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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
March 31, 2022

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
____________________________________________
btu-20220331_g1.jpg
PEABODY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware13-4004153
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
701 Market Street,St. Louis,Missouri63101-1826
(Address of principal executive offices)(Zip Code)
(314342-3400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBTUNew 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
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No
There were 143.8 million shares of the registrant’s common stock (par value of $0.01 per share) outstanding at April 29, 2022.



TABLE OF CONTENTS
 Page
 
 


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,
20222021
(Dollars in millions, except per share data)
Revenue$691.4 $651.3 
Costs and expenses
Operating costs and expenses (exclusive of items shown separately below)
699.0 582.6 
Depreciation, depletion and amortization72.9 68.3 
Asset retirement obligation expenses15.0 15.9 
Selling and administrative expenses23.1 21.7 
Restructuring charges
1.6 2.1 
Other operating (income) loss:
Net (gain) loss on disposals(4.9)0.6 
(Income) loss from equity affiliates(44.7)0.9 
Operating loss(70.6)(40.8)
Interest expense39.4 52.4 
Net loss (gain) on early debt extinguishment23.5 (3.5)
Interest income(0.5)(1.5)
Net periodic benefit credit, excluding service cost(12.2)(8.7)
Loss from continuing operations before income taxes(120.8)(79.5)
Income tax benefit(1.0)(1.8)
Loss from continuing operations, net of income taxes(119.8)(77.7)
Loss from discontinued operations, net of income taxes(0.8)(2.0)
Net loss(120.6)(79.7)
Less: Net (loss) income attributable to noncontrolling interests(1.1)0.4 
Net loss attributable to common stockholders$(119.5)$(80.1)
Loss from continuing operations:
Basic loss per share$(0.87)$(0.79)
Diluted loss per share$(0.87)$(0.79)
Net loss attributable to common stockholders: 
Basic loss per share$(0.88)$(0.81)
Diluted loss per share$(0.88)$(0.81)
See accompanying notes to unaudited condensed consolidated financial statements.

1


PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,
20222021
(Dollars in millions)
Net loss$(120.6)$(79.7)
Postretirement plans (net of $0.0 tax provisions in each period)
(13.4)(11.0)
Foreign currency translation adjustment1.9 (0.2)
Other comprehensive loss, net of income taxes(11.5)(11.2)
Comprehensive loss(132.1)(90.9)
Less: Net (loss) income attributable to noncontrolling interests(1.1)0.4 
Comprehensive loss attributable to common stockholders$(131.0)$(91.3)

See accompanying notes to unaudited condensed consolidated financial statements.

2


PEABODY ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2022December 31, 2021
(Amounts in millions, except per share data)
ASSETS  
Current assets  
Cash and cash equivalents$823.3 $954.3 
Restricted cash
24.7  
Accounts receivable, net of allowance for credit losses of $0.0 at March 31, 2022 and December 31, 2021
357.4 350.5 
Inventories, net269.1 226.7 
Other current assets331.8 270.2 
Total current assets1,806.3 1,801.7 
Property, plant, equipment and mine development, net2,903.3 2,950.6 
Operating lease right-of-use assets33.0 35.5 
Investments and other assets201.2 162.0 
Total assets$4,943.8 $4,949.8 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities  
Current portion of long-term debt$19.1 $59.6 
Accounts payable and accrued expenses798.2 872.1 
Total current liabilities817.3 931.7 
Long-term debt, less current portion1,079.0 1,078.2 
Deferred income taxes20.9 27.3 
Asset retirement obligations659.5 654.8 
Accrued postretirement benefit costs209.6 212.1 
Operating lease liabilities, less current portion24.6 27.2 
Other noncurrent liabilities236.0 197.7 
Total liabilities3,046.9 3,129.0 
Stockholders’ equity  
Preferred Stock — $0.01 per share par value; 100.0 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021
  
Series Common Stock — $0.01 per share par value; 50.0 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021
  
Common Stock — $0.01 per share par value; 450.0 shares authorized, 187.0 shares issued and 143.8 shares outstanding as of March 31, 2022 and 176.3 shares issued and 133.3 shares outstanding as of December 31, 2021
1.9 1.8 
Additional paid-in capital3,969.5 3,745.6 
Treasury stock, at cost — 43.2 and 43.0 common shares as of March 31, 2022 and December 31, 2021
(1,372.3)(1,370.3)
Accumulated deficit(1,032.7)(913.2)
Accumulated other comprehensive income286.4 297.9 
Peabody Energy Corporation stockholders’ equity1,852.8 1,761.8 
Noncontrolling interests44.1 59.0 
Total stockholders’ equity1,896.9 1,820.8 
Total liabilities and stockholders’ equity$4,943.8 $4,949.8 
See accompanying notes to unaudited condensed consolidated financial statements.

3


PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
20222021
 (Dollars in millions)
Cash Flows From Operating Activities 
Net loss$(120.6)$(79.7)
Loss from discontinued operations, net of income taxes0.8 2.0 
Loss from continuing operations, net of income taxes(119.8)(77.7)
Adjustments to reconcile loss from continuing operations, net of income taxes to net cash (used in) provided by operating activities: 
Depreciation, depletion and amortization72.9 68.3 
Noncash interest expense, net3.8 4.9 
Deferred income taxes(6.4)(0.4)
Noncash share-based compensation2.0 1.8 
Net (gain) loss on disposals(4.9)0.6 
Net loss (gain) on early debt extinguishment23.5 (3.5)
(Income) loss from equity affiliates(44.7)0.9 
Foreign currency option contracts(3.3)2.9 
Changes in current assets and liabilities: 
Accounts receivable(6.9)77.0 
Inventories(42.4)20.3 
Other current assets(80.0)1.6 
Accounts payable and accrued expenses(28.4)(15.4)
Collateral arrangements(28.7)(5.3)
Asset retirement obligations4.7 8.1 
Workers’ compensation obligations(0.6)0.6 
Postretirement benefit obligations(15.9)(13.4)
Pension obligations(0.6)2.8 
Other, net3.2  
Net cash (used in) provided by continuing operations(272.5)74.1 
Net cash used in discontinued operations(1.2)(3.1)
Net cash (used in) provided by operating activities(273.7)71.0 



4


PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Three Months Ended March 31,
20222021
(Dollars in millions)
Cash Flows From Investing Activities
Additions to property, plant, equipment and mine development(29.7)(50.3)
Changes in accrued expenses related to capital expenditures(7.0)(11.4)
Proceeds from disposal of assets, net of receivables3.6 0.9 
Contributions to joint ventures(126.6)(136.1)
Distributions from joint ventures148.2 102.4 
Cash receipts from Middlemount Coal Pty Ltd and other related parties47.2 2.3 
Other, net(0.5)(1.0)
Net cash provided by (used in) investing activities35.2 (93.2)
Cash Flows From Financing Activities
Proceeds from long-term debt545.0  
Repayments of long-term debt(599.9)(40.2)
Payment of debt issuance and other deferred financing costs(19.2)(22.5)
Proceeds from common stock issuances, net of costs222.0  
Repurchase of employee common stock relinquished for tax withholding(2.0)(0.6)
Distributions to noncontrolling interests(13.8)(0.1)
Other, net0.1 0.1 
Net cash provided by (used in) financing activities132.2 (63.3)
Net change in cash, cash equivalents and restricted cash(106.3)(85.5)
Cash, cash equivalents and restricted cash at beginning of period954.3 709.2 
Cash, cash equivalents and restricted cash at end of period$848.0 $623.7 
See accompanying notes to unaudited condensed consolidated financial statements.

5


PEABODY ENERGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31,
20222021
 (Dollars in millions)
Common Stock
Balance, beginning of period$1.8 $1.4 
Common stock issuances, net of costs0.1  
Balance, end of period1.9 1.4 
Additional paid-in capital
Balance, beginning of period3,745.6 3,364.6 
Share-based compensation for equity-classified awards2.0 1.8 
Common stock issuances, net of costs221.9  
Balance, end of period3,969.5 3,366.4 
Treasury stock
Balance, beginning of period(1,370.3)(1,368.9)
Repurchase of employee common stock relinquished for tax withholding(2.0)(0.6)
Balance, end of period(1,372.3)(1,369.5)
Accumulated deficit
Balance, beginning of period(913.2)(1,273.3)
Net loss attributable to common stockholders(119.5)(80.1)
Balance, end of period(1,032.7)(1,353.4)
Accumulated other comprehensive income
Balance, beginning of period297.9 205.8 
Postretirement plans (net of $0.0 tax provisions in each period)
(13.4)(11.0)
Foreign currency translation adjustment1.9 (0.2)
Balance, end of period286.4 194.6 
Noncontrolling interests
Balance, beginning of period59.0 51.7 
Net (loss) income attributable to noncontrolling interests(1.1)0.4 
Distributions to noncontrolling interests(13.8)(0.1)
Balance, end of period44.1 52.0 
Total stockholders’ equity$1,896.9 $891.5 
See accompanying notes to unaudited condensed consolidated financial statements.

6


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, 2021. 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, 2021 has been derived from the Company’s audited consolidated balance sheet at that date. The Company’s results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2022.
(2)    Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented
Newly Adopted Accounting Standards
Convertible Debt. In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted ASU 2020-06, effective January 1, 2022. In the Company’s accompanying condensed consolidated balance sheets, the adoption of the new standard impacted the accounting for the Company’s $320.0 million of convertible debt issued in March 2022, as further described in Note 11. “Long-term Debt.” In particular, because the related senior notes have cash conversion features, bifurcation of the principal balance between debt and equity is no longer applicable. Additionally, this guidance will require the application of the “if-converted” method to calculate the impact of convertible instruments on diluted earnings per share, which may increase their dilutive impact compared to the prior accounting model.
Accounting Standards Not Yet Implemented
Reference Rate Reform. In March 2020, ASU 2020-04 was issued, which provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022. The Company has certain debt which utilizes a U.S. Dollar one-month LIBOR rate, which is expected to be published until June 2023. The LIBOR rate is likely to be replaced by a similar secured or unsecured overnight financing rate. The Company cannot estimate the impact of such variable rates on its consolidated financial statements.

7


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Government Assistance. In November 2021, ASU 2021-10 was issued, which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. The guidance is effective for annual periods beginning after December 15, 2021, with early application permitted. The Company did not early adopt the guidance in ASU 2021-10 and does not expect the guidance to have a material impact on its 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, 2021, 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 mining 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 March 31, 2022
Seaborne Thermal MiningSeaborne Metallurgical MiningPowder River Basin MiningOther U.S. Thermal Mining
Corporate and Other (1)
Consolidated
(Dollars in millions)
Thermal coal
Domestic$40.4 $ $251.5 $199.9 $ $491.8 
Export210.5     210.5 
Total thermal250.9  251.5 199.9  702.3 
Metallurgical coal
Export 318.0    318.0 
Total metallurgical 318.0    318.0 
Other (2)
0.3 3.3 (0.3)3.2 (335.4)(328.9)
Revenue$251.2 $321.3 $251.2 $203.1 $(335.4)$691.4 
Three Months Ended March 31, 2021
Seaborne Thermal MiningSeaborne Metallurgical MiningPowder River Basin MiningOther U.S. Thermal Mining
Corporate and Other (1)
Consolidated
(Dollars in millions)
Thermal coal
Domestic$44.1 $ $228.4 $146.8 $ $419.3 
Export131.9     131.9 
Total thermal176.0  228.4 146.8  551.2 
Metallurgical coal
Export 86.6    86.6 
Total metallurgical 86.6    86.6 
Other (2)
0.4 0.9  2.5 9.7 13.5 
Revenue$176.4 $87.5 $228.4 $149.3 $9.7 $651.3 
(1)    Corporate and Other revenue includes net losses related to unrealized mark-to-market adjustments on derivatives related to forecasted sales and other financial trading activity of $290.2 million and $4.9 million during the three months ended March 31, 2022 and 2021, respectively. Refer to Note 7. “Derivatives and Fair Value Measurements” for additional information. Also included in Corporate and Other revenue is revenue with customers of $19.0 million and $17.9 million during the three months ended March 31, 2022 and 2021, respectively.
(2)    Other 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 and property and facility rentals.

8


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company recorded revenue related to delivered coal to customers of approximately $1,039 million and $656 million during the three months ended March 31, 2022 and 2021, respectively. Such amounts exclude unrealized and realized gains and losses on derivative contracts related to forecasted sales and certain other revenue unrelated to delivered coal.
Committed Revenue from Contracts with Customers
The Company expects to recognize revenue subsequent to March 31, 2022 of approximately $5.1 billion related to contracts with customers in which volumes and prices per ton were fixed or reasonably estimable at March 31, 2022. Approximately 48% of such amount is expected to be recognized over the next twelve months and the remainder thereafter. Actual revenue related to such contracts may differ materially for various reasons, including price adjustment features for coal quality and cost escalations, volume optionality provisions and potential force majeure events. This estimate of future revenue does not include any revenue related to contracts with variable prices per ton that cannot be reasonably estimated, such as the majority of seaborne metallurgical and seaborne thermal coal contracts where pricing is negotiated or settled quarterly or annually.
Accounts Receivable
“Accounts receivable, net” at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, 2022December 31, 2021
 (Dollars in millions)
Trade receivables, net$323.4 $307.0 
Miscellaneous receivables, net34.0 43.5 
Accounts receivable, net$357.4 $350.5 
None of the above receivables included allowances for credit losses at March 31, 2022 or December 31, 2021. No charges for credit losses were recognized during the three months ended March 31, 2022 or 2021.
(4)    Discontinued Operations
Historically, discontinued operations included certain former Seaborne Thermal Mining and Other U.S. Thermal Mining segment assets that have ceased production and other previously divested legacy operations, including Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot). In the third quarter of 2021, the Company executed the sale of the closed Wilkie Creek Mine, which reduced its closed mine reclamation liabilities and associated costs.
Summarized Results of Discontinued Operations
Results from discontinued operations were as follows during the periods presented below:
Three Months Ended March 31,
20222021
(Dollars in millions)
Loss from discontinued operations, net of income taxes$(0.8)$(2.0)
Liabilities of Discontinued Operations
Liabilities classified as discontinued operations included in the Company’s condensed consolidated balance sheets were as follows:
March 31, 2022December 31, 2021
(Dollars in millions)
Liabilities:
Accounts payable and accrued expenses$45.0 $45.0 
Other noncurrent liabilities58.7 59.0 
Total liabilities classified as discontinued operations$103.7 $104.0 

9


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Patriot-Related Matters
A significant portion of the liabilities in the table above relate to 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 (UMWA), 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 in the U.S. District Court for the Eastern District of Virginia 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.
Black Lung Occupational Disease Liabilities. 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 Company’s accounting for the black lung liabilities related to Patriot is based on an interpretation of applicable statutes. Management believes that inconsistencies exist among the applicable statutes, regulations promulgated under those statutes and the DOL’s interpretative guidance. The Company has sought clarification from the DOL regarding these inconsistencies. The amount of these liabilities could be reduced in the future. Whether the Company will ultimately be required to fund certain of those obligations in the future as a result of Patriot’s May 2015 bankruptcy remains uncertain. The amount of the liability, which was determined on an actuarial basis based on the best information available to the Company, was $87.1 million and $87.2 million at March 31, 2022 and December 31, 2021, respectively. While the Company has recorded a liability, it intends to review each claim on a case-by-case basis and contest liability estimates as appropriate. The amount of the Company’s recorded liability reflects only Patriot workers employed by former subsidiaries of the Company that are presently retired, disabled or otherwise not actively employed. The Company cannot reliably estimate the potential liabilities for Patriot’s workers employed by former subsidiaries of the Company that are presently active in the workforce because of the potential for such workers to continue to work for another coal operator that is a going concern.
(5)     Inventories
Inventories, net” as of March 31, 2022 and December 31, 2021 consisted of the following:
March 31, 2022December 31, 2021
 (Dollars in millions)
Materials and supplies, net$112.8 $102.1 
Raw coal46.9 54.6 
Saleable coal109.4 70.0 
Inventories, net$269.1 $226.7 
Materials and supplies inventories, net presented above have been shown net of reserves of $9.0 million as of both March 31, 2022 and December 31, 2021.
(6) Equity Method Investments
The Company had total equity method investments and financing receivables of $62.9 million and $62.2 million reflected in “Investments and other assets” in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively, related to Middlemount Coal Pty Ltd (Middlemount). Included in “(Income) loss from equity affiliates” in the unaudited condensed consolidated statements of operations were gains related to Middlemount of $45.1 million during the three months ended March 31, 2022, and losses of $0.9 million during the three months ended March 31, 2021.
The Company received cash payments from Middlemount of $47.0 million and $2.3 million during the three months ended March 31, 2022 and 2021, respectively.

10


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
One of the Company’s Australian subsidiaries and the other shareholder of Middlemount are parties to an agreement, as amended from time to time, to provide a revolving loan (Revolving Loans) to Middlemount. The Company’s participation in the Revolving Loans will not, at any time, exceed its 50% equity interest of the revolving loan limit, which was $50 million Australian dollars at March 31, 2022. The Revolving Loans bear interest at 10% per annum and expire on December 31, 2023. The Revolving Loans were not drawn upon by Middlemount as of either March 31, 2022 or December 31, 2021.
As of both March 31, 2022 and December 31, 2021, the financing receivables and Revolving Loans are accounted for as in-substance common stock due to the limited fair value attributed to Middlemount’s equity.
(7) 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.
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 March 31, 2022.
Foreign Currency Option Contracts
As of March 31, 2022, the Company had currency options outstanding with an aggregate notional amount of $705.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending December 31, 2022. The instruments are quarterly average rate options which 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 $0.76 to $0.80 over the nine-month period ending December 31, 2022.
Derivative Contracts Related to Forecasted Sales
As of March 31, 2022, the Company held coal derivative contracts related to a portion of its forecasted sales with an aggregate notional volume of 1.6 million tonnes. Such financial contracts may include futures, forwards and options. Included in this total are 1.3 million tonnes related to financial derivatives entered to support the profitability of the Wambo Underground Mine as part of a strategy to extend the mine life through mid-2023. Of this total, 0.6 million tonnes will settle in 2022 and 0.7 million tonnes will settle in 2023 at expected average pricing of approximately $84 per tonne (Newcastle index). The remaining 0.3 million tonnes aggregate notional volume related to other coal financial contracts will settle in 2022. Additionally, 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 March 31, 2022, the Company recorded an unrealized mark-to-market loss of $301.0 million on these coal derivative contracts, which includes approximately $237 million of unrealized mark-to-market losses on financial derivatives, and approximately $64 million 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 March 31, 2022.

11


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.
 March 31, 2022December 31, 2021
 Asset DerivativeLiability DerivativeAsset DerivativeLiability Derivative
 (Dollars in millions)
Foreign currency option contracts$6.3 $ $1.4 $ 
Derivative contracts related to forecasted sales133.2 (558.1)59.5 (184.2)
Financial trading contracts13.5  3.4  
Total derivatives153.0 (558.1)64.3 (184.2)
Effect of counterparty netting(133.2)133.2 (59.5)59.5 
Variation margin (received) posted(13.5)360.6 (3.4)95.2 
Net derivatives and variation margin as classified in the balance sheets$6.3 $(64.3)$1.4 $(29.5)
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 March 31, 2022, the Company had posted $481.7 million aggregate margin cash, consisting of $347.1 million variation margin cash and $134.6 million initial margin. As of December 31, 2021, the Company had posted $130.1 million aggregate margin cash, consisting of $91.8 million variation margin cash and $38.3 million initial margin.
To reduce exposure to additional margin requirements, subsequent to March 31, 2022, the Company converted 0.8 million metric tons of financial hedges into fixed price physical sales over the next 12 months, eliminating further margin requirements on these tons. With these transactions, 1.4 million metric tons remain outstanding with 0.9 million metric tons projected to settle over the remainder of 2022.
The net amount of asset derivatives, net of variation margin, is included in “Other current assets” and the net amount of liability derivatives, net of variation margin, is included in “Accounts payable and accrued expenses” in the accompanying condensed consolidated balance sheets. The amounts of initial margin are not included with the derivatives presented in the tabular disclosures above and are included in “Other current assets” in the accompanying condensed consolidated balance sheets.

12


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 pre-tax gains and losses related to the Company’s derivatives and their classification within the accompanying unaudited condensed consolidated statements of operations.
Three Months Ended March 31, 2022
Total gain (loss) recognized in incomeLoss realized in income on derivativesUnrealized gain (loss) recognized in income on derivatives
Derivative InstrumentClassification
(Dollars in millions)
Foreign currency option contractsOperating costs and expenses$2.3 $(1.0)$3.3 
Derivative contracts related to forecasted salesRevenue(369.0)(68.0)(301.0)
Financial trading contractsRevenue10.1 (0.7)10.8 
Total$(356.6)$(69.7)$(286.9)
Three Months Ended March 31, 2021 (1)
Total loss recognized in incomeGain (loss) realized in income on derivativesUnrealized loss recognized in income on derivatives
Derivative InstrumentClassification
(Dollars in millions)
Foreign currency option contractsOperating costs and expenses$(2.9)$4.7 $(7.6)
Derivative contracts related to forecasted salesRevenue(9.7)(7.9)(1.8)
Financial trading contractsRevenue(0.7)2.4 (3.1)
Total$(13.3)$(0.8)$(12.5)
(1)    ‘Results realized in income on derivatives’ has been revised to exclude revenue arising from coal deliveries earned by the Company’s trading and brokerage function of $17.9 million for the three months ended March 31, 2021, to be comparable to the presentation of the 2022 amounts.
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.
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.

13


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables set forth the hierarchy of the Company’s net (liability) asset positions for which fair value is measured on a recurring basis. Variation margin cash associated with the derivative balances is excluded from this table.
 March 31, 2022
 Level 1Level 2Level 3Total
 (Dollars in millions)
Foreign currency option contracts$ $6.3 $ $6.3 
Derivative contracts related to forecasted sales (424.9) (424.9)
Financial trading contracts 13.5  13.5 
Equity securities  4.0 4.0 
Total net (liabilities) assets$ $(405.1)$4.0 $(401.1)
 December 31, 2021
 Level 1Level 2Level 3Total
 (Dollars in millions)
Foreign currency option contracts$ $1.4 $ $1.4 
Derivative contracts related to forecasted sales (124.7) (124.7)
Financial trading contracts 3.4  3.4 
Equity securities  4.0 4.0 
Total net (liabilities) assets$ $(119.9)$4.0 $(115.9)
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 based on observed prices in an inactive market (Level 3).
Other Financial Instruments. The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of March 31, 2022 and December 31, 2021:
Cash and cash equivalents, restricted cash, accounts receivable, including those within the Company’s accounts receivable securitization program, margining cash, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments.
Long-term debt fair value estimates are based on observed prices for securities when available (Level 2), and otherwise on estimated borrowing rates to discount the cash flows to their present value (Level 3).

14


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.
 March 31, 2022December 31, 2021
 (Dollars in millions)
Total debt at par value$1,129.9 $1,173.2 
Less: Unamortized debt issuance costs and original issue discount(31.8)(35.4)
Net carrying amount$1,098.1 $1,137.8 
Estimated fair value$1,277.3 $1,136.5 
Generally, the Company’s Level 3 instruments or contracts are valued using bid/ask price quotations and other market assessments obtained from multiple, independent third-party brokers or other transactional data incorporated into internally-generated discounted cash flow models. Decreases in the number of third-party brokers or market liquidity could erode the quality of market information and therefore the valuation of the Company’s market positions. The Company’s valuation techniques include basis adjustments to the foregoing price inputs for quality, such as sulfur and ash content, location differentials, expressed as port and freight costs, and credit risk. The Company’s risk management function independently validates the Company’s valuation inputs, including unobservable inputs, with third-party information and settlement prices from other sources where available. A daily process is performed to analyze market price changes and changes to the portfolio. Further periodic validation occurs at the time contracts are settled with the counterparty. These valuation techniques have been consistently applied in all periods presented, and the Company believes it has obtained the most accurate information available for the types of derivative contracts held.
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.
The Company had no transfers between Levels 1, 2 and 3 during the three months ended March 31, 2022 and 2021. The Company’s policy is to value all transfers between levels using the beginning of period valuation.
(8) Property, Plant, Equipment and Mine Development
The composition of property, plant, equipment and mine development, net, as of March 31, 2022 and December 31, 2021 is set forth in the table below:
March 31, 2022December 31, 2021
(Dollars in millions)
Land and coal interests$2,494.1 $2,494.1 
Buildings and improvements590.2 550.8 
Machinery and equipment1,370.9 1,386.2 
Less: Accumulated depreciation, depletion and amortization(1,551.9)(1,480.5)
Property, plant, equipment and mine development, net$2,903.3 $2,950.6 
Asset Impairment and Other At-Risk Assets
The Company has identified certain assets with an aggregate carrying value of approximately $0.5 billion at March 31, 2022 in its Other U.S. Thermal Mining and Corporate and Other segments whose recoverability is most sensitive to customer demand, customer concentration risk and future economic viability. The Company conducted a review of those assets as of March 31, 2022 and determined that no impairment charges were necessary as of that date.
(9) Leases
The Company has operating and finance leases for mining and non-mining equipment, office space and certain other facilities under various non-cancellable agreements. Historically, the majority of the Company’s leases have been accounted for as operating leases. 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, 2021, for the Company’s policies regarding “Leases.”

15


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company and certain of its subsidiaries have guaranteed other subsidiaries’ performance under various lease obligations. Certain lease agreements are subject to the restrictive covenants of the Company’s credit facilities and include cross-acceleration provisions, under which the lessor could require remedies including, but not limited to, immediate recovery of the present value of any remaining lease payments. The Company typically agrees to indemnify lessors for the value of the property or equipment leased, should the property be damaged or lost during the course of the Company’s operations. The Company expects that losses with respect to leased property, if any, may be covered by insurance (subject to deductibles). Aside from indemnification of the lessor for the value of the property leased, the Company’s maximum potential obligations under its leases are equal to the respective future minimum lease payments, and the Company assumes that no amounts could be recovered from third parties.
The components of lease expense during the three months ended March 31, 2022 and 2021 were as follows:
Three Months Ended March 31,
20222021
(Dollars in millions)
Operating lease cost:
Operating lease cost$4.7 $6.0 
Short-term lease cost6.3 3.4 
Variable lease cost1.6 0.5 
Sublease income(0.4)(0.5)
Total operating lease cost$12.2 $9.4 
Finance lease cost:
Amortization of right-of-use assets$1.5 $0.6 
Interest on lease liabilities0.6 0.5 
Total finance lease cost$2.1 $1.1 

16


PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental balance sheet information related to leases at March 31, 2022 and December 31, 2021 was as follows:
March 31, 2022December 31, 2021
(Dollars in millions)
Operating leases:
Operating lease right-of-use assets$33.0 $35.5 
Accounts payable and accrued expenses$16.1 $16.4 
Operating lease liabilities, less current portion24.6 27.2 
Total operating lease liabilities$40.7 $43.6 
Finance leases:
Property, plant, equipment and mine development$32.4 $32.2 
Accumulated depreciation(9.0)(7.4)
Property, plant, equipment and mine development, net$23.4 $24.8 
Current portion of long-term debt$