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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

In 2020, we produced and sold 128.8 million and 132.6 million tons of coal, respectively, from continuing operations.

As of December 31, 2020, we report our results of operations primarily through the following reportable segments: Seaborne Thermal Mining, Seaborne Metallurgical Mining, Powder River Basin Mining, Other U.S. Thermal Mining and Corporate and Other.

The business of our seaborne operating platform is primarily export focused with customers spread across several countries, with a portion of our thermal and metallurgical coal sold within Australia. Generally, revenues from individual countries vary year by year based on electricity and steel demand, the strength of the global economy, governmental policies and several other factors, including those specific to each country. We classify our seaborne mines within the Seaborne Thermal Mining or Seaborne Metallurgical Mining segments based on the primary customer base and coal reserve type of each mining operation. A small portion of the coal mined by the Seaborne Thermal Mining segment is of a metallurgical grade. Similarly, a small portion of the coal mined by the Seaborne Metallurgical Mining segment is of a thermal grade. Additionally, we may market some of our metallurgical coal products as a thermal coal product from time to time depending on market conditions.

Our Seaborne Thermal Mining operations consist of mines in New South Wales, Australia. The mines in that segment utilize both surface and underground extraction processes to mine low-sulfur, high Btu thermal coal.

Our Seaborne Metallurgical Mining operations consist of mines in Queensland, Australia, one in New South Wales, Australia and one in Alabama. The mines in that segment utilize both surface and underground extraction processes to mine various qualities of metallurgical coal (low-sulfur, high Btu coal). The metallurgical coal qualities include hard coking coal, semi-hard coking coal, semi-soft coking coal and PCI coal.

The principal business of our thermal mining segments in the U.S. is the mining, preparation and sale of thermal coal, sold primarily to electric utilities in the U.S. under long-term contracts, with a relatively small portion sold as international exports as conditions warrant. Our Powder River Basin Mining operations consist of our mines in Wyoming. The mines in that segment are characterized by surface mining extraction processes, coal with a lower sulfur content and Btu and higher customer transportation costs (due to longer shipping distances). Our Other U.S. Thermal Mining operations historically reflect the aggregation of our Illinois, Indiana, New Mexico, Colorado and Arizona mining operations. The mines in that segment are characterized by a mix of surface and underground mining extraction processes, coal with a higher sulfur content and Btu and lower customer transportation costs (due to shorter shipping distances). Geologically, our Powder River Basin Mining operations mine sub-bituminous coal deposits and our Other U.S. Thermal Mining operations mine both bituminous and sub-bituminous coal deposits.

Our Corporate and Other segment includes selling and administrative expenses, including our technical and shared services functions; results from equity affiliates; corporate hedging activities; trading and brokerage activities; results from certain mining and export/transportation joint ventures; minimum charges on certain transportation-related contracts; the closure of inactive mining sites; and certain commercial matters.

Resource Management. As of December 31, 2020, we controlled approximately 3.0 billion tons of proven and probable coal reserves and approximately 450,000 acres of surface property through ownership and lease agreements. We have an ongoing asset optimization program whereby our property management group regularly reviews these reserves and surface properties for opportunities to generate earnings and cash flow through the sale or exchange of non-strategic coal reserves and surface lands. These surface lands include acres where we have completed post-mining reclamation. In addition, we generate revenue through royalties from coal reserves and oil and gas rights leased to third parties and farm income from surface lands under third-party contracts.

Middlemount Mine. We own a 50% equity interest in Middlemount, which owns the Middlemount Mine in Queensland, Australia. The mine predominantly produces semi-hard coking coal and LV PCI coal for sale into seaborne coal markets through Abbot Point Coal Terminal, with some capacity also secured at Dalrymple Bay Coal Terminal. Mining operations first commenced at the Middlemount Mine in late 2011. During the years ended December 31, 2020, 2019 and 2018, the mine sold 3.2 million, 2.9 million and 4.2 million tons of coal, respectively (on a 100% basis).

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Coronavirus (COVID-19) Pandemic

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic.

Coal mining in the U.S. and Australia has been designated as an essential business to support coal-fueled electric power generation and critical steelmaking needs. As part of Peabody’s commitment to the ongoing health and safety of our employees, vendors and communities, we are following advice from government authorities and taking precautions to manage the spread of COVID-19. Peabody operations have implemented rigorous protocols, control and prevention measures, including mandatory temperature and health checks; paid leave for recommended self-isolation periods; enhanced cleaning and sterilization practices; expanded use of personal protective equipment; social distancing; and working remotely when circumstances warrant. While our operations have been designated as essential, each operation will only continue to operate when it is safe and economic to do so.

The global impact on economic activity has severely curtailed demand for numerous commodities. Within the global coal industry, supply and demand disruptions have been widespread. The global economy is showing improvement in industrial production, even as the timing of a recovery varies across countries and sectors. However, in the seaborne metallurgical and thermal markets, demand remains below pre-pandemic levels. In the U.S., the impacts of COVID-19 have accelerated a multi-year decline in coal demand. During the year ended December 31, 2020, coal-fueled generation declined approximately 20% compared to the prior year period and now represents 19% of the overall generation mix. Additionally, we have faced limited disruption to supply chain and distribution channels and adverse effects to our workforce. Coal industry fundamentals, as well as known impacts specific to Peabody, are further addressed in the “Results of Operations” section contained within this Item 7.

While the ultimate impacts of the COVID-19 pandemic on our business are unknown, we expect continued interference with general commercial activity, which may negatively affect both demand and prices for our products. Given the uncertainties with respect to future COVID-19 developments, including the duration, severity and scope, as well as the necessary government actions to limit the spread, we are unable to estimate the full impact of the pandemic on our business, financial condition, results of operations or cash flows at this time.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), a $2 trillion economic relief bill, was enacted in the U.S.. The CARES Act contained numerous income tax provisions, including a provision that provides for the acceleration of refunds of previously generated alternative minimum tax credits. Pursuant to the CARES Act, we received approximately $24 million of accelerated refunds from the Internal Revenue Service and adjusted our current and deferred tax asset balances accordingly. The CARES Act also contained a provision for deferred payment of 2020 employer payroll taxes after the date of enactment to future years. We deferred a portion of our remaining 2020 employer payroll taxes to subsequent years.

North Goonyella Mine

Our North Goonyella Mine in Queensland, Australia experienced a fire in a portion of the mine during September 2018 and mining operations have been suspended since then. In 2020, we commenced a review of strategic alternatives for North Goonyella which is currently ongoing.

During the years ended December 31, 2019 and 2018, we recorded provisions for equipment losses of $83.2 million and $66.4 million, respectively, related to the fire, representing the best estimate of losses to date. No additional provisions for equipment losses were recorded during the year ended December 31, 2020. We have also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $32.3 million, $111.5 million and $58.0 million during the years ended December 31, 2020, 2019 and 2018, respectively.

In March 2019, we entered into an insurance claim settlement agreement with our insurers and various re-insurers under a combined property damage and business interruption policy and recorded a $125 million insurance recovery, the maximum amount available under the policy above a $50 million deductible. We have collected the full amount of the recovery.

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Results of Operations

Non-GAAP Financial Measures

The following discussion of our results of operations includes references to and analysis of Adjusted EBITDA, which is a financial measure 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 our segments’ operating performance. We have retrospectively modified our calculation of Adjusted EBITDA to exclude restructuring charges and transaction costs related to business combinations and joint ventures as management does not view these items as part of our normal operations.

Also included in the following discussion of our results of operations are references to Revenues per Ton, Costs per Ton and Adjusted EBITDA Margin per Ton for each mining segment. These metrics are used by management to measure each of our mining segments’ operating performance. Management believes Costs per Ton and Adjusted EBITDA Margin per Ton best reflect controllable costs and operating results at the mining segment level. We consider all measures reported on a per ton basis to be operating/statistical measures; however, we include 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 7.

In our discussion of liquidity and capital resources, we include references to Free Cash Flow which is also a non-GAAP measure. Free Cash Flow is used by management as a measure of our financial performance and our ability to generate excess cash flow from our business operations.

We believe non-GAAP performance measures are used by investors to measure our operating performance and lenders to measure our ability to incur and service debt. 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 7 for definitions and reconciliations to the most comparable measures under U.S. GAAP.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Summary

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 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the year ended December 31, 2020 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing we realized during the year ended December 31, 2020 due to quality differentials and the majority of our seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically. Our 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 we realized during the year ended December 31, 2020 since we generally sell 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 our realized pricing.

High Low Average December 31, 2020

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

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Within the global coal industry, supply and demand disruptions have been widespread as the COVID-19 pandemic has forced country-wide lockdowns and regional restrictions. Future COVID-19-related developments are unknown, including the duration, severity, scope and the necessary government actions to limit the spread of COVID-19. The global coal industry data for the year ended December 31, 2020 presented herein may not be indicative of the ultimate impacts of the COVID-19 pandemic given the various levels of response and unknown duration, and potential for continued weak demand for our products.

With respect to seaborne metallurgical coal, global steel production decreased approximately 1% during the year ended December 31, 2020 compared to the prior year, with significant declines in most regions due to the impacts of COVID-19, offset by another year of strong growth in China. Excluding China, steel production was down approximately 10%, while Chinese steel production increased approximately 5% from 2019. While global steel production remained lower year-over-year, there has been consistent improvement in steel production since July 2020 as COVID-19 related lockdown restrictions eased in key countries. Improved steel demand has enabled steelmakers, including Peabody customers, to restart capacity and increase output, resulting in improvements in seaborne metallurgical coal demand. For example, India seaborne metallurgical coal imports set a new all-time monthly volume record each month from October to December. Elsewhere, the recovery continues steadily with most countries operating at or just below pre-COVID-19 levels. A key risk to demand for Australian metallurgical coal in 2021 is China’s import policies, which have largely prohibited the buying of Australian products since October 2020 and an end date to the limitations is currently unclear.

Within the seaborne thermal coal market, demand has been below pre-pandemic levels in many key countries, and headwinds such as COVID-19, China import restrictions and competition from alternative fuel sources persist. China thermal imports were up 6 million tonnes through the year ended December 31, 2020. India has seen domestic power demand recover, but thermal imports are down by approximately 25 million tonnes through the year ended December 31, 2020 compared to the prior year.

In the United States, overall electricity demand has been negatively impacted year-over-year due to COVID-19 induced economic shutdowns and mild weather during the year ended December 31, 2020. The reduction in thermal coal demand during that period has exceeded the reduction in overall electricity demand as continued coal plant retirements, and growth in natural gas and renewable generation negatively impacted coal’s share of electricity generation. Lower total electricity demand driven by COVID-19 related curtailments has resulted in coal’s share of generation declining to approximately 19% for the year ended December 31, 2020, while natural gas and renewables increased. Through the year ended December 31, 2020 utility consumption of PRB coal fell approximately 20% compared to the prior year period.

Our revenues for the year ended December 31, 2020 decreased compared to the same period in 2019 ($1,742.3 million) primarily due to lower sales volumes which were affected by the COVID-19 pandemic and lower realized prices.

Results from continuing operations, net of income taxes for the year ended December 31, 2020 decreased compared to the same period in the prior year ($1,671.5 million). The decrease was driven by the unfavorable revenue variance described above, higher asset impairment charges recorded in the current period ($1,217.2 million) and a prior year insurance recovery related to the events at our North Goonyella Mine ($125.0 million). These unfavorable variances were partially offset by reduced operating costs and expenses owing largely to the sales volume decline as well as production efficiencies and other cost improvements ($1,011.7 million) and lower depreciation, depletion and amortization ($255.0 million).

Adjusted EBITDA for the year ended December 31, 2020 reflected a year-over-year decrease of $624.2 million.

As of December 31, 2020, our available liquidity was approximately $729 million. Refer to the “Liquidity and Capital Resources” section contained within this Item 7 for a further discussion of factors affecting our available liquidity.

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Tons Sold

The following table presents tons sold by operating segment:

(Decrease) Increase

Year Ended December 31, to Volumes

(Tons in millions)

Seaborne Metallurgical Mining 5.6 8.1 (2.5) (30.9) %

Supplemental Financial Data

The following table presents supplemental financial data by operating segment:

Year Ended December 31, (Decrease) Increase

Revenues per Ton - Mining Operations (1)

Costs per Ton - Mining Operations (1) (2)

Adjusted EBITDA Margin per Ton - Mining Operations (1) (2)

(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; provision for North Goonyella equipment loss and related insurance recovery; amortization of take-or-pay contract-based intangibles; and certain other costs related to post-mining activities.

(3)Costs incurred at the North Goonyella Mine from January 1, 2020 forward are included within the Corporate and Other segment. Costs incurred at the North Goonyella Mine during the year ended December 31, 2019 remain within the Seaborne Metallurgical Mining segment and resulted in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton of $9.59.

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Revenues

The following table presents revenues by reporting segment:

Decrease

Year Ended December 31, to Revenues

(Dollars in millions)

Seaborne Thermal Mining. The decrease in our Seaborne Thermal Mining segment revenues for the year ended December 31, 2020 compared to the prior year was driven by unfavorable realized coal pricing ($220.3 million) and unfavorable volume and mix variances ($39.6 million).

Seaborne Metallurgical Mining. Segment revenues decreased during the year ended December 31, 2020 compared to the prior year due to unfavorable volume and mix variances ($340.8 million) resulting from demand-based volume decreases across our mines and unfavorable realized coal pricing ($205.8 million).

Powder River Basin Mining. Segment revenues decreased during the year ended December 31, 2020 compared to the prior year period due to demand-based volume decreases ($244.3 million) and the prior year benefit of a contract settlement with a PRB customer ($19.7 million). These unfavorable variances were partially offset by favorable realized coal pricing ($26.4 million).

Other U.S. Thermal Mining. The decrease in segment revenues for the year ended December 31, 2020 compared to the same period in the prior year was primarily due to volume decreases ($453.6 million) which were driven by the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Wildcat Hills Underground Mine during the second quarter of 2020, the prior year benefit of revenues associated with the final commercial negotiations for the Kayenta Mine ($127.8 million) and unfavorable realized coal pricing ($20.7 million).

Corporate and Other. Segment revenues decreased during the year ended December 31, 2020 compared to the prior year due to lower results on economic hedge activities.

Adjusted EBITDA

The following table presents Adjusted EBITDA for each of our reporting segments:

(Decrease) Increase to

Year Ended December 31, Adjusted EBITDA

(Dollars in millions)

(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 Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year as a result of lower realized net coal pricing ($202.4 million), unfavorable volume variances ($12.6 million) and the unfavorable impacts of a temporary shutdown at our Wambo Underground Mine ($12.2 million). The decrease was partially offset by favorable mine sequencing impacts and lower costs for materials, services and repairs at our thermal surface mines ($35.6 million) and lower pricing for fuel ($14.0 million).

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Seaborne Metallurgical Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year due to lower realized net coal pricing ($188.0 million), unfavorable volume variances ($138.7 million) and higher costs at our Shoal Creek Mine, including those related to a conveyor upgrade ($51.1 million). These negative variances were partially offset by the inclusion of North Goonyella Mine containment and holding costs within our Corporate and Other segment in the current year ($77.6 million) and lower pricing for fuel ($10.9 million).

Powder River Basin Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year due to the impact of lower volumes ($43.6 million), the prior year net benefit of a contract settlement with a PRB customer ($24.0 million) and unfavorable mine sequencing impacts ($22.2 million). These negative variances were partially offset by lower costs for materials, services, repairs and labor ($31.1 million), lower pricing for fuel and explosives ($23.5 million) and higher realized net coal pricing ($6.5 million).

Other U.S. Thermal Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2020 compared to the same period in the prior year primarily due to the impact of lower volumes ($135.4 million) as described above, the prior year net benefit associated with the final commercial negotiations for the Kayenta Mine ($83.3 million), lower realized net coal pricing ($37.8 million) and unfavorable mine sequencing impacts ($12.9 million). These unfavorable variances were partially offset by lower costs for materials, services, repairs and labor ($42.4 million) and lower pricing for fuel and explosives ($16.8 million).

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

(Decrease) Increase

Year Ended December 31, to Income

(Dollars in millions)

(1)Middlemount’s results are before the impact of related changes in deferred tax asset valuation allowance and reserves and amortization of basis difference. Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $29.9 million and $25.1 million during the years ended December 31, 2020 and 2019, respectively.

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

(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 our other commercial activities.

(4)North Goonyella costs incurred from January 1, 2020 forward are included within the Corporate and Other segment. Costs incurred prior to January 1, 2020 remain within the Seaborne Metallurgical Mining segment.

The increase in Corporate and Other Adjusted EBITDA during the year ended December 31, 2020 compared to the same period in the prior year was due to lower selling and administrative expenses driven by lower personnel costs; the favorable impact of changes made to one of our postretirement health care benefit plans during the third quarter of 2020 ($14.9 million); resource management gains recorded in the current period ($14.8 million); and favorable corporate hedging results ($10.7 million). These favorable results were partially offset by current year containment and holding costs for our North Goonyella Mine ($32.3 million) and an unfavorable variance in Middlemount’s results due to the continuing impacts of lower sales pricing and a significant change to the mine plan following a highwall failure in mid-2019.

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Loss From Continuing Operations, Net of Income Taxes

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

(Decrease) Increase to Income

Year Ended December 31,

(Dollars in millions)

Asset retirement obligation expenses (45.7) (58.4) 12.7 21.7 %

Transaction costs related to joint ventures (23.1) (21.6) (1.5) (6.9) %

Gain on formation of United Wambo Joint Venture — 48.1 (48.1) (100.0) %

Provision for North Goonyella equipment loss — (83.2) 83.2 100.0 %

North Goonyella insurance recovery - equipment — 91.1 (91.1) (100.0) %

Unrealized (losses) gains on economic hedges (29.6) 42.2 (71.8) (170.1) %

Unrealized gains on non-coal trading derivative contracts 7.1 1.2 5.9 491.7 %

Take-or-pay contract-based intangible recognition 8.2 16.6 (8.4) (50.6) %

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

Increase (Decrease)

Year Ended December 31, to Income

(Dollars in millions)

Seaborne Thermal Mining $ (88.0) $ (90.7) $ 2.7 3.0 %

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

Year Ended December 31,

Seaborne Thermal Mining $ 1.90 $ 1.84

Seaborne Metallurgical Mining 2.30 3.09

Powder River Basin Mining 0.50 0.80

Other U.S. Thermal Mining 1.04 1.33

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Depreciation, depletion and amortization expense decreased during the year ended December 31, 2020 compared to the same period in the prior year primarily due to the closure of the Kayenta and Cottage Grove Mines during the third quarter of 2019 and the Millennium and Wildcat Hills Underground Mines during the second quarter of 2020 ($122.7 million), the impact of the asset impairment recorded at the North Antelope Rochelle Mine during the second quarter of 2020 ($52.6 million), decreased depletion driven by lower sales volumes ($22.5 million) and lower amortization of contract based intangibles ($21.8 million). The decrease in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment during the year ended December 31, 2020 compared to the same period in the prior year reflects the volume and mix variances which impacted our revenues as described above. The decrease in the weighted-average depletion rate per ton for the Powder River Basin Mining segment during the year ended December 31, 2020 compared to the same period in the prior year reflects the asset impairment recorded during the second quarter of 2020.

Asset Retirement Obligation Expenses. Asset retirement obligation expenses decreased during the year ended December 31, 2020 compared to the same period in the prior year as the result of favorable revisions to the estimates for our closed mines.

Restructuring Charges. Restructuring charges increased during the year ended December 31, 2020 compared to the same period in the prior year as the result of workforce reductions made across the organization through the use of involuntary and voluntary reductions, as discussed in Note 1. “Summary of Significant Accounting Policies” to the accompanying consolidated financial statements.

Transaction Costs Related to Joint Ventures. The charges recorded during the current and prior year periods related to the proposed PRB Colorado joint venture with Arch Resources, Inc. as further described in Note 20. “Other Events” to the accompanying consolidated financial statements.

Gain on Formation of United Wambo Joint Venture. During the year ended December 31, 2019, we recognized a $48.1 million gain upon the formation of the United Wambo Joint Venture. Refer to Note 20. “Other Events” to the accompanying consolidated financial statements for further information regarding the calculation of the gain, which information is incorporated herein by reference.

Asset Impairment. We recognized $1,487.4 million in aggregate asset impairment charges during the year ended December 31, 2020, primarily related to the fair value of our North Antelope Rochelle Mine in our Powder River Basin Mining segment. During the year ended December 31, 2019, we recognized $270.2 million in aggregate asset impairment charges primarily related to the El Segundo/Lee Ranch and Wildcat Hills Underground Mines in our Other U.S. Thermal Mining segment. Refer to Note 3. “Asset Impairment” to the accompanying consolidated financial statements for further information regarding the nature and composition of those charges, which information is incorporated herein by reference.

Provision for North Goonyella Equipment Loss. A provision for expected equipment losses related to the events at our North Goonyella Mine was recorded during the prior year as discussed in Note 20. “Other Events” to the accompanying consolidated financial statements.

North Goonyella Insurance Recovery - Equipment. During the year ended December 31, 2019, we entered into an insurance claim settlement agreement with our insurance providers related to North Goonyella equipment losses and recorded a $125.0 million insurance recovery, as discussed in Note 20. “Other Events” to the accompanying consolidated financial statements. Of this amount, Adjusted EBITDA excludes an allocated amount applicable to total equipment losses recognized at the time of the insurance recovery settlement, which consisted of $24.7 million and $66.4 million recognized during the years ended December 31, 2019 and 2018, respectively. The remaining $33.9 million, applicable to incremental costs and business interruption losses, is included in Adjusted EBITDA for the year ended December 31, 2019.

Changes in Deferred Tax Asset Valuation Allowance and Reserves and Amortization of Basis Difference Related to Equity Affiliates. During the year ended December 31, 2020, we established a valuation allowance on Middlemount’s net deferred tax position of approximately $33 million. During the year ended December 31, 2019, we released a tax reserve of approximately $17 million. Refer to Note 6. “Equity Method Investments” to the accompanying consolidated financial statements for further information regarding these changes, which information is incorporated herein by reference

Interest Income. The decrease in interest income during the year ended December 31, 2020 compared to the prior year was driven by the conclusion of a contract during the fourth quarter of 2019 which contained an embedded financing element and by lower cash balances.

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Net Mark-to-Market Adjustment on Actuarially Determined Liabilities. The gain recorded during the year ended December 31, 2020 was driven by gains on pension and postretirement benefit plan assets ($73.7 million), the favorable impacts of a mortality update for all actuarially determined liabilities ($39.5 million) and changes related to claims for the postretirement benefit plans ($21.2 million). These increases were offset by decreases to the discount rates for all actuarially determined liabilities ($116.5 million).

The expense recorded during the year ended December 31, 2019 was driven by decreases to the discount rates for all actuarially determined liabilities ($137.6 million) and the unfavorable impact of changes related to claims and an update to our census data for the postretirement benefits plans ($19.7 million). These decreases were partially offset by actuarial gains on pension assets ($94.5 million).

Unrealized (Losses) Gains on Economic Hedges. Unrealized (losses) gains primarily relate to mark-to-market activity from economic hedge activities intended to hedge future coal sales. For additional information, refer to Note 7. “Derivatives and Fair Value Measurements” to the accompanying consolidated financial statements.

Take-or-Pay Contract-Based Intangible Recognition. During the years ended December 31, 2020 and 2019, we ratably recognized contract-based intangible liabilities for port and rail take-or-pay contracts. For additional details, refer to Note 8. “Intangible Contract Assets and Liabilities” to the accompanying consolidated financial statements.

Income Tax Provision. The decrease in the income tax provision during the year ended December 31, 2020 compared to the prior year period was primarily due to year-over-year decreases in taxable income, partially offset by an increase in the provision related to the remeasurement of foreign income tax accounts. Refer to Note 10. “Income Taxes” to the accompanying consolidated financial statements for additional information.

Net Loss Attributable to Common Stockholders

The following table presents net loss attributable to common stockholders:

Decrease to

Year Ended December 31, to Income

(Dollars in millions)

(Loss) Income from Discontinued Operations, Net of Income Taxes. The decrease in results from discontinued operations, net of income taxes during the year ended December 31, 2020 compared to the prior year period was primarily driven by decreases to the discount rates for black lung liabilities.

Net (Loss) Income Attributable to Noncontrolling Interests. The decrease in net results attributable to noncontrolling interests during the year ended December 31, 2020 compared to the prior year period was primarily due to lower results of our majority-owned mines in which there is an outside non-controlling interest.

Diluted EPS

The following table presents diluted EPS:

Decrease to

Year Ended December 31, EPS

Diluted EPS attributable to common stockholders:

(Loss) income from discontinued operations (0.15) 0.03 (0.18) (600.0) %

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 97.7 million and 103.7 million for the years ended December 31, 2020 and 2019, respectively.

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Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Summary

Spot pricing for Premium HCC, Premium PCI coal, Newcastle index thermal coal and API 5 thermal coal, and prompt month pricing for PRB 8,880 Btu/Lb coal and Illinois Basin 11,500 Btu/Lb coal during the year ended December 31, 2019 is set forth in the table below.

The seaborne pricing included in the table below is not necessarily indicative of the pricing we realized during the year ended December 31, 2019 due to quality differentials and the majority of our seaborne sales being executed through annual and multi-year international coal supply agreements that contain provisions requiring both parties to renegotiate pricing periodically. Our 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 we realized during the year ended December 31, 2019 since we generally sell 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 coal producers may also impact our realized pricing.

High Low Average December 31, 2019

(1) Prices expressed per tonne.

(2) Prices expressed per ton.

With respect to seaborne metallurgical coal, global steel production increased approximately 3% through the year ended December 31, 2019 as compared to the prior year period. India imports increased approximately 5% through the year ended December 31, 2019, as compared to the prior year, amid domestic steel production growth of approximately 3% year-over-year. Steel production in China increased approximately 7% through the year ended December 31, 2019 as compared to the prior year, resulting in an approximate 15% increase in coking coal imports during the same period.

Seaborne thermal coal demand and pricing was subdued due to restrictions in China and low gas prices coupled with elevated stockpiles in Europe, despite robust demand from India and other Asian regions. Chinese thermal coal imports increased by approximately 8 million tonnes through the year ended December 31, 2019 as compared to the prior year. Despite constraints by heightened mine safety inspections, China’s domestic production registered a 4.2% increase through the year ended December 31, 2019, as compared to the prior year period, supported by new mine approvals. India’s domestic production declined approximately 1% through the year ended December 31, 2019, which was not sufficient to meet growing demand from its industrial and power sectors. As a result, India’s thermal coal imports increased by approximately 6% or 10 million tonnes year-over-year through December 31, 2019. Demand from countries comprising the Association of Southeast Asian Nations (ASEAN) increased 23 million tonnes through the year ended December 31, 2019 as compared to the prior year, primarily led by Vietnam.

In the United States, overall electricity demand was down year-over-year through the year ended December 31, 2019. Continued coal plant retirements, growth in natural gas and renewable generation and weak natural gas prices negatively impacted coal demand. For the year ended December 31, 2019, utility consumption of PRB coal fell approximately 16% as compared to the prior year due to ongoing pressure from retirements, wind generation and regional natural gas prices that traded at a discount to quoted Henry Hub natural gas spot prices.

Our revenues for the year ended December 31, 2019 decreased as compared to the same period in 2018 ($958.4 million) primarily due to lower sales volumes and realized prices. Our Seaborne Metallurgical Mining segment was adversely impacted by the events at our North Goonyella Mine described above, as well as other production factors, partially offset by the incremental volume provided by our Shoal Creek Mine. Our Powder River Basin Mining segment was adversely impacted by lower demand and delays in rail shipments caused by severe flooding during the first half of 2019.

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Results from continuing operations, net of income taxes for the year ended December 31, 2019 decreased as compared to the same period in the prior year ($834.0 million). The decrease was driven by the unfavorable revenue variances described above, as well as asset impairment charges recorded in the current period ($270.2 million), the impact of a net mark-to-market loss on actuarially determined liabilities as compared to a gain in the prior year ($192.9 million) and approximately $20 million of expense in the current year related to the Monto litigation. These unfavorable variances were partially offset by reduced operating costs and expenses owing largely to the sales volume decline as well as production efficiencies and other cost improvements ($534.8 million) and an insurance recovery related to the events at our North Goonyella Mine ($125.0 million).

The decrease in net results attributable to common stockholders during the year ended December 31, 2019 as compared to the same period in 2018 was partially offset by dividends ($102.5 million) recorded in the prior year period related to the convertible preferred stock issued in connection with our reorganization. Adjusted EBITDA for the year ended December 31, 2019 reflected a year-over-year decrease of $504.9 million.

Tons Sold

The following table presents tons sold by operating segment:

Increase (Decrease)to Tons Sold

Year Ended December 31,

(Tons in millions)

Seaborne Metallurgical Mining 8.1 11.0 (2.9) (26.4) %

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Supplemental Financial Data

The following table presents supplemental financial data by operating segment:

Year Ended December 31, (Decrease) Increase

Revenues per Ton - Mining Operations (1)

Costs per Ton - Mining Operations (1) (2)

Adjusted EBITDA Margin per Ton - Mining Operations (1) (2)

(3)Includes the events at the North Goonyella Mine resulting in additional Costs per Ton and lower Adjusted EBITDA Margin per Ton for Seaborne Metallurgical of $9.59 and $5.27 for the years ended December 31, 2019 and 2018, respectively.

Revenues

The following table presents revenues by reporting segment:

Year Ended December 31, Decrease to Revenues

(Dollars in millions)

Seaborne Thermal Mining. The decrease in our Seaborne Thermal Mining segment revenues for the year ended December 31, 2019 compared to the prior year was primarily driven by unfavorable realized coal pricing ($131.9 million), partially offset by favorable volume and mix variances ($4.4 million).

Seaborne Metallurgical Mining. Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to unfavorable volumes (2.9 million tons, $441.1 million). The unfavorable volume variance resulting from the transition to highwall mining at our Millennium Mine in September 2018, an extended longwall move at our Metropolitan Mine and various mine sequencing impacts (3.2 million tons, $424.4 million) and no volume from our North Goonyella Mine during 2019 (1.7 million tons, $337.6 million) was partially offset by incremental volume provided by our Shoal Creek Mine, acquired in December 2018 (2.0 million tons, $320.9 million). Segment revenues were further impacted by lower realized pricing ($78.8 million).

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Powder River Basin Mining. Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year due to lower volume primarily attributable to lower demand and railroad closures and delays that resulted from severe flooding across the upper Great Plains during the first half of 2019 ($157.9 million) and unfavorable realized pricing ($57.9 million). These unfavorable variances were partially offset by a favorable contract settlement with a PRB customer ($19.7 million).

Other U.S. Thermal Mining. Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to unfavorable volume and mix variances ($200.2 million) and unfavorable realized pricing ($11.2 million). These unfavorable variances were partially offset by revenues associated with the final commercial negotiations for the Kayenta Mine ($127.8 million).

Corporate and Other. Segment revenues decreased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to lower results on economic hedges.

Adjusted EBITDA

The following table presents Adjusted EBITDA for each of our reporting segments:

Year Ended December 31, (Decrease) Increase toAdjusted EBITDA

(Dollars in millions)

Seaborne Thermal Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year as a result of lower realized net coal pricing ($121.7 million) and unfavorable mine sequencing impacts and higher equipment maintenance costs among our thermal surface mines ($48.1 million), offset by improved longwall performance at our Wambo Underground Mine ($30.2 million) and favorable foreign currency impacts ($24.1 million).

Seaborne Metallurgical Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year due to unfavorable volume variances described above ($231.9 million). The impact of the negative volumes at our Australian mines ($356.8 million) was partially offset by the incremental volume provided by our Shoal Creek Mine ($124.9 million). The decrease in Segment Adjusted EBITDA was further impacted by lower realized net coal pricing ($71.6 million), mine sequencing impacts among our metallurgical surface operations ($62.6 million) and the net containment and holding costs at our North Goonyella Mine ($19.6 million). These negative variances were partially offset by favorable foreign currency impacts ($50.5 million).

Powder River Basin Mining. Segment Adjusted EBITDA decreased during the year ended December 31, 2019 compared to the same period in the prior year due to the impact of lower volume ($78.7 million) described above, lower realized net coal pricing ($10.7 million) and unfavorable mine sequencing impacts ($10.0 million), partially offset by the net impact of the favorable contract settlement with a PRB customer ($24.0 million) and lower lease expenses due to early lease buyouts ($8.6 million).

Other U.S. Thermal Mining. Segment Adjusted EBITDA increased during the year ended December 31, 2019 compared to the same period in the prior year primarily due to the net impact associated with the final commercial negotiations for the Kayenta Mine ($83.3 million) and higher realized net coal pricing ($13.0 million), partially offset by the unfavorable impact of lower volume ($25.7 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:

Year Ended December 31, (Decrease) Increase to Income

(Dollars in millions)

Corporate and Other Adjusted EBITDA $ (169.2) (80.6) $ (88.6) (109.9) %

(1)Middlemount’s results are before the impact of related changes in deferred tax asset valuation allowance and reserves and amortization of basis difference. Middlemount’s standalone results included (on a 50% attributable basis) aggregate amounts of depreciation, depletion and amortization, asset retirement obligation expenses, net interest expense and income taxes of $25.1 million and $46.8 million during the years ended December 31, 2019 and 2018, respectively.

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

(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 and expenses related to our other commercial activities.

The decrease in Corporate and Other Adjusted EBITDA during the year ended December 31, 2019 compared to the same period in the prior year was primarily driven by an unfavorable variance in Middlemount’s results due to the temporary suspension of operations and a significant change to the mine plan following a highwall failure mid-2019 and resource management gains recorded in the prior year period related to the sale of surplus land assets in Queensland’s Bowen Basin ($20.6 million) and the sale of surplus coal resources associated with the Millennium Mine ($20.5 million). These unfavorable results were partially offset by lower selling and administrative expenses primarily related to outside services and lower personnel costs.

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

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

Year Ended December 31, (Decrease) Increase to Income

(Dollars in millions)

Asset retirement obligation expenses (58.4) (53.0) (5.4) (10.2) %

Gain on formation of United Wambo Joint Venture 48.1 — 48.1 n.m.

Provision for North Goonyella equipment loss (83.2) (66.4) (16.8) (25.3) %

North Goonyella insurance recovery - equipment 91.1 — 91.1 n.m.

Take-or-pay contract-based intangible recognition 16.6 26.7 (10.1) (37.8) %

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

(Decrease) Increase

Year Ended December 31, to Income

(Dollars in millions)

Seaborne Thermal Mining $ (90.7) $ (88.4) $ (2.3) (2.6) %

Corporate and Other (8.3) (8.6) 0.3 3.5 %

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

Year Ended December 31,

Seaborne Thermal Mining $ 1.84 $ 1.79

Seaborne Metallurgical Mining 3.09 0.94

Powder River Basin Mining 0.80 0.81

Other U.S. Thermal Mining 1.33 1.51

Depreciation, depletion and amortization expense decreased during the year ended December 31, 2019 as compared to the same period in the prior year primarily due to lower amortization of the fair value of certain U.S. coal supply agreements ($65.9 million), decreased expense at our North Goonyella Mine after the fire due to lower sales volumes and asset impairments ($19.2 million) and decreased expense related to the closures of the Kayenta and Cottage Grove Mines during the third quarter of 2019 ($23.7 million). The acquisition of the Shoal Creek Mine in the fourth quarter of 2018 partly offset the decrease in depreciation, depletion and amortization ($41.0 million) and was the driver of the year-over-year increase in the weighted-average depletion rate per ton for the Seaborne Metallurgical Mining segment.

Restructuring Charges. Restructuring charges increased during the year ended December 31, 2019 compared to the same period in the prior year as the result of workforce reductions made during 2019 resulting from actions taken at the North Goonyella Mine, U.S. mine closures and reductions in overhead and support functions.

Transaction Costs Related to Business Combinations and Joint Ventures. The increase in transaction costs was primarily related to the proposed PRB Colorado joint venture with Arch Resources, Inc. as further described in Note 20. “Other Events” to the accompanying consolidated financial statements.

Asset Impairment. We recognized $270.2 million in aggregate asset impairment charges during the year ended December 31, 2019. Refer to Note 3. “Asset Impairment” to the accompanying consolidated financial statements for further information regarding the nature and composition of those charges, which information is incorporated herein by reference.

Provision for North Goonyella Equipment Loss. Provisions for equipment losses related to the events at our North Goonyella Mine were recorded during the years ended December 31, 2019 and 2018 as discussed in Note 20. “Other Events” to the accompanying consolidated financial statements. The provision recorded during 2019 was incremental to the provisions recorded during 2018 and represents the best estimate of potential loss associated with these events based on assessments made to date.

Interest Income. The decrease in interest income during the year ended December 31, 2019 as compared to the prior year was driven by lower cash balances.

Net Mark-to-Market Adjustment on Actuarially Determined Liabilities. The expense recorded during the year ended December 31, 2019 was driven by decreases to the discount rates for all actuarially determined liabilities ($137.6 million) and the unfavorable impact of changes related to claims and an update to our census data for the postretirement benefits plans ($19.7 million). These decreases were partially offset by actuarial gains on pension assets ($94.5 million).

The gain recorded during the year ended December 31, 2018 was driven by increases to the discount rates ($46.2 million), the favorable impact of changes related to claims ($54.2 million), updates to the Medicare law ($20.0 million) and an update to our census data ($7.7 million) for the postretirement benefit plans. The impact on our pension plans was small as actuarial losses on pension assets were largely offset by an increase in discount rates.

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Reorganization Items, Net. The reorganization items recorded during the year ended December 31, 2018 were impacted by a favorable adjustment to our former bankruptcy claims accrual due to settlement of claims.

Unrealized Gains on Economic Hedges. Unrealized gains primarily relate to mark-to-market activity from economic hedge activities intended to hedge future coal sales. For additional information, refer to Note 7. “Derivatives and Fair Value Measurements” to the accompanying consolidated financial statements.

Take-or-Pay Contract-Based Intangible Recognition. During the years ended December 31, 2019 and 2018, we ratably recognized contract-based intangible liabilities for port and rail take-or-pay contracts. For additional details, refer to Note 8. “Intangible Contract Assets and Liabilities” to the accompanying consolidated financial statements.

Income Tax Provision. The increase in the income tax provision during the year ended December 31, 2019 as compared to the prior year period was primarily related to the tax impact of the gain on formation of the United Wambo Joint Venture recognized during the fourth quarter of 2019, the year-over-year change in the benefit recorded in continuing operations under the exception provisions within ASC 740-20-45-7 and the prior year tax benefit related to the release of valuation allowance on refundable alternative minimum tax credits. Refer to Note 10. “Income Taxes” to the accompanying consolidated financial statements for additional information.

Net (Loss) Income Attributable to Common Stockholders

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

(Decrease) Increase to

Year Ended December 31, to Income

(Dollars in millions)

Less: Series A Convertible Preferred Stock dividends — 102.5 (102.5) (100.0) %

Less: Net income attributable to noncontrolling interests 26.2 16.9 9.3 55.0 %

Income from Discontinued Operations, Net of Income Taxes. The decrease in income from discontinued operations, net of income taxes during the year ended December 31, 2019 as compared to the prior year period was primarily driven by smaller actuarial gains associated with black lung liabilities.

Series A Convertible Preferred Stock Dividends. The convertible preferred stock dividends for the year ended December 31, 2018 were comprised of the deemed dividends granted for all remaining shares of convertible preferred stock shares that were converted as of January 31, 2018.

Net Income Attributable to Noncontrolling Interests. The increase in net income attributable to noncontrolling interests during the year ended December 31, 2019 was primarily driven by the gain on formation of the United Wambo Joint Venture recognized during the fourth quarter of 2019.

Diluted EPS

The following table presents diluted EPS:

Decrease to

Year Ended December 31, EPS

Diluted EPS attributable to common stockholders:

(Loss) income from continuing operations $ (2.07) $ 4.28 $ (6.35) (148.4) %

Income from discontinued operations 0.03 0.15 (0.12) (80.0) %

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 103.7 million and 121.0 million for the years ended December 31, 2019 and 2018, respectively

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Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA is defined as (loss) income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses, depreciation, depletion and amortization and reorganization items, net. Adjusted EBITDA is also adjusted for the discrete items that management excluded in analyzing each of our segment’s operating performance, as displayed in the reconciliations below. We have retrospectively modified our calculation of Adjusted EBITDA to exclude restructuring charges and transaction costs related to business combinations and joint ventures as management does not view these items as part of our normal operations.

Year Ended December 31,

(Dollars in millions)

Asset retirement obligation expenses 45.7 58.4 53.0

Gain on formation of United Wambo Joint Venture — (48.1) —

Provision for North Goonyella equipment loss — 83.2 66.4

North Goonyella insurance recovery - equipment — (91.1) —

Reorganization items, net — — (12.8)

Unrealized losses (gains) on economic hedges 29.6 (42.2) (18.3)

Take-or-pay contract-based intangible recognition (8.2) (16.6) (26.7)

Revenues per Ton and Adjusted EBITDA Margin per Ton are equal to revenues by segment and Adjusted EBITDA by segment, respectively, divided by segment tons sold. Costs per Ton is equal to Revenues per Ton less Adjusted EBITDA Margin per Ton, and are reconciled to operating costs and expenses as follows:

Year Ended December 31,

(Dollars in millions)

Unrealized gains (losses) on non-coal trading derivative contracts 7.1 1.2 (0.7)

Take-or-pay contract-based intangible recognition 8.2 16.6 26.7

Net periodic benefit (credit) costs, excluding service cost (1.8) 19.4 18.1

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The following table presents Reporting Segment Costs by reporting segment:

Year Ended December 31,

(Dollars in millions)

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

(Amounts in millions, except per ton data)

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(Amounts in millions, except per ton data)

Free Cash Flow is defined as net cash (used in) provided by operating activities less net cash used in investing activities and excludes cash outflows related to business combinations. See the table below for a reconciliation of Free Cash Flow to its most comparable measure under U.S. GAAP.

Year Ended December 31,

(Dollars in millions)

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash used in investing activities (206.7) (261.3)

Add back: Amount attributable to acquisition of Shoal Creek Mine — 2.4

Outlook

As part of its normal planning and forecasting process, Peabody utilizes a broad approach to develop macroeconomic assumptions for key variables, including country-level gross domestic product, industrial production, fixed asset investment and third-party inputs, driving detailed supply and demand projections for key demand centers for coal, electricity generation and steel. Specific to the U.S., the Company evaluates individual plant needs, including expected retirements, on a plant by plant basis in developing its demand models. Supply models and cost curves concentrate on major supply regions/countries that impact the regions in which the Company operates.

Our estimates involve risks and uncertainties and are subject to change based on various factors as described more fully in the “Cautionary Notice Regarding Forward-Looking Statements” section contained within this Annual Report on Form 10-K.

Our near-term outlook is intended to coincide with the next 12 to 24 months, with subsequent periods addressed in our long-term outlook. Peabody is continuing to monitor the rapidly evolving COVID-19 pandemic and any impacts related to both our near-term and long-term outlook.

Near-Term Outlook

The COVID-19 pandemic continues to impact the global economy, including demand and pricing for global coal markets. Ultimately, demand for seaborne coal will be dependent on the timing and scale of a COVID-19 recovery.

Seaborne thermal coal markets have recently shown signs of improvement with Newcastle forward prices averaging over $80 per tonne in 2021. Colder than expected weather across Asia and Europe has resulted in record high power generation in key markets, driving global liquefied natural gas prices significantly higher and supporting increased seaborne thermal coal demand. In addition, seaborne thermal supply has been impacted by severe wet weather in Indonesia as well as COVID-related production disruptions in China and labor issues in Colombia. Peabody’s seaborne thermal segment is well positioned to serve that demand.

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While seaborne metallurgical coal pricing has improved from 2020 lows, disrupted metallurgical trade flows have contributed to short term pricing volatility. In addition, limitations on Australian imports into China as well as the scope and scale of a steel recovery in traditional regions continue to weigh on markets. China has continued to not import Australian coals even as the spread between Australian and non-Australian premium hard coking coals reached an all-time high in January 2021, resulting in China paying a significant premium for non-Australian metallurgical coal. However, outside of China, demand has started to pick up in the traditional markets of Japan and Korea as well as India. Peabody remains focused on improving its seaborne metallurgical segment cost profile, particularly at the Shoal Creek and Metropolitan Mines, and will continue to be cautious and deliberate in its actions to resume production at currently idled operations.

U.S. thermal coal markets continue to be heavily influenced by natural gas prices, growth in renewable generation and weather. In 2020, coal's share of the generation mix declined to 19% from 23% in the prior year, while natural gas' share rose to 40% as prompt natural gas prices averaged $2.13 per mmBtu. While current natural gas forward prices are above a key competitive mark of $2.50 per mmBtu, coal demand continues to be impacted by secular decline. Peabody remains committed to continuing to serve its customers from its low-cost operations.

Long-Term Outlook

Current projections indicate a slow seaborne market recovery as the global economy continues to be impacted by COVID-19. Future supply and demand will be impacted by economic conditions and public policy related to the COVID-19 pandemic in key supply and demand centers. Further, we believe coal demand and use will be adversely impacted by the policy decisions of various governments, regulatory bodies, financial institutions and others with respect to concerns over the environmental and social impacts of coal generation.

Seaborne Fundamentals. Peabody projects global seaborne metallurgical demand to show consistent, albeit modest, growth over the next several years. During this time, India is expected to account for the vast majority of overall demand growth amid significant steel capacity additions and lack of domestic reserves. ASEAN countries are also projected to be a notable contributor to growth as demand in Japan and Korea remains largely stable. Australia will continue to account for more than 50% of seaborne supply.

For seaborne thermal, Peabody expects ASEAN countries and India to be drivers for seaborne coal demand growth due to increased electrification and economic gains. This growth is anticipated to more than offset declines from developed economies, including the U.S. and Europe. Seaborne thermal coal will continue to be sourced primarily from seaborne exporters Indonesia and Australia, along with Russia, Colombia, South Africa and the U.S., among others.

U.S. Fundamentals. U.S. thermal coal demand continues to be pressured by the ongoing secular decline and is expected to continue to decline longer-term. Future demand will be highly dependent on natural gas prices, growth in renewable generation and other competing fuels, general economic conditions, weather, and policy and regulations, among other factors.

Liquidity and Capital Resources

Overview

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

Any future determinations to return capital to stockholders, such as dividends or share repurchases will depend on a variety of factors, including the restrictions set forth under our debt and surety agreements, our 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. Our ability to early retire debt, declare dividends, or repurchase shares in the future will depend on our future financial performance, which in turn depends on the successful implementation of our 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 our industry, many of which are beyond our control. We have presently suspended the payment of dividends and share repurchases, as discussed in Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

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Liquidity

As of December 31, 2020, our cash balances totaled $709.2 million, including approximately $555 million held by U.S. subsidiaries and $136 million held by Australian subsidiaries, approximately $107 million of which was held by the subsidiary which conducts the operations of our Wilpinjong Mine. Our remaining balance was held by other foreign subsidiaries in accounts predominantly domiciled in the U.S. A significant majority of the cash held by our 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.

We experienced negative cash flows from operations during the year ended December 31, 2020. Results from continuing operations, net of income taxes and Adjusted EBITDA for the year ended December 31, 2020 declined by $1,671.5 million and $624.2 million, respectively, compared to the year ended December 31, 2019. Our total liquidity declined from $1,275.8 million at December 31, 2019 to $728.7 million at December 31, 2020. Available liquidity as of December 31, 2020 and 2019 was comprised of the following:

(Dollars in millions)

Cash and cash equivalents $ 709.2 $ 732.2

Revolving credit facility availability 0.2 498.6

Accounts receivable securitization program availability 19.3 45.0

During the year ended December 31, 2020, the combined availability under our revolving credit facility and accounts receivable securitization program decreased as a result of $375.0 million of borrowings, $159.0 million of which was subsequently repaid, an additional $237.0 million of letters of credit issuances, a $46.1 million reduction in available receivable balances under the accounts receivable securitization program, and the maturity of a $25.0 million commitment under the revolving credit facility.

As further described in Note 23. “Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees,” we are party to various guarantees and financial instruments to provide support for our reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees. At December 31, 2020, such instruments included $1,633.6 million face amount of surety bonds and $437.6 million of outstanding letters of credit. As further described below, we have reached an agreement with the majority of our surety bond providers to limit future collateral requests related to surety bonding.

Existing Debt Financing

As described in Note 12. “Long-term Debt” of the accompanying consolidated financial statements, during 2017, we entered into an indenture related to the issuance of $500.0 million of 6.000% senior secured notes due March 2022 and $500.0 million of 6.375% senior secured notes due March 2025. We make semi-annual interest payments on the senior notes each March 31 and September 30 until maturity. Also during 2017, we entered into a credit agreement (the Credit Agreement) and related term loan under which we originally borrowed $950.0 million and have repaid $561.0 million through December 31, 2020. The term loan requires quarterly principal payments of $1.0 million and periodic interest payments, currently at LIBOR plus 2.75%, through December 2024 with the remaining balance due in March 2025.

We entered into the revolving credit facility allowable under our Credit Agreement during 2017 for an aggregate commitment of $350.0 million for general corporate purposes. In September 2019, we entered into an amendment to the Credit Agreement which increased the aggregate commitment amount under the revolver to $565.0 million and, beginning in 2020, made applicable interest rates and fees dependent upon our periodically-determined first lien leverage ratio, as defined in the Credit Agreement. During 2020, we utilized the revolving credit facility to borrow $315.0 million, of which we subsequently repaid $99.0 million. At December 31, 2020, the revolving loan balance of $216.0 million bore interest at LIBOR plus 3.25%. The revolving credit facility was also utilized for letters of credit, amounting to $323.8 million at December 31, 2020, which incur combined fees of 3.375%, while unused capacity bears a commitment fee of 0.5%. Such letters of credit were primarily in support of our reclamation obligations.

Our debt agreements impose various restrictions and limits on certain categories of payments that we may make, such as those for dividends, investments, and stock repurchases. We are also subject to customary affirmative and negative covenants.

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Refinancing and Related Transactions

During the fourth quarter of 2020 and the first quarter of 2021, we entered into a series of interrelated agreements with our surety bond providers, the revolving lenders under our credit agreement and certain holders of our senior secured notes to extend a significant portion of our near-term debt maturities to December 2024 and to stabilize collateral requirements for our existing surety bond portfolio. Such agreements and related activities are described below.

Organizational Realignment

In July and August 2020, we effected certain changes to our corporate structure in contemplation of a debt-for-debt exchange, which included, among other steps, the formation of certain wholly-owned subsidiaries (the Co-Issuers) to indirectly own and conduct the operations of our Wilpinjong Mine in Australia and the designation of such entities as unrestricted subsidiaries under the Credit Agreement and our senior notes’ indenture (the Existing Indenture). In connection with these actions, we contributed $100.0 million to the Co-Issuers to provide the Wilpinjong Mine with operating liquidity and address its capital needs over the next twelve months.

Surety Agreement

In November 2020, we entered into a surety transaction support agreement (Surety Agreement) with the providers of 99% of our surety bond portfolio (Participating Sureties) to resolve approximately $800 million in additional collateral demands made by the Participating Sureties. In accordance with the Surety Agreement, we initially provided $75.0 million of collateral, in the form of letters of credit.

Upon completion of the Refinancing Transactions, as defined below, other provisions of the Surety Agreement became effective. In particular, we granted second liens on $200.0 million of certain mining equipment and will post an additional $25.0 million of collateral per year from 2021 through 2024 for the benefit of the Participating Sureties. The collateral postings may also further increase to the extent we generate more than $100.0 million of free cash flow (as defined in the Surety Agreement) in any twelve-month period or have asset sales in excess of $10.0 million. Further, the Participating Sureties have agreed to a standstill through December 31, 2024, during which time, the Participating Sureties will not demand any additional collateral, draw on letters of credit posted for the benefit of themselves, or cancel any existing surety bond. We will not pay dividends or make share repurchases during the standstill period, unless otherwise agreed between parties.

Refinancing Transactions

On January 29, 2021 (the Settlement Date), we completed a series of transactions (collectively, the Refinancing Transactions) to, among other things, provide us with maturity extensions and covenant relief, while allowing us to maintain sufficient operating liquidity and financial flexibility. The Refinancing Transactions included a senior notes exchange and related consent solicitation, a revolving credit facility exchange, and various amendments to our existing debt agreements, as summarized below.

Exchange Offer

On January 29, 2021, we settled an exchange offer (Exchange Offer) pursuant to which $398.7 million aggregate principal amount of our 6.000% Senior Secured Notes due March 2022 (2022 Notes) were validly tendered, accepted by us and exchanged for aggregate consideration consisting of (a) $193.9 million aggregate principal amount of new 10.000% Senior Secured Notes due 2024 issued by the Co-Issuers (New Co-Issuer Notes), (b) $195.1 million aggregate principal amount of new 8.500% Senior Secured Notes due 2024 issued by Peabody (New Peabody Notes), and (c) a cash payment of approximately $9.4 million. In connection with the settlement of the Exchange Offer, we also paid early tender premiums totaling $4.0 million in cash. Refer to Note 12. “Long-term Debt” for additional information associated with the New Co-Issuer Notes and the New Peabody Notes.

Following the settlement of the Exchange Offer, approximately $60.3 million aggregate principal amount of the 2022 Notes remain outstanding and are governed by the Existing Indenture, as amended by the supplemental indenture described below.

In connection with the Exchange Offer, we must offer to purchase up to $22.5 million New Peabody Notes at 80% of their accreted value, plus accrued and unpaid interest, subsequent to the Settlement Date. We expect to complete this purchase during the first quarter of 2021.

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Consent Solicitation

Concurrently with the Exchange Offer, we solicited consents from holders of the 2022 Notes to certain proposed amendments to the Existing Indenture to (i) eliminate substantially all of the restrictive covenants, certain events of default applicable to the 2022 Notes and certain other provisions contained in the Existing Indenture and (ii) release the collateral securing the 2022 Notes and eliminate certain other related provisions contained in the Existing Indenture. The Company received the requisite consents from holders of the 2022 Notes and entered into a supplemental indenture to the Existing Indenture, which became operative on January 29, 2021.

Revolver Transactions

In connection with the Refinancing Transactions, we restructured the revolving loans under the Credit Agreement by (i) making a pay down of revolving loans thereunder in the aggregate amount of $10.0 million, (ii) the Co-Issuers incurring $206.0 million of term loans under a credit agreement, dated as of the Settlement Date (New Co-Issuer Term Loans, New Co-Issuer Term Loan Agreement), (iii) Peabody entering into a letter of credit facility (the New Company LC Agreement), and (iv) amending the Credit Agreement (collectively, the Revolver Transactions).

The New Co-Issuer Term Loans mature on December 31, 2024 and bear interest at a rate of 10.00% per annum.

On the Settlement Date, we entered into the New Company LC Agreement with the revolving lenders party to the Credit Agreement, pursuant to which we obtained a $324.0 million letter of credit facility under which our existing letters of credit under the Credit Agreement were deemed to be issued. The commitments under the New Company LC Agreement mature on December 31, 2024. Undrawn letters of credit under the New Company LC Agreement bear interest at 6.00% per annum and unused commitments are subject to a 0.50% per annum commitment fee.

In connection with the Revolver Transactions, we amended the Credit Agreement to make certain changes in consideration of the New Company LC Agreement. After giving effect to the Revolver Transactions, there remain no revolving commitments or revolving loans under the Credit Agreement and the first lien net leverage ratio covenant was eliminated, effectively negating the compliance requirement at December 31, 2020. The New Company LC Agreement requires that our restricted subsidiaries maintain minimum aggregate liquidity of $125.0 million at the end of each quarter through December 31, 2024. As such, liquidity attributable to the Co-Issuers will be excluded from the calculation.

Considering the Refinancing Transactions, we expect to incur approximately $200 million of interest expense, including approximately $50 million of non-cash interest expense, during the year ended December 31, 2021.

Accounts Receivable Securitization Program

As described in Note 23. “Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” of the accompanying consolidated financial statements, we entered into an amended accounts receivable securitization program during 2017 which currently expires in 2022. The program provides for up to $250.0 million in funding, limited to the availability of eligible receivables, accounted for as a secured borrowing. Funding capacity under the program may also be provided for letters of credit in support of other obligations. At December 31, 2020, we had no outstanding borrowings and $112.3 million of letters of credit provided under the program. The letters of credit are primarily in support of portions of our obligations for property and casualty insurance.

Capital Requirements

Additions to Property, Plant, Equipment and Mine Development. For 2021, we are targeting capital expenditures of approximately $225 million, which includes approximately $135 million for ongoing extension projects primarily related to our Seaborne Thermal Mining segment. We have no substantial future payment requirements under U.S. federal coal reserve leases.

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Historical Cash Flows and Free Cash Flow

The following table summarizes our cash flows for the year ended December 31, 2020 and 2019, as reported in the accompanying consolidated financial statements:

Year Ended December 31,

(Dollars in millions)

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash used in investing activities (206.7) (261.3)

Net cash provided by (used in) financing activities 193.4 (701.3)

Net change in cash, cash equivalents and restricted cash (23.0) (285.2)

Cash, cash equivalents and restricted cash at beginning of period 732.2 1,017.4

Cash, cash equivalents and restricted cash at end of period $ 709.2 $ 732.2

Net cash (used in) provided by operating activities $ (9.7) $ 677.4

Net cash used in investing activities (206.7) (261.3)

Add back: Amount attributable to acquisition of Shoal Creek Mine — 2.4

Operating Activities. The net decrease in net cash (used in) provided by operating activities for the year ended December 31, 2020 compared to the prior year was driven by a year-over-year decrease in cash from our mining operations, partially offset by a favorable change in net cash flows associated with our working capital ($108.0 million), and higher funding of our pension and retiree healthcare plans during 2019 ($16.7 million).

Investing Activities. The decrease in net cash used in investing activities for the year ended December 31, 2020 compared to the prior year was driven by lower capital expenditures ($87.8 million), partially offset by higher proceeds from insurance recoveries attributable to North Goonyella equipment in the prior year period ($23.2 million) and higher cash receipts from Middlemount in the prior year period ($14.7 million).

Financing Activities. The increase in net cash provided by (used in) financing activities for the year ended December 31, 2020 compared to the prior year was driven by borrowings under our revolving credit facility and accounts receivable securitization program ($315.0 million and $60.0 million, respectively), greater common stock repurchases and dividends in the prior year ($329.9 million and $258.1 million, respectively), partially offset by higher long-term debt repayments in the current year ($98.4 million).

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Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2020:

Payments Due By Year

Total Less than1 Year 2 - 3Years 4 - 5Years More than5 Years

(Dollars in millions)

Finance lease obligations (principal and interest) 33.3 17.1 7.3 1.2 7.7

Unconditional purchase obligations (3) 37.0 29.3 7.7 — —

(1)Represents the original contractual maturities of our long-term debt obligations. The related interest on long-term debt was calculated using rates in effect at December 31, 2020 for the remaining contractual term of the outstanding borrowings. Following the completion of the Refinancing Transactions, our total long-term debt obligations (principal and interest) increased to $1,953.6 million.

(2)Excludes contingent rents. Refer to Note 13. “Leases” to the accompanying consolidated financial statements for additional discussion of contingent rental agreements.

(3)We routinely enter into purchase agreements with approved vendors for most types of operating expenses in the ordinary course of business. Our specific open purchase orders (which have not been recognized as a liability) under these purchase agreements, combined with any other open purchase orders, are not material and though they are considered enforceable and legally binding, the related terms generally allow us the option to cancel, reschedule or adjust our requirements based on our business needs prior to the delivery of goods or performance of services. Accordingly, the commitments in the table above relate to orders to suppliers for capital purchases.

(4)Represents various short- and long-term take-or-pay arrangements in Australia and the U.S. associated with rail and port commitments for the delivery of coal, including amounts relating to export facilities.

(5)Represents estimated cash outflows for long-term liabilities relating to our postretirement benefit plans, work-related injuries and illnesses, defined benefit pension plans, mine reclamation and end-of-mine closure costs and exploration obligations. Also includes $15 million related to the settlement of the United Mine Workers of America (UMWA) 1974 Pension Plan Litigation described in Note 4. “Discontinued Operations” to the accompanying consolidated financial statements.

We do not expect any of the $9.1 million of net unrecognized tax benefits reported in our consolidated financial statements to require cash settlement within the next year. Beyond that, we are unable to make reasonably reliable estimates of periodic cash settlements with respect to such unrecognized tax benefits.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to various guarantees and financial instruments that carry off-balance-sheet risk and are not reflected in the accompanying consolidated balance sheets. At December 31, 2020, such instruments included $1,633.6 million of surety bonds and $437.6 million of letters of credit. Such financial instruments provide support for our reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees. We periodically evaluate the instruments for on-balance-sheet treatment based on the amount of exposure under the instrument and the likelihood of required performance. We do not expect any material losses to result from these guarantees or off-balance-sheet instruments in excess of liabilities provided for in our consolidated balance sheets.

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As of December 31, 2020, the Company was party to financial instruments with off-balance sheet risk in support of the following obligations:

(Dollars in millions)

Other letters of credit — 1.5 — — — 1.5

Less: Cash collateral in support of surety bonds (4) (15.0) — — — — (15.0)

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

(2)Obligations pertain to customer and vendor contracts

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

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

We could experience a decline in our liquidity as financial assurances associated with reclamation bonding requirements, surety bonds or other obligations are required to be collateralized by cash or letters of credit.

As described in Note 23. “Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to the accompanying consolidated financial statements, we are required to provide various forms of financial assurance in support of our mining reclamation obligations in the jurisdictions in which we operate. Such requirements are typically established by statute or under mining permits. Historically, such assurances have taken the form of third-party instruments such as surety bonds, bank guarantees and letters of credit, as well as self-bonding arrangements in the U.S. Following our emergence from the Chapter 11 Cases, we shifted away from extensive self-bonding in the U.S. in favor of increased usage of surety bonds and similar third-party instruments. This change in practice has had an unfavorable impact on our liquidity due to increased collateral requirements and surety and related fees.

At December 31, 2020, we had total asset retirement obligations of $728.2 millionwhich were backed by a combination of surety bonds, bank guarantees and letters of credit.

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 our accounting liabilities are discounted from the end of a mine’s economic life (when final reclamation work would begin) to the balance sheet date.

Guarantees and Other Financial Instruments with Off-Balance Sheet Risk. See Note 23. “Financial Instruments, Guarantees With Off-Balance-Sheet Risk and Other Guarantees” to our accompanying consolidated financial statements for a discussion of our accounts receivable securitization program and guarantees and other financial instruments with off-balance sheet risk.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. We are also required under U.S. GAAP to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that we believe 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.

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Impairment of Long-Lived Assets. We evaluate our long-lived assets held and used in operations for impairment as events and changes in circumstances indicate that the carrying amount of such assets might not be recoverable. Factors that would indicate potential impairment to be present include, but are not limited to, a sustained history of operating or cash flow losses, an unfavorable change in earnings and cash flow outlook, prolonged adverse industry or economic trends and a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition. We generally do not view short-term declines in thermal and metallurgical coal prices as a triggering event for conducting impairment tests because of historic price volatility. However, we generally view a sustained trend of depressed coal pricing (for example, over periods exceeding one year) as an indicator of potential impairment. Because of the volatile and cyclical nature of coal prices and demand, it is reasonably possible that coal prices may decrease and/or fail to improve in the near term, which, absent sufficient mitigation such as an offsetting reduction in our operating costs, may result in the need for future adjustments to the carrying value of our long-lived mining assets and mining-related investments.

Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. For our active mining operations, we generally group such assets at the mine level, or the mining complex level for mines that share infrastructure, with the exception of impairment evaluations triggered by mine closures. In those cases involving mine closures, the related assets are evaluated at the individual asset level for remaining economic life based on transferability to ongoing operating sites or for expected salvage. For our development and exploration properties and portfolio of surface land and coal reserve holdings, we consider several factors to determine whether to evaluate those assets individually or on a grouped basis for purposes of impairment testing. Such factors include geographic proximity to one another, the expectation of shared infrastructure upon development based on future mining plans and whether it would be most advantageous to bundle such assets in the event of a sale to a third party.

When indicators of impairment are present, we evaluate our long-lived assets for recoverability by comparing the estimated undiscounted cash flows expected to be generated by those assets under various assumptions to their carrying amounts. If such undiscounted cash flows indicate that the carrying value of the asset group is not recoverable, impairment losses are measured by comparing the estimated fair value of the asset group to its carrying amount. As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of an expected present value technique based on the income approach, except for non-strategic coal reserves, surface lands and undeveloped coal properties excluded from our long-range mine planning. In those cases, a market approach is utilized based on the most comparable market multiples available. The estimated future cash flows and underlying assumptions used to assess recoverability and, if necessary, measure the fair value of our long-lived mining assets are derived from those developed in connection with our planning and budgeting process. We believe our assumptions to be consistent with those a market participant would use for valuation purposes. The most critical assumptions underlying our projections and fair value estimates include those surrounding future tons sold, coal prices for unpriced coal, production costs (including costs for labor, commodity supplies and contractors), transportation costs, foreign currency exchange rates and a risk-adjusted, cost of capital (all of which generally constitute unobservable Level 3 inputs under the fair value hierarchy), in addition to market multiples for non-strategic coal reserves, surface lands and undeveloped coal properties excluded from our long-range mine planning (which generally constitute Level 2 inputs under the fair value hierarchy).

Impairment charges of $1,487.4 million of long-lived assets were recorded for the year ended December 31, 2020. The assumptions used are based on our best knowledge at the time we prepare our analysis but can vary significantly due to the volatile and cyclical nature of coal prices and demand, regulatory issues, unforeseen mining conditions, commodity prices and cost of labor. Additionally, the decline of coal-fired electricity generation in the U.S., driven by the reduced utilization of plants and plant retirements, sustained low natural gas pricing and the increased use of renewable energy sources, was a significant consideration in our analysis. These factors may cause us to be unable to recover all or a portion of the carrying value of our long-lived assets. We conducted a review of all other long-lived assets for recoverability as of December 31, 2020 and determined that no further impairment charge was necessary as of that date.

See Note 3. “Asset Impairment” to our accompanying consolidated financial statements for additional information regarding impairment charges.

Income Taxes. We account for income taxes in accordance with accounting guidance which requires deferred tax assets and liabilities to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. The guidance also requires that deferred tax assets be reduced by a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized. In our evaluation of the need for a valuation allowance, we take into account various factors, including the expected level of future taxable income, available tax planning strategies, reversals of existing taxable temporary differences and taxable income in carryback years. As of December 31, 2020, we had valuation allowances for income taxes totaling $2,287.3 million. If actual results differ from the assumptions made in our annual evaluation of our valuation allowance, we may record a change in valuation allowance through income tax expense in the period such determination is made.

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Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions. We recognize the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position must be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2020, we had net unrecognized tax benefits of $9.1 million included in recorded liabilities in the consolidated balance sheet. We believe that our judgments and estimates are reasonable; however, to the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our recorded liabilities, our effective tax rate in a given period could be materially affected.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code. Key provisions of the Act that impact the Company include: (i) repeal of the corporate alternative minimum tax system, (ii) reduction of the U.S. federal corporate tax rate from 35% to 21% and (iii) the inclusion of foreign income from the new global intangible low-taxed income provision of the Act.

See Note 10. “Income Taxes” to the accompanying consolidated financial statements for additional information regarding valuation allowances, unrecognized tax benefits and the Act.

Postretirement Benefit and Pension Liabilities. We have long-term liabilities for our employees’ postretirement benefit costs and defined benefit pension plans. Our pension obligations are funded in accordance with the provisions of applicable laws and our policies. Liabilities for postretirement benefit costs are funded at our discretion. Expense for the year ended December 31, 2020 for postretirement benefit costs and pension liabilities totaled $1.1 million, while employer contributions were $36.3 million. An actuarial gain of $9.1 million was recorded for the year ended December 31, 2020.

Each of these liabilities is actuarially determined and we use various actuarial assumptions, including the discount rate, future cost trends, demographic assumptions and expected asset returns to estimate the costs and obligations for these items. Our discount rate is determined by utilizing a hypothetical bond portfolio model which approximates the future cash flows necessary to service our liabilities. We make assumptions related to future trends for medical care costs in the estimates of postretirement benefit costs. Our medical trend assumption is developed by annually examining the historical trend of cost per claim data. In addition, we make assumptions related to rates of return on plan assets. If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could differ materially from our current estimates. Moreover, regulatory changes could affect our obligation to satisfy these or additional obligations.

For our postretirement benefit obligation, assumed discount rates and health care cost trend rates have a significant effect on the expense and liability amounts reported for our health care plans. Below we have provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

For Year Ended December 31, 2020

One-Percentage-Point Increase One-Percentage-Point Decrease

(Dollars in millions)

Health care cost trend rate:

Effect on total net periodic postretirement benefit cost $ 2.0 $ (1.8)

Effect on total postretirement benefit obligation $ 43.7 $ (37.0)

For Year Ended December 31, 2020

One-HalfPercentage-Point Increase One-HalfPercentage-Point Decrease

(Dollars in millions)

Discount rate:

Effect on total net periodic postretirement benefit cost $ 1.6 $ (1.8)

Effect on total postretirement benefit obligation $ (22.1) $ 25.2

Expected return on assets:

Effect on total net periodic postretirement benefit cost $ (0.1) $ 0.1

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For our pension obligation, assumed discount rates and expected returns on assets have a significant effect on the expense and funded status amounts reported for our defined benefit pension plans. Below we have provided two separate sensitivity analyses to demonstrate the significance of these assumptions in relation to reported amounts.

For Year Ended December 31, 2020

One-HalfPercentage-Point Increase One-HalfPercentage-Point Decrease

(Dollars in millions)

Discount rate:

Effect on total net periodic pension cost $ 2.5 $ (2.8)

Expected return on assets:

Effect on total net periodic pension cost $ (4.1) $ 4.1

As a result of discretionary contributions made in recent years, our defined benefit pension plans have become nearly fully funded. As a result of the funding level, the asset allocation mix reflected Peabody’s target asset mix of 100% fixed income investments and the pensions plans’ assets provide a significant hedge to the funded status against interest rate movements. If the discount rate moves, Peabody’s actual results would be different than those shown above as substantially all of the change in the discount rate should be offset by changes to the expected return on plan assets.

See Note 15. “Postretirement Health Care and Life Insurance Benefits” and Note 16. “Pension and Savings Plans” to the accompanying consolidated financial statements for additional information regarding postretirement benefit and pension plans.

Asset Retirement Obligations. Our asset retirement obligations primarily consist of spending estimates for surface land reclamation and support facilities at both surface and underground mines in accordance with applicable reclamation laws and regulations in the U.S. and Australia as defined by each mining permit. Asset retirement obligations are determined for each mine using various estimates and assumptions including, among other items, estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing of these cash flows, discounted using a credit-adjusted, risk-free rate. As changes in estimates occur (such as mine plan revisions, changes in estimated costs or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted, risk-free rate. If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could be materially different than currently estimated. Moreover, regulatory changes could increase our obligation to perform reclamation and mine closing activities. Amortization associated with our asset retirement obligation assets was $26.7 million for the year ended December 31, 2020. Asset retirement obligation expenses for the year ended December 31, 2020 was $45.7 million and payments totaled $43.4 million. See Note 14. “Asset Retirement Obligations” to the accompanying consolidated financial statements for additional information regarding our asset retirement obligations.

Contingent liabilities. From time to time, we are subject to legal and environmental matters related to our continuing and discontinued operations and certain historical, non-coal producing operations. In connection with such matters, we are required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses.

A determination of the amount of reserves required for these matters is made after considerable analysis of each individual issue. We accrue for legal and environmental matters within “Operating costs and expenses” when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We provide disclosure surrounding loss contingencies when we believe that it is at least reasonably possible that a material loss may be incurred or an exposure to loss in excess of amounts already accrued may exist. Adjustments to contingent liabilities are made when additional information becomes available that affects the amount of estimated loss, which information may include changes in facts and circumstances, changes in interpretations of law in the relevant courts, the results of new or updated environmental remediation cost studies and the ongoing consideration of trends in environmental remediation costs.

Accrued contingent liabilities exclude claims against third parties and are not discounted. The current portion of these accruals is included in “Accounts payables and accrued expenses” and the long-term portion is included in “Other noncurrent liabilities” in our consolidated balance sheets. In general, legal fees related to environmental remediation and litigation are charged to expense. We include the interest component of any litigation-related penalties within “Interest expense” in our consolidated statements of operations. See Note 24. “Commitments and Contingencies” to the accompanying consolidated financial statements for further discussion of our contingent liabilities.

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Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented

See Note 1. “Summary of Significant Accounting Policies” to the accompanying consolidated financial statements for a discussion of newly adopted accounting standards and accounting standards not yet implemented.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The potential for changes in the market value of our coal and freight-related trading, crude oil, diesel fuel and foreign currency contract portfolios, as applicable, is referred to as “market risk.” Market risk related to our coal trading and freight-related contract portfolio, which includes bilaterally-settled and over-the-counter (OTC) exchange-settled trading, in addition to, from time to time, the brokered trading of coal, is evaluated using a value at risk (VaR) analysis. VaR analysis is not used to evaluate our non-trading diesel fuel or foreign currency hedging portfolios, as applicable, or coal trading activities we employ in support of coal production (as discussed below). We attempt to manage market price risks through diversification, controlling position sizes and executing hedging strategies. Due to a lack of quoted market prices and the long-term, illiquid nature of the positions, we have not quantified market price risk related to our non-trading, long-term coal supply agreement portfolio.

Coal Trading Activities and Related Commodity Price Risk

Coal Price Risk Monitored Using VaR. We engage in direct and brokered trading of physical coal and freight-related commodities in OTC markets. These activities give rise to commodity price risk, which represents the potential loss that can be caused by an adverse change in the market value of a particular commitment. We actively measure, monitor, manage and hedge market price risk due to current and anticipated trading activities to remain within risk limits prescribed by management. For example, we have policies in place that limit the amount of market price risk, as measured by VaR, that we may assume at any point in time from our trading and brokerage activities.

We generally account for our coal trading activities using the fair value method, which requires us to reflect contracts with third parties that meet the definition of a derivative at market value in our consolidated financial statements, with the exception of contracts for which we have elected to apply the normal purchases and normal sales exception. Our trading portfolio included futures, forwards and options as of December 31, 2020. The use of VaR allows us to quantify in dollars, on a daily basis, a measure of price risk inherent in our trading portfolio. VaR represents the expected loss in portfolio value due to adverse market price movements over a defined time horizon (liquidation period) within a specified confidence level. Our VaR model is based on a variance/co-variance approach, which captures our potential loss exposure related to future, forward, swap and option positions. Our VaR model assumes a 15-day holding period at the time of VaR measurement and produces an output corresponding with a 95% one-tailed confidence interval, which means that there is a one in 20 statistical chance that our portfolio could lose more than the VaR estimates during the assumed liquidation period. Our volatility calculation incorporates an exponentially weighted moving average algorithm based on price movements during the previous 60 market days, which makes our volatility more representative of recent market conditions while still reflecting an awareness of historical price movements. VaR does not estimate the maximum potential loss expected in the 5% of the time that changes in the portfolio value during the assumed liquidation period is expected to exceed measured VaR. We use stress testing and scenario analysis to help provide visibility in such cases, as discussed further below.

VaR analysis allows us to aggregate market price risk across products in the portfolio, compare market price risk on a consistent basis and identify the drivers of risk and changes thereto over time. We use historical data to estimate price volatility as an input to VaR. Given our reliance on historical data, we believe VaR is reasonably effective in characterizing market price risk exposures in markets in which there are not sudden fundamental changes or shifts in market conditions. Nonetheless, an inherent limitation of VaR is that past changes in market price risk factors may not produce accurate predictions of future market price risk. Due to that limitation, combined with the subjectivity in the choice of the liquidation period and reliance on historical data to calibrate our models, we perform stress and scenario analyses as needed to estimate the impacts of market price changes on the value of the portfolio. Additionally, back-testing is regularly performed to monitor the effectiveness of our VaR measure. The results of these analyses are used to supplement the VaR methodology and identify additional market price-related risks.

During the year ended December 31, 2020, the actual low, high and average VaR was $0.3 million, $3.0 million and $1.1 million, respectively.

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Other Risk Exposures. We also use our coal trading and brokerage platform to support various coal production-related activities. These transactions may involve coal to be produced from our mines, coal sourcing arrangements with third-party mining companies, joint venture positions with producers or offtake agreements with producers. While the support activities (such as the forward sale of coal to be produced and/or purchased) may ultimately involve instruments sensitive to market price risk, the sourcing of coal in these arrangements does not involve market risk sensitive instruments and does not encompass the commodity price risks that we monitor through VaR analysis, as discussed above.

Future Realization. As of December 31, 2020, the total estimated future realization of the value of our trading portfolio is expected to occur over 2021 and 2022.

We also monitor other types of risk associated with our coal trading activities, including credit, market liquidity and counterparty nonperformance.

Credit and Nonperformance Risk

The fair values of our derivative instruments utilized for corporate hedging and coal trading activities reflect adjustments for credit risk, as necessary. Our exposure is substantially with electric utilities, energy marketers, steel producers and nonfinancial trading houses. Our policy is to independently evaluate each counterparty’s creditworthiness prior to entering into transactions and to regularly monitor exposures. We manage our counterparty risk from our hedging activities related to foreign currency and fuel exposures, as applicable, through established credit standards, diversification of counterparties, utilization of investment grade commercial banks, adherence to established tenor limits based on counterparty creditworthiness and continual monitoring of that creditworthiness. If we engage in a transaction with a counterparty that does not meet our credit standards, we seek to protect our position by requiring the counterparty to provide an appropriate credit enhancement. Also, when appropriate (as determined by our credit management function), we have taken steps to reduce our exposure to customers or counterparties whose credit has deteriorated and who may pose a higher risk of failure to perform under their contractual obligations. These steps include obtaining letters of credit or cash collateral (margin), requiring prepayments for shipments or the creation of customer trust accounts held for our benefit to serve as collateral in the event of a failure to pay or perform. To reduce our credit exposure related to trading and brokerage activities, we seek to enter into netting agreements with counterparties that permit us to offset asset and liability positions with such counterparties and, to the extent required, we will post or receive margin amounts associated with exchange-cleared and certain OTC positions. We also continually monitor counterparty and contract nonperformance risk, if present, on a case-by-case basis.

Foreign Currency Risk

We have historically utilized currency forwards and options to hedge currency risk associated with anticipated Australian dollar expenditures. The accounting for these derivatives is discussed in Note 7. “Derivatives and Fair Value Measurements” to the accompanying consolidated financial statements. As of December 31, 2020, we had currency options outstanding with an aggregate notional amount of $575.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the first nine months of 2021. Assuming we had no foreign currency hedging instruments in place, our exposure in operating costs and expenses due to a $0.10 change in the Australian dollar/U.S. dollar exchange rate is approximately $110 to $120 million for the next twelve months. Based upon the Australian dollar/U.S. dollar exchange rate at December 31, 2020, the currency option contracts outstanding at that date would limit our net exposure to a $0.10 unfavorable change in the exchange rate to approximately $60 million for the next twelve months.

Other Non-Coal Trading Activities — Commodity Price Risk

Long-Term Coal Contracts. We predominantly manage our commodity price risk for our 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. Sales under such agreements comprised approximately 89%, 88% and 87% of our worldwide sales (by volume) for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had approximately 89 million tons of U.S. thermal coal priced and committed for 2021. This includes approximately 73 million tons of PRB coal and 16 million tons of other U.S. thermal coal. We have the flexibility to increase volumes should demand warrant. We are estimating 2021 thermal coal sales volumes from our Seaborne Thermal Mining segment of 17.2 million tons comprised of thermal export volume of 9.5 million tons and domestic volume of 7.7 million tons. We are estimating full year 2021 metallurgical coal sales from our Seaborne Metallurgical Mining segment of 5.7 million tons. Sales commitments in the metallurgical coal market are typically not long-term in nature, and we are therefore subject to fluctuations in market pricing.

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Diesel Fuel Hedges. Previously, we managed price risk of the diesel fuel used in our mining activities through the use of derivatives, primarily swaps. As of December 31, 2020, we did not have any diesel fuel derivative instruments in place. We also manage the price risk of diesel fuel through the use of cost pass-through contacts with certain customers.

We expect to consume 75 to 85 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 our annual diesel fuel costs by approximately $20 million based on our expected usage.

Interest Rate Risk

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. From time to time, we manage our debt to achieve a certain ratio of fixed-rate debt and variable-rate debt as a percent of net debt through the use of various hedging instruments. As of December 31, 2020, we had approximately $1 billion of fixed-rate borrowings and $0.7 billion of variable-rate borrowings outstanding and had no interest rate swaps in place. A one percentage point increase in interest rates would result in an annualized increase to interest expense of approximately $7 million on our variable-rate borrowings. With respect to our fixed-rate borrowings, a one percentage point increase in interest rates would result in a decrease of approximately $14 million in the estimated fair value of these borrowings.

Item 8. Financial Statements and Supplementary Data.

See Part IV, Item 15. “Exhibits and Financial Statement Schedules” of this report for the information required by this Item 8, which information is incorporated by reference herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our 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 the principal executive officer and principal accounting officer, on a timely basis. As of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2020 were effective to provide reasonable assurance that the desired control objectives were achieved.

Changes in Internal Control Over Financial Reporting

We periodically review our internal control over financial reporting as part of our efforts to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In addition, we routinely review our system of internal control over financial reporting to identify potential changes to our processes and systems that may improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new systems; consolidating the activities of acquired business units; migrating certain processes to our shared services organizations and/or managed third parties; formalizing and refining policies, procedures and control documentation requirements; improving segregation of duties and adding monitoring controls. In addition, when we acquire new businesses, we incorporate our controls and procedures into the acquired business as part of our integration activities.

There have been no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Management’s Report on Internal Control Over Financial Reporting

Management is responsible for maintaining and establishing adequate internal control over financial reporting. An evaluation of the effectiveness of the design and operation of our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as of the end of the period covered by this report was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. This evaluation is performed to determine if our internal controls over financial reporting provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of inherent limitations, any system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of our internal control over financial reporting using the criteria set by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective to provide reasonable assurance that the desired control objectives were achieved as of December 31, 2020.

Our Independent Registered Public Accounting Firm, Ernst & Young LLP, has audited our internal control over financial reporting, as stated in their unqualified opinion report included herein.

/s/ Glenn L. Kellow /s/ Mark A. Spurbeck

February 23, 2021

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Peabody Energy Corporation

Opinion on Internal Control over Financial Reporting

We have audited Peabody Energy Corporation’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Peabody Energy Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Peabody Energy Corporation as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”) of the Company, and our report dated February 23, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young, LLP

St. Louis, Missouri

February 23, 2021

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Item 9B. Other Information.

None.

PART III

Item 10.Directors, Executive Officers and Corporate Governance.

The information required by Item 401 of Regulation S-K is included under the caption Proposal I - “Election of Directors” in our 2021 Proxy Statement and in Part I, Item 1. “Business” of this report under the caption “Information About Our Executive Officers.” The information required by Items 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is included under the captions “Stock Ownership,” “Corporate Governance - Code of Business Conduct and Ethics” and “Additional Information Concerning the Board of Directors - Committee Overview - Audit Committee” in our 2021 Proxy Statement. Such information is incorporated herein by reference.

Item 11.Executive Compensation.

The information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K is included under the captions “Additional Information Concerning the Board of Directors - Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in our 2021 Proxy Statement and is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 403 of Regulation S-K is included under the caption “Stock Ownership - Security Ownership of Directors and Management and Certain Beneficial Owners” in our 2021 Proxy Statement and is incorporated herein by reference.

Equity Compensation Plan Information

As required by Item 201(d) of Regulation S-K, the following table provides information regarding our equity compensation plans as of December 31, 2020:

Plan Category

Equity compensation plans not approved by security holders — — —

(1)Shares issuable pursuant to outstanding performance units and vested but not issued deferred stock units. Performance units are shown at target and could change based on actual metrics achieved.

(2)The weighted-average exercise price shown in the table does not take into account outstanding deferred stock units or performance awards.

Refer to Note 18. “Share-Based Compensation” to the accompanying consolidated financial statements for additional information regarding the material features of our current equity compensation plans.

Item 13.Certain Relationships and Related Transactions, and Director Independence.

The information required by Items 404 and 407(a) of Regulation S-K is included under the captions “Review of Related Person Transactions” and “Additional Information Concerning the Board of Directors - Board Independence” in our 2021 Proxy Statement and is incorporated herein by reference.

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Item 14.Principal Accountant Fees and Services.

The information required by Item 9(e) of Schedule 14A is included under the caption “Audit Fees” in our 2021 Proxy Statement and is incorporated herein by reference.

PART IV

Item 15.Exhibits and Financial Statement Schedules.

(a) Documents Filed as Part of the Report

(1) Financial Statements.

The following consolidated financial statements of Peabody Energy Corporation and the report thereon of the independent registered public accounting firm are included herein on the pages indicated:

Page

Report of Independent Registered Public Accounting Firm F-1

Consolidated Balance Sheets — December 31, 2020 and 2019 F-5

Notes to Consolidated Financial Statements F-9

(2) Financial Statement Schedules.

The following financial statement schedule of Peabody Energy Corporation is at the page indicated:

Page

Valuation and Qualifying Accounts F-71

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are not applicable and, therefore, have been omitted.

(3) Exhibits.

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

Exhibit No. Description of Exhibit

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Peabody Energy Corporation 2020 Form 10-K 94

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Peabody Energy Corporation 2020 Form 10-K 95

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21† List of Subsidiaries.

BTU US Equity

BTU · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10.Directors, Executive Officers and Corporate Governance.

Item 11.Executive Compensation.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13.Certain Relationships and Related Transactions, and Director Independence.

Item 14.Principal Accountant Fees and Services.

Item 15.Exhibits and Financial Statement Schedules.

BTU US Equity☆

BTU · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10.Directors, Executive Officers and Corporate Governance.

Item 11.Executive Compensation.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13.Certain Relationships and Related Transactions, and Director Independence.

Item 14.Principal Accountant Fees and Services.

Item 15.Exhibits and Financial Statement Schedules.

BTU US Equity