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MarketScreener Homepage  >  Equities  >  Nyse  >  Peabody Energy Corporation    BTU

PEABODY ENERGY CORPORATION

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PEABODY ENERGY : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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08/10/2020 | 07:23am EDT
As used in this report, the terms "we," "us," "our," "Peabody" or "the Company"
refer to Peabody Energy Corporation or its applicable subsidiary or
subsidiaries. Unless otherwise noted herein, disclosures in this Quarterly
Report on Form 10-Q relate only to our continuing operations.
When used in this filing, the term "ton" refers to short or net tons, equal to
2,000 pounds (907.18 kilograms), while "tonne" refers to metric tons, equal to
2,204.62 pounds (1,000 kilograms).
Cautionary Notice Regarding Forward-Looking Statements
This report includes statements of our expectations, intentions, plans and
beliefs that constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and are intended to come within the safe harbor protection
provided by those sections. These statements relate to future events or our
future financial performance, including, without limitation, the section
captioned "Outlook" in this Item 2. We use words such as "anticipate,"
"believe," "expect," "may," "forecast," "project," "should," "estimate," "plan,"
"outlook," "target," "likely," "will," "to be" or other similar words to
identify forward-looking statements.
Without limiting the foregoing, all statements relating to our future operating
results, anticipated capital expenditures, future cash flows and borrowings, and
sources of funding are forward-looking statements and speak only as of the date
of this report. These forward-looking statements are based on numerous
assumptions that we believe are reasonable, but are subject to a wide range of
uncertainties and business risks, and actual results may differ materially from
those discussed in these statements. These factors are difficult to accurately
predict and may be beyond our control. Factors that could affect our results or
an investment in our securities include, but are not limited to:
•our profitability depends upon the prices we receive for our coal;
•if a substantial number of our long-term coal supply agreements terminate, or
if the pricing, volumes or other elements of those agreements materially adjust,
our revenues and operating profits could suffer if we are unable to find
alternate buyers willing to purchase our coal on comparable terms to those in
our contracts;
•the loss of, or significant reduction in, purchases by our largest customers
could adversely affect our revenues;
•our trading and hedging activities do not cover certain risks and may expose us
to earnings volatility and other risks;
•our operating results could be adversely affected by unfavorable economic and
financial market conditions;
•our ability to collect payments from our customers could be impaired if their
creditworthiness or contractual performance deteriorates;
•risks inherent to mining could increase the cost of operating our business, and
events and conditions that could occur during the course of our mining
operations could have a material adverse impact on us;
•if transportation for our coal becomes unavailable or uneconomic for our
customers, our ability to sell coal may be diminished;
•a decrease in the availability or increase in costs of key supplies, capital
equipment or commodities such as diesel fuel, steel, explosives and tires could
decrease our anticipated profitability;
•take-or-pay arrangements within the coal industry could unfavorably affect our
profitability;
•an inability of trading, brokerage, mining or freight counterparties to fulfill
the terms of their contracts with us could reduce our profitability;
•we may not recover our investments in our mining, exploration and other assets,
which may require us to recognize impairment charges related to those assets;
•our ability to operate our company effectively could be impaired if we lose key
personnel or fail to attract qualified personnel;
•we could be negatively affected if we fail to maintain satisfactory labor
relations;
•we could be adversely affected if we fail to appropriately provide financial
assurances for our obligations;
•our mining operations are extensively regulated, which imposes significant
costs on us, and future regulations and developments could increase those costs
or limit our ability to produce coal;
•our operations may impact the environment or cause exposure to hazardous
substances, and our properties may have environmental contamination, which could
result in material liabilities to us;
•we may be unable to obtain, renew or maintain permits necessary for our
operations, or we may be unable to obtain, renew or maintain such permits
without conditions on the manner in which we run our operations, which would
reduce our production, cash flows and profitability;

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•our mining operations are subject to extensive forms of taxation, which imposes
significant costs on us, and future regulations and developments could increase
those costs or limit our ability to produce coal competitively;
•if the assumptions underlying our asset retirement obligations for reclamation
and mine closures are materially inaccurate, our costs could be significantly
greater than anticipated;
•our future success depends upon our ability to continue acquiring and
developing coal reserves that are economically recoverable;
•we face numerous uncertainties in estimating our economically recoverable coal
reserves and inaccuracies in our estimates could result in lower than expected
revenues, higher than expected costs and decreased profitability;
•our global operations increase our exposure to risks unique to international
mining and trading operations;
•our proposed joint venture with Arch Resources, Inc.,(Arch), known as Arch
Coal, Inc. prior to May 15, 2020, may not be completed;
•joint ventures, partnerships or non-managed operations may not be successful
and may not comply with our operating standards;
•we may undertake further repositioning plans that would require additional
charges;
•we could be exposed to significant liability, reputational harm, loss of
revenue, increased costs or other risks if we sustain cyber-attacks or other
security breaches that disrupt our operations or result in the dissemination of
proprietary or confidential information about us, our employees, our customers
or other third-parties;
•our business, results of operations, financial condition and prospects could be
materially and adversely affected by the recent coronavirus (COVID-19) pandemic
and the related effects on public health;
•our expenditures for postretirement benefit obligations could be materially
higher than we have predicted if our underlying assumptions prove to be
incorrect;
•concerns about the impacts of coal combustion on global climate are
increasingly leading to consequences that have affected and could continue to
affect demand for our products or our securities and our ability to produce,
including increased governmental regulation of coal combustion and unfavorable
investment decisions by electricity generators;
•numerous activist groups are devoting substantial resources to anti-coal
activities to minimize or eliminate the use of coal as a source of electricity
generation, domestically and internationally, thereby further reducing the
demand and pricing for coal, and potentially materially and adversely impacting
our future financial results, liquidity and growth prospects;
•our financial performance could be adversely affected by our indebtedness;
•despite our indebtedness, we may still be able to incur substantially more
debt, including secured debt, which could further increase the risks associated
with our indebtedness;
•the terms of our indenture governing our senior secured notes and the
agreements and instruments governing our other indebtedness impose restrictions
that may limit our operating and financial flexibility;
•the number and quantity of viable financing and insurance alternatives
available to us may be significantly impacted by unfavorable lending and
investment policies by financial institutions and insurance companies associated
with concerns about environmental impacts of coal combustion, and negative views
around our efforts with respect to environmental and social matters and related
governance considerations could harm the perception of our company by certain
investors or result in the exclusion of our securities from consideration by
those investors;
•the price of our securities may be volatile;
•our Common Stock is subject to dilution and may be subject to further dilution
in the future;
•there may be circumstances in which the interests of a significant stockholder
could be in conflict with other stakeholders' interests;
•the payment of dividends on our stock or repurchases of our stock is dependent
on a number of factors, and future payments and repurchases cannot be assured;
•we may not be able to fully utilize our deferred tax assets;
•acquisitions and divestitures are a potentially important part of our long-term
strategy, subject to our investment criteria, and involve a number of risks, any
of which could cause us not to realize the anticipated benefits;
•our certificate of incorporation and by-laws include provisions that may
discourage a takeover attempt;
•diversity in interpretation and application of accounting literature in the
mining industry may impact our reported financial results; and

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•other risks and factors detailed in this report, including, but not limited to,
those discussed in "Legal Proceedings," set forth in Part II, Item 1 and in
"Risk Factors," set forth in Part II, Item 1A of this Quarterly Report on
Form 10-Q.
When considering these forward-looking statements, you should keep in mind the
cautionary statements in this document and in our other Securities and Exchange
Commission (SEC) filings, including, but not limited to, the more detailed
discussion of these factors and other factors that could affect our results
contained in Item 1A. "Risk Factors" and Item 3. "Legal Proceedings" of our
Annual Report on Form 10-K for the year ended December 31, 2019 filed with the
SEC on February 21, 2020. These forward-looking statements speak only as of the
date on which such statements were made, and we undertake no obligation to
update these statements except as required by federal securities laws.
Overview
We are a leading coal producer. In 2019, we produced and sold 164.7 million and
165.5 million tons of coal, respectively, from continuing operations. Since
December 31, 2019, the Millennium Mine in the Seaborne Metallurgical Mining
segment and the Wildcat Hills Underground Mine in the Other U.S. Thermal Mining
segment shipped their final tons. As a result, we owned interests in 18 active
coal mining operations located in the United States (U.S.) and Australia at
June 30, 2020. Included in that count is our 50% equity interest in Middlemount
Coal Pty Ltd. (Middlemount), which owns the Middlemount Mine in Queensland,
Australia. In addition to our mining operations, we market and broker coal from
other coal producers, both as principal and agent, and trade coal and
freight-related contracts.
We conduct business through four operating segments: Seaborne Thermal Mining,
Seaborne Metallurgical Mining, Powder River Basin Mining and Other U.S. Thermal
Mining. Refer to Note 19. "Segment Information" to the accompanying unaudited
condensed consolidated financial statements for further information regarding
those segments and the components of our Corporate and Other segment.
From time to time, we initiate restructuring activities in connection with our
repositioning efforts to appropriately align our cost structure or optimize our
coal production relative to prevailing market conditions. As further described
in the "Results of Operations" section contained within this Item 2, we incurred
restructuring charges of $16.5 million and $23.0 million during the three and
six months ended June 30, 2020, respectively, related to workforce reductions
made across the organization through the use of both involuntary and voluntary
reductions.
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 increasingly 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. In the seaborne metallurgical and thermal
markets, demand remains weak as a result of curtailed steel production and
reduced electricity generation. Thermal coal demand in the U.S. has been
pressured by low natural gas prices, increased renewable energy usage and weak
electric power sector consumption due to reduced industrial activity. Coal
industry fundamentals, as well as known impacts specific to Peabody, are further
addressed in the "Results of Operations" section contained within this Item 2.

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While the ultimate impacts of the COVID-19 pandemic on our business are unknown,
we expect continued interference with general commercial activity, which may
further negatively affect both demand and prices for our products. We also face
disruption to supply chain and distribution channels, potentially increasing
costs of production, storage and distribution, and potential adverse effects to
our workforce, each of which could have a material adverse effect on our
business, financial condition or results of operations. In addition, the
COVID-19 pandemic could continue to have an adverse impact on the timing of key
events, including the timing of our litigation in the U.S. federal court system
as we pursue the completion of the proposed joint venture with Arch. 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 or results of operations at this time.
We have taken actions to mitigate our financial risk given the uncertainty in
global markets caused by the COVID-19 pandemic, and we also made the decision
during the first quarter to pause debt reduction activities. We are continuing
to advance our program to reposition the cost structure of the corporate
functions and mines to counter the impacts of reduced demand and low pricing.
These initiatives include temporarily idling production at some mines; adjusting
shift schedules to match demand; reducing the number of units in operation;
offloading take-or-pay commitments; and eliminating additional positions, among
other items. During the second quarter of 2020, we borrowed $300.0 million under
our revolving credit facility. The borrowing was made as part of our ongoing
efforts to preserve financial flexibility in light of the current uncertainty in
the global markets and related effects on our business resulting from the
COVID-19 pandemic. As described below in the "Liquidity and Capital Resources"
section contained within this Item 2, we anticipate significant risk of
noncompliance with the leverage ratio limitations under our credit agreement
during the second half of 2020 unless we successfully take mitigating action.
This risk is driven by unfavorable trends in our results from continuing
operations, net of income taxes, and our Adjusted EBITDA, as further described
within the "Results of Operations" section below.
On March 27, 2020, the President of the United States signed and enacted into
law the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), a $2
trillion economic relief bill. The CARES Act contains an income tax provision
that provides for the acceleration of refunds of previously generated
alternative minimum tax credits. We have requested accelerated refunds of
approximately $24 million from the Internal Revenue Service and have adjusted
our current and deferred tax asset balances accordingly. The CARES Act also
contains a provision for deferred payment of 2020 employer payroll taxes after
the date of enactment to future years. We will defer a portion of our remaining
2020 employer payroll taxes to subsequent years.
United Wambo Joint Venture with Glencore
In December 2019, after receiving the requisite regulatory and permitting
approvals, we formed an unincorporated joint venture with Glencore plc
(Glencore), in which we hold a 50% interest, to combine the existing operations
of our Wambo Open-Cut Mine in Australia with the adjacent coal reserves of
Glencore's United Mine. We proportionally consolidate the entity based upon our
economic interest.
Both parties contributed mining tenements upon formation of the joint venture.
Construction and development efforts are currently underway to combine
operations. The joint venture agreement specifies that we will continue to fully
own and operate the existing Wambo Open-Cut Mine through the date that
development of the combined operations is completed, which is currently expected
to be during the second half of 2020. The parties will then contribute mining
equipment and other assets, and joint operations will commence. Glencore is
responsible for construction and development activities and will manage the
mining operations of the joint venture.
PRB Colorado Joint Venture with Arch
On June 18, 2019, we entered into a definitive implementation agreement (the
Implementation Agreement) with Arch, to establish a joint venture that will
combine the respective Powder River Basin (PRB) and Colorado operations of
Peabody and Arch. We expect the joint venture to result in several operational
synergies, including improved mining productivity and lower per-unit operating
costs. Pursuant to the terms of the Implementation Agreement, we will hold a
66.5% economic interest in the joint venture and Arch will hold a 33.5% economic
interest. We expect to proportionally consolidate the entity based upon our
economic interest. Governance of the joint venture will be overseen by the joint
venture's board of managers, which will be comprised of Peabody and Arch
representatives with voting powers proportionate with the companies' economic
interests, with the exception of certain specified matters which will require
supermajority approval. We will manage the operations of the joint venture,
subject to the supervision of the joint venture's board of managers.

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On February 26, 2020, the U.S. Federal Trade Commission (FTC) sought a
preliminary injunction to challenge our proposed joint venture. We and Arch
continue to pursue creation of the joint venture and are litigating the FTC's
decision in the U.S. federal court in the Eastern District of Missouri. Related
hearings took place July 14, 2020 through July 24, 2020 and closing arguments
are scheduled for August 10, 2020, with a ruling expected during the third
quarter of 2020. The FTC has also initiated an administrative proceeding on the
merits, which is currently scheduled for hearing on October 27, 2020. If the
court denies the preliminary injunction, we plan to proceed with the joint
venture.
Formation of the joint venture is subject to favorable resolution of the FTC's
challenge noted above and customary closing conditions, including the
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, the receipt of certain other
required regulatory approvals and the absence of injunctions or other legal
restraints preventing the formation of the joint venture. In September 2019, we
amended our credit agreement to expressly permit formation of the joint venture
and intend to address such formation under the indenture governing our senior
secured notes. At such time as control over the existing operations is
exchanged, we will account for our interest in the combined operations at fair
value.
North Goonyella
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. During 2018 and 2019, we recorded provisions for equipment
losses amounting to $149.6 million related to the fire, representing the best
estimate of losses to date. Of that amount, $24.7 million was recorded during
the six months ended June 30, 2019. No additional provisions for equipment
losses were recorded during the three and six months ended June 30, 2020. We
have also incurred containment and idling costs subsequent to the mine's
suspension which amounted to $11.3 million and $28.4 million during the three
months ended June 30, 2020 and 2019, respectively, and $21.4 million and
$65.3 million during the six months ended June 30, 2020 and 2019, 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.
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 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 2.
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 2 for definitions and
reconciliations to the most comparable measures under U.S. GAAP.

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Three and Six Months Ended June 30, 2020 Compared to the Three and Six Months
Ended June 30, 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 three months ended June 30, 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 three months ended June 30, 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 three months ended June 30,
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       June 30, 2020
 Premium HCC (1)                            $ 143.80$ 108.30$ 118.47$      113.70
 Premium PCI coal (1)                          84.75          66.60          71.22               70.15
 Newcastle index thermal coal (1)              68.33          50.48          55.08               51.17
 API 5 thermal coal (1)                        52.80          37.70          43.44               37.70
 PRB 8,800 Btu/Lb coal (2)                     12.00          11.90          11.97               11.90

Illinois Basin 11,500 Btu/Lb coal (2) 31.15 28.00

  30.41               28.00


(1) Prices expressed per tonne.
(2) Prices expressed per ton.
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. The global coal industry data for the six months ended June
30, 2020 presented herein, is not indicative of the ultimate impacts of the
COVID-19 pandemic given the various levels of response and unknown duration, the
significant decline in prices for our products and continued weak demand for our
products.
With respect to seaborne metallurgical coal, global steel production decreased
approximately 6% through the six months ended June 30, 2020 compared to the
prior year period, as the COVID-19 pandemic continued to have significant
impacts on steel demand. Steel production in China increased approximately 3%
through the six months ended June 30, 2020 compared to the prior year, including
a new monthly production record achieved in May as the country attempts to
recover from the COVID-19 pandemic. Despite a strong start to the year, China's
coking coal imports have been pressured recently by intensified import
restrictions, which are likely to be a factor for the remainder of 2020.
Steel production, excluding China, was down approximately 14% through the six
months ended June 30, 2020 compared to the prior year due to COVID-19 related
lockdowns and economic weakness. Steel demand deterioration has caused
producers, including Peabody customers, to idle capacity and restrict output,
which has pressured seaborne metallurgical coal demand. This deterioration could
continue given ongoing effects from the COVID-19 pandemic on economic conditions
in key demand centers. The recovery in India is underway with the restart of
steel mills and improving blast furnace utilization rates, but is threatened by
the increasing spread of COVID-19, and will likely be delayed by elevated
inventories and the pending monsoon season. European steel and metallurgical
coal demand recovery is also underway, but is likely to lag behind the full
reopening of the automotive sector.

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Seaborne thermal coal demand continues to be impacted by the COVID-19 induced
reduction in overall electric generation, along with competition from
alternative fuel sources and low gas prices. Chinese thermal coal imports
increased by approximately 18 million tonnes through the six months ended
June 30, 2020 compared to the prior year, mainly reflecting carryover tonnes
from port restrictions in 2019 and China's domestic production, which is flat
through the six months ended June 30, 2020 due to COVID-19 related disruption
and safety checks. Meanwhile, Chinese thermal power generation declined
approximately 2% year-over-year during the six months ended June 30, 2020
leading to above-average inventory at utilities. Seaborne demand outside of
China remains pressured as economies are at various phases of reopening. India
has seen domestic power demand recover, but thermal imports are down by
approximately 20 million tonnes through the six months ended June 30, 2020
compared to the prior year and are likely to remain under pressure given
inventory overhang, domestic production growth and subdued demand.
In the United States, overall electricity demand has been negatively impacted
year-over-year due to COVID-19 induced economic shutdowns during the six months
ended June 30, 2020. The reduction in thermal coal demand during that period has
outpaced the reduction in overall electricity demand as continued coal plant
retirements, growth in natural gas and renewable generation and weak natural gas
prices continue to negatively impact coal's share of electricity generation.
COVID-19 related curtailments reduced total electricity demand in the second
quarter, which has resulted in coal's share of generation declining to
approximately 17% for the six months ended June 30, 2020, while natural gas and
renewables continue to gain. Through the six months ended June 30, 2020 utility
consumption of PRB coal fell over 30% compared to the prior year period.
Moreover, reduced coal consumption year-to-date has resulted in elevated coal
inventories, pressuring the required coal shipments needed to meet demand.
Our revenues for the three and six months ended June 30, 2020 decreased compared
to the same periods in 2019 ($522.3 million and $926.7 million, respectively)
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 three and six months ended June 30, 2020 decreased compared
to the same periods in the prior year ($1,588.2 million and $1,850.8 million,
respectively). The decrease was driven by the asset impairment charges recorded
in the current period (three and six months, $1,418.1 million), the unfavorable
revenue variances described above and a prior year insurance recovery related to
the events at our North Goonyella Mine (six months, $125.0 million). These
unfavorable variances were partially offset by lower operating costs and
expenses due largely to the sales volume decline as well as production
efficiencies and other cost improvements ($301.5 million and $470.2 million,
respectively), lower depreciation, depletion and amortization ($77.1 million and
$143.6 million, respectively) and lower selling and administrative expenses
($13.7 million and $25.5 million, respectively).
Adjusted EBITDA for the three and six months ended June 30, 2020 reflected a
year-over-year decrease of $206.6 million and $423.9 million, respectively.
As of June 30, 2020, our available liquidity was approximately $926 million.
Refer to the "Liquidity and Capital Resources" section contained within this
Item 2 for a further discussion of factors affecting our available liquidity.
Tons Sold
The following table presents tons sold by operating segment:
                                        Three Months Ended                                        (Decrease) Increase                                       Six Months Ended                     (Decrease) Increase
                                             June 30,                                                 to Volumes                                                June 30,                             to Volumes
                                     2020                2019               Tons                 %                  2020               2019               Tons               %
                                                 (Tons in millions)                                                                                           (Tons in millions)
Seaborne Thermal Mining                 4.6                4.7               (0.1)                  (2) %             9.2                9.2                   -              -  %
Seaborne Metallurgical Mining           1.1                2.1               (1.0)                 (48) %             3.1                4.4                (1.3)           (30) %
Powder River Basin Mining              17.9               25.0               (7.1)                 (28) %            41.4               50.3                (8.9)           (18) %
Other U.S. Thermal Mining               3.8                7.2               (3.4)                 (47) %             8.7               15.1                (6.4)           (42) %
Total tons sold from mining
segments                               27.4               39.0              (11.6)                 (30) %            62.4               79.0               (16.6)           (21) %
Corporate and Other                     0.9                0.4                0.5                  125  %             1.5                0.9                 0.6             67  %
Total tons sold                        28.3               39.4              (11.1)                 (28) %            63.9               79.9               (16.0)           (20) %



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Supplemental Financial Data
The following table presents supplemental financial data by operating segment:
                                       Three Months Ended                                        (Decrease)                                         Six Months Ended                       (Decrease)
                                            June 30,                                              Increase                                              June 30,                            Increase
                                      2020              2019               $                 %               2020             2019                  $                   %
Revenues per Ton - Mining Operations (1)
Seaborne Thermal                  $   35.10$ 46.41$ (11.31)              (24) %       $ 39.58$ 51.18$       (11.60)            (23) %
Seaborne Metallurgical                86.80           138.42            (51.62)              (37) %         92.61           140.45                  (47.84)            (34) %
Powder River Basin                    11.45            11.33              0.12                 1  %         11.40            11.34                    0.06               1  %
Other U.S. Thermal                    39.81            43.04             (3.23)               (8) %         39.49            42.60                   (3.11)             (7) %
Costs per Ton - Mining Operations (1)(2)
Seaborne Thermal                  $   29.19$ 30.73$  (1.54)               (5) %       $ 30.56$ 32.82$        (2.26)             (7) %
Seaborne Metallurgical (3)           120.72           111.12              9.60                 9  %        115.00           107.77                    7.23               7  %
Powder River Basin                     9.26             9.72             (0.46)               (5) %          9.84             9.82                    0.02               -  %
Other U.S. Thermal                    31.22            31.47             (0.25)               (1) %         31.31            32.08                   (0.77)             (2) %
Adjusted EBITDA Margin per Ton - Mining Operations (1)(2)
Seaborne Thermal                  $    5.91$ 15.68$  (9.77)              (62) %       $  9.02$ 18.36$        (9.34)            (51) %
Seaborne Metallurgical (3)           (33.92)           27.30            (61.22)             (224) %        (22.39)           32.68                  (55.07)           (169) %
Powder River Basin                     2.19             1.61              0.58                36  %          1.56             1.52                    0.04               3  %
Other U.S. Thermal                     8.59            11.57             (2.98)              (26) %          8.18            10.52                   (2.34)            (22) %


(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 three and six months ended June 30, 2019 remain within
the Seaborne Metallurgical Mining segment and resulted in additional Costs per
Ton and lower Adjusted EBITDA Margin per Ton of $13.51 and $7.17, respectively.
Revenues
The following table presents revenues by reporting segment:
                                        Three Months Ended                                         Decrease                                          Six Months Ended                      Decrease
                                             June 30,                                            to Revenues                                             June 30,                         to Revenues
                                      2020              2019                $                %               2020               2019                 $                 %
                                                (Dollars in millions)                                                                                 (Dollars in millions)
Seaborne Thermal Mining            $ 162.0$   220.2$  (58.2)            (26) %       $   363.1$   471.2$   (108.1)            (23) %
Seaborne Metallurgical Mining         91.6              290.9            (199.3)            (69) %           284.8              615.4              (330.6)            (54) %
Powder River Basin Mining            205.8              282.6             (76.8)            (27) %           472.4              569.9               (97.5)            (17) %
Other U.S. Thermal Mining            152.0              309.6            (157.6)            (51) %           344.3              644.4              (300.1)            (47) %
Corporate and Other                   15.3               45.7             (30.4)            (67) %             8.3               98.7               (90.4)            (92) %
Revenues                           $ 626.7$ 1,149.0$ (522.3)            (45) %       $ 1,472.9$ 2,399.6$   (926.7)            (39) %


Seaborne Thermal Mining. Segment revenues decreased during the three and six
months ended June 30, 2020 compared to the same periods in the prior year due to
unfavorable realized coal pricing (three months, $47.0 million; six months,
$97.0 million) and unfavorable volume and mix variances (three months, $11.2
million; six months, $11.1 million).

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Seaborne Metallurgical Mining. Segment revenues decreased during the three and
six months ended June 30, 2020 compared to the same periods in the prior year
due to unfavorable volume and mix variances (three months, $153.8 million; six
months, $203.7 million) and unfavorable realized coal pricing (three months,
$45.5 million; six months, $126.9 million). The unfavorable volume variances
primarily resulted from demand-based volume decreases across our mines and the
impact of the conveyor upgrade at our Shoal Creek Mine.
Powder River Basin Mining. Segment revenues decreased during the three and six
months ended June 30, 2020 compared to the same periods in the prior year
primarily due to demand-based volume decreases (three months, $79.4 million; six
months, $104.1 million).
Other U.S. Thermal Mining. Segment revenues decreased during the three and six
months ended June 30, 2020 compared to the same periods in the prior year
primarily due to volume decreases (three months, $153.2 million; six months,
$289.6 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 and unfavorable realized pricing (three
months, $4.4 million; six months, $10.5 million).
Corporate and Other. Segment revenues decreased during the three and six months
ended June 30, 2020 compared to the same periods in the prior year primarily due
to lower results on economic hedge activities.
Adjusted EBITDA
The following table presents Adjusted EBITDA for each of our reporting segments:
                                      Three Months Ended                                       Decrease                                       Six Months Ended                              Decrease
                                                                                          to Segment Adjusted
                                           June 30,                                             EBITDA                                            June 30,                         to Segment Adjusted EBITDA
                                     2020              2019               $                %             2020             2019                $                 %
                                              (Dollars in millions)                                                                            (Dollars in millions)
Seaborne Thermal Mining          $   27.7$  74.4$  (46.7)            (63) %       $ 82.8$ 169.1$    (86.3)            (51) %
Seaborne Metallurgical Mining       (36.1)             57.4             (93.5)           (163) %        (68.8)           143.2              (212.0)           (148) %
Powder River Basin Mining            39.3              40.2              (0.9)             (2) %         64.7             76.6               (11.9)            (16) %
Other U.S. Thermal Mining            32.9              83.1             (50.2)            (60) %         71.4            159.0               (87.6)            (55) %
Corporate and Other                 (40.4)            (25.1)            (15.3)            (61) %        (89.9)           (63.8)              (26.1)            (41) %
Adjusted EBITDA (1)              $   23.4$ 230.0$ (206.6)            (90) %       $ 60.2$ 484.1$   (423.9)            (88) %


(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 three
months ended June 30, 2020 compared to the same period in the prior year as a
result of lower realized net coal pricing ($43.2 million), unfavorable mine
sequencing impacts and higher costs for materials, services and repairs at our
thermal surface mines ($6.1 million) and unfavorable volume variances as
described above ($6.0 million); the decrease was partially offset by lower
pricing for fuel ($5.9 million). Segment Adjusted EBITDA decreased during the
six months ended June 30, 2020 compared to the same period in the prior year as
a result of lower realized net coal pricing ($89.2 million), longwall
performance issues at our Wambo Underground Mine ($16.6 million) and unfavorable
volume variances as described above ($7.3 million); the decrease was partially
offset by favorable foreign currency impacts ($12.1 million), favorable mine
sequencing impacts and lower costs for materials, services and repairs at our
thermal surface mines ($6.9 million) and lower pricing for fuel ($5.6 million).
Seaborne Metallurgical Mining. Segment Adjusted EBITDA decreased during the
three and six months ended June 30, 2020 compared to the same periods in the
prior year due to unfavorable volume variances which included non-cash charges
to record certain mines' coal inventories to their net realizable values (three
months, $65.1 million; six months, $91.4 million), lower realized net coal
pricing (three months, $42.9 million; six months, $118.8 million), higher costs
associated with the conveyor upgrade at our Shoal Creek Mine (three months,
$18.4 million; six months, $31.5 million), and the impact of a longwall move at
our Metropolitan Mine during the current year (six months, $21.9 million). These
negative variances were partially offset by the exclusion of the current year
containment and holding costs for our North Goonyella Mine (three months, $28.4
million; six months, $31.4 million) and favorable foreign currency impacts
(three months, $10.4 million; six months, $22.3 million).

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Powder River Basin Mining. Segment Adjusted EBITDA decreased during the three
and six months ended June 30, 2020 compared to the same periods in the prior
year as the result of unfavorable mine sequencing impacts (three months, $29.6
million; six months, $36.8 million) and the impact of lower volumes (three
months, $12.5 million; six months, $17.0 million) as described above, partially
offset by lower costs for materials, services, repairs and labor (three months,
$27.5 million; six months, $26.8 million) and lower pricing for fuel and
explosives (three months, $9.2 million; six months, $13.2 million).
Other U.S. Thermal Mining. Segment Adjusted EBITDA decreased during the three
and six months ended June 30, 2020 compared to the same periods in the prior
year due to the impact of lower volume (three months, $52.2 million; six months,
$93.8 million) which was primarily driven by the closure of the Kayenta Mine
during the third quarter of 2019, unfavorable mine sequencing impacts (three
months, $13.2 million; six months, $15.4 million) and lower realized net coal
pricing (three months, $5.6 million; six months, $11.8 million), partially
offset by lower costs for materials, services and repairs (three months, $12.5
million; six months, $19.9 million) and lower pricing for fuel and explosives
(three months, $6.5 million; six months, $9.3 million).
Corporate and Other Adjusted EBITDA. The following table presents a summary of
the components of Corporate and Other Adjusted EBITDA:
                                          Three Months Ended                                     (Decrease) Increase                                     Six Months Ended                      (Decrease) Increase
                                               June 30,                                          to Adjusted EBITDA                                          June 30,                          to Adjusted EBITDA
                                         2020              2019              $                   %                  2020             2019                $                 %
                                                 (Dollars in millions)                                                                                    (Dollars in millions)
Middlemount (1)                      $    (6.4)$  10.0$ (16.4)                  (164) %       $ (16.1)$  13.9$   (30.0)            (216) %
Resource management activities (2)         0.8              1.7             (0.9)                   (53) %           8.8              3.7                5.1              138  %
Selling and administrative expenses      (25.2)           (38.9)            13.7                     35  %         (50.1)           (75.6)              25.5               34  %
Other items, net (3)(4)                   (9.6)             2.1            (11.7)                  (557) %         (32.5)            (5.8)             (26.7)            (460) %

Corporate and Other Adjusted EBITDA $ (40.4)$ (25.1)$ (15.3)

                   (61) %       $ (89.9)$ (63.8)$   (26.1)             (41) %


(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 $8.8 million and
$9.5 million during the three months ended June 30, 2020 and 2019, respectively,
and $13.2 million and $17.0 million during the six months ended June 30, 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 decrease in Corporate and Other Adjusted EBITDA during the three and six
months ended June 30, 2020 compared to the same periods in the prior year was
primarily driven by an unfavorable variance in Middlemount's results due to the
impacts of wet weather and lower sales pricing, current year containment and
holding costs for our North Goonyella Mine (three months, $11.3 million; six
months, $21.4 million) and unfavorable results from trading and brokerage
activities (three months, $2.3 million; six months, $11.1 million). These
unfavorable variances were partially offset by lower selling and administrative
expenses driven by lower personnel costs and reduced expense associated with our
share-based incentive plans and a gain on the sale of undeveloped Australian
land tenements in the Bowen Basin (six months, $7.5 million).

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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:

                                          Three Months Ended                                         (Decrease) Increase                                         Six Months Ended                        (Decrease) Increase
                                               June 30,                                                   to Income                                                  June 30,                                 to Income
                                        2020               2019                $                    %                  2020               2019                 $                   %
                                                  (Dollars in millions)                                                                                          (Dollars in millions)
Adjusted EBITDA (1)                 $     23.4$ 230.0$   (206.6)                  (90) %       $     60.2$ 484.1$     (423.9)               (88) %
Depreciation, depletion and
amortization                             (88.3)          (165.4)               77.1                    47  %           (194.3)          (337.9)                143.6                 42  %
Asset retirement obligation
expenses                                 (14.1)           (15.3)                1.2                     8  %            (31.7)           (29.1)                 (2.6)                (9) %
Restructuring charges                    (16.5)            (0.4)              (16.1)               (4,025) %            (23.0)            (0.6)                (22.4)            (3,733) %
Transaction costs related to joint
ventures                                 (12.9)            (1.6)              (11.3)                 (706) %            (17.1)            (1.6)                (15.5)              (969) %
Asset impairment                      (1,418.1)               -            (1,418.1)                    n.m.         (1,418.1)               -              (1,418.1)                 n.m.
Provision for North Goonyella
equipment loss                               -                -                   -                     n.m.                -            (24.7)                 24.7                100  %
North Goonyella insurance recovery
- equipment                                  -                -                   -                     n.m.                -             91.1                 (91.1)              (100) %
Changes in deferred tax asset
valuation allowance and reserves
and amortization of basis
difference related to equity
affiliates                                 0.4             (0.3)                0.7                   233  %              1.1             (0.3)                  1.4                467  %
Interest expense                         (34.3)           (36.0)                1.7                     5  %            (67.4)           (71.8)                  4.4                  6  %

Interest income                            2.4              7.2                (4.8)                  (67) %              5.5             15.5                 (10.0)               (65) %
Unrealized gains on economic hedges        7.0             22.4               (15.4)                  (69) %              4.8             62.2                 (57.4)               (92) %
Unrealized gains (losses) on
non-coal trading derivative
contracts                                  2.8             (0.3)                3.1                 1,033  %              2.9             (0.1)                  3.0              3,000  %
Take-or-pay contract-based
intangible recognition                     2.7              5.6                (2.9)                  (52) %              5.3             11.2                  (5.9)               (53) %
Income tax benefit (provision)             0.2             (3.0)                3.2                   107  %             (2.8)           (21.8)                 19.0                 87  %

(Loss) income from continuing operations, net of income taxes $ (1,545.3)$ 42.9$ (1,588.2)

               (3,702) %       $ (1,674.6)$ 176.2$   (1,850.8)            (1,050) %


(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.

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

                                      Three Months Ended                                 Increase (Decrease)                                   Six Months Ended                      Increase (Decrease)
                                           June 30,                                           to Income                                            June 30,                               to Income
                                    2020              2019               $               %              2020              2019                 $                 %
                                             (Dollars in millions)                                                                              (Dollars in millions)
Seaborne Thermal Mining          $  (20.5)$  (22.0)$  1.5               7  %       $  (42.7)$  (45.2)$     2.5                6  %
Seaborne Metallurgical Mining       (20.5)            (31.1)           10.6              34  %          (45.3)            (71.2)              25.9               36  %
Powder River Basin Mining           (28.3)            (36.0)            7.7              21  %          (63.5)            (72.6)               9.1               13  %
Other U.S. Thermal Mining           (15.6)            (73.7)           58.1              79  %          (37.0)           (144.5)             107.5               74  %
Corporate and Other                  (3.4)             (2.6)           (0.8)            (31) %           (5.8)             (4.4)              (1.4)             (32) %
Total                            $  (88.3)$ (165.4)$ 77.1              47  %       $ (194.3)$ (337.9)$   143.6               42  %

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

                                         Three Months Ended                         Six Months Ended
                                              June 30,                                  June 30,
                                         2020           2019         2020              2019
     Seaborne Thermal Mining         $    2.08$ 1.97$ 1.99       $          1.89
     Seaborne Metallurgical Mining        1.81          3.47         2.38                  3.01
     Powder River Basin Mining            0.80          0.80         0.79                  0.81
     Other U.S. Thermal Mining            0.96          1.50         1.02                  1.51


Depreciation, depletion and amortization expense decreased during the three and
six months ended June 30, 2020 compared to the same periods 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 (three months, $47.9 million; six months,
$95.0 million), decreased depletion driven by lower sales volumes (three months,
$11.5 million; six months, $13.3 million) and lower amortization of the fair
value of certain U.S. coal supply agreements (three months, $5.4 million; six
months, $11.4 million). The decrease in the weighted-average depletion rate per
ton for the Seaborne Metallurgical Mining segment during the three and six
months ended June 30, 2020 compared to the same periods in the prior year
reflects the volume and mix variances which impacted our revenues as described
above.
Restructuring Charges. Restructuring charges increased during the three and six
months ended June 30, 2020 compared to the same periods 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 15. "Other Events" to
the accompanying unaudited condensed consolidated financial statements.
Transaction Costs Related to Joint Ventures. The charges recorded during the
three and six months ended June 30, 2020 related to the proposed PRB Colorado
joint venture with Arch as further described in Note 15. "Other Events" to the
accompanying unaudited condensed consolidated financial statements.
Asset Impairment. During the three and six months ended June 30, 2020, we
recognized $1,418.1 million in aggregate asset impairment charges related to the
fair value of our North Antelope Rochelle Mine as discussed in
Note 9. "Property, Plant, Equipment and Mine Development" to the accompanying
unaudited condensed consolidated financial statements.
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 15. "Other Events" to the accompanying unaudited
condensed consolidated financial statements.

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North Goonyella Insurance Recovery - Equipment. During the six months ended
June 30, 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 15. "Other Events" to
the accompanying unaudited condensed 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 six
months ended June 30, 2019 and the year ended December 31, 2018, respectively.
The remaining $33.9 million, applicable to incremental costs and business
interruption losses, is included in Adjusted EBITDA for the six months ended
June 30, 2019.
Interest Income. The decrease in interest income during the three and six months
ended June 30, 2020 compared to the same periods in 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.
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 unaudited condensed consolidated
financial statements.
Take-or-Pay Contract-Based Intangible Recognition. During the three and six
months ended June 30, 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 unaudited condensed consolidated financial statements.
Income Tax Benefit (Provision). The decrease in the income tax provision for the
three and six months ended June 30, 2020 compared to the same periods in the
prior year was primarily due to changes in forecasted taxable income, partially
offset by an increase in the provision related to the remeasurement of foreign
income tax accounts. Refer to Note 11. "Income Taxes" to the accompanying
unaudited condensed consolidated financial statements for additional
information.
Net (Loss) Income Attributable to Common Stockholders
The following table presents net (loss) income attributable to common
stockholders:
                                         Three Months Ended                                         (Decrease) Increase                                         Six Months Ended                        (Decrease) Increase
                                              June 30,                                                   to Income                                                  June 30,                                 to Income
                                        2020              2019                $                    %                  2020               2019                 $                   %
                                                  (Dollars in millions)                                                                                         (Dollars in millions)
(Loss) income from continuing
operations, net of income taxes     $ (1,545.3)$ 42.9$ (1,588.2)               (3,702) %       $ (1,674.6)$ 176.2$   (1,850.8)            (1,050) %
Loss from discontinued operations,
net of income taxes                       (2.3)           (3.4)                1.1                    32  %             (4.5)            (6.8)                  2.3                 34  %
Net (loss) income                     (1,547.6)           39.5            (1,587.1)               (4,018) %         (1,679.1)           169.4              (1,848.5)            (1,091) %
Less: Net (loss) income
attributable to noncontrolling
interests                                 (3.4)            2.4                (5.8)                 (242) %             (5.2)             8.1                 (13.3)              (164) %
Net (loss) income attributable to
common stockholders                 $ (1,544.2)$ 37.1$ (1,581.3)               (4,262) %       $ (1,673.9)$ 161.3$   (1,835.2)            (1,138) %


Net (Loss) Income Attributable to Noncontrolling Interests. The decrease in net
results attributable to noncontrolling interests during the three and six months
ended June 30, 2020 compared to the prior year periods was primarily due to
lower results of our majority-owned mines in which there is an outside
non-controlling interest.

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Diluted Earnings per Share (EPS)
The following table presents diluted EPS:
                                        Three Months Ended                                      (Decrease) Increase                                        Six Months Ended                         (Decrease) Increase
                                             June 30,                                                  to EPS                                                  June 30,                                   to EPS
                                       2020              2019               $                   %                  2020             2019                  $                    %
Diluted EPS attributable to common
stockholders:
(Loss) income from continuing
operations                         $   (15.76)$ 0.37$ (16.13)                (4,359) %       $ (17.12)$ 1.54$       (18.66)           (1,212) %
Loss from discontinued operations       (0.02)          (0.03)             0.01                     33  %          (0.04)          (0.06)                   0.02                33  %
Net (loss) income attributable to
common stockholders                $   (15.78)$ 0.34$ (16.12)                (4,741) %       $ (17.16)$ 1.48$       (18.64)           (1,259) %


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 97.9 million and 108.1
million for the three months ended June 30, 2020 and 2019, respectively, and
97.5 million and 109.3 million for the six months ended June 30, 2020 and 2019,
respectively.
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 and depreciation, depletion and amortization. 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 joint ventures as
management does not view these items as part of our normal operations.
                                                                    Three Months Ended                                  Six Months Ended
                                                                         June 30,                                           June 30,
                                                                  2020               2019              2020                2019
                                                                                      (Dollars in millions)
(Loss) income from continuing operations, net of income taxes $ (1,545.3)

$ 42.9$ (1,674.6)$ 176.2 Depreciation, depletion and amortization

                            88.3            165.4               194.3             337.9
Asset retirement obligation expenses                                14.1             15.3                31.7              29.1
Restructuring charges                                               16.5              0.4                23.0               0.6
Transaction costs related to joint ventures                         12.9              1.6                17.1               1.6
Asset impairment                                                 1,418.1                -             1,418.1                 -
Provision for North Goonyella equipment loss                           -                -                   -              24.7
North Goonyella insurance recovery - equipment                         -                -                   -             (91.1)
Changes in deferred tax asset valuation allowance and
reserves and amortization of basis difference related to
equity affiliates                                                   (0.4)             0.3                (1.1)              0.3
Interest expense                                                    34.3             36.0                67.4              71.8

Interest income                                                     (2.4)            (7.2)               (5.5)            (15.5)
Unrealized gains on economic hedges                                 (7.0)           (22.4)               (4.8)            (62.2)

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

                                                           (2.8)             0.3                (2.9)              0.1
Take-or-pay contract-based intangible recognition                   (2.7)            (5.6)               (5.3)            (11.2)
Income tax (benefit) provision                                      (0.2)             3.0                 2.8              21.8
Total Adjusted EBITDA                                         $     23.4$ 230.0$     60.2$  484.1



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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:
                                                                   Three Months Ended                                    Six Months Ended
                                                                        June 30,                                             June 30,
                                                                  2020              2019              2020                  2019
                                                                                        (Dollars in millions)
Operating costs and expenses                                  $   556.3

$ 857.8$ 1,335.8$ 1,806.0 Unrealized gains (losses) on non-coal trading derivative contracts

                                                           2.8             (0.3)               2.9                     (0.1)
Take-or-pay contract-based intangible recognition                   2.7              5.6                5.3                     11.2

North Goonyella insurance recovery - cost recovery and business interruption

                                                 -                -                  -                    (33.9)
Net periodic benefit costs, excluding service cost                  2.7              4.8                5.5                      9.7
Total Reporting Segment Costs                                 $   564.5

$ 867.9$ 1,349.5$ 1,792.9

The following table presents Reporting Segment Costs by reporting segment:

                                       Three Months Ended                            Six Months Ended
                                            June 30,                                     June 30,
                                       2020           2019           2020               2019
                                                        (Dollars in millions)
   Seaborne Thermal Mining         $   134.3$ 145.8$   280.3       $         302.1
   Seaborne Metallurgical Mining       127.7         233.5           353.6                 472.2
   Powder River Basin Mining           166.5         242.4           407.7                 493.3
   Other U.S. Thermal Mining           119.1         226.5           272.9                 485.4
   Corporate and Other                  16.9          19.7            35.0                  39.9
   Total Reporting Segment Costs   $   564.5$ 867.9$ 1,349.5$       1,792.9

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

Three Months Ended June 30, 2020

                                                    Seaborne                 Seaborne               Powder River             Other U.S.
                                                 Thermal Mining        Metallurgical Mining         Basin Mining           Thermal Mining
                                                                         (Amounts in millions, except per ton data)
Tons sold                                               4.6                       1.1                    17.9                     3.8

Revenues                                         $    162.0            $         91.6             $     205.8$     152.0
Reporting Segment Costs                               134.3                     127.7                   166.5                   119.1
Adjusted EBITDA                                        27.7                     (36.1)                   39.3                    32.9

Revenues per Ton                                 $    35.10$        86.80$     11.45$     39.81
Costs per Ton                                         29.19                    120.72                    9.26                   31.22
Adjusted EBITDA Margin per Ton                         5.91                    (33.92)                   2.19                    8.59



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Three Months Ended June 30, 2019

                                                    Seaborne                 Seaborne                Powder River             Other U.S.
                                                 Thermal Mining        Metallurgical Mining          Basin Mining           Thermal Mining
                                                                         (Amounts in millions, except per ton data)
Tons sold                                               4.7                        2.1                    25.0                     7.2

Revenues                                         $    220.2            $         290.9             $     282.6$     309.6
Reporting Segment Costs                               145.8                      233.5                   242.4                   226.5
Adjusted EBITDA                                        74.4                       57.4                    40.2                    83.1

Revenues per Ton                                 $    46.41$        138.42$     11.33$     43.04
Costs per Ton                                         30.73                     111.12                    9.72                   31.47
Adjusted EBITDA Margin per Ton                        15.68                      27.30                    1.61                   11.57


                                                                                Six Months Ended June 30, 2020
                                                     Seaborne                 Seaborne               Powder River             Other U.S.
                                                  Thermal Mining        Metallurgical Mining         Basin Mining           Thermal Mining
                                                                          (Amounts in millions, except per ton data)
Tons sold                                                9.2                       3.1                    41.4                     8.7

Revenues                                          $    363.1$        284.8$     472.4$     344.3
Reporting Segment Costs                                280.3                     353.6                   407.7                   272.9
Adjusted EBITDA                                         82.8                     (68.8)                   64.7                    71.4

Revenues per Ton                                  $    39.58$        92.61$     11.40$     39.49
Costs per Ton                                          30.56                    115.00                    9.84                   31.31
Adjusted EBITDA Margin per Ton                          9.02                    (22.39)                   1.56                    8.18


                                                                                Six Months Ended June 30, 2019
                                                     Seaborne                 Seaborne                Powder River             Other U.S.
                                                  Thermal Mining        Metallurgical Mining          Basin Mining           Thermal Mining
                                                                          (Amounts in millions, except per ton data)
Tons sold                                                9.2                        4.4                    50.3                    15.1

Revenues                                          $    471.2            $         615.4             $     569.9$     644.4
Reporting Segment Costs                                302.1                      472.2                   493.3                   485.4
Adjusted EBITDA                                        169.1                      143.2                    76.6                   159.0

Revenues per Ton                                  $    51.18$        140.45$     11.34$     42.60
Costs per Ton                                          32.82                     107.77                    9.82                   32.08
Adjusted EBITDA Margin per Ton                         18.36                      32.68                    1.52                   10.52



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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.
                                                                             Six Months Ended
                                                                                 June 30,
                                                                          2020                2019
                                                                           (Dollars in millions)
Net cash (used in) provided by operating activities                  $     (53.1)$  377.0
Net cash used in investing activities                                     (115.6)             (64.0)
Add back: Amount attributable to acquisition of Shoal Creek Mine               -                2.4
Free Cash Flow                                                       $    (168.7)$  315.4


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 Item 2.
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
Seaborne Thermal and Metallurgical Coal. While the global economy continues to
navigate through the COVID-19 pandemic, the scope and scale of the recovery
remains uncertain. Ongoing demand uncertainty driven by idled steel capacity in
Europe and the Asia-Pacific, weak overall electricity generation and the
implementation of Chinese import restrictions have all contributed to low
seaborne coal prices. In addition, based on current economic data, the Company
would expect near-term seaborne coal demand to decline from prior-year levels.
The ultimate quantum of demand will be highly dependent upon the scope and scale
of the eventual COVID-19 pandemic recovery.
U.S. Thermal Coal. U.S. thermal coal conditions remain especially challenging
given weak overall electricity demand, high customer inventory levels and
continued low natural gas prices. These factors have accelerated the secular
decline already underway in the industry. Total U.S. electricity generation
year-to-date through June 30, 2020, was down approximately 4%, with coal
generation falling 31% to 17% of the generation mix as natural gas and wind took
market share, rising to 39% and 9%, respectively, of the generation mix.
Long-Term Outlook
Given widespread industry changes, in part due to the prolonged COVID-19
pandemic, we have updated our long-term outlook. Current projections indicate a
slow seaborne market recovery over the next 12 to 15 months. Future demand will
be impacted by economic conditions and public policy related to the COVID-19
pandemic in key 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 combustion.
Seaborne Fundamentals. Longer-term, Peabody continues to anticipate that
seaborne metallurgical coal demand will continue to grow as India increases
steel production and lacks the quantity and quality of domestic metallurgical
coal to meet its anticipated needs. China will continue to have a significant
influence on seaborne demand, which will be highly dependent on the scope and
scale of the recovery from the COVID-19 pandemic and use and availability of
domestic coal.

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For seaborne thermal, Peabody expects longer-term demand growth from the
Association of Southeast Asian Nations to continue, which is anticipated to help
offset demand decline elsewhere, most notably, in the Atlantic markets. The vast
majority of seaborne thermal coal demand is projected to come from the
Asia-Pacific region as Europe's coal generation continues its secular decline.
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 has been dramatically reduced in the
first half of 2020, accelerating the secular demand decline already underway.
Future demand will be highly dependent on natural gas prices, growth in
renewable generation and other competing fuels, and policy and regulations,
among other things.
Regulatory Update
Other than as described in the following section, there were no significant
changes to our regulatory matters subsequent to December 31, 2019. Information
regarding our regulatory matters is outlined in Part I, Item 1. "Business" in
our Annual Report on Form 10-K for the year ended December 31, 2019.
Regulatory Matters - U.S.
Temporary Enforcement Policy. On March 26, 2020, the United States Environmental
Protection Agency (EPA) announced a temporary policy regarding EPA enforcement
of environmental legal obligations as a result of the COVID-19 pandemic.
(COVID-19 Implications for EPA's Enforcement and Compliance Assurance Program).
Under the temporary policy, the EPA will exercise the enforcement discretion for
certain noncompliance events that occur during the period of time that the
temporary policy is in effect and that result from the COVID-19 pandemic. The
EPA's temporary policy does not provide leniency for intentional criminal
violations of law and imposes conditions on any violation that may result in
"acute risk or an imminent threat to human health or the environment." The
policy also does not apply to activities that are carried out under Superfund
and Resource Conservation and Recovery Act (RCRA) Corrective Action enforcement
instruments. The EPA's temporary policy became retroactively effective on
March 13, 2020 and is in effect until August 31, 2020. (COVID-19 Implications
for EPA's Enforcement and Compliance Assurance Program: Addendum on Termination,
June 29, 2020).
EPA Regulation of Greenhouse Gas Emissions from Existing Fossil Fuel-Fired
Electricity Utility Generating Units (EGUs). On October 23, 2015, the EPA
published a final rule in the Federal Register regulating greenhouse gas
emissions from existing fossil fuel-fired EGUs under Section 111(d) of the Clean
Air Act (CAA) (80 Fed. Reg. 64,662 (Oct. 23, 2015)). The rule (known as the
Clean Power Plan or CPP) established emission guidelines for states to follow in
developing plans to reduce greenhouse gas emissions from existing fossil
fuel-fired EGUs. The CPP required that the states individually or collectively
create systems that would reduce carbon emissions from any EGU located within
their borders by 28% in 2025 and 32% in 2030 (compared with a 2005 baseline).
Following Federal Register publication, 39 separate petitions for review of the
CPP by approximately 157 entities were filed in the United States Court of
Appeals for the D.C. Circuit (D.C. Circuit). The petitions reflected challenges
by 27 states and governmental entities, as well as by utilities, industry
groups, trade associations, coal companies and other entities. The lawsuits were
consolidated with the case filed by West Virginia and Texas (in which other
states also joined) (D.C. Cir. No. 15-1363). On October 29, 2015, we filed a
motion to intervene in the case filed by West Virginia and Texas, in support of
the petitioning states. The motion was granted on January 11, 2016. Numerous
states and other entities also intervened in support of the EPA.
On February 9, 2016, the U.S. Supreme Court granted a motion to stay
implementation of the CPP until the legal challenges were resolved. Thereafter,
oral arguments in the case were heard in the D.C. Circuit sitting en banc. On
April 28, 2017, the D.C. Circuit granted the EPA's motion to hold the case in
abeyance while the agency reconsidered the rule. The D.C. Circuit case has been
in abeyance since, so no opinion has been issued.
In October 2017, the EPA proposed to repeal the CPP (82 Fed. Reg. 48,035
(Oct. 16, 2017)). In August 2018, the EPA issued a proposed rule to replace the
CPP with the Affordable Clean Energy (ACE) Rule. (83 Fed. Reg. 44,746
(August 31, 2018)). On June 19, 2019, the EPA issued a combined package that
finalized the CPP repeal rule as well as the replacement rule, ACE. (Repeal of
the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions from
Existing Electric Utility Generating Units; Revisions to Emission Guidelines
Implementing Regulations, 84 Fed. Reg. 32,520 (July 8, 2019)).
The ACE rule sets emissions guidelines for greenhouse gas emissions from
existing EGUs based on a determination that efficiency heat rate improvements
constitute the Best System of Emission Reduction. The EPA's final rule also
revises the CAA Section 111(d) regulations to give the states greater
flexibility on the content and timing of their state plans.

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Based on the EPA's final rules repealing and replacing the CPP, petitioners in
the D.C. Circuit matter seeking review of CPP, including Peabody, filed a motion
to dismiss, which the court granted in September 2019. Meanwhile, challengers to
the ACE Rule filed petitions for judicial review; briefing in this case
(No. 19-1140 (D.C. Cir.)) has concluded and oral argument has been scheduled for
October 2020.
New Source Review (NSR). The Clean Air Act imposes permitting requirements when
a new source undergoes construction or when an existing source is reconstructed
or undergoes a major modification. These requirements are contained in the Clean
Air Act's Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review (NNSR) programs, generally referred to as NSR. On March 25, 2020,
the EPA released a draft guidance document that would allow power plants,
refineries and other sources of emissions to begin certain construction
activities while still awaiting a permit under the NSR program. Under the EPA's
revised interpretation, a source owner or operator may, prior to obtaining a NSR
permit, undertake physical on-site activities- including activities that may
significantly alter the site, and/or are permanent in nature- provided that
those activities do not constitute physical construction on an emissions unit.
The comment period on the draft memo ended May 11, 2020.
The EPA has also taken action on a number of different rules and guidance
affecting the interpretation and application of NSR. In a final rule (83 Fed.
Reg. 57,324 (Nov. 15, 2018), the EPA completed reconsideration of a 2009
petition to clarify when certain actions must be "aggregated" for purposes of
determining whether these actions are part of a single project to which NSR
applies. The EPA has additionally published guidance on the definition of
"ambient air" (Revised Policy on Exclusions from "Ambient Air," Dec. 2, 2019)
and guidance concerning when multiple air pollution-emitting activities may be
considered to be "adjacent" so that they should be considered to be a single
source (Interpreting "Adjacent" for New Source Review and Title V Source
Determinations in All Industries Other Than Oil and Gas, Nov. 26, 2019).
Additional memorandum and applicability determinations have also been made that
address other NSR issues. These rules, guidance and memorandum may therefore
affect the construction, reconstruction and modification of sources and the
level of pollution control requirements that will be necessary on a case-by-case
basis.
Clean Water Act (CWA) Definition of "Waters of the United States". A final rule
defining the scope of waters protected under the CWA (commonly called the Waters
of the United States, or WOTUS) (WOTUS Rule), was published by the EPA and the
U.S. Army Corps of Engineers (Corps) in June 2015. Several states and others
subsequently filed lawsuits challenging the 2015 WOTUS Rule, and eventually that
rule was preliminarily enjoined in over half of the country. On October 22,
2019, the EPA and the Corps jointly published a final rule, which became
effective on December 23, 2019, repealing the 2015 WOTUS Rule and recodifying
the regulatory definitions of WOTUS that existed prior to the implementation of
the WOTUS Rule. On January 23, 2020, the EPA and the Corps finalized the
Navigable Waters Protection Rule to revise the definition of "Waters of the
United States" and thereby establish the scope of federal regulatory authority
under the CWA. A federal district judge in Colorado preliminarily enjoined the
Navigable Waters Protection Rule in the State of Colorado on June 19, 2020. The
new rule took effect in all other states on June 22, 2020, but the pre-2015
definitions apply in Colorado.
National Environmental Policy Act (NEPA). NEPA, signed into law in 1970,
requires federal agencies to review the environmental impacts of their decisions
and issue either an environmental assessment or an environmental impact
statement. We must provide information to agencies when we propose actions that
will be under the authority of the federal government. The NEPA process involves
public participation and can involve lengthy timeframes. The White House Council
on Environmental Quality issued a proposed rule that would comprehensively
update and modernize its longstanding NEPA regulations on January 10, 2020. The
comment period closed on March 10, 2020. As proposed, the rule seeks to reduce
unnecessary paperwork, burdens and delays, promote better coordination among
agency decision makers, and clarify scope of NEPA reviews, among other things.
Proposed Rule for Disposal of Coal Combustion Residuals (CCR) from Electric
Utilities; Federal CCR Permit Program. On February 20, 2020, as required by the
Water Infrastructure Improvements for the Nation Act, the EPA proposed a federal
permitting program for the disposal of CCR in surface impoundments and
landfills. Under the proposal, the EPA would directly implement the permit
program in Indian Country, and at CCR units located in states that have not
submitted their own CCR permit program for approval. The proposal includes
requirements for federal CCR permit applications, content and modification, as
well as procedural requirements. The comment period for EPA's proposal ended on
April 20, 2020.

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Regulatory Matters - AustraliaOccupational Health and Safety. State legislation requires us to provide and
maintain a safe workplace by providing safe systems of work, safety equipment
and appropriate information, instruction, training and supervision. In
recognition of the specialized nature of mining and mining activities, specific
occupational health and safety obligations have been mandated under state
legislation specific to the coal mining industry. There are some differences in
the application and detail of the laws, and mining operators, directors,
officers and certain other employees are all subject to the obligations under
this legislation.
Safe Work Australia (SWA) is currently reviewing the Workplace Exposure
Standards (WES) for all airborne contaminants including welding fumes and diesel
particulate matter and giving priority to the WES for coal dust and silica. In
March 2020, SWA paused the release and public consultation for the WES review
until further notice. SWA's draft evaluation reports will include
recommendations for exposure limits. The exposure limits recommended by SWA are
based on toxicological information and other monitoring data. SWA have
recommended exposure limits of 1.5 mg/m3 for coal dust and 0.05 mg/m3 for
silica.
Following the re-identification of coal workers' pneumoconiosis and six mining
and quarrying fatalities that occurred over a 12-month period, the Resources
Safety and Health Queensland Bill 2019 was introduced into Queensland Parliament
in September 2019, was passed into law in March 2020 and became effective on
July 1, 2020. It establishes Resources Safety and Health Queensland (RSHQ) as a
statutory body designed to ensure independence of the mining safety and health
regulator. RSHQ will include inspectorates for coal mines, mineral mines and
quarries, explosives and petroleum and gas. The new laws seek to enhance the
role of advisory committees to identify, quantify and prioritize safety and
health issues in the mining and quarrying industries. It also provides for an
independent Work Health and Safety Prosecutor to prosecute serious offenses
under resources safety legislation.
On May 20, 2020, the Queensland Parliament passed a bill into law that
introduces the criminal offense of 'industrial manslaughter' for executive
officers, individuals who are "senior officers" and companies in the mining
industry. Individuals now face a maximum prison sentence of 20 years and
companies could be fined up to approximately $13 million Australian dollars. The
new law also introduces the requirement for statutory role holders to be
employees of the coal mine operator entity with an 18-month transition period
ending November 25, 2021. The new law became effective July 1, 2020.
On June 19, 2020, the Environmental Protection and Other Legislation Amendment
Bill 2020 (EPOLA Bill) was introduced into Queensland Parliament. The EPOLA Bill
includes the establishment of the Rehabilitation Commissioner as an independent
statutory position, which will be responsible for monitoring and reporting on
rehabilitation performance and trends across Queensland, as well as amendments
to the residual risk framework that aim to ensure that any remaining risks on
former resource sites are appropriately identified, costed and managed.
Sydney Water Catchment Areas. In November 2017, the New South Wales government
established an independent expert panel (Panel) to advise the Department of
Planning, Industry and Environment (DPIE) on the impact of underground mining
activities in Sydney's water catchment areas, including at our Metropolitan
Mine. The Panel issued its final report in October 2019. The final report makes
findings and recommendations concerning mining activities and effects across the
catchment as a whole.
The DPIE considered the recommendations in the Panel's final report and in
April 2020 announced that it had accepted all 50 recommendations in the Panel's
report, and that it has established an interagency taskforce to implement a
detailed action plan during 2020. The action plan includes: ensuring there is a
net gain for the metropolitan water supply by requiring more offsetting from
mining companies; establishing a new independent expert panel to advise on
future mining applications in the catchment; strengthening surface and
groundwater monitoring; improving access to and transparency of environmental
data; adopting a more stringent approach to the assessment and conditioning of
future mining proposals to minimize subsidence impacts; reviewing and updating
current and potential future water losses from mining in line with the best
available science; introducing a licensing regime to properly account for any
water losses; and undertaking further research into mine closure planning to
reduce potential long-term impacts.
Queensland Royalties. As part of the Queensland Government's 2019-20 Budget, the
Government committed to freeze royalty rates on coal and minerals for three
years, provided companies voluntarily contribute to a Resource Community
Infrastructure Fund (the Fund) over this three-year period. The Government
contributes $30 million Australian dollars towards the Fund, with companies
voluntarily contributing $70 million Australian dollars. Peabody's contribution
to the Fund is approximately $750,000 Australian dollars for the first year and
is expected to decrease in years two and three based on an expected reduction in
production at our Queensland mines.

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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 be at the discretion of our Board of Directors and
will depend on a variety of factors, including the restrictions set forth under
our debt 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 declare dividends, repurchase shares or early retire
debt 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.
Liquidity
As of June 30, 2020, our cash balances totaled $848.5 million, including
approximately $785 million held by U.S. subsidiaries, $33 million held by
Australian subsidiaries and the remaining balance 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.
Our available liquidity has declined from $1,275.8 million as of December 31,
2019 to $926.1 million as of June 30, 2020. Available liquidity was comprised of
cash and cash equivalents of $732.2 million and $848.5 million as of
December 31, 2019 and June 30, 2020, respectively, and combined availability
under our revolving credit facility and accounts receivable securitization
program of $543.6 million and $77.6 million as of December 31, 2019 and June 30,
2020, respectively. We have experienced negative cash flows from operations
during the first half of 2020, and results from continuing operations, net of
income taxes and Adjusted EBITDA for the six months ended June 30, 2020 declined
by $1,850.8 million and $423.9 million, respectively, compared to the
corresponding prior year period. During the six months ended June 30, 2020, the
combined availability under our revolving credit facility and accounts
receivable securitization program decreased as a result of borrowing $300.0
million under our revolving credit facility on April 3, 2020, which is further
described in Note 12. "Long-term Debt" of the accompanying unaudited condensed
consolidated financial statements, an additional $83.0 million of letters of
credit issuances, and a $83.0 million decrease in available receivable balances
under the accounts receivable securitization program.
While we were in compliance with the restrictions and covenants under our debt
agreements at June 30, 2020, as further described below, there is significant
risk that we will not be in compliance with the first lien leverage ratio
requirement under our credit agreement in the second half of 2020 without
successfully taking mitigating action. Noncompliance with the ratio covenant
would constitute a default under the credit agreement, and the revolving lenders
could elect to accelerate the maturity of the related indebtedness, and could
potentially choose to exercise other rights and remedies under the agreement.
Further, our senior secured notes and certain lease agreements contain
cross-default provisions which would be activated by a default under the credit
agreement, which could result in a similar acceleration of maturity under those
obligations.
We believe we could seek to avoid noncompliance by taking certain mitigating
actions, such as obtaining a waiver of the default condition, executing an
amendment to the credit agreement, or completing asset sales to generate
additional liquidity, but can offer no assurance as to the likelihood of success
of such actions. If such actions were not successful, we could avoid
noncompliance while maintaining operating liquidity beyond twelve months by
repaying the amount currently outstanding under our revolving credit facility
and replacing outstanding letters of credit with cash collateral. Such actions
would avoid default on the remaining indebtedness under the credit agreement and
cross-default on the senior secured notes and lease agreements as described
above, but would have negative impacts to our liquidity. Any of these actions
could have an adverse effect on our financial condition, results of operations
or cash flows.

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Our ability to maintain adequate liquidity depends on the successful operation
of our business and appropriate management of operating expenses and capital
spending. Our anticipated liquidity needs are highly sensitive to changes in
each of these and other factors, including the evolving impact of the COVID-19
pandemic.
At July 31, 2020, our available liquidity was approximately $822 million. The
decrease subsequent to June 30, 2020 was driven by a reduction in cash and cash
equivalent balances and changes in availability under our accounts receivable
securitization program and revolving credit facility, including the issuance of
an additional $53.2 million of letters of credit. Also during July 2020, we
issued a bank guarantee for $50 million Australian dollars as a performance
guarantee in favor of the largest customer of our Seaborne Thermal Mining
segment. Under the terms of our coal supply agreement, which is sourced from our
Wilpinjong Mine, that customer may unilaterally demand such a guarantee at any
time. The coal supply agreement and an associated step-in deed also require us
to maintain compliance with certain covenants and restrictions. In the event of
noncompliance, the customer may exercise contractual step-in rights to appoint a
receiver to operate the mine within the parameters of the coal supply agreement
and step-in deed. As of August 7, 2020, we were in compliance with the terms of
these contractual arrangements.
Debt Financing
As described in Note 12. "Long-term Debt" of the accompanying unaudited
condensed 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 and related term loan under which we originally borrowed $950.0
million and have repaid $559.0 million through June 30, 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. To date, we have utilized this
revolving credit facility for the $300.0 million borrowing described above and
for letters of credit which incur combined fees of 3.125%, while unused capacity
bears a commitment fee of 0.4%. As of June 30, 2020, such letters of credit
amounted to $197.9 million and were primarily in support of our reclamation
obligations. At June 30, 2020, the remaining availability under the revolving
credit facility was $67.1 million.
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, such as the first lien leverage ratio requirement described above. We
were in compliance with all such restrictions and covenants at June 30, 2020.
As described in the "Overview" section contained within this Item 2, the
September 2019 amendment to our credit facility made the formation of the PRB
Colorado joint venture with Arch expressly permissible. We are currently
considering various alternatives for implementing the joint venture in
accordance with the terms of the indenture governing our senior secured notes.
Our ability to accomplish this objective is subject to market conditions and
other factors, including financing options that may be available to us from time
to time and conditions in the credit and debt capital markets generally.
Accounts Receivable Securitization Program
As described in Note 17. "Financial Instruments and Other Guarantees" of the
accompanying unaudited condensed 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 June 30, 2020, we had no
outstanding borrowings and $84.2 million of letters of credit provided under the
program. The letters of credit are primarily in support of portions of our
obligations for reclamation, workers' compensation and postretirement benefits.
Availability under the program, which is adjusted for certain ineligible
receivables, was $10.5 million at June 30, 2020 and there was no cash collateral
requirement.

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Capital Requirements
As a result of the deferral of certain capital project spending to subsequent
periods, we revised our expected 2020 capital expenditures to approximately $200
million during the second quarter of 2020, as compared to approximately $250
million as disclosed in Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the year ended December 31, 2019. There were no other material changes to
our capital requirements.
Contractual Obligations
There were no material changes to our contractual obligations from the
information previously provided in Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of our Annual Report on
Form 10-K for the year ended December 31, 2019, with the exception of our
obligations for 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. Due to
extensions to our commercial agreements for rail and port commitments, partially
offset by reductions to our near-term commitments related to our North Goonyella
Mine, our estimated obligations are expected to be $5.0 million less for the
remainder of 2020 than that provided in Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our Annual Report
on Form 10-K for the year ended December 31, 2019. For the two-year period 2021
through 2022, such obligations are comparatively reduced by $27.1 million. For
the two-year period 2023 through 2024, and periods thereafter, such obligations
are comparatively increased by $10.8 million and $158.5 million, respectively.
Historical Cash Flows and Free Cash Flow
The following table summarizes our cash flows for the six months ended June 30,
2020 and 2019, as reported in the accompanying unaudited condensed consolidated
financial statements. Free Cash Flow is a financial measure not recognized in
accordance with U.S. GAAP. Refer to the "Reconciliation of Non-GAAP Financial
Measures" section above for definitions and reconciliations to the most
comparable measures under U.S. GAAP.
                                                                          Six Months Ended June 30,
                                                                         2020                   2019
                                                                            (Dollars in millions)
Net cash (used in) provided by operating activities                $       (53.1)$      377.0
Net cash used in investing activities                                     (115.6)                 (64.0)
Net cash provided by (used in) in financing activities                     285.0                 (430.3)
Net change in cash, cash equivalents and restricted cash                   116.3                 (117.3)

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 $ 848.5

           $      900.1

Net cash (used in) provided by operating activities                $       (53.1)$      377.0
Net cash used in investing activities                                     (115.6)                 (64.0)
Add back: Amount attributable to acquisition of Shoal Creek Mine               -                    2.4
Free Cash Flow                                                     $      (168.7)$      315.4



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Operating Activities. The net decrease in net cash (used in) provided by
operating activities for the six months ended June 30, 2020 compared to the same
period in 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 ($127.3 million).
Investing Activities. The increase in net cash used in investing activities for
the six months ended June 30, 2020 compared to the same period in the prior year
was driven by higher advances to related parties and joint ventures, on a net
basis, ($23.0 million) and insurance proceeds attributable to North Goonyella
equipment losses in the prior year period ($23.2 million).
Financing Activities. The increase in net cash provided by (used in) financing
activities for the six months ended June 30, 2020 compared to the same period in
the prior year was driven by the $300.0 million borrowing under our revolving
credit facility and the prior year payment of dividends of $229.3 million,
including a supplemental dividend of $1.85 per share of common stock, and common
stock repurchases of $156.0 million. We have presently suspended such payments,
as discussed in Part II, Item 2. "Unregistered Sales of Equity Securities and
Use of Proceeds."
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 condensed consolidated balance sheets. At June 30, 2020, such
instruments included $1,589.4 million of surety bonds and $283.6 million of
letters of credit. These 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 condensed consolidated balance
sheets.
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. Our
surety providers have the ability to demand collateral up to the full amount of
each surety bond.
As described in Note 17. "Financial Instruments and Other Guarantees" in the
accompanying unaudited condensed 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. Self-bonding in the U.S. has become
increasingly restricted in recent years, leading to our 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 June 30, 2020, we had total asset retirement obligations of $757.5 million
which were backed by a combination of surety bonds 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 17. "Financial Instruments and Other Guarantees" in our unaudited condensed
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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We recognized an asset impairment charge of $1,418.1 million during the three
and six months ended June 30, 2020 related to our North Antelope Rochelle Mine
of the Powder River Basin Mining segment. The outlook for the mine has been
negatively impacted by the accelerated 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. These factors have led to the expectation of reduced
future sales volumes. The impairment charge was based upon the remaining
estimated discounted cash flows of the mine. Such cash flows were based upon
estimates which generally constitute unobservable Level 3 inputs under the fair
value hierarchy, including, but not limited to, future tons sold, coal prices
for unpriced coal, production costs (including costs for labor, commodity
supplies and contractors), transportation costs, and a risk-adjusted, cost of
capital.
At June 30, 2020, we also identified certain assets with an aggregate carrying
value of approximately $850 million in our Seaborne Metallurgical Mining, Powder
River Basin Mining, Other U.S. Thermal Mining and Corporate and Other segments
whose recoverability is most sensitive to coal pricing, cost pressures, customer
demand and customer concentration risk. We conducted a review of those assets
for recoverability as of June 30, 2020 and determined that no further impairment
charges were necessary as of that date.
See Note 9. "Property, Plant, Equipment and Mine Development" to our
accompanying unaudited condensed consolidated financial statements for
additional information regarding impairment charges.
Our critical accounting policies are discussed in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended December 31, 2019. Our critical
accounting policies remain unchanged at June 30, 2020.
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented
See Note 2. "Newly Adopted Accounting Standards and Accounting Standards Not Yet
Implemented" to our unaudited condensed consolidated financial statements for a
discussion of newly adopted accounting standards and accounting standards not
yet implemented.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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 unaudited condensed consolidated financial
statements. As of June 30, 2020, the Company had currency options outstanding
with an aggregate notional amount of $613.0 million Australian dollars to hedge
currency risk associated with anticipated Australian dollar expenditures over
the six-month period ending December 31, 2020. 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 $125 million for the next twelve months. Based upon the
Australian dollar/U.S. dollar exchange rate at June 30, 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 $95 million for
the next twelve months.
Other Non-Coal Trading Activities - Diesel Fuel Price Risk
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
June 30, 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 85 to 95 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.

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