UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2023

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 1-16463

____________________________________________

PEABODY ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware						13-4004153
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

701 Market Street,

St. Louis,

Missouri

63101-1826

(Address of principal executive offices)

(Zip Code)

(314) 342-3400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value $0.01 per share			BTU			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☑                          Accelerated filer ☐

Non-accelerated filer ☐                         Smaller reporting company ☐

                                 Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 131.1 million shares of the registrant’s common stock (par value of $0.01 per share) outstanding at October 27, 2023.

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TABLE OF CONTENTS

			Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			1
Unaudited Condensed Consolidated Statements of Operations			1
Unaudited Condensed Consolidated Statements of Comprehensive Income			2
Condensed Consolidated Balance Sheets			3
Unaudited Condensed Consolidated Statements of Cash Flows			4
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity			6
Notes to Unaudited Condensed Consolidated Financial Statements			7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			49
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 4. Mine Safety Disclosures			52
Item 5. Other Information			52
Item 6. Exhibits			53
EXHIBIT INDEX			54
SIGNATURE			55

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Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions, except per share data)
Revenue			$	1,078.9					$	1,342.5					$	3,711.7					$	3,355.8
Costs and expenses
Operating costs and expenses (exclusive of items shown separately below)			803.7						838.4						2,512.3						2,363.0
Depreciation, depletion and amortization			82.3						80.7						239.2						227.4
Asset retirement obligation expenses			15.4						13.1						46.3						40.8
Selling and administrative expenses			21.5						19.6						66.0						64.5
Restructuring charges			0.9						1.0						3.0						2.8
Other operating (income) loss:
Net gain on disposals			(1.4)						(5.0)						(8.5)						(22.7)
Asset impairment			—						1.7						2.0						1.7
Provision for NARM and Shoal Creek loss			3.3						—						37.0						—
Income from equity affiliates			(5.6)						(27.5)						(9.7)						(120.9)
Operating profit			158.8						420.5						824.1						799.2
Interest expense			13.8						33.8						45.5						110.8
Net loss on early debt extinguishment			—						8.7						8.8						34.5
Interest income			(20.3)						(4.9)						(56.5)						(6.3)
Net periodic benefit credit, excluding service cost			(10.0)						(12.2)						(29.4)						(36.7)
Income from continuing operations before income taxes			175.3						395.1						855.7						696.9
Income tax provision			46.5						10.7						238.7						21.0
Income from continuing operations, net of income taxes			128.8						384.4						617.0						675.9
Income (loss) from discontinued operations, net of income taxes			2.5						(0.8)						(0.1)						(2.3)
Net income			131.3						383.6						616.9						673.6
Less: Net income attributable to noncontrolling interests			11.4						8.5						49.3						8.5
Net income attributable to common stockholders			$	119.9					$	375.1					$	567.6					$	665.1
Income from continuing operations:
Basic income per share			$	0.88					$	2.61					$	4.06					$	4.72
Diluted income per share			$	0.80					$	2.34					$	3.68					$	4.33
Net income attributable to common stockholders:
Basic income per share			$	0.90					$	2.60					$	4.05					$	4.70
Diluted income per share			$	0.82					$	2.33					$	3.68					$	4.31

See accompanying notes to unaudited condensed consolidated financial statements.

1

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PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Net income			$	131.3					$	383.6					$	616.9					$	673.6
Postretirement plans (net of $0.0 tax provisions in each period)			(13.5)						(13.4)						(40.3)						(40.3)
Foreign currency translation adjustment			(1.0)						0.1						(1.6)						(1.4)
Other comprehensive loss, net of income taxes			(14.5)						(13.3)						(41.9)						(41.7)
Comprehensive income			116.8						370.3						575.0						631.9
Less: Net income attributable to noncontrolling interests			11.4						8.5						49.3						8.5
Comprehensive income attributable to common stockholders			$	105.4					$	361.8					$	525.7					$	623.4

See accompanying notes to unaudited condensed consolidated financial statements.

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PEABODY ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

			(Unaudited)
			September 30, 2023						December 31, 2022
			(Amounts in millions, except per share data)
ASSETS
Current assets
Cash and cash equivalents			$	988.5					$	1,307.3
Accounts receivable, net of allowance for credit losses of $0.0 at September 30, 2023 and December 31, 2022			348.4						465.5
Inventories, net			352.0						296.1
Other current assets			244.1						303.6
Total current assets			1,933.0						2,372.5
Property, plant, equipment and mine development, net			2,805.5						2,865.0
Operating lease right-of-use assets			36.0						26.9
Restricted cash and collateral			866.1						187.4
Investments and other assets			79.1						84.3
Deferred income taxes			2.5						74.7
Total assets			$	5,722.2					$	5,610.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt			$	12.7					$	13.2
Accounts payable and accrued expenses			826.8						905.5
Total current liabilities			839.5						918.7
Long-term debt, less current portion			320.9						320.6
Deferred income taxes			20.0						20.4
Asset retirement obligations			669.7						665.8
Accrued postretirement benefit costs			150.6						156.5
Operating lease liabilities, less current portion			21.6						11.0
Other noncurrent liabilities			187.4						223.0
Total liabilities			2,209.7						2,316.0
Stockholders’ equity
Preferred Stock — $0.01 per share par value; 100.0 shares authorized, no shares issued or outstanding as of September 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 September 30, 2023 and December 31, 2022			—						—
Common Stock — $0.01 per share par value; 450.0 shares authorized, 188.6 shares issued and 132.2 shares outstanding as of September 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			3,981.2						3,975.9
Treasury stock, at cost — 56.4 and 43.2 common shares as of September 30, 2023 and December 31, 2022			(1,655.7)						(1,372.9)
Retained earnings			930.6						383.9
Accumulated other comprehensive income			200.6						242.5
Peabody Energy Corporation stockholders’ equity			3,458.6						3,231.3
Noncontrolling interests			53.9						63.5
Total stockholders’ equity			3,512.5						3,294.8
Total liabilities and stockholders’ equity			$	5,722.2					$	5,610.8

See accompanying notes to unaudited condensed consolidated financial statements.

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PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
			Nine Months Ended September 30,
			2023						2022
			(Dollars in millions)
Cash Flows From Operating Activities
Net income			$	616.9					$	673.6
Loss from discontinued operations, net of income taxes			0.1						2.3
Income from continuing operations, net of income taxes			617.0						675.9
Adjustments to reconcile income from continuing operations, net of income taxes to net cash provided by operating activities:
Depreciation, depletion and amortization			239.2						227.4
Noncash interest expense, net			4.0						13.6
Deferred income taxes			71.8						(2.8)
Noncash share-based compensation			5.1						6.6
Asset impairment			2.0						1.7
Noncash provision for NARM and Shoal Creek loss			33.7						—
Net gain on disposals			(8.5)						(22.7)
Noncash income from port and rail capacity assignment			(9.4)						—
Net loss on early debt extinguishment			8.8						34.5
Income from equity affiliates			(9.7)						(120.9)
Foreign currency option contracts			(0.1)						4.4
Changes in current assets and liabilities:
Accounts receivable			126.6						(75.9)
Inventories			(59.9)						(50.7)
Other current assets			30.1						(40.6)
Accounts payable and accrued expenses			(29.2)						(61.6)
Collateral arrangements			(145.9)						(36.8)
Asset retirement obligations			3.9						6.0
Workers’ compensation obligations			(1.3)						(2.5)
Postretirement benefit obligations			(46.3)						(48.5)
Pension obligations			0.9						(1.7)
Other, net			(0.1)						3.5
Net cash provided by continuing operations			832.7						508.9
Net cash used in discontinued operations			(79.6)						(4.8)
Net cash provided by operating activities			753.1						504.1

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PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
			Nine Months Ended September 30,
			2023						2022
			(Dollars in millions)
Cash Flows From Investing Activities
Additions to property, plant, equipment and mine development			(190.4)						(104.5)
Changes in accrued expenses related to capital expenditures			(5.1)						(8.3)
Proceeds from disposal of assets, net of receivables			13.9						30.6
Contributions to joint ventures			(573.4)						(475.1)
Distributions from joint ventures			579.4						465.2
Advances to related parties			(0.1)						(1.3)
Cash receipts from Middlemount Coal Pty Ltd and other related parties			2.6						154.9
Other, net			(1.5)						(0.4)
Net cash (used in) provided by investing activities			(174.6)						61.1
Cash Flows From Financing Activities
Proceeds from long-term debt			—						545.0
Repayments of long-term debt			(6.9)						(846.3)
Payment of debt issuance and other deferred financing costs			(0.3)						(21.1)
Proceeds from common stock issuances, net of costs			—						222.0
Common stock repurchases			(264.0)						—
Repurchase of employee common stock relinquished for tax withholding			(13.7)						(2.6)
Dividends paid			(20.7)						—
Distributions to noncontrolling interests			(58.9)						(17.5)
Net cash used in financing activities			(364.5)						(120.5)
Net change in cash, cash equivalents and restricted cash			214.0						444.7
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)			$	1,631.6					$	1,399.0
(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			$	988.5
Restricted cash included in “Restricted cash and collateral”			643.1
Cash, cash equivalents and restricted cash at end of period			$	1,631.6

See accompanying notes to unaudited condensed consolidated financial statements.

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PEABODY ENERGY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

			Three Months Ended September 30,												Nine Months Ended September 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			3,979.4						3,972.9						3,975.9						3,745.6
Dividend equivalent units on dividends declared			0.1						—						0.2						—
Share-based compensation for equity-classified awards			1.7						1.2						5.1						6.6
Common stock issuances, net of costs			—						—						—						221.9
Balance, end of period			3,981.2						3,974.1						3,981.2						3,974.1
Treasury stock
Balance, beginning of period			(1,572.4)						(1,372.9)						(1,372.9)						(1,370.3)
Common stock repurchases			(91.0)						—						(264.0)						—
Net change in unsettled common stock repurchases			8.6						—						(2.6)						—
Excise tax accrued on common stock repurchases			(0.9)						—						(2.5)						—
Repurchase of employee common stock relinquished for tax withholding			—						—						(13.7)						(2.6)
Balance, end of period			(1,655.7)						(1,372.9)						(1,655.7)						(1,372.9)
Retained earnings (Accumulated deficit)
Balance, beginning of period			820.7						(623.2)						383.9						(913.2)
Net income attributable to common stockholders			119.9						375.1						567.6						665.1
Dividends declared ($0.075, $0.000, $0.150, and $0.000 per share, respectively)			(10.0)						—						(20.9)						—
Balance, end of period			930.6						(248.1)						930.6						(248.1)
Accumulated other comprehensive income
Balance, beginning of period			215.1						269.5						242.5						297.9
Postretirement plans (net of $0.0 tax provisions in each period)			(13.5)						(13.4)						(40.3)						(40.3)
Foreign currency translation adjustment			(1.0)						0.1						(1.6)						(1.4)
Balance, end of period			200.6						256.2						200.6						256.2
Noncontrolling interests
Balance, beginning of period			78.6						45.2						63.5						59.0
Net income attributable to noncontrolling interests			11.4						8.5						49.3						8.5
Distributions to noncontrolling interests			(36.1)						(3.7)						(58.9)						(17.5)
Balance, end of period			53.9						50.0						53.9						50.0
Total stockholders’ equity			$	3,512.5					$	2,661.2					$	3,512.5					$	2,661.2

See accompanying notes to unaudited condensed consolidated financial statements.

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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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2023.

(2)    Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

Accounting Standards Not Yet Implemented

Joint Ventures. In August 2023, Accounting Standards Update 2023-05 was issued, which requires joint ventures to recognize and measure the initial contributions of monetary and nonmonetary assets and its net assets at fair value. The Company is required to apply the amendments for joint ventures with a formation date on or after January 1, 2025. A joint venture that was formed before January 1, 2025 may apply the amendments retrospectively. The Company does not expect the guidance to have a material impact on its consolidated financial statements or disclosures.

(3)    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 September 30, 2023
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal						Corporate and Other (1)						Consolidated
			(Dollars in millions)
Thermal coal
Domestic			$	31.3					$	—					$	313.3					$	227.1					$	—					$	571.7
Export			265.9						—						—						—						—						265.9
Total thermal			297.2						—						313.3						227.1						—						837.6
Metallurgical coal
Export			—						246.0						—						—						—						246.0
Total metallurgical			—						246.0						—						—						—						246.0
Other (2)			0.2						1.0						(0.3)						1.1						(6.7)						(4.7)
Revenue			$	297.4					$	247.0					$	313.0					$	228.2					$	(6.7)					$	1,078.9

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

			Three Months Ended September 30, 2022
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal						Corporate and Other (1)						Consolidated
			(Dollars in millions)
Thermal coal
Domestic			$	44.8					$	—					$	290.2					$	259.8					$	—					$	594.8
Export			308.3						—						—						—						—						308.3
Total thermal			353.1						—						290.2						259.8						—						903.1
Metallurgical coal
Export			—						309.9						—						—						—						309.9
Total metallurgical			—						309.9						—						—						—						309.9
Other (2)			0.1						0.8						0.3						1.6						126.7						129.5
Revenue			$	353.2					$	310.7					$	290.5					$	261.4					$	126.7					$	1,342.5

			Nine Months Ended September 30, 2023
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal						Corporate and Other (1)						Consolidated
			(Dollars in millions)
Thermal coal
Domestic			$	100.7					$	—					$	878.1					$	673.2					$	—					$	1,652.0
Export			942.2						—						—						—						—						942.2
Total thermal			1,042.9						—						878.1						673.2						—						2,594.2
Metallurgical coal
Export			—						904.8						—						—						—						904.8
Total metallurgical			—						904.8						—						—						—						904.8
Other (2)			0.5						3.1						(0.1)						4.3						204.9						212.7
Revenue			$	1,043.4					$	907.9					$	878.0					$	677.5					$	204.9					$	3,711.7

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

			Nine Months Ended September 30, 2022
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal						Corporate and Other (1)						Consolidated
			(Dollars in millions)
Thermal coal
Domestic			$	125.0					$	—					$	771.6					$	682.5					$	—					$	1,579.1
Export			833.7						—						—						1.0						—						834.7
Total thermal			958.7						—						771.6						683.5						—						2,413.8
Metallurgical coal
Export			—						1,161.2						—						—						—						1,161.2
Total metallurgical			—						1,161.2						—						—						—						1,161.2
Other (2)			0.6						4.6						(0.2)						5.9						(230.1)						(219.2)
Revenue			$	959.3					$	1,165.8					$	771.4					$	689.4					$	(230.1)					$	3,355.8

(1)    Corporate and Other includes the following:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Unrealized gains (losses) on derivative contracts related to forecasted sales			$	—					$	90.4					$	159.0					$	(235.1)
Realized losses on derivative contracts related to forecasted sales			—						(117.4)						(80.9)						(308.0)
Revenue from physical sale of coal (3)			(10.4)						150.7						97.4						294.0
Trading revenue			(0.1)						0.3						—						10.7
Other (2)			3.8						2.7						29.4						8.3
Total Corporate and Other			$	(6.7)					$	126.7					$	204.9					$	(230.1)

(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 September 30, 2023 and December 31, 2022 consisted of the following:

			September 30, 2023						December 31, 2022
			(Dollars in millions)
Trade receivables, net			$	294.1					$	416.3
Miscellaneous receivables, net			54.3						49.2
Accounts receivable, net			$	348.4					$	465.5

None of the above receivables included allowances for credit losses at September 30, 2023 or December 31, 2022. No charges for credit losses were recognized during the three and nine months ended September 30, 2023 or 2022.

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)     Inventories

“Inventories, net” as of September 30, 2023 and December 31, 2022 consisted of the following:

			September 30, 2023						December 31, 2022
			(Dollars in millions)
Materials and supplies, net			$	155.7					$	130.8
Raw coal			105.8						98.3
Saleable coal			90.5						67.0
Inventories, net			$	352.0					$	296.1

Materials and supplies inventories, net presented above have been shown net of reserves of $7.8 million and $9.5 million as of September 30, 2023 and December 31, 2022.

(5) 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 September 30,												Nine Months Ended September 30,
			September 30, 2023						December 31, 2022						2023						2022						2023						2022
			(Dollars in millions)
Equity method investment related to Middlemount			$	40.2					$	27.1					$	(8.2)					$	(28.4)					$	(14.9)					$	(123.6)
Equity method investment related to R3			7.3						7.0						2.6						0.9						5.2						2.7
Total equity method investments			$	47.5					$	34.1					$	(5.6)					$	(27.5)					$	(9.7)					$	(120.9)

The Company received no cash payments from Middlemount during the nine months ended September 30, 2023. Payments of $151.5 million were received from Middlemount during the nine months ended September 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 September 30, 2023. The revolving loan bears interest at 10% per annum and expires on December 31, 2023. There was no outstanding revolving loan at September 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 $5.5 million and $10.9 million to R3 during the nine months ended September 30, 2023 and 2022, respectively.

(6) 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.

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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 September 30, 2023.

Foreign Currency Option Contracts

The Company has historically utilized currency forwards and options to hedge currency risk associated with anticipated Australian dollar operating expenditures. As of September 30, 2023, the Company held average rate options with an aggregate notional amount of $615.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar operating expenditures over the nine-month period ending June 30, 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 $0.72 over the nine-month period ending June 30, 2024. As of September 30, 2023, the Company also held purchased collars with an aggregate notional amount of $339.0 million Australian dollars related to anticipated Australian dollar operating expenditures during the six-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 September 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 September 30, 2023, the Company recorded no unrealized mark-to-market gains or losses on coal derivative contracts. During the three months ended September 30, 2022, the Company recorded a net unrealized mark-to-market gain of $90.4 million on coal derivative contracts, which included approximately $49 million of unrealized mark-to-market gains on financial derivatives and approximately $41 million of unrealized mark-to-market gains on physical forward sales contracts.

During the nine months ended September 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 nine months ended September 30, 2022, the Company recorded a net unrealized mark-to-market loss of $235.1 million on coal derivative contracts, which included approximately $257 million of unrealized mark-to-market losses on financial derivatives and approximately $22 million of unrealized mark-to-market gains 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 September 30, 2023.

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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.

			September 30, 2023												December 31, 2022
			Asset Derivative						Liability Derivative						Asset Derivative						Liability Derivative
			(Dollars in millions)
Foreign currency option contracts			$	0.1					$	—					$	3.0					$	—
Derivative contracts related to forecasted sales			—						—						100.6						(310.3)
Financial trading contracts			—						—						11.7						—
Total derivatives			0.1						—						115.3						(310.3)
Effect of counterparty netting			—						—						(100.6)						100.6
Variation margin (received) posted			—						—						(11.7)						209.7
Net derivatives and variation margin as classified in the balance sheets			$	0.1					$	—					$	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 September 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.

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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 September 30, 2023
						Total loss recognized in income						Loss 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			$	(2.7)					$	(2.2)					$	(0.5)
Financial trading contracts			Revenue			(0.1)						(19.7)						19.6
Total						$	(2.8)					$	(21.9)					$	19.1
						Three Months Ended September 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			$	(3.0)					$	(1.6)					$	(1.4)
Derivative contracts related to forecasted sales			Revenue			(27.0)						(117.4)						90.4
Financial trading contracts			Revenue			0.3						0.5						(0.2)
Total						$	(29.7)					$	(118.5)					$	88.8
						Nine Months Ended September 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			$	(7.8)					$	(7.9)					$	0.1
Derivative contracts related to forecasted sales			Revenue			78.1						(80.9)						159.0
Financial trading contracts			Revenue			—						11.5						(11.5)
Total						$	70.3					$	(77.3)					$	147.6
						Nine Months Ended September 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			$	(8.2)					$	(3.8)					$	(4.4)
Derivative contracts related to forecasted sales			Revenue			(543.1)						(308.0)						(235.1)
Financial trading contracts			Revenue			10.7						0.6						10.1
Total						$	(540.6)					$	(311.2)					$	(229.4)

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.

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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.

			September 30, 2023
			Level 1						Level 2						Level 3						Total
			(Dollars in millions)
Foreign currency option contracts			$	—					$	0.1					$	—					$	0.1
Derivative contracts related to forecasted sales			—						—						—						—
Financial trading contracts			—						—						—						—
Equity securities			0.2						—						—						0.2
Total net assets			$	0.2					$	0.1					$	—					$	0.3
			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 September 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).

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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.

			September 30, 2023						December 31, 2022
			(Dollars in millions)
Total debt at par value			$	342.1					$	343.6
Less: Unamortized debt issuance costs			(8.5)						(9.8)
Net carrying amount			$	333.6					$	333.8
Estimated fair value			$	506.2					$	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 nine months ended September 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.

The Company had no transfers between Levels 1, 2 and 3 during the three and nine months ended September 30, 2023 and 2022. The Company’s policy is to value all transfers between levels using the beginning of period valuation.

(7) Property, Plant, Equipment and Mine Development

The composition of property, plant, equipment and mine development, net, as of September 30, 2023 and December 31, 2022 is set forth in the table below:

			September 30, 2023						December 31, 2022
			(Dollars in millions)
Land and coal interests			$	2,511.9					$	2,514.7
Buildings and improvements			633.5						594.2
Machinery and equipment			1,671.0						1,543.1
Less: Accumulated depreciation, depletion and amortization			(2,010.9)						(1,787.0)
Property, plant, equipment and mine development, net			$	2,805.5					$	2,865.0

Asset Impairment and Other At-Risk Assets

The Company identified certain assets with an aggregate carrying value of approximately $388 million at September 30, 2023 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.

(8)  Income Taxes

The Company's effective tax rate before remeasurement for the nine months ended September 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 $46.5 million and $10.7 million for the three months ended September 30, 2023 and 2022, respectively, included tax benefits of $3.3 million and $1.6 million, respectively, related to the remeasurement of foreign income tax accounts. The Company’s income tax provisions of $238.7 million and $21.0 million for the nine months ended September 30, 2023 and 2022, respectively, included tax benefits of $2.6 million and $3.5 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.

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9)     Long-term Debt 

The Company’s total indebtedness as of September 30, 2023 and December 31, 2022 consisted of the following:

Debt Instrument (defined below, as applicable)			September 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			22.1						23.6
Less: Debt issuance costs			(8.5)						(9.8)
			333.6						333.8
Less: Current portion of long-term debt			12.7						13.2
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 its unsecured 3.250% Convertible Senior Notes due March 2028 (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 $0.150 per share dividends declared and paid during the nine months ended September 30, 2023 yielded a revised conversion rate of 50.7205 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 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.

As of September 30, 2023, the if-converted value of the 2028 Convertible Notes exceeded the principal amount by $99.0 million.

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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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Indebtedness			$	4.9					$	20.8					$	16.6					$	70.7
Financial assurance instruments			8.9						13.0						28.9						40.1
Interest expense			$	13.8					$	33.8					$	45.5					$	110.8
Cash paid for interest			$	14.8					$	26.4					$	56.7					$	104.2
Non-cash interest expense			$	0.7					$	4.6					$	4.0					$	13.6

Covenant Compliance

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

(10) 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Service cost for benefits earned			$	0.1					$	0.1					$	0.1					$	0.1
Interest cost on projected benefit obligation			3.6						5.3						18.4						16.0
Expected return on plan assets			(3.1)						(6.0)						(16.3)						(17.9)
Net periodic pension cost (credit)			$	0.6					$	(0.6)					$	2.2					$	(1.8)

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 September 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, which was funded directly by the Peabody Plan’s assets. The benefit obligation was not transferred to Prudential and the Peabody Plan continued to administer and pay the retirement benefits of Peabody Plan participants, but was reimbursed by Prudential for the payment of all benefits covered by the GAC. 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.

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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.

On July 31, 2023, as part of the completion of the standard Employee Retirement Income Security Act plan termination process for the Peabody Plan, 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.

During the nine months ended September 30, 2023, the Company settled $442.0 million of its pension obligations for active and deferred participants in the Peabody Plan with an equal amount paid from plan assets. Any settlement gain or loss related to the termination process will be recorded during the fourth quarter, but the Company does not expect a material impact to its results.

Net periodic postretirement benefit credit included the following components:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Service cost for benefits earned			$	0.1					$	0.2					$	0.4					$	0.6
Interest cost on accumulated postretirement benefit obligation			2.6						1.7						7.6						5.2
Expected return on plan assets			(0.1)						(0.2)						(0.4)						(0.6)
Amortization of prior service credit			(13.5)						(13.4)						(40.3)						(40.3)
Net periodic postretirement benefit credit			$	(10.9)					$	(11.7)					$	(32.7)					$	(35.1)

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.

(11) 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.

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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 nine months ended September 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(In millions, except per share data)
Basic EPS numerator:
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	617.0					$	675.9
Less: Net income attributable to noncontrolling interests			11.4						8.5						49.3						8.5
Income from continuing operations attributable to common stockholders			117.4						375.9						567.7						667.4
Income (loss) from discontinued operations, net of income taxes			2.5						(0.8)						(0.1)						(2.3)
Net income attributable to common stockholders			$	119.9					$	375.1					$	567.6					$	665.1
Diluted EPS numerator:
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	617.0					$	675.9
Add: Tax adjusted interest expense related to 2028 Convertible Notes			3.0						2.6						9.1						6.1
Less: Net income attributable to noncontrolling interests			11.4						8.5						49.3						8.5
Income from continuing operations attributable to common stockholders			120.4						378.5						576.8						673.5
Income (loss) from discontinued operations, net of income taxes			2.5						(0.8)						(0.1)						(2.3)
Net income attributable to common stockholders			$	122.9					$	377.7					$	576.7					$	671.2
EPS denominator:
Weighted average shares outstanding — basic			133.2						144.1						140.0						141.4
Dilutive impact of share-based compensation awards			0.6						1.7						0.6						1.6
Dilutive impact of 2028 Convertible Notes			16.1						16.1						16.1						12.6
Weighted average shares outstanding — diluted			149.9						161.9						156.7						155.6
Basic EPS attributable to common stockholders:
Income from continuing operations			$	0.88					$	2.61					$	4.06					$	4.72
Income (loss) from discontinued operations			0.02						(0.01)						(0.01)						(0.02)
Net income attributable to common stockholders			$	0.90					$	2.60					$	4.05					$	4.70
Diluted EPS attributable to common stockholders:
Income from continuing operations			$	0.80					$	2.34					$	3.68					$	4.33
Income (loss) from discontinued operations			0.02						(0.01)						—						(0.02)
Net income attributable to common stockholders			$	0.82					$	2.33					$	3.68					$	4.31

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(12) 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-sheet 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.

			September 30, 2023																		December 31, 2022
			Reclamation Support						Other Support (1)						Total						Reclamation Support						Other Support (1)						Total
			(Dollars in millions)
Surety bonds			$	1,070.0					$	127.9					$	1,197.9					$	1,250.1					$	126.7					$	1,376.8
Letters of credit (2)			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
Less: Letters of credit in support of surety bonds (3)			(6.0)						(11.5)						(17.5)						(431.7)						(37.2)						(468.9)
Obligations supported, net			$	1,070.0					$	217.8					$	1,287.8					$	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 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 $586.1 million at September 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.

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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 nine months ended September 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 September 30, 2023, the Company had no outstanding borrowings and $107.4 million of letters of credit outstanding under the Securitization Program, primarily in support of reclamation obligations. Availability under the Securitization Program, which is adjusted for certain ineligible receivables, was $79.8 million at September 30, 2023. The Company was not required to post cash collateral under the Securitization Program at September 30, 2023.

The Company incurred interest and fees associated with the Securitization Program of $0.9 million and $1.2 million during the three months ended September 30, 2023 and 2022, respectively, and $2.8 million and $3.4 million during the nine months ended September 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 September 30, 2023, letters of credit of $167.0 million were outstanding under the agreement, which were collateralized by cash of $172.0 million.

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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.

			September 30, 2023						December 31, 2022
			(Dollars in millions)
Restricted cash (1)
Surety trust accounts (2)			$	471.1					$	—
Collateralized letters of credit funding (2)			172.0						110.3
			643.1						110.3
Other collateral (1)
Deposits with regulatory authorities for reclamation and other obligations			223.0						33.6
LC Facility (3)			—						28.5
Deposit held on behalf of surety			—						15.0
			223.0						77.1
Restricted cash and collateral			$	866.1					$	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.

(13) Commitments and Contingencies

Commitments

Unconditional Purchase Obligations

As of September 30, 2023, purchase commitments for capital expenditures were $91.1 million, all of which is obligated within the next two years, with $84.7 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.

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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 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 was 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 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 commenced a prosecution for five breaches of the Protection of the Environment Operations Act 1997 on September 6, 2023.

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.

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 Patriot Federal Black Lung Claims). The Company’s accounting for the black lung liabilities related to Patriot was based on an interpretation of applicable statutes. Management believed that inconsistencies existed among the applicable statutes, regulations promulgated under those statutes and the DOL’s interpretative guidance. The Company sought clarification from the DOL regarding these inconsistencies and challenged the DOL’s position in individual black lung claims. The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $82.3 million at December 31, 2022. The liability, which was classified as discontinued operations, was included in the Company’s condensed consolidated balance sheet within “Accounts payable and accrued expenses” and “Other noncurrent liabilities.”

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On August 8, 2023, the Company entered into a settlement agreement to resolve the liability dispute with the DOL. 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.

(14) 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Revenue:
Seaborne Thermal			$	297.4					$	353.2					$	1,043.4					$	959.3
Seaborne Metallurgical			247.0						310.7						907.9						1,165.8
Powder River Basin			313.0						290.5						878.0						771.4
Other U.S. Thermal			228.2						261.4						677.5						689.4
Corporate and Other			(6.7)						126.7						204.9						(230.1)
Total			$	1,078.9					$	1,342.5					$	3,711.7					$	3,355.8
Adjusted EBITDA:
Seaborne Thermal			$	115.5					$	171.2					$	477.0					$	438.5
Seaborne Metallurgical			78.6						113.2						271.9						593.9
Powder River Basin			54.1						37.9						116.1						43.5
Other U.S. Thermal			49.1						72.7						165.2						184.6
Corporate and Other			(27.3)						43.9						(11.4)						83.7
Total			$	270.0					$	438.9					$	1,018.8					$	1,344.2

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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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	617.0					$	675.9
Depreciation, depletion and amortization			82.3						80.7						239.2						227.4
Asset retirement obligation expenses			15.4						13.1						46.3						40.8
Restructuring charges			0.9						1.0						3.0						2.8
Asset impairment			—						1.7						2.0						1.7
Provision for NARM and Shoal Creek loss			3.3						—						37.0						—
Changes in amortization of basis difference related to equity affiliates			(0.5)						(0.5)						(1.2)						(1.7)
Interest expense			13.8						33.8						45.5						110.8
Net loss on early debt extinguishment			—						8.7						8.8						34.5
Interest income			(20.3)						(4.9)						(56.5)						(6.3)
Unrealized (gains) losses on derivative contracts related to forecasted sales			—						(90.4)						(159.0)						235.1
Unrealized losses (gains) on foreign currency option contracts			0.5						1.4						(0.1)						4.4
Take-or-pay contract-based intangible recognition			(0.7)						(0.8)						(1.9)						(2.2)
Income tax provision			46.5						10.7						238.7						21.0
Adjusted EBITDA			$	270.0					$	438.9					$	1,018.8					$	1,344.2

(15) Other Events

Coal Deposit Acquisition

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.

Share Repurchases

During the three and nine months ended September 30, 2023, the Company repurchased approximately 3.7 million shares and 12.6 million shares, respectively, of its common stock for $82.4 million and $266.6 million, respectively, including commission fees. Of this amount, $2.6 million related to repurchases which settled subsequent to September 30, 2023. As of September 30, 2023, the Company had accrued excise taxes of $2.5 million related to the repurchases, which were unpaid at September 30, 2023. The Company includes commission fees and excise taxes, as incurred, with the cost of treasury stock. At September 30, 2023, $733.6 million remained available under its share repurchase program. From October 1, 2023 through October 27, 2023, the Company repurchased an additional 1.1 million shares for $27.3 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 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.

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PEABODY ENERGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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.

Port and Rail Capacity Assignment

During the nine months ended September 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 nine months ended September 30, 2023 and had a discounted receivable of $9.4 million included in “Accounts receivable, net” as of September 30, 2023.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As used in this report, the terms “Peabody” or “the Company” refer to Peabody Energy Corporation or its applicable subsidiary or subsidiaries. Unless otherwise noted herein, disclosures in this Quarterly Report on Form 10-Q relate only to the Company’s continuing operations.

When used in this filing, the term “ton” refers to short or net tons, equal to 2,000 pounds (907.18 kilograms), while “tonne” refers to metric tons, equal to 2,204.62 pounds (1,000 kilograms).

Cautionary Notice Regarding Forward-Looking Statements

This report includes statements of Peabody’s expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and are intended to come within the safe harbor protection provided by those sections. These statements relate to future events or Peabody’s future financial performance. The Company uses words such as “anticipate,” “believe,” “expect,” “may,” “forecast,” “project,” “should,” “estimate,” “plan,” “outlook,” “target,” “likely,” “will,” “to be” or other similar words to identify forward-looking statements.

Without limiting the foregoing, all statements relating to Peabody’s future operating results, anticipated capital expenditures, future cash flows and borrowings, and sources of funding are forward-looking statements and speak only as of the date of this report. These forward-looking statements are based on numerous assumptions that Peabody believes are reasonable, but are subject to a wide range of uncertainties and business risks, and actual results may differ materially from those discussed in these statements. These factors are difficult to accurately predict and may be beyond the Company’s control.

When considering these forward-looking statements, you should keep in mind the cautionary statements in this document and in the Company’s other Securities and Exchange Commission (SEC) filings, including, but not limited to, the more detailed discussion of these factors and other factors that could affect its results contained in Item 1A. “Risk Factors” of Part II of this Quarterly Report on Form 10-Q, Item 1A. “Risk Factors” of Part II of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 4, 2023 and Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” of Part I of its Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023. These forward-looking statements speak only as of the date on which such statements were made, and the Company undertakes no obligation to update these statements except as required by federal securities laws.

Non-GAAP Financial Measures

The following discussion of the Company’s results of operations includes references to and analysis of Adjusted EBITDA and Total Reporting Segment Costs, which are financial measures not recognized in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Adjusted EBITDA is used by management as the primary metric to measure each of its segments’ operating performance and allocate resources. Total Reporting Segment Costs is also used by management as a component of a metric to measure each of its segments’ operating performance.

Also included in the following discussion of the Company’s results of operations are references to Revenue per Ton, Costs per Ton and Adjusted EBITDA Margin per Ton for each reporting segment. These metrics are used by management to measure each of its reporting segments’ operating performance. Management believes Costs per Ton and Adjusted EBITDA Margin per Ton best reflect controllable costs and operating results at the reporting segment level. The Company considers all measures reported on a per ton basis to be operating/statistical measures; however, the Company includes reconciliations of the related non-GAAP financial measures (Adjusted EBITDA and Total Reporting Segment Costs) in the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 2.

In its discussion of liquidity and capital resources, the Company includes references to Available Free Cash Flow (AFCF) which is also a non-GAAP measure. AFCF is used by management as a measure of its ability to generate excess cash flow from its business operations.

The Company believes non-GAAP performance measures are used by investors to measure its operating performance. These measures are not intended to serve as alternatives to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies. Refer to the “Reconciliation of Non-GAAP Financial Measures” section contained within this Item 2 for definitions and reconciliations to the most comparable measures under U.S. GAAP.

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Overview

Peabody is a leading producer of metallurgical and thermal coal. In 2022, the Company produced and sold 122.9 million and 123.7 million tons of coal, respectively, from continuing operations. 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. In addition to its mining operations, the Company markets and brokers coal from other coal producers; trades coal and freight-related contracts; and during 2022, partnered in a joint venture with the intent of developing various sites, including certain reclaimed mining land held by the Company in the U.S., for utility-scale photovoltaic solar generation and battery storage.

The Company reports its results of operations primarily through the following reportable segments: Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal and Corporate and Other. Refer to Note 14. “Segment Information” to the accompanying unaudited condensed consolidated financial statements for further information regarding those segments and the components of its Corporate and Other segment.

Spot pricing for premium low-vol hard coking coal (Premium HCC), premium low-vol pulverized coal injection (Premium PCI) coal, Newcastle index thermal coal and API 5 index thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the three months ended September 30, 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 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 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. may vary significantly in many respects, including price adjustment features, price reopener terms, coal quality requirements, quantity parameters, permitted sources of supply, treatment of environmental constraints, extension options, force majeure and termination and assignment provisions. Competition from alternative fuels such as natural gas and other fuel sources may also impact the Company’s realized pricing.

						High						Low						Average						September 30, 2023						October 27, 2023
Premium HCC (1)						$	333.00					$	221.50					$	263.59					$	333.00					$	350.00
Premium PCI coal (1)						200.00						154.50						168.31						200.00						197.00
Newcastle index thermal coal (1)						163.21						127.33						148.70						157.91						126.25
API 5 index thermal coal (1)						99.75						84.25						88.25						99.75						99.82
PRB 8,800 Btu/Lb coal (2)						14.30						14.10						14.26						14.10						13.75
Illinois Basin 11,500 Btu/Lb coal (2)						51.50						46.00						49.16						46.00						45.25

(1)    Prices expressed per metric tonne.

(2)    Prices expressed per short ton.

Within the global coal industry, supply and demand for its products and the supplies used for mining have been impacted by the ongoing Russian-Ukrainian conflict. 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 nine months ended September 30, 2023 presented herein may not be indicative of their ultimate impacts.

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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 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

On April 14, 2023, the Company amended its existing agreement with the providers of its surety bond portfolio, dated November 6, 2020. Under the agreement, the Company was required to post collateral on a periodic basis. Pursuant to the amendment, the Company and its surety bond providers agreed to (i) establish a combined maximum collateral cap, (ii) remove the restrictions on shareholder returns contained in the original agreement, subject to a minimum liquidity threshold, and (iii) extend the expiration date of the existing agreement from December 31, 2025 to December 31, 2026. Peabody also terminated the letter of credit facility which was previously used primarily for surety collateral, further reducing interest costs and increasing financial flexibility.

On April 17, 2023, the Company announced that its Board of Directors (Board) approved a new shareholder return framework which includes a share repurchase plan, a fixed quarterly cash dividend and a variable quarterly cash dividend component. 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 for a further discussion of the surety agreement amendment.

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Other

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

Summary

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. 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.

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Tons Sold

The following table presents tons sold by operating segment:

			Three Months Ended September 30,												Increase (Decrease) to Volumes												Nine Months Ended September 30,												Increase (Decrease) to Volumes
			2023						2022						Tons						%						2023						2022						Tons						%
			(Tons in millions)																								(Tons in millions)
Seaborne Thermal			4.2						3.7						0.5						14		%				11.8						11.5						0.3						3		%
Seaborne Metallurgical			1.5						1.8						(0.3)						(17)		%				4.8						4.6						0.2						4		%
Powder River Basin			22.7						22.3						0.4						2		%				63.6						61.4						2.2						4		%
Other U.S. Thermal			4.2						4.8						(0.6)						(13)		%				12.5						13.4						(0.9)						(7)		%
Total tons sold from operating segments			32.6						32.6						—						—		%				92.7						90.9						1.8						2		%
Corporate and Other			—						0.1						(0.1)						(100)		%				0.3						0.3						—						—		%
Total tons sold			32.6						32.7						(0.1)						—		%				93.0						91.2						1.8						2		%

Supplemental Financial Data

The following table presents supplemental financial data by operating segment:

			Three Months Ended September 30,												(Decrease) Increase												Nine Months Ended September 30,												Increase (Decrease)
			2023						2022						$						%						2023						2022						$						%
Revenue per Ton (1)
Seaborne Thermal			$	71.38					$	95.54					$	(24.16)					(25)		%				$	89.06					$	83.30					$	5.76					7		%
Seaborne Metallurgical			162.02						179.77						(17.75)						(10)		%				189.50						254.52						(65.02)						(26)		%
Powder River Basin			13.79						12.99						0.80						6		%				13.80						12.55						1.25						10		%
Other U.S. Thermal			53.89						54.58						(0.69)						(1)		%				54.12						51.62						2.50						5		%
Costs per Ton (1)(2)
Seaborne Thermal			$	43.68					$	49.22					$	(5.54)					(11)		%				$	48.35					$	45.22					$	3.13					7		%
Seaborne Metallurgical			110.38						114.32						(3.94)						(3)		%				132.74						124.86						7.88						6		%
Powder River Basin			11.41						11.29						0.12						1		%				11.98						11.84						0.14						1		%
Other U.S. Thermal			42.28						39.40						2.88						7		%				40.92						37.80						3.12						8		%
Adjusted EBITDA Margin per Ton (1)(2)
Seaborne Thermal			$	27.70					$	46.32					$	(18.62)					(40)		%				$	40.71					$	38.08					$	2.63					7		%
Seaborne Metallurgical			51.64						65.45						(13.81)						(21)		%				56.76						129.66						(72.90)						(56)		%
Powder River Basin			2.38						1.70						0.68						40		%				1.82						0.71						1.11						156		%
Other U.S. Thermal			11.61						15.18						(3.57)						(24)		%				13.20						13.82						(0.62)						(4)		%

(1)This is an operating/statistical measure not recognized in accordance with U.S. GAAP. Refer to the “Reconciliation of Non-GAAP Financial Measures” section below for definitions and reconciliations to the most comparable measures under U.S. GAAP.

(2)Includes revenue-based production taxes and royalties; excludes depreciation, depletion and amortization; asset retirement obligation expenses; selling and administrative expenses; restructuring charges; asset impairment; amortization of take-or-pay contract-based intangibles; and certain other costs related to post-mining activities.

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Revenue

The following table presents revenue by reporting segment:

			Three Months Ended September 30,												(Decrease) Increase to Revenue												Nine Months Ended September 30,												Increase (Decrease) to Revenue
			2023						2022						$						%						2023						2022						$						%
			(Dollars in millions)																								(Dollars in millions)
Seaborne Thermal			$	297.4					$	353.2					$	(55.8)					(16)		%				$	1,043.4					$	959.3					$	84.1					9		%
Seaborne Metallurgical			247.0						310.7						(63.7)						(21)		%				907.9						1,165.8						(257.9)						(22)		%
Powder River Basin			313.0						290.5						22.5						8		%				878.0						771.4						106.6						14		%
Other U.S. Thermal			228.2						261.4						(33.2)						(13)		%				677.5						689.4						(11.9)						(2)		%
Corporate and Other			(6.7)						126.7						(133.4)						(105)		%				204.9						(230.1)						435.0						189		%
Revenue			$	1,078.9					$	1,342.5					$	(263.6)					(20)		%				$	3,711.7					$	3,355.8					$	355.9					11		%

Seaborne Thermal. 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 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 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.

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

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Adjusted EBITDA

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

			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						$						%
			(Dollars in millions)																								(Dollars in millions)
Seaborne Thermal			$	115.5					$	171.2					$	(55.7)					(33)		%				$	477.0					$	438.5					$	38.5					9		%
Seaborne Metallurgical			78.6						113.2						(34.6)						(31)		%				271.9						593.9						(322.0)						(54)		%
Powder River Basin			54.1						37.9						16.2						43		%				116.1						43.5						72.6						167		%
Other U.S. Thermal			49.1						72.7						(23.6)						(32)		%				165.2						184.6						(19.4)						(11)		%
Corporate and Other			(27.3)						43.9						(71.2)						(162)		%				(11.4)						83.7						(95.1)						(114)		%
Adjusted EBITDA (1)			$	270.0					$	438.9					$	(168.9)					(38)		%				$	1,018.8					$	1,344.2					$	(325.4)					(24)		%

(1)This is a financial measure not recognized in accordance with U.S. GAAP. Refer to the “Reconciliation of Non-GAAP Financial Measures” section below for definitions and reconciliations to the most comparable measures under U.S. GAAP.

Seaborne Thermal. 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 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 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 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.

Other U.S. Thermal. 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).

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

			Three Months Ended September 30,												Decrease to Adjusted EBITDA												Nine Months Ended September 30,												(Decrease) Increase to Adjusted EBITDA
			2023						2022						$						%						2023						2022						$						%
			(Dollars in millions)																								(Dollars in millions)
Middlemount (1)			$	7.7					$	27.9					$	(20.2)					(72)		%				$	13.7					$	121.9					$	(108.2)					(89)		%
Resource management activities (2)			3.1						5.2						(2.1)						(40)		%				11.4						22.5						(11.1)						(49)		%
Selling and administrative expenses			(21.5)						(19.6)						(1.9)						(10)		%				(66.0)						(64.5)						(1.5)						(2)		%
Other items, net (3)			(16.6)						30.4						(47.0)						(155)		%				29.5						3.8						25.7						676		%
Corporate and Other Adjusted EBITDA			$	(27.3)					$	43.9					$	(71.2)					(162)		%				$	(11.4)					$	83.7					$	(95.1)					(114)		%

(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 $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 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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Income From Continuing Operations, Net of Income Taxes

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

			Three Months Ended September 30,												(Decrease) Increase to Income												Nine Months Ended September 30,												(Decrease) Increase to Income
			2023						2022						$						%						2023						2022						$						%
			(Dollars in millions)																								(Dollars in millions)
Adjusted EBITDA (1)			$	270.0					$	438.9					$	(168.9)					(38)		%				$	1,018.8					$	1,344.2					$	(325.4)					(24)		%
Depreciation, depletion and amortization			(82.3)						(80.7)						(1.6)						(2)		%				(239.2)						(227.4)						(11.8)						(5)		%
Asset retirement obligation expenses			(15.4)						(13.1)						(2.3)						(18)		%				(46.3)						(40.8)						(5.5)						(13)		%
Restructuring charges			(0.9)						(1.0)						0.1						10		%				(3.0)						(2.8)						(0.2)						(7)		%
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.						(37.0)						—						(37.0)						n.m.
Changes in amortization of basis difference related to equity affiliates			0.5						0.5						—						—		%				1.2						1.7						(0.5)						(29)		%
Interest expense			(13.8)						(33.8)						20.0						59		%				(45.5)						(110.8)						65.3						59		%
Net loss on early debt extinguishment			—						(8.7)						8.7						100		%				(8.8)						(34.5)						25.7						74		%
Interest income			20.3						4.9						15.4						314		%				56.5						6.3						50.2						797		%
Unrealized gains (losses) on derivative contracts related to forecasted sales			—						90.4						(90.4)						(100)		%				159.0						(235.1)						394.1						168		%
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)		%
Income tax provision			(46.5)						(10.7)						(35.8)						(335)		%				(238.7)						(21.0)						(217.7)						(1,037)		%
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	(255.6)					(66)		%				$	617.0					$	675.9					$	(58.9)					(9)		%

(1)This is a financial measure not recognized in accordance with U.S. GAAP. Refer to the “Reconciliation of Non-GAAP Financial Measures” section below for definitions and reconciliations to the most comparable measures under U.S. GAAP.

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

			Three Months Ended September 30,												Increase (Decrease) to Income												Nine Months Ended September 30,												Increase (Decrease) to Income
			2023						2022						$						%						2023						2022						$						%
			(Dollars in millions)																								(Dollars in millions)
Seaborne Thermal			$	(26.1)					$	(28.8)					$	2.7					9		%				$	(77.5)					$	(79.0)					$	1.5					2		%
Seaborne Metallurgical			(23.1)						(22.6)						(0.5)						(2)		%				(67.1)						(64.5)						(2.6)						(4)		%
Powder River Basin			(13.3)						(11.6)						(1.7)						(15)		%				(35.6)						(31.4)						(4.2)						(13)		%
Other U.S. Thermal			(17.9)						(15.7)						(2.2)						(14)		%				(52.7)						(45.1)						(7.6)						(17)		%
Corporate and Other			(1.9)						(2.0)						0.1						5		%				(6.3)						(7.4)						1.1						15		%
Total			$	(82.3)					$	(80.7)					$	(1.6)					(2)		%				$	(239.2)					$	(227.4)					$	(11.8)					(5)		%

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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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Seaborne Thermal			$	2.14					$	2.79					$	2.13					$	2.57
Seaborne Metallurgical			2.29						2.04						2.06						2.55
Powder River Basin			0.31						0.32						0.31						0.32
Other U.S. 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 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. 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.

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

Net Loss on Early Debt Extinguishment. 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. The losses recognized during the prior year periods were primarily related to the redemption of existing notes during the periods as further described in Note 9. “Long-term Debt” to the accompanying unaudited condensed consolidated financial statements and Note 10. “Long-term Debt” to the Annual Report on Form 10-K for the year ended December 31, 2022.

Interest Income. The increase in interest income during the three 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.

Unrealized Gains (Losses) on Derivative Contracts Related to Forecasted Sales. Unrealized gains (losses) primarily relate to mark-to-market activity on derivative contracts related to forecasted coal sales. For additional information, refer to Note 6. “Derivatives and Fair Value Measurements” to the accompanying unaudited condensed consolidated financial statements.

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

Income Tax Provision. 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. “Income Taxes” to the accompanying unaudited condensed consolidated financial statements for additional information.

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Net Income Attributable to Common Stockholders

The following table presents net income attributable to common stockholders:

			Three Months Ended September 30,												(Decrease) Increase to Income												Nine Months Ended September 30,												(Decrease) Increase to Income
			2023						2022						$						%						2023						2022						$						%
			(Dollars in millions)																								(Dollars in millions)
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	(255.6)					(66)		%				$	617.0					$	675.9					$	(58.9)					(9)		%
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)		%
Less: 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 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 September 30,												(Decrease) Increase to EPS												Nine Months Ended September 30,												(Decrease) Increase to EPS
			2023						2022						$						%						2023						2022						$						%
Diluted EPS attributable to common stockholders:
Income from continuing operations			$	0.80					$	2.34					$	(1.54)					(66)		%				$	3.68					$	4.33					$	(0.65)					(15)		%
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 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.

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Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA is defined as income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses and depreciation, depletion and amortization. Adjusted EBITDA is also adjusted for the discrete items that management excluded in analyzing each of its segment’s operating performance, as displayed in the reconciliations below.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Income from continuing operations, net of income taxes			$	128.8					$	384.4					$	617.0					$	675.9
Depreciation, depletion and amortization			82.3						80.7						239.2						227.4
Asset retirement obligation expenses			15.4						13.1						46.3						40.8
Restructuring charges			0.9						1.0						3.0						2.8
Asset impairment			—						1.7						2.0						1.7
Provision for NARM and Shoal Creek loss			3.3						—						37.0						—
Changes in amortization of basis difference related to equity affiliates			(0.5)						(0.5)						(1.2)						(1.7)
Interest expense			13.8						33.8						45.5						110.8
Net loss on early debt extinguishment			—						8.7						8.8						34.5
Interest income			(20.3)						(4.9)						(56.5)						(6.3)
Unrealized (gains) losses on derivative contracts related to forecasted sales			—						(90.4)						(159.0)						235.1
Unrealized losses (gains) on foreign currency option contracts			0.5						1.4						(0.1)						4.4
Take-or-pay contract-based intangible recognition			(0.7)						(0.8)						(1.9)						(2.2)
Income tax provision			46.5						10.7						238.7						21.0
Total Adjusted EBITDA			$	270.0					$	438.9					$	1,018.8					$	1,344.2

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Operating costs and expenses			$	803.7					$	838.4					$	2,512.3					$	2,363.0
Unrealized (losses) gains on foreign currency option contracts			(0.5)						(1.4)						0.1						(4.4)
Take-or-pay contract-based intangible recognition			0.7						0.8						1.9						2.2
Net periodic benefit credit, excluding service cost			(10.0)						(12.2)						(29.4)						(36.7)
Total Reporting Segment Costs			$	793.9					$	825.6					$	2,484.9					$	2,324.1

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(Dollars in millions)
Seaborne Thermal			$	181.9					$	182.0					$	566.4					$	520.8
Seaborne Metallurgical			168.4						197.5						636.0						571.9
Powder River Basin			258.9						252.6						761.9						727.9
Other U.S. Thermal			179.1						188.7						512.3						504.8
Corporate and Other			5.6						4.8						8.3						(1.3)
Total Reporting Segment Costs			$	793.9					$	825.6					$	2,484.9					$	2,324.1

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

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

			Three Months Ended September 30, 2023
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal
			(Amounts in millions, except per ton data)
Tons sold			4.2						1.5						22.7						4.2
Revenue			$	297.4					$	247.0					$	313.0					$	228.2
Total Reporting Segment Costs			181.9						168.4						258.9						179.1
Adjusted EBITDA			$	115.5					$	78.6					$	54.1					$	49.1
Revenue per Ton			$	71.38					$	162.02					$	13.79					$	53.89
Costs per Ton			43.68						110.38						11.41						42.28
Adjusted EBITDA Margin per Ton			$	27.70					$	51.64					$	2.38					$	11.61

			Three Months Ended September 30, 2022
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal
			(Amounts in millions, except per ton data)
Tons sold			3.7						1.8						22.3						4.8
Revenue			$	353.2					$	310.7					$	290.5					$	261.4
Total Reporting Segment Costs			182.0						197.5						252.6						188.7
Adjusted EBITDA			$	171.2					$	113.2					$	37.9					$	72.7
Revenue per Ton			$	95.54					$	179.77					$	12.99					$	54.58
Costs per Ton			49.22						114.32						11.29						39.40
Adjusted EBITDA Margin per Ton			$	46.32					$	65.45					$	1.70					$	15.18

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			Nine Months Ended September 30, 2023
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal
			(Amounts in millions, except per ton data)
Tons sold			11.8						4.8						63.6						12.5
Revenue			$	1,043.4					$	907.9					$	878.0					$	677.5
Total Reporting Segment Costs			566.4						636.0						761.9						512.3
Adjusted EBITDA			$	477.0					$	271.9					$	116.1					$	165.2
Revenue per Ton			$	89.06					$	189.50					$	13.80					$	54.12
Costs per Ton			48.35						132.74						11.98						40.92
Adjusted EBITDA Margin per Ton			$	40.71					$	56.76					$	1.82					$	13.20

			Nine Months Ended September 30, 2022
			Seaborne Thermal						Seaborne Metallurgical						Powder River Basin						Other U.S. Thermal
			(Amounts in millions, except per ton data)
Tons sold			11.5						4.6						61.4						13.4
Revenue			$	959.3					$	1,165.8					$	771.4					$	689.4
Total Reporting Segment Costs			520.8						571.9						727.9						504.8
Adjusted EBITDA			$	438.5					$	593.9					$	43.5					$	184.6
Revenue per Ton			$	83.30					$	254.52					$	12.55					$	51.62
Costs per Ton			45.22						124.86						11.84						37.80
Adjusted EBITDA Margin per Ton			$	38.08					$	129.66					$	0.71					$	13.82

Available Free Cash Flow is defined as operating cash flow minus investing cash flow and distributions to noncontrolling interests; plus/minus changes to restricted cash and collateral (excluding one-time effects of the recent surety agreement amendment) and other anticipated expenditures. See the table below for a reconciliation of Available Free Cash Flow to its most comparable measure under U.S. GAAP.

			Nine Months Ended September 30, 2023
			(Dollars in millions)
Net cash provided by operating activities			$	753.1
- Net cash used in investing activities			(174.6)
- Distributions to noncontrolling interests			(58.9)
+/- Changes to restricted cash and collateral			128.0
- Anticipated expenditures or other requirements			—
Available Free Cash Flow			$	647.6

Regulatory Update

Other than as described in the following section, there were no significant changes to the Company’s regulatory or global climate matters subsequent to December 31, 2022. This section should be considered in connection with the Company’s regulatory and global climate matters as outlined in Part I, Item 1. “Business” in its Annual Report on Form 10-K for the year ended December 31, 2022.

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Regulatory Matters - U.S.

National Ambient Air Quality Standards (NAAQS). 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 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. The CSAPR and related updates require numerous U.S. 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 nitrogen oxide (NOx) in 23 states, including California, Nevada, Oklahoma and Texas, as well as some Indian reservations. The rule includes state emission budgets for NOx 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. The EPA estimates that annual compliance costs (for 2023 through 2042) will be $770 million to $910 million. These emission limitations would apply in addition to requirements contained in State Implementation Plans to control ozone precursors in affected states, although states have the option to replace these limits with equally strict or more stringent limitations. When implemented, this rule could influence the closure of some coal generating units that have not installed selective catalytic reduction technologies. The rule has been challenged in several U.S. Courts of Appeal, including the U. S. Court of Appeals for the D.C. Circuit (D.C. Circuit).

EPA Regulation of Greenhouse Gas Emissions from New and Existing Fossil Fuel-Fired Electricity Utility Generating Units (EGUs). On May 23, 2023, the EPA proposed a rule that includes five separate actions regarding the control of greenhouse gas (GHG) emissions from fossil fuel-fired power plants. The EPA proposed to revise New Source Performance Standards (NSPS) to address carbon dioxide (CO2) emissions from both new fossil fuel-fired steam generating units and new fossil fuel-fired stationary combustion turbines. The EPA also proposed emission guidelines for existing coal- and oil/gas-fired steam generating units and for existing stationary combustion turbines. Finally, in the same proposed rule, the EPA proposed to repeal the Affordable Clean Energy Rule, promulgated by the EPA in 2019 and vacated by the D.C. Circuit in 2021.

If finalized in the form proposed, the regulations would require existing fossil fuel-fired steam generating units (primarily coal units) to use carbon capture and sequestration (CCS) with 90% capture of CO2 if they plan to operate after December 31, 2039. These units, however, may also pursue a different compliance pathway that is based on making a commitment to cease operations. The proposed rule also would require existing stationary combustion turbines over 300 megawatts with a capacity factor greater than 50% (primarily units using natural gas) to either utilize CCS by 2035 or pursue a pathway that would require co-firing with 30% low-GHG hydrogen by 2032, followed by co-firing with 96% low-GHG hydrogen by 2038. The EPA is also taking comments with regard to imposing standards for stationary combustion turbines under 300 megawatts.

All requirements related to existing affected units – whether fired by coal, oil or natural gas – will be imposed through state plans that can additionally take into account the remaining useful life of a generating unit when determining appropriate controls. The EPA, however, proposes that such plans generally be no less stringent than the emission reductions that would be obtained under the EPA’s guidelines. 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 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% CO2 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.

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If finalized as proposed, the GHG NSPS could have substantial impacts on the use of coal, oil and natural gas for the generation of electricity.

Mercury and Air Toxic Standards (MATS). In 2012, the EPA published the final MATS rule, which revised the NSPS for NOx, sulfur dioxide and PM for new and modified coal-fueled electricity generating plants, and imposed maximum achievable control technology (MACT) emission limits on hazardous air pollutants (HAPs) from new and existing coal-fueled and oil-fueled electric generating plants. MACT standards limit emissions of mercury, acid gas HAPs, non-mercury HAP metals and organic HAPs.

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 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. The public comment period on the proposals ended on June 23, 2023.

Effluent Limitations Guidelines for the Steam Electric Power Generating Industry. In 2015, the EPA published a final rule setting requirements for wastewater discharge from EGUs. On March 29, 2023, the EPA proposed a rule that would establish more stringent standards for flue gas desulfurization wastewater, bottom ash transport water and combustion residual leachate. If the proposed rule is finalized in substantially the same form, the revised effluent limitations guidelines would significantly increase costs for many coal-fueled steam electric power plants. Concurrently, the EPA issued a direct final rule which extended the deadline through June 2023 for steam electric power plants to commit to the permanent cessation of coal combustion by December 31, 2028 in exchange for less stringent wastewater discharge requirements during the interim. The direct final rule could influence fuel switching or additional coal generating unit retirements by the end of 2028.

Clean Water Act (CWA) Definition of “Waters of the United States”. On January 18, 2023, the EPA and the U.S. Army Corp of Engineers finalized a revised definition of “Waters of the United States” to clarify the scope of federal regulatory authority under the CWA. Several courts preliminarily enjoined that rule in 27 states. In addition, on May 25, 2023, the Supreme Court of the United States issued its decision in Sackett v. EPA, No. 21-454, which significantly narrowed the scope of federal regulatory authority over wetlands and non-navigable waters. 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

New South Wales Coal Directions. The State of New South Wales (NSW) enacted the Energy and Utilities Administration Amendment Act 2022 granting the State Premier and Minister for Energy the ability to issue directions in the event of a coal market price emergency (among other powers). On December 22, 2022, the State Premier declared such an emergency, intended to control coal and electricity pricing. Subsequently, directions were issued to Peabody Energy Australia Pty Ltd and other coal producers with operations in NSW, which have been amended at various dates. The most recent directions require Peabody Energy Australia Pty Ltd to reserve a portion of coal produced by Wambo Coal Pty Ltd and Wilpinjong Coal Pty Ltd for sale to NSW power generators at a capped price until June 30, 2024 and impose additional reporting obligations to demonstrate compliance. 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.

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

On March 27, 2023, the Australian Federal Government announced several additional measures in the Safeguard Mechanism (Crediting) Amendments Bill 2023 which was introduced and passed both Houses of Parliament on March 30, 2023. The legislation introduces a cap on overall net emissions from facilities covered by the scheme through 2030. The legislation also sets a cap of net zero tonnes carbon dioxide equivalent for any financial year beginning after June 30, 2049. In addition, if the Minister for Environment and Water grants an approval under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) to a new or expanded facility covered by the scheme, the Minister will be required to give an estimate of the facility's Scope 1 emissions to the Minister for Climate Change, the Climate Change Secretary and the Climate Change Authority for assessment against scheme targets. The legislation went into effect on July 1, 2023. 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

There have been no significant changes to the Company’s global climate matters subsequent to December 31, 2022. Refer to Part I, Item 1. “Business” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for information regarding the Company’s global climate matters.

Liquidity and Capital Resources

Overview

The Company’s primary source of cash is proceeds from the sale of its coal production to customers. The Company has also generated cash from the sale of non-strategic assets, including coal reserves and surface lands, and, from time to time, borrowings under its credit facilities and the issuance of securities. The Company’s primary uses of cash include the cash costs of coal production, capital expenditures, coal reserve lease and royalty payments, debt service costs, finance and operating lease payments, postretirement plans, take-or-pay obligations, post-mining reclamation obligations, collateral and margining requirements, dividends, share repurchases, and selling and administrative expenses. The Company has also used cash for early debt retirements.

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Any future determinations to return capital to stockholders, such as dividends or share repurchases will depend on a variety of factors, including the Company’s net income or other sources of cash, liquidity position and potential alternative uses of cash, such as internal development projects or acquisitions, as well as economic conditions and expected future financial results. The Company’s ability to early retire debt, declare dividends or repurchase shares in the future will depend on its future financial performance, which in turn depends on the successful implementation of its strategy and on financial, competitive, regulatory, technical and other factors, general economic conditions, demand for and selling prices of coal and other factors specific to its industry, many of which are beyond the Company’s control.

Liquidity

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. A significant majority of the cash held by the Company’s foreign subsidiaries is denominated in U.S. dollars. This cash is generally used to support non-U.S. liquidity needs, including capital and operating expenditures in Australia. From time to time, the Company may repatriate excess cash from its foreign subsidiaries to the U.S. During the 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 $1,068.3 million as of September 30, 2023. Available liquidity was comprised of the following:

									September 30, 2023						December 31, 2022
									(Dollars in millions)
Cash and cash equivalents									$	988.5					$	1,307.3
Credit facility availability									—						3.5
Accounts receivable securitization program availability									79.8						7.0
Total liquidity									$	1,068.3					$	1,317.8

Capital Returns to Shareholders

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

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 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 $586.1 million at September 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 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. 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.

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To fund the maximum collateral amount, the Company deposited $566.3 million into trust accounts for the benefit of certain surety providers on March 31, 2023. The remainder was comprised of $140.5 million of existing cash-collateralized letters of credit and $15.0 million already held on behalf of a surety provider. The amendment became effective on April 14, 2023, when the Company terminated a credit agreement which, as amended, provided for $237.2 million of capacity for irrevocable standby letters of credit (LC Facility). The $223.8 million of letters of credit that were outstanding under the LC Facility at March 31, 2023 were 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

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 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

From time to time, the Company enters into hedging arrangements, including economic hedging arrangements, to manage various risks, including coal price volatility. Most hedging arrangements require the Company to post margin with its clearing broker based on the value of the related instruments and other credit factors. If the fair value of its exchange-cleared hedge portfolio moves significantly, the Company could be required to post additional margin, which could negatively impact its liquidity.

During 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.

Indebtedness

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)
3.250% Convertible Senior Notes due March 2028 (2028 Convertible Notes)			$	320.0					$	320.0
Finance lease obligations			22.1						23.6
Less: Debt issuance costs			(8.5)						(9.8)
			333.6						333.8
Less: Current portion of long-term debt			12.7						13.2
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 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.

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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 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.

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.

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.

Accounts Receivable Securitization Program

As described in Note 12. “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. 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 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 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.

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Cash Flows

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

			Nine Months Ended September 30,
			2023						2022
			(Dollars in millions)
Net cash provided by operating activities			$	753.1					$	504.1
Net cash (used in) provided by investing activities			(174.6)						61.1
Net cash used in financing activities			(364.5)						(120.5)
Net change in cash, cash equivalents and restricted cash			214.0						444.7
Cash, cash equivalents and restricted cash at beginning of period			1,417.6						954.3
Cash, cash equivalents and restricted cash at end of period			$	1,631.6					$	1,399.0
Available Free Cash Flow			$	647.6

Operating Activities. 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 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 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

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

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

			September 30, 2023																		December 31, 2022
			Reclamation Support						Other Support (1)						Total						Reclamation Support						Other Support (1)						Total
			(Dollars in millions)
Surety bonds			$	1,070.0					$	127.9					$	1,197.9					$	1,250.1					$	126.7					$	1,376.8
Letters of credit (2)			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
Less: Letters of credit in support of surety bonds (3)			(6.0)						(11.5)						(17.5)						(431.7)						(37.2)						(468.9)
Obligations supported, net			$	1,070.0					$	217.8					$	1,287.8					$	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.

At September 30, 2023, the Company had total asset retirement obligations of $753.9 million. Bonding requirement amounts may differ significantly from the related 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 $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. Such collateral is primarily in support of the financial instruments noted above, including in relation to the Company’s surety bond portfolio, its collateralized letter of credit agreement, mandatory repurchases of credit facility capacity and amounts held directly with beneficiaries which are not supported by surety bonds.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition, results of operations, liquidity and capital resources is based upon its financial statements, which have been prepared in accordance with U.S. GAAP. The Company is also required under U.S. GAAP to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 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 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

See Note 2. “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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Coal Pricing Risk

The Company predominantly manages its commodity price risk for its non-trading, long-term coal contract portfolio through the use of long-term coal supply agreements (those with terms longer than one year) to the extent possible, rather than through the use of derivative instruments. As of September 30, 2023, the Company had approximately 112 million tons of U.S. thermal coal priced and committed for 2023. This includes approximately 93 million tons of PRB coal and 19 million tons of other U.S. thermal coal. The Company has the flexibility to increase volumes should demand warrant. Peabody is estimating full year 2023 thermal coal sales volumes from its Seaborne Thermal segment of 15 million to 16 million tons comprised of thermal export volume of 9.5 million to 10.5 million tons and domestic volume of 5.5 million tons. Peabody is estimating full year 2023 metallurgical coal sales from its Seaborne Metallurgical segment of 6.5 million to 7.5 million tons. Sales commitments in the metallurgical coal market are typically not long-term in nature, and the Company is therefore subject to fluctuations in market pricing. The Company’s sensitivity to market pricing in thermal coal markets is dependent on the duration of contracts.

As of September 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.

Foreign Currency Risk

The Company has historically utilized currency forwards and options to hedge currency risk associated with anticipated Australian dollar operating expenditures. The accounting for these derivatives is discussed in Note 6. “Derivatives and Fair Value Measurements” to the accompanying unaudited condensed consolidated financial statements. As of September 30, 2023, the Company held average rate options with an aggregate notional amount of $615.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar operating expenditures over the nine-month period ending June 30, 2024. As of September 30, 2023, the Company also held purchased collars with an aggregate notional amount of $339.0 million Australian dollars related to anticipated Australian dollar operating expenditures during the six-month period ending March 31, 2024. Assuming the Company had no foreign currency hedging instruments in place, its exposure in operating costs and expenses due to a $0.10 change in the Australian dollar/U.S. dollar exchange rate is approximately $206 million for the next twelve months. Based upon the Australian dollar/U.S. dollar exchange rate at September 30, 2023, the currency option contracts outstanding at that date would limit the Company’s exposure to approximately $175 million with respect to a $0.10 increase in the exchange rate and approximately $180 million with respect to a $0.10 decrease in the exchange rate for the next twelve months.

Diesel Fuel Price Risk

The Company expects to consume 90 to 100 million gallons of diesel fuel during the next twelve months. A $10 per barrel change in the price of crude oil (the primary component of a refined diesel fuel product) would increase or decrease its annual diesel fuel costs by approximately $22 million based on its expected usage.

As of September 30, 2023, the Company did not have any diesel fuel derivative instruments in place. The Company partially manages the price risk of diesel fuel through the use of cost pass-through contacts with certain customers.

Item 4. Controls and Procedures.

The Company’s disclosure controls and procedures are designed to, among other things, provide reasonable assurance that material information, both financial and non-financial, and other information required under the securities laws to be disclosed is accumulated and communicated to senior management, including its principal executive and financial officers, on a timely basis. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2023, and concluded that such controls and procedures were effective to provide reasonable assurance that the desired control objectives were achieved. Additionally, there have been no changes to the Company’s internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is subject to various legal and regulatory proceedings. For a description of its significant legal proceedings refer to Note 13. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements” of this Quarterly Report, which information is incorporated by reference herein.

Item 1A. Risk Factors.

The Company operates in a rapidly changing environment that involves a number of risks. For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors disclosed in Item 1A. “Risk Factors” of Part II of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 4, 2023, and Item 1A. “Risk Factors” of Part I of its Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023. In addition to the other information set forth in this Quarterly Report, including the information presented in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” you should carefully consider the risk factors disclosed in the aforementioned filings, which could materially affect the Company’s results of operations, financial condition and liquidity.

Factors that could affect the Company’s results or an investment in the Company’s securities include, but are not limited to:

•the Company’s profitability depends upon the prices it receives for its coal;

•if a substantial number of the Company’s long-term coal supply agreements, including those with its largest customers, terminate, or if the pricing, volumes or other elements of those agreements materially adjust, its revenue and operating profits could suffer if the Company is unable to find alternate buyers willing to purchase its coal on comparable terms to those in its contracts;

•risks inherent to mining could increase the cost of operating the Company’s business, and events and conditions that could occur during the course of its mining operations could have a material adverse impact on the Company;

•the Company’s take-or-pay arrangements could unfavorably affect its profitability;

•the Company may not recover its investments in its mining, exploration and other assets, which may require the Company to recognize impairment charges related to those assets;

•the Company’s ability to operate effectively could be impaired if it loses key personnel or fails to attract qualified personnel;

•the Company could be negatively affected if it fails to maintain satisfactory labor relations;

•the Company could be adversely affected if it fails to appropriately provide financial assurances for its obligations;

•the Company’s mining operations are extensively regulated, which imposes significant costs on it, and future regulations and developments could increase those costs or limit its ability to produce coal;

•the Company’s operations may impact the environment or cause exposure to hazardous substances, and its properties may have environmental contamination, which could result in material liabilities to the Company;

•the Company may be unable to obtain, renew or maintain permits necessary for its operations, or the Company may be unable to obtain, renew or maintain such permits without conditions on the manner in which it runs its operations, which would reduce its production, cash flows and profitability;

•concerns about the impacts of coal combustion on global climate are increasingly leading to conditions that have affected and could continue to affect demand for the Company’s products or its securities and its ability to produce, including increased governmental regulation of coal combustion and unfavorable investment decisions by electricity generators;

•numerous activist groups are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation, domestically and internationally, thereby further reducing the demand and pricing for coal, and potentially materially and adversely impacting the Company’s future financial results, liquidity and growth prospects;

•the Company’s trading and hedging activities do not cover certain risks and may expose it to earnings volatility and other risks;

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•if the assumptions underlying the Company’s asset retirement obligations for reclamation and mine closures are materially inaccurate, its costs could be significantly greater than anticipated;

•the Company’s future success depends upon its ability to continue acquiring and developing coal reserves and resources that are economically recoverable;

•the Company faces numerous uncertainties in estimating its coal reserves and resources and inaccuracies in its estimates could result in lower than expected revenue, higher than expected costs and decreased profitability;

•joint ventures, partnerships or non-managed operations may not be successful and may not comply with the Company’s operating standards;

•the Company’s expenditures for postretirement benefit obligations could be materially higher than it has predicted if its underlying assumptions prove to be incorrect;

•inflation could result in higher costs and decreased profitability;

•the Company’s business, results of operations, financial condition and prospects could be materially and adversely affected by pandemic or other widespread illnesses and the related effects on public health;

•Peabody is exposed to risks associated with political or international conflicts such as the ongoing conflict between Russia and Ukraine;

•Peabody could be exposed to significant liability, reputational harm, loss of revenue, increased costs or other risks if it sustains cyber attacks or other security breaches that disrupt its operations or result in the dissemination of proprietary or confidential information about the Company, its customers or other third-parties;

•the Company is subject to various general operating risks which may be fully or partially outside of its control;

•the terms of the agreements and instruments governing the Company’s debt and surety bonding obligations impose restrictions that may limit its operating and financial flexibility;

•the number and quantity of viable financing and insurance alternatives available to the Company may be significantly impacted by unfavorable lending and investment policies by financial institutions and insurance companies associated with concerns about environmental impacts of coal combustion, and negative views around its efforts with respect to environmental and social matters and related governance considerations could harm the perception of the Company by a significant number of investors or result in the exclusion of its securities from consideration by those investors;

•the price of Peabody’s securities may be volatile;

•Peabody’s common stock is subject to dilution and may be subject to further dilution in the future;

•there may be circumstances in which the interests of a significant stockholder could be in conflict with other stakeholders’ interests;

•the future payment of dividends on Peabody’s stock or future repurchases of its stock is dependent on a number of factors and cannot be assured;

•the Company may not be able to fully utilize its deferred tax assets;

•acquisitions and divestitures are a potentially important part of the Company’s long-term strategy, subject to its investment criteria, and involve a number of risks, any of which could cause the Company not to realize the anticipated benefits;

•Peabody’s certificate of incorporation and by-laws include provisions that may discourage a takeover attempt;

•diversity in interpretation and application of accounting literature in the mining industry may impact the Company’s reported financial results; and

•other risks and factors detailed in this report, including, but not limited to, those discussed in “Legal Proceedings,” set forth in Part II, Item 1 of this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Dividends

The declaration and payment of dividends and the amount of dividends will depend on the Company’s annual AFCF. Peabody anticipates a regular quarterly cash dividend of $0.075 per share, but all shareholder returns remain at the Board of Director's discretion.

During the three and nine months ended September 30, 2023, the Company declared dividends per share of $0.075 and $0.150, respectively. On October 26, 2023, the Company declared an additional dividend per share of $0.075 to be paid on November 29, 2023 to shareholders of record as of November 9, 2023.

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Share Relinquishments

The Company routinely allows employees to relinquish common stock to pay estimated taxes upon the vesting of restricted stock units and the payout of performance units that are settled in common stock under its equity incentive plans. The value of common stock tendered by employees is determined based on the closing price of the Company’s common stock on the dates of the respective relinquishments.

Share Repurchase Program

On April 17, 2023, the Company announced that its Board of Directors authorized a share repurchase program (2023 Repurchase Program) authorizing repurchases of up to $1.0 billion of its common stock.

Under the 2023 Repurchase Program, the Company may purchase shares of common stock from time to time at the discretion of management through open market purchases, privately negotiated transactions, block trades, accelerated or other structured share repurchase programs or other means. The manner, timing, pricing and amount of any share repurchase transactions will be based on a variety of factors, including market conditions, applicable legal requirements and alternative opportunities that the Company may have for the use or investment of capital. Through September 30, 2023, the Company had repurchased 12.6 million shares of its common stock under the 2023 Repurchase Program for $266.6 million, which included commissions paid of $0.2 million, leaving $733.6 million available for share repurchase. From October 1, 2023 through October 27, 2023, the Company has purchased an additional 1.1 million shares of its common stock for $27.3 million.

Purchases of Equity Securities

The following table summarizes all share purchases for the three months ended September 30, 2023:

Period						Total Number of Shares Purchased (1)						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Program						Maximum Dollar Value that May Yet Be Used to Repurchase Shares Under the Publicly Announced Program (In millions)
July 1 through July 31, 2023						3,105,291						$	21.58					3,104,886						$	749.0
August 1 through August 31, 2023						—						—						—						749.0
September 1 through September 30, 2023						636,035						24.14						636,035						733.6
Total						3,741,326						22.02						3,740,921

(1)Includes shares withheld to cover the withholding taxes upon the vesting of equity awards, which are not part of the publicly announced repurchase programs.

Item 4. Mine Safety Disclosures.

Peabody’s “Safety and Sustainability Management System” has been designed to set clear and consistent expectations for safety, health and environmental stewardship across the Company’s business. It aligns to the National Mining Association’s CORESafety® framework and encompasses three fundamental areas: leadership and organization, risk management and assurance. Peabody also partners with other companies and certain governmental agencies to pursue new technologies that have the potential to improve its safety performance and provide better safety protection for employees.

Peabody continually monitors its safety performance and regulatory compliance. The information concerning mine safety violations or other regulatory matters required by SEC regulations is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Item 5. Other Information.

Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2023, none of Peabody’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

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Item 6. Exhibits.

See Exhibit Index on following pages.

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EXHIBIT INDEX

The exhibits below are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.

Exhibit No.						Description of Exhibit
31.1†						Certification of periodic financial report by the Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†						Certification of periodic financial report by the Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†						Certification of periodic financial report pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Registrant’s Chief Executive Officer.
32.2†						Certification of periodic financial report pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Registrant’s Chief Financial Officer.
95†						Mine Safety Disclosure required by Item 104 of Regulation S-K.
101.INS						Inline XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).
†						Filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PEABODY ENERGY CORPORATION

Date:

November 3, 2023

By:

/s/ MARK A. SPURBECK

Mark A. Spurbeck

Executive Vice President and Chief Financial Officer (On behalf of the registrant and as Principal Financial Officer)

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