What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-03 · 200 added, 145 removed, 510 unchanged (40% of the section changed)

34 unchanged sentences

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

At June 30, 2023, the Company owned interests in 17 active coal mining operations located in the United States (U.S.) and Australia.

At September 30, 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.

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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 June 30, 2023 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended June 30, 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 seaborne pricing included in the table below is not necessarily indicative of the pricing the Company realized during the three months ended September 30, 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 June 30, 2023 since the Company generally sells coal under long-term contracts where pricing is determined based on various factors.

In the U.S., the pricing included in the table below is also not necessarily indicative of the pricing the Company realized during the three months ended September 30, 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 June 30, 2023 July 28, 2023

High Low Average September 30, 2023 October 27, 2023

Premium HCC (1)

14 unchanged sentences

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 and rising inflation are unknown, the global coal industry data for the six months ended June 30, 2023 presented herein may not be indicative of their ultimate impacts.

Within the seaborne metallurgical coal market, the six months ended June 30, 2023 were characterized by ongoing volatility as global macroeconomic turbulence combined with seasonal demand and supply fluctuations.

The steel sector showed positive signs in early 2023 with several steelmakers announcing blast furnace capacity restarts;

however ongoing economic uncertainty and multi-year high steel exports from China have dampened the revival and impacted metallurgical coal demand in key markets.

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.

Combined with abundant domestic and Mongolian supply, this is further enabling China to readily compete in the international steel market.

Further economic stimulus in China, India and elsewhere, combined with seasonal demand growth is fueling positive sentiment in the market outlook to the end of the year.

Within the seaborne thermal coal market, global thermal coal prices have remained volatile during the quarter ended June 30, 2023 with prices declining from the first quarter.

China has ended its unofficial ban of Australian coal imports, providing additional demand for Australian thermal coal through the six months ended June 30, 2023.

In China, domestic coal production and renewable generation have been strong through the six months ended June 30, 2023;

As future developments related to the Russian-Ukrainian conflict and rising inflation are unknown, the global coal industry data for the nine months ended September 30, 2023 presented herein may not be indicative of their ultimate impacts.

Within the seaborne metallurgical coal market, the volatility which characterized the first half of 2023 has continued during the three months ended September 30, 2023 as global macroeconomic turbulence combined with demand and supply fluctuations.

The steel sector showed positive signs in early 2023, however ongoing economic uncertainty, inflating feed-stock prices and multi-year high steel exports from China have reportedly dampened steel margins and slowed steel production.

India is an exception where steel output has grown year-over-year reflecting strong economic growth.

Overall, metallurgical coal prices improved in the latter part of the three months ended September 30, 2023, supported by exports from some key metallurgical coal producing regions tracking historical lows.

However, the impact of the diverging steel market outlook has further bifurcated metallurgical coal market outcomes.

Supply and demand fundamentals for prime hard coking coals are supporting stronger price outcomes for this grade.

In other metallurgical coal market segments, such as pulverized coal injection coal, reduced steel making productivity targets and a greater breadth of supply options have contributed to more conservative price increases.

The seaborne metallurgical coal market is expected to remain volatile for the balance of the year, influenced by the rate of recovery of export from Australia and economic performance in China, India and elsewhere.

Within the seaborne thermal coal market, global thermal coal prices remained volatile during the three months ended September 30, 2023.

China has ended its unofficial ban of Australian coal imports, providing additional demand for Australian thermal coal through the nine months ended September 30, 2023.

In China, domestic coal production and renewable generation have been strong through the nine months ended September 30, 2023;

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 amid ample supply and seasonal demand requirements in the Northern Hemisphere, as well as lower global natural gas prices.

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

Through the six months ended June 30, 2023, electricity generation from thermal coal has declined year-over-year due to low natural gas prices and nearly level year-over-year renewable generation despite lower overall electricity demand.

Coal’s share of electricity generation has declined to approximately 15% for the six months ended June 30, 2023, while wind and solar’s combined generation share has increased to 17% and the share of natural gas generation has increased to 40%.

Coal inventories have increased during the six months ended June 30, 2023, with an increase of approximately 50%.

During the six months ended June 30, 2023, utility consumption of PRB coal declined approximately 25% compared to the prior year period.

Overall, global thermal coal markets remain turbulent amid ample supply and seasonal demand requirements in the Northern Hemisphere, as well as volatile global natural gas markets.

In the United States, overall electricity demand decreased approximately 2% year-over-year, negatively impacted by weather in the first half of the year.

Through the nine months ended September 30 2023, electricity generation from thermal coal has declined year-over-year due to low natural gas prices and stronger renewable generation despite lower overall electricity demand.

Coal’s share of electricity generation has declined to approximately 16% for the nine months ended September 30, 2023, while wind and solar’s combined generation share has increased to 16% and the share of natural gas generation has increased to 43%.

While coal inventories have slightly recovered over the summer, they remain approximately 35% higher than the levels at the end of 2022.

During the nine months ended September 30, 2023, utility consumption of PRB coal declined approximately 20% compared to the prior year period.

Department of Labor Settlement

On August 8, 2023, the Company entered into a settlement agreement with the U.S.

Department of Labor to resolve a liability dispute regarding the federal black lung claims of the Company’s previously divested legacy operations of Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot).

In accordance with the settlement agreement, the Company paid $72.0 million to settle the Patriot federal black lung claims, with the exception of approximately $4.2 million of certain claims for attorney’s fees and additional compensation due to claimants not paid during appeal.

As a result of the settlement, the Company recognized a $3.9 million gain within “Income (loss) from discontinued operations, net of income taxes” during the three and nine months ended September 30, 2023.

Surety Agreement Amendment and Shareholder Return Program

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The Board also approved a new share repurchase program authorizing repurchases up to $1.0 billion of the Company’s common stock.

Refer to the “Liquidity and Capital Resources” section contained within this Item 2 and Part II, Item 2.

“Unregistered Sales of Equity Securities and Use of Proceeds” for a further discussion of the surety agreement amendment.

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.

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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.

During the nine months ended September 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.

In October, the Company filed an insurance claim against applicable insurance policies with combined business interruption and property loss limits of $125 million above a $50 million deductible.

On June 23, 2023, the Company’s North Antelope Rochelle Mine (NARM) 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.

During the three and nine months ended September 30, 2023, the Company recorded a provision for loss of $3.3 million and $8.3 million, respectively, related to the tornado damage.

The combined provision includes $4.0 million for materials and supplies inventories, $1.0 million for buildings and equipment and $3.3 million for incremental repair costs.

The Company anticipates that incremental repair costs will continue to be recorded in future periods.

The Company entered into a definitive agreement dated October 26, 2023, with Stanmore SMC Pty Ltd (Stanmore) to acquire the southern part of Stanmore’s Wards Well tenements (Wards Well area) which are adjacent to the Company’s North Goonyella Mine in Queensland, Australia.

The acquisition terms include cash consideration of $136 million and a contingent royalty of up to $200 million.

The royalty will only be payable once the Company has recovered its investment and development costs of the Wards Well area and if the average sales price achieved exceeds certain thresholds.

No royalty is payable if the Company does not commence mining in the Wards Well area.

Completion of the transaction is subject to the satisfaction of certain conditions, including regulatory approvals.

Results of Operations

Three and Six Months Ended June 30, 2023 Compared to the Three and Six Months Ended June 30, 2022

The decrease in income from continuing operations, net of income taxes for the three months ended June 30, 2023 compared to the same period in the prior year ($207.2 million), was driven by a higher tax provision ($62.9 million);

lower revenue ($53.1 million) primarily due to a 42% decrease in metallurgical pricing;

decreased results from equity affiliates ($46.4 million);

higher operating costs and expenses ($36.4 million);

and a provision of $33.7 million related to the losses at NARM and Shoal Creek.

This unfavorable variance was partially offset by lower net interest expense ($46.8 million).

The increase in income from continuing operations, net of income taxes for the six months ended June 30, 2023 compared to the same period in the prior year ($196.7 million), was primarily driven by higher revenue ($619.5 million) due to net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales and lower net interest expense ($97.1 million).

This favorable variance was partially offset by higher operating costs and expenses ($184.0 million), which reflect increased sales price sensitive costs and inflationary pressures for materials, services, repairs and labor;

a higher income tax provision ($181.9 million);

Three and Nine Months Ended September 30, 2023 Compared to the Three and Nine Months Ended September 30, 2022

The decrease in income from continuing operations, net of income taxes for the three months ended September 30, 2023 compared to the same period in the prior year ($255.6 million), was driven by lower revenue ($263.6 million) primarily due to decreases in net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales and seaborne coal pricing;

a higher tax provision ($35.8 million);

and decreased results from equity affiliates ($21.9 million).

These unfavorable variances were partially offset by lower net interest expense ($44.1 million) and operating costs and expenses ($34.7 million).

The decrease in income from continuing operations, net of income taxes for the nine months ended September 30, 2023 compared to the same period in the prior year ($58.9 million), was primarily driven by a higher income tax provision ($217.7 million);

higher operating costs and expenses ($149.3 million), which reflect increased sales price sensitive costs and inflationary pressures for materials, services, repairs and labor;

decreased results from equity affiliates ($111.2 million);

and a provision of $37.0 million related to the losses at NARM and Shoal Creek.

Adjusted EBITDA for the three and six months ended June 30, 2023 reflected year-over-year decreases of $219.6 million and $156.5 million, respectively.

These unfavorable variances were offset by higher revenue ($355.9 million) due to net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales and lower net interest expense ($141.2 million).

Adjusted EBITDA for the three and nine months ended September 30, 2023 reflected year-over-year decreases of $168.9 million and $325.4 million, respectively.

The following table presents tons sold by operating segment:

Three Months Ended June 30, Increase (Decrease)

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

Three Months Ended September 30, Increase (Decrease)

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

2023 2022 Tons % 2023 2022 Tons %

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The following table presents supplemental financial data by operating segment:

Three Months Ended June 30, Increase

(Decrease) Six Months Ended June 30, Increase

Three Months Ended September 30, (Decrease)

Increase Nine Months Ended September 30, Increase

2023 2022 $ % 2023 2022 $ %

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The following table presents revenue by reporting segment:

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

Three Months Ended September 30, (Decrease) Increase to Revenue Nine Months Ended September 30, Increase (Decrease) to Revenue

2023 2022 $ % 2023 2022 $ %

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Seaborne Thermal.

Segment revenue increased during the three and six months ended June 30, 2023 compared to the same periods in the prior year due to favorable mix variances ($35.5 million and $66.3 million, respectively) which offset unfavorable volumes and favorable realized prices ($9.1 million and $73.6 million, respectively).

Segment revenue decreased during the three months ended September 30, 2023 compared to the same period in the prior year due to unfavorable realized prices ($241.9 million), offset by favorable mix variances ($186.1 million).

Segment revenue increased during the nine months ended September 30, 2023 compared to the same period in the prior year due to favorable mix variances ($234.5 million), offset by unfavorable realized prices ($150.4 million).

Seaborne Metallurgical.

Segment revenue decreased during the three and six months ended June 30, 2023 compared to the same periods in the prior year due to unfavorable realized prices ($204.0 million and $226.8 million, respectively) and unfavorable volumes from the Shoal Creek Mine resulting from the fire in the first quarter of 2023 ($121.3 million and $124.6 million, respectively), offset by favorable volumes from the Australian operations ($164.0 million and $157.2 million, respectively).

Segment revenue decreased during the three months ended September 30, 2023 compared to the same period in the prior year due to unfavorable realized prices ($32.9 million) and unfavorable volumes ($30.8 million).

Segment revenue decreased during the nine months ended September 30, 2023 compared to the same period in the prior year due to unfavorable realized prices ($249.2 million) and unfavorable volumes from the Shoal Creek Mine resulting from the fire in the first quarter of 2023 ($106.0 million), partially offset by favorable volumes from the Australian operations ($97.3 million).

Powder River Basin.

Segment revenue increased during the three and six months ended June 30, 2023 compared to the same periods in the prior year due to favorable realized prices ($25.9 million and $65.2 million, respectively) and favorable volumes ($4.1 million and $18.9 million, respectively) resulting from improved rail performance.

Segment revenue decreased during the three months ended June 30, 2023 compared to the same period in the prior year due to unfavorable volumes ($41.4 million) resulting from decreased demand, offset by favorable realized prices ($16.4 million).

Segment revenue increased during the six months ended June 30, 2023 compared to the same period in the prior year due to favorable realized prices ($43.5 million), offset by unfavorable volumes ($22.2 million) resulting from decreased demand.

Segment revenue increased during the three and nine months ended September 30, 2023 compared to the same periods in the prior year due to favorable realized prices ($12.8 million and $79.6 million, respectively) and favorable volumes ($9.7 million and $27.0 million, respectively) resulting from improved rail performance.

Segment revenue decreased during the three and nine months ended September 30, 2023 compared to the same periods in the prior year due to unfavorable volumes ($34.4 million and $55.6 million, respectively) resulting from decreased demand, offset by favorable realized prices ($1.2 million and $43.7 million, respectively).

Corporate and Other.

Segment revenue increased during the three months ended June 30, 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 ($64.8 million), partially offset by lower results from trading activities ($6.6 million).

Segment revenue increased during the six months ended June 30, 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 ($484.5 million);

higher results from trading activities ($63.9 million) primarily due to lower net realized losses on derivative contracts related to forecasted coal sales;

Segment revenue decreased during the three months ended September 30, 2023 compared to the same period in the prior year due to decreased net unrealized mark-to-market gains on derivative contracts related to forecasted coal sales ($90.4 million) as all derivative contracts have settled in the current year and lower results from trading activities ($44.1 million).

Segment revenue increased during the nine months ended September 30, 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 ($394.1 million);

higher results from trading activities ($19.8 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 15.

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

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

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

2023 2022 $ % 2023 2022 $ %

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Seaborne Thermal.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2023 compared to the same periods in the prior year as a result of favorable mix variances ($23.8 million and $53.6 million, respectively) and higher realized prices net of sales sensitive costs ($8.6 million and $68.8 million, respectively), partially offset by unfavorable operational costs ($11.5 million and $19.8 million, respectively) resulting from higher costs for repairs, maintenance and labor.

Segment Adjusted EBITDA decreased during the three months ended September 30, 2023 compared to the same period in the prior year as a result of lower realized prices net of sales sensitive costs ($221.8 million), offset by favorable mix variances ($165.3 million).

Segment Adjusted EBITDA increased during the nine months ended September 30, 2023 compared to the same period in the prior year as a result of favorable mix variances ($200.4 million), offset by lower realized prices net of sales sensitive costs ($137.2 million) and unfavorable operational costs ($25.5 million) resulting from higher costs for repairs, maintenance and labor.

Seaborne Metallurgical.

Segment Adjusted EBITDA decreased during the three and six months ended June 30, 2023 compared to the same periods in the prior year due to lower realized prices net of sales sensitive costs ($199.8 million and $229.7 million, respectively) and unfavorable operational costs ($87.6 million and $137.4 million, respectively) resulting from the fire at the Shoal Creek Mine in the first quarter of 2023 and increased repair and maintenance spend at the Australian metallurgical operations, partially offset by favorable volumes ($92.0 million and $87.8 million, respectively).

Segment Adjusted EBITDA decreased during the three and nine months ended September 30, 2023 compared to the same periods in the prior year due to lower realized prices net of sales sensitive costs ($21.5 million and $239.0 million, respectively);

unfavorable volume and mix variances ($19.1 million and $43.3 million, respectively);

and unfavorable operational costs (nine months, $40.1 million) resulting from the fire at the Shoal Creek Mine in the first quarter of 2023 and increased repair and maintenance spend at the Australian metallurgical operations.

Powder River Basin.

Segment Adjusted EBITDA increased during the three and six months ended June 30, 2023 compared to the same periods in the prior year due to favorable commodity pricing ($13.3 million and $11.3 million, respectively);

Segment Adjusted EBITDA increased during the three and nine months ended September 30, 2023 compared to the same periods in the prior year due to favorable commodity pricing and usage ($11.3 million and $23.9 million, respectively);

decreased overburden removal costs ($3.6 million and $13.3 million, respectively);

higher realized prices net of sales sensitive costs ($2.3 million and $36.4 million, respectively);

and decreased overburden removal costs (six months, $14.4 million).

and favorable volumes ($1.9 million and $11.0 million, respectively).

The increases were partially offset by higher costs for materials, services, repairs and labor ($3.0 million and $13.2 million, respectively) due in part to timing, increased repairs for an aging equipment fleet and inflationary pressures on materials and services.

Segment Adjusted EBITDA decreased during the three months ended June 30, 2023 compared to the same period in the prior year due to higher costs for materials, services, repairs and labor ($17.0 million) due in part to timing, increased repairs for an aging equipment fleet and inflationary pressures on materials and services and unfavorable volumes ($16.1 million).

These decreases were offset by higher realized prices net of sales sensitive costs ($14.3 million) and favorable commodity pricing ($10.5 million).

Segment Adjusted EBITDA increased during the six months ended June 30, 2023 compared to the same period in the prior year due to higher realized prices net of sales sensitive costs ($37.1 million) and favorable commodity pricing ($10.6 million), offset by higher costs for materials, services, repairs and labor ($32.6 million) due in part to increased equipment repairs and headcount and inflationary pressures on materials and services and unfavorable volumes ($7.1 million).

Segment Adjusted EBITDA decreased during the three and nine months ended September 30, 2023 compared to the same periods in the prior year due to unfavorable volumes ($29.0 million and $31.4 million, respectively) and higher costs for materials, services, repairs and labor (nine months, $34.1 million) due in part to timing, increased repairs for an aging equipment fleet and inflationary pressures on materials and services.

These decreases were offset by favorable commodity pricing ($4.4 million and $15.1 million, respectively) and higher realized prices net of sales sensitive costs (nine months, $33.4 million).

Corporate and Other Adjusted EBITDA.

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

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

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

2023 2022 $ % 2023 2022 $ %

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(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 $3.3 million and $23.3 million during the three months ended June 30, 2023 and 2022, respectively, and $5.9 million and $43.5 million during the six months ended June 30, 2023 and 2022, respectively.

Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $5.2 million and $12.9 million during the three months ended September 30, 2023 and 2022, respectively, and $11.1 million and $56.4 million during the nine months ended September 30, 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.

Corporate and Other Adjusted EBITDA decreased during the three months ended June 30, 2023 compared to the same period in the prior year primarily due to unfavorable variances in Middlemount’s results driven by a 40% decrease in sales pricing and lower sales volumes.

Corporate and Other Adjusted EBITDA decreased during the six months ended June 30, 2023 compared to the same period in the prior year due to unfavorable variances in Middlemount’s results driven by a 29% decrease in sales pricing and lower sales volumes, offset by favorable trading results ($68.6 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.

Corporate and Other Adjusted EBITDA decreased during the three months ended September 30, 2023 compared to the same period in the prior year due to unfavorable trading results ($40.1 million) and unfavorable variances in Middlemount’s results driven by a 38% decrease in sales pricing and lower sales volumes.

Corporate and Other Adjusted EBITDA decreased during the nine months ended September 30, 2023 compared to the same period in the prior year due to unfavorable variances in Middlemount’s results driven by a 33% decrease in sales pricing and lower sales volumes, offset by favorable trading results ($28.4 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 15.

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

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

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

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

2023 2022 $ % 2023 2022 $ %

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Restructuring charges (0.9) (1.0) 0.1 10 % (3.0) (2.8) (0.2) (7) %

Asset impairment — — — n.m.

(2.0) — (2.0) n.m.

Asset impairment — (1.7) 1.7 100 % (2.0) (1.7) (0.3) (18) %

Provision for NARM and Shoal Creek loss (3.3) — (3.3) n.m.

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— 90.4 (90.4) (100) % 159.0 (235.1) 394.1 168 %

Unrealized gains (losses) on foreign currency option contracts 2.8 (6.3) 9.1 144 % 0.6 (3.0) 3.6 120 %

Unrealized (losses) gains on foreign currency option contracts (0.5) (1.4) 0.9 64 % 0.1 (4.4) 4.5 102 %

Take-or-pay contract-based intangible recognition 0.7 0.8 (0.1) (13) % 1.9 2.2 (0.3) (14) %

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

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

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

2023 2022 $ % 2023 2022 $ %

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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Thermal 1.23 1.26 1.25 1.23

The decrease in the weighted-average depletion rate per ton for the Seaborne Thermal segment during the three and six months ended June 30, 2023 compared to the same periods in the prior year reflects the impact of volume and mix variances across the segment.

The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical segment during the three and six months ended June 30, 2023 compared to the same periods in the prior year reflects the impact of the fire at the Shoal Creek Mine.

The decrease in the weighted-average depletion rate per ton for the Seaborne Thermal segment during the three and nine months ended September 30, 2023 compared to the same periods in the prior year reflects the impact of volume and mix variances across the segment.

The changes in the weighted-average depletion rate per ton for the Seaborne Metallurgical segment during the three and nine months ended September 30, 2023 compared to the same periods in the prior year reflect the impact of volume and mix variances across the segment.

Provision for NARM and Shoal Creek Loss.

A provision of $33.7 million million was recorded during the three and six months ended June 30, 2023 for losses related to the events at NARM and the Shoal Creek Mine, as discussed in Note 14.

Provisions of $3.3 million and $37.0 million, respectively, were recorded during the three and nine months ended September 30, 2023 for losses and ongoing incremental repair costs related to the events at NARM and the Shoal Creek Mine, as discussed in Note 15.

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

The current period provision represents the best estimate of potential loss associated with these events based on assessments made to date.

Interest Expense.

The decrease in interest expense during the three and six months ended June 30, 2023 primarily reflects the impacts of debt retirements completed by the Company during 2022 as further described in Note 8.

The decrease in interest expense during the three and nine months ended September 30, 2023 primarily reflects the impacts of debt retirements completed by the Company during 2022 as further described in Note 9.

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

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Net Loss on Early Debt Extinguishment.

The losses recognized during the three and six months ended June 30, 2023 were primarily related to the Company’s terminated letter of credit facility as further discussed in Note 11.

The losses recognized during the nine months ended September 30, 2023 were primarily related to the Company’s terminated letter of credit facility as further discussed in Note 12.

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

3 unchanged sentences

Interest Income.

The increase in interest income during the three and six months ended June 30, 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.

The increase in interest income during the three and nine months ended September 30, 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.

3 unchanged sentences

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

Unrealized Gains (Losses) on Foreign Currency Option Contracts.

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

Unrealized (Losses) Gains on Foreign Currency Option Contracts.

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

For additional information, refer to Note 6.

1 unchanged sentence

Income Tax Provision.

The increase in the income tax provision during the three and six months ended June 30, 2023 compared to the same periods 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.

The increase in the income tax provision during the three months ended September 30, 2023 compared to the same period in the prior year was primarily due to the release of a valuation allowance related to Australian net operating losses during the fourth quarter of 2022, partially offset by lower pretax income.

The increase in the income tax provision during the nine months ended September 30, 2023 compared to the same period in the prior year was primarily due to an increase in pretax income and the release of a valuation allowance related to Australian net operating losses during the fourth quarter of 2022.

Refer to Note 8.

2 unchanged sentences

The following table presents net income attributable to common stockholders:

Three Months Ended June 30, (Decrease) Increase

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

Three Months Ended September 30, (Decrease) Increase

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

2023 2022 $ % 2023 2022 $ %

1 unchanged sentence

Income from continuing operations, net of income taxes $ 128.8 $ 384.4 $ (255.6) (66) % $ 617.0 $ 675.9 $ (58.9) (9) %

Loss from discontinued operations, net of income taxes (1.3) (0.7) (0.6) (86) % (2.6) (1.5) (1.1) (73) %

Income (loss) from discontinued operations, net of income taxes 2.5 (0.8) 3.3 413 % (0.1) (2.3) 2.2 96 %

Net income 131.3 383.6 (252.3) (66) % 616.9 673.6 (56.7) (8) %

Net income attributable to noncontrolling interests 23.6 1.1 22.5 2,045 % 37.9 — 37.9 n.m.

Net income attributable to noncontrolling interests 11.4 8.5 2.9 34 % 49.3 8.5 40.8 480 %

Net income attributable to common stockholders $ 119.9 $ 375.1 $ (255.2) (68) % $ 567.6 $ 665.1 $ (97.5) (15) %

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

The increase in the results from discontinued operations, net of income taxes during the three and nine months ended September 30, 2023 compared to the same periods in the prior year was primarily due to the gain recognized on the settlement of the Patriot federal black lung liabilities, as discussed in Note 13.

“Commitments and Contingencies” in the accompanying unaudited condensed consolidated financial statements.

Net Income Attributable to Noncontrolling Interests.

The increase in the results attributable to noncontrolling interests during the three and six months ended June 30, 2023 compared to the same periods 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.

The increase in the results attributable to noncontrolling interests during the three and nine months ended September 30, 2023 compared to the same periods 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 June 30, Decrease

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

Three Months Ended September 30, (Decrease) Increase

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

2023 2022 $ % 2023 2022 $ %

1 unchanged sentence

Income from continuing operations $ 0.80 $ 2.34 $ (1.54) (66) % $ 3.68 $ 4.33 $ (0.65) (15) %

Loss from discontinued operations (0.01) (0.01) — — % (0.02) — (0.02) n.m.

Income (loss) from discontinued operations 0.02 (0.01) 0.03 300 % — (0.02) 0.02 100 %

Net income attributable to common stockholders $ 0.82 $ 2.33 $ (1.51) (65) % $ 3.68 $ 4.31 $ (0.63) (15) %

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 159.0 million and 161.9 million for the three months ended June 30, 2023 and 2022, respectively, and 160.2 million and 152.5 million for the six months ended June 30, 2023 and 2022, respectively.

Diluted EPS reflects weighted average diluted common shares outstanding of 149.9 million and 161.9 million for the three months ended September 30, 2023 and 2022, respectively, and 156.7 million and 155.6 million for the nine months ended September 30, 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Asset impairment

— 1.7 2.0 1.7

Provision for NARM and Shoal Creek loss 3.3 — 37.0 —

6 unchanged sentences

Unrealized (gains) losses on derivative contracts related to forecasted sales — (90.4) (159.0) 235.1

Unrealized (gains) losses on foreign currency option contracts (2.8) 6.3 (0.6) 3.0

Unrealized losses (gains) on foreign currency option contracts 0.5 1.4 (0.1) 4.4

Take-or-pay contract-based intangible recognition

4 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

2 unchanged sentences

$ 803.7 $ 838.4 $ 2,512.3 $ 2,363.0

Unrealized gains (losses) on foreign currency option contracts 2.8 (6.3) 0.6 (3.0)

Unrealized (losses) gains on foreign currency option contracts (0.5) (1.4) 0.1 (4.4)

Take-or-pay contract-based intangible recognition

3 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

9 unchanged sentences

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

7 unchanged sentences

Adjusted EBITDA Margin per Ton $ 27.70 $ 51.64 $ 2.38 $ 11.61

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

7 unchanged sentences

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

7 unchanged sentences

Adjusted EBITDA Margin per Ton $ 40.71 $ 56.76 $ 1.82 $ 13.20

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

10 unchanged sentences

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(Dollars in millions)

12 unchanged sentences

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.

On January 6, 2023, the EPA proposed to lower the allowable level of average annual primary particulate matter (PM).

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.

On January 6, 2023, the EPA proposed to lower the level of the primary standard for particulate matter (PM).

If enacted as proposed, this rule could require fossil fuel electric generating units (EGUs) and non-EGUs to install additional emission control technologies, thereby increasing the cost of utilizing fossil fuels for electric generation and industrial uses.

On August 18, 2023, the EPA announced that it was no longer engaging in a reconsideration of the 2020 ozone NAAQS that it had initiated on October 28, 2021, but rather will “wrap the EPA’s reconsideration process” into a new five-year periodic review of the ozone NAAQS.

The level of the ozone NAAQS can affect requirements to install new or improved emission control technologies at fossil fuel-fired EGUs and non-EGU industrial sources.

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

1 unchanged sentence

states and the District of Columbia to reduce power plant emissions that cross state lines and significantly contribute to ozone and/or fine PM pollution in other states.

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

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.

On March 15, 2023, the EPA issued a final rule to address regional ozone transport by imposing new federal ozone season emission budgets for nitrogen oxide (NO x ) in 23 states, including California, Nevada, Oklahoma and Texas, as well as some Indian reservations.

The rule includes state emission budgets for NO x affecting 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.

19 unchanged sentences

Existing steam generating units must start complying with the EPA’s proposed standards by January 1, 2030 and existing stationary combustion turbines by either January 1, 2032 or January 1, 2035 depending on what option for compliance is chosen.

Finally, as part of the proposed rule, any newly constructed steam generating unit or newly constructed stationary combustion turbine would be subject to GHG standards as of May 23, 2023, the date of the proposed rule.

As proposed, any new fossil-fuel steam generating unit will need to comply with partial CCS upon startup as well as a requirement for 90% CO 2 reduction through CCS by 2040.

Finally, as part of the proposed rule, any newly constructed steam electric generating unit or newly constructed stationary combustion turbine would be subject to GHG standards as of May 23, 2023, the date of the proposed rule.

In addition, as proposed, any new fossil-fuel steam generating unit will need to comply with partial CCS upon startup as well as a requirement for 90% CO 2 reduction through CCS by 2040.

Any new or reconstructed stationary combustion turbine will be subject to different standards based on whether it is considered low load, intermediate load or a base load unit.

4 unchanged sentences

On March 6, 2023, the EPA issued a final rule which reaffirmed its determination to regulate coal- and oil-fired EGUs under CAA section 112, including the regulation of HAPs from EGUs after considering cost.

On April 3, 2023, the EPA proposed to amend the 2012 MATS rule and require an additional two-thirds reduction in the filterable PM emission of non-mercury HAP metals from existing coal-fired power plants as well as the usage of continuous emissions monitoring systems, among other proposals.

On April 24, 2023, the EPA proposed to amend the 2012 MATS rule and require an additional two-thirds reduction in the filterable PM emission of non-mercury HAP metals from existing coal-fired power plants and to reduce the mercury standard for lignite plants by 70%.

The EPA is also proposing to require the use of continuous emissions monitoring systems, and to revise other requirements such as those applicable to the startup of generating units.

Under the proposed rule, the EPA estimated that approximately 500 megawatts of coal-fired capacity would retire by 2028.

12 unchanged sentences

21-454, which significantly narrowed the scope of federal regulatory authority over wetlands and non-navigable waters.

The agencies have indicated that they are implementing the CWA consistent with the Sackett decision, and they may issue additional guidance or initiate another rulemaking proceeding to revise the 2023 rule.

The agencies finalized a rule on September 8, 2023, to conform key aspects of the regulatory definition to the Sackett decision.

Pending litigation over the January 2023 definition is set to resume, as the September 2023 final rule did not address many of the claims at issue in those cases.

CWA Water Quality Certification Rule .

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.

On September 27, 2023, the EPA finalized a superseding rule that would 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.

That rule takes effect on November 27, 2023.

Regulatory Matters - Australia

5 unchanged sentences

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.

Industrial Relations .

A national industrial relations system, the Fair Work Act and National Employment Standards, administered by the federal government applies to all employers and employees.

The matters regulated under the national system include general employment conditions, unfair dismissal, enterprise bargaining, bullying claims, industrial action and resolution of workplace disputes.

Most of the hourly workers employed in the Company’s mines are also covered by the Black Coal Mining Industry Award and company specific enterprise agreements approved under the national system.

On October 27, 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 was tabled in the Australian Federal Parliament.

The bill proposed a number of changes relating to gender equity, flexible working arrangements, job security and bargaining amongst other matters.

The Australian Federal Parliament passed the bill amending the Fair Work Act.

The legislation introduced several changes to workplace laws in Australia including changes to enterprise agreement making and termination, to when industrial action can be taken and to access to multi-employer bargaining.

In addition, employers will no longer be able to employ individuals on a fixed-term contract for more than two years, and access to flexible working arrangements for employees has been expanded.

A number of measures aimed at addressing the gender pay gap have also been introduced.

In early September 2023, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 was presented to the Australian Federal Parliament.

The bill contemplates amendments to the Fair Work Act 2009 in relation to casual employment;

regulated labor hire arrangement orders;

workplace delegates’ rights exemptions to waive entry requirements for suspected underpayment and increasing maximum penalties for underpayments;

introduction of a criminal offense for wage theft;

and increased powers for unions.

The bill is currently being considered by a Senate Committee for Education and Employment for inquiry and report by February 1, 2024.

If these amendments pass it is likely to result in increased labor and compliance costs.

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

6 unchanged sentences

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

New South Wales Royalty .

In New South Wales, the royalty applicable to coal is charged as a percentage of the value of production (total revenue less allowable deductions).

This is equal to 6.2% for deep underground mines (coal extracted at depths greater than 400 meters below ground surface), 7.2% for underground mines and 8.2% for open-cut mines.

As part of its 2023/24 state budget the newly elected New South Wales government announced that from July 1, 2024 it would be increasing each of these rates by 2.6% to 8.8% for deep underground mines, 9.8% for underground mines and 10.8% for open-cut mines.

The future impacts of this royalty rate rise on Peabody’s NSW mining operations is being assessed.

Risks Related to Global Climate Change

9 unchanged sentences

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.

As of June 30, 2023, the Company’s cash balances totaled $1,080.5 million, including approximately $676.4 million held by Australian subsidiaries, $380.9 million held by U.S.

As of September 30, 2023, the Company’s cash balances totaled $988.5 million, including approximately $505.6 million held by Australian subsidiaries, $466.3 million held by U.S.

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

3 unchanged sentences

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

During the six months ended June 30, 2023, the Company repatriated approximately $250 million through intercompany dividends.

During the nine months ended September 30, 2023, the Company repatriated approximately $250 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 decreased from $1,317.8 million as of December 31, 2022 to $1,115.3 million as of June 30, 2023.

The Company’s available liquidity decreased from $1,317.8 million as of December 31, 2022 to $1,068.3 million as of September 30, 2023.

Available liquidity was comprised of the following:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(Dollars in millions)

4 unchanged sentences

Capital Returns to Shareholders

The Company repurchased approximately 8.9 million shares of its common stock for $184.2 million and paid dividends of $10.8 million during the three months ended June 30, 2023.

Subsequent to June 30, 2023, the Company repurchased an additional 3.1 million shares for $67.0 million.

The Company repurchased approximately 12.6 million shares of its common stock for $266.6 million and paid dividends of $20.7 million during the nine months ended September 30, 2023.

From October 1, 2023 through October 27, 2023, the Company repurchased an additional 1.1 million shares for $27.3 million.

Surety Agreement Amendment and Collateral Requirements

2 unchanged sentences

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.

Under the April 2023 amendment, the Company and its 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.

For purposes of calculating the ratio, only 50% of the outstanding principal amount of the Company’s 3.250% Convertible Senior Notes due March 2028 (the 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.

4 unchanged sentences

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.

The $223.8 million of letters of credit that were outstanding under the LC Facility at March 31, 2023 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.

Collateralized Letter of Credit Agreement

3 unchanged sentences

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

At March 31, 2023, letters of credit of $168.2 million were outstanding under the agreement, which were collateralized by cash of $173.2 million.

At September 30, 2023, letters of credit of $167.0 million were outstanding under the agreement, which were collateralized by cash of $172.0 million.

Margin Requirements

2 unchanged sentences

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 the six months ended June 30, 2023, the Company’s coal derivative contracts with margin requirements were settled and margin postings declined from $255.5 million at December 31, 2023 to zero at June 30, 2023.

The Company’s total indebtedness as of June 30, 2023 and December 31, 2022 is presented in the table below.

Debt Instrument (defined below, as applicable) June 30, 2023 December 31, 2022

During the nine months ended September 30, 2023, the Company’s coal derivative contracts with margin requirements were settled and margin postings declined from $255.5 million at December 31, 2022 to zero at September 30, 2023.

The Company’s total indebtedness as of September 30, 2023 and December 31, 2022 is presented in the table below.

Debt Instrument (defined below, as applicable) September 30, 2023 December 31, 2022

(Dollars in millions)

4 unchanged sentences

Long-term debt $ 320.9 $ 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 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 June 30, 2023, of approximately $10 million in 2023, $23 million in 2024, $16 million in 2025, $13 million in 2026, $12 million in 2027 and $325 million thereafter.

Cash payments for interest related to the Company’s indebtedness and financial assurance instruments amounted to $40.6 million and $77.8 million during the six months ended June 30, 2023 and 2022, respectively.

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 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 September 30, 2023, of approximately $5 million in 2023, $23 million in 2024, $16 million in 2025, $13 million in 2026, $12 million in 2027 and $325 million thereafter.

Cash payments for interest related to the Company’s indebtedness and financial assurance instruments amounted to $56.7 million and $104.2 million during the nine months ended September 30, 2023 and 2022, respectively.

2028 Convertible Notes

3 unchanged sentences

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.

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.

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.

During the first three 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 or third quarters of 2023, and will not be similarly convertible during the fourth 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.

2 unchanged sentences

“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 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, which has been the Company’s primary utilization.

At June 30, 2023, the Company had no outstanding borrowings and $117.8 million of letters of credit outstanding under the program, which were primarily in support of portions of the Company’s reclamation obligations.

The Company was not required to post cash collateral under the securitization program at June 30, 2023.

At September 30, 2023, the Company had no outstanding borrowings and $107.4 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, 2023.

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 eliminated the related compliance requirements as of March 31, 2023 and prospectively.

The following table summarizes the Company’s cash flows for the six months ended June 30, 2023 and 2022, as reported in the accompanying unaudited condensed consolidated financial statements.

The Company was compliant with all relevant covenants under its debt and other finance agreements at September 30, 2023.

The April 2023 termination of the Company’s credit agreement and related letter of credit facility, as described in Note 12.

“Financial Instruments and Other Guarantees” of the accompanying unaudited condensed consolidated financial statements, eliminated the related compliance requirements as of March 31, 2023 and prospectively.

The following table summarizes the Company’s cash flows for the nine months ended September 30, 2023 and 2022, as reported in the accompanying unaudited condensed consolidated financial statements.

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

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

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions)

1 unchanged sentence

Net cash (used in) provided by investing activities (174.6) 61.1

Net cash (used in) provided by financing activities (225.4) 75.1

Net cash used in financing activities (364.5) (120.5)

Net change in cash, cash equivalents and restricted cash 214.0 444.7

3 unchanged sentences

Operating Activities.

The increase in net cash provided by operating activities for the six months ended June 30, 2023 compared to the same period in the prior year was driven by the year-over-year increase in operating cash flow from working capital fluctuations ($450.7 million), including the return of margin associated with derivative financial instruments ($255.5 million), and from the Company’s mining operations ($279.6 million).

The increase in net cash provided by operating activities for the nine months ended September 30, 2023 compared to the same period in the prior year was primarily driven by the receipt of cash in the current year and posting of cash in the prior year related to variation margin requirements associated with derivative financial instruments ($484.0 million) and the year-over-year increase in operating cash flow from working capital fluctuations ($296.4 million), partially offset by an increase in cash used for collateral requirements ($109.1 million) and cash used to settle disputed black lung claims ($72.0 million) with the remaining variance primarily due to lower cash generated from mining operations.

Investing Activities.

The increase in net cash used in investing activities for the six months ended June 30, 2023 compared to the same period in the prior year was driven by lower cash receipts from Middlemount ($142.2 million), higher capital expenditures and the payment of capital accruals ($54.9 million), and lower cash receipts from the disposal of assets ($11.4 million).

The increase in net cash used in investing activities for the nine months ended September 30, 2023 compared to the same period in the prior year was driven by lower cash receipts from Middlemount ($152.3 million), higher capital expenditures and the payment of capital accruals ($82.7 million) including capital expenditures for the redevelopment of the North Goonyella Mine ($58.8 million), and lower cash receipts from the disposal of assets ($16.7 million).

Financing Activities.

The increase in net cash used by financing activities for the six months ended June 30, 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) and common stock repurchases and dividends paid in the current year ($173.0 million and $10.8 million, respectively), partially offset by lower repayments of long-term debt ($650.0 million) in the current year.

The increase in net cash used by financing activities for the nine months ended September 30, 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) and common stock repurchases and dividends paid in the current year ($264.0 million and $20.7 million, respectively), partially offset by lower repayments of long-term debt ($839.4 million) in the current year.

Off-Balance-Sheet Arrangements

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Reclamation Support Other Support (1)

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6.0 101.4 107.4 437.8 131.8 569.6

1,076.0 229.3 1,305.3 1,687.9 258.5 1,946.4

Letters of credit in support of surety

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(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.

At June 30, 2023, the Company had total asset retirement obligations of $753.5 million .

At September 30, 2023, the Company had total asset retirement obligations of $753.9 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 $925.4 million of restricted cash and other balances serving as collateral which are included in the accompanying condensed consolidated balance sheets at June 30, 2023, as described in Note 11.

Not presented in the above table is approximately $866.1 million of restricted cash and other balances serving as collateral which are included in the accompanying condensed consolidated balance sheets at September 30, 2023, as described in Note 12.

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

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Actual results may differ from these estimates.

At September 30, 2023, the Company identified certain assets with an aggregate carrying value of approximately $388 million in its Powder River Basin and Other U.S.

Thermal segments whose recoverability is most sensitive to customer demand and customer concentration risk.

The Company conducted a review of those assets as of September 30, 2023 and determined that no impairment charges were necessary as of that date.

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 June 30, 2023, and there have been no material changes in the Company’s critical accounting estimates.

The Company’s critical accounting policies remain unchanged at September 30, 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

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.

“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

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