Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||||
Date of Report (Date of earliest event reported): April 10, 2017 | |||||||
PEABODY ENERGY CORPORATION | |||||||
(Exact name of registrant as specified in its charter) | |||||||
Delaware | 1-16463 | 13-4004153 | |||||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |||||
701 Market Street, St. Louis, Missouri | 63101-1826 | ||||||
(Address of principal executive offices) | (Zip Code) | ||||||
Registrant's telephone number, including area code: (314) 342-3400 | |||||||
N/A | |||||||
(Former name or former address, if changed since last report.) | |||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||||
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
• | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2016; |
• | Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2016; and |
• | Notes to the Unaudited Pro Forma Condensed Consolidated Financial Data |
• | competition in the energy market and supply and demand for our products, including the impact of alternative energy sources, such as natural gas and renewables; |
• | global steel demand and the downstream impact on metallurgical coal prices, and lower demand for Peabody Energy's products by electric power generators; |
• | customer procurement practices and contract duration; |
• | the impact of weather and natural disasters on demand, production and transportation; |
• | reductions and/or deferrals of purchases by major customers and Peabody Energy's ability to renew sales contracts; |
• | credit and performance risks associated with customers, suppliers, contract miners, co-shippers, and trading, bank and other financial counterparties; |
• | geologic, equipment, permitting, site access, operational risks and new technologies related to mining; |
• | transportation availability, performance and costs; |
• | availability, timing of delivery and costs of key supplies, capital equipment or commodities such as diesel fuel, steel, explosives and tires; |
• | impact of take-or-pay arrangements for rail and port commitments for the delivery of coal; |
• | successful implementation of business strategies, including, without limitation, the actions Peabody Energy is implementing to improve its organization; |
• | negotiation of labor contracts, employee relations and workforce availability, including, without limitation, attracting and retaining key personnel; |
• | changes in post-retirement benefit and pension obligations and their related funding requirements; |
• | replacement and development of coal reserves; |
• | effects of changes in interest rates and currency exchange rates (primarily the Australian dollar); |
• | effects of acquisitions or divestitures; |
• | Peabody Energy's ability to successfully consummate planned divestitures, including the announced sale of all of its equity interests in Metropolitan Collieries Pty Ltd, the entity that owns the Metropolitan coal mine in New South Wales, Australia; |
• | economic strength and political stability of countries in which Peabody Energy has operations or serves customers; legislation, regulations and court decisions or other government actions, including, but not limited to, new environmental and mine safety requirements, changes in income tax regulations, sales-related royalties, or other regulatory taxes and changes in derivative laws and regulations; |
• | Peabody Energy's ability to obtain and renew permits necessary for its operations; |
• | Peabody Energy's ability to appropriately secure its requirements for reclamation, federal and state workers’ compensation, federal coal leases and other obligations related to it operations, including its ability to utilize self-bonding and/or successfully access the commercial surety bond market; |
• | litigation or other dispute resolution, including, but not limited to, claims not yet asserted; |
• | terrorist attacks or security threats, including, but not limited to, cybersecurity breaches; |
• | impacts of pandemic illnesses; |
• | any lack of an established market for certain of Peabody Energy's securities, including Peabody Energy's Series A Convertible Preferred Stock, and potential dilution of its common stock due to future issuances of equity securities; |
• | price volatility in Peabody Energy's securities; |
• | short-sales in Peabody Energy's common stock; and |
• | any conflicts of interest between Peabody Energy's significant shareholders and other holders of its capital stock. |
• | Peabody Energy's ability to generate sufficient cash to service all of its indebtedness; |
• | Peabody Energy's debt instruments and capital structure place certain limits on its ability to pay dividends and repurchase Common Stock; and |
• | Peabody Energy's ability to comply with financial and other restrictive covenants in various agreements, including its debt instruments. |
Exhibit No. | Description of Exhibit |
12.1 | Computation of Ratio of Earnings to Fixed Charges for each of the years in the five-year period ended December 31, 2016 |
12.2 | Unaudited Pro Forma Computation of Ratio of Earnings to Combined Fixed Charges and Preference Security Dividends |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Data |
99.2 | Certain updates to Risk Factors included in Item 1A. of Peabody's Annual Report on Form 10-K as filed with the SEC on March 22, 2017 |
PEABODY ENERGY CORPORATION | |
April 10, 2017 | By: /s/ Amy B. Schwetz |
Name: Amy B. Schwetz | |
Title: Executive Vice President and Chief Financial Officer | |
Exhibit No. | Description |
12.1 | Computation of Ratio of Earnings to Fixed Charges for each of the years in the five-year period ended December 31, 2016 |
12.2 | Unaudited Pro Forma Computation of Ratio of Earnings to Combined Fixed Charges and Preference Security Dividends |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Data |
99.2 | Certain updates to Risk Factors included in Item 1A. of Peabody's Annual Report on Form 10-K as filed with the SEC on March 22, 2017 |
Year Ended December 31, | ||||||||||||||||||||
Dollars in millions | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Loss from Continuing Operations Before Income Taxes | $ | (208.6 | ) | $ | (734.3 | ) | $ | (547.9 | ) | $ | (1,990.3 | ) | $ | (758.3 | ) | |||||
Interest Expense | 405.6 | 425.2 | 428.2 | 533.2 | 328.1 | |||||||||||||||
Interest Portion of Rental Expense | 51.9 | 55.5 | 56.5 | 49.3 | 45.1 | |||||||||||||||
Losses (Income) from Equity Affiliates | 61.2 | 83.4 | 107.6 | 292.4 | (16.2 | ) | ||||||||||||||
Adjusted Earnings | $ | 310.1 | $ | (170.2 | ) | $ | 44.4 | $ | (1,115.4 | ) | $ | (401.3 | ) | |||||||
Interest Expense | $ | 405.6 | $ | 425.2 | $ | 428.2 | $ | 533.2 | $ | 328.1 | ||||||||||
Interest Portion of Rental Expense | 51.9 | 55.5 | 56.5 | 49.3 | 45.1 | |||||||||||||||
Adjusted Fixed Charges | $ | 457.5 | $ | 480.7 | $ | 484.7 | $ | 582.5 | $ | 373.2 | ||||||||||
Ratio of Earnings to Fixed Charges | (1) | (1) | (1) | (1) | (1) | |||||||||||||||
Dollars in millions | 2016 | |||
Income from Continuing Operations Before Income Taxes | $ | 53.5 | ||
Interest Expense | 181.6 | |||
Interest Portion of Rental Expense | 45.1 | |||
Income from Equity Affiliates | (16.2 | ) | ||
Adjusted Earnings | $ | 264.0 | ||
Interest Expense | $ | 181.6 | ||
Interest Portion of Rental Expense | 45.1 | |||
Preference Security Dividend (1) | 65.1 | |||
Adjusted Combined Fixed Charges and Preference Security Dividends | $ | 291.8 | ||
Ratio of Earnings to Combined Fixed Charges and Preference Security Dividends | (2) | |||
(Dollars in millions) | As Reported December 31, 2016 | Debt Discharge, Debt and Equity Issuances, Reclassifications and Distributions to Creditors | Revaluation of Assets and Liabilities | Pro Forma December 31, 2016 | |||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 872.3 | $ | (431.0 | ) | $ | — | $ | 441.3 | ||||||
Restricted cash | 54.3 | (54.3 | ) | — | — | ||||||||||
Accounts receivable, net | 473.0 | — | — | 473.0 | |||||||||||
Inventories | 203.7 | — | 67.3 | A | 271.0 | ||||||||||
Assets from coal trading activities, net | 0.7 | — | — | 0.7 | |||||||||||
Other current assets | 486.6 | (18.1 | ) | — | 468.5 | ||||||||||
Total current assets | 2,090.6 | (503.4 | ) | 67.3 | 1,654.5 | ||||||||||
Property, plant, equipment and | |||||||||||||||
mine development, net | 8,776.7 | — | (3,644.2 | ) | B | 5,132.5 | |||||||||
Investments and other assets | 910.4 | 113.1 | 293.5 | C | 1,317.0 | ||||||||||
Total assets | $ | 11,777.7 | $ | (390.3 | ) | $ | (3,283.4 | ) | $ | 8,104.0 | |||||
Current portion of long-term debt | $ | 20.2 | $ | — | $ | — | $ | 20.2 | |||||||
Liabilities from coal trading activities, net | 1.2 | — | — | 1.2 | |||||||||||
Accounts payable and accrued expenses | 990.4 | — | 9.4 | D | 999.8 | ||||||||||
Total current liabilities | 1,011.8 | — | 9.4 | 1,021.2 | |||||||||||
Long-term debt, less current portion | — | 1,871.3 | — | 1,871.3 | |||||||||||
Deferred income taxes | 17.6 | — | — | 17.6 | |||||||||||
Asset retirement obligations | 717.8 | — | (61.4 | ) | E | 656.4 | |||||||||
Accrued postretirement benefit costs | 756.3 | — | — | 756.3 | |||||||||||
Other noncurrent liabilities | 496.2 | — | 107.9 | F | 604.1 | ||||||||||
Total liabilities not subject to compromise | 2,999.7 | 1,871.3 | 55.9 | 4,926.9 | |||||||||||
Liabilities subject to compromise | 8,440.2 | (8,440.2 | ) | — | — | ||||||||||
Total liabilities | 11,439.9 | (6,568.9 | ) | 55.9 | 4,926.9 | ||||||||||
Stockholders' Equity: | |||||||||||||||
Common stock | 0.2 | 1.2 | (0.2 | ) | G | 1.2 | |||||||||
Preferred stock | — | 1,305.4 | — | 1,305.4 | |||||||||||
Additional paid-in capital in excess of par value | 2,422.0 | 1,774.4 | (2,422.0 | ) | G | 1,774.4 | |||||||||
Treasury stock | (371.8 | ) | 3,097.6 | (2,725.8 | ) | G | — | ||||||||
Accumulated deficit | (1,243.2 | ) | — | 1,243.2 | G | — | |||||||||
Accumulated other comprehensive loss | (477.0 | ) | — | 477.0 | G | — | |||||||||
Peabody Energy Stockholders' equity | 330.2 | 6,178.6 | (3,427.8 | ) | 3,081.0 | ||||||||||
Noncontrolling interest | 7.6 | — | 88.5 | H | 96.1 | ||||||||||
Total stockholders' equity | 337.8 | 6,178.6 | (3,339.3 | ) | 3,177.1 | ||||||||||
Total liabilities and stockholders' equity | $ | 11,777.7 | $ | (390.3 | ) | $ | (3,283.4 | ) | $ | 8,104.0 |
As Reported | Interest | Pro Forma | ||||||||||||||||||
Year Ended | Expense | Total | Year Ended | |||||||||||||||||
December 31, | Fresh Start | and Preferred | Transaction | December 31, | ||||||||||||||||
(Dollars in millions) | 2016 | Reporting | Dividends | Adjustments | 2016 | |||||||||||||||
Total Revenues | $ | 4,715.3 | $ | — | $ | — | $ | — | $ | 4,715.3 | ||||||||||
Operating Costs & Expenses | 4,107.6 | (309.8 | ) | — | (309.8 | ) | a | 3,797.8 | ||||||||||||
Depreciation, Depletion & Amortization | 465.4 | (24.2 | ) | — | (24.2 | ) | b | 441.2 | ||||||||||||
Asset Retirement Obligation Expense | 41.8 | 73.9 | — | 73.9 | c | 115.7 | ||||||||||||||
Selling and Administrative Expenses | 153.4 | (21.5 | ) | — | (21.5 | ) | d | 131.9 | ||||||||||||
Restructuring Charges | 15.5 | — | — | — | 15.5 | |||||||||||||||
Other Operating (Income) Loss: | ||||||||||||||||||||
Net Gain on Disposal or Exchange of Assets | (23.2 | ) | 23.2 | — | 23.2 | e | — | |||||||||||||
Asset Impairment | 247.9 | (247.9 | ) | — | (247.9 | ) | e | — | ||||||||||||
Income From Equity Affiliates | (16.2 | ) | — | — | — | (16.2 | ) | |||||||||||||
Operating Profit | (276.9 | ) | 506.3 | — | 506.3 | 229.4 | ||||||||||||||
Interest Expense | 298.6 | (298.6 | ) | 181.6 | (117.0 | ) | f | 181.6 | ||||||||||||
Loss on Debt Extinguishment | 29.5 | (29.5 | ) | — | (29.5 | ) | f | — | ||||||||||||
Interest Income | (5.7 | ) | — | — | — | (5.7 | ) | |||||||||||||
Reorganization Items, Net | 159.0 | (159.0 | ) | — | (159.0 | ) | g | — | ||||||||||||
Income From Continuing Operations Before Taxes | (758.3 | ) | 993.4 | (181.6 | ) | 811.8 | 53.5 | |||||||||||||
Income Tax Benefit | (84.0 | ) | 83.3 | — | 83.3 | h | (0.7 | ) | ||||||||||||
Income From Continuing Operations, Net of Taxes | (674.3 | ) | 910.1 | (181.6 | ) | 728.5 | 54.2 | |||||||||||||
Loss from Discontinued Operations | (57.6 | ) | — | — | — | (57.6 | ) | |||||||||||||
Net Loss | (731.9 | ) | 910.1 | (181.6 | ) | 728.5 | (3.4 | ) | ||||||||||||
Less: Net Income Attributed to Noncontrolling Interests | 7.9 | — | — | — | 7.9 | |||||||||||||||
Preferred Dividend | — | — | (65.1 | ) | (65.1 | ) | i | (65.1 | ) | |||||||||||
Net Loss Attributable to Common Shareholders | $ | (739.8 | ) | $ | 910.1 | $ | (246.7 | ) | $ | 663.4 | $ | (76.4 | ) | |||||||
Loss from continuing operations | ||||||||||||||||||||
Basic loss per share | $ | (37.30 | ) | $ | (0.14 | ) | ||||||||||||||
Diluted loss per share | $ | (37.30 | ) | $ | (0.14 | ) | ||||||||||||||
Net loss per share | ||||||||||||||||||||
Basic loss per share | $ | (40.45 | ) | $ | (0.56 | ) | ||||||||||||||
Diluted loss per share | $ | (40.45 | ) | $ | (0.56 | ) |
• | the debt and equity refinancing transactions pursuant to the Plan, including the impact on long-term debt for issuances of $1.95 billion in debt and issuances of stockholders’ equity totaling $1.5 billion in cash receipts, with both items shown net of their respective issuance costs, which were estimated to be $24 million for equity and $78 million for long-term debt; |
• | approximate increase of $110 million in cash collateral on our reclamation obligations, which is included in the investments and other assets line; and |
• | the settlement of over $3.9 billion in claims for cash and other exit expenditures. |
A. | Inventories. For purposes of the unaudited pro forma condensed consolidated financial statements, preliminary fair value of our inventory has been determined based on currently available information and certain assumptions, and may be different from the final estimate of fair value, and the difference could be material. A net adjustment of $67.3 million to increase the value of coal inventories to their estimated fair value, less costs to sell the inventories. |
B. | Property, plant, equipment and mine development, net. The fair value of property, plant, equipment and mine development, net is estimated based on either a review and analysis of several recent transactions in our industry or a calculation of the present value of future cash flows based on our projections. A net adjustment of $3.6 billion to reduce the net book value of property, plant, equipment and mine development, net to their estimated fair value. The preliminary estimates of the fair value of our property, plant and equipment and the associated depletion and depreciation expense included in the pro forma condensed consolidated financial statements could be different from the final values determined through fresh start reporting, and the difference could be material. |
C. | Investments and other assets. As part of fresh start reporting, identifiable intangible assets are required to be measured at fair value. An adjustment of $293.5 million made primarily to recognize the fair value of certain coal supply agreements by comparing the contract price with estimated market price for the same coal product. |
D. | Accounts payable and accrued expenses. As part of fresh start reporting, identifiable intangible liabilities are required to be measured at fair value. An adjustment of $9.4 million is primarily based on the value of certain contract based intangibles primarily consisting of unutilized capacity of certain port and rail take-or-pay contracts. |
E. | Asset retirement obligations. For purposes of the unaudited pro forma condensed consolidated financial statements, asset retirement obligations will be restated to fair value. The estimates are based on the discounted cash flows of projected spending to reclaim the properties used in our operations. These estimates will change in the future and the change could be material. |
F. | Other noncurrent liabilities. As part of fresh start reporting, identifiable intangible liabilities are required to be measured at fair value. An adjustment of $107.9 million is primarily based on the value of certain contract based intangibles primarily consisting of unutilized capacity of certain port and rail take-or-pay contracts. |
G. | Peabody Energy stockholders’ equity. The adoption of fresh start reporting will result in a new reporting entity with no beginning retained earnings or accumulated deficit. All common stock of the predecessor company will be eliminated and replaced by the new equity structure of the Plan. For purposes of the unaudited pro forma condensed consolidated financial statements, common stock and preferred stock will be restated to their estimated fair value |
H. | Noncontrolling interests. An adjustment of $88.5 million to increase the value of noncontrolling interests to its estimated fair value based on an estimate of the rights to the assets of the noncontrolling interests. |
a. | Operating costs and expenses. Adjustments include: |
• | the increase in operating costs of $39.1 million associated with the realization of the increased coal inventory values, as discussed above, into earnings; |
• | the elimination of excess take-or-pay charges of $70.3 million, as discussed above, that would be recorded at the adoption of fresh start reporting; |
• | the elimination of the amortization of actuarial losses and prior services costs of $24.5 million due to the release of all balances within accumulated other comprehensive loss as a result of the adoption of fresh start reporting; |
• | the elimination of the impact of prior cash flow hedge and related accounting of $232.2 million due to the release of all balances within accumulated other comprehensive loss as a result of the adoption of fresh start reporting; and |
• | an estimated adjustment of $21.9 million for a change in accounting policy related to the capitalization of certain expenditures which extend the useful lives of existing plant and equipment that were not previously capitalized. |
b. | Depreciation, depletion and amortization. The adjustments reflect the reduced expense for the estimated impact on depreciation, depletion and amortization for the fair value adjustment for property, plant and equipment, as discussed above, partially offset by the increased expense for the estimated impact of amortization of contract based intangibles associated with certain coal supply agreements over an average agreement life of approximately three years, as discussed above. |
c. | Asset retirement obligation expense. This adjustment primarily reflects the increased accretion expense and increased amortization expense associated with the adjustment to the asset retirement obligations discussed above and the corresponding adjustment to the asset retirement obligations asset. |
d. | Selling and administrative expenses. The adjustment is to eliminate the costs associated with debt restructuring activities since these costs would not continue after emergence from the Chapter 11 Cases. |
e. | Net gain on disposals or exchange of assets and asset impairment. Due to the adoption of fresh start reporting, which requires that all items be adjusted to fair value, gains on asset disposals and asset impairments have been eliminated as the items would have been remeasured to fair value resulting in no such items being realized into earnings. |
f. | Interest expense and loss on debt extinguishment. This adjustment reflects the elimination of interest expense associated with the predecessor company’s capital structure, including loss on extinguishment of the predecessor’s Superpriority Secured Debtor-in-Possession Credit Agreement, and reflects the estimated interest expense associated with the capital structure as contemplated in the Plan with an assumed weighted average interest rate of approximately 6%. Interest expense also reflects the amortization of deferred financing costs and costs associated with surety bonds. |
g. | Reorganization items, net. This adjustment reflects the elimination of these items as they would not occur outside of the Chapter 11 Cases. |
h. | Income tax benefit. Reflects the after tax effects of the adjustments in the pro forma condensed consolidated statements of operations. |
i. | Preferred dividend. Reflects 8.5% assumed dividend rate per annum, payable semiannually in kind as a dividend of additional shares of preferred equity. |
• | making it more difficult for us to pay interest and satisfy our debt obligations; |
• | increasing the cost of borrowing under our credit facilities; |
• | increasing our vulnerability to general adverse economic and industry conditions; |
• | requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, business development or other general corporate requirements; |
• | limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements; |
• | making it more difficult to obtain surety bonds, letters of credit, bank guarantees or other financing, particularly during periods in which credit markets are weak; |
• | limiting our flexibility in planning for, or reacting to, changes in our business and in the coal industry; |
• | causing a decline in our credit ratings; and |
• | placing us at a competitive disadvantage compared to less leveraged competitors. |
• | incur additional indebtedness; |
• | pay dividends on or make distributions in respect of stock or make certain other restricted payments or investments; |
• | enter into agreements that restrict distributions from certain subsidiaries; |
• | sell or otherwise dispose of assets; |
• | incur capital expenditures beyond a specified amount; |
• | enter into transactions with affiliates; |
• | create or incur liens; |
• | merge, consolidate or sell all or substantially all of our assets; and |
• | place restrictions on the ability of subsidiaries to pay dividends or make other payments to us. |
• | actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry; |
• | industry cycles and trends; |
• | mergers and strategic alliances in the coal industry; |
• | changes in government regulation; |
• | potential or actual military conflicts or acts of terrorism; |
• | the failure of securities analysts to publish research about us after this offering, or shortfalls in our operating results from levels forecast by securities analysts; |
• | the limited trading history of our Securities; |
• | changes in accounting principles |
• | announcements concerning us or our competitors; and |
• | the general state of the securities market. |
• | our results of operation and financial condition; |
• | our ability to obtain or replace economically recoverable reserves; |
• | our ability to economically recover reserves commensurate with our reserve estimates; |
• | quarterly variations in the rate of growth of certain financial indicators; |
• | the public reaction to our press releases, our other public announcements and our filings with the SEC; |
• | strategic decisions by us, our clients or competitors, such as acquisitions, divestitures, spin-offs, joint ventures, investments or changes in business strategy; |
• | claims against us by third-parties; |
• | future sales of our Securities by us, the selling security holders, significant stockholders or our directors or executive officers; and |
• | the realization of any risk described under this “Risk Factors” section or those incorporated by reference. |