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EX-95 - EXHIBIT 95 - PEABODY ENERGY CORPbtu_20160930xex95.htm
EX-32.2 - EXHIBIT 32.2 - PEABODY ENERGY CORPbtu_20160930xex322.htm
EX-32.1 - EXHIBIT 32.1 - PEABODY ENERGY CORPbtu_20160930xex321.htm
EX-31.2 - EXHIBIT 31.2 - PEABODY ENERGY CORPbtu_20160930xex312.htm
EX-31.1 - EXHIBIT 31.1 - PEABODY ENERGY CORPbtu_20160930xex311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 1-16463
____________________________________________
peabody20150930a02a01a04.gif
PEABODY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
13-4004153
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
701 Market Street, St. Louis, Missouri
 
63101-1826
(Address of principal executive offices)
 
(Zip Code)
(314) 342-3400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ   No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer þ
 
 
 
 
 
Accelerated filer ¨
 
 
Non-accelerated filer ¨
 
 
 
 
 
Smaller reporting company ¨
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
There were 18.5 million shares of the registrant's common stock (par value of $0.01 per share) outstanding at October 31, 2016.




TABLE OF CONTENTS
 
Page
 
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and 2015

Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015

Condensed Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015


 
Item 4. Mine Safety Disclosures
Item 5. Other Information
 EX-31.1
 
 EX-31.2
 
 EX-32.1
 
 EX-32.2
 
 EX-95
 
 EX-101 INSTANCE DOCUMENT
 
 EX-101 SCHEMA DOCUMENT
 
 EX-101 CALCULATION LINKBASE DOCUMENT
 
 EX-101 LABELS LINKBASE DOCUMENT
 
 EX-101 PRESENTATION LINKBASE DOCUMENT
 
 EX-101 DEFINITION LINKBASE DOCUMENT
 




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(Dollars in millions, except per share data)
Revenues
 
 

 
 
 
 
 
 
Sales
 
$
1,076.8

 
$
1,277.4

 
$
2,861.9

 
$
3,922.9

Other revenues
 
130.3

 
141.5

 
412.6

 
373.2

Total revenues
 
1,207.1

 
1,418.9

 
3,274.5

 
4,296.1

Costs and expenses
 
 
 
 
 

 
 
Operating costs and expenses (exclusive of items shown separately below)
 
1,064.8

 
1,254.0

 
2,981.2

 
3,774.4

Depreciation, depletion and amortization
 
117.8

 
136.0

 
345.5

 
430.6

Asset retirement obligation expenses
 
12.7

 
12.3

 
37.3

 
40.4

Selling and administrative expenses
 
32.1

 
37.8

 
114.6

 
128.8

Restructuring charges
 
0.3

 
1.8

 
15.5

 
23.0

Other operating (income) loss:
 
 
 
 
 
 
 
 
Net gain on disposal of assets
 
(1.9
)
 
(7.9
)
 
(17.4
)
 
(20.2
)
Asset impairment
 

 

 
17.2

 
900.8

Loss from equity affiliates
 
2.9

 
5.3

 
12.6

 
12.3

Operating loss

(21.6
)
 
(20.4
)

(232.0
)
 
(994.0
)
Interest expense
 
58.5

 
118.5

 
243.7

 
344.0

Loss on early debt extinguishment
 

 

 

 
67.8

Interest income
 
(1.3
)
 
(1.4
)
 
(4.0
)
 
(6.6
)
Reorganization items, net
 
29.7

 

 
125.1

 

Loss from continuing operations before income taxes
 
(108.5
)
 
(137.5
)
 
(596.8
)
 
(1,399.2
)
Income tax (benefit) provision
 
(12.9
)
 
6.9

 
(108.7
)
 
(83.2
)
Loss from continuing operations, net of income taxes
 
(95.6
)
 
(144.4
)
 
(488.1
)
 
(1,316.0
)
Loss from discontinued operations, net of income taxes
 
(38.1
)
 
(157.5
)
 
(44.5
)
 
(202.7
)
Net loss
 
(133.7
)
 
(301.9
)
 
(532.6
)
 
(1,518.7
)
Less: Net income attributable to noncontrolling interests
 
1.8

 
2.8

 
3.5

 
7.9

Net loss attributable to common stockholders
 
$
(135.5
)
 
$
(304.7
)
 
$
(536.1
)
 
$
(1,526.6
)
 
 
 
 
 
 
 
 
 
Loss from continuing operations:
 
 
 
 
 
 
 
 
Basic loss per share
 
$
(5.32
)
 
$
(8.08
)
 
$
(26.88
)
 
$
(73.05
)
Diluted loss per share
 
$
(5.32
)
 
$
(8.08
)
 
$
(26.88
)
 
$
(73.05
)
 
 
 
 
 
 
 
 
 
Net loss attributable to common stockholders:
 
 
 
 
 
 
 
 
Basic loss per share
 
$
(7.41
)
 
$
(16.73
)
 
$
(29.31
)
 
$
(84.23
)
Diluted loss per share
 
$
(7.41
)
 
$
(16.73
)
 
$
(29.31
)
 
$
(84.23
)
 
 
 
 
 
 
 
 
 
Dividends declared per share
 
$

 
$

 
$

 
$
0.075

See accompanying notes to unaudited condensed consolidated financial statements.


1



PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in millions)
Net loss
$
(133.7
)
 
$
(301.9
)
 
$
(532.6
)
 
$
(1,518.7
)
Other comprehensive income (loss), net of income taxes:
 
 
 
 
 
 
 
Net change in unrealized gains on available-for-sale securities (net of respective net tax provision (benefit) of $0.0, $0.0, $0.0 and ($0.1))

 
0.2

 

 
0.2

Net unrealized gains (losses) on cash flow hedges (net of respective net tax provision (benefit) of $17.6, $(30.1), $69.9 and $49.8)
 
 
 
 
 
 
 
Decrease in fair value of cash flow hedges

 
(115.6
)
 

 
(100.4
)
Reclassification for realized losses included in net loss
29.9

 
68.9

 
119.0

 
183.9

Net unrealized gains (losses) on cash flow hedges
29.9

 
(46.7
)
 
119.0

 
83.5

Postretirement plans and workers' compensation obligations (net of respective net tax provision of $2.1, $1.8, $6.3 and $11.2)

3.6

 
10.8

 
10.8

 
26.8

Foreign currency translation adjustment
1.5

 
(15.3
)
 
2.4

 
(41.5
)
Other comprehensive income (loss), net of income taxes
35.0

 
(51.0
)
 
132.2

 
69.0

Comprehensive loss
(98.7
)
 
(352.9
)
 
(400.4
)
 
(1,449.7
)
Less: Comprehensive income attributable to noncontrolling interests
1.8

 
2.8

 
3.5

 
7.9

Comprehensive loss attributable to common stockholders
$
(100.5
)
 
$
(355.7
)
 
$
(403.9
)
 
$
(1,457.6
)
See accompanying notes to unaudited condensed consolidated financial statements.


2



PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
(Unaudited)
 
 
 
 
September 30, 2016
 
December 31, 2015
 
 
(Amounts in millions, except per share data)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
1,167.8

 
$
261.3

Restricted cash
 
24.2

 

Accounts receivable, net of allowance for doubtful accounts of $14.2 at September 30, 2016 and $6.6 at December 31, 2015
 
351.9

 
228.8

Inventories
 
259.6

 
307.8

Assets from coal trading activities, net
 
19.9

 
23.5

Deferred income taxes
 
53.5

 
53.5

Other current assets
 
368.9

 
447.6

Total current assets
 
2,245.8

 
1,322.5

Property, plant, equipment and mine development, net
 
9,215.5

 
9,258.5

Deferred income taxes
 
2.3

 
2.2

Investments and other assets
 
771.6

 
363.7

Total assets
 
$
12,235.2

 
$
10,946.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Current portion of long-term debt
 
$
493.1

 
$
5,874.9

Liabilities from coal trading activities, net
 
19.5

 
15.6

Accounts payable and accrued expenses
 
835.9

 
1,446.3

Total current liabilities
 
1,348.5

 
7,336.8

Long-term debt, less current portion
 

 
366.3

Deferred income taxes
 
107.6

 
69.1

Asset retirement obligations
 
703.4

 
686.6

Accrued postretirement benefit costs
 
715.4

 
722.9

Other noncurrent liabilities
 
504.8

 
846.7

Total liabilities not subject to compromise
 
3,379.7

 
10,028.4

Liabilities subject to compromise
 
8,331.6

 

Total liabilities
 
11,711.3

 
10,028.4

Stockholders’ equity
 
 
 
 
Preferred Stock — $0.01 per share par value; 10.0 shares authorized, no shares issued or outstanding as of September 30, 2016 or December 31, 2015
 

 

Perpetual Preferred Stock — 0.8 shares authorized, no shares issued or outstanding as of September 30, 2016 or December 31, 2015
 

 

Series Common Stock — $0.01 per share par value; 40.0 shares authorized, no shares issued or outstanding as of September 30, 2016 or December 31, 2015
 

 

Common Stock — $0.01 per share par value; 53.3 shares authorized,19.3 shares issued and 18.5 shares outstanding as of September 30, 2016 and December 31, 2015
 
0.2

 
0.2

Additional paid-in capital
 
2,418.5

 
2,410.7

Treasury stock, at cost — 0.8 shares as of September 30, 2016 and December 31, 2015
 
(371.8
)
 
(371.7
)
Accumulated deficit
 
(1,039.5
)
 
(503.4
)
Accumulated other comprehensive loss
 
(486.7
)
 
(618.9
)
Peabody Energy Corporation stockholders’ equity
 
520.7

 
916.9

Noncontrolling interests
 
3.2

 
1.6

Total stockholders’ equity
 
523.9

 
918.5

Total liabilities and stockholders’ equity
 
$
12,235.2

 
$
10,946.9

See accompanying notes to unaudited condensed consolidated financial statements.


3



PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
 
(Dollars in millions)
Cash Flows From Operating Activities
 
 
 
 
Net loss
 
$
(532.6
)
 
$
(1,518.7
)
Loss from discontinued operations, net of income taxes
 
44.5

 
202.7

Loss from continuing operations, net of income taxes
 
(488.1
)
 
(1,316.0
)
Adjustments to reconcile loss from continuing operations, net of income taxes to net cash used in operating activities:
 
 
 
 
Depreciation, depletion and amortization
 
345.5

 
430.6

Noncash interest expense
 
30.0

 
22.9

Deferred income taxes
 
(38.9
)
 
(53.7
)
Noncash share-based compensation
 
8.9

 
20.0

Asset impairment
 
17.2

 
900.8

Net gain on disposal of assets
 
(17.4
)
 
(20.2
)
Loss from equity affiliates
 
12.6

 
12.3

Gain on VEBA settlement
 
(68.1
)
 

Settlement of hedge positions
 
(25.0
)
 

Reclassification from OCI for terminated hedge contracts
 
82.0

 
(14.9
)
Noncash reorganization items, net
 
96.5

 

Changes in current assets and liabilities:
 
 
 
 
Accounts receivable
 
24.4

 
190.0

Change in receivable from accounts receivable securitization program
 
(168.5
)
 
(5.0
)
Inventories
 
47.8

 
55.2

Net assets from coal trading activities
 
7.5

 
(17.4
)
Other current assets
 
(28.6
)
 
7.6

Accounts payable and accrued expenses
 
5.2

 
(322.0
)
Restricted cash
 
(94.8
)
 

Asset retirement obligations
 
19.0

 
28.1

Accrued postretirement benefit costs
 
(0.6
)
 
14.2

Accrued pension costs
 
16.4

 
21.1

Take-or-pay obligation settlement
 
(15.5
)
 

Other, net
 
(25.4
)
 
(15.6
)
Net cash used in continuing operations
 
(257.9
)
 
(62.0
)
Net cash used in discontinued operations
 
(18.9
)
 
(28.6
)
Net cash used in operating activities
 
(276.8
)
 
(90.6
)
Cash Flows From Investing Activities
 
 
 
 
Additions to property, plant, equipment and mine development
 
(56.6
)
 
(76.9
)
Changes in accrued expenses related to capital expenditures
 
(5.5
)
 
(14.5
)
Federal coal lease expenditures
 
(249.0
)
 
(89.8
)
Proceeds from disposal of assets, net of notes receivable
 
134.7

 
39.6

Purchases of debt and equity securities
 

 
(22.6
)
Proceeds from sales and maturities of debt and equity securities
 

 
33.6

Contributions to joint ventures
 
(241.7
)
 
(349.8
)
Distributions from joint ventures
 
236.7

 
339.8

Advances to related parties
 
(23.3
)
 
(3.6
)
Repayments of loans from related parties
 
13.2

 

Other, net
 
(8.2
)
 
(2.1
)
Net cash used in investing activities
 
(199.7
)
 
(146.3
)
Cash Flows From Financing Activities
 
 
 
 
Proceeds from long-term debt
 
1,429.8

 
975.7

Repayments of long-term debt
 
(11.2
)
 
(666.0
)
Payment of deferred financing costs
 
(29.8
)
 
(28.7
)
Dividends paid
 

 
(1.4
)
Distributions to noncontrolling interests
 
(3.9
)
 
(2.1
)
Other, net
 
(1.9
)
 
(4.3
)
Net cash provided by financing activities
 
1,383.0

 
273.2

Net change in cash and cash equivalents
 
906.5

 
36.3

Cash and cash equivalents at beginning of period
 
261.3

 
298.0

Cash and cash equivalents at end of period
 
$
1,167.8

 
$
334.3

See accompanying notes to unaudited condensed consolidated financial statements.


4



PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

 
Peabody Energy Corporation Stockholders’ Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated Deficit
 
Accumulated
Other Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
(Dollars in millions)
December 31, 2015
$
0.2

 
$
2,410.7

 
$
(371.7
)
 
$
(503.4
)
 
$
(618.9
)
 
$
1.6

 
$
918.5

Net loss

 

 

 
(536.1
)
 

 
3.5

 
(532.6
)
Net realized losses on cash flow hedges (net of $69.9 net tax provision)

 

 

 

 
119.0

 

 
119.0

Postretirement plans and workers’ compensation obligations (net of $6.3 net tax provision)

 

 

 

 
10.8

 

 
10.8

Foreign currency translation adjustment

 

 

 

 
2.4

 

 
2.4

Share-based compensation for equity-classified awards

 
7.8

 

 

 

 

 
7.8

Repurchase of employee common stock relinquished for tax withholding

 

 
(0.1
)
 

 

 

 
(0.1
)
Distributions to noncontrolling interests

 

 

 

 

 
(1.9
)
 
(1.9
)
September 30, 2016
$
0.2

 
$
2,418.5

 
$
(371.8
)
 
$
(1,039.5
)
 
$
(486.7
)
 
$
3.2

 
$
523.9

See accompanying notes to unaudited condensed consolidated financial statements.



5



PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The condensed consolidated financial statements include the accounts of Peabody Energy Corporation and its affiliates (the Company or Peabody). Interests in subsidiaries controlled by the Company are consolidated with any outside shareholder interests reflected as noncontrolling interests, except when the Company has an undivided interest in an unincorporated joint venture. In those cases, the Company includes its proportionate share in the assets, liabilities, revenues and expenses of the jointly controlled entities within each applicable line item of the unaudited condensed consolidated financial statements.  All intercompany transactions, profits and balances have been eliminated in consolidation. As discussed below in Note 2. "Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented," prior year amounts of deferred financing costs have been reclassified to conform with the new standard.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. In the opinion of management, these financial statements reflect all normal, recurring adjustments necessary for a fair presentation. Balance sheet information presented herein as of December 31, 2015 has been derived from the Company’s audited consolidated balance sheet at that date. The Company's results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2016.
Pursuant to the authorization provided at a special meeting of the Company's stockholders held on September 16, 2015, the Company completed a 1-for-15 reverse stock split of the shares of the Company’s common stock on September 30, 2015 (the Reverse Stock Split). As a result of the Reverse Stock Split, every 15 shares of issued and outstanding common stock were combined into one issued and outstanding share of Common Stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split and any fractional shares that would otherwise have resulted from the Reverse Stock Split were paid in cash. The Reverse Stock Split reduced the number of shares of common stock outstanding from approximately 278 million shares to approximately 19 million shares. The number of authorized shares of common stock was also decreased from 800 million shares to 53.3 million shares. The Company's common stock began trading on a reverse stock split-adjusted basis on the New York Stock Exchange (NYSE) on October 1, 2015. All share and per share data included in this report has been retroactively restated to reflect the Reverse Stock Split. Since the par value of the common stock remained at $0.01 per share, the value for "Common stock" recorded to the Company's condensed consolidated balance sheets has been retroactively reduced to reflect the par value of restated outstanding shares, with a corresponding increase to "Additional paid-in capital."
The Company has classified items within discontinued operations in the unaudited condensed consolidated financial statements for disposals (by sale or otherwise) that have occurred prior to January 1, 2015 when the operations and cash flows of a disposed component of the Company were eliminated from the ongoing operations of the Company as a result of the disposal and the Company no longer had any significant continuing involvement in the operation of that component.
Filing Under Chapter 11 of the United States Bankruptcy Code
On April 13, 2016 (the Petition Date), Peabody and a majority of its wholly owned domestic subsidiaries as well as one international subsidiary in Gibraltar (the Filing Subsidiaries, and together with Peabody, the Debtors) filed voluntary petitions for reorganization (the petitions collectively, the Bankruptcy Petitions) under Chapter 11 of Title 11 of the U.S. Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Eastern District of Missouri (the Bankruptcy Court). The Company’s Australian operations and other international subsidiaries are not included in the filings. The Debtors' Chapter 11 cases (collectively, the Chapter 11 Cases) are being jointly administered under the caption In re Peabody Energy Corporation, et al., Case No. 16-42529 (Bankr. E.D. Mo.). The Debtors continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.


6


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The filings of the Bankruptcy Petitions constituted an event of default under the Company’s prepretition credit agreement as well as the indentures governing certain of the Company’s debt instruments, as further described in Note 13. "Current and Long-term Debt" to the condensed consolidated financial statements, and all unpaid principal and accrued and unpaid interest due thereunder became immediately due and payable. Any efforts to enforce such payment obligations are automatically stayed as a result of the Bankruptcy Petitions and the creditors' rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.
Additionally, on the Petition Date, the NYSE determined that Peabody’s common stock was no longer suitable for listing pursuant to Section 8.02.01D of the NYSE’s Listed Company Manual, and trading in the Company’s common stock was suspended. The Company's common stock began trading on the OTC Pink Sheets marketplace under the symbol BTUUQ on April 14, 2016. Following the Petition Date, the NYSE formally de-listed the Company's common stock.
On April 14, 2016, the Bankruptcy Court approved several motions (First Day Motions), including motions (i) authorizing the Debtors to pay prepetition wages and benefits for its workforce (Employee Motion), in part, (ii) prohibiting utilities from discontinuing service and authorizing the Debtors to provide adequate assurance deposits, (iii) authorizing the Debtors to pay prepetition obligations to certain critical vendors on an interim basis (Critical Vendor Motion), (iv) authorizing the Debtors to maintain their existing cash management system on an interim basis (Cash Management Motion), (v)  authorizing certain Debtors to continue selling and contributing receivables and related rights pursuant to a securitization facility on an interim basis (Securitization Motion) and (vi) authorizing the Debtors to enter into an $800 million debtor-in-possession financing facility (DIP Credit Agreement) on an interim basis (DIP Motion).
Pursuant to Section 362 of the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically stayed most actions against the Debtors, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors’ property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors’ Chapter 11 Cases also automatically stayed the continuation of most legal proceedings, including certain of the third party litigation matters described in Note 19. "Commitments and Contingencies" and Note 20. "Matters Related to the Bankruptcy of Patriot Coal Corporation" of this report or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.
The U.S. Trustee for the Eastern District of Missouri filed a notice appointing an official committee of unsecured creditors (the Creditors' Committee) on April 29, 2016. The Creditors’ Committee represents all unsecured creditors of the Debtors and has a right to be heard on all matters that come before the Bankruptcy Court.
On May 17, 2016, the Bankruptcy Court approved various of the First Day Motions on a final basis, including the Employee Motion, Critical Vendor Motion, Cash Management Motion, Securitization Motion and DIP Motion. At the May 17 hearing, the Bankruptcy Court also approved various motions (i) authorizing the Debtors’ retention of various professionals, (ii) establishing procedures for the retention of ordinary course professionals, (iii) establishing procedures for the sale of de minimis assets and (iv)  authorizing the Debtors to consummate the sale of the Debtors’ equity interests in Lively Grove Energy Partners, LLC, a Debtor, and dismissing Lively Grove Energy Partners, LLC’s current chapter 11 case.
On May 20, 2016, the Debtors filed a complaint and request for declaratory judgment, as required by the terms of the DIP Credit Agreement, against Citibank, N.A. (in its capacity as Administrative Agent under the Debtors' prepetition secured credit agreement), among others, regarding the extent of certain collateral and secured claims of certain prepetition creditors (the CNTA Adversary Proceeding).
On June 13, 2016, Citibank, N.A. filed an answer and counter-claim for declaratory judgment.  On June 14, 2016, two motions to intervene were filed, one from the Creditors' Committee and another from a group of creditors holding $1.65 billion in face value of the Company's Senior Notes (as indicated in their motion). The intervention motions were granted on July 7, 2016.
On June 15, 2016, the Bankruptcy Court approved several motions, including motions that (i)  established deadlines for the filing of certain proofs of claim, approved the form and manner of notice thereof, and (ii)  established a key employee retention program. At this hearing, the Bankruptcy Court also approved the Debtors' retention of various professionals, and the Creditors’ Committee's retention of various professionals.


7


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



On July 5, 2016, the Debtors filed an answer to certain counterclaims in the CNTA Adversary Proceeding.  On July 7, 2016, the Bankruptcy Court entered a stipulated order authorizing the Official Committee of Unsecured Creditors and certain noteholders to intervene in the CNTA Adversary Proceeding. On July 12, 2016, the Bankruptcy Court entered an order appointing the Honorable James L. Garrity, Jr. as mediator in the CNTA Adversary Proceeding. Defendant Citibank, N.A. moved for leave to amend its answer and counterclaim on August 18, 2016.
On July 7, 2016, the defendants in the adversary proceeding captioned Peabody Coalsales, LLC v. Arizona Public Service Company and PacifiCorp (the "APS Adversary Proceeding") filed a motion for dismissal of part of the Debtors' complaint. The Bankruptcy Court entered an order denying that motion the next day - on July 8, 2016. On July 22 and 29, 2016, the defendants in the APS Adversary Proceeding filed their answers to the Debtors' complaint. On August 3, 2016, a notice was filed indicating that the parties had agreed on a mediator in the APS Adversary Proceeding. In September 2016, the parties engaged in a court-ordered mediation. On November 2, 2016, the Bankruptcy Court entered an order scheduling the matter for trial beginning on February 13, 2017.
On July 20, 2016, the Bankruptcy Court approved several motions, including motions that (i) granted certain entities limited relief from the automatic stay; (ii) established procedures governing the Creditors' Committee's obligation to provide information to unsecured creditors; (iii) authorized the retention of the Debtors' tax advisors; (iv) extended certain time periods, including the time period in which the Debtors' have the exclusive right to file a plan of reorganization; (v) authorized the rejection of certain executory contracts; and (vi) authorized the payment of certain secured and priority prepetition property taxes.
On July 26, 2016, the Debtors filed motions to approve settlement agreements that the Debtors have reached with regulators in Wyoming, New Mexico and Indiana concerning the Debtors' reclamation bonding in those states (the Self-Bonding Stipulations). On August 3, 2016, the Debtors filed additional motions, including (i) a motion for approval of (a) a key employee incentive plan, (b) an executive leadership team short-term incentive plan and (c) modifications to the current director compensation program (collectively, the KEIP Motion); and (ii) a motion to extend (a)  the period during which the Debtors have the exclusive right to file a plan of reorganization through and including November 9, 2016 and (b) the period during which the Debtors have the exclusive right to solicit acceptances thereof through and including January 9, 2017 (collectively, the Exclusivity Motion). On August 10, 2016, the Creditors' Committee filed a statement in support of the KEIP Motion.
On July 29, 2016, the defendant in the adversary proceeding captioned Four Star Holdings, LLC v. Bowie Resource Holdings, LLC (Bowie) (the Four Star Adversary Proceeding) filed (i) a motion to dismiss part of the Debtors' complaint and (ii) its answer (with counterclaims) to the Debtors' complaint. On August 19, 2016, in the Four Star Adversary Proceeding the Debtors filed their reply and affirmative defenses to Defendant Bowie's counterclaims. On August 23, 2016, the Bankruptcy Court entered an order denying Bowie's previously-filed motion to dismiss a portion of the Debtors' complaint. On October 5, 2016, Bowie filed an amended answer to the Debtors' complaint, which included amended affirmative defenses and counterclaims. On October 19, 2016, the Debtors filed their reply and affirmative defenses to Defendant Bowie's amended counterclaims.
On August 11, 2016, the Bankruptcy Court entered a stipulation and agreed order providing limited relief from the automatic stay to certain litigation claimants. Also on August 11, 2016, the Debtors filed their notice of reconciliation of reclamation claims.
On August 18, 2016, the Bankruptcy Court entered orders in connection with several motions, including the Self-Bonding Stipulations, the KEIP Motion and the Exclusivity Motion. On August 19, 2016, certain of the Debtors filed amended schedules of assets and liabilities and schedules of financial affairs with the Bankruptcy Court.
On August 18, 2016, in the CNTA Adversary Proceeding, Citibank, N.A. moved for leave to amend its answer and counterclaim. Additionally, on August 24, 2016, (i) the Debtors filed their motion for summary judgment and the Creditors' Committee and the ad hoc group of senior noteholders filed joinders thereto and (ii) Citibank, N.A. filed its motion for summary judgment. On September 12, 2016, the Bankruptcy Court heard oral argument on the Debtors' and Citibank, N.A.'s summary judgment motions in the CNTA Adversary Proceeding. On September 13, 2016, (i) the Bankruptcy Court entered an order granting Citibank, N.A.'s previously-filed motion to amend its answer and counterclaim, (ii) Citibank, N.A. filed its answer and amended counterclaim for declaratory relief and (iii) the Bankruptcy Court entered an order vacating the trial dates that had been previously scheduled in the CNTA Adversary Proceeding. On October 4, 2016, the Debtors filed their answer to Citibank, N.A.'s answer and amended counterclaim for declaratory relief. On October 7, 2016, two members of a group of creditors (the two members holding approximately $287.4 million in face value of the Company’s Senior Secured Second Lien Notes (as indicated in their motion)) moved to intervene in the CNTA Adversary Proceeding.


8


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



On August 22, 2016, the Debtors filed a motion regarding a settlement agreement that the Debtors reached with regulators in Illinois concerning the Debtors' reclamation bonding in that state (the Illinois Self-Bonding Stipulation). On September 1, 2016, (i) the Debtors filed a motion to establish claims objection procedures (the Claims Objection Procedures Motion) and (ii) the Bankruptcy Court entered (a) a stipulation and consent order by and between the Debtors and certain environmental groups concerning pending litigation brought by the environmental groups and (b) an order confirming the Debtors' authority to share confidential agreements with their restructuring advisors.
On September 15, 2016, the Bankruptcy Court granted several motions, including the Claims Objections Procedures Motion and the Illinois Self-Bonding Stipulation. The Bankruptcy Court entered orders approving these motions on September 15, 2016 and September 16, 2016, respectively. On September 16, 2016, the Debtors filed two omnibus objections to certain proofs of claim.
On September 8, 2016, the Debtors filed an objection to a claim asserted by the United Mine Workers of America 1974 Pension Plan and Trust (UMWA Plan). On September 26, 2016, the UMWA Plan filed a motion for relief from the automatic stay, seeking to allow arbitration between the Debtors and the UMWA Plan to resume outside of the Bankruptcy Court's jurisdiction. On October 7, 2016, the UMWA Plan filed a motion to continue the hearing on the Debtors' objection to the UMWA Plan's proof of claim until January 2017.
On September 30, 2016, numerous professionals retained by the Debtors and the Creditors’ Committee filed their first interim fee applications.
On October 4, 2016, the Debtors filed several motions, including: (i) an application to retain additional professionals, (ii) a motion to reject certain contracts, (iii) a motion seeking authority for the Debtors to implement procedures by which the Debtors may, from time to time, amend and assume, or settle and buy-out, certain leases of personal property and equipment without need for further Bankruptcy Court approval (Equipment Lease Procedures Motion), and (iv) two motions related to the Debtors' insurance programs.
On October 11, 2016, the Bankruptcy Court approved a stipulation and agreed order filed by the Debtors seeking the authority to enter into that certain Amendment No. 4 and Consent Under Superpriority Secured Debtor-in-Possession Credit Agreement (the DIP Amendment). The DIP Amendment modifies certain of the milestones under the DIP Credit Agreement, including (i) a modification to the deadline by which the Bankruptcy Court shall enter an order determining the issues being adjudicated in the CNTA Adversary Proceeding (the CNTA Order) to provide that the Bankruptcy Court shall have entered the CNTA Order by no later than November 23, 2016; (ii) a modification to the deadlines for the Company to file an Acceptable Reorganization Plan (as defined in the DIP Credit Agreement) and related disclosure statement to provide that the Company must file these by, or on, the date that is the later of (a) 30 days after the entry of the CNTA Order and (b) December 14, 2016; and (iii) a modification to the deadline by which the Bankruptcy Court shall enter an order approving the Debtors' disclosure statement to provide that the Bankruptcy Court shall have entered this order by no later than January 31, 2017. The DIP Credit Agreement also contains restrictions on the ability of Peabody Global Funding, LLC (Global Funding) to amend or waive provisions under the Intercompany Loan Agreement (as defined in the DIP Credit Agreement) in a manner that would release or subordinate more than 50% of the collateral thereunder. The DIP Amendment modifies these restrictions to expressly allow Global Funding to amend or waive provisions under the Intercompany Loan Agreement to permit the release or subordination of collateral thereunder, including as a result of potential asset sales, of up to $250 million in cash proceeds in the aggregate over the life of the Intercompany Loan Agreement.
On October 14, 2016, the Debtors filed four omnibus objections to certain proofs of claim.
On October 18, 2016, the Bankruptcy Court granted several motions, including (i) an application to retain additional professionals, (ii) a motion to reject a certain contract, (iii) the Equipment Lease Procedures Motion, and (iv) two motions related to the Debtors' insurance programs authorizing the Debtors to (a) enter into a new postpetition property policy with an affiliate(s) of American International Group, Inc. and (b) assume certain existing policies and enter into a new workers compensation insurance policy with ACE American Insurance Company, including its affiliated companies. Additionally, the Bankruptcy Court partially and conditionally granted the motion for relief from the automatic stay filed on September 26, 2016 by the UMWA Plan. The Bankruptcy Court lifted the automatic stay to provide the UMWA Plan until October 28, 2016, to receive a written confirmation from the American Arbitration Association (the AAA) that the AAA could find an arbitrator with sufficient experience who could arbitrate the UMWA Plan's claim and reach a decision, without extension or any exception for cause, by January 26, 2017.
On October 21, 2016, Berenergy Corporation filed a motion to lift the automatic stay to allow it to appeal a final judgment entered in the Sixth Judicial District Court in the state of Wyoming, as discussed in more detail below in Note 19 "Commitments and Contingencies".


9


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



On October 24, 2016, the Debtors filed a motion to assume or reject non-residential leases to which the Debtors are a party.
On October 25, 2016, the UMWA Plan filed a copy of its correspondence with the AAA and on October 26, 2016, the Bankruptcy Court issued an order lifting the automatic stay to allow arbitration of the claim to proceed. The parties have selected an arbitrator, and the arbitration hearings are scheduled to begin on December 19, 2016.
On October 26, 2016, the Debtors filed a motion to assume certain executory contracts to which certain Debtors are a party, as well as an omnibus motion for the rejection of certain executory contracts regarding overriding royalties.
As a result of the Bankruptcy Petitions, the realization of the Debtors’ assets and the satisfaction of liabilities are subject to significant uncertainty. For the Debtors to emerge successfully from Chapter 11, they must obtain the Bankruptcy Court’s approval of a plan of reorganization, which will enable them to transition from Chapter 11 into ordinary course operations as reorganized entities outside of bankruptcy. A plan of reorganization determines the rights and treatment of claims of various creditors and equity security holders, and is subject to the ultimate outcome of negotiations and Bankruptcy Court decisions ongoing through the date on which the plan of reorganization is confirmed.
The Debtors intend to propose a plan of reorganization on or prior to the applicable date required under the Bankruptcy Code and in accordance with milestones set forth in the DIP Credit Agreement (as set forth below in Note 13. "Current and Long-term Debt"), as the same may be extended with approval of the Bankruptcy Court. As noted above, the Debtors and the parties to the DIP Credit Agreement entered into the DIP Amendment, which modified certain milestone dates. The Debtors presently expect that any proposed plan of reorganization will provide, among other things, for mechanisms for the settlement of claims against the Debtors’ estates, treatment of the Debtors' existing equity and debt holders, and certain corporate governance and administrative matters pertaining to the reorganized Debtors. A proposed plan of reorganization filed with the Bankruptcy Court likely will incorporate provisions arising out of the Debtors' discussions with their creditors and other interested parties, and likely will be further revised thereafter. There can be no assurance that the Debtors will be able to secure approval for their proposed plan of reorganization from the Bankruptcy Court or execute such plan. Further, a plan of reorganization is likely to materially change the amounts and classifications of assets and liabilities reported in the Company’s condensed consolidated financial statements. Although it is uncertain at this stage if any proposed plan of reorganization would allow for distributions with respect to equity or other securities, it is likely that equity securities will be cancelled and extinguished upon confirmation of a proposed plan of reorganization by the Bankruptcy Court, and that the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests.
The Company believes it will require a significant restructuring of its balance sheet in order to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon, among other things, its ability to become profitable and maintain profitability, its ability to access sufficient liquidity and its ability to successfully implement their Chapter 11 plan of reorganization. The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might be required if the Company were unable to continue as a going concern.
(2)    Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented
Newly Adopted Accounting Standards
Going Concern. In August 2014, the Financial Accounting Standards Board (FASB) issued disclosure guidance that requires management to evaluate, at each annual and interim reporting period, whether substantial doubt exists about an entity's ability to continue as a going concern and, if applicable, to provide related disclosures. As outlined by that guidance, substantial doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or are available to be issued). The new guidance is effective for annual reporting periods ending after December 15, 2016 (the year ending December 31, 2016 for the Company) and interim periods thereafter, with early adoption permitted.
Deferred Financing Costs. On April 7, 2015, the FASB issued accounting guidance that requires deferred financing costs to be presented as a direct reduction from the related debt liability in the financial statements rather than as a separately recognized asset. Under the new guidance, amortization of such costs will continue to be reported as interest expense. In August 2015, an update was issued that clarified that debt issuance costs associated with line-of-credit arrangements may continue to be reported as an asset. The new guidance became effective retrospectively for interim and annual periods beginning after December 15, 2015 (January 1, 2016 for the Company). There was no material impact to the Company's results of operations or cash flows in connection with the adoption of the guidance.


10


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The impact to the Company's condensed consolidated balance sheets as of December 31, 2015 was as follows:
 
 
Before Application of Accounting Guidance
 
Adjustment
 
After Application of Accounting Guidance
 
 
(Dollars in millions)
Other current assets
 
$
503.1

 
$
(55.5
)
 
$
447.6

Investments and other assets
 
382.6

 
(18.9
)
 
363.7

Total assets
 
11,021.3

 
(74.4
)
 
10,946.9

Current portion of long-term debt
 
5,930.4

 
(55.5
)
 
5,874.9

Long-term debt, less current portion
 
385.2

 
(18.9
)
 
366.3

Total liabilities
 
10,102.8

 
(74.4
)
 
10,028.4

Accounting Standards Not Yet Implemented
Revenue Recognition. In May 2014, the FASB issued a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The new standard provides a single principles-based, five-step model to be applied to all contracts with customers, which steps are to (1) identify the contract(s) with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when each performance obligation is satisfied. More specifically, revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. The standard also requires entities to disclose sufficient qualitative and quantitative information to enable financial statement users to understand the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers.
Under the originally issued standard, the new guidance would have been effective for interim and annual periods beginning after December 15, 2016 (January 1, 2017 for the Company). On July 9, 2015, the FASB decided to delay the effective date of the new revenue recognition standard by one year with early adoption permitted, but not before the original effective date. The standard allows for either a full retrospective adoption or a modified retrospective adoption. The Company is in the process of evaluating the impact that the adoption of this guidance will have on its results of operations, financial condition, cash flows and financial statement presentation.
Inventory. In July 2015, the FASB issued guidance which requires entities to measure most inventory "at the lower of cost and net realizable value", thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The guidance does not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. The new guidance will be effective prospectively for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company), and interim periods therein, with early adoption permitted. The Company is in the process of evaluating the impact that the adoption of this guidance will have on its results of operations, financial condition, cash flows and financial statement presentation.
Income Taxes. In November 2015, the FASB issued accounting guidance that requires entities to classify all deferred tax assets and liabilities, along with any related valuation allowance as noncurrent on the balance sheet. Under the new guidance, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction. The new guidance will be effective prospectively or retrospectively for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company) and interim periods therein, with early adoption permitted. While the Company does not anticipate an impact to its results of operations or cash flows in connection with the adoption of this guidance, there will be an impact on the presentation of the Company's condensed consolidated balance sheets. The impact to the condensed consolidated balance sheets will depend upon the facts and circumstances at the time of adoption.


11


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Lease Accounting. In February 2016, the FASB issued accounting guidance that will require a lessee to recognize in its balance sheet a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for leases with lease terms of more than 12 months.  Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. Additional qualitative disclosures along with specific quantitative disclosures will also be required.  The new guidance will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (January 1, 2019 for the Company), with early adoption permitted.  Upon adoption, the Company will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is in the process of evaluating the impact that the adoption of this guidance will have on its results of operations, financial condition, cash flows and financial statement presentation. 
Compensation - Stock Compensation. In March 2016, the FASB issued accounting guidance which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The new guidance will be effective prospectively for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company) and interim periods therein, with early adoption permitted. The Company is in the process of evaluating the impact that the adoption of this guidance will have on its results of operations, financial condition, cash flows and financial statement presentation.
Financial Instruments - Credit Losses. In June 2016, the FASB issued accounting guidance related to the measurement of credit losses on financial instruments. The pronouncement replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at fair value with gains and losses recognized through net income. This standard is effective for fiscal years beginning after December 15, 2019 (January 1, 2020 for the Company) and interim periods therein,with early adoption permitted for fiscal years, and interim periods therein, beginning after December 15, 2018. The Company is in the process of evaluating the impact that the adoption of this guidance will have on its results of operations, financial condition, cash flows and financial statement presentation.
Classification of Certain Cash Receipts and Cash Payments. In August 2016, the FASB issued accounting guidance to amend the classification of certain cash receipts and cash payments in the statement of cash flows to reduce diversity in practice. The new guidance will be effective for fiscal years beginning after December 15, 2017 (January 1, 2018 for the Company) and interim periods therein, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The Company is currently evaluating this guidance and its impact on classification of certain cash receipts and cash payments in the Company's statements of cash flows.
(3)    Reorganization Items, Net
In accordance with Accounting Standards Codification 852, "Reorganizations," the statement of operations shall portray the results of operations of the reporting entity during the pendency of the Chapter 11 Cases. Revenues, expenses (including professional fees), realized gains and losses, and provisions for losses resulting from reorganization and restructuring of the business shall be reported separately as reorganization items.


12


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The Company's reorganization items for the three and nine months ended September 30, 2016 consisted of the following:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2016
 
September 30, 2016
 
 
(Dollars in millions)
Loss on termination of derivative contracts
 
$

 
$
75.2

Professional fees
 
31.1

 
52.7

Accounts payable settlement gains
 
(0.5
)
 
(0.7
)
Interest income
 
(0.9
)
 
(1.1
)
Other
 

 
(1.0
)
Reorganization items, net
 
$
29.7

 
$
125.1

As a result of filing the Bankruptcy Petitions, counterparties to certain derivative contracts terminated the agreements shortly thereafter in accordance with their contractual terms and the Company adjusted the corresponding liabilities to be equivalent to the termination value and allowed claim amount, of each contract. Such liabilities are considered first lien debt and are included within "Liabilities subject to compromise" in the accompanying condensed consolidated balance sheet at September 30, 2016.
Professional fees are only those that are directly related to the reorganization including, but not limited to, fees associated with advisors to the Debtors, the Creditors' Committee and certain secured and unsecured creditors.
During the nine months ended September 30, 2016, $30.7 million of cash payments were made for "Reorganization items, net".
(4)    Liabilities Subject to Compromise
Liabilities subject to compromise include unsecured or under-secured liabilities incurred prior to the Petition Date. These liabilities represent the amounts expected to be allowed on known or potential claims to be resolved through the Chapter 11 Cases and remain subject to future adjustments based on negotiated settlements with claimants, actions of the Bankruptcy Court, rejection of executory contracts, proofs of claims or other events. Additionally, liabilities subject to compromise also include certain items that may be assumed under a plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise. Generally, actions to enforce or otherwise effect payment of prepetition liabilities are subject to the automatic stay, as discussed in Note 1. "Basis of Presentation".
Liabilities subject to compromise consisted of the following:
Previously Reported Balance Sheet Line
 
September 30, 2016
 
 
(Dollars in millions)
Debt (1)
 
$
7,920.4

Interest payable
 
172.6

Trade payables
 
77.3

Environmental liabilities
 
62.9

Postretirement benefit obligations (2)
 
34.0

UMWA 1974 Pension Plan liability (3)
 
25.0

Property taxes
 
7.1

Other accrued liabilities
 
32.3

Liabilities subject to compromise
 
$
8,331.6

(1) 
Includes $7,601.6 million of debt, $257.3 million of derivative contract terminations, and $61.5 million of liabilities secured by prepetition letters of credit.
(2) 
Includes liabilities for unfunded non-qualified pension plans, all the participants of which are former employees.
(3) 
Refer to Note 20. "Matters Related to the Bankruptcy of Patriot Coal Corporation" for additional information.


13


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(5)    Asset Impairment
The Company's mining and exploration assets and mining-related investments may be adversely affected by numerous uncertainties that may cause the Company to be unable to recover all or a portion of the carrying value of those assets. Because of the volatile and cyclical nature of U.S. and international seaborne coal demand, it is reasonably possible that prices may decrease in the near term, which, absent sufficient mitigation such as an offsetting reduction in the Company's operating costs, may result in the need for future adjustments to the carrying value of the Company's long-lived mining assets and mining-related investments.
The Company's assets whose recoverability and values are most sensitive to near-term pricing and other market factors include certain Australian metallurgical and thermal assets for which impairment charges were recorded in 2015 and certain U.S. coal properties being leased to unrelated mining companies under agreements that require royalties to be paid as the coal is mined. These assets had an aggregate carrying value of $577.7 million as of September 30, 2016. The Company conducted a review of those assets for recoverability as of September 30, 2016 and determined that no impairment charge was necessary as of that date.
As further discussed in Note 23. “Subsequent Event”, the Company has entered into an agreement for the sale of its Metropolitan mine. As a result of entering into the transaction, and the approval of the Company’s Board of Directors of such a transaction in October 2016, the Metropolitan mine was deemed to meet held-for-sale accounting criteria in the fourth quarter of 2016. Accordingly, the Company expects to record an after-tax impairment charge of approximately $180 million to write down the assets to their estimated selling price, which is the best estimate of fair value under a held-for-sale accounting model, in the fourth quarter of 2016. The carrying value of the mine is included in the value of assets noted as at-risk in the preceding paragraph.
Three and Nine Months Ended September 30, 2016
The Company reviewed its portfolio of mining tenements and surface lands that were classified as held-for-sale. As a result of that review, the Company recognized an aggregate impairment charge of $17.2 million during the nine months ended September 30, 2016 to write down the carrying value of certain Australian metallurgical assets targeted for divestiture, and eventually divested, to their estimated fair value. For additional information regarding those divested assets, refer to Note 16. "Other Events".
Nine Months Ended September 30, 2015
The following costs are reflected in "Asset impairment" in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2015:
 
 
Reportable Segment
 
 
 
 
Australian Metallurgical
Mining
 
Australian Thermal Mining
 
Corporate
and Other
 
Consolidated
 
 
(Dollars in millions)
Asset impairment charges:
 
 
 
 
 
 
 
 
Long-lived assets
 
$
527.0

 
$
8.2

 
$
182.2

 
$
717.4

Equity method investments
 

 

 
183.4

 
183.4

Total
 
$
527.0

 
$
8.2

 
$
365.6

 
$
900.8

Australian Metallurgical and Thermal Mining
Due to the severity of the decline in seaborne metallurgical and thermal coal pricing observed during the first half of 2015 and other adverse conditions noted during that period, the Company concluded that indicators of impairment existed surrounding its Australian mining platform as of June 30, 2015. Accordingly, the Company reviewed its Australian mining assets for recoverability and, based on that review, determined that the carrying values of three of its active mines that produce metallurgical coal were not recoverable and recognized an aggregate impairment charge of $230.5 million to write those assets down from their carrying value to their estimated fair value.


14


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Also during the second quarter of 2015, the Company reviewed its portfolio of mining tenements and surface lands to identify non-strategic assets that could be monetized. In connection with that review, certain of such assets were deemed to meet held-for-sale accounting criteria or were otherwise considered more likely to generate cash flows through divestiture rather than development, with the long-term plans for certain adjacent assets also consequently affected. Accordingly, the Company recognized an aggregate impairment charge of $304.7 million to write down those assets from their carrying value to their estimated fair value.
Corporate and Other
Long-lived Assets. In connection with a similar review of the Company's asset portfolio conducted during the second quarter of 2015 to identify non-strategic domestic assets that could be monetized, the Company identified non-strategic, non-coal-supplying assets as held-for-sale rather than held-for-use as of June 30, 2015. Accordingly, the Company recognized an impairment charge of $182.2 million to write the assets down from their carrying value to estimated fair value.
Equity Method Investments. Due to the impairment indicators noted above surrounding the Company's Australian platform, the Company reviewed its total investment in Middlemount Coal Pty Ltd. (Middlemount), which owns the Middlemount Mine in Queensland, Australia, as of June 30, 2015. As a result of that review, the Company determined that the carrying value of its total investment in Middlemount was other-than-temporarily impaired and recorded a charge of $46.6 million to write-off the equity investment and recorded a charge of $136.8 million to write down the carrying value of certain of its loans to Middlemount.
The fair value estimates made during the Company's impairment assessments were determined in accordance with the methods outlined in Note 1. "Summary of Significant Accounting Policies" to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, except in certain instances where indicative bids were received related to non-strategic assets being marketed for divestiture. In those instances, the indicative bids were also considered in estimating fair value.
(6)    Discontinued Operations
Discontinued operations include certain former Australian Thermal Mining and Midwestern U.S. Mining segment assets that have ceased production and other previously divested legacy operations, including Patriot Coal Corporation and certain of its wholly-owned subsidiaries (Patriot).
Summarized Results of Discontinued Operations
Results from discontinued operations were as follows during the three and nine months ended September 30, 2016 and 2015:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(Dollars in millions)
Loss from discontinued operations, net of income taxes
 
$
(38.1
)
 
$
(157.5
)
 
$
(44.5
)
 
$
(202.7
)


15


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Assets and Liabilities of Discontinued Operations
Assets and liabilities classified as discontinued operations included in the Company's condensed consolidated balance sheets were as follows:
 
 
September 30, 2016
 
December 31, 2015
 
 
(Dollars in millions)
Assets:
 
 
 
 
Other current assets
 
$
3.9

 
$
3.1

Investments and other assets
 
13.2

 
13.2

Total assets classified as discontinued operations
 
$
17.1

 
$
16.3

 
 
 
 
 
Liabilities:
 
 
 
 
Accounts payable and accrued expenses
 
$
30.2

 
$
60.0

Other noncurrent liabilities
 
197.0

 
203.7

Liabilities subject to compromise
 
45.9

 

Total liabilities classified as discontinued operations
 
$
273.1

 
$
263.7

Patriot-Related Matters. During the three months ended September 30, 2016, the Company recognized a charge of $35.0 million for the UMWA 1974 Pension Plan, consisting of a $10.0 million cash liability and an allowed unsecured claim of $25.0 million, to "Loss from discontinued operations, net of income taxes" in the unaudited condensed consolidated statement of operations. Refer to Note 20. "Matters Related to the Bankruptcy of Patriot Coal Corporation" for information surrounding charges recorded during the three and nine months ended September 30, 2016 and 2015 associated with the bankruptcy of Patriot.
Wilkie Creek Mine. In December 2013, the Company ceased production and started reclamation of the Wilkie Creek Mine in Queensland, Australia. On June 30, 2014, Queensland Bulk Handling Pty Ltd (QBH) commenced litigation against Peabody (Wilkie Creek) Pty Limited, the indirect wholly-owned subsidiary of the company that owns the Wilkie Creek Mine, alleging breach of a Coal Port Services Agreement (CPSA) between the parties. Included in "Loss from discontinued operations, net of income taxes" for the year ended December 31, 2015 is a charge of $9.7 million related to that litigation, of which $7.6 million was recorded in the nine months ended September 30, 2015. On September 30, 2016, the Company paid $13.0 million Australian dollars ($9.9 million USD) to QBH in a full and complete settlement of the litigation. Refer to Note 19. "Commitments and Contingencies" for additional information surrounding the QBH matter.
In June 2015, the Company entered into a conditional agreement to sell the Wilkie Creek Mine.  The agreement was subsequently terminated in October 2015 in conjunction with entering into a new agreement with similar terms. The second agreement was terminated in March 2016. 
(7)     Inventories
Inventories as of September 30, 2016 and December 31, 2015 consisted of the following:
 
September 30, 2016
 
December 31, 2015
 
(Dollars in millions)
Materials and supplies
$
110.7

 
$
115.9

Raw coal
53.0

 
75.9

Saleable coal
95.9

 
116.0

Total
$
259.6

 
$
307.8

Materials and supplies inventories presented above have been shown net of reserves of $6.0 million and $4.7 million as of September 30, 2016 and December 31, 2015, respectively.


16


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(8)     Derivatives and Fair Value Measurements
Risk Management — Non-Coal Trading Activities
The Company is exposed to several risks in the normal course of business, including (1) foreign currency exchange rate risk for non-U.S. dollar expenditures and balances, (2) price risk on coal produced by, and diesel fuel utilized in, the Company's mining operations and (3) interest rate risk that has been partially mitigated by fixed rates on long-term debt. The Company manages a portion of its price risk related to the sale of coal (excluding coal trading activities) using long-term coal supply agreements (those with terms longer than one year), rather than using derivative instruments. Derivative financial instruments have historically been used to manage the Company's risk exposure to foreign currency exchange rate risk, primarily on Australian dollar expenditures made in its Australian mining platform. This risk has historically been managed using forward contracts and options designated as cash flow hedges, with the objective of reducing the variability of cash flows associated with forecasted foreign currency expenditures. The Company has also used derivative instruments to manage its exposure to the variability of diesel fuel prices used in production in the U.S. and Australia with swaps or options, which it has also designated as cash flow hedges, with the objective of reducing the variability of cash flows associated with forecasted diesel fuel purchases. These risk management activities are collectively referred to as "Corporate Hedging" and are actively monitored for compliance with the Company's risk management policies.
During the fourth quarter of 2015, the Company performed an assessment of its risk of nonperformance with respect to derivative financial instruments designated as cash flow hedges in light of three rating agencies downgrading the Company's corporate credit rating during 2015 and declining financial results. The Company determined its hedging relationships were expected to be "highly effective" throughout 2015 based on its quarterly assessments. However, as a result of a deterioration in the Company's credit profile, the Company could no longer conclude, as of December 31, 2015, that its hedging relationships were expected to be "highly effective" at offseting the changes in the anticipated exposure of the hedged item. Therefore, the Company discontinued the application of cash flow hedge accounting subsequent to December 31, 2015 and changes in the fair value of derivative instruments have been recorded as operating costs and expenses in the accompanying unaudited condensed consolidated statements of operations. Previous fair value adjustments recorded in "Accumulated other comprehensive loss" will be frozen until the underlying transactions impact the Company's earnings.
The Company's Bankruptcy Petitions constituted an event of default under the Company's derivative financial instrument contracts and the counterparties terminated the agreements shortly thereafter in accordance with contractual terms. The terminated positions are first-lien obligations under the Company's secured credit agreement dated September 24, 2013 (as amended, the 2013 Credit Facility). The net settlement liability was accounted for as a prepetition liability subject to compromise without credit valuation adjustments. As of September 30, 2016, the Company had no derivative financial instruments in place in relation to diesel fuel or foreign currency exchange rate.
Based on the previous fair value adjustments of the Company's foreign currency hedge contract portfolio recorded in "Accumulated other comprehensive loss", the net loss expected to be reclassified from comprehensive income to earnings over the next 12 months associated with that hedge program is approximately $68 million. Based on the previous fair value adjustments of the Company’s diesel fuel hedge contract portfolio recorded in “Accumulated other comprehensive loss”, the net loss expected to be reclassified from comprehensive income to earnings over the next 12 months associated with that hedge program is approximately $50 million.


17


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The tables below show the classification and amounts of pre-tax gains and losses related to the Company’s Corporate Hedging derivatives during the three and nine months ended September 30, 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2016
Financial Instrument
 
Income Statement
Classification of (Losses) Gains
 
Total realized loss recognized in income
 
Loss reclassified from other comprehensive loss into income
 
(Loss) gain recognized in income on derivatives
 
Unrealized gain (loss)recognized in income on non- designated derivatives
 
 
 
 
(Dollars in millions)
Commodity swap contracts
 
Operating costs and expenses
 
$
(19.4
)
 
$
(19.4
)
 
$

 
$

Foreign currency forward contracts
 
Operating costs and expenses
 
(28.0
)
 
(28.0
)
 

 

Total
 
 
 
$
(47.4
)
 
$
(47.4
)
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2015
Financial Instrument
 
Income Statement
Classification of (Losses) Gains
 
Loss recognized in other comprehensive income on derivatives
(effective portion)
 
Loss reclassified from other comprehensive income into income
(effective portion)(1)
 
Loss reclassified from other comprehensive income into income
(ineffective portion)
 
 
 
(Dollars in millions)

Commodity swap contracts
 
Operating costs and expenses
 
$
(63.1
)
 
$
(31.9
)
 
$
(0.5
)
Foreign currency forward contracts
 
Operating costs and expenses
 
(118.2
)
 
(84.5
)
 

Total
 
 
 
$
(181.3
)
 
$
(116.4
)
 
$
(0.5
)
(1)  
Includes the reclassification from "Accumulated other comprehensive loss" into earnings of $0.1 million of previously unrecognized gains on foreign currency cash flow hedge contracts monetized in the fourth quarter of 2012.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
Financial Instrument
 
Income Statement
Classification of (Losses) Gains
 
Total realized loss recognized in income
 
Loss reclassified from other comprehensive income into income (1)
 
(Loss) gain recognized in income on derivatives
 
Unrealized (loss) gain recognized in income on non- designated derivatives
 
 
 
 
(Dollars in millions)

Commodity swap contracts
 
Operating costs and expenses
 
$
(78.4
)
 
$
(66.4
)
 
$
(11.9
)
 
$

Commodity swap contracts
 
Reorganization items
 
(38.8
)
 

 
(38.8
)
 

Foreign currency forward contracts
 
Operating costs and expenses
 
(119.4
)
 
(122.1
)
 
2.7

 

Foreign currency forward contracts
 
Reorganization items
 
(36.4
)
 

 
(36.4
)
 

Total
 
 
 
$
(273.0
)
 
$
(188.5
)
 
$
(84.4
)
 
$

(1)  
Includes the reclassification from "Accumulated other comprehensive loss" into earnings of $13.6 million and $9.0 million of previously unrecognized losses on foreign currency and fuel contracts, respectively, monetized in the first quarter of 2016.



18


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2015
Financial Instrument
 
Income Statement
Classification of (Losses) Gains
 
Loss recognized in other comprehensive income on derivatives
(effective portion)
 
Loss reclassified from other comprehensive income into income
(effective portion)(1)
 
Gain reclassified from other comprehensive income into income
(ineffective portion)
 
 
 
(Dollars in millions)

Commodity swap contracts
 
Operating costs and expenses
 
$
(27.3
)
 
$
(89.0
)
 
$
1.3

Foreign currency forward contracts
 
Operating costs and expenses
 
(137.2
)
 
(238.9
)
 

Total
 
 
 
$
(164.5
)
 
$
(327.9
)
 
$
1.3

(1)  
Includes the reclassification from "Accumulated other comprehensive loss" into earnings of $14.9 million of previously unrecognized gains on foreign currency cash flow hedge contracts monetized in the fourth quarter of 2012.
Cash Flow Presentation. The Company classifies the cash effects of its Corporate Hedging derivatives within the "Cash Flows From Operating Activities" section of the unaudited condensed consolidated statements of cash flows.
Offsetting and Balance Sheet Presentation
The Company's Corporate Hedging derivative financial instruments were transacted in over-the-counter (OTC) markets with financial institutions under International Swaps and Derivatives Association (ISDA) Master Agreements. Those agreements contain symmetrical default provisions which allow for the net settlement of amounts owed by either counterparty in the event of default or contract termination. The Company offsets its Corporate Hedging asset and liability derivative positions on a counterparty-by-counterparty basis in the condensed consolidated balance sheets, with the fair values of those respective derivatives reflected in “Other current assets,” “Investments and other assets,” “Accounts payable and accrued expenses” and “Other noncurrent liabilities." Though the symmetrical default provisions associated with the Company's Corporate Hedging derivatives exist at the overall counterparty level across its foreign currency and diesel fuel hedging strategy derivative contract portfolios, the Company's accounting policy is to apply counterparty offsetting separately within those derivative contract portfolios for presentation in the condensed consolidated balance sheets because that application is more consistent with the fact that the Company generally net settles its Corporate Hedging derivatives with each counterparty by derivative contract portfolio on a routine basis.
The classification and amount of Corporate Hedging derivative financial instruments presented on a gross and net basis as of December 31, 2015 are presented in the table that follows.
Financial Instrument
Fair Value of Liabilities Presented in the Condensed Consolidated Balance Sheet as of December 31, 2015 (1)
 
(Dollars in millions)
Current Liabilities:
 
Commodity swap contracts
$
86.1

Foreign currency forward contracts
145.6

Total
$
231.7

 
 
Noncurrent Liabilities:
 
Commodity swap contracts
$
37.6

Foreign currency forward contracts
55.1

Total
$
92.7

(1)  
All commodity swap contracts and foreign currency forward contracts were in a liability position as of December 31, 2015.
See Note 9. "Coal Trading" for information on balance sheet offsetting related to the Company’s coal trading activities.


19


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Fair Value Measurements
The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. These levels include: Level 1 - inputs are quoted prices in active markets for the identical assets or liabilities; Level 2 - inputs are other than quoted prices included in Level 1 that are directly or indirectly observable through market-corroborated inputs; and Level 3 - inputs are unobservable, or observable but cannot be market-corroborated, requiring the Company to make assumptions about pricing by market participants.
Financial Instruments Measured on a Recurring Basis. The following tables set forth the hierarchy of the Company’s net financial liability positions for which fair value is measured on a recurring basis:
 
December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Dollars in millions)
Commodity swap contracts

 

 
(123.7
)
 
(123.7
)
Foreign currency contracts

 

 
(200.7
)
 
(200.7
)
Total net financial liabilities
$

 
$

 
$
(324.4
)
 
$
(324.4
)
As of September 30, 2016, the Company no longer had any outstanding financial positions.
For Level 1 and 2 financial assets and liabilities, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, exchange indices, broker/dealer quotes, published indices, issuer spreads, benchmark securities and other market quotes. In the case of certain debt securities, fair value is provided by a third-party pricing service. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities:
Commodity swap contracts — diesel fuel and explosives: valued based on a valuation that is corroborated by the use of market-based pricing (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3.
Foreign currency forward and option contracts: valued utilizing inputs obtained in quoted public markets (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3.
The following table summarizes the changes related to the Company’s Corporate Hedging derivative financial instruments recurring Level 3 financial liabilities:
 
Nine Months Ended
 
September 30, 2016
 
Commodity Contracts
 
Foreign Currency Contracts
 
Total
 
(Dollars in millions)
Beginning of period
$
123.7

 
$
200.7

 
$
324.4

Total net losses realized/unrealized:
 
 
 
 
 
Included in earnings (1)
15.7

 
(48.0
)
 
(32.3
)
Settlements / terminations
(139.4
)
 
(152.7
)
 
(292.1
)
End of period
$

 
$

 
$

(1)
Includes reorganization items and realized gains (losses)
The Company had no transfers between Levels 1, 2 and 3 during the three and nine months ended September 30, 2016 or 2015. Transfers into Level 3 of liabilities previously classified in Level 2 during the year ended December 31, 2015 were due to the relative value of unobservable inputs to the total fair value measurement of certain derivative contracts rising above the 10% threshold. The Company’s policy is to value all transfers between levels using the beginning of period valuation.


20


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Other Financial Instruments. The Company used the following methods and assumptions in estimating fair values for other financial instruments as of September 30, 2016 and December 31, 2015:
Cash and cash equivalents, restricted cash, accounts receivable, including those within the Company’s accounts receivable securitization program, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments.
Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2), and otherwise on estimated borrowing rates to discount the cash flows to their present value (Level 3).
The estimated fair value of the Company’s current and long-term debt as of September 30, 2016 is subject to compromise in connection with the Company's plan of reorganization and as such has been excluded from the table below. The carrying amount and estimated fair value of the Company's current and long-term debt as of December 31, 2015 are summarized as follows:
 
December 31, 2015
 
Carrying
Amount
 
Estimated
Fair Value
 
(Dollars in millions)
Current and Long-term debt
$
6,241.2

 
$
1,372.7

(9)     Coal Trading
The Company engages in the direct and brokered trading of coal and freight-related contracts (coal trading). Except those for which the Company has elected to apply a normal purchases and normal sales exception, all derivative coal trading contracts are accounted for at fair value.
The Company includes instruments associated with coal trading transactions as a part of its trading book. Trading revenues from such transactions are recorded in “Other revenues” in the unaudited condensed consolidated statements of operations and include realized and unrealized gains and losses on derivative instruments, including those that arise from coal deliveries related to contracts accounted for on an accrual basis under the normal purchases and normal sales exception. Therefore, the Company has elected the trading exemption surrounding disclosure of its coal trading activities.
Trading (losses) revenues recognized during the three and nine months ended September 30, 2016 and 2015 were as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
Trading Revenues by Type of Instrument
 
2016
 
2015
 
2016
 
2015
 
 
(Dollars in millions)
Futures, swaps and options
 
$
(32.4
)
 
$
47.7

 
$
(68.7
)
 
$
89.4

Physical purchase/sale contracts
 
13.2

 
(23.2
)
 
36.1

 
(46.7
)
Total trading (losses) revenues
 
$
(19.2
)
 
$
24.5

 
$
(32.6
)
 
$
42.7

Risk Management
Hedge Ineffectiveness. In some instances, the Company has designated an existing coal trading derivative as a hedge and, thus, the derivative has a non-zero fair value at hedge inception. The “off-market” nature of these derivatives, which is best described as an embedded financing element within the derivative, is a source of ineffectiveness. In other instances, the Company uses a coal trading derivative that settles at a different time, has different quality specifications or has a different location basis than the occurrence of the cash flow being hedged. These collectively yield ineffectiveness to the extent that the derivative hedge contract does not exactly offset changes in the fair value or expected cash flows of the hedged item.
The Company had no coal trading positions designated as cash flow hedges as of September 30, 2016 and December 31, 2015.


21


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Offsetting and Balance Sheet Presentation
The Company's coal trading assets and liabilities include financial instruments, such as swaps, futures and options, cleared through various exchanges, which involve the daily net settlement of closed positions. The Company must post cash collateral, known as variation margin, on exchange-cleared positions that are in a net liability position and receives variation margin when in a net asset position. The Company also transacts in coal trading financial swaps and options through OTC markets with financial institutions and other non-financial trading entities under ISDA Master Agreements, which contain symmetrical default provisions. Certain of the Company's coal trading agreements with OTC counterparties also contain credit support provisions that may periodically require the Company to post, or entitle the Company to receive, initial and variation margin. Physical coal and freight-related purchase and sale contracts included in the Company's coal trading assets and liabilities are executed pursuant to master purchase and sale agreements that also contain symmetrical default provisions and allow for the netting and setoff of receivables and payables that arise during the same time period. The Company offsets its coal trading asset and liability derivative positions, and variation margin related to those positions, on a counterparty-by-counterparty basis in the condensed consolidated balance sheets, with the fair values of those respective derivatives reflected in “Assets from coal trading activities, net” and “Liabilities from coal trading activities, net."
The fair value of assets and liabilities from coal trading activities presented on a gross and net basis as of September 30, 2016 and December 31, 2015 is set forth below:
Affected Line Item in the Condensed Consolidated Balance Sheets
 
Gross Amounts of Recognized Assets (Liabilities)
 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
 
Variation Margin (Held) Posted (1)
 
Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheets
 
 
(Dollars in millions)
 
 
Fair Value as of September 30, 2016
Assets from coal trading activities, net
 
$
169.9

 
$
(149.1
)
 
$
(0.9
)
 
$
19.9

Liabilities from coal trading activities, net
 
(227.4
)
 
149.1

 
58.8

 
(19.5
)
Total, net
 
$
(57.5
)
 
$

 
$
57.9

 
$
0.4

 
 
 
 
 
 
 
 
 
 
 
Fair Value as of December 31, 2015
Assets from coal trading activities, net
 
$
128.6

 
$
(87.3
)
 
$
(17.8
)
 
$
23.5

Liabilities from coal trading activities, net
 
(110.0
)
 
87.3

 
7.1

 
(15.6
)
Total, net
 
$
18.6

 
$

 
$
(10.7
)
 
$
7.9

(1) 
None of the net variation margin held at September 30, 2016 and December 31, 2015, respectively, related to cash flow hedges.
See Note 8. "Derivatives and Fair Value Measurements" for information on balance sheet offsetting related to the Company’s Corporate Hedging activities.


22


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Fair Value Measurements
The following tables set forth the hierarchy of the Company’s net financial asset (liability) coal trading positions for which fair value is measured on a recurring basis as of September 30, 2016 and December 31, 2015:
 
September 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Dollars in millions)
Futures, swaps and options
$

 
$
(0.1
)
 
$
(0.2
)
 
$
(0.3
)
Physical purchase/sale contracts

 
1.2

 
(0.5
)
 
0.7

Total net financial assets (liabilities)
$

 
$
1.1

 
$
(0.7
)
 
$
0.4

 
December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Dollars in millions)
Futures, swaps and options
$

 
$
3.3

 
$

 
$
3.3

Physical purchase/sale contracts

 
20.2

 
(15.6
)
 
4.6

Total net financial assets (liabilities)
$

 
$
23.5

 
$
(15.6
)
 
$
7.9

For Level 1 and 2 financial assets and liabilities, the Company utilizes both direct and indirect observable price quotes, including U.S. interest rate curves; LIBOR yield curves; Chicago Mercantile Exchange (CME) Group, Intercontinental Exchange (ICE), LCH.Clearnet (formerly known as the London Clearing House), NOS Clearing ASA and Singapore Exchange (SGX) contract prices; broker quotes; published indices and other market quotes. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities:
Futures, swaps and options: generally valued based on unadjusted quoted prices in active markets (Level 1) or a valuation that is corroborated by the use of market-based pricing (Level 2) except when credit and non-performance risk is considered to be a significant input (greater than 10% of fair value), then the Company classifies as Level 3.
Physical purchase/sale contracts: purchases and sales at locations with significant market activity corroborated by market-based information (Level 2) except when credit and non-performance risk is considered to be a significant input (greater than 10% of fair value), then the Company classifies as Level 3.
Physical purchase/sale contracts include a credit valuation adjustment based on credit and non-performance risk (Level 3). The credit valuation adjustment has not historically had a material impact on the valuation of the contracts resulting in Level 2 classification. However, due to the Company's corporate credit rating downgrades in 2015, the credit valuation adjustments as of September 30, 2016 and December 31, 2015 are considered to be significant unobservable inputs in the valuation of the contracts resulting in Level 3 classification.
The Company's risk management function, which is independent of the Company's commercial trading function, is responsible for valuation policies and procedures, with oversight from executive management. Generally, the Company's Level 3 instruments or contracts are valued using bid/ask price quotations and other market assessments obtained from multiple, independent third-party brokers or other transactional data incorporated into internally-generated discounted cash flow models. Decreases in the number of third-party brokers or market liquidity could erode the quality of market information and therefore the valuation of the Company's market positions. The Company's valuation techniques include basis adjustments to the foregoing price inputs for quality, such as heat rate and sulfur and ash content, location differentials, expressed as port and freight costs, and credit risk. The Company's risk management function independently validates the Company's valuation inputs, including unobservable inputs, with third-party information and settlement prices from other sources where available. A daily process is performed to analyze market price changes and changes to the portfolio. Further periodic validation occurs at the time contracts are settled with the counterparty. These valuation techniques have been consistently applied in all periods presented, and the Company believes it has obtained the most accurate information available for the types of derivative contracts held.


23


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The following table summarizes the quantitative unobservable inputs utilized in the Company's internally-developed valuation models for physical commodity purchase/sale contracts classified as Level 3 as of September 30, 2016:
 
 
Range
 
Weighted
Input
 
Low
 
High
 
Average
Quality adjustments
 
2
%
 
2
%
 
2
%
Location differentials
 
9
%
 
9
%
 
9
%
Credit and non-performance risk
 
26
%
 
26
%
 
26
%
Significant increases or decreases in the inputs in isolation could result in a significantly higher or lower fair value measurement. The unobservable inputs do not have a direct interrelationship; therefore, a change in one unobservable input would not necessarily correspond with a change in another unobservable input.
The following table summarizes the changes in the Company’s recurring Level 3 net financial assets:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in millions)
Beginning of period
$
(1.1
)
 
$
1.8

 
$
(15.6
)
 
$
2.1

Transfers into Level 3
4.6

 

 
5.0

 

Transfers out of Level 3
(11.1
)
 

 
(0.4
)
 

Total gains realized/unrealized:
 

 
 

 
 

 
 

Included in earnings
2.6

 

 
1.2

 
0.5

Sales
0.1

 

 

 

Settlements
4.2

 
(0.5
)
 
9.1

 
(1.3
)
End of period
$
(0.7
)
 
$
1.3

 
$
(0.7
)
 
$
1.3

The Company had no transfers between Levels 1 and 2 during the three and nine months ended September 30, 2016 and 2015. Transfers of liabilities into/out of Level 3 from/to Level 2 during the three and nine months ended September 30, 2016 were due to the relative value of unobservable inputs to the total fair value measurement of certain derivative contracts falling below, or in the case of transfers in rising above, the 10% threshold. The Company’s policy is to value all transfers between levels using the beginning of period valuation.
The following table summarizes the changes in net unrealized (losses) gains relating to Level 3 net financial assets held both as of the beginning and the end of the period:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in millions)
Changes in unrealized gains (losses) (1)
$
0.1

 
$
0.1

 
$
(0.1
)
 
$
0.4

(1) 
Within the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income for the periods presented, unrealized gains and losses from Level 3 items are combined with unrealized gains and losses on positions classified in Level 1 or 2, as well as other positions that have been realized during the applicable periods.
As of September 30, 2016, the Company's trading portfolio was expected to have negative net cash realizations in total, with positive realizations in 2016 and 2018 and net negative realization in 2017.


24


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



As of September 30, 2016, the timing of the estimated future realization of the value of the Company’s trading portfolio, on a cumulative cash basis, was as follows:
 
 
Percentage of
Year of Expiration
 
Portfolio Total
 
 
 
2016
 
66
 %
2017
 
(171
)%
2018
 
5
 %
 
 
(100
)%
Credit and Non-performance Risk. The fair value of the Company’s coal derivative assets and liabilities reflects adjustments for credit risk. The Company’s exposure is substantially with electric utilities, energy marketers, steel producers and nonfinancial trading houses. The Company’s policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to regularly monitor the credit extended. If the Company engages in a transaction with a counterparty that does not meet its credit standards, the Company seeks to protect its position by requiring the counterparty to provide an appropriate credit enhancement. Also, when appropriate (as determined by its credit management function), the Company has taken steps to reduce its exposure to customers or counterparties whose credit has deteriorated and who may pose a higher risk of failure to perform under their contractual obligations. These steps include obtaining letters of credit or cash collateral (margin), requiring prepayments for shipments or the creation of customer trust accounts held for the Company’s benefit to serve as collateral in the event of a failure to pay or perform. To reduce its credit exposure related to trading and brokerage activities, the Company seeks to enter into netting agreements with counterparties that permit the Company to offset asset and liability positions with such counterparties and, to the extent required, the Company will post or receive margin amounts associated with exchange-cleared and certain OTC positions. The Company also continually monitors counterparty and contract non-performance risk, if present, on a case-by-case basis.
At September 30, 2016, 65% of the Company’s credit exposure related to coal trading activities with investment grade counterparties, while 11% was with non-investment grade counterparties and 24% was with counterparties that are not rated.
Performance Assurances and Collateral
Certain of the Company’s derivative trading instruments require the parties to provide additional performance assurances whenever a material adverse event jeopardizes one party’s ability to perform under the instrument. If the Company was to sustain a material adverse event (using commercially reasonable standards), its counterparties could request collateralization on derivative trading instruments in net liability positions which, based on an aggregate fair value at September 30, 2016 and December 31, 2015, would have amounted to collateral postings to counterparties of approximately $1 million and $21 million, respectively. As of September 30, 2016, the Company was required to post approximately $4 million in collateral to counterparties for such positions. No collateral was required to be posted to counterparties as of December 31, 2015.
Certain of the Company’s other derivative trading instruments require the parties to provide additional performance assurances whenever a credit downgrade occurs below a certain level, as specified in each underlying contract. The terms of such derivative trading instruments typically require additional collateralization, which is commensurate with the severity of the credit downgrade. During the second quarter of 2016, each of the three rating agencies downgraded the Company's corporate credit rating due to the Bankruptcy Petitions. Despite the rating agencies downgrades, the Company’s additional collateral requirement owed to its counterparties for these ratings based derivative trading instruments would have been zero at September 30, 2016 and December 31, 2015 based on the aggregate fair value of all derivative trading instruments with such features. As of September 30, 2016 and December 31, 2015, no collateral was posted to counterparties to support such derivative trading instruments.
The Company is required to post variation margin on positions that are in a net liability position and is entitled to receive and hold variation margin on positions that are in a net asset position with an exchange and certain of its OTC derivative contract counterparties. At September 30, 2016 and December 31, 2015, the Company posted a net variation margin of $57.9 million and held a net variation margin of $10.7 million, respectively.


25


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



In addition to the requirements surrounding variation margin, the Company is required by the exchanges upon which it transacts and by certain of its OTC arrangements to post certain additional collateral, known as initial margin, which represents an estimate of potential future adverse price movements across the Company’s portfolio under normal market conditions. As of September 30, 2016 and December 31, 2015, the Company had posted initial margin of $11.3 million and $9.2 million, respectively, which is reflected in “Other current assets” in the condensed consolidated balance sheets. As of September 30, 2016 and December 31, 2015, the Company was in receipt of $1.3 million and $0.7 million of margin in excess of the required variation and initial margin.
(10) Financing Receivables
The Company's total financing receivables as of September 30, 2016 and December 31, 2015 consisted of the following:
Balance Sheet Classification
 
September 30, 2016
 
December 31, 2015
 
(Dollars in millions)
Other current assets
$

 
$
20.0

Investments and other assets
68.6

 
65.2

Total financing receivables
$
68.6


$
85.2

The Company periodically assesses the collectability of accounts and loans receivable by considering factors such as specific evaluation of collectability, historical collection experience, the age of the receivable and other available evidence. Below is a description of the Company's financing receivables outstanding as of September 30, 2016.
Codrilla Mine Project. In 2011, a wholly-owned subsidiary of PEA-PCI, then Macarthur Coal Limited, completed the sale of a portion of its 85% interest in the Codrilla Mine Project to the other participants of the Coppabella Moorvale Joint Venture, afterward retaining 73.3% ownership.The final outstanding installment payment of 40% of the sale price was due upon the earlier of the mine's first coal shipment or a specified date. The sales agreement was amended in the second quarter of 2013 to delay the specified date from March 31, 2015 to June 30, 2016. The remaining balance was received during the nine months ended September 30, 2016. At December 31, 2015, the balance associated with these receivables totaled $20.0 million and was recorded in "Other current assets" in the condensed consolidated balance sheets.
Middlemount. The Company periodically makes loans (Priority Loans) to Middlemount, in which the Company owns a 50% equity interest, pursuant to the related shareholders’ agreement for purposes of funding capital expenditures and working capital requirements. The Priority Loans bear interest at a rate equal to the monthly average 30-day Australian Bank Bill Swap Reference Rate plus 3.5% and expire on December 31, 2016. Based on the existence of letters of support from related entities of the shareholders, the expected timing of repayment of these loans is projected to extend beyond the stated expiration date and so the Company considers these loans to be of a long-term nature. As a result, (i) the foreign currency impact related to the shareholder loans is included in foreign currency translation adjustment in the condensed consolidated balance sheets and the unaudited condensed consolidated statements of comprehensive income and (ii) interest income on the Priority Loans is recognized when cash is received. Refer to Note 2. "Asset Impairment" to the consolidated financial statements included in the Company's Annual Report on form 10-K for the year ended December 31, 2015 for background surrounding the impairment charge recognized in 2015 related to Middlemount. The carrying value of the loans of $58.3 million and $65.2 million was reflected in "Investments and other assets" in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, respectively.
On August 8, 2016, one of the Company's Australian subsidiaries and the other shareholder of Middlemount entered into an agreement to provide a revolving loan (Revolving Loans) to Middlemount not to exceed $60.0 million Australian dollars (Revolving Loan Limit). The Company’s participation in the Revolving Loans will not, at any time, exceed its 50% equity interest of the Revolving Loan Limit. The Revolving Loans bear interest at 15% per annum and expire on December 31, 2017. As of September 30, 2016, the carrying value of the Revolving Loans due to the Company's Australian subsidiary was $10.3 million.


26


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(11) Property, Plant, Equipment and Mine Development
Property, plant, equipment and mine development, net, as of September 30, 2016 and December 31, 2015 consisted of the following:
 
September 30, 2016
 
December 31, 2015
 
(Dollars in millions)
Land and coal interests
$
10,756.7

 
$
10,503.7

Buildings and improvements
1,533.0

 
1,506.0

Machinery and equipment
2,272.5

 
2,280.4

Less: Accumulated depreciation, depletion and amortization
(5,346.7
)
 
(5,031.6
)
Total, net
$
9,215.5

 
$
9,258.5

(12)  Income Taxes
The Company's income tax benefit of $12.9 million and provision of $6.9 million for the three months ended September 30, 2016 and 2015, respectively, included a tax provision of $0.3 million and benefit of $0.8 million, respectively, related to the remeasurement of foreign income tax accounts. The Company’s income tax benefits of $108.7 million and $83.2 million for the nine months ended September 30, 2016 and 2015, respectively, included a tax benefit related to the remeasurement of foreign income tax accounts of $1.0 million for the nine months ended September 30, 2015. The Company's effective tax rate before remeasurement for the nine months ended September 30, 2016 is based on the Company’s estimated full year effective tax rate, comprised of expected statutory tax benefit, offset by foreign rate differential and changes in valuation allowance, plus tax benefits for expected refunds for U.S. net operating loss carrybacks and a tax allocation to results from continuing operations related to the tax effects of items credited directly to “Other comprehensive income”.
(13)     Current and Long-term Debt 
The Company’s total indebtedness as of September 30, 2016 and December 31, 2015 consisted of the following:
 
September 30, 2016
 
December 31, 2015
 
(Dollars in millions)
2013 Revolver
$
1,388.4

 
$

2013 Term Loan Facility due September 2020
1,154.5

 
1,156.3

6.00% Senior Notes due November 2018
1,509.9

 
1,508.9

6.50% Senior Notes due September 2020
645.8

 
645.5

6.25% Senior Notes due November 2021
1,327.7

 
1,327.0

10.00% Senior Secured Second Lien Notes due March 2022
962.3

 
960.4

7.875% Senior Notes due November 2026
245.9

 
245.8

Convertible Junior Subordinated Debentures due December 2066
367.1

 
366.3

DIP Term Loan Facility
470.5

 

Capital lease obligations
22.1

 
30.3

Other
0.5

 
0.7

 
8,094.7

 
6,241.2

Less: Liabilities subject to compromise
7,601.6

 

Less: Current portion of long-term debt
493.1

 
5,874.9

Long-term debt
$

 
$
366.3

The carrying amounts of the 2013 Term Loan Facility due September 2020, the 6.00% Senior Notes due November 2018, the 6.50% Senior Notes due September 2020, the 6.25% Senior Notes due November 2021, the 10.00% Senior Secured Second Lien Notes due March 2022 (the Senior Secured Second Lien Notes), the 7.875% Senior Notes due November 2026, the Convertible Junior Subordinated Debentures due December 2066 (the Debentures) and the DIP Term Loan Facility (as defined below) have been presented above net of the respective unamortized debt issuance costs and original issue discounts, as applicable.


27


PEABODY ENERGY CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The Company's consolidated financial statements as of December 31, 2015 were prepared under a going concern opinion, and as such, all of its long-term debt with the exception of the Debentures was classified as current. As of September 30, 2016, all of the Company's long-term debt with the exception of the DIP Term Loan Facility (as defined below) and certain other debt arrangements was recorded in “Liabilities subject to compromise” in the condensed consolidated balance sheets. The DIP Term Loan Facility (as defined below) and certain other debt arrangements were recorded in “Current portion of long-term debt” in the condensed consolidated balance sheets as of September 30, 2016.
During the first quarter of 2016, the Company borrowed $947.0 million under the $1.65 billion revolving credit facility (as amended, the 2013 Revolver) for general corporate purposes. As of the Petition Date, the Company had approximately $675 million letters of credit outstanding on the 2013 Revolver.  Subsequent to the Petition Date, certain counterparties drew on a portion of those letters of credit.  The letters of credit were in place to support various types of obligations, though the most significant items related to bank guarantees in place for certain reclamation obligations in Australia.  The draws required the recording of previously off-balance sheet liabilities, except in certain instances where the Company had previously recorded a liability, and as such have been reflected as additional borrowings under the 2013 Revolver.  The total of such letters of credit was $441.4 million as of September 30, 2016. "Investments and other assets" in the condensed consolidated balance sheets as of September 30, 2016 includes $343.7 million of collateral in support of certain of these obligations.
As a result of filing the Bankruptcy Petitions on April 13, 2016, as discussed in Note 1. "Basis of Presentation", the Company is in default under the 2013 Credit Facility and as such the 2013 Revolver can no longer be utilized.
Additional information regarding the Company's current and long-term debt is outlined in Note 12 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
The filing of the Bankruptcy Petitions constituted an event of default that accelerated Peabody’s obligations under the following debt instruments (collectively, the “Debt Instruments”):
Indenture governing $1,000.0 million outstanding aggregate principal amount of the Company’s 10.00% Senior Secured Second Lien Notes due 2022, dated as of March 16, 2015, among the Company, U.S. Bank National Association (“U.S. Bank”), as trustee and collateral agent, and the guarantors named therein;
Indenture governing $650.0 million outstanding aggregate principal amount of the Company’s 6.50% Senior Notes due 2020, dated as of March 19, 2004, among the Company, U.S. Bank and the guarantors named therein, as supplemented;
Indenture governing $1,518.8 million outstanding aggregate principal amount of the Company’s 6.00% Senior Notes due 2018, dated as of November 15, 2011, among the Company, U.S. Bank and the guarantors named therein;
Indenture governing $1,339.6 million outstanding aggregate principal amount of the Company’s 6.25% Senior Notes due 2021, dated as of November 15, 2011, by and among the Company, U.S. Bank and the guarantors named therein;
Indenture governing $250.0 million outstanding aggregate principal amount of the Company’s