Peabody Energy Corporation (BTU) Q3 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Peabody Energy Q3 Earnings Call. For the conference, all participant lines are in a listen-only mode. There will be an opportunity for your questions. Instructions will be given at that time. As a reminder, today's call is being recorded. I'll turn the conference now over to Mr. Vic Svec, Senior Vice President, Global Investor and Corporate Relations. Please go ahead. Victor P. Svec - SVP-Global Investor & Corporate Relations: Okay. Thanks, Scott, and good morning, everyone. Thanks very much for taking part in the conference call for BTU. With us today are President and Chief Executive Officer Glenn Kellow, Executive Vice President and Chief Financial Officer Amy Schwetz, as well as our Senior Vice President of Finance, Walter Hawkins. We do have some forward-looking statements today. I would remind you they should be considered along with the risk factors that we note at the end of our release, as well as the MD&A section of our filed documents, and we also refer you to peabodyenergy.com for additional information. With that, I'll now turn the call over to Amy. Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Thanks, Vic, and good morning, everyone. Peabody's operating segments turned in solid results this past quarter with all three U.S. regions generating good margins despite lower revenues and our Australia and trading and brokerage segments outperforming the prior year. I'll begin by discussing our third quarter financial results, which highlight the recent operational improvements we have been making as well as the Patriot charge and discontinued operations. I will then review our liquidity and conclude with an update of our full-year guidance. Let's start with a review of the income statement. Third quarter revenues totaled $1.4 billion compared to $1.7 billion in the prior year, primarily due to a 7% reduction in volume and realized price declines in the U.S. and Australia of 7% and 23% respectively. Adjusted EBITDA totaled $129 million and reflects strong operational performance across the portfolio despite the weak pricing environment. Recent initiatives to increase productivity and reduce costs led to benefits that partially offset the nearly $120 million in lower pricing and $124 million in hedge losses. Moving down the income statement, we recorded third quarter income tax expense of $7 million compared to $79 million in the prior year. You might recall that our prior-year tax item was affected by the repeal of the Australian Minerals Resource Rent Tax in 2014. Loss from continuing operations totaled $144 million in the third quarter. Diluted loss per share from continuing operations totaled $8.08 as adjusted for the recent 1-for-15 reverse stock split that took place on October 1. Adjusted diluted loss per share totaled $8.13. We also recorded a third quarter charge of $155 million in discontinued operations for certain Patriot liabilities related to black lung and the Combined Benefit Fund Coal Act. Peabody has remained secondarily liable for these by statute since the spin-off. This wasn't unexpected given Patriot's recent bankruptcy and we would expect cash payments to initially be approximately $15 million per year and to decline over time. I will now review the supplemental information. In the U.S., adjusted EBITDA of $238 million reflects slower Midwest and Western shipments as well as a reduction in realized pricing. U.S. cost per ton declined 5% despite a volume decline of 2.5 million tons compared with the prior year as our team continues to take aggressive actions to maneuver our mines down the cost curve. Within the PRB, revenue per ton of $13.42 improved from the prior period due to a mix of higher-value shipments. Also, our PRB cost per ton improved slightly, resulting in a 5% gross margin expansion to $3.39 per ton. You'll recall that we began the quarter still working through challenging mining conditions in the PRB, but as expected our mines have now recovered and are shipping at customary rates. In the Midwest, volume declined 1 million tons due to lower demand as a result of increased natural gas switching, while costs improved over $2 per ton on lower fuel expense and cost-reduction actions. Western volumes declined 24% due to lower demand from natural gas competition, a planned reduction in volumes associated with export shipments from the Twentymile Mine, as well as the longwall move. The move also affected cost per ton and suppressed margins compared with the prior year. Turning to Australia, adjusted EBITDA rose $25 million to $35 million as lower costs more than offset a reduction in volume and a $110 million impact from lower pricing. Third quarter costs declined over $18 per ton compared to the prior year, representing a record low for this platform. And we continue to benefit from lower currency and fuel expense as well as recent productivity improvements. Met coal volumes declined 11% from the prior year, mainly due to the planned reduction at the contractor-operated Burton Mine and the end-of-life closure at the Eaglefield Mine in late 2014. In spite of lower realized pricing, met gross margins improved over $7 per ton as cost per ton declined 28%. I would note that the costs include both royalties and rail import expenses, unlike some of our peers. Australian thermal coal cost per ton declined 25% to $29.47. This segment's low costs are anchored by the Wilpinjong Mine, one of the premier thermal assets in Australia. Trading and brokerage adjusted EBITDA totaled $29.4 million, which included favorable New South Wales thermal positions that were settled during the quarter. The results also reflect a $7 million gain related to a negotiated settlement. We see the benefit this quarter from a number of steps we recently implemented to reduce SG&A, such as de-layering the organization and closing offices. This resulted in a 29% improvement from the prior year and reached the lowest quarterly level in nearly a decade. Corporate hedge losses totaled $117 million in the quarter, primarily related to currency. Consistent with our recent approach in this area, we reduced the duration of our currency program, have not layered on any additional material currency hedges in nearly two years, and all existing currency hedges will expire by the end of 2017. We have also included a summary of our hedge positions in the supplemental financial statement, which reflect our lower 2015 currency and fuel requirements. That's a review of our income statement and key earnings drivers. Now let's turn to our cash and liquidity position. In this area, we have dual financial objectives of optimizing liquidity while reducing debt. The company ended the quarter with $1.8 billion of liquidity, including $1.4 billion under our fully committed revolver and $334 million in cash. Our liquidity also reflects third quarter CapEx payments of $26 million and operating cash flows of $34 million, which included $89 million in interest payments. During the quarter, liquidity declined approximately $250 million, primarily due to $195 million of letter-of-credit support for existing surety bonds and bank guarantees. We also completed approximately $180 million in PRB reserve and interest payments. As a reminder, our bank guarantees are primarily used to support reclamation obligations in Australia. We expect liquidity to decline in the fourth quarter as a result of PRB reserve installments of $188 million, interest payments of $136 million and additional letter-of-credit support. And we remain focused on maintaining adequate liquidity heading into 2016. Looking forward, Peabody is scheduled to complete its last committed annual PRB reserve installments of $250 million in late 2016. The last VEBA health benefit trust payments are scheduled to be paid in the amount of $75 million in 2016 and $70 million in January of 2017. This agreement is currently before the court. Our foreign currency and fuel hedge positions also begin to meaningfully roll off next year. With respect to the collateral package under the secured credit facility, total consolidated net tangible assets were $10.1 billion at September 30, with $3 billion in principal property and $2.4 billion in non-principal property. Turning to our outlook, relative to the third quarter, fourth quarter adjusted EBITDA results are primarily expected to be impacted by normalized trading and brokerage results and a decline in seaborne coal prices. Our full-year financial targets include: reducing our U.S. sales volume targets 5 million tons as a result of working with customers to defer shipments into 2016; raising the low-end of our Australian met volume guidance to approximately 15 million tons; lowering our overall Australian cost per ton range to $50 to $52, nearly 25% below 2014 levels; trimming SG&A expenses further to $170 million to $175 million; and reducing CapEx to $140 million to $150 million as we continue to tightly manage capital while benefiting from previous investments across the platform. That's a brief review of our third quarter performance as well as our 2015 targets. Now I'll turn the call over to Glenn. Glenn L. Kellow - President, Chief Executive Officer & Director: Thanks, Amy, and good morning, everyone. Our operations continue to deliver in the third quarter, and these results have helped to offset coal fundamentals that remain challenged, as slowing global growth cast a shadow over the broader commodity sector. Safety remains a key component of our operational results, and I am pleased to note that we are on track for yet another year of record safety performance, driven by a 20% improvement in Australia. I would also like to recognize our Wambo Mine, which was recently named rescue team of the year, the highest honor in the Australian mine rescue competition. Today I'll discuss our view on market conditions, then provide an update on our four areas of management emphasis. Within the coal markets, sluggish GDP growth and weak industry data from China have led to further decline in global coal demand. This in turn has diminished the benefit of recent production CapEx. U.S. coal fundamentals also face headwinds as surplus natural gas has suppressed prices and continue to weigh on domestic coal demand. Certainly, China's economy remains a key component for coal trends. Recent domestic steel consumption has declined due to oversupply in the property sector and has paved the way for a rise in steel exports, which reached record levels through September. As a result, metallurgical coal demand in other regions has declined. So has fourth quarter benchmark pricing for high-quality, hard coking coal and low-vol PCI, which leaves 4% and 3% from prior settlements respectively. At the same time, lower electricity consumption and strong hydroelectric generation due to heavy rainfall have led to reduced Chinese seaborne thermal coal demand, which has more than offset a 70% year-to-date import gain in India. Weakening currencies have continued to put downward pressure on seaborne thermal coal prices, though this actually benefits of course Peabody's Australian portfolio. Whilst we've been disappointed by the modest amount of marginal production that has come out of met coal markets, we project met coal supply to fall below 300 million tons in 2015, primarily due to declining U.S. exports. And we expect additional curtailments going forward, as an estimated 80% of seaborne met coal production is not covering cash costs at current pricing. Seaborne thermal coal markets tell a similar story as continued cost pressures have eroded U.S. and Indonesian supplies while Australian producers benefit from falling oil prices and favorable currency rates. Longer term, supply reductions are underpinned by the sizable withdrawal of capital investment within the coal industry. In fact, Peabody estimates that capital spending by top coal producers has declined some 70% from the historical highs we saw in 2012. We believe this limited capital investment is insufficient to sustain current production and coal prices will need to rise well above levels we see today to incentivize new investment. And over time, we expect a gradual reduction in supply as well as increased coal demand to lead to improved fundamentals. Turning now to the U.S. coal market, Peabody projects U.S. coal demand to decline 100 million tons this year, largely due to lower natural gas prices. That's at the higher end of our original estimate from January, and while we remained almost bearish at the time, unfortunately the projection has proven to be accurate. Coal's share of U.S. electricity is expected to be 35% this year compared to 31% for natural gas. We have the benefit of spanning the two best thermal coal regions in the U.S., the PRB and the Illinois Basin. While lower demand has impacted all major coal basins, we've seen the greatest percentage of both consumption and production declines in regions outside of the PRB. In our view, PRB coal is most competitive against natural gas as well as other coal regions. In fact, the PRB's average delivered cost is more than 20% below the Illinois Basin based on 2014 EIA data. Peabody expects 2015 U.S. coal supply to decline 90 million tons. However, supply CapEx have continued to lag behind demand reductions, leading to rising coal inventories. Looking ahead, based on today's snapshot of forward gas prices, Peabody would expect 2016 coal demand to be below 2015 levels, but ultimately coal demand will rise or fall in sensitivity to natural gas price movements. I would remind you that Peabody is 85% priced for U.S. coal deliveries based on 2016 production levels. We look for U.S. coal demand to rise above current levels in coming years as natural gas prices increase, in line with third-party projections. We believe gas prices will strengthen as LNG exports increase, onshore demand rises, and additional pipeline opportunities to Mexico take shape. In regard to the U.S. regulatory environment, I would like to briefly touch on the EPA's carbon rules. We have seen early opposition from Congress, legislatures, and other groups, and we expect the regulations to face significant judicial challenges. That's particularly true in light of the Supreme Court's MATS ruling in regard to EPA overreach and most recently the judicial stay of the waters of the United States. At the same time, it is imperative that courts provide clarity in swift fashion. Some utilities are already making investment decisions based on the current rules even though ultimate deadlines are still many years away. The current plan is poor policy and poor law. Even so, I would note that under the plan the EPA still expects coal to fuel 30% of U.S. electricity generation in 2025. Those are levels we've seen at times in 2015. And now that we've covered the coal markets, I'd like to review our actions within each of our four areas of emphasis and highlight a few specific points that benefit Peabody. First, we'll begin with our operations. I'm pleased to note that all of the company's U.S. mining assets are EBITDA and cash flow positive. Also, four out of our five operating segments average gross margins above 25%, and even our Australian met coal segment performed better than the prior year despite significantly lower coal prices. These are strong margins based on where we are in the cycle. And these performances are credit to the significant improvements our team has made across our operations. As we discussed last quarter, Peabody has advanced a number of initiatives to improve productivity and reduce costs. We also lowered coking coal and low-vol PCI volumes at several of our Australian mines to respond to current fundamentals and preserve our high-quality reserves for better markets. During the quarter, Peabody executed a toll washing agreement between our Millennium Mine and a neighboring prep plant. This agreement is an example of how the company is working with partners to maximize value, reduced fixed costs, and make the most efficient use of our assets. And in the U.S. we have successfully transitioned into the newly-completed Gateway North Mine extension. This project is a low-capital-intensive solution completed for less than $75 million and funded within the company's lower CapEx profile you've seen recently. The extension makes efficient use of the existing infrastructure and a highly productive workforce while adding some 30 years of mine life and maintaining the production profile of one of the lowest-cost operations in the region. Our second area of emphasis is at the organizational level. We have succeeded in our recent efforts to de-layer and streamline the organization. Our new operating model is based around our internal mantra of speed, focus and purpose, and we're already realizing benefits from rationalized activities, consolidated reporting relationships and our shared services initiative. As Amy mentioned, our improvements to SG&A have been what we would regard as impressive, with third quarter costs declining nearly 30% compared to 2014 levels. Third, regarding portfolio optimization, Peabody has an unmatched collection of coal assets with access to some of the best markets. We have more than 7 billion tons of reserves, 0.5 million acres of surface land, and ownership interest in ports and generation projects in multiple countries. And this substantial asset base provides us with option value going forward. While we may look to monetize certain assets within our larger portfolio, we are committed to maintaining a diverse platform in terms of both region and products. In the U.S., we benefit from our positions in the PRB and Illinois Basin, and in Australia we have world-class thermal operations and we do believe that our Australian met assets offers the greatest torque (20:44) as markets improve. We are currently advancing multiple asset sale processes for certain operating and non-mining assets. Our criteria for evaluating opportunities include strategic fit, value considerations, potential growth and capital or cash requirements. Certainly, this is a challenging environment, and we remained focused on opportunities that include appropriate assets at acceptable valuations. And on the fourth area of emphasis, financial, Peabody is focused on optimizing liquidity during these difficult markets with a strategic eye towards deleveraging. As with many businesses in a cyclical market, we retain a large revolver to address potential liquidity needs while continuing to assess liquidity targets based on cash from our operations, asset sale proceeds, and other business requirements. At the same time, we continue to evaluate ways to reduce leverage, including debt exchanges and buybacks. Our valuation will set a number of criteria, including the economics of transactions, tax efficiency, runway, impact on interest expense and timing. Regarding both potential deleveraging transactions and asset sales, the behind-the-scenes activity is substantial but we also are committed to the premise that making the right deal is important as the timing. In conclusion, these are undoubtedly difficult, if not unprecedented, times for the coal sector. But despite the current environment, I believe that we have a number of inherent strengths that benefit the company. We have an unmatched portfolio with access to some of the best markets. Our operational performance continues to demonstrate the strength of our underlying business. We have significant advantages from our diverse operations, particularly in the PRB, Illinois Basin and Australia. And finally, our dual financial focus remains on optimizing liquidity and deleveraging. We believe that long-term global coal demand is favorable, even though its effects are being masked by mid-term industry headwinds. And Peabody continues to take necessary steps to improve our operations and business, and we recognize that there is more to do. Before we move into the Q&A session, I would like to take a moment to recognize Greg Boyce, our current Executive Chairman. As recently announced, Greg will be retiring from Peabody at the end of December following a distinguished four-decade career in the resource sector. We thank Greg for his commitment to the company and industry and wish him all the best in his retirement. I would also like to welcome our incoming non-executive Chairman, Bob Malone. Bob has extensive global energy and mining experience at the executive and operational level. He has also served as our independent lead director since early 2013. We look forward to his valued counsel in his new role beginning in January. With that, operator, we'd be happy to take questions at this time.

Certainly. First, we go to the line of Michael Dudas with Sterne Agee. Please go ahead.

Good morning, everyone. Glenn L. Kellow - President, Chief Executive Officer & Director: Good morning, Michael.

Glenn, following up on your four tenets for how you are trying to reshape the company. Do you have any – as you look maybe from a financial standpoint, the optimal liquidity balance sheet, where the company needs to be given where the coal fundamentals you project, maybe looking out to maybe 2017 and 2018, given where you are today and I guess you can't get there quick enough to get some of these fixed payments off your books. Do you have maybe a little more granular aspect to where that might be and how that plays into your – to either accelerate or to take your time on getting the right value for assets on a sales rate basis? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Sure, Michael, this is Amy. I might touch on some key points and ask Glenn to weigh in as well. But as we look at our liquidity, it's obviously an iterative process depending on where the market's at at any given point in time. So as we look at what our liquidity needs are, we're looking at what our cash flow from operations are, what our CapEx profile will be, fixed charges over time. That's why we've maintained a relatively large revolver for so many years. The $1.65 billion revolver is something that we have felt is key to our arsenal in terms of maintaining adequate liquidity for the business. So we're obviously looking forward to those fixed charges rolling off in 2016 and 2017, as you indicated, both the VEBA payments, which as indicated we have asked for some clarification around, as well as our hedges and the LBAs next year. Glenn L. Kellow - President, Chief Executive Officer & Director: Yeah, in terms of the longer-term picture around deleveraging, we have often talked about our prima capital (26:16) level in terms of sort of debt multiples. And that would be certainly something that we would like to move towards over time. You did mention the four areas of focus in terms of continuing to reduce cost and I hope we're demonstrating that. There is a number of activities which I've outlined with respect to what we're thinking about with our portfolio. But I would like to emphasize we did talk about making the right deal is as important as the nature of the timing.

Can you characterize – a follow up, characterize kind of the interest and opportunities you're seeing from potential buyers in the marketplace? Is the oversupplied nature of certain projects and properties making it more difficult for you to get to that reasonable price? Glenn L. Kellow - President, Chief Executive Officer & Director: I would say that that's a general statement in the industry, but I would like to say that it is asset-specific and market-specific. And I would like to reiterate that I do believe we have probably the premier coal portfolio around the globe, not only in terms of our producing assets but also we have significant land positions, infrastructure assets and reserve positions, et cetera. So I think we are seeing buyer interest for the right assets and I would say that that is also both in some of our non-core areas but also I'm talking about operating mines.

Excellent. Thank you, Amy and Glenn.

The next question is from Justine Fisher with Goldman Sachs. Please go ahead.

Hi, everyone. This is Conor McKinnon filling in for Justine. My first question was on the topic of liquidity, too. You said in the press release this quarter you provided an additional $195 million in collateral to existing surety bond providers in the form of LCs. Could you give us a little more color on that, what drove it, are there specific credit metrics that your surety providers are looking at, maybe what geographies that came in and what might drive more of the same in coming quarters? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Sure, Conor. I think as you look at our surety and bank guarantee facilities, it's probably important to remember that they are bilateral agreements. So the level of collateral can vary by provider. We did have about $200 million of LC support, so surety bonds and bank guarantees, provided by the end of the quarter. As we look at our surety bonds, we have $540 million of bonds outstanding; about $80 million of that relates specifically to Patriot. About 70% of that value requested collateral during the quarter and we posted $120 million of LCs related to that exposure. We also have $365 million of bank guarantees outstanding in Australia, so about 20% of that value, or $80 million, requested collateral during the third quarter and we posted $80 million of, well, 100% collateral for those that requested. It is probably worth noting as well that in addition to that collateral posted, we have about $175 million of LCs for other obligations such as port agreements, pension support, workers' compensation, which has been in place for some time and is just a standard mechanism for doing business with some of those parties. As we look at our LCs, it obviously reduces availability under our revolver, but it's not a cash outflow.

Great. Thank you. And then my follow-up was related to Patriot, which you touched on briefly a little bit earlier. So we know that there has been a legal dispute as part of their second filing related to the VEBA payments, which had been scheduled to be made by Peabody. Could you give us a little update there as far as what exactly the dispute is over? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Sure. And I might just take this opportunity to go through Patriot in a bit more detail as well in terms of the number of moving parts that are outstanding with respect to the issue. You mentioned specifically the VEBA and credit support, which both are related to the 2013 settlement agreement as part of Patriot's first bankruptcy. In 2013 we agreed to cap certain liabilities that we had on our balance sheet already that were associated with retiree healthcare and we agreed to fund those on an accelerated basis in the total of about $310 million into a VEBA. We made two payments of roughly $165 million in total to the VEBA and there is the two remaining payments that I referenced in my remarks, $75 million in 2016 and $70 million in 2017 that we discussed. We also provided $120 million of credit support for a variety of obligations as part of the agreement. And Patriot was required to reimburse Peabody as part of that agreement. Peabody has met its obligations, as you know, both with respect to the VEBA payments and the credit support. However, Patriot has failed to reimburse us for more than $20 million of credit support that's been drawn upon. And because of this, because terms of the settlement have been breached by Patriot, we asked the U.S. Bankruptcy Court in Missouri, which is the court that originally approved the 2013 settlement, to determine what obligation, if any, remains for Peabody based on that breach. So that's the VEBA that you've seen in the news recently. I also may just provide a bit more detail on the black lung and Combined Benefit Fund Coal Act liabilities, where we remain secondarily liable by statute since the spinoff. We took a third quarter charge of $155 million, as we deemed during the quarter that it was probable Peabody would be required to fund an incremental portion of these liabilities given the status of Patriot's case. You'll recall that we had discussed these secondarily liability obligations in the past, so it wasn't unexpected to us at the time. And with respect to those obligations, we would expect that the cash would start out at approximately $15 million a year and that would decline over time. We have had a third element of the case that related to Patriot's salaried retiree healthcare liabilities. These liabilities had remained on our balance sheet since the spin. We recently reached a settlement agreement on these payments, replacing a prior agreement. And these liabilities, which were fully accrued, we would expect to realize a modest benefit moving forward under the terms of the settlement agreement. The fourth side that I'll touch upon is related to the 1974 UMWA pension plan, or the MEP. There is a pending lawsuit by the pension plan that alleges that Peabody and another producer may be liable under the MEP as a result of the 2015 bankruptcy. And obviously given that it's ongoing litigation we're limited by how much detail we can get into on this topic. But we believe we have a strong position and will work to vigorously defend against any claims. Peabody was not a signatory to that labor agreement that requires contributions into the MEP. And in addition to that, at the time of the spin it was pretty well funded at a 90% level. And Patriot continued to make payments into the MEP for their eight years of operation. So let me reiterate with respect to that, we do not see the trustees prevailing as probable in that case, but if so we would estimate that any payments would be made over a multi-decade period.

Great. That's very helpful. That's all I had. Thanks a lot.

And next we'll go to Brian Yu with Citi. Please go ahead.

Yeah. Great, thanks. And good morning. Just first question is that you guys come out with a lower CapEx budget. I know it's a bit early for 2016, but do you see this as a sustainable level heading into next year given that since you are guiding for a bit lower production? Glenn L. Kellow - President, Chief Executive Officer & Director: Good morning, Brian. Yes, you'll recall that we have benefited or are benefiting from a well-capitalized platform in prior years and the team has been focused on looking to optimize and manage through a lower-capital profile. We've said because of that and the building of that position, we will be able to do the lower levels for a number of years. Having said that, we've lowered the guidance this time around and I think that is in part related to the improvement in the Australian dollar. Also the team continues to surprise on innovative ways of looking to manage capital. So maybe not quite at the levels we've lowered guidance, but at the lower levels we see those occurring for a number of years.

Okay. That's helpful. And then second is on rails. Yesterday there was one of the Eastern coal producers said that they're getting some breaks from the rails, both Eastern rail companies as well as West, to try to make their product a bit more competitive. I'm wondering if on the PRB side you guys are seeing the same thing where the rail companies are being a bit more flexible with their rates so your coal could be either more competitive to existing markets or perhaps travel a bit farther? Glenn L. Kellow - President, Chief Executive Officer & Director: Yeah, I think that certainly is encouraging to hear. We actually, as you're probably aware, we don't have insight specifically into that as these are direct discussions between our utility customers and the rails. Having said that, we continue to reiterate that we believe the PRB is the most competitive of the basins with respect to both coal-on-coal competition and coal-on-gas. But it is encouraging to continue to see that. We would expect fuel surcharges to be one area that would provide opportunities, however, in the overall contract structure that would benefit our customers.

Okay. Thank you.

And we'll go to Lucas Pipes with FBR. Please go ahead. Lucas N. Pipes - FBR Capital Markets & Co.: Hey, good morning, everyone, and thanks for taking my question. Glenn L. Kellow - President, Chief Executive Officer & Director: Good morning, Lucas. Victor P. Svec - SVP-Global Investor & Corporate Relations: Good morning. Lucas N. Pipes - FBR Capital Markets & Co.: I wanted to follow up on asset sales and to maybe focus a little bit more specifically on the U.S. market. And my question is what sort of level of interest are you seeing today? And maybe you could comment on why we haven't seen a deal yet, if there are any stumbling blocks that you could share with us in this market environment? Glenn L. Kellow - President, Chief Executive Officer & Director: Perhaps I'll talk about – you know I'm not going to be able to talk about specific assets or specific sorts of activities. Lucas N. Pipes - FBR Capital Markets & Co.: Yeah. Glenn L. Kellow - President, Chief Executive Officer & Director: But I could perhaps give you a bit of color about what our thinking is with respect to asset sales; it's not necessarily U.S.-specific. Firstly, it would be around our strategic objectives and how well the particular asset or activity fit into that, looking at its overall growth profile of course how we look at enhancing value on a discounted cash flow and net asset value basis as we accelerate – the potential to accelerate future cash flows, the asset's cash-generation profile, our future capital needs for it, including what we would see as being bonding or collateral requirements, and how the overall transaction would support our financial objectives of optimizing liquidity and deleveraging. So as I said, we have a number of processes underway. I'd go back to what I've said earlier about it's important for us that we do both the right deal as with respect to meeting that criteria as well as the timing activities. We have seen buyer – continue to see buyer interest for the right assets in the right locations. Lucas N. Pipes - FBR Capital Markets & Co.: That's helpful. And since you mentioned you use a kind of DCF approach for the valuation of these assets, could you give us a range of a discount rate that you would employ in your analysis? Glenn L. Kellow - President, Chief Executive Officer & Director: No, unfortunately we don't typically publish or disclose that indicator. Lucas N. Pipes - FBR Capital Markets & Co.: All right. Okay. Thank you for that. And then I think in your prepared remarks you mentioned a tolling arrangement. And I didn't catch all the details and I wondered if you could maybe provide a little bit more color around that proposal? Glenn L. Kellow - President, Chief Executive Officer & Director: It's more of an example I think of the sorts of things – and you saw us earlier in the period work with Glencore on our Wambo surface activity. We'd announced plans to work with them on lowering CapEx, lowering costs through a partnering concept. Similarly here at our Millennium Mine, we've been able to work with a neighboring operator who has capacity in their coal plants through a tolling arrangement to actually have a win-win for both parties by lowering our overall cost and increasing productivity. So I think it's – I just use it as color to kind of paint the sort of innovative thinking that the team is continuing to work through as we focus on all aspects of our business and drive that operational performance further. Lucas N. Pipes - FBR Capital Markets & Co.: Okay. Got it, well, thank you very much and good luck. Glenn L. Kellow - President, Chief Executive Officer & Director: Thank you. Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Thank you.

Our next question is from Matthew Fields with Bank of America Merrill Lynch. Please go ahead.

Hi, everyone. I just wanted to follow up on the LC question. Can you mention sort of what jurisdictions the $195 million of LCs that you posted were related to? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: So this is Amy. It does depend a bit in terms of what we're looking at. With respect to the bank guarantees that, as I mentioned, we've posted $80 million of collateral related to, that is specific to Australia and the remainder is generally within the U.S.

Okay. And then you mentioned that I guess $540 million of your surety bonds are outstanding, 70% requested additional collateral and you posted $120 million. Does that mean that we should expect the additional $260 million million that have requested it to eventually be posted? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Those arrangements – with the piece of collateral that we've already provided, that has been based on negotiated terms with those specific sureties. I think as you look at time progressing, we will continue to have discussions with our surety bond providers and with our banks to provide guarantees about collateral requests and we do plan on continuing to update those as part of our reporting cycle.

And ladies and gentlemen, we have time for one more question. We'll go to Jeremy Sussman with Clarkson. Please go ahead.

Yes. Hello, thanks very much for taking the question. Just first question, in terms of Australian costs, obviously very good numbers there and bringing guidance down to $50 to $52 versus $53 to $56 previously was nice to see. Can you maybe give us a breakdown of kind of currency, productivity, fuel, et cetera, in terms of I guess where costs are now versus where they were previously? Amy B. Schwetz - CFO, Chief Accounting Officer & Executive VP: Sure, Jeremy. As we look at our Australian costs, the $18 improvement, the vast majority of that is actually related to fuel and FX. And I think one of the things that differentiates us in the U.S. segment is our exposure to the lower A dollar in the current environment. The balance of that is related really to productivity improvements and mix, but sort of out-weighted towards FX and fuel.

Okay. Great. And maybe just one more, can you just remind us when you can close – you've talked about potentially closing Burton, I believe, if market conditions remain weak, I guess. What would this – I guess from a timing perspective, what should we look to on this front and maybe what would this do to your overall cost profile? Or maybe put another way, what would the financial benefit be versus kind of where things are today? Thank you very much. Glenn L. Kellow - President, Chief Executive Officer & Director: So thanks for raising Burton. So the Burton story has been one in which we've been restructuring that contract to try and get the best optimum outcome we can within the constraints that the contract mining activity really, really has on us. We see the ability in 2016 to evaluate the continued future of that mine and we would be looking to make a decision and talk about it in 2016. It is our highest-cost operation. It is cash negative and therefore if you back that out, both of those elements, we would expect to see an improvement as a result across the portfolio. So I don't want to take away from the team managing Burton. I think they've done a great job in terms of reducing cost. The contract renegotiations are great. It actually has very good safety performance going through the mine. I don't want to take away those factors. However, having said that, in this environment it does stick out as a mine that we'd be looking to have under a great deal of scrutiny in the portfolio.

Understood. Thanks very much and good luck. Glenn L. Kellow - President, Chief Executive Officer & Director: Thank you.

And Mr. Kellow, I'll turn it back to you for any closing comments. Glenn L. Kellow - President, Chief Executive Officer & Director: Well, thank you, operator, and thanks to everyone for joining our call today. I would also like to extend my appreciation to the entire Peabody team for their focus on safe, productive operations and workplaces. There is no questioning the pressures from ongoing market weakness, but I'll remind you that Peabody benefits from an exceptional global asset base, strong operational performance and commitment to take a fresh look at the many dimensions of our business. Thank you for your continued interest and we look forward to discussing our progress with you as key milestones arise.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.