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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
(Mark One)
| ý | Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 For the fiscal year ended December 31, 2005 |
| o | Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ______________. |
Commission file number: 1-13105
Arch Coal, Inc. Employee Thrift Plan
(Full title of the plan and the address of the plan, if different from that of the issuer
named below)
Arch Coal, Inc.
One CityPlace Drive, Suite 300
St. Louis, Missouri 63141
One CityPlace Drive, Suite 300
St. Louis, Missouri 63141
(Name
of issuer of the securities held pursuant to the plan and the address of its principal
executive office)
Table of Contents
ARCH COAL, INC.
EMPLOYEE THRIFT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2005
EMPLOYEE THRIFT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2005
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FINANCIAL STATEMENTS AND EXHIBIT
Financial Statements And Schedule |
||||||||
Exhibit: |
||||||||
| Consent of Independent Registered Public Accounting Firm | ||||||||
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Report Of Independent Registered Public Accounting Firm
To the Pension Committee
Arch Coal, Inc. Employee Thrift Plan
Arch Coal, Inc. Employee Thrift Plan
We have audited the accompanying statement of net assets available for benefits of the Arch Coal,
Inc. Employee Thrift Plan (the Plan) as of December 31, 2005 and 2004, and the related statement of
changes in net assets available for 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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 consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Plan’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide 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 benefits at December 31, 2005 and 2004, 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/ RubinBrown LLP
St. Louis, Missouri
June 23, 2006
June 23, 2006
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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
| December 31, | ||||||||
| 2005 | 2004 | |||||||
Assets |
||||||||
Investments, At Fair Value (Note 3) |
||||||||
Money market |
$ | 2,521,074 | $ | 2,078,221 | ||||
Mutual funds and common/collective fund |
196,403,572 | 164,696,914 | ||||||
Guaranteed investment account |
64,984,586 | 61,236,705 | ||||||
Company stock |
29,362,090 | 15,133,166 | ||||||
Brokerage securities |
17,501,232 | 16,637,272 | ||||||
Participant loans (Note 4) |
13,247,484 | 11,880,873 | ||||||
Net Assets Available For Benefits |
$ | 324,020,038 | $ | 271,663,151 | ||||
| See the accompanying notes to financial statements. | Page 2 | |
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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
AVAILABLE FOR BENEFITS
| For The Years | ||||||||
| Ended December 31, | ||||||||
| 2005 | 2004 | |||||||
Additions To Net Assets Attributed To: |
||||||||
Investment Income (Note 3) |
||||||||
Dividends and interest |
$ | 9,702,428 | $ | 6,290,664 | ||||
Net appreciation in fair value of investments |
26,443,068 | 19,449,026 | ||||||
Net Investment Income |
36,145,496 | 25,739,690 | ||||||
Transfer Into The Plan (Note 7) |
11,091,394 | — | ||||||
Contributions |
||||||||
Salary deferral |
16,179,664 | 12,890,588 | ||||||
Employer |
12,225,450 | 9,681,067 | ||||||
Employee after-tax |
1,289,169 | 1,122,335 | ||||||
Rollover |
844,043 | 413,592 | ||||||
Total Contributions |
30,538,326 | 24,107,582 | ||||||
Total Additions |
77,775,216 | 49,847,272 | ||||||
Deductions From Net Assets Attributed To: |
||||||||
Benefits paid directly to participants |
25,418,329 | 20,979,554 | ||||||
Net Increase |
52,356,887 | 28,867,718 | ||||||
Net Assets Available For Benefits - |
||||||||
Beginning Of Year |
271,663,151 | 242,795,433 | ||||||
Net Assets Available For Benefits - |
||||||||
End Of Year |
$ | 324,020,038 | $ | 271,663,151 | ||||
| See the accompanying notes to financial statements. | Page 3 | |
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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 And 2004
| 1. | Description Of The Plan | |
| The Arch Coal, Inc. Employee Thrift Plan (the Plan) was established by Arch Coal, Inc. (the 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 Plan Agreement 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 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% of compensation. Highly compensated employees may contribute up to 16%, with the exception of the highly compensated hourly employees at Mingo Logan and Mountain Laurel who may contribute up to 17%. The percentage of employer match or nondiscretionary contribution 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 | ||
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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. The hourly employees at Mingo Logan and Mountain Laurel are fully vested after the completion of two 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 first day of the month the loan is processed. Principal and interest are 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, the purchase of 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, 2005 and 2004, forfeited amounts available to reduce future Company contributions were $161,849 and $39,409, respectively. | ||
| Investment Options | ||
| Upon enrollment in the Plan, a participant may direct contributions in a number of investment options offered by the Plan. |
| Page 5 | ||
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ARCH
COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)
| Hardship Withdrawals | ||
| A participant who has reached age 59-1/2 or experienced a qualifying financial hardship may withdraw all or part of his or her vested account. Hardship withdrawals will be approved only if they conform to the Plan provisions and established Internal Revenue Service safe harbors. | ||
| 2. | Summary Of Significant Accounting Policies | |
| Basis Of Accounting | ||
| The financial statements of the Plan are prepared under the accrual basis of accounting. | ||
| 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 additions to and deductions from net assets during the reporting period. Actual results could differ from those estimates. | ||
| 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. Participant loans are valued at their outstanding balances, which approximate fair value. | ||
| Investment income is recorded as earned on the accrual basis. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. | ||
| Payment Of Benefits | ||
| Benefits are recorded when paid. | ||
| 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. Mercer Fiduciary Trust Company is the Trustee for the Plan and Mercer HR Services is the Plan recordkeeper. | ||
| Page 6 |
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ARCH
COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)
Net Assets Available For Benefits
| December 31, | ||||||||
| 2005 | 2004 | |||||||
Putnam Money Market Fund |
$ | 2,521,074 | $ | 2,078,221 | ||||
Mutual Funds And Common/Collective Fund |
||||||||
American Century Income and Growth Fund |
32,171,638 | * | 33,023,173 | * | ||||
Growth Fund of America |
24,631,761 | * | 18,556,267 | * | ||||
Investment Company of America |
1,927,475 | 1,414,736 | ||||||
Black Rock Small Cap Core Equity Fund |
3,079,098 | — | ||||||
Dodge & Cox Balanced Fund |
27,074,513 | * | 22,148,939 | * | ||||
Franklin Templeton Balance Sheet Fund |
26,176,501 | * | 20,582,889 | * | ||||
Julius Baer International Equity Fund |
15,964,475 | * | — | |||||
PIMCO Total Return Fund |
16,434,041 | * | 15,641,715 | * | ||||
Putnam Asset Allocation: Balanced Fund |
5,352,404 | 1,733,323 | ||||||
Putnam
S&P 500 Index |
25,145,367 | * | 22,702,828 | * | ||||
Putnam Vista Fund |
13,299,605 | 9,704,941 | ||||||
Wells Fargo Advantage Outlook 2010 |
2,114,854 | 1,882,094 | ||||||
Wells Fargo Advantage Outlook 2020 |
1,340,528 | 1,004,852 | ||||||
Wells Fargo Advantage Outlook 2030 |
898,320 | 564,358 | ||||||
Wells Fargo Advantage Outlook 2040 |
792,992 | 703,981 | ||||||
Fidelity Diversified International Equity Fund |
— | 12,285,398 | * | |||||
Fidelity Small Cap Fund |
— | 2,747,420 | ||||||
Total Mutual Funds And
Common/Collective Fund |
196,403,572 | 164,696,914 | ||||||
Invesco Stable Value Fund |
64,984,586 | * | 61,236,705 | * | ||||
Arch Coal, Inc. Common Stock |
29,362,090 | * | 15,133,166 | * | ||||
Putnam Direct Personal Choice Retirement
Account |
17,501,232 | * | 16,637,272 | |||||
Participant Loans |
13,247,484 | 11,880,873 | ||||||
| $ | 324,020,038 | $ | 271,663,151 | |||||
* Investment represents 5% or more of net assets at the beginning of the respective Plan year.
| Page 7 | ||
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ARCH
COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)
Changes In Net Assets Available For Benefits
| For The Years | ||||||||
| Ended December 31, | ||||||||
| 2005 | 2004 | |||||||
Investment Income |
||||||||
Dividends and interest |
$ | 9,702,428 | $ | 6,290,664 | ||||
Net appreciation in fair value
of investments |
26,443,068 | 19,449,026 | ||||||
Net Investment Income |
$ | 36,145,496 | $ | 25,739,690 | ||||
| Interest income on the Invesco 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 4.68% and 4.56% for the years ended December 31, 2005 and 2004, respectively. The average crediting interest rate was 4.71% and 4.59% at December 31, 2005 and 2004, respectively. The fair value of the investment contract was $64,984,586 and $61,236,705 at December 31, 2005 and 2004, respectively. |
| 4. | Participant Loans | |
| Participant loans are secured by participants’ vested balances. The loans are due in bi-weekly payments including principal and interest at varying rates reflective of the prime rate as of the time of issue. At December 31, 2005, the interest rates on the participant loans range from 4% — 10%. The final installments are due at various dates through October 2019. | ||
| 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 | ||
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ARCH
COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)
| 6. | Income 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 since receiving the determination letter. The Plan Administrator is working with the Plan’s counsel to correct certain design and operational failures of the Plan. The Plan Sponsor will submit the corrections for approval through the Internal Revenue Service’s voluntary correction program. The Plan Administrator believes that the corrective actions will maintain the tax qualifications of the Plan and the related trust will continue to be tax exempt. | ||
| 7. | Plan Amendments | |
| Effective January 1, 2005, the Plan was amended to include participants in Triton Coal Company, LLC 401(k) Plan as a result of the merger of this company with Arch Coal, Inc. Prior to that date, the former Triton employees participated in the Triton Coal Company, LLC 401(k) Plan until its merger into the Plan. In addition, the Plan was amended to reduce the minimum participant account balance for which automatic cash distribution is required from $5,000 to $1,000. | ||
| 8. | New Accounting Pronouncement | |
| In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) AAG INV-1 and SOP 94-4-1 Reporting of Fully Benefit-Responsive-Investment Contracts Held By Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans, which affects defined contribution pension plans that hold fully benefit-responsive investment contracts. The FSP is effective for all investment contracts as of the last day of the annual period ending after December 15, 2006. The Plan invests in the Invesco Stable Value Fund, which is a fully benefit-responsive investment as defined in the FSP. The Plan will implement the new accounting standard for the year ending December 31, 2006 and will apply the standard retrospectively to the year ended December 31, 2005. | ||
| Page 9 | ||
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ARCH
COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)
| 9. | Subsequent Events | |
| On December 31, 2005, Arch Coal, Inc. sold three of its subsidiaries; Hobet Mining, Apogee Coal Company and Catenary Coal Company, to Magnum Coal Company. The employees of these subsidiaries remained participants in the Plan at December 31, 2005. Subsequent to year end, their account balances were transferred to Magnum’s 401(k) Plan. | ||
| Effective January 1, 2006, the Plan was amended to increase the default percentage deferral rate from 3% to 6% for those new participants who did not make an election under the Plan. | ||
| Page 10 |
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Report Of Independent Registered Public
Accounting Firm On Supplementary Information
Accounting Firm On Supplementary Information
Our audits were performed for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplemental schedule of assets held at end of year is presented for
purposes of additional analysis and is not a required part of the basic financial statements, but
is supplementary information required by the Department of Labor’s Rules and Regulations for
Reporting and Disclosure under the Employee Income Security Act of 1974. This supplemental
schedule is the responsibility of the Plan’s management. The supplemental schedule 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/ RubinBrown LLP
June 23, 2006
Page 11
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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
E.I.N.: 43-0921172 PLAN NO.: 006
SCHEDULE OF ASSETS HELD AT END OF YEAR
December 31, 2005
Page 1 Of 2
Page 1 Of 2
| Identity Of Issuer | Description Of Investment | Current Value | ||||
Money Market |
||||||
Putnam Investments*
|
Putnam Money Market Fund | $ | 2,521,074 | |||
Mutual Funds And Common/Collective Fund |
||||||
American Century
|
American Century Income and Growth Fund | 32,171,638 | ||||
American Fund Corporation
|
Growth Fund of America | 24,631,761 | ||||
American Fund Corporation
|
Investment Company of America | 1,927,475 | ||||
Black Rock Funds
|
Black Rock Small Cap Core Equity Fund | 3,079,098 | ||||
Dodge & Cox Funds
|
Dodge & Cox Balanced Fund | 27,074,513 | ||||
Franklin Investments
|
Franklin Templeton Balance Sheet Fund | 26,176,501 | ||||
Julius Baer Group
|
Julius Baer International Equity Fund | 15,964,475 | ||||
PIMCO Investments
|
PIMCO Total Return Fund | 16,434,041 | ||||
Putnam Investments*
|
Putnam Asset Allocation: Balanced Fund | 5,352,404 | ||||
Putnam Investments*
|
Putnam S&P 500 Index | 25,145,367 | ||||
Putnam Investments*
|
Putnam Vista Fund | 13,299,605 | ||||
Wells Fargo
|
Wells Fargo Advantage Outlook 2010 | 2,114,854 | ||||
Wells Fargo
|
Wells Fargo Advantage Outlook 2020 | 1,340,528 | ||||
Wells Fargo
|
Wells Fargo Advantage Outlook 2030 | 898,320 | ||||
Wells
Fargo |
Wells Fargo Advantage Outlook 2040 | 792,992 | ||||
Total Mutual Funds And Common/Collective Fund
|
196,403,572 | |||||
Common Stock |
||||||
Arch Coal, Inc. *
|
Common Stock | 29,362,090 | ||||
Participant Directed Brokerage Accounts |
||||||
Putnam*
|
Putnam Direct Personal Choice Retirement Account (Participant Directed Brokerage Accounts) |
17,501,232 | ||||
Balance Carried Forward
|
245,787,968 | |||||
* Represents party-in-interest
The above information is a required disclosure for IRS Form 5500, Schedule H, Part IV, line 4i.
| Page 12 | ||
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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
E.I.N.: 43-0921172
PLAN NO.: 006
SCHEDULE OF ASSETS HELD AT END OF YEAR
December 31, 2005
Page 2 Of 2
SCHEDULE OF ASSETS HELD AT END OF YEAR
December 31, 2005
Page 2 Of 2
| Identity Of Issuer | Description Of Investment | Current Value | ||||||
Balance Brought Forward |
$ | 245,787,968 | ||||||
Guaranteed Investment Account - |
||||||||
Invesco Stable Value Fund |
||||||||
Bank of America NT & SA |
01-257 | 13,124,614 | ||||||
Bank of America NT & SA Wrapper |
01-257 | (20,676 | ) | |||||
ING Life & Annuity |
60034 | 8,501,277 | ||||||
ING Life & Annuity Wrapper |
60034 | 63,049 | ||||||
JP Morgan Chase Bank |
433119-MGC | 11,418,025 | ||||||
JP Morgan Chase Bank Wrapper |
433119-MGC | 125,228 | ||||||
Mellon Bank STIF Account |
6070002 | 953,105 | ||||||
Monumental Life Insurance Co. |
MDA-00589TR | 9,838,559 | ||||||
Monumental Life Insurance Co. Wrapper |
MDA-00589TR | 220,227 | ||||||
State Street Bank & Trust Co. |
103077 | 11,423,089 | ||||||
State Street Bank & Trust Co. Wrapper |
103077 | 120,478 | ||||||
Union Bank of Switzerland |
5043 | 1,654,576 | ||||||
Union Bank of Switzerland Wrapper |
5043 | 14,151 | ||||||
Union Bank of Switzerland |
5155 | 7,473,955 | ||||||
Union Bank of Switzerland Wrapper |
5155 | 74,929 | ||||||
Total Guaranteed Investment Account |
64,984,586 | |||||||
Participant Loans |
Bearing interest at 4% - 10%, due at various dates through October 2019 | 13,247,484 | ||||||
| $ | 324,020,038 | |||||||
The above
information is a required disclosure for IRS Form 5500,
Schedule H, Part IV, line 4i. |
||||||||
| Page 13 | ||||||||
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other
persons who administer the employee benefit plan) have duly caused this annual report to be signed
on its behalf by the undersigned thereunto duly authorized.
| Arch Coal, Inc. Employee Thrift Plan |
||||
| By: | /s/ Sheila B. Feldman | |||
| Sheila B. Feldman | ||||
| Plan Administrator | ||||
June 28, 2006
Table of Contents
Exhibit Index
| Exhibit | Description | |
23.1
|
Consent of Independent Registered Public Accounting Firm |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
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 May 22, 2006,
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 year ended December 31, 2005.
/s/ Rubin Brown LLP
June 28, 2006