PEABODY ENERGY CORP 10-Q

Item 1. Financial Statements. PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions, except per share data) Revenue $ 1,268.8 $ 1,321.9 $ 2,632.8 $ 2,013.3 Costs and expenses Operating costs and expenses (exclusive of items shown separately below) 862.0 825.6 1,708.6 1,524.6 Depreciation, depletion and amortization 80.6 73.8 156.9 146.7 Asset retirement obligation expenses 15.5 12.7 30.9 27.7 Selling and administrative expenses 21.7 21.8 44.5 44.9 Restructuring charges 2.0 0.2 2.1 1.8 Other operating income: Net gain on disposals ( 5.2 ) ( 12.8 ) ( 7.1 ) ( 17.7 ) Asset impairment — — 2.0 — Provision for NARM and Shoal Creek loss 33.7 — 33.7 — Income from equity affiliates ( 2.3 ) ( 48.7 ) ( 4.1 ) ( 93.4 ) Operating profit 260.8 449.3 665.3 378.7 Interest expense 13.3 37.6 31.7 77.0 Net loss on early debt extinguishment 2.0 2.3 8.8 25.8 Interest income ( 23.1 ) ( 0.9 ) ( 36.2 ) ( 1.4 ) Net periodic benefit credit, excluding service cost ( 9.7 ) ( 12.3 ) ( 19.4 ) ( 24.5 ) Income from continuing operations before income taxes 278.3 422.6 680.4 301.8 Income tax provision 74.2 11.3 192.2 10.3 Income from continuing operations, net of income taxes 204.1 411.3 488.2 291.5 Loss from discontinued operations, net of income taxes ( 1.3 ) ( 0.7 ) ( 2.6 ) ( 1.5 ) Net income 202.8 410.6 485.6 290.0 Less: Net income attributable to noncontrolling interests 23.6 1.1 37.9 — Net income attributable to common stockholders $ 179.2 $ 409.5 $ 447.7 $ 290.0 Income from continuing operations: Basic income per share $ 1.27 $ 2.85 $ 3.14 $ 2.08 Diluted income per share $ 1.16 $ 2.55 $ 2.85 $ 1.93 Net income attributable to common stockholders: Basic income per share $ 1.26 $ 2.84 $ 3.12 $ 2.07 Diluted income per share $ 1.15 $ 2.54 $ 2.83 $ 1.93 See accompanying notes to unaudited condensed consolidated financial statements. 1 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Net income $ 202.8 $ 410.6 $ 485.6 $ 290.0 Postretirement plans (net of $ 0.0 tax provisions in each period) ( 13.4 ) ( 13.5 ) ( 26.8 ) ( 26.9 ) Foreign currency translation adjustment ( 0.4 ) ( 3.4 ) ( 0.6 ) ( 1.5 ) Other comprehensive loss, net of income taxes ( 13.8 ) ( 16.9 ) ( 27.4 ) ( 28.4 ) Comprehensive income 189.0 393.7 458.2 261.6 Less: Net income attributable to noncontrolling interests 23.6 1.1 37.9 — Comprehensive income attributable to common stockholders $ 165.4 $ 392.6 $ 420.3 $ 261.6 See accompanying notes to unaudited condensed consolidated financial statements. 2 Table of Contents PEABODY ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2023 December 31, 2022 (Amounts in millions, except per share data) ASSETS Current assets Cash and cash equivalents $ 1,080.5 $ 1,307.3 Accounts receivable, net of allowance for credit losses of $ 0.0 at June 30, 2023 and December 31, 2022 325.5 465.5 Inventories, net 312.9 296.1 Other current assets 244.3 303.6 Total current assets 1,963.2 2,372.5 Property, plant, equipment and mine development, net 2,819.5 2,865.0 Operating lease right-of-use assets 27.2 26.9 Restricted cash and collateral 925.4 187.4 Investments and other assets 73.8 84.3 Deferred income taxes 19.0 74.7 Total assets $ 5,828.1 $ 5,610.8 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current portion of long-term debt $ 13.0 $ 13.2 Accounts payable and accrued expenses 892.1 905.5 Total current liabilities 905.1 918.7 Long-term debt, less current portion 321.5 320.6 Deferred income taxes 20.0 20.4 Asset retirement obligations 669.4 665.8 Accrued postretirement benefit costs 153.0 156.5 Operating lease liabilities, less current portion 11.7 11.0 Other noncurrent liabilities 224.1 223.0 Total liabilities 2,304.8 2,316.0 Stockholders’ equity Preferred Stock — $ 0.01 per share par value; 100.0 shares authorized, no shares issued or outstanding as of June 30, 2023 and December 31, 2022 — — Series Common Stock — $ 0.01 per share par value; 50.0 shares authorized, no shares issued or outstanding as of June 30, 2023 and December 31, 2022 — — Common Stock — $ 0.01 per share par value; 450.0 shares authorized, 188.6 shares issued and 135.9 shares outstanding as of June 30, 2023 and 187.1 shares issued and 143.9 shares outstanding as of December 31, 2022 1.9 1.9 Additional paid-in capital 3,979.4 3,975.9 Treasury stock, at cost — 52.7 and 43.2 common shares as of June 30, 2023 and December 31, 2022 ( 1,572.4 ) ( 1,372.9 ) Retained earnings 820.7 383.9 Accumulated other comprehensive income 215.1 242.5 Peabody Energy Corporation stockholders’ equity 3,444.7 3,231.3 Noncontrolling interests 78.6 63.5 Total stockholders’ equity 3,523.3 3,294.8 Total liabilities and stockholders’ equity $ 5,828.1 $ 5,610.8 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2023 2022 (Dollars in millions) Cash Flows From Operating Activities Net income $ 485.6 $ 290.0 Loss from discontinued operations, net of income taxes 2.6 1.5 Income from continuing operations, net of income taxes 488.2 291.5 Adjustments to reconcile income from continuing operations, net of income taxes to net cash provided by operating activities: Depreciation, depletion and amortization 156.9 146.7 Noncash interest expense, net 3.3 9.0 Deferred income taxes 65.0 ( 1.4 ) Noncash share-based compensation 3.4 5.4 Asset impairment 2.0 — Provision for NARM and Shoal Creek loss 33.7 — Net gain on disposals ( 7.1 ) ( 17.7 ) Noncash income from port and rail capacity assignment ( 9.2 ) — Net loss on early debt extinguishment 8.8 25.8 Income from equity affiliates ( 4.1 ) ( 93.4 ) Foreign currency option contracts ( 0.6 ) 3.0 Changes in current assets and liabilities: Accounts receivable 149.3 ( 179.9 ) Inventories ( 20.8 ) ( 26.2 ) Other current assets 43.4 ( 82.9 ) Accounts payable and accrued expenses ( 23.3 ) ( 13.1 ) Collateral arrangements ( 116.9 ) ( 28.2 ) Asset retirement obligations 3.6 5.2 Workers’ compensation obligations ( 0.7 ) ( 1.6 ) Postretirement benefit obligations ( 30.4 ) ( 32.2 ) Pension obligations 0.7 ( 1.2 ) Other, net — 3.3 Net cash provided by continuing operations 745.2 12.1 Net cash used in discontinued operations ( 5.5 ) ( 2.7 ) Net cash provided by operating activities 739.7 9.4 4 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) Six Months Ended June 30, 2023 2022 (Dollars in millions) Cash Flows From Investing Activities Additions to property, plant, equipment and mine development ( 122.3 ) ( 63.1 ) Changes in accrued expenses related to capital expenditures ( 5.4 ) ( 9.7 ) Proceeds from disposal of assets, net of receivables 12.0 23.4 Contributions to joint ventures ( 370.8 ) ( 276.0 ) Distributions from joint ventures 365.8 280.8 Advances to related parties ( 0.1 ) ( 1.2 ) Cash receipts from Middlemount Coal Pty Ltd and other related parties 1.7 143.9 Other, net ( 0.9 ) ( 3.6 ) Net cash (used in) provided by investing activities ( 120.0 ) 94.5 Cash Flows From Financing Activities Proceeds from long-term debt — 545.0 Repayments of long-term debt ( 4.8 ) ( 654.8 ) Payment of debt issuance and other deferred financing costs ( 0.3 ) ( 20.7 ) Proceeds from common stock issuances, net of costs — 222.0 Common stock repurchases ( 173.0 ) — Repurchase of employee common stock relinquished for tax withholding ( 13.7 ) ( 2.6 ) Dividends paid ( 10.8 ) — Distributions to noncontrolling interests ( 22.8 ) ( 13.8 ) Net cash (used in) provided by financing activities ( 225.4 ) 75.1 Net change in cash, cash equivalents and restricted cash 394.3 179.0 Cash, cash equivalents and restricted cash at beginning of period (1) 1,417.6 954.3 Cash, cash equivalents and restricted cash at end of period (2) $ 1,811.9 $ 1,133.3 (1) The following table provides a reconciliation of “Cash, cash equivalents and restricted cash at beginning of period”: Cash and cash equivalents $ 1,307.3 Restricted cash included in “Restricted cash and collateral” 110.3 Cash, cash equivalents and restricted cash at beginning of period $ 1,417.6 (2) The following table provides a reconciliation of “Cash, cash equivalents and restricted cash at end of period”: Cash and cash equivalents $ 1,080.5 Restricted cash included in “Restricted cash and collateral” 731.4 Cash, cash equivalents and restricted cash at end of period $ 1,811.9 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents PEABODY ENERGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions, except per share data) Common Stock Balance, beginning of period $ 1.9 $ 1.9 $ 1.9 $ 1.8 Common stock issuances, net of costs — — — 0.1 Balance, end of period 1.9 1.9 1.9 1.9 Additional paid-in capital Balance, beginning of period 3,977.6 3,969.5 3,975.9 3,745.6 Dividend equivalent units on dividends declared 0.1 — 0.1 — Share-based compensation for equity-classified awards 1.7 3.4 3.4 5.4 Common stock issuances, net of costs — — — 221.9 Balance, end of period 3,979.4 3,972.9 3,979.4 3,972.9 Treasury stock Balance, beginning of period ( 1,386.1 ) ( 1,372.3 ) ( 1,372.9 ) ( 1,370.3 ) Common stock repurchases ( 173.0 ) — ( 173.0 ) — Unsettled common stock repurchases ( 11.2 ) — ( 11.2 ) — Excise tax payable on common stock repurchases ( 1.6 ) — ( 1.6 ) — Repurchase of employee common stock relinquished for tax withholding ( 0.5 ) ( 0.6 ) ( 13.7 ) ( 2.6 ) Balance, end of period ( 1,572.4 ) ( 1,372.9 ) ( 1,572.4 ) ( 1,372.9 ) Retained earnings (Accumulated deficit) Balance, beginning of period 652.4 ( 1,032.7 ) 383.9 ( 913.2 ) Net income attributable to common stockholders 179.2 409.5 447.7 290.0 Dividends declared ($ 0.075 , $ 0.000 , $ 0.075 , and $ 0.000 per share, respectively) ( 10.9 ) — ( 10.9 ) — Balance, end of period 820.7 ( 623.2 ) 820.7 ( 623.2 ) Accumulated other comprehensive income Balance, beginning of period 228.9 286.4 242.5 297.9 Postretirement plans (net of $ 0.0 tax provisions in each period) ( 13.4 ) ( 13.5 ) ( 26.8 ) ( 26.9 ) Foreign currency translation adjustment ( 0.4 ) ( 3.4 ) ( 0.6 ) ( 1.5 ) Balance, end of period 215.1 269.5 215.1 269.5 Noncontrolling interests Balance, beginning of period 55.0 44.1 63.5 59.0 Net income attributable to noncontrolling interests 23.6 1.1 37.9 — Distributions to noncontrolling interests — — ( 22.8 ) ( 13.8 ) Balance, end of period 78.6 45.2 78.6 45.2 Total stockholders’ equity $ 3,523.3 $ 2,293.4 $ 3,523.3 $ 2,293.4 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The condensed consolidated financial statements include the accounts of Peabody Energy Corporation (PEC) and its consolidated subsidiaries and affiliates (along with PEC, the Company or Peabody). Interests in subsidiaries controlled by the Company are consolidated with any outside stockholder interests reflected as noncontrolling interests, except when the Company has an undivided interest in a joint venture. In those cases, the Company includes its proportionate share in the assets, liabilities, revenue and expenses of the jointly controlled entities within each applicable line item of the unaudited condensed consolidated financial statements. All intercompany transactions, profits and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, these financial statements reflect all normal, recurring adjustments necessary for a fair presentation. Balance sheet information presented herein as of December 31, 2022 has been derived from the Company’s audited consolidated balance sheet at that date. The Company’s results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2023. 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. (2) Revenue Recognition Refer to Note 1. “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for the Company’s policies regarding “Revenue” and “Accounts receivable, net.” Disaggregation of Revenue Revenue by product type and market is set forth in the following tables. With respect to its seaborne reporting segments, the Company classifies as “Export” certain revenue from domestically-delivered coal under contracts in which the price is derived on a basis similar to export contracts. Three Months Ended June 30, 2023 Seaborne Thermal Seaborne Metallurgical Powder River Basin Other U.S. Thermal Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 31.9 $ — $ 259.8 $ 198.2 $ — $ 489.9 Export 367.5 — — — — 367.5 Total thermal 399.4 — 259.8 198.2 — 857.4 Metallurgical coal Export — 371.6 — — — 371.6 Total metallurgical — 371.6 — — — 371.6 Other (2) 0.1 0.9 ( 0.1 ) 1.7 37.2 39.8 Revenue $ 399.5 $ 372.5 $ 259.7 $ 199.9 $ 37.2 $ 1,268.8 7 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Three Months Ended June 30, 2022 Seaborne Thermal Seaborne Metallurgical Powder River Basin Other U.S. Thermal Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 39.8 $ — $ 229.9 $ 222.8 $ — $ 492.5 Export 314.9 — — 1.0 — 315.9 Total thermal 354.7 — 229.9 223.8 — 808.4 Metallurgical coal Export — 533.3 — — — 533.3 Total metallurgical — 533.3 — — — 533.3 Other (2) 0.2 0.5 ( 0.2 ) 1.1 ( 21.4 ) ( 19.8 ) Revenue $ 354.9 $ 533.8 $ 229.7 $ 224.9 $ ( 21.4 ) $ 1,321.9 Six Months Ended June 30, 2023 Seaborne Thermal Seaborne Metallurgical Powder River Basin Other U.S. Thermal Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 69.4 $ — $ 564.8 $ 446.1 $ — $ 1,080.3 Export 676.3 — — — — 676.3 Total thermal 745.7 — 564.8 446.1 — 1,756.6 Metallurgical coal Export — 658.8 — — — 658.8 Total metallurgical — 658.8 — — — 658.8 Other (2) 0.3 2.1 0.2 3.2 211.6 217.4 Revenue $ 746.0 $ 660.9 $ 565.0 $ 449.3 $ 211.6 $ 2,632.8 8 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Six Months Ended June 30, 2022 Seaborne Thermal Seaborne Metallurgical Powder River Basin Other U.S. Thermal Corporate and Other (1) Consolidated (Dollars in millions) Thermal coal Domestic $ 80.2 $ — $ 481.4 $ 422.7 $ — $ 984.3 Export 525.4 — — 1.0 — 526.4 Total thermal 605.6 — 481.4 423.7 — 1,510.7 Metallurgical coal Export — 851.3 — — — 851.3 Total metallurgical — 851.3 — — — 851.3 Other (2) 0.5 3.8 ( 0.5 ) 4.3 ( 356.8 ) ( 348.7 ) Revenue $ 606.1 $ 855.1 $ 480.9 $ 428.0 $ ( 356.8 ) $ 2,013.3 (1) Corporate and Other includes the following: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Unrealized gains (losses) on derivative contracts related to forecasted sales $ 40.3 $ ( 24.5 ) $ 159.0 $ ( 325.5 ) Realized losses on derivative contracts related to forecasted sales ( 30.3 ) ( 122.6 ) ( 80.9 ) ( 190.6 ) Revenue from physical sale of coal (3) 23.3 122.0 107.8 143.3 Trading revenue 0.1 0.3 0.1 10.4 Other (2) 3.8 3.4 25.6 5.6 Total Corporate and Other $ 37.2 $ ( 21.4 ) $ 211.6 $ ( 356.8 ) (2) Includes revenue from arrangements such as customer contract-related payments associated with volume shortfalls; royalties related to coal lease agreements; sales agency commissions; farm income; property and facility rentals; and revenue related to the Company’s assignment of rights to its excess port and rail capacity. (3) Includes revenue recognized upon the physical sale of coal purchased from the Company’s operating segments and sold to customers through the Company’s coal trading business as part of settling certain derivative contracts. Primarily represents the difference between the price contracted with the customer and the price allocated to the operating segment. Accounts Receivable “Accounts receivable, net” at June 30, 2023 and December 31, 2022 consisted of the following: June 30, 2023 December 31, 2022 (Dollars in millions) Trade receivables, net $ 278.5 $ 416.3 Miscellaneous receivables, net 47.0 49.2 Accounts receivable, net $ 325.5 $ 465.5 None of the above receivables included allowances for credit losses at June 30, 2023 or December 31, 2022. No charges for credit losses were recognized during the three and six months ended June 30, 2023 or 2022. 9 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (3) Inventories “ Inventories, net” as of June 30, 2023 and December 31, 2022 consisted of the following: June 30, 2023 December 31, 2022 (Dollars in millions) Materials and supplies, net $ 152.0 $ 130.8 Raw coal 94.2 98.3 Saleable coal 66.7 67.0 Inventories, net $ 312.9 $ 296.1 Materials and supplies inventories, net presented above have been shown net of reserves of $ 8.5 million and $ 9.5 million as of June 30, 2023 and December 31, 2022. (4) Equity Method Investments The Company’s equity method investments include its joint venture interest in Middlemount Coal Pty Ltd (Middlemount), R3 Renewables LLC (R3) and certain other equity method investments. The table below summarizes the book value of those investments, which are reported in “Investments and other assets” in the condensed consolidated balance sheets, and the related “Income from equity affiliates”: (Income) Loss from Equity Affiliates Book Value at Three Months Ended June 30, Six Months Ended June 30, June 30, 2023 December 31, 2022 2023 2022 2023 2022 (Dollars in millions) Equity method investment related to Middlemount $ 33.1 $ 27.1 $ ( 4.1 ) $ ( 49.5 ) $ ( 6.7 ) $ ( 95.2 ) Equity method investment related to R3 7.8 7.0 1.8 0.8 2.6 1.8 Total equity method investments $ 40.9 $ 34.1 $ ( 2.3 ) $ ( 48.7 ) $ ( 4.1 ) $ ( 93.4 ) The Company received no cash payments from Middlemount during the six months ended June 30, 2023. Payments of $ 143.2 million were received from Middlemount during the six months ended June 30, 2022. One of the Company’s Australian subsidiaries is party to an agreement to provide a revolving loan to Middlemount. The Company’s participation in the revolving loan will not, at any time, exceed its 50 % equity interest of the revolving loan limit, which was $ 50 million Australian dollars at June 30, 2023. The revolving loan bears interest at 10 % per annum and expires on December 31, 2023. There was no outstanding revolving loan at June 30, 2023 or December 31, 2022. In March 2022, the Company entered into a joint venture with unrelated partners to form R3. R3 was formed with the intent of developing various sites, including certain reclaimed mining land held by the Company in the U.S., for utility-scale photovoltaic solar generation and battery storage. The Company contributed $ 3.5 million and $ 2.5 million to R3 during the six months ended June 30, 2023 and 2022, respectively. (5) Derivatives and Fair Value Measurements Derivatives From time to time, the Company may utilize various types of derivative instruments to manage its exposure to risks in the normal course of business, including (1) foreign currency exchange rate risk and the variability of cash flows associated with forecasted Australian dollar expenditures made in its Australian mining platform, (2) price risk of fluctuating coal prices related to forecasted sales or purchases of coal, or changes in the fair value of a fixed price physical sales contract, (3) price risk and the variability of cash flows related to forecasted diesel fuel purchased for use in its operations and (4) interest rate risk on long-term debt. These risk management activities are actively monitored for compliance with the Company’s risk management policies. 10 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) On a limited basis, the Company engages in the direct and brokered trading of coal and freight-related contracts. Except those contracts for which the Company has elected to apply a normal purchases and normal sales exception, all derivative coal trading contracts are accounted for at fair value. The Company had no diesel fuel or interest rate derivatives in place as of June 30, 2023. Foreign Currency Option Contracts The Company has historically utilized currency forwards and options to hedge currency risk associated with anticipated Australian dollar expenditures. As of June 30, 2023, the Company held average rate options with an aggregate notional amount of $ 486.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending March 31, 2024. The instruments entitle the Company to receive payment on the notional amount should the quarterly average Australian dollar-to-U.S. dollar exchange rate exceed amounts ranging from $ 0.70 to $ 0.75 over the nine-month period ending March 31, 2024. As of June 30, 2023, the Company also held purchased collars with an aggregate notional amount of $ 514.0 million Australian dollars related to anticipated Australian dollar expenditures during the nine-month period ending March 31, 2024. The purchased collars have a floor and ceiling of approximately $ 0.60 and $ 0.75 , respectively, whereby the Company will incur a loss on the instruments for rates below the floor and a gain for rates above the ceiling. Derivative Contracts Related to Forecasted Sales As of June 30, 2023, the Company had no coal derivative contracts related to its forecasted sales. Historically, such financial contracts have included futures, forwards and options. The Company classifies certain physical forward sales contracts as derivatives for which the normal purchase, normal sales exception does not apply. During the three months ended June 30, 2023, the Company recorded a net unrealized mark-to-market gain of $ 40.3 million on financial coal derivative contracts, and no unrealized mark-to-market gains or losses on physical forward sales contracts. During the three months ended June 30, 2022, the Company recorded a net unrealized mark-to-market loss of $ 24.5 million on coal derivative contracts, which included approximately $ 40 million of unrealized mark-to-market losses on financial derivatives and approximately $ 15 million of unrealized mark-to-market gains on physical forward sales contracts. During the six months ended June 30, 2023, the Company recorded a net unrealized mark-to-market gain of $ 159.0 million on financial coal derivative contracts, and no unrealized mark-to-market gains or losses on physical forward sales contracts. During the six months ended June 30, 2022, the Company recorded a net unrealized mark-to-market loss of $ 325.5 million on coal derivative contracts, which included approximately $ 306 million of unrealized mark-to-market losses on financial derivatives and approximately $ 20 million of unrealized mark-to-market losses on physical forward sales contracts. Financial Trading Contracts On a limited basis, the Company may enter coal or freight derivative contracts for trading purposes. Such financial contracts may include futures, forwards and options. The Company held nominal financial trading contracts as of June 30, 2023. 11 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Tabular Derivatives Disclosures The Company has master netting agreements with certain of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the condensed consolidated balance sheets. The fair value of derivatives reflected in the accompanying condensed consolidated balance sheets are set forth in the table below. June 30, 2023 December 31, 2022 Asset Derivative Liability Derivative Asset Derivative Liability Derivative (Dollars in millions) Foreign currency option contracts $ 0.9 $ — $ 3.0 $ — Derivative contracts related to forecasted sales 30.4 ( 15.4 ) 100.6 ( 310.3 ) Financial trading contracts — ( 15.0 ) 11.7 — Total derivatives 31.3 ( 30.4 ) 115.3 ( 310.3 ) Effect of counterparty netting ( 30.4 ) 30.4 ( 100.6 ) 100.6 Variation margin (received) posted — — ( 11.7 ) 209.7 Net derivatives and variation margin as classified in the balance sheets $ 0.9 $ — $ 3.0 $ — The Company generally posts or receives variation margin cash with its clearing broker on the majority of its financial derivatives as market values of the financial derivatives fluctuate. As of June 30, 2023, the Company had no margin cash posted. As of December 31, 2022, the Company had posted $ 255.5 million aggregate margin cash, consisting of $ 198.0 million variation margin cash and $ 57.5 million initial margin. The net amount of asset derivatives, net of variation margin, is included in “Other current assets” and the net amount of liability derivatives, net of variation margin, is included in “Accounts payable and accrued expenses” in the accompanying condensed consolidated balance sheets. The amounts of initial margin are not included with the derivatives presented in the tabular disclosures above and are included in “Other current assets” in the accompanying condensed consolidated balance sheets. 12 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Currently, the Company does not seek cash flow hedge accounting treatment for its derivative financial instruments and thus changes in fair value are reflected in current earnings. The tables below show the amounts of pretax gains and losses related to the Company’s derivatives and their classification within the accompanying unaudited condensed consolidated statements of operations. Three Months Ended June 30, 2023 Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 0.1 ) $ ( 2.9 ) $ 2.8 Derivative contracts related to forecasted sales Revenue 10.0 ( 30.3 ) 40.3 Financial trading contracts Revenue 0.1 13.9 ( 13.8 ) Total $ 10.0 $ ( 19.3 ) $ 29.3 Three Months Ended June 30, 2022 Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized loss recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 7.5 ) $ ( 1.2 ) $ ( 6.3 ) Derivative contracts related to forecasted sales Revenue ( 147.1 ) ( 122.6 ) ( 24.5 ) Financial trading contracts Revenue 0.3 0.9 ( 0.6 ) Total $ ( 154.3 ) $ ( 122.9 ) $ ( 31.4 ) Six Months Ended June 30, 2023 Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized gain (loss) recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 5.2 ) $ ( 5.8 ) $ 0.6 Derivative contracts related to forecasted sales Revenue 78.1 ( 80.9 ) 159.0 Financial trading contracts Revenue 0.1 31.2 ( 31.1 ) Total $ 73.0 $ ( 55.5 ) $ 128.5 Six Months Ended June 30, 2022 Total (loss) gain recognized in income (Loss) gain realized in income on derivatives Unrealized (loss) gain recognized in income on derivatives Derivative Instrument Classification (Dollars in millions) Foreign currency option contracts Operating costs and expenses $ ( 5.2 ) $ ( 2.2 ) $ ( 3.0 ) Derivative contracts related to forecasted sales Revenue ( 516.1 ) ( 190.6 ) ( 325.5 ) Financial trading contracts Revenue 10.4 0.2 10.2 Total $ ( 510.9 ) $ ( 192.6 ) $ ( 318.3 ) The Company classifies the cash effects of its derivatives within the “Cash Flows From Operating Activities” section of the unaudited condensed consolidated statements of cash flows. 13 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Measurements The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. These levels include: Level 1 - inputs are quoted prices in active markets for the identical assets or liabilities; Level 2 - inputs are other than quoted prices included in Level 1 that are directly or indirectly observable through market-corroborated inputs; and Level 3 - inputs are unobservable, or observable but cannot be market-corroborated, requiring the Company to make assumptions about pricing by market participants. The following tables set forth the hierarchy of the Company’s net asset (liability) positions for which fair value is measured on a recurring basis. Variation margin cash associated with the derivative balances is excluded from this table. June 30, 2023 Level 1 Level 2 Level 3 Total (Dollars in millions) Foreign currency option contracts $ — $ 0.9 $ — $ 0.9 Derivative contracts related to forecasted sales — 15.0 — 15.0 Financial trading contracts — ( 15.0 ) — ( 15.0 ) Equity securities — — 0.3 0.3 Total net assets $ — $ 0.9 $ 0.3 $ 1.2 December 31, 2022 Level 1 Level 2 Level 3 Total (Dollars in millions) Foreign currency option contracts $ — $ 3.0 $ — $ 3.0 Derivative contracts related to forecasted sales — ( 209.7 ) — ( 209.7 ) Financial trading contracts — 11.7 — 11.7 Equity securities — — 2.5 2.5 Total net (liabilities) assets $ — $ ( 195.0 ) $ 2.5 $ ( 192.5 ) For Level 1 and 2 financial assets and liabilities, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, exchange indices, broker/dealer quotes, published indices, issuer spreads, benchmark securities and other market quotes. In the case of certain debt securities, fair value is provided by a third-party pricing service. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities: • Foreign currency option contracts are valued utilizing inputs obtained in quoted public markets (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3. • Derivative contracts related to forecasted sales and financial trading contracts are generally valued based on unadjusted quoted prices in active markets (Level 1) or a valuation that is corroborated by the use of market-based pricing (Level 2) except when credit and non-performance risk is considered to be a significant input (greater than 10 % of fair value), then the Company classifies as Level 3. • Investments in equity securities are currently based on unadjusted quoted prices in active markets (Level 1). Other Financial Instruments . The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of June 30, 2023 and December 31, 2022: • Cash and cash equivalents, restricted cash, accounts receivable, including those within the Company’s accounts receivable securitization program, margining cash, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments. • Long-term debt fair value estimates are based on observed prices for securities when available (Level 2), and otherwise on estimated borrowing rates to discount the cash flows to their present value (Level 3). 14 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Market risk associated with the Company’s fixed- and variable-rate long-term debt relates to the potential reduction in the fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt, shown below, is principally based on reported market values and estimates based on interest rates, maturities, credit risk, underlying collateral and completed market transactions. June 30, 2023 December 31, 2022 (Dollars in millions) Total debt at par value $ 343.5 $ 343.6 Less: Unamortized debt issuance costs ( 9.0 ) ( 9.8 ) Net carrying amount $ 334.5 $ 333.8 Estimated fair value $ 454.8 $ 560.0 The Company’s risk management function, which is independent of the Company’s coal trading function, is responsible for valuation policies and procedures, with oversight from executive management. The fair value of the Company’s coal derivative assets and liabilities reflects adjustments for credit risk. The Company’s exposure to credit risk is substantially with electric utilities, energy marketers, steel producers and nonfinancial trading houses. Significant increases or decreases in the inputs in isolation could result in a significantly higher or lower fair value measurement. The unobservable inputs do not have a direct interrelationship; therefore, a change in one unobservable input would not necessarily correspond with a change in another unobservable input. During the six months ended June 30, 2023, the entity in which the Company held a Level 3 investment in equity securities completed a merger transaction and its shares were exchanged for the shares of the newly-combined entity, which are publicly traded. The Company recorded an impairment loss of $ 2.0 million upon the exchange of shares, and will mark the investment to market as a Level 1 asset prospectively. The Company had no transfers between Levels 1, 2 and 3 during the three and six months ended June 30, 2023 and 2022. The Company’s policy is to value all transfers between levels using the beginning of period valuation. (6) Property, Plant, Equipment and Mine Development The composition of property, plant, equipment and mine development, net, as of June 30, 2023 and December 31, 2022 is set forth in the table below: June 30, 2023 December 31, 2022 (Dollars in millions) Land and coal interests $ 2,511.9 $ 2,514.7 Buildings and improvements 628.8 594.2 Machinery and equipment 1,612.0 1,543.1 Less: Accumulated depreciation, depletion and amortization ( 1,933.2 ) ( 1,787.0 ) Property, plant, equipment and mine development, net $ 2,819.5 $ 2,865.0 (7) Income Taxes The Company's effective tax rate before remeasurement for the six months ended June 30, 2023 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax provision, offset by foreign rate differential and changes in valuation allowance. The Company’s income tax provisions of $ 74.2 million and $ 11.3 million for the three months ended June 30, 2023 and 2022, respectively, included a tax provision of $ 0.3 million and a tax benefit of $ 3.5 million, respectively, related to the remeasurement of foreign income tax accounts. The Company’s income tax provisions of $ 192.2 million and $ 10.3 million for the six months ended June 30, 2023 and 2022, respectively, included a tax provision of $ 0.7 million and a tax benefit of $ 1.9 million, respectively, related to the remeasurement of foreign income tax accounts. The Company’s estimated full year pretax income and income tax expense are expected to be primarily generated in Australia. 15 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (8) Long-term Debt The Company’s total indebtedness as of June 30, 2023 and December 31, 2022 consisted of the following: Debt Instrument (defined below, as applicable) June 30, 2023 December 31, 2022 (Dollars in millions) 3.250 % Convertible Senior Notes due March 2028 (2028 Convertible Notes) $ 320.0 $ 320.0 Finance lease obligations 23.5 23.6 Less: Debt issuance costs ( 9.0 ) ( 9.8 ) 334.5 333.8 Less: Current portion of long-term debt 13.0 13.2 Long-term debt $ 321.5 $ 320.6 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 its unsecured 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. 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 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 Company capitalized $ 11.2 million of debt issuance costs related to the offering and recognized a loss on early debt extinguishment of $ 23.0 million during the three months ended March 31, 2022. The 2028 Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in accordance with their terms. The 2028 Convertible Notes bore interest from March 1, 2022 at a rate of 3.250 % per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2022. The 2028 Convertible Notes’ indenture requires conversion rate adjustments upon the payment of dividends to holders of the Company’s common stock once such cumulative dividends impact the conversion rate by at least 1 %. Under the applicable conversion rate formula, the $ 0.075 per share dividend declared on April 27, 2023 and paid on May 31, 2023 yielded a revised conversion rate of 50.5451 shares per $1,000 principal amount of 2028 Convertible Notes, which did not meet the 1 % threshold to impact the existing conversion rate of 50.3816 . The conversion rate may be impacted prospectively, based upon cumulative dividends paid. During the first and second quarters 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 were not convertible at the option of the holders during the second quarter of 2023, and will not be similarly convertible during the third quarter of 2023. As of June 30, 2023, the if-converted value of the 2028 Convertible Notes exceeded the principal amount by $ 29.2 million. 16 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Interest Charges The following table presents the components of the Company’s interest expense related to its indebtedness and financial assurance instruments such as surety bonds and letters of credit. Additionally, the table sets forth the amount of cash paid for interest and the amount of non-cash interest expense primarily related to the amortization of debt issuance costs. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Indebtedness $ 5.3 $ 24.0 $ 11.7 $ 49.9 Financial assurance instruments 8.0 13.6 20.0 27.1 Interest expense $ 13.3 $ 37.6 $ 31.7 $ 77.0 Cash paid for interest $ 22.9 $ 40.6 $ 41.9 $ 77.8 Non-cash interest expense $ 1.7 $ 5.2 $ 3.3 $ 9.0 Covenant Compliance The Company was compliant with all relevant covenants under its debt and other finance agreements at June 30, 2023. The April 2023 termination of the Company’s credit agreement and related letter of credit facility, as described in Note 11. “Financial Instruments and Other Guarantees,” eliminated the related compliance requirements as of March 31, 2023 and prospectively. (9) Pension and Postretirement Benefit Costs The components of net periodic pension and postretirement benefit costs, excluding the service cost for benefits earned, are included in “Net periodic benefit credit, excluding service cost” in the unaudited condensed consolidated statements of operations. Net periodic pension cost (credit) included the following components: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Interest cost on projected benefit obligation $ 7.4 $ 5.4 $ 14.8 $ 10.7 Expected return on plan assets ( 6.6 ) ( 6.0 ) ( 13.2 ) ( 11.9 ) Net periodic pension cost (credit) $ 0.8 $ ( 0.6 ) $ 1.6 $ ( 1.2 ) Annual contributions to the qualified plans are made in accordance with minimum funding standards and the Company’s agreement with the Pension Benefit Guaranty Corporation. Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006 (generally 80 %). As of June 30, 2023, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds. The Company is not required to make any contributions to its qualified pension plans in 2023 based on minimum funding requirements and does not expect to make any discretionary contributions in 2023 at this time. In March 2022, Peabody Investments Corp. (PIC), a wholly-owned subsidiary of PEC, entered into a commitment agreement relating to the Peabody Investments Corp. Retirement Plan (the Peabody Plan) with The Prudential Insurance Company of America (Prudential) and Fiduciary Counselors Inc., as independent fiduciary to the Peabody Plan. Under the commitment agreement, the Peabody Plan purchased a buy-in group annuity contract (GAC) from Prudential for approximately $ 500 million and Prudential would reimburse the Peabody Plan for benefit payments to be made to the Peabody Plan’s participants. The benefit obligation was not transferred to Prudential and the Peabody Plan continued to administer and pay the retirement benefits of Peabody Plan participants and was reimbursed by Prudential for the payment of all benefits covered by the GAC. The purchase of the GAC was funded directly by the Peabody Plan’s assets. There was no impact on the monthly retirement benefits paid to Peabody Plan participants and no material impact on contributions for the Peabody Plan in 2022 or 2023 as a result of this transaction. 17 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) In May 2022, the Board of Directors of PIC approved the termination of the Peabody Plan effective July 31, 2022. In June 2022, the Peabody Plan’s participants were notified of the Peabody Plan termination and PIC filed an application with the Internal Revenue Service to request a determination as to the qualified status under §401(a) of the Internal Revenue Code of 1986 with respect to the amendment and termination of the Peabody Plan. In May 2023, PIC received a favorable determination from the Internal Revenue Service as to the Peabody Plan’s qualified status with respect to its plan termination. In February 2023, as part of the Peabody Plan termination process, PIC announced a program to offer a voluntary lump-sum pension payout to certain active and deferred participants of the Peabody Plan which would fully settle the Peabody Plan’s obligation to them. The program provided participants with a limited-time opportunity to elect to receive a lump-sum settlement of their pension benefit or begin to receive their benefit in the form of a monthly annuity in May 2023. During the six months ended June 30, 2023, the Company settled $ 21.9 million of its pension obligations for active and deferred participants in the Peabody Plan with an equal amount paid from plan assets. As part of the completion of the standard Employee Retirement Income Security Act plan termination process for the Peabody Plan, on July 31, 2023, the GAC with Prudential was converted from a buy-in group annuity contract to a buy-out group annuity contract, irrevocably transferring the remaining benefit obligation and administration to Prudential. The Peabody Plan no longer administers or pays the retirement benefits of Peabody Plan participants. No cash contributions are expected to be required to complete the termination process for the Peabody Plan. Net periodic postretirement benefit credit included the following components: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Service cost for benefits earned $ 0.2 $ 0.2 $ 0.3 $ 0.4 Interest cost on accumulated postretirement benefit obligation 2.5 1.8 5.0 3.5 Expected return on plan assets ( 0.2 ) ( 0.2 ) ( 0.3 ) ( 0.4 ) Amortization of prior service credit ( 13.4 ) ( 13.5 ) ( 26.8 ) ( 26.9 ) Net periodic postretirement benefit credit $ ( 10.9 ) $ ( 11.7 ) $ ( 21.8 ) $ ( 23.4 ) The Company has established a Voluntary Employees’ Beneficiary Association (VEBA) trust to pre-fund a portion of benefits for non-represented retirees. The Company does not expect to make any discretionary contributions to the VEBA trust in 2023 and plans to utilize a portion of VEBA assets to make certain benefit payments. (10) Earnings per Share (EPS) Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding. As such, the Company includes the 2028 Convertible Notes and share-based compensation awards in its potentially dilutive securities. Generally, dilutive securities are not included in the computation of loss per share when a company reports a net loss from continuing operations as the impact would be anti-dilutive. For all but performance units, the potentially dilutive impact of the Company’s share-based compensation awards is determined using the treasury stock method. Under the treasury stock method, awards are treated as if they had been exercised with any proceeds used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and purchased is included in the diluted share computation. For performance units, their contingent features result in an assessment for any potentially dilutive common stock by using the end of the reporting period as if it were the end of the contingency period for all units granted. A conversion of the 2028 Convertible Notes may result in payment in the Company’s common stock. For diluted EPS purposes, the potentially dilutive common stock is assumed to have been converted at the beginning of the period (or at the time of issuance, if later). In periods where the potentially dilutive common stock is included in the computation of diluted EPS, the numerator will be adjusted to add back tax adjusted interest expense, which includes the amortization of debt issuance costs, related to the convertible debt. 18 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The computation of diluted EPS excluded aggregate share-based compensation awards of less than 0.1 million for the three and six months ended June 30, 2023 and 2022 because to do so would have been anti-dilutive for those periods. Because the potential dilutive impact of such share-based compensation awards is calculated under the treasury stock method, anti-dilution generally occurs when the exercise prices or unrecognized compensation cost per share of such awards are higher than the Company’s average stock price during the applicable period. Anti-dilution also occurs when a company reports a net loss from continuing operations, and the dilutive impact of all share-based compensation awards are excluded accordingly. The following illustrates the earnings allocation method utilized in the calculation of basic and diluted EPS. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (In millions, except per share data) Basic EPS numerator: Income from continuing operations, net of income taxes $ 204.1 $ 411.3 $ 488.2 $ 291.5 Less: Net income attributable to noncontrolling interests 23.6 1.1 37.9 — Income from continuing operations attributable to common stockholders 180.5 410.2 450.3 291.5 Loss from discontinued operations, net of income taxes ( 1.3 ) ( 0.7 ) ( 2.6 ) ( 1.5 ) Net income attributable to common stockholders $ 179.2 $ 409.5 $ 447.7 $ 290.0 Diluted EPS numerator: Income from continuing operations, net of income taxes $ 204.1 $ 411.3 $ 488.2 $ 291.5 Add: Tax adjusted interest expense related to 2028 Convertible Notes 3.5 2.5 6.1 3.5 Less: Net income attributable to noncontrolling interests 23.6 1.1 37.9 — Income from continuing operations attributable to common stockholders 184.0 412.7 456.4 295.0 Loss from discontinued operations, net of income taxes ( 1.3 ) ( 0.7 ) ( 2.6 ) ( 1.5 ) Net income attributable to common stockholders $ 182.7 $ 412.0 $ 453.8 $ 293.5 EPS denominator: Weighted average shares outstanding — basic 142.3 144.0 143.4 140.1 Dilutive impact of share-based compensation awards 0.6 1.8 0.7 1.5 Dilutive impact of 2028 Convertible Notes 16.1 16.1 16.1 10.9 Weighted average shares outstanding — diluted 159.0 161.9 160.2 152.5 Basic EPS attributable to common stockholders: Income from continuing operations $ 1.27 $ 2.85 $ 3.14 $ 2.08 Loss from discontinued operations ( 0.01 ) ( 0.01 ) ( 0.02 ) ( 0.01 ) Net income attributable to common stockholders $ 1.26 $ 2.84 $ 3.12 $ 2.07 Diluted EPS attributable to common stockholders: Income from continuing operations $ 1.16 $ 2.55 $ 2.85 $ 1.93 Loss from discontinued operations ( 0.01 ) ( 0.01 ) ( 0.02 ) — Net income attributable to common stockholders $ 1.15 $ 2.54 $ 2.83 $ 1.93 19 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (11) Financial Instruments and Other 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 the accompanying condensed consolidated balance sheets. The following table summarizes the Company’s financial instruments that carry off-balance-sheet risk. June 30, 2023 December 31, 2022 Reclamation Support Other Support (1) Total Reclamation Support Other Support (1) Total (Dollars in millions) Surety bonds $ 1,119.0 $ 113.1 $ 1,232.1 $ 1,250.1 $ 126.7 $ 1,376.8 Letters of credit (2) 23.8 94.0 117.8 437.8 131.8 569.6 1,142.8 207.1 1,349.9 1,687.9 258.5 1,946.4 Less: Letters of credit in support of surety bonds (3) ( 23.8 ) ( 5.9 ) ( 29.7 ) ( 431.7 ) ( 37.2 ) ( 468.9 ) Obligations supported, net $ 1,119.0 $ 201.2 $ 1,320.2 $ 1,256.2 $ 221.3 $ 1,477.5 (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) 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. 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 represented a negotiated increase from the uncapped cumulative collateral amount prior to the amendment and will vary prospectively as bonding levels increase or decrease. The amendment also removed restrictions on the payment of dividends and share repurchases, and extended 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, which was $ 533.6 million at June 30, 2023. 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. The Company is in compliance with such requirements, which commenced 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). All letters of credit that were outstanding under the LC Facility were cancelled upon its termination and, in certain cases, replaced by cash-collateralized letters of credit or letters of credit issued under the Company’s accounts receivable securitization program. 20 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) LC Facility 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. The Company recorded early debt extinguishment losses of $ 8.8 million during the six months ended June 30, 2023 as a result of the February 2023 amendment and subsequent termination. Prior to its termination, undrawn letters of credit under the LC Facility bore interest at 6.00 % per annum and unused commitments were subject to a 0.50 % per annum commitment fee. Accounts Receivable Securitization In 2017, the Company entered into the Sixth Amended and Restated Receivables Purchase Agreement, as amended from time to time (the Receivables Purchase Agreement.) The receivables securitization program authorized under the agreement (Securitization Program) is subject to customary events of default. The Receivables Purchase Agreement 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). Such funding is accounted for as a secured borrowing, limited to the availability of eligible receivables, and may be secured by a combination of collateral and the trade receivables underlying the program. Funding capacity under the Securitization Program may also be utilized for letters of credit in support of other obligations, which has been the Company’s primary utilization. Borrowings under the Securitization Program bear interest at SOFR plus 2.1 % per annum and remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables. At June 30, 2023, the Com pany had no outstanding borrowings and $ 117.8 million o f letters of credit outstanding under the Securitization Program, primarily in support of reclamation obligations. Availability under the Securitizatio n Program, which is adjusted for certain ineligible receivables, was $ 34.8 million at June 30, 2023. The Company was not required to post cash collateral under the Securitization Program at June 30, 2023. The Company incurred interest and fees associated with the Securitization Program of $ 0.8 million and $ 0.9 million during the three months ended June 30, 2023 and 2022, respectively, and $ 1.9 million and $ 1.8 million during the six months ended June 30, 2023 and 2022, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations. Collateralized Letter of Credit Agreement In February 2022, the Company entered into 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 June 30, 2023, letters of credit of $ 168.2 million were outstanding under the agreement, which were collateralized by cash of $ 173.2 million. 21 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restricted Cash and Collateral The following table summarizes the Company’s “Restricted cash and collateral” in the accompanying condensed consolidated balance sheets. Restricted cash balances are held in controlled accounts with minimum balance requirements; withdrawals are subject to the approval of account beneficiaries, such as the Company’s surety providers, who have perfected security interests in the funds. The Company’s other collateral generally includes deposits held by regulatory authorities or financial institutions over which the Company has no control or ability to access. June 30, 2023 December 31, 2022 (Dollars in millions) Restricted cash (1) Surety trust accounts (2) $ 558.2 $ — Collateralized letters of credit funding (2) 173.2 110.3 731.4 110.3 Other collateral (1) Deposits with regulatory authorities for reclamation and other obligations 194.0 33.6 LC Facility (3) — 28.5 Deposit held on behalf of surety — 15.0 194.0 77.1 Restricted cash and collateral $ 925.4 $ 187.4 (1) Restricted cash balances are combined with unrestricted cash and cash equivalents in the accompanying unaudited condensed consolidated statements of cash flows; changes in restricted cash balances are thus not reflected in the operating, investing or financing activities therein. Changes in other collateral balances are reflected as operating activities therein. (2) Surety trust accounts and the funding for collateralized letters of credit are comprised of highly liquid investments with original maturities of three months or less; interest and other earnings on such funds accrue to the Company. (3) Balance related to the Company’s mandatory repurchase of $ 30.0 million priority lien obligations under the LC Facility during 2022 at approximately 95 %. The Company received approximately $ 30.0 million upon termination of the LC Facility on April 14, 2023 . (12) Commitments and Contingencies Commitments Unconditional Purchase Obligations As of June 30, 2023, purchase commitments for capital expenditures were $ 100.8 million, all of which is obligated within the next two years, with $ 94.1 million obligated within the next 12 months. There were no other material changes to the Company’s commitments from the information provided in Note 21. “Commitments and Contingencies” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Contingencies From time to time, the Company or its subsidiaries are involved in legal proceedings arising in the ordinary course of business or related to indemnities or historical operations. The Company believes it has recorded adequate reserves for these liabilities. The Company discusses its significant legal proceedings below, including ongoing proceedings and those that impacted the Company’s consolidated results of operations for the periods presented. 22 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Litigation and Matters Relating to Continuing Operations Metropolitan Mine Stormwater Discharge. Over the past few years, there has been significantly high rainfall in New South Wales, including unprecedented rain totals at the Metropolitan Mine site. While stormwater collected at the mine site is managed through two sedimentation dams, at times the heavy rainfall has presented challenges with managing the significant volumes of stormwater, as the surface water management infrastructure has not had sufficient capacity. As a result, on multiple occasions throughout 2021 and 2022 stormwater has been discharged from the mine site. Metropolitan Collieries Pty Ltd (MCPL), a wholly-owned subsidiary of PEC, removed accumulated material from the sedimentation dams to restore full site stormwater capacity by December 31, 2022 and has identified and is implementing additional controls for the management of sediment moving forward. Despite the measures undertaken by MCPL to manage and improve the situation, the Environment Protection Authority is currently undertaking an investigation in relation to the discharges of sediment laden water from the mine site and whether there are potential offenses against the environmental protection legislation arising from the stormwater discharges from the site. The Environmental Protection Authority has also completed a review of MCPL’s environmental protection license and has implemented some additional compliance conditions. Puerto Rico Climate Change Lawsuit . On November 22, 2022, the Municipalities of Puerto Rico filed a class action complaint for damages against several major energy fuel producers, including Peabody Energy. This lawsuit represents the latest in a series of lawsuits that have been brought in both state and federal court around the United States, generally seeking to impose liability on the energy fuel producers for the effects allegedly caused by climate change. Many of these lawsuits have been brought on behalf of governmental entities (counties, cities, and towns) by plaintiff law firms on a contingent fee arrangement. The causes of action in the Puerto Rico lawsuit include public and private nuisance, liability for failure to warn, consumer fraud, antitrust and claims under the Racketeer Influenced and Corrupt Organizations Act. On April 21, 2023, the plaintiffs filed a Notice of Voluntary Dismissal dismissing all claims against the Company without prejudice. Oregon Climate Change Lawsuit. On July 20, 2023, Peabody Energy was served with a summons issued on behalf of Multnomah County, Oregon. The complaint seeks damages from the Company and other major energy producers for allegedly causing an “extreme heat event” in Multnomah County in late June and early July 2021. The causes of action, pursuant to Oregon state law, include a failure to warn, false or misleading advertisement and public nuisance. The Company will defend the claim and will continue to assert all applicable defenses available in regards to these claims. Other At times, the Company becomes a party to other disputes, including those related to contract miner performance, claims, lawsuits, arbitration proceedings, regulatory investigations and administrative procedures in the ordinary course of business in the U.S., Australia and other countries where the Company does business. Based on current information, the Company believes that such other pending or threatened proceedings are likely to be resolved without a material adverse effect on its consolidated financial condition, results of operations or cash flows. The Company reassesses the probability and estimability of contingent losses as new information becomes available. Claims, Litigation and Settlements Relating to Indemnities or Historical Operations Patriot-Related Matters. Included in the Company’s discontinued operations are the previously divested legacy operations of Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot). In 2012, Patriot filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Code (the Bankruptcy Code). In 2013, the Company entered into a definitive settlement agreement (2013 Agreement) with Patriot and the United Mine Workers of America, on behalf of itself, its represented Patriot employees and its represented Patriot retirees, to resolve all then-disputed issues related to Patriot’s bankruptcy. In May 2015, Patriot again filed voluntary petitions for relief under the Bankruptcy Code and subsequently initiated a process to sell substantially all of its assets to qualified bidders. On October 9, 2015, Patriot’s bankruptcy court entered an order confirming Patriot’s plan of reorganization, which provided, among other things, for the sale of substantially all of Patriot’s assets to two different buyers. Patriot had federal and state black lung occupational disease liabilities related to workers employed in periods prior to Patriot’s spin-off from the Company in 2007. Upon spin-off, Patriot indemnified the Company against any claim relating to these liabilities, which amounted to approximately $ 150 million at that time. The indemnification included any claim made by the U.S. Department of Labor (DOL) against the Company with respect to these obligations as a potentially liable operator under the Federal Coal Mine Health and Safety Act of 1969. The 2013 Agreement included Patriot’s affirmance of indemnities provided in the spin-off agreements, including the indemnity relating to such black lung liabilities; however, Patriot rejected this indemnity in its May 2015 bankruptcy. 23 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) By statute, the Company had secondary liability for the black lung liabilities related to Patriot’s workers employed by former subsidiaries of the Company. The Company’s accounting for the black lung liabilities related to Patriot is based on an interpretation of applicable statutes. Management believes that inconsistencies exist among the applicable statutes, regulations promulgated under those statutes and the DOL’s interpretative guidance. The Company has sought clarification from the DOL regarding these inconsistencies and has challenged the DOL’s position in individual black lung claims. The amount of these liabilities could be reduced in the future. Whether the Company will ultimately be required to fund certain of those obligations in the future as a result of Patriot’s May 2015 bankruptcy remains uncertain. The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $ 80.0 million and $ 82.3 million at June 30, 2023 and December 31, 2022, respectively. The liability, which is classified as discontinued operations, is included in the Company’s condensed consolidated balance sheets within “Accounts payable and accrued expenses” and “Other noncurrent liabilities.” While the Company has recorded a liability, it intends to review each claim on a case-by-case basis and contest liability estimates as appropriate. The amount of the Company’s recorded liability reflects only Patriot workers employed by former subsidiaries of the Company that are presently retired, disabled or otherwise not actively employed. The Company cannot reliably estimate the potential liabilities for Patriot’s workers employed by former subsidiaries of the Company that are presently active in the workforce because of the potential for such workers to continue to work for another coal operator that is a going concern. (13) Segment Information The Company reports its results of operations primarily through the following reportable segments: Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal and Corporate and Other. The Company’s chief operating decision maker, defined as its Chief Executive Officer, uses Adjusted EBITDA as the primary metric to measure the segments’ operating performance and allocate resources. Adjusted EBITDA is a non-GAAP financial measure defined as income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses and depreciation, depletion and amortization. Adjusted EBITDA is also adjusted for the discrete items that management excluded in analyzing the segments’ operating performance, as displayed in the reconciliation below. Management believes this non-GAAP performance measure is also used by investors to measure the Company’s operating performance. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies. Reportable segment results were as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Revenue: Seaborne Thermal $ 399.5 $ 354.9 $ 746.0 $ 606.1 Seaborne Metallurgical 372.5 533.8 660.9 855.1 Powder River Basin 259.7 229.7 565.0 480.9 Other U.S. Thermal 199.9 224.9 449.3 428.0 Corporate and Other 37.2 ( 21.4 ) 211.6 ( 356.8 ) Total $ 1,268.8 $ 1,321.9 $ 2,632.8 $ 2,013.3 Adjusted EBITDA: Seaborne Thermal $ 197.5 $ 176.8 $ 361.5 $ 267.3 Seaborne Metallurgical 102.5 299.7 193.3 480.7 Powder River Basin 26.2 ( 2.0 ) 62.0 5.6 Other U.S. Thermal 51.9 61.9 116.1 111.9 Corporate and Other ( 19.9 ) 41.4 15.9 39.8 Total $ 358.2 $ 577.8 $ 748.8 $ 905.3 24 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation of consolidated income from continuing operations, net of income taxes to Adjusted EBITDA follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in millions) Income from continuing operations, net of income taxes $ 204.1 $ 411.3 $ 488.2 $ 291.5 Depreciation, depletion and amortization 80.6 73.8 156.9 146.7 Asset retirement obligation expenses 15.5 12.7 30.9 27.7 Restructuring charges 2.0 0.2 2.1 1.8 Asset impairment — — 2.0 — Provision for NARM and Shoal Creek loss 33.7 — 33.7 — Changes in amortization of basis difference related to equity affiliates ( 0.4 ) ( 0.6 ) ( 0.7 ) ( 1.2 ) Interest expense 13.3 37.6 31.7 77.0 Net loss on early debt extinguishment 2.0 2.3 8.8 25.8 Interest income ( 23.1 ) ( 0.9 ) ( 36.2 ) ( 1.4 ) Unrealized (gains) losses on derivative contracts related to forecasted sales ( 40.3 ) 24.5 ( 159.0 ) 325.5 Unrealized (gains) losses on foreign currency option contracts ( 2.8 ) 6.3 ( 0.6 ) 3.0 Take-or-pay contract-based intangible recognition ( 0.6 ) ( 0.7 ) ( 1.2 ) ( 1.4 ) Income tax provision 74.2 11.3 192.2 10.3 Adjusted EBITDA $ 358.2 $ 577.8 $ 748.8 $ 905.3 (14) Other Events Share Repurchases During the three months ended June 30, 2023, the Company repurchased approximately 8.9 million shares of its common stock for $ 184.2 million, including commission fees. Of this amount, $ 11.2 million related to repurchases which settled subsequent to June 30, 2023. The Company recognized excise taxes of $ 1.6 million related to the repurchases, which were unpaid at June 30, 2023. The Company includes commission fees and excise taxes, as incurred, with the cost of treasury stock. Subsequent to June 30, 2023, the Company repurchased an additional 3.1 million shares for $ 67.0 million. North Antelope Rochelle Mine Tornado On June 23, 2023, the Company’s North Antelope Rochelle Mine sustained damage from a tornado which led to a temporary suspension of operations. The mine resumed operations on June 25, 2023. During the three and six months ended June 30, 2023, the Company recorded a provision for loss of $ 5.0 million related to the tornado damage. The provision includes $ 4.0 million for materials and supplies inventories and $ 1.0 million for buildings and equipment. This provision represents the best estimate of potential loss based on the assessments made to date. The Company continues to assess the loss and anticipates that incremental repair costs will be recorded in future periods. Shoal Creek Incident 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. On June 20, 2023, the Company announced that the Shoal Creek Mine, in coordination with the Mine Safety and Health Administration, had safely completed localized sealing of the affected area of the mine. Development coal production has been resumed in a new area of the mine. During the three and six months ended June 30, 2023, the Company recorded a provision for loss of $ 28.7 million related to the fire. The provision includes $ 17.8 million related to longwall development and other costs and $ 10.9 million for equipment deemed inoperable within the affected area of the mine. 25 Table of Contents PEABODY ENERGY CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Port and Rail Capacity Assignment During the six months ended June 30, 2023, the Company entered into an agreement to assign the right to its excess port and rail capacity related to its North Goonyella Mine to an unrelated party in exchange for $ 30.0 million Australian dollars. Half of such amount was received by the Company upon entry into the agreement, and half is payable in June 2024, subject to certain conditions. In connection with the transaction, the Company recorded revenue of $ 19.2 million during the six months ended June 30, 2023 and had a discounted receivable of $ 9.3 million included in “Accounts receivable, net” as of June 30, 2023. 26 Table of Contents