What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 260 added, 466 removed, 389 unchanged (65% of the section changed)

11 unchanged sentences

When considering these forward-looking statements, you should keep in mind the cautionary statements in this document and in the Company’s other Securities and Exchange Commission (SEC) filings, including, but not limited to, the more detailed discussion of these factors and other factors that could affect its results contained in Item 1A.

“Risk Factors” of Part II of this Quarterly Report on Form 10-Q, and Item 1A.

“Risk Factors” and Item 3.

“Legal Proceedings” of its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 18, 2022.

“Legal Proceedings” of Part I of its Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023.

These forward-looking statements speak only as of the date on which such statements were made, and the Company undertakes no obligation to update these statements except as required by federal securities laws.

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

Also included in the following discussion of the Company’s results of operations are references to Revenue 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 the Company’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;

however, the Company includes reconciliations of the related non-GAAP financial measures (Adjusted EBITDA and Total Reporting Segment Costs) in the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 2.

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

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

The Company 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.

The Company 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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In 2022, the Company produced and sold 122.9 million and 123.7 million tons of coal, respectively, from continuing operations.

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

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

(Middlemount), which owns the Middlemount Mine in Queensland, Australia.

In addition to its mining operations, the Company markets and brokers coal from other coal producers, both as principal and agent, and trades coal and freight-related contracts.

At March 31, 2023, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

Included in that count is Peabody’s 50% equity interest in Middlemount Coal Pty Ltd (Middlemount), which owns the Middlemount Mine in Queensland, Australia.

In addition to its mining operations, the Company markets and brokers coal from other coal producers;

trades coal and freight-related contracts;

and during 2022, partnered in a joint venture 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.

The Company reports its results of operations primarily through the following reportable segments:

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

Spot pricing for premium low-vol hard coking coal (Premium HCC), premium low-vol pulverized coal injection (Premium PCI) coal, Newcastle index thermal coal and API 5 index thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the three months ended September 30, 2022 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended September 30, 2022 due to quality differentials and a portion of its seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically, with spot, index and quarterly sales arrangements also utilized.

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

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

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended March 31, 2023 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 three months ended March 31, 2023 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

Such long-term contracts in the U.S.

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

High Low Average September 30, 2022 October 31, 2022

High Low Average March 31, 2023 April 28, 2023

Premium HCC (1)

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(2) Prices expressed per short ton.

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the nine months ended September 30, 2022, utility consumption of PRB coal declined approximately 6% 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 has continued to reduce it outstanding debt.

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

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

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

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

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

North Goonyella Redevelopment

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

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

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

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

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

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

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

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

During 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 $2.8 million from its operations during the nine months ended September 30, 2022.

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

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

Under the terms of this transaction, the Plan will continue to administer and pay the retirement benefits of Plan participants but will be 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 10.

“Pension and Postretirement Benefit Costs” to the accompanying unaudited condensed consolidated financial statements for a further discussion of this transaction.

As future developments related to the Russian-Ukrainian conflict and rising inflation are unknown, the global coal industry data for the three months ended March 31, 2023 presented herein may not be indicative of their ultimate impacts.

Within the seaborne metallurgical coal market, the three months ended March 31, 2023 were characterized by ongoing volatility as global macroeconomic turbulence counteracted improving demand and further weather-induced supply disruptions in Australia.

Several steelmakers announced blast furnace capacity restarts in the three months ended March 31, 2023, as growth in forward orders drives improvements to steel prices and margins.

This is supportive for seaborne metallurgical coal demand in the coming period.

Furthermore, China has ended its unofficial ban of Australian coal imports providing increased market depth for Australian products, especially for Premium HCC.

Russian coal remains banned in the European Union, Japan and elsewhere, disrupting natural trade flows and resulting in low priced Russian products being made available to countries, such as China and India, which can continue procurement.

The PCI market remained exceedingly tight during the three months ended March 31, 2023, especially in Europe, where Russia traditionally held dominant market share.

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 demand and further economic stimulus in China and elsewhere.

Within the seaborne thermal coal market, global thermal coal prices stabilized in March and recently showed improvement amid supply distributions in Colombia and Australia and ongoing robust demand from India and China.

China has ended its unofficial ban of Australian coal imports, providing additional demand for Australian thermal coal.

In China, domestic coal production and renewable generation have been strong to start the year, however, import demand has been higher year-over-year, as overall coal demand has been strong.

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 has been disrupted due to logistics and weather issues and lower global natural gas prices.

In the United States, overall electricity demand decreased nearly 4% year-over-year, negatively impacted by weather.

Through the three months ended March 31, 2023, electricity generation from thermal coal has declined year-over-year due to low gas prices, and stronger gas and renewable generation despite lower overall electricity demand.

Coal’s share of electricity generation has declined to approximately 15% for the three months ended March 31, 2023, while wind and solar’s combined generation share has increased to 17% and the share of gas generation has increased to 39%.

Coal inventories have increased during the three months ended March 31, 2023, with an increase of approximately 25% or 22 million tons.

During the three months ended March 31, 2023, utility consumption of PRB coal declined approximately 25% compared to the prior year period.

Surety Agreement Amendment

On April 14, 2023, the Company amended its existing agreement with the providers of its surety bond portfolio, dated November 6, 2020.

Under the agreement, the Company was required to post collateral on a periodic basis.

Pursuant to the amendment, the Company and its surety bond providers agreed to (i) establish a combined maximum collateral cap, (ii) remove the restrictions on shareholder returns contained in the original agreement, subject to a minimum liquidity threshold, and (iii) extend the expiration date of the existing agreement from December 31, 2025 to December 31, 2026.

Peabody also terminated the letter of credit facility which was previously used primarily for surety collateral, further reducing interest costs and increasing financial flexibility.

Refer to the “Liquidity and Capital Resources” section contained within this Item 2 for a further discussion of the surety agreement amendment.

On March 29, 2023, the Company’s Shoal Creek Mine experienced a fire involving void fill material utilized to stabilize the roof structure of the mine.

All mine personnel were safely evacuated from the mine.

The Mine Safety and Health Administration (MSHA) has allowed mine rescue-equipped personnel into the mine at various times to assess the situation.

On April 26, 2023, MSHA approved a temporary sealing program which was completed on April 28, 2023, and the Company continues to monitor air quality in the affected underground area.

Results of Operations

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

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

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

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

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

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

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

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The increase in results from continuing operations, net of income taxes for the three months ended March 31, 2023 compared to the same period in the prior year ($403.9 million), was primarily driven by higher revenue ($672.6 million) due to higher realized prices and volumes.

This favorable variance was partially offset by higher operating costs and expenses ($147.6 million), which reflect increased sales price sensitive costs and inflationary pressures for commodities, materials, services, repairs and labor;

and a higher income tax provision ($119.0 million).

Adjusted EBITDA for the three months ended March 31, 2023 reflected a year-over-year increase of $63.1 million.

The following table presents tons sold by operating segment:

Three Months Ended

September 30, (Decrease) Increase

to Volumes Nine Months Ended

September 30, (Decrease) Increase

2022 2021 Tons % 2022 2021 Tons %

(Tons in millions) (Tons in millions)

Three Months Ended March 31, (Decrease) Increase

2023 2022 Tons %

(Tons in millions)

Seaborne Thermal Mining 3.6 3.8 (0.2) (5) %

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Thermal Mining 4.5 4.2 0.3 7 %

Total tons sold from mining segments

32.6 33.2 (0.6) (2) % 90.9 94.8 (3.9) (4) %

Total tons sold from operating segments 31.4 29.8 1.6 5 %

Corporate and Other 0.1 0.1 — — %

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The following table presents supplemental financial data by operating segment:

Three Months Ended

September 30, Increase Nine Months Ended

September 30, Increase

Three Months Ended March 31, Increase

2023 2022 $ %

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The following table presents revenue by reporting segment:

Three Months Ended

September 30, Increase to Revenue Nine Months Ended

September 30, Increase (Decrease) to Revenue

Three Months Ended March 31, Increase (Decrease) to Revenue

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Seaborne Thermal Mining $ 346.5 $ 251.2 $ 95.3 38 %

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Seaborne Thermal Mining.

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

Segment revenue increased during the three months ended March 31, 2023 compared to the same period in the prior year due to favorable realized prices ($68.7 million) and favorable mix variances ($26.6 million) which offset unfavorable volumes.

Seaborne Metallurgical Mining.

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

Segment revenue decreased during the three months ended March 31, 2023 compared to the same period in the prior year due to unfavorable realized prices ($39.8 million), partially offset by favorable volumes ($6.9 million).

Powder River Basin Mining.

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

Segment revenue increased during the three months ended March 31, 2023 compared to the same period in the prior year due to favorable realized prices ($33.3 million) and favorable volumes ($20.8 million) resulting from improved rail performance.

Thermal Mining.

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

Segment revenue increased during the three months ended March 31, 2023 compared to the same period in the prior year due to favorable realized prices ($28.4 million) and favorable volumes ($17.9 million).

Corporate and Other.

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

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

Segment revenue increased during the three months ended March 31, 2023 compared to the same period in the prior year due to net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales in the current year compared to net unrealized mark-to-market losses in the prior year ($419.7 million);

higher results from trading activities ($72.7 million) due to higher margins recognized on the physical sale of coal and lower net realized losses on derivative contracts related to forecasted coal sales;

and revenue related to the Company’s assignment of rights to its excess port and rail capacity ($19.2 million) as discussed in Note 14.

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

Adjusted EBITDA

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

Three Months Ended

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

September 30, Increase (Decrease) to Segment Adjusted EBITDA

Three Months Ended March 31, Increase (Decrease) to Segment Adjusted EBITDA

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Seaborne Thermal Mining

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Seaborne Thermal Mining.

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

Segment Adjusted EBITDA increased during the three months ended March 31, 2023 compared to the same period in the prior year as a result of higher realized prices net of sales sensitive costs ($64.1 million) and favorable mix variances ($26.6 million), partially offset by higher commodity pricing ($8.9 million) and higher port and demurrage costs ($7.1 million).

Seaborne Metallurgical Mining.

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

Segment Adjusted EBITDA decreased during the three months ended March 31, 2023 compared to the same period in the prior year due to unfavorable operational costs ($50.4 million) resulting from wet weather impacts at the Coppabella and Moorvale Mines and geological conditions at the Shoal Creek Mine and lower realized prices net of sales sensitive costs ($43.8million).

Powder River Basin Mining.

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

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

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

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

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

Segment Adjusted EBITDA increased during the three months ended March 31, 2023 compared to the same period in the prior year due to higher realized prices net of sales sensitive costs ($22.1 million);

decreased overburden removal costs ($11.0 million);

and favorable volumes ($7.3 million) resulting from improved rail performance.

The increases were partially offset by higher costs for materials, services, repairs and labor ($9.7 million) due in part to timing, increased repairs for an aging equipment fleet and inflationary pressures on materials and services.

Thermal Mining.

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

These increases were offset by higher costs for materials, services, repairs and labor ($16.9 million) due in part to increased equipment repairs and headcount resulting from increasing volume demands and inflationary pressures on materials and services.

Corporate and Other Adjusted EBITDA.

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

Three Months Ended

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

September 30, Increase (Decrease) to Adjusted EBITDA

Three Months Ended March 31, (Decrease) Increase to Adjusted EBITDA

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Middlemount (1)

$ 2.3 $ 45.1 $ (42.8) (95) %

Resource management

activities (2)

Resource management activities (2)

2.3 3.5 (1.2) (34) %

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$ 35.8 $ (1.6) $ 37.4 2,338 %

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

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

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

(1) Middlemount’s results are before the impact of related changes in amortization of basis difference.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $2.6 million and $20.2 million during the three months ended March 31, 2023 and 2022, respectively.

(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 the Company’s other commercial activities.

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

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

($3.9 million).

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

and Australia ($16.5 million).

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

Corporate and Other Adjusted EBITDA benefited during the three months ended March 31, 2023 compared to the same period in the prior year from favorable trading results ($69.7 million) and revenue related to the Company’s assignment of rights to its excess port and rail capacity ($19.2 million) as discussed in Note 14.

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

This benefit was offset by unfavorable variances in Middlemount’s results due to lower sales pricing and sales volumes.

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

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

Three Months Ended

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

September 30, Increase (Decrease) to Income

Three Months Ended March 31, Increase (Decrease) to Income

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Adjusted EBITDA (1)

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Asset impairment (2.0) — (2.0) n.m.

(1.7) — (1.7) n.m.

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

Changes in amortization of basis difference related to equity affiliates 0.3 0.6 (0.3) (50) %

Interest expense (18.4) (39.4) 21.0 53 %

Net (loss) gain on early debt extinguishment (8.7) 16.0 (24.7) (154) % (34.5) 31.3 (65.8) (210) %

Net loss on early debt extinguishment (6.8) (23.5) 16.7 71 %

Interest income 13.1 0.5 12.6 2,520 %

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

Three Months Ended

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

September 30, (Decrease) Increase to Income

Three Months Ended March 31, Increase (Decrease) to Income

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Seaborne Thermal Mining

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Total $ (76.3) $ (72.9) $ (3.4) (5) %

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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:

Three Months Ended March 31,

Seaborne Thermal Mining $ 2.17 $ 2.48

Seaborne Metallurgical Mining

2.04 1.14 2.55 1.06

Powder River Basin Mining 0.31 0.33

Thermal Mining

1.26 1.18 1.23 1.16

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

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

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

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

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

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

The decrease in the weighted-average depletion rate per ton for the Seaborne Thermal Mining segment during the three months ended March 31, 2023 compared to the same period in the prior year reflects the impact of volume and mix variances across the segment.

Interest Expense.

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

The decrease in interest expense during the three months ended March 31, 2023 primarily reflects the impacts of debt retirements completed by the Company during 2022 as further described in Note 8.

“Long-term Debt” to the accompanying unaudited condensed consolidated financial statements and Note 10.

“Long-term Debt” to the Annual Report on Form 10-K for the year ended December 31, 2022.

Net (Loss) Gain on Early Debt Extinguishment.

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

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

Net Loss on Early Debt Extinguishment.

The losses recognized during the three months ended March 31, 2023 were primarily related to the amendment of the Company’s now-terminated letter of credit facility as further discussed in Note 11.

“Financial Instruments and Other Guarantees” to the accompanying unaudited condensed consolidated financial statements.

The losses recognized during the prior year period were primarily related to the redemption of existing notes during the period as further described in Note 8.

“Long-term Debt” to the accompanying unaudited condensed consolidated financial statements and Note 10.

“Long-term Debt” to the Annual Report on Form 10-K for the year ended December 31, 2022.

Interest Income.

The increase in interest income during the three months ended March 31, 2023 was primarily due to higher cash balances, including restricted cash balances on which the Company earns interest, and higher interest rates in the current year.

Based upon projected cash balances and interest rates, the Company anticipates significantly higher interest income throughout 2023 as compared to the prior year.

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

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Income Tax (Provision) Benefit.

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

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

in 2022 based on estimated pretax income.

The increase in the income tax provision during the three months ended March 31, 2023 compared to the same period in the prior year was primarily due to an increase in pretax income and the release of valuation allowance related to Australian net operating losses during the fourth quarter of 2022.

Refer to Note 7.

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

Three Months Ended

September 30, Increase (Decrease)

to Income Nine Months Ended

September 30, Increase (Decrease)

Three Months Ended March 31, Increase (Decrease)

2023 2022 $ %

(Dollars in millions) (Dollars in millions)

(Dollars in millions)

Income (loss) from continuing operations, net of income taxes $ 284.1 $ (119.8) $ 403.9 337 %

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

Loss from discontinued operations, net of income taxes (1.3) (0.8) (0.5) (63) %

Net income (loss) 282.8 (120.6) 403.4 334 %

Net income attributable to noncontrolling interests 8.5 8.9 (0.4) (4) % 8.5 12.6 (4.1) (33) %

Net income (loss) attributable to noncontrolling interests 14.3 (1.1) 15.4 1,400 %

Net income (loss) attributable to common stockholders $ 268.5 $ (119.5) $ 388.0 325 %

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

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

Refer to Note 15.

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

Net Income (Loss) Attributable to Noncontrolling Interests.

The increase in the results attributable to noncontrolling interests during the three months ended March 31, 2023 compared to the same period in the prior year was primarily due to stronger financial results of Peabody’s majority-owned Wambo operations in which there is an outside non-controlling interest.

Diluted Earnings per Share (EPS)

The following table presents diluted EPS:

Three Months Ended

September 30, Increase (Decrease)

to EPS Nine Months Ended

September 30, Increase (Decrease)

Three Months Ended March 31, Increase

2023 2022 $ %

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Income (loss) from continuing operations $ 1.69 $ (0.87) $ 2.56 294 %

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

Loss from discontinued operations (0.01) (0.01) — — %

Net income (loss) attributable to common stockholders $ 1.68 $ (0.88) $ 2.56 291 %

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

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

Diluted EPS reflects weighted average diluted common shares outstanding of 161.4 million and 136.2 million for the three months ended March 31, 2023 and 2022, respectively.

Reconciliation of Non-GAAP Financial Measures

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(Dollars in millions)

1 unchanged sentence

Depreciation, depletion and amortization

80.7 77.9 227.4 223.3

Asset retirement obligation expenses

13.1 14.3 40.8 45.3

Restructuring charges

1.0 1.7 2.8 5.9

Asset impairment

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

(0.5) (6.4) (1.7) (8.4)

Changes in amortization of basis difference related to equity affiliates (0.3) (0.6)

Interest expense

33.8 45.5 110.8 143.3

Net loss (gain) on early debt extinguishment 8.7 (16.0) 34.5 (31.3)

Net loss on early debt extinguishment 6.8 23.5

Interest income

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

Unrealized (gains) losses on derivative contracts related to forecasted sales (118.7) 301.0

1 unchanged sentence

Take-or-pay contract-based intangible recognition

(0.8) (1.0) (2.2) (3.2)

Income tax provision (benefit) 118.0 (1.0)

2 unchanged sentences

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(Dollars in millions)

3 unchanged sentences

Take-or-pay contract-based intangible recognition

0.8 1.0 2.2 3.2

Net periodic benefit credit, excluding service cost (9.7) (12.2)

1 unchanged sentence

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(Dollars in millions)

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

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

Three Months Ended September 30, 2022

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

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 3.7 1.8 22.3 4.8

Revenue $ 353.2 $ 310.7 $ 290.5 $ 261.4

Reporting Segment Costs 182.0 197.5 252.6 188.7

Adjusted EBITDA $ 171.2 $ 113.2 $ 37.9 $ 72.7

Revenue per Ton $ 95.54 $ 179.77 $ 12.99 $ 54.58

Costs per Ton 49.22 114.32 11.29 39.40

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

Three Months Ended September 30, 2021

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

Thermal Mining

(Amounts in millions, except per ton data)

Tons sold 4.5 1.5 22.7 4.5

Revenue $ 260.7 $ 179.5 $ 247.1 $ 184.6

Reporting Segment Costs 156.3 122.1 210.1 139.5

Adjusted EBITDA $ 104.4 $ 57.4 $ 37.0 $ 45.1

Revenue per Ton $ 58.53 $ 119.98 $ 10.88 $ 40.99

Costs per Ton 35.09 81.61 9.25 30.99

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

Nine Months Ended September 30, 2022

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

Three Months Ended March 31, 2023

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

3 unchanged sentences

Revenue $ 346.5 $ 288.4 $ 305.3 $ 249.4

Reporting Segment Costs 520.8 571.9 727.9 504.8

Total Reporting Segment Costs 182.5 197.6 269.5 185.2

Adjusted EBITDA $ 164.0 $ 90.8 $ 35.8 $ 64.2

2 unchanged sentences

Adjusted EBITDA Margin per Ton $ 45.81 $ 69.47 $ 1.63 $ 14.08

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

3 unchanged sentences

Revenue $ 251.2 $ 321.3 $ 251.2 $ 203.1

Reporting Segment Costs 426.9 379.4 611.5 370.4

Total Reporting Segment Costs 160.7 140.3 243.6 153.1

Adjusted EBITDA $ 90.5 $ 181.0 $ 7.6 $ 50.0

2 unchanged sentences

Adjusted EBITDA Margin per Ton $ 24.09 $ 145.56 $ 0.37 $ 11.92

Free Cash Flow is defined as net cash provided by (used in) operating activities plus net cash provided by (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.

Nine Months Ended

September 30,

(Dollars in millions)

Net cash provided by (used in) operating activities $ 504.1 $ (18.4)

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

Free Cash Flow $ 565.2 $ (138.1)

Regulatory Update

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Regulatory Matters - U.S.

EPA Regulation of Greenhouse Gas Emissions from Existing Fossil Fuel-Fired EGUs .

On October 23, 2015, the United States Environmental Protection Agency (EPA) published a final rule in the Federal Register regulating greenhouse gas emissions from existing fossil fuel-fired electric generation units (EGUs) under Section 111(d) of the Clean Air Act (CAA) (80 Fed.

The rule (known as the Clean Power Plan or CPP) established emission guidelines for states to follow in developing plans to reduce greenhouse gas emissions (GHGs) from existing fossil fuel-fired EGUs.

The CPP required that the states individually or collectively create systems that would reduce carbon emissions from any EGU located within their borders by 28% in 2025 and 32% in 2030 (compared with a 2005 baseline).

The EPA subsequently proposed to repeal the CPP and in August 2018 issued a proposed rule to replace the CPP with the Affordable Clean Energy (ACE) Rule.

In June 2019, the EPA issued a combined package that finalized the CPP repeal rule as well as the replacement rule, ACE.

The ACE rule set emissions guidelines for greenhouse gas emissions from existing EGUs based on a determination that efficiency heat rate improvements constitute the Best System of Emission Reduction (BSER).

Numerous petitions for review challenging the ACE Rule were filed in the United States Court of Appeals for the D.C.

Circuit (D.C.

Circuit) and subsequently consolidated.

In January 2021, a 3-judge panel of the D.C.

Circuit vacated and remanded the ACE Rule to the EPA, including its repeal of the CPP and amendments to the implementing regulations that extended the compliance timeline.

On October 29, 2021, the Supreme Court of the United States (Supreme Court) granted certiorari in four consolidated matters seeking review of the D.C.

Circuit’s opinion vacating the ACE rule and invalidating the repeal of the CPP.

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

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

Circuit’s opinion was reversed and remanded, leaving neither the CPP or the ACE Rule in effect.

Thus, it will be necessary for the EPA to initiate new rulemaking in order to control GHGs from EGUs using section 111(d) of the CAA.

The EPA tentatively plans to propose emission guidelines for EGUs in the spring of 2023.

The Company will continue to monitor EPA rulemaking in this regard.

National Ambient Air Quality Standards (NAAQS).

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

The Clean Air Act (CAA) requires the United States Environmental Protection Agency (EPA) to review national ambient air quality standards every five years to determine whether revision to current standards are appropriate.

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

The EPA subsequently promulgated final standards to this effect.

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

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

Circuit (D.C.

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

4 unchanged sentences

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

More stringent PM or ozone standards would require new state implementation plans to be developed and filed with the EPA and may trigger additional control technology for mining equipment or result in additional challenges to permitting and expansion efforts.

This could also be the case with respect to other NAAQS for nitrogen dioxide (NO 2 ) and sulfur dioxide (SO 2 ), although these standards are not subject to a statutorily-required review until 2023 for NO 2 and 2024 for SO 2 .

On January 6, 2023, the EPA proposed to lower the level of the annual PM 2.5 NAAQS from 12.0 ug /m 3 to within the range of 9.0 to 10.0 ug /m 3.

If enacted as proposed, this rule would require fossil fuel generating units to install additional nitrogen oxide (NO x ) reducing technologies ultimately increasing the cost of fossil fuel generated energy or causing potential unit retirements.

Cross State Air Pollution Rule (CSAPR) and CSAPR Update Rule .

In 2011, the EPA finalized the CSAPR, which requires the District of Columbia and 27 states from Texas eastward (not including the New England states or Delaware) to reduce power plant emissions that cross state lines and significantly contribute to ozone and/or fine particle pollution in other states.

In 2016, the EPA published the final CSAPR Update Rule which imposed additional reductions in nitrogen oxides (NO x ) beginning in 2017 in 22 states subject to CSAPR.

In 2016, the EPA published the final CSAPR Update Rule which imposed additional reductions in NO x beginning in 2017 in 22 states subject to CSAPR.

This rule was subsequently remanded back to the EPA.

4 unchanged sentences

In the same rule, the EPA determined that 9 states did not significantly contribute to downwind nonattainment and/or maintenance issues and therefore did not require additional emission reductions.

The EPA subsequently issued Federal Implementation Plans (FIPs) to lower state ozone season NO x budgets in 2021 to 2024 in the affected states.

The EPA subsequently issued Federal Implementation Plans to lower state ozone season NO x budgets in 2021 to 2024 in the affected states.

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

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

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

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

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

The EPA estimates that by 2026 the compliance cost will be $1.1 billion.

On March 15, 2023, the EPA Administrator signed a final rule to address regional ozone transport for the 2015 ozone NAAQS by imposing new federal ozone season emission budgets for NO x in 23 states, including California, Nevada, Oklahoma and Texas, as well as some areas in Indian country.

The rule includes emission limits for NO x for fossil fuel-fired power plants and a “backstop daily emissions rate” for large coal-fired power plants if they exceed specified limits.

The rule also sets first-time limits on certain industrial sources that will apply starting with the 2026 ozone season in 20 states.

The EPA estimates that annual compliance costs (for 2023 through 2042) will be $770 million to $910 million, depending on the discount rate applied.

These emission limitations would apply in addition to requirements contained in State Implementation Plans to control ozone precursors in affected states, although states have the option to replace these limits with equally strict or more stringent limitations.

When implemented, this rule could influence the closure of some coal generating units that haven’t installed selective catalytic reduction technologies.

Mercury and Air Toxic Standards (MATS) .

The EPA published the final MATS rule in the Federal Register in 2012.

The MATS rule revised the new source performance standards (NSPS) for NO x , SO 2 and PM for new and modified coal-fueled electricity generating plants, and imposed maximum achievable control technology (MACT) emission limits on hazardous air pollutants (HAPs) from new and existing coal-fueled and oil-fueled electric generating plants.

The MATS rule revised the New Source Performance Standards for NO x , sulfur dioxide and PM for new and modified coal-fueled electricity generating plants, and imposed maximum achievable control technology (MACT) emission limits on hazardous air pollutants (HAPs) from new and existing coal-fueled and oil-fueled electric generating plants.

MACT standards limit emissions of mercury, acid gas HAPs, non-mercury HAP metals and organic HAPs.

3 unchanged sentences

Circuit but this litigation was placed in abeyance.

On February 9, 2022 the EPA proposed a rule to revoke the 2020 finding and to reaffirm the agency’s 2016 finding that it remains “appropriate and necessary” to regulate HAP emissions from coal- and oil-fired power plants under Clean Air Act section 112.

On February 9, 2022 the EPA proposed a rule to revoke the 2020 finding and to reaffirm the agency’s 2016 finding that it remained “appropriate and necessary” to regulate HAP emissions from coal- and oil-fired power plants under Section 112 of the CAA.

In the same proposal, the EPA solicited comments on the performance and cost of new or improved technologies to control HAPs from these power plants as part of the agency’s review of related residual risk and technology review standards.

Clean Water Act (CWA) .

The CWA of 1972 directly impacts U.S.

coal mining operations by requiring effluent limitations and treatment standards for wastewater discharge from mines through the National Pollutant Discharge Elimination System (NPDES).

Regular monitoring, reporting and performance standards are requirements of NPDES permits that govern the discharge of water from mine-related point sources into receiving waters.

Army Corps of Engineers (Corps) regulates certain activities affecting navigable waters and waters of the U.S., including wetlands.

Section 404 of the CWA requires mining companies to obtain permits from the Corps to place material in or mine through jurisdictional waters of the U.S.

States are empowered to develop and apply water quality standards.

These standards are subject to change and must be approved by the EPA.

Discharges must either meet state water quality standards or be authorized through available regulatory processes such as alternate standards or variances.

Standards vary from state to state.

Additionally, through the CWA Section 401 certification program, state and tribal regulators have approval authority over federal permits or licenses that might result in a discharge to their waters.

State and tribal regulators consider whether the activity will comply with their water quality standards and other applicable requirements in deciding whether or not to certify the activity.

The EPA issued a final rule in 2020 that could limit state and tribal regulators’ authority by allowing the EPA to certify projects over state or tribal regulator objections in some circumstances.

That rule was temporarily vacated by a district court, but a Supreme Court order on April 7, 2022, effectively reinstated the rule.

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

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

National Environmental Policy Act (NEPA) .

NEPA, signed into law in 1970, requires federal agencies to review the environmental impacts of their decisions and issue either an environmental assessment or an environmental impact statement.

Peabody must provide information to agencies when it proposes actions that will be under the authority of the federal government.

The NEPA process involves public participation and can involve lengthy timeframes.

The White House Council on Environmental Quality (CEQ) issued a final rule comprehensively updating and modernizing its longstanding NEPA regulations on July 16, 2020.

That final rule sought to reduce unnecessary paperwork, burdens and delays, promote better coordination among agency decision makers, and clarify scope of NEPA reviews, among other things.

States and environmental groups have filed several lawsuits challenging the final rule.

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

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

Black Lung Benefits Act Self-Insurance Requirements .

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

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

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

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

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

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

SEC Climate-Related Disclosures.

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

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

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

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

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

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

Inflation Reduction Act of 2022 .

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

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

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

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

The EPA finalized the 2022 proposed rule on March 6, 2023, revoking the 2020 finding and concluding that it is appropriate and necessary to regulate coal- and oil-fired electric steam generating units under CAA Section 112.

If enacted, this rule could influence closure of additional coal generating units.

Effluent Limitations Guidelines for the Steam Electric Power Generating Industry.

On September 30, 2015, the EPA published a final rule setting new or additional requirements for various wastewater discharges from steam electric power plants.

The rule set zero discharge requirements for some waste streams, as well as new, more stringent limits for arsenic, mercury, selenium and nitrogen applicable to certain other waste streams.

On October 13, 2020, the EPA issued a final rule revising the technology-based effluent limitations guidelines and standards for the steam electric power generating point source category applicable to flue gas desulfurization wastewater and bottom ash transport water.

However, on March 8, 2023, the EPA released the pre-publication versions of two actions to further revise certain discharge limits applicable to steam electric power plants.

The first action is a proposed rule that would establish more stringent standards for flue gas desulfurization wastewater, bottom ash transport water and combustion residual leachate.

If the proposed rule is finalized in substantially the same form, the revised effluent limitations guidelines would significantly increase costs for many coal-fired steam electric power plants.

The second action is a direct final rule that extends the deadline for steam electric power plants to opt in to the 2028 early retirement provision that was part of the 2020 rule.

The direct final rule could influence fuel switching or additional coal generating unit retirements by the end of 2028.

Regulatory Matters - Australia

Australian federal election.

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

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

however, the majority of reforms are unlikely to be legislated until 2023.

Proposed labor market reforms include legislation that would require contracted or labor hire workers undertaking the same roles as direct employees to be paid equal wages;

reduced flexibility of employment;

and changes to enterprise bargaining legislation that may increase the difficulty of reaching enterprise agreements.

The new Australian federal government has announced plans to legislate for a 43% reduction in Australia’s greenhouse gas emissions by 2030 and to introduce changes by mid-2023 that will require heavy emitting companies producing more than 100,000 tonnes of carbon emissions annually to accelerate their emissions reduction activities.

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

Sharma v Minister for the Environment.

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

In light of this decision, the Minister no longer must consider the effects of carbon emissions when assessing referrals under the Environment Protection and Biodiversity Conservation Act 1999.

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

Queensland royalties.

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

The new tier rates are 20% for the portion of prices above $175 Australian dollars per tonne;

30% for prices above $225 Australian dollars per tonne;

and a 40% tier for when prices exceed $300 Australian dollars per tonne.

Previously, the maximum royalty rate was 15% of the value of the coal sold above $150 Australian dollars per tonne.

The change follows a three-year freeze on royalty rates for coal in the state.

The Company is working with other coal producers to consider challenges to the implementation of the new royalty tiers.

New South Wales Coal Directions.

The State of New South Wales (NSW) enacted the Energy and Utilities Administration Amendment Act 2022 granting the State Premier and Minister for Energy the ability to issue directions in the event of a coal market price emergency (among other powers).

On December 22, 2022, the State Premier declared a coal market price emergency on the basis that the declaration was necessary to reduce the risk that increases in coal prices could contribute to an increase in electricity prices.

On December 23, 2022, directions were issued to Peabody Energy Australia Pty Ltd and a number of other coal producers with operations in NSW.

Those directions were amended on January 31, 2023 and February 16, 2023.

The most recent directions require Peabody Energy Australia Pty Ltd to reserve a portion of coal produced by Wambo Coal Pty Ltd and by Wilpinjong Coal Pty Ltd for sale to NSW power generators at a capped price until June 30, 2024 and impose additional reporting obligations to demonstrate compliance with the directions.

While these directions are currently not anticipated to significantly impact the Wambo Mines or the Wilpinjong Mine, the nature and extent of those obligations and associated reporting requirements may continue to evolve if further directions are issued.

National Greenhouse and Energy Reporting Act 2007 (NGER Act) .

The NGER Act imposes requirements for corporations meeting a certain threshold to register and report greenhouse gas emissions and abatement actions, as well as energy production and consumption as part of a single, national reporting system.

The Clean Energy Regulator administers the NGER Act.

The federal Department of Environment and Energy is responsible for NGER Act-related policy developments and review.

On July 1, 2016, amendments to the NGER Act implemented the Emissions Reduction Fund Safeguard Mechanism.

From that date, large designated facilities such as coal mines were issued with a baseline for their covered emissions and must take steps to keep their emissions at or below the baseline or face penalties.

The National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 outlines key elements of a responsible emitter’s duty to avoid an excess emissions situation and provides detail on how it can meet that requirement.

The rule was amended between 2019 and 2021 to transition responsible emitters to new baseline setting arrangements.

From the start of the 2020-21 compliance year, baselines must use prescribed production variables (an example being run of mine coal) and default emissions intensity values (being values set by the government to represent the industry average emissions intensity of production over five years) unless specific exemptions apply (such as a facility having site-specific values set).

On January 10, 2023, the Australian federal government released its Safeguard Mechanism Reforms Position Paper setting out the proposed changes to the emissions reduction regime.

The reforms will commence on July 1, 2023 utilizing site specific baseline emissions as benchmarks for year-on-year improvement (proposed to be 4.9% each year to 2030) before transitioning to industry average emissions benchmarks by 2030.

Proponents will earn tradeable credits (Safeguard Mechanism Credits) when emissions are below their baselines or can purchase credits to offset emissions.

Access to existing Australian Carbon Credit Units will continue unchanged albeit with a price ceiling of $75 Australian dollars per tonne of carbon dioxide (CO 2) in 2023-24, increasing with the Consumer Price Index plus 2% each year.

On March 27, 2023, the Australian Federal Government announced a number of additional measures in the Safeguard Mechanism (Crediting) Amendments Bill 2023 which was introduced and passed both Houses of Parliament on March 30, 2023.

The legislation introduces a cap on overall net emissions from facilities covered by the scheme through to 2030.

The legislation also sets a cap of net zero tonnes CO 2-e for any financial year beginning after June 30, 2049.

In addition, if the Minister for Environment and Water grants an approval under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) to a new or expanded facility covered by the scheme, the Minister will be required to give an estimate of the facility's Scope 1 emissions to the Minister for Climate Change, the Climate Change Secretary and the Climate Change Authority for assessment against scheme targets.

The legislation is now awaiting assent and is expected to commence on July 1, 2023.

The potential impact of these reforms to Peabody’s Australian operations is under review.

Risks Related to Global Climate Change

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The senior management team champions the strategic objectives set forth by the board of directors and Peabody’s global workforce turns those objectives into meaningful actions.

Management believes that the Company’s external communications, including environmental regulatory filings and public notices, SEC filings, its annual Environmental, Social and Governance (ESG) Report, its website and various other stakeholder-focused publications provide a comprehensive picture of the Company’s material risks and progress.

Management believes that the Company’s external communications, including environmental regulatory filings and public notices, U.S.

Securities and Exchange Commission filings, its annual Environmental, Social and Governance (ESG) Report, its website and various other stakeholder-focused publications provide a comprehensive picture of the Company’s material risks and progress.

All such communications are subject to oversight and review protocols established by Peabody’s board of directors and executive leadership team.

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

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

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

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

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The Company has also used cash for early debt retirements, dividends, and share repurchases.

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.

As described below, the Company recently amended its existing agreement with the providers of its surety bond portfolio, which included lifting the previous restrictions on capital returns to shareholders.

In connection with the amendment, the Company announced a new shareholder return plan, as discussed in Part II, Item 2.

“Unregistered Sales of Equity Securities and Use of Proceeds.” Any future determinations to return capital to stockholders, such as dividends or share repurchases will depend on a variety of factors, including its net income or other sources of cash, liquidity position and potential alternative uses of cash, such as internal development projects or acquisitions, as well as economic conditions and expected future financial results.

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

The Company has presently suspended the payment of dividends and share repurchases, as discussed in Part II, Item 2.

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

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

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

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

As of March 31, 2023, the Company’s cash balances totaled $892.2 million, including approximately $563.6 million held by Australian subsidiaries, $301.8 million held by U.S.

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

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

During the three months ended March 31, 2023, the Company repatriated approximately $100 million through intercompany dividends.

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 $1,369.2 million as of September 30, 2022.

The Company’s available liquidity decreased from $1,317.8 million as of December 31, 2022 to $907.5 million as of March 31, 2023.

Available liquidity was comprised of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(Dollars in millions)

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Total liquidity $ 907.5 $ 1,317.8

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

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

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.

The Company expects to utilize its collateralized letter of credit agreement, described below, to offset future required credit facility capacity reductions.

The Company has no contractual commitment for renewable energy-related project investment.

Surety Agreement Amendment and Collateral Requirements

In April 2023, the Company amended its existing agreement with the providers of its surety bond portfolio, dated November 6, 2020.

Under the agreement, the Company was required to post collateral on a periodic basis through December 31, 2025.

Prior to the April 2023 amendment, the Company had posted cumulative collateral of $557.8 million, primarily in the form of letters of credit.

Under the April 2023 amendment, the Company and surety providers agreed to a maximum aggregate collateral amount of $721.8 million based upon bonding levels at the effective date of the amendment.

This maximum collateral amount represents a negotiated increase from the uncapped cumulative collateral amount prior to the amendment and may vary prospectively as future bonding levels increase or decrease.

The amendment also removes restrictions on the payment of dividends and share repurchases, and extends the agreement through December 31, 2026.

In order to maintain the new maximum collateral standstill, the Company must remain compliant with a minimum liquidity test and a maximum net leverage ratio, as measured each quarter.

The minimum liquidity test requires the Company to maintain liquidity at the greater of $400 million or the difference between the penal sum of all surety bonds and the amount of collateral posted in favor of surety providers.

The Company must also maintain a maximum net leverage ratio of 1.5 to 1.0, where the numerator consists of its funded debt, net of cash, and the denominator consists of its Adjusted EBITDA for the trailing twelve months.

For purposes of calculating the ratio, only 50% of the outstanding principal amount of the Company’s 2028 Convertible Notes is deemed to be funded debt.

The Company’s ability to pay dividends and make share repurchases is also subject to the quarterly minimum liquidity test.

Such compliance requirements will commence for the second quarter of 2023.

The Company granted second liens on $200.0 million of mining equipment under the original agreement, which remain in force under the April 2023 amendment.

To fund the maximum collateral amount, the Company deposited $566.3 million into trust accounts for the benefit of certain surety providers on March 31, 2023.

The remainder was comprised of $140.5 million of existing cash-collateralized letters of credit and $15.0 million already held on behalf of a surety provider.

The amendment became effective on April 14, 2023, when the Company terminated a credit agreement which, as amended, provided for $237.2 million of capacity for irrevocable standby letters of credit (LC Facility).

The $223.8 million of letters of credit that were outstanding under the LC Facility at March 31, 2023 were subsequently cancelled and, in certain cases, replaced by cash-collateralized letters of credit or letters of credit issued under the Company’s accounts receivable securitization program.

Collateralized Letter of Credit Agreement

In February 2022, the Company entered into an agreement which provides up to $250.0 million of capacity for irrevocable standby letters of credit, primarily to 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 March 31, 2023, letters of credit of $245.3 million were outstanding under the agreement, which were collateralized by cash of approximately $250 million.

Margin Requirements

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

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

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

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

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

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

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

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

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

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

The Company made no additional borrowings and terminated the facility prior to its scheduled 2025 maturity, on August 4, 2022.

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

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

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

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

At March 31, 2023, the Company was party to coal derivative contracts related to 0.3 million metric tons of production, all of which are expected to settle during the second quarter of 2023.

At March 31, 2023 and December 31, 2022, the Company had margin posted of $59.8 million and $255.5 million, respectively, related to its coal derivative contracts.

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

“Quantitative and Qualitative Disclosures About Market Risk” of this Quarterly Report.

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 $38.7 million was posted during the nine months ended September 30, 2022 and $57.4 million was posted subsequent to September 30, 2022, in the form of cash-collateralized letters of credit.

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

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 Company receives a deposit rate of 2.24% per annum on the amount of cash collateral posted in support of letters of credit, with the rate subject to variation over time.

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

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

Capital Expenditures

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

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

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

The Company’s total indebtedness as of March 31, 2023 and December 31, 2022 is presented in the table below.

Debt Instrument (defined below, as applicable) March 31, 2023 December 31, 2022

(Dollars in millions)

6.000% Senior Secured Notes due March 2022 (2022 Notes)

8.500% Senior Secured Notes due December 2024 (2024 Peabody Notes)

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

Senior Secured Term Loan due 2024 (Co-Issuer Term Loans) 114.6 206.0

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

Senior Secured Term Loan due 2025, net of original issue discount (Senior Secured Term Loan) 282.6 322.8

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

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Debt issuance costs (9.4) (9.8)

869.2 1,137.8

Current portion of long-term debt 13.2 13.2

Long-term debt $ 322.4 $ 320.6

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

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

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

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

2021 Financing Activity and Subsequent Debt Repurchases

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

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

Subsequent to these transactions, the Company completed additional financing transactions during 2021 which included the implementation of an at-the-market equity offering program pursuant to which the Company sold approximately 24.8 million shares of common stock for net cash proceeds of $269.8 million, the retirement of $270.9 million principal amount of existing debt through various open market purchases at an aggregate cost of $232.4 million, and the issuance of an aggregate 10.0 million shares of common stock in exchange for an additional $106.1 million principal amount of existing debt through multiple bilateral transactions with debt holders.

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

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

The open market debt repurchases completed during the three months ended December 31, 2021 necessitated 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 offer resulted in the valid tender and purchase of $0.1 million aggregate accreted value of 2024 Peabody Notes and $30.0 million aggregate principal and commitment amounts under the Company LC Agreement during the three months ended March 31, 2022.

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

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

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

The offer will expire on November 16, 2022.

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

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 required offer to prepay $105.6 million of total principal resulted in the prepayment of $17.2 million of Co-Issuer Term Loans principal, $0.3 million of 2024 Co-Issuer Notes principal, and a related loss on early debt extinguishment of $0.5 million during the three months ended March 31, 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

Both offers will expire on November 18, 2022.

Retirement of 2022 Notes

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

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).

During 2022, the Company utilized various methods allowable or required under its then-existing debt agreements to retire all of its senior secured long-term debt, leaving only the 3.250% Convertible Senior Notes due 2028 (the 2028 Convertible Notes), which are further described below, and various finance lease obligations outstanding at December 31, 2022.

The Company’s remaining indebtedness requires estimated contractual principal and interest payments, assuming interest rates in effect at March 31, 2023, of approximately $12 million in 2023, $23 million in 2024, $16 million in 2025, $13 million in 2026, $12 million in 2027 and $322 million thereafter.

Cash payments for interest related to the Company’s indebtedness and financial assurance instruments amounted to $19.1 million and $37.2 million during the three months ended March 31, 2023 and 2022, respectively.

2028 Convertible Notes

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

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

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

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

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

The Company used the proceeds of the offering of the 2028 Convertible Notes and available cash to redeem $62.6 million of senior secured notes maturing in 2024 and $257.4 million of senior secured notes maturing in 2025, and to pay related premiums, fees and expenses relating to the offering and redemptions.

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

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

Covenant Compliance

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

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

During the first quarter of 2023, the Company’s reported common stock prices did not prompt the conversion feature of the 2028 Convertible Notes.

As a result, the 2028 Convertible Notes are not convertible at the option of the holders during the second quarter of 2023.

The now-terminated LC Facility had an original capacity of $324.0 million and was subsequently amended at various dates to reduce its capacity and effect certain other changes, including in February 2023 to reduce capacity by $65.0 million, accelerate the 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.

Accounts Receivable Securitization Program

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“Financial Instruments and Other Guarantees” of the accompanying unaudited condensed 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 February 2023 to increase the available funding capacity from $175.0 million to $225.0 million and adjust the relevant interest rate for borrowings to a secured overnight financing rate (SOFR).

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

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

Cash Flows and Free Cash Flow

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

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

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

Nine Months Ended

September 30,

Funding capacity under the program may also be utilized for letters of credit in support of other obligations, which has been the Company’s primary utilization.

At March 31, 2023, the Company had no outstanding borrowings and $190.7 million of letters of credit outstanding under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company was not required to post cash collateral under the securitization program at March 31, 2023.

By April 14, 2023, $101.3 million of letters of credit outstanding under the securitization program were cancelled in connection with the surety agreement amendment and related trust accounts described above.

Covenant Compliance

The Company was compliant with all relevant covenants under its debt and other finance agreements at March 31, 2023.

The April 2023 termination of the Company’s credit agreement and related letter of credit facility eliminated the related compliance requirements as of March 31, 2023 and prospectively.

The following table summarizes the Company’s cash flows for the three months ended March 31, 2023 and 2022, as reported in the accompanying unaudited condensed consolidated financial statements.

Three Months Ended March 31,

(Dollars in millions)

Net cash provided by (used in) operating activities $ 386.3 $ (273.7)

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

Net cash (used in) provided by investing activities (58.5) 35.2

Net cash (used in) provided by financing activities (39.0) 132.2

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Cash, cash equivalents and restricted cash at end of period $ 1,706.4 $ 848.0

Net cash provided by (used in) operating activities $ 504.1 $ (18.4)

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

Free Cash Flow $ 565.2 $ (138.1)

Operating Activities.

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

The increase in net cash provided by operating activities for the three months ended March 31, 2023 compared to the same period in the prior year was driven by lower cash utilization with respect to the margin requirements associated with derivative financial instruments ($547.4 million) and the year-over-year increase in operating cash flow from Company’s mining operations ($112.6 million).

Investing Activities.

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

The increase in net cash used in investing activities for the three months ended March 31, 2023 compared to the same period in the prior year was driven by lower cash receipts from Middlemount ($47.2 million), higher net contributions to joint ventures and related parties ($25.7 million), and higher capital expenditures and the payment of capital accruals ($20.6 million).

Financing Activities.

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

The decrease in net cash provided by financing activities for the three months ended March 31, 2023 compared to the same period in the prior year was driven by the cash proceeds from common stock and debt issuances in the prior year ($222.0 million and $545.0 million, respectively), partially offset by lower repayments of long-term debt ($597.2 million) in the current year.

Off-Balance-Sheet Arrangements

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

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

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

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

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

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

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

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

Reclamation Health and welfare (1)

Contract performance (2)

Leased property and equipment Other (3)

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

The following table summarizes the Company’s financial instruments that carry off-balance-sheet risk.

March 31, 2023 December 31, 2022

Reclamation Support Other Support (1)

Total Reclamation Support Other Support (1)

(Dollars in millions)

Surety bonds and bank guarantees $ 1,234.6 $ 40.5 $ 55.9 $ 33.3 $ 16.2 $ 1,380.5

Letters of credit outstanding under letter of credit facilities 241.5 90.9 3.9 5.0 — 341.3

Letters of credit outstanding under accounts receivable securitization program 134.2 19.5 10.4 — — 164.1

Surety bonds $ 1,236.4 $ 152.1 $ 1,388.5 $ 1,250.1 $ 126.7 $ 1,376.8

Letters of credit (2)

22.4 67.0 89.4 437.8 131.8 569.6

Letters of credit in support of surety bonds (4)

1,258.8 219.1 1,477.9 1,687.9 258.5 1,946.4

Letters of credit in support of surety

(22.4) (5.4) (27.8) (431.7) (37.2) (468.9)

Obligations supported, net $ 1,236.4 $ 213.7 $ 1,450.1 $ 1,256.2 $ 221.3 $ 1,477.5

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

(2) Obligations pertain to customer and vendor contracts

(3) Obligations primarily pertain to the disturbance or alteration of public roadways in connection with the Company’s mining activities that is subject to future restoration

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

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

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

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

As described in Note 12.

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

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

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

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

(1) Instruments support obligations related to pension and health care plans, workers’ compensation, property and casualty insurance, customer and vendor contracts and certain restoration ancillary to prior mining activities.

(2) March 31, 2023 balances exclude $223.8 million of letters of credit outstanding under the LC Facility and $101.3 million of letters of credit outstanding under the Company’s accounts receivable securitization program that were cancelled by April 14, 2023.

The collateral obligations related to such letters of credit were met by the March 31, 2023 funding of collateral trust accounts in connection with the surety agreement amendment described above.

Amounts do not include cash collateralized letters of credit.

(3) Certain letters of credit serve as collateral for surety bonds at the request of surety bond providers.

At March 31, 2023, the Company had total asset retirement obligations of $752.5 million.

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

Not presented in the above table is approximately $936.7 million of restricted cash and other balances serving as collateral which are included in the accompanying condensed consolidated balance sheets at March 31, 2023, as described in Note 11.

“Financial Instruments and Other Guarantees” of the accompanying unaudited condensed consolidated financial statements.

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

Critical Accounting Policies and Estimates

5 unchanged sentences

Actual results may differ from these estimates.

The Company’s critical accounting policies and estimates are discussed in Item 7.

The Company’s critical accounting policies and estimates are discussed in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K for the year ended December 31, 2022.

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

The Company’s critical accounting policies remain unchanged at March 31, 2023, and there have been no material changes in the Company’s critical accounting estimates.

Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

“Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented” to the Company’s unaudited condensed consolidated financial statements for a discussion of newly adopted accounting standards and accounting standards not yet implemented.

Although there are new accounting pronouncements issued by the Financial Accounting Standards Board that the Company will adopt, as applicable, the Company does not believe any of these accounting pronouncements will have a material impact on its unaudited condensed consolidated financial statements or disclosures.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis