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, 1999 OR (_) 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 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Arch Coal, Inc. Employee Thrift Plan B. Name of issuer of the securities to be held pursuant to the plan and the address of its principal executive office: Arch Coal, Inc., City Place One, Suite 300, St. Louis, Missouri 63141
FINANCIAL STATEMENTS AND EXHIBIT Financial Statements and Schedule Independent Auditors' Report Statements of Net Assets Available for Benefits Statements of Changes in Net Assets Available for Benefits Notes to Financial Statements Schedule of Assets Held for Investment Purposes Exhibit 23 - Consent of Stone Carlie & Company, L.L.C., Independent Auditors
=============================================================================== ARCH COAL, INC. EMPLOYEE THRIFT PLAN St. Louis, Missouri FINANCIAL STATEMENTS WITH SUPPLEMENTAL SCHEDULE AND INDEPENDENT AUDITORS' REPORT YEARS ENDED DECEMBER 31, 1999 AND 1998 ===============================================================================
Contents - ------------------------------------------------------------------------------- Page Independent Auditors' Report............................................ 1 Financial Statements Statements of Net Assets Available for Benefits....................... 2 Statements of Changes in Net Assets Available for Benefits............ 3 Notes to Financial Statements........................................... 4 - 11 Supplemental Schedule Schedule of Assets Held for Investment Purposes....................... 13 - 14
INDEPENDENT AUDITORS' REPORT To the Administrator Arch Coal, Inc. Employee Thrift Plan We have audited the accompanying statements of net assets available for benefits of the Arch Coal, Inc. Employee Thrift Plan as of December 31, 1999 and 1998 and the related statements 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 generally accepted auditing standards. 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 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 of the Plan at December 31, 1999 and 1998, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes as of December 31, 1999 is presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and is not a required part of the basic financial statements. The supplemental schedule has been subjected to the auditing procedures applied in our 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. Stone Carlie & Company, L.L.C. St. Louis, Missouri June 23, 2000
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS December 31, -------------------- 1999 1998 ---- ---- Assets Participant directed investments $245,262,368 $204,677,941 ------------ ------------ Receivables Participant 520,657 536,310 Employer 357,934 278,765 ------------ ------------ Total receivables 878,591 815,075 ------------ ------------ Net assets available for benefits $246,140,959 $205,493,016 ============ ============ - -------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Page 2
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS Year Ended December 31, ----------------------- 1999 1998 ---- ---- Additions to net assets attributed to: Investment income Realized and unrealized gains, net $ 33,782,429 $ 8,818,097 Interest and dividend income 6,073,425 4,694,440 ------------ ------------ Net investment income 39,855,854 13,512,537 ------------ ------------ Contributions Participant 14,712,325 9,071,893 Employer 9,688,907 7,357,213 ------------ ------------ Total contributions 24,401,232 16,429,106 ------------ ------------ Total additions 64,257,086 29,941,643 ------------ ------------ Deductions from net assets attributed to: Benefits paid to participants 23,489,197 11,171,569 Administrative expenses 119,946 40,137 ------------ ------------ Total deductions 23,609,143 11,211,706 ------------ ------------ Net increase prior to transfers 40,647,943 18,729,937 Transfers from other plans - 91,224,911 ------------ ------------ Net increase 40,647,943 109,954,848 Net assets available for benefits, beginning of year 205,493,016 95,538,168 ------------ ------------ Net assets available for benefits, end of year $246,140,959 $205,493,016 ============ ============ - -------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Page 3
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 1 - DESCRIPTION OF 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 Summary Plan Description, copies of which are available from the Company, 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 is a defined contribution plan established by the Company under the provisions of Section 401(a) of the Internal Revenue Code (IRC), which includes a qualified deferred arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company has established a Pension Committee to oversee the activities of the Plan and has appointed the Senior Vice President - Law and Human Resources as Plan Administrator. Plan investments are held in a trust with Chase Manhattan Bank as trustee. American Century Retirement Plan Services is the Plan's recordkeeper. Eligibility Participation in the Plan is open to 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. Participant Accounts Individual accounts are maintained for each participant to reflect the participant's share of the Plan's income, the Company's contribution and the participant's contribution. Allocations are based on participant account balances, as defined. - -------------------------------------------------------------------------------- Page 4
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 1 - DESCRIPTION OF PLAN (Continued) Contributions Participants may contribute up to 16% of compensation, as defined by the Plan, on a pre-tax, after-tax, or combined basis. The Company matches 100% of the first 6% of compensation contributed by each participant. Participant and Company contributions are made with each weekly or biweekly payroll. Contributions to the plan, including employee and employer contributions, are subject to various limitations imposed by the Internal Revenue Code. Vesting Participants are fully vested in their contributions and all earnings thereon. 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 thereon upon the completion of three full and consecutive years of service. All participants become fully vested upon death while employed, total disability, or at normal retirement age (age 65), regardless of the number of months of participation. Forfeitures of terminated participants' nonvested amounts are used to reduce the Company's future contributions. Restoration of such forfeitures to reemployed participants is made in accordance with the Plan's provisions. Withdrawals Upon death, disability, retirement, or termination of employment, a participant or his or her designated beneficiary may elect to withdraw the value of the participant's vested interest in his or her account. The normal form of payment is a lump-sum distribution. Alternative forms of payment include annuity purchase, installments, and direct rollover. Active participants can make hardship withdrawals of pre-tax employee contributions in certain circumstances and can make withdrawals of vested employer contributions, after-tax employee contributions, or rollover contributions on a non-hardship basis. All such withdrawals are subject to various restrictions and may be subject to income tax penalties. Loans to Participants Participants who have been in the Plan for at least 12 months may borrow a portion of their account in accordance with the provisions of the Plan. No loan shall be made if, immediately after the loan, the unpaid balance of all loans to the participant would exceed the lesser of $50,000 or 50% of the vested portion of the participant's account. - -------------------------------------------------------------------------------- Page 5
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 1 - DESCRIPTION OF PLAN (Continued) Loans to Participants (Continued) The maximum repayment period for a loan not used for the acquisition of a participant's primary residence is five years. If a loan is used for the acquisition of a participant's primary residence, the maximum repayment period is 15 years. All outstanding participant loans must be repaid upon the participant's termination of employment with the Company. Loans are secured by assignment of the participant's account and the participant's collateral promissory note for the amount of the loan. Interest rates are based on the prime rate on the first working day of the month in which the loans are made. Investment Options Participants direct contributions, including Company matching contributions, into one or more investment options in 1% increments. Participants may change their investment elections daily. A description of each investment option available at December 31, 1999 is provided below: . Arch Coal, Inc. Common Stock Fund - Funds are invested in Arch Coal, Inc. common stock. . ARCO Common Stock Fund - Funds are invested in common stock of the Atlantic Richfield Company (Arco). This fund option is only available to former employees of Arco who became employees of the Company through the Company's acquisition of Arco's coal operations, as further described in Note 3. No contributions or transfers into this fund option are allowed. Furthermore, this fund option is temporary and participants must transfer any remaining balances to other options at the earlier of 90 days after the effective date of the pending merger of Arco and BP Amoco or December 31, 2003. . Primco Stable Value Fund - This fund invests in long-term investment contracts issued by a variety of insurance carriers, collective trusts, pooled separate accounts, and money market funds. The objective of this fund is to generate current income, while providing protection against loss of capital. The investment contracts included in this fund had average yields of 5.66% and 6.01% for the years ended December 31, 1999 and 1998, respectively. The average crediting interest rates were 5.94% and 5.54% at December 31, 1999 and 1998, respectively. The fair value of the investment contracts was $53,822,660 and $45,480,266 at December 31, 1999 and 1998, respectively. - -------------------------------------------------------------------------------- Page 6
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 1 - DESCRIPTION OF PLAN (Continued) Investment Options (Continued) . American Century GNMA Fund - This fund invests in mortgage-backed Ginnie Mae certificates. The investment objective is to generate current interest income while limiting exposure to loss of capital. . Dodge & Cox Balanced Fund - This fund invests in a combination of stocks and bonds and seeks to provide current income and the opportunity for long-term growth. . J.P. Morgan Diversified Fund - This fund invests in a combination of stocks and bonds and seeks to provide current income and the opportunity for long-term growth. . American Century Income and Growth Fund - This fund invests primarily in dividend-paying common stocks and seeks to provide current income and long-term growth. . MAS Value Institutional Fund - This fund invests primarily in common stocks and seeks long-term growth by following a value-oriented investment approach. . Franklin Balance Sheet Fund - This fund invests in common stocks, preferred stocks, and debt securities and seeks high total return and long-term growth by following a value-oriented investment approach. . American Century Equity Index Fund - This fund invests in a broad portfolio of common stocks and seeks to track the performance of the Standard & Poor's 500 Index. . American Century Ultra Fund - This fund, formerly the Twentieth Century Ultra Fund, invests primarily in common stocks with above- average growth potential and above-average price volatility. . American Century International Growth Fund - This fund, formerly the Twentieth Century International Growth Fund, invests primarily in common stocks of foreign companies and seeks long-term growth subject to the volatility inherent in international investing. . Schwab Personal Choice Retirement Account - This is an option wherein a plan participant can make self-directed investments directly in equity and debt securities through a Charles Schwab & Company brokerage account. - -------------------------------------------------------------------------------- Page 7
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 1 - DESCRIPTION OF PLAN (Continued) Administrative Expenses The Company pays the salaries and related benefits of employees who administer the Plan. Participants pay loan fees. All other administrative expenses are paid by the Plan. Administrative expenses do not include investment advisory fees, which directly reduce net investment income. Plan Termination Although it has not expressed any 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 set forth in ERISA. In the event of Plan termination, participants will become fully vested in their accounts. The net assets of the Plan will be allocated to provide benefits to participants as prescribed by ERISA. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements are prepared on the accrual basis of accounting. Investment Valuation Investments of the Plan are stated at fair value. Publicly traded securities are valued at their quoted market prices. Investments in mutual funds are valued at published market value on the last business day of the plan year. Investment contracts are stated at contract value (which represents cost plus accumulated interest, less funds to pay for certain benefits and loans to participants) because they are fully benefit responsive. The fair value of the participation units owned by the Plan in the collective trust funds and pooled separate accounts are based on quoted redemption values on the last business day of the plan year. Participant notes receivable are valued at their outstanding balances, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Page 8
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Adoption of SOP 99-3 The Plan has adopted Accounting Standards Executive Committee Statement of Position 99-3, "Accounting for and Reporting of Certain Defined Benefit Plan Investments and Other Disclosure Matters." Certain prior year disclosures have been modified for consistent presentation. NOTE 3 - PLAN MERGERS AND ASSET TRANSFERS On January 1, 1998, the Company merged three similar plans sponsored by the Company and its subsidiaries into the Plan and amended the Plan to reflect this merger. The value of assets transferred is based on the value of the assets of the merged plans as of December 31, 1997. Effective June 1, 1998, in connection with the Company's acquisition of the domestic coal related operations of Arco, certain Arco defined contribution plan assets allocated to former Arco employees who became employees of the Company and its affiliates as a result of the acquisition were transferred to the Plan. The Plan was amended to reflect and allow this asset transfer. The assets transferred to the Plan as a result of these plan mergers and asset transfers during the year ended December 31, 1998 are as follows: Assets Transfer from Transferred --------------------------------------------- ------------- Ashland Coal, Inc. Employee Thrift Plan $29,108,983 Mingo Logan Coal Company Retirement Plan and Mingo Logan Hourly Employees Savings Plan 7,799,114 Coal Mac, Inc. Savings and Retirement Plan 4,767,169 Arco Thrift and Savings Plans 49,549,645 ----------- $91,224,911 =========== - -------------------------------------------------------------------------------- Page 9
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 4 - INVESTMENTS The following presents investments of the Plan, including investments that represent five percent or more of the Plan's net assets. All investments are participant directed. December 31, ------------------------- 1999 1998 ------------ ------------ Arch Coal, Inc., 361,725 and 160,738 shares $ 4,112,048 $ 2,787,504 Atlantic Richfield Company, 128,320 and 308,325 shares 11,099,956 20,123,472 Schwab Personal Choice Retirement Accounts, various investments 10,958,112 1,859,894 American Century Ultra Fund, 786,917 and 642,666 shares 36,025,059 21,471,454 American Century International Growth Fund, 726,769 and 648,734 shares 10,879,735 6,214,873 American Century GNMA Fund, 657,036 and 764,369 shares 6,662,346 8,171,106 American Century Income and Growth Fund, 1,075,023 and 1,027,329 shares 36,604,531 30,049,366 Franklin Balance Sheet Fund, 170,854 and 240,845 shares 5,205,903 7,610,710 MAS Value Institutional Fund, 720,078 and 750,647 shares 8,734,546 10,861,857 J.P. Morgan Diversified Fund, 510,873 and 427,755 shares 8,541,803 6,634,479 Dodge & Cox Balanced Fund, 211,681 and 197,783 shares 13,909,518 12,899,397 American Century Equity Index Fund, 4,408,537 shares 25,878,111 - Barclays S&P 500 Equity Index Fund, 711,053 units - 20,826,732 Primco Stable Value Fund, 4,954,137 and 4,238,744 units 55,209,896 44,826,413 Participant notes receivable, 6.00% - 9.75% 11,440,804 10,340,684 ------------ ------------ $245,262,368 $204,677,941 ============ ============ - -------------------------------------------------------------------------------- Page 10
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- NOTE 5 - TAX STATUS OF THE PLAN The Plan obtained its latest determination letter on August 9, 1996, 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. However, the plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. NOTE 6 - TRANSACTIONS WITH PARTIES-IN-INTEREST The Company engages the services of a third-party service provider to assist it in carrying out certain administrative and recordkeeping functions under the Plan. The Plan has investments in the common stock of the Company as well as in mutual funds sponsored by the third-party service provider and a collective trust sponsored by the Plan Trustee. - -------------------------------------------------------------------------------- Page 11
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- SUPPLEMENTAL SCHEDULE - -------------------------------------------------------------------------------- Page 12
ARCH COAL, INC. EMPLOYEE THRIFT PLAN - -------------------------------------------------------------------------------- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES December 31, 1999 Description of Investment Including Maturity Date, Identity of Issue, Borrower, Rate of Interest, Par or Current Lessor, or Similar Party Maturity Value Value - ---------------------------- ------------------------- ------- Participant Directed Investments - -------------------------------- Common stock: Arch Coal, Inc. Stock Fund 361,725 shares $ 4,112,048 Atlantic Richfield Company Stock Fund 128,320 shares 11,099,956 Schwab Personal Choice Retirement Accounts various 10,958,112 ------------ 26,170,116 ------------ Mutual funds: American Century Ultra Fund 786,917 shares 36,025,059 American Century International Growth Fund 726,769 shares 10,879,735 American Century GNMA Fund 657,036 shares 6,662,346 American Century Income and Growth Fund 1,075,023 shares 36,604,531 Franklin Balance Sheet Fund 170,854 shares 5,205,903 MAS Value Institutional Fund 720,078 shares 8,734,546 J.P. Morgan Diversified Fund 510,873 shares 8,541,803 Dodge & Cox Balanced Fund 211,681 shares 13,909,518 American Century Equity Index Fund 4,408,537 shares 25,878,111 ------------ 152,441,552 ------------ Participant loans 6.00% - 9.75% 11,440,804 ------------ - -------------------------------------------------------------------------------- See independent auditors' report. Page 13
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (Continued) December 31, 1999 Description of Investment Including Maturity Date, Identity of Issue, Borrower, Rate of Interest, Par or Current Lessor, or Similar Party Maturity Value Value - ---------------------------------------- ------------------------- ------- Participant Directed Investments, Continued Collective trusts: Bankers Trust Delaware - Basic $ 1,570,565 Chase Manhattan Bank Pooled Cash Investment Fund 4,058,941 ------------ 5,629,506 ------------ Investment contracts: Allstate Life Insurance Co. 8,366,563 State Street Bank & Trust 3,660,474 United of Omaha Life Insurance 501,550 Business Men's Assurance MBIA 1,512,992 GE Life & Annuity 1,516,034 Jackson National Life 1,006,256 Metropolitan Life Insurance Company 1,423,140 Monumental Life Insurance Company 6,095,344 Monumental Life Insurance Company 1,515,536 UBS AG 1,443,643 ------------ 27,041,532 ------------ Pooled separate accounts: John Hancock Mutual Life 5,521,203 Allstate Life Insurance Co. 1,109,933 Bankers Trust Delaware 6,611,338 State Street Bank & Trust 6,102,207 Transamerica Life & Annuity 3,194,177 ------------ 22,538,858 ------------ $245,262,368 ============ - -------------------------------------------------------------------------------- See independent auditors' report. Page 14
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 28, 2000 By: /s/ Bradley M. Allbritten --------------------------------------------- Bradley M. Allbritten Plan Administrator
INDEX TO EXHIBIT Exhibit 23 Consent of Stone Carlie & Company, L.L.C., Independent Auditors
EXHIBIT 23 CONSENT OF STONE CARLIE & COMPANY, L.L.C. 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 23, 2000, 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, 1999. /s/Stone Carlie & Company, L.L.C. St. Louis, Missouri June 28, 2000