Dear Fellow Stockholder:
It is my
pleasure to invite you to attend the 2020 Annual Meeting of Stockholders on Thursday, May 7 in St. Louis.
As you know, 2019 was a difficult year for Peabody
and energy markets in general. Peabodys sales volumes and realized pricing declined in both Australia and the United States. The company lost $188.3 million in income from continuing operations, net of income taxes, on Adjusted EBITDA1 of $837.1 million and revenue of $4.62 billion, while generating Free Cash Flow2 of $418.5 million.
Industry challenges were evident in both international and U.S. markets. The year was marked by global trade war concerns, port restrictions in China and reduced LNG
prices. U.S. natural gas prices declined further, and coal plant retirements and penetration of subsidized renewables continued. These factors contributed to a 62 percent decline in total shareholder return, in a year where 12 of 14 public coal
companies and master limited partnerships in the U.S. and Australia experienced negative returns and five U.S. coal companies declared bankruptcy.
Against these
headwinds, Peabody advanced successful initiatives and finished the year with achievements that helped to mitigate a number of those headwinds. Financially, we completed the year with a strong cash and liquidity position. Our seaborne thermal
business finished with attractive margins and reduced costs as well as regulatory approval for two mine extensions. In seaborne met, the management team drove down costs in the fourth quarter and advanced multiple initiatives. In U.S. thermal coal,
we reduced costs at our operations and advanced what we believe could be a transformational transaction in the Powder River Basin (subject to ultimate government clearance) to increase coals competitiveness against natural gas and unlock
substantial synergies for the benefit of all stakeholders.
We have always maintained that how we perform is as important as what we do, and in 2019 we continued
our strong performance on the Environmental, Social and Governance (ESG) front. We also received prestigious recognition and honors in safety, environmental excellence, leadership, employment and diversity. The company was also named best for small-
to mid-cap companies in the entire metals and mining sector for ESG metrics as well as governance in the 2019 Institutional Investor rankings. External recognition is always an important validation of any companies efforts in ESG.
For Peabody and our 6,600 employees, it is only the beginning of our strong commitment to provide clean and reliable energy in a safe and environmentally responsible
manner. We strongly encourage you to further explore the companys ESG practices in our ESG Report.
In February 2020, Peabody and Elliott Management, our
largest stockholder, reached a settlement agreement that includes the addition of several new members to the Peabody Board of Directors. Peabody and Elliott are aligned in our objective to create value for all stockholders, and I am pleased to
welcome the new members to our board.
We enter 2020 with the strength and commitment to overcome the headwinds that we face. I know the management team and the
Board of Directors will take meaningful action on volumes, costs, overheads and capital allocation. We will also target lower capital expenditures that will underpin a live within our means approach. We look forward to a year where
thoughtful and developed initiatives, combined with a continued commitment to advance our ESG agenda, will provide the greatest opportunities for real value creation.
Thank you for your time and ongoing support of Peabody.
Bob Malone
Chair of the Board
1
Adjusted EBITDA is not a recognized term under GAAP. This measure is defined and reconciled to the nearest GAAP measure in Appendix B.
2 Free Cash Flow is not a recognized term under GAAP. This measure is defined and reconciled to the nearest GAAP measure in Appendix B.