)

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

Net cash provided by operating activities $ 1,173.6 $ 420.0

Net cash used in investing activities ( 28.7 ) ( 131.5 )

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

Net cash used in financing activities ( 681.6 ) ( 43.4 )

Net change in cash, cash equivalents and restricted cash 463.3 245.1

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Cash, cash equivalents and restricted cash at end of period $ 1,417.6 $ 954.3

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

Net cash provided by operating activities $ 1,173.6 $ 420.0

Net cash used in investing activities (28.7) (131.5)

1 unchanged sentence

Operating Activities.

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

The net increase in net cash provided by operating activities for the year ended December 31, 2022 compared to the prior year was driven by a year-over-year increase in cash from the Company’s mining operations ($879.0 million) partially offset by increased cash utilized to satisfy the margin requirements associated with derivative financial instruments ($125.4 million).

Investing Activities.

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

The decrease in net cash used in investing activities for the year ended December 31, 2022 compared to the prior year was driven by increased cash receipts from Middlemount and other related parties ($126.7 million) and increased asset disposal proceeds ($22.8 million), partially offset by increased capital expenditures and payments of capital accruals ($48.5 million).

Financing Activities.

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

Financial Assurances

The increase in net cash used in financing activities for the year ended December 31, 2022 compared to the prior year was driven by higher repayments of debt principal ($1,122.0 million), decreased proceeds from common stock issuances in the current year ($47.8 million) and higher distributions to non-controlling interests ($13.6 million) partially offset by proceeds from long-term debt issuances of $545.0 million during the year ended December 31, 2022.

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 consolidated balance sheets.

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Surety bonds and bank guarantees $ 1,250.1 $ 40.5 $ 35.2 $ 35.0 $ 16.0 $ 1,376.8

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

Letters of credit outstanding under letter of credit facilities 300.8 91.9 3.9 5.0 — 401.6

Letters of credit outstanding under accounts receivable securitization program 137.0 19.2 11.8 — — 168.0

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(431.7) (31.9) (4.1) (1.2) — (468.9)

Cash collateral in support of surety bonds (4)

(15.0) — — — — (15.0)

Obligations supported, net $ 1,256.2 $ 119.7 $ 46.8 $ 38.8 $ 16.0 $ 1,477.5

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

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

Not presented in the above table is approximately $187 million of cash collateral posted by the Company and included in the accompanying consolidated balance sheet at December 31, 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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Such requirements are typically established by statute or under mining permits.

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

Self-bonding in the U.S.

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

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

At December 31, 2022, the Company had total asset retirement obligations of $750.0 million which were backed by a combination of surety bonds, bank guarantees and letters of credit.

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The Company is also required under U.S.

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

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

On an ongoing basis, the Company evaluates its estimates.

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Peabody Energy Corporation 2022 Form 10-K

Asset Retirement Obligations.

The Company’s asset retirement obligations primarily consist of spending estimates for surface land reclamation and support facilities at both surface and underground mines in accordance with applicable reclamation laws and regulations in the U.S.

and Australia as defined by each mining permit.

Asset retirement obligations are determined for each mine using various estimates and assumptions including, among other items, estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing of these cash flows, escalated for inflation and then discounted using a credit-adjusted, risk-free rate.

As changes in estimates occur (such as mine plan revisions, changes in estimated costs or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted, risk-free rate.

If the Company’s assumptions do not materialize as expected, actual cash expenditures and costs that it incurs could be materially different than currently estimated.

Moreover, regulatory changes could increase its obligation to perform reclamation and mine closing activities.

Amortization associated with the Company’s asset retirement obligation assets of $26.5 million for the year ended December 31, 2022 was included in “Depreciation, depletion and amortization” in the Company’s consolidated statements of operations.

Asset retirement obligation expense, consisting of both accretion expense and changes in estimates for the Company’s inactive locations, for the year ended December 31, 2022 was $49.4 million and payments totaled $52.6 million.

“Asset Retirement Obligations” to the accompanying consolidated financial statements for additional information regarding the Company’s asset retirement obligations.

Impairment of Long-Lived Assets.

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

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

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

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

Additionally, the decline of coal-fired electricity generation in the U.S., driven by the reduced utilization of plants and plant retirements, sustained low natural gas pricing and the increased use of renewable energy sources, was a significant consideration in the Company’s analysis.

Peabody Energy Corporation 2022 Form 10-K

Impairment charges related to long-lived assets of $9.5 million were recorded for the year ended December 31, 2022.

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

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

The Company has identified certain assets with an aggregate carrying value of approximately $0.5 billion at December 31, 2021 in its Other U.S.

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

The Company conducted a review of those assets as of December 31, 2021 and determined that no further impairment charges were necessary as of that date.

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

Peabody Energy Corporation 2021 Form 10-K

Income Taxes.

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

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

During the year ended December 31, 2022, the Company released valuation allowances of $74.7 million recorded against the Australian NOLs and net deferred tax asset position due to the significant current year utilization of NOLs and expected future realization of the deferred tax assets.

At December 31, 2022, the Company maintained valuation allowances for income taxes totaling $1,451.0 million.

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

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The tax benefits recognized in the financial statements from such a position must be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As of December 31, 2021, the Company had net unrecognized tax benefits of $11.0 million included in recorded liabilities in the consolidated balance sheet.

At December 31, 2022, the Company had net unrecognized tax benefits of $9.5 million included in recorded liabilities in the consolidated balance sheet.

Peabody believes that its judgments and estimates are reasonable;

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“Pension and Savings Plans” to the accompanying consolidated financial statements for additional information regarding postretirement benefit and pension plans.

Peabody Energy Corporation 2021 Form 10-K

Asset Retirement Obligations.

and Australia as defined by each mining permit.

Asset retirement obligations are determined for each mine using various estimates and assumptions including, among other items, estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing of these cash flows, discounted using a credit-adjusted, risk-free rate.

If the Company’s assumptions do not materialize as expected, actual cash expenditures and costs that it incurs could be materially different than currently estimated.

Moreover, regulatory changes could increase its obligation to perform reclamation and mine closing activities.

Amortization associated with the Company’s asset retirement obligation assets of $27.1 million for the year ended December 31, 2021 was included in “Depreciation, depletion and amortization” in the Company’s consolidated statements of operations.

Asset retirement obligation expense, consisting of both accretion expense and expense related to reclamation activities at the Company’s active locations, for the year ended December 31, 2021 was $44.7 million and payments totaled $39.3 million.

“Asset Retirement Obligations” to the accompanying consolidated financial statements for additional information regarding the Company’s asset retirement obligations.

Contingent liabilities.

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Peabody accrues for legal and environmental matters within “Operating costs and expenses” when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with Accounting Standards Codification 450, “Contingencies.”

Peabody Energy Corporation 2022 Form 10-K

Peabody provides disclosure surrounding loss contingencies when it believes that it is at least reasonably possible that a material loss may be incurred or an exposure to loss in excess of amounts already accrued may exist.

8 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis