SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13105 Title of the Plan - ARCH COAL, INC. EMPLOYEE THRIFT PLAN Name and Address of the issuer of the Securities Held Pursuant to the Plan - Arch Coal, Inc. One City Place Drive, Suite 300 St. Louis, Missouri 63141
FINANCIAL STATEMENTS AND EXHIBITS Financial Statements and Schedule Independent Auditors' Report Statement of Net Assets Available for Plan Benefits Statement of Changes in Net Assets Available for Plan Benefits Notes to Financial Statements Schedule of Assets Held Exhibits: 23 Consent of Rubin, Brown, Gornstein & Co. LLP, Independent Auditors 99.1 Statement Under Oath of Principal Executive Officer Regarding Facts and Circumstances Relating to Exchange Act Filings executed by Steven F. Leer 99.2 Statement Under Oath of Principal Financial Officer Regarding Facts and Circumstances Relating to Exchange Act Filings executed by Robert J. Messey
================================================================================ ARCH COAL, INC. EMPLOYEE THRIFT PLAN FINANCIAL STATEMENTS DECEMBER 31, 2002 ================================================================================
CONTENTS PAGE INDEPENDENT AUDITORS' REPORT....................................................................1 FINANCIAL STATEMENTS Statement Of Net Assets Available For Plan Benefits................................................................................2 Statement Of Changes In Net Assets Available For Plan Benefits.......................................................................3 Notes To Financial Statements...........................................................4 - 9 SUPPLEMENTARY INFORMATION Independent Auditors' Report On Supplementary Information............................................................................10 Schedule Of Assets Held...............................................................11 - 12
INDEPENDENT AUDITORS' REPORT To the Audit Committee Arch Coal, Inc. Employee Thrift Plan St. Louis, Missouri We have audited the accompanying statement of net assets available for plan benefits of the Arch Coal, Inc. Employee Thrift Plan as of December 31, 2002 and 2001 and the related statement of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits at December 31, 2002 and 2001, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Rubin, Brown, Gornstein & Co. LLP St. Louis, Missouri June 17, 2003
ARCH COAL, INC. EMPLOYEE THRIFT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, ---------------------------------------- 2002 2001 ---------------------------------------- ASSETS INVESTMENTS, AT FAIR VALUE (NOTE 3) Money market $ 1,564,190 $ 1,543,086 Mutual funds and common/collective fund 106,587,507 119,599,522 Guaranteed investment account 55,380,598 50,853,111 Company stock 15,495,457 16,289,419 Participant loans (Note 4) 9,618,429 9,924,227 Brokerage securities 7,787,352 8,809,499 - ------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS 196,433,533 207,018,864 - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 196,433,533 $ 207,018,864 ========================================================================================================================= See the accompanying report letter and notes to financial statements. Page 2
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2002 FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------ 2002 2001 ------------------------------------------ ADDITIONS TO NET ASSETS ATTRIBUTED TO: INVESTMENT INCOME (LOSS) (NOTE 3) Dividends and interest $ 5,314,719 $ 5,501,477 Net depreciation in fair value of investments (26,599,478) (21,381,000) - ---------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (21,284,759) (15,879,523) - ---------------------------------------------------------------------------------------------------------------------------- CONTRIBUTIONS Salary deferral contributions 13,252,073 12,433,338 Employer contribution 10,224,095 9,677,607 Employee after-tax contribution 1,301,353 1,413,284 Rollover contribution 417,482 710,788 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL CONTRIBUTIONS 25,195,003 24,235,017 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL ADDITIONS 3,910,244 8,355,494 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid directly to participants 14,495,575 17,362,250 - ---------------------------------------------------------------------------------------------------------------------------- NET DECREASE (10,585,331) (9,006,756) NET ASSETS AVAILABLE FOR PLAN BENEFITS - BEGINNING OF YEAR 207,018,864 216,025,620 - ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR PLAN BENEFITS - END OF YEAR $ 196,433,533 $ 207,018,864 ============================================================================================================================ See the accompanying report letter and notes to financial statements. Page 3
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 AND 2001 1. DESCRIPTION OF THE PLAN The Arch Coal, Inc. Employee Thrift Plan was established by Arch Coal, Inc. (Company) for the benefit of the eligible employees of the Company, its subsidiaries and controlled affiliates. The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan's provisions. Certain provisions of the Plan as described below do not apply to or have been modified for certain subsidiaries and affiliates of the Company. GENERAL The Plan, which has been adopted by Arch Coal, Inc. is a defined contribution profit sharing plan which includes a 401(k) provision. The Plan covers all full-time salaried employees, all full-time nonunion hourly employees, and certain union employees where specified by applicable collective bargaining agreements of the Company, its subsidiaries, and any controlled affiliates that elect to participate in the Plan. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). CONTRIBUTIONS Participants may elect to defer between 1 percent and 50 percent of compensation, depending upon the location of the employee. Highly compensated employees may contribute up to 16%, with the exception of those employed at Mingo Logan who may contribute 17%. The percentage of employer match or nondiscretionary contribution also depends upon the location. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions, the employer's matching contribution, if applicable, or employer non-discretionary contribution, if applicable, and an allocation of Plan earnings. The allocation of earnings is determined by the earnings of the participant's investment selection based on each participant's account balance, as defined in the Plan agreement. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Page 4
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) VESTING Participants are fully vested in their contributions plus actual earnings. All eligible employees of the Company at December 31, 1997 became fully vested in the Plan. Eligible employees hired subsequent to December 31, 1997 vest in Company contributions and earnings upon the completion of three full and consecutive years of service. All participants become fully vested upon death while employed, total disability, or normal retirement age, regardless of the number of months of participation. PARTICIPANT LOANS Active participants, with some exceptions, may borrow from their fund accounts a minimum of $500 or up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balances. Loan terms range from one to five years or longer for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at the prime rate listed in the Wall Street Journal on the day the loan is processed. Principal and interest is paid ratably through payroll deductions. PAYMENT OF BENEFITS Upon death, termination of service, or attainment of age 70-1/2, a participant may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account, a single annuity, a joint and survivorship annuity with various survivor options or a series of installment payments. FORFEITED ACCOUNTS Forfeited amounts of employer contributions are used to offset future Company matching contributions of the Plan. At December 31, 2002 and 2001, forfeited amounts available to reduce future Company contributions were $273,997 and $185,074, respectively. Page 5
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. BASIS OF ACCOUNTING The financial statements of the Plan are prepared under the accrual method of accounting. INVESTMENT VALUATION AND INCOME RECOGNITION Investments in mutual funds are valued at reported net asset value at December 31 as determined by the fund manager. Investment income is recorded as earned on the accrual basis. PAYMENT OF BENEFITS Benefits are recorded when paid. Page 6
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) 3. INVESTMENTS The Company has established a Pension Committee to oversee the activities of the Plan and has appointed the Vice President - Human Resources as the Plan Administrator. Fleet Bank is the trustee for the Plan and Putnam Fiduciary Trust Company is the Plan recordkeeper. Investments at fair value as of December 31, 2002 and 2001 consist of the following: DECEMBER 31, ------------------------------------- 2002 2001 ------------------------------------- PUTNAM MONEY MARKET FUND $ 1,564,190 $ 1,543,086 - ----------------------------------------------------------------------------------------------------------- MUTUAL FUNDS AND COMMON COLLECTIVE FUND American Century Income and Growth Fund 23,606,930* 28,146,653* Barclay's Lifepath 2010 599,395 160,372 Barclay's Lifepath 2020 554,161 488,589 Barclay's Lifepath 2030 223,176 130,407 Barclay's Lifepath 2040 238,111 201,744 Dodge & Cox Balanced Fund 12,219,588* -- Franklin Templeton Balance Sheet Fund 10,406,097 9,063,457 Investment Company of America 67,188 -- PIMCO Total Return Fund 13,867,234* 10,070,589 Putnam Balanced Fund 63,475 14,858,769* Putnam Growth Opportunities Fund 14,182,019* 19,755,092* Putnam International Growth Fund 7,833,417 9,152,343 Putnam OTC Emerging Growth Fund 1,304,682 1,589,311 Putnam S&P 500 Index 16,023,021* 18,990,294* Putnam Vista Fund 5,399,013 6,991,902 - ----------------------------------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS AND COMMON/COLLECTIVE FUND 106,587,507 119,599,522 - ----------------------------------------------------------------------------------------------------------- ARCH COAL, INC. COMMON STOCK 15,495,457* 16,289,419 - ----------------------------------------------------------------------------------------------------------- PUTNAM DIRECT PERSONAL CHOICE RETIREMENT ACCOUNT 7,787,352 8,809,499 - ----------------------------------------------------------------------------------------------------------- PRIMCO STABLE VALUE FUND 55,380,598* 50,853,111* - ----------------------------------------------------------------------------------------------------------- PARTICIPANT LOANS 9,618,429 9,924,227 - ----------------------------------------------------------------------------------------------------------- $ 196,433,533 $ 207,018,864 =========================================================================================================== *Investment represents 5 percent or more of net assets at the beginning of the respective Plan year. Page 7
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS: FOR THE YEAR ENDED DECEMBER 31, --------------------------------------- 2002 2001 --------------------------------------- Investment Income (Loss): Dividends and interest $ 5,314,719 $ 5,501,477 Net depreciation in fair value of investments (26,599,478) (21,381,000) - ------------------------------------------------------------------------------------------------ Net Investment Income (Loss) $ (21,284,759) $ (15,879,523) ================================================================================================ Interest income on the Primco Stable Value Fund is calculated and credited daily based on the aggregate contract yield of the underlying investments. The investment contracts included in this fund had an average yield of 4.51% and 5.52% for the years ended December 31, 2002 and 2001, respectively. The average crediting interest rate was 5.52% and 5.87% at December 31, 2002 and 2001, respectively. The fair value of the investment contract was $55,380,598 and $50,853,111 at December 31, 2002 and 2001, respectively. 4. PARTICIPANTS LOANS Notes receivable are secured by participants' vested balances. The notes are due in bi-weekly payments including principal and interest at varying rates reflective of the prime rate as of the time of issue. The final installments are due at various dates. 5. PLAN TERMINATION Although it has not expressed intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. Page 8
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued) 6. TAX STATUS The Plan obtained its latest determination letter on September 26, 2002 in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended during 2002 to incorporate language required by the passing of certain laws, commonly referred to as "EGTRRA." The Plan Administrator and the Plan's tax counsel believe the Plan is correctly designed and operated with the applicable requirements of the Internal Revenue Code. Therefore, the Plan Administrator believes the Plan was qualified and the related trust tax exempt. Page 9
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of assets held is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary data required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Income Security Act of 1974. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Rubin, Brown, Gornstein & Co. LLP June 17, 2003 Page 10
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- E.I.N. 43-0921172 PLAN 006 SCHEDULE OF ASSETS HELD DECEMBER 31, 2002 CURRENT IDENTITY OF ISSUER DESCRIPTION OF INVESTMENT VALUE - ------------------------------------------------------------------------------------------------------------------ MONEY MARKET Putnam Investments Putnam Money Market Fund $ 1,564,190 ----------------- MUTUAL FUNDS AND COMMON/COLLECTIVE FUND American Fund Corporation American Century Income and Growth Fund 23,606,930 American Fund Corporation Investment Company of America 67,188 Barclay Global Investors Barclay's Lifepath 2010 599,395 Barclay Global Investors Barclay's Lifepath 2020 554,161 Barclay Global Investors Barclay's Lifepath 2030 223,176 Barclay Global Investors Barclay's Lifepath 2040 238,111 Dodge & Cox Funds Dodge & Cox Balanced Fund 12,219,588 Franklin Investments Franklin Templeton Balance Sheet Fund 10,406,097 PIMCO Investments PIMCO Total Return Fund 13,867,234 Putnam Investments Putnam Balanced Fund 63,475 Putnam Investments Putnam Growth Opportunities Fund 14,182,019 Putnam Investments Putnam OTC Emerging Growth Fund 1,304,682 Putnam Investments Putnam International Growth Fund 7,833,417 Putnam Investments Putnam S&P 500 Index 16,023,021 Putnam Investments Putnam Vista Fund 5,399,013 ----------------- TOTAL MUTUAL FUNDS AND COMMON/COLLECTIVE FUND 106,587,507 ----------------- COMMON STOCK Arch Coal, Inc. Common stock 15,495,457 ----------------- PARTICIPANT DIRECTED BROKERAGE ACCOUNTS Putnam Putnam Direct Personal Choice Retirement Account (Participants Directed Brokerage Accounts) 7,787,352 ----------------- BALANCE CARRIED FORWARD 131,434,506 ----------------- The above information is a required disclosure for IRS Form 5500, Schedule H, Part IV, line 4i. Page 11
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- E.I.N. 43-0921172 PLAN 006 SCHEDULE OF ASSETS HELD DECEMBER 31, 2002 DESCRIPTION OF CURRENT IDENTITY OF ISSUER INVESTMENT VALUE - ------------------------------------------------------------------------------------------------------------------------ BALANCE BROUGHT FORWARD $ 131,434,506 ----------------------- GUARANTEED INVESTMENT ACCOUNT - PRIMCO STABLE VALUE FUND Allstate Life Insurance Company Synthetic GIC 4,618,294 Allstate Life Insurance Company Wrapper Synthetic GIC (2,651,401) Bank of America NT & SA 103-121E 11,196,578 Bank of America NT & SA Wrapper 103-121E (173,944) ING Life Insurance & Annuity Company 103-121E 4,534,176 ING Life Insurance & Annuity Company Wrapper 103-121E (27,051) John Hancock Life Insurance PSA 3,477,562 John Hancock Life Insurance Wrapper PSA (282,581) JP Morgan Chase Bank 103-121E 8,332,045 JP Morgan Chase Bank Wrapper 103-121E (440,505) Monumental Life Insurance Company Synthetic GIC 2,521,723 Monumental Life Insurance Company Wrapper Synthetic GIC (168,153) Monumental Life Insurance Company 103-121E 8,491,357 Monumental Life Insurance Company Wrapper 103-121E (302,628) State Street Bank & Trust Synthetic GIC 2,433,659 State Street Bank & Trust Wrapper Synthetic GIC (265,277) State Street Bank & Trust 103-121E 1,710,384 State Street Bank & Trust Wrapper 103-121E (108,816) UBS AG Synthetic GIC 7,034,163 UBS AG Wrapper Synthetic GIC (1,646,789) Boston Company Common/Collective Trust 4,279,494 Bus Men's Assur-MBIA Insd GIC 1,512,771 Security Life of Denver GIC 1,305,537 ----------------------- TOTAL GUARANTEED INVESTMENT ACCOUNT 55,380,598 ----------------------- PARTICIPANT LOANS Notes Receivable 9,618,429 ----------------------- $ 196,433,533 ======================= Page 12
SIGNATURE PAGE Pursuant to the requirements of the Securities Exchange Act of 1934, the duly authorized Plan Administrator has executed this annual report. ARCH COAL, INC. EMPLOYEE THRIFT PLAN Date: June 20, 2003 By: /s/ Sheila Feldman ---------------------------------- Sheila Feldman Plan Administrator
INDEX TO EXHIBITS Exhibit 23 Consent of Rubin, Brown, Gornstein & Co. LLP, Independent Auditors Exhibit 99.1 Statement Under Oath of Principal Executive Officer Regarding Facts and Circumstances Relating to Exchange Act Filings executed by Steven F. Leer Exhibit 99.2 Statement Under Oath of Principal Financial Officer Regarding Facts and Circumstances Relating to Exchange Act Filings executed by Robert J. Messey Page 14
EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-32777) pertaining to the Arch Coal, Inc. Employee Thrift Plan of our report dated June 17, 2003, with respect to the financial statements and supplemental schedule of Arch Coal, Inc. Employee Thrift Plan included in this Annual Report on Form 11-K for the years ended December 31, 2002 and 2001. /S/ Rubin, Brown, Gornstein & Co. LLP - ------------------------------------- Rubin, Brown, Gornstein & Co. LLP June 20, 2003
EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of the Arch Coal, Inc. Employee Thrift Plan (the "Plan") on Form 11-K for the year ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Steven F. Leer, Chief Executive Officer of Arch Coal, Inc., certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Plan. /s/ Steven F. Leer ------------------------------------ Steven F. Leer President and Chief Executive Officer June 20, 2003 Page 3
EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of the Arch Coal, Inc. Employee Thrift Plan (the "Plan") on Form 11-K for the year ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Robert J. Messey, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Plan. /s/ Robert J. Messey --------------------------------------- Robert J. Messey Senior Vice President and Chief Financial Officer June 20, 2003