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, 1997.
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., CityPlace
One, Suite 300, St. Louis, Missouri, 63141.
FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements and Schedules
Report of Independent Auditors
Statements of Net Assets Available for Benefits
Statement of Changes in Net Assets Available for Benefits
Notes to Financial Statements
Schedule of Assets Held for Investment Purposes
Schedule of Reportable Transactions
Exhibits
23 - Consent of Ernst & Young LLP, independent auditors
Financial Statements and Schedules
Arch Coal, Inc. Employee Thrift Plan
Year Ended December 31, 1997
with Report of Independent Auditors
Arch Coal, Inc. Employee Thrift Plan
Financial Statements and Schedules
Year Ended December 31, 1997
CONTENTS
Report of Independent Auditors............................................1
Financial Statements
Statements of Net Assets Available for Benefits...........................2
Statement of Changes in Net Assets Available for Benefits.................4
Notes to Financial Statements ............................................5
Schedules
Schedule of Assets Held for Investment Purposes..........................14
Schedule of Reportable Transactions......................................15
Report of Independent Auditors
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, 1997 and 1996,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 1997. 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, 1997 and 1996, and the changes in net assets available for benefits
for the year ended December 31, 1997, 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 schedules
of assets held for investment purposes as of December 31, 1997 and reportable
transactions for the year then ended are 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 are
not a required part of the basic financial statements. The supplemental
schedules are the responsibility of the Plan's management. The fund information
in the statements of net assets available for benefits and the statement of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and the changes in net assets available for benefits of each fund. The
supplemental schedules and fund information have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 25, 1998 /s/ Ernst & Young LLP
1
Arch Coal, Inc. Employee Thrift Plan
Statements of Net Assets Available for Benefits, with Fund Information
December 31, 1997
INVESCO
ARCH COAL, INTERMEDIATE INVESCO INVESCO INVESCO
INC. COMMON GOVENRMENT SELECT HIGH YIELD TOTAL RETURN
TOTAL STOCK FUND BOND FUND INCOME FUND BOND FUND FUND
------------- -----------------------------------------------------------------------------
ASSETS
Investments
Common stock $ 91,195 $ 91,195 $ -- $ -- $ -- $ --
Mutual funds 68,685,454 -- 8,091,573 7,346,224 2,904,865 19,123,491
Pooled separate account 2,020,411 -- -- -- -- --
Investment contracts 6,007,769 -- -- -- -- --
Collective trust 13,820,591 -- -- -- -- --
Participant notes
receivable 4,786,256 -- -- -- -- --
---------- --------- ---------- --------- --------- -----------
Total investments 95,411,676 91,195 8,091,573 7,346,224 2,904,865 19,123,491
---------- --------- ---------- --------- --------- -----------
Cash 126,492 -- -- -- -- --
---------- --------- ---------- --------- --------- -----------
Net assets available
for benefits $95,538,168 $ 91,195 $ 8,091,573 $ 7,346,224 $ 2,904,865 $19,123,491
=========== =========== =========== =========== =========== ===========
TABLE CONTINUED
INVESCO INVESCO INVESCO INVESCO CAPITAL
INDUSTRIAL DYNAMICS INTERNATIONAL EMERGING PRESERVATION
INCOME FUND FUND GROWTH FUND GROWTH FUND FUND LOAN FUND
-----------------------------------------------------------------------------------------------
ASSETS
Investments
Common stock $ -- $ -- $ -- $ -- $ -- $ --
Mutual funds 13,716,282 11,694,364 1,727,160 3,458,050 623,445 --
Pooled separate account -- -- -- -- 2,020,411 --
Investment contracts -- -- -- -- 6,007,769 --
Collective trust -- -- -- -- 13,820,591 --
Participant notes
receivable -- -- -- -- -- 4,786,256
---------- --------- ---------- --------- ---------- ---------
Total investments 13,716,282 11,694,364 1,727,160 3,458,050 22,472,216 4,786,256
---------- --------- ---------- --------- ---------- ---------
Cash -- -- -- -- 126,492 --
---------- --------- ---------- --------- ---------- ---------
Net assets available
for benefits $13,716,282 $11,694,364 $ 1,727,160 $ 3,458,050 $22,598,708 $ 4,786,256
=========== =========== =========== =========== =========== ===========
SEE ACCOMPANYING NOTES.
2
Arch Coal, Inc. Employee Thrift
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1996
INVESCO
INTERMEDIATE INVESCO INVESCO INVESCO
GOVENRMENT SELECT HIGH YIELD TOTAL RETURN
TOTAL BOND FUND INCOME FUND BOND FUND FUND
------------- -------------------------------------------------------------------------------
ASSETS
Investments
Mutual funds $57,234,889 $8,323,729 $7,030,008 $2,046,421 $14,231,068
Investment contracts 7,602,039 -- -- -- --
Collective trust 12,543,920 -- -- -- --
Participant notes-
receivable 4,750,950 -- -- -- --
----------- --------- --------- --------- -----------
Total investments 82,131,798 8,323,729 7,030,008 2,046,421 14,231,068
----------- --------- --------- --------- -----------
Receivables
Participant 187,676 22,500 17,388 6,495 35,958
Employer 120,596 16,154 11,205 3,935 23,239
Participant note
repayments 75,006 -- -- -- --
----------- --------- --------- --------- ----------
Total receivables 383,278 38,654 28,593 10,430 59,197
----------- --------- --------- -------- ----------
Total assets 82,515,076 8,362,383 7,058,601 2,056,851 14,290,265
LIABILITIES
Administrative expenses
payable (27,315) (2,828) (2,389) (695) (4,835)
----------- --------- --------- -------- ----------
Net assets available
for benefits $82,487,761 $8,359,555 $7,056,212 $2,056,156 $14,285,430
=========== ========== ========== ========== ===========
TABLE CONTINUED
INVESCO INVESCO INVESCO INVESCO CAPITAL
INDUSTRIAL DYNAMICS INTERNATIONAL EMERGING PRESERVATION
INCOME FUND FUND GROWTH FUND GROWTH FUND FUND LOAN FUND
-------------------------------------------------------------------------------------------------
ASSETS
Investments
Mutual funds $11,578,106 $8,851,312 $1,780,162 $2,521,986 $ 872,097 $ --
Investment contracts -- -- -- -- 7,602,039 --
Collective trust -- -- -- -- 12,543,920 --
Participant notes
receivable -- -- -- -- -- 4,750,950
---------- --------- --------- --------- ---------- ---------
Total investments 11,578,106 8,851,312 1,780,162 2,521,986 21,018,056 4,750,950
---------- --------- --------- --------- ---------- ---------
Receivables
Participant 21,523 24,550 5,620 6,387 47,255 --
Employer 12,967 14,635 3,258 3,512 31,691 --
Participant note
repayments -- -- -- -- -- 75,006
---------- --------- --------- --------- ---------- ---------
Total receivables 34,490 39,185 8,878 9,899 78,946 75,006
----------- ---------- ---------- --------- ---------- ---------
Total assets 11,612,596 8,890,497 1,789,040 2,531,885 21,097,002 4,825,956
LIABILITIES
Administrative expenses
payable (3,934) (3,007) (605) (857) (7,141) (1,024)
---------- --------- --------- --------- ---------- ---------
Net assets available
for benefits $11,608,662 $8,887,490 $1,788,435 $2,531,028 $21,089,861 $4,824,932
=========== ========== ========== ========== =========== ==========
SEE ACCOMPANYING NOTES.
3
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year ended December 31, 1997
INVESCO
ARCH COAL, INTERMEDIATE INVESCO INVESCO INVESCO
INC. COMMON GOVERNMENT SELECT HIGH YIELD TOTAL RETURN
TOTAL STOCK FUND BOND FUND INCOME FUND BOND FUND FUND
---------- --------------------------------------------------------------------------
Additions to net assets
attributed to:
Investment income
Net appreciation (depreciation)
in fair value of investments $ 4,700,149 $(3,487) $ 60,722 $ 135,036 $ 28,788 $ 2,964,655
Interest and dividend income 8,145,922 1,937 424,243 662,659 363,695 769,398
---------- ------ --------- --------- -------- ----------
12,846,071 (1,550) 484,965 797,695 392,483 3,734,053
Contributions
Participant 5,778,358 13,635 563,166 453,437 261,601 1,142,465
Employer 3,626,728 3,975 396,882 296,930 140,949 723,381
---------- ------ --------- --------- -------- ----------
9,405,086 17,610 960,048 750,367 402,550 1,865,846
---------- ------ --------- --------- -------- ----------
Total additions 22,251,157 16,060 1,445,013 1,548,062 795,033 5,599,899
Benefits paid to participants (9,116,115) (396) (588,869) (853,169) (181,641) (1,050,385)
Administrative expenses (84,635) (15) (10,710) (7,876) (3,987) (16,793)
---------- ------ --------- --------- -------- ----------
Net increase prior
to transfers 13,050,407 15,649 845,434 687,017 609,405 4,532,721
Interfund transfers (net) -- 75,546 (1,113,416) (397,005) 239,304 305,340
---------- ------ --------- --------- -------- ----------
Net increase (decrease) 13,050,407 91,195 (267,982) 290,012 848,709 4,838,061
Net assets available for benefits
Beginning of year 82,487,761 -- 8,359,555 7,056,212 2,056,156 14,285,430
---------- ------ --------- --------- -------- ---------
End of year $95,538,168 $91,195 $ 8,091,573 $ 7,346,224 $2,904,865 $ 19,123,491
=========== ======= =========== ========== ========== ============
TABLE CONTINUED
INVESCO INVESCO INVESCO INVESCO CAPITAL
INDUSTRIAL DYNAMICS INTERNATIONAL EMERGING PRESERVATION
INCOME FUND FUND GROWTH FUND GROWTH FUND FUND LOAN FUND
----------------------------------------------------------------------------------------
Additions to net assets
attributed to:
Investment income
Net appreciation (depreciation)
in fair value of investments $ 1,449,987 $ 765,193 $ (341,295) $ (359,450) $ -- $ --
Interest and dividend income 1,693,409 1,413,068 295,578 803,046 1,352,097 366,792
---------- --------- --------- -------- --------- --------
3,143,396 2,178,261 (45,717) 443,596 1,352,097 366,792
Contributions
Participant 728,787 781,996 197,408 292,045 1,343,818 --
Employer 416,481 473,465 110,663 154,573 909,429 --
---------- --------- --------- -------- --------- --------
1,145,268 1,255,461 308,071 446,618 2,253,247 --
---------- --------- --------- -------- --------- --------
Total additions 4,288,664 3,433,722 262,354 890,214 3,605,344 366,792
Benefits paid to participants (2,459,023) (622,680) (235,659) (288,659) (2,609,301) (226,333)
Administrative expenses (9,047) (29,935) (3,420) (2,852) -- --
---------- --------- --------- -------- --------- --------
Net increase prior
to transfers 1,820,594 2,781,107 23,275 598,703 996,043 140,459
Interfund transfers (net) 287,026 25,767 (84,550) 328,319 512,804 (179,135)
---------- --------- --------- -------- --------- --------
Net increase (decrease) 2,107,620 2,806,874 (61,275) 927,022 1,508,847 (38,676)
Net assets available for benefits
Beginning of year 11,608,662 8,887,490 1,788,435 2,531,028 21,089,861 4,824,932
---------- --------- --------- -------- --------- --------
End of year $13,716,282 $11,694,364 $1,727,160 $3,458,050 $22,598,708 $4,786,256
=========== =========== ========== ========== =========== ==========
SEE ACCOMPANYING NOTES.
4
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements
December 31, 1997
1. PLAN AMENDMENT AND DESCRIPTION OF PLAN
Pursuant to an April 4, 1997 Agreement and Plan of Merger among Ashland Coal,
Inc., Arch Mineral Corporation, and AMC Merger Corporation (AMC) (a wholly-owned
subsidiary of Arch Mineral), Arch Mineral's name was changed to Arch Coal, Inc.
and Ashland Coal, Inc. merged with AMC effective July 1, 1997, thereby becoming
a wholly-owned subsidiary of Arch Coal, Inc. On the effective date of the
merger, the Arch Coal, Inc. Employee Thrift Plan (the Plan) (formerly known as
the Arch Mineral Corporation Employee Thrift Plan) was amended to provide for a
new Arch Coal common stock investment option. References herein to "the Company"
relate to Arch Mineral prior to the merger and to Arch Coal after the merger.
The following description of the Plan provides only general information.
Participants should refer to the Summary Plan Description, copies of which are
available from Arch Coal, for a more complete description of the Plan's
provisions.
GENERAL
The Plan is a defined contribution plan established by the Company and
affiliates 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 salaried and nonunion hourly
employees. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
The Company is the plan administrator. A Pension Committee, comprised of senior
officers of the Company, oversees the activities of the Plan as agent of the
employer. INVESCO Retirement Plan Services (INVESCO) is the Plan's trustee.
Benefit Services Corporation is the Plan's recordkeeper.
CONTRIBUTIONS
Participants may contribute up to 16% of gross wages, as defined by the Plan.
The Company contributes an amount equal to 100% of the first 6% contributed by
each participant. Participants and the Company contribute biweekly.
5
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
1. PLAN AMENDMENT AND DESCRIPTION OF THE PLAN (CONTINUED)
VESTING
Participants are fully vested in their contributions and all earnings. Vesting
in Company matching contributions is based on years of continuous service.
During 1997, participants vest according to the following schedule:
VESTED
YEARS OF SERVICE PERCENTAGE
--------------------------- ------------
Less than 2 years 0%
More than 2 but less than 3 25
More than 3 but less than 4 50
More than 4 but less than 5 75
5 years or more 100%
All participants are automatically fully vested in the case of death while
employed, total disability or at retirement age, regardless of the number of
months of participation.
Forfeitures of terminated participants' nonvested accounts 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.
BENEFITS
Upon termination of service due to death, disability or retirement, a
participant may elect to receive an amount equal to the value of the
participant's vested interest in his or her account. The form of payment is a
lump-sum distribution. Effective July 1, 1996, a participant who is disabled or
eligible for retirement may elect to receive payment in installments. The
minimum installment allowed is $500 and installments are paid quarterly,
semiannually or annually.
6
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
1. PLAN AMENDMENT AND DESCRIPTION OF THE PLAN (CONTINUED)
PARTICIPANT ACCOUNTS
Individual accounts are maintained for each of the Plan's participants 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.
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:
(A) $50,000
(B) 50% of the vested portion of the participant's account.
The maximum loan repayment period is the earlier of 5 years or the date of the
participant's termination of employment. If the loan is used for the purchase of
a primary residence, the repayment period is the earlier of 15 years or when the
participant terminates employment.
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 taken.
INVESTMENT OPTIONS
Participants direct contributions, including Company matching contributions,
into ten investment options in 1% increments. Participants may change their
investment elections daily. A description of each investment option is provided
below:
Arch Coal, Inc. Common Funds are invested in Arch Coal's common stock.
Stock Fund This investment option became available to
participants on July 1, 1997.
7
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
1. PLAN AMENDMENT AND DESCRIPTION OF THE PLAN (CONTINUED)
INVESTMENT OPTIONS (CONTINUED)
Invesco The mutual fund invests primarily in obligations of
Intermediate the United States government and government agencies
Government Bond Fund and instruments maturing in three to five years.
Invesco At least 50% of the mutual fund's assets are invested
Select Income Fund in investment grade debt securities. The balance of
the fund may be invested in corporate bonds rated below
investment grade.
Invesco The mutual fund invests primarily in higher yielding
High Yield Bond Fund corporate bonds (including convertible issues) and
preferred stocks with medium to lower credit ratings.
Invesco The mutual fund invests, at a minimum, 30% in equities
Total Return Fund and 30% in fixed and variable income securities. The
remaining 40% of the portfolio will vary in asset
allocation.
Invesco The mutual fund may invest between 60% and 75% of its
Industrial Income assets in dividend-paying common stocks of domestic
Fund industrial issuers. The remaining assets are invested
in other income-producing securities, mostly
convertible bonds, preferred stocks, and straight debt
securities.
Invesco The mutual fund invests in common stocks of companies
Dynamics Fund traded on U.S. securities exchanges and over-the-
counter. The fund is designed for aggressive investors
by investing in stocks of emerging growth companies.
Invesco The mutual fund invests substantially all of its assets
International Growth in foreign securities, principally equity securities.
Fund This fund is considered aggressive, and may hold
speculative investments.
Invesco The mutual fund normally invests in equity securities
Emerging Growth Fund of undervalued companies with market capitalizations
under $500 million. The remaining assets maybe
invested in U.S. Government securities and foreign
securities.
8
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
1. PLAN AMENDMENT AND DESCRIPTION OF THE PLAN (CONTINUED)
Capital Preservation This fund invests in long-term investment contracts
Fund issued by a variety of insurance carriers, a
collective trust, a pooled separate account and a money
market fund. The objective of this fund is to provide
current income, while providing protection against loss
of capital. The investment contracts included in this
fund had average yields of 7.39% and 8.24% for the
years ended December 31, 1997 and 1996, respectively.
The average crediting interest rates were 7.34% and
7.88% for December 31, 1997 and 1996, respectively. The
fair values of the guaranteed insurance contracts were
$8,169,467 and $7,813,537 at December 31, 1997 and
1996, respectively.
ADMINISTRATIVE EXPENSES
The Company pays the salaries and related benefits of employees who administer
the Plan. Effective July 1, 1996, participants pay for loan, withdrawal and
distribution fees. All other administrative expenses are paid by the Plan.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting.
9
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT VALUATION
Investments of the Plan are stated at fair value. Securities traded in public
markets 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
based on the number of unit shares held. The 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 fund and pooled separate account 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.
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.
RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to 1997 presentation.
10
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
The Plan's investments are held by a trust fund and are presented in the
following table.
DECEMBER 31
1997 1996
---------- -----------
Investments at fair value determined by quoted
market price:
Common stock
Arch Coal, Inc., 9,668 shares $ 91,195 $ -
Mutual funds
INVESCO Intermediate Government Bond Fund,
644,747 and 668,036 shares, respectively 8,091,573 8,323,729
INVESCO Select Income Fund, 1,101,383 and
1,073,284 shares, respectively 7,346,224 7,030,008
INVESCO High Yield Fund, 288,228 and 401,779
shares, respectively 2,904,865 2,046,421
INVESCO Total Return Fund, 657,391 and
585,640 shares, respectively 19,123,491 14,231,068
INVESCO Industrial Income Fund, 919,938 and
860,186 shares, respectively 13,716,282 11,578,106
INVESCO Dynamics Fund, 837,705 and 686,681
shares, respectively 11,694,364 8,851,312
INVESCO International Growth Fund, 128,318
and 107,045 shares, respectively 1,727,160 1,780,162
INVESCO Emerging Growth Fund, 308,479 and
201,437 shares, respectively 3,458,050 2,521,986
INVESCO Treasurer's Fund, 623,445 and 872,097
shares, respectively 623,445 872,097
---------- -----------
68,685,454 57,234,889
Pooled separate account
John Hancock Mutual Life 2,020,411 -
11
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
DECEMBER 31
1997 1996
---------- ----------
Investment contracts
Commonwealth Life Insurance, #00128TR-1 $ 992,408 $ 971,470
Commonwealth Life Insurance, #00128TR-2 947,123 925,732
Commonwealth Life Insurance, #00128TR-3 999,611 976,530
Commonwealth Life Insurance, #00128TR-4 521,357 524,085
Commonwealth Life Insurance, #00128TR-5 502,380 502,803
Commonwealth Life Insurance, #00128TR-6 516,254 512,953
Commonwealth Life Insurance, #00128TR-7 1,027,185 -
United of Omaha Life Insurance, #11491 501,451 -
Hartford Life Insurance, #9601 - 3,188,467
---------- ----------
6,007,769 7,602,039
Collective trust fund
I.R.T Stable Value Fund 13,820,591 12,543,920
Investments at estimated fair value:
Participant notes receivable, 8-9% 4,786,256 4,750,950
---------- ----------
Total investments at fair value $ 95,411,676 $ 82,131,798
============ ============
During the year ended December 31, 1997 the Plan's investments (including
investments bought, sold, as well as held during the year) appreciated in fair
value as follows:
Investments at fair value determined by quoted
market price:
Common stocks $ (3,487)
Mutual funds 4,703,636
------------
$ 4,700,149
============
12
Arch Coal, Inc. Employee Thrift Plan
Notes to Financial Statements (continued)
4. TAX STATUS OF THE PLAN
The Internal Revenue Service ruled on August 9, 1996 that the Plan qualifies
under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the
related trust is not subject to tax under present income tax law. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The plan administrator is not aware of any course of
action or series of events that have occurred that might adversely affect the
Plan's qualified status.
5. 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 record keeping functions under the
Plan. The Plan has investments in the common stock of the sponsoring company as
well as in mutual funds and a collective trust sponsored by the third party
service provider of the Plan.
6. SUBSEQUENT EVENT
On January 1, 1998, Arch Coal merged three similar plans sponsored by Arch Coal
and affiliated companies into the Arch Coal, Inc. Employee Thrift Plan.
Effective with the merger of the Plans, all Plan participants became fully
vested in their participant accounts. For plan participants employed on or
before December 31, 1997, the Plan provides for immediate vesting of matching
Company contributions. Participants hired on or after January 1, 1998 are fully
vested in their participant accounts, but will only become fully vested in the
matching Company contribution account upon the completion of three full and
consecutive years of service.
7. YEAR 2000 ISSUE (UNAUDITED)
The Company has developed a plan to modify its internal information technology
to be ready for the year 2000 and has begun converting critical data processing
systems. The project also includes determining whether third party service
providers have reasonable plans in place to become year 2000 compliant. The
Company currently expects the project to be substantially complete by the third
quarter of 1999. The Company does not expect this project to have a significant
effect on plan operations.
13
Schedules
Arch Coal, Inc. Employee Thrift Plan
Item 27a - Schedule of Assets Held for Investment Purposes
EIN #43-0921172, Plan Number 006
December 31, 1997
DESCRIPTION OF
INVESTMENT, INCLUDING
MATURITY DATE, RATE
OF INTEREST, PAR OR
IDENTITY OF ISSUE, BORROWER, LESSOR, OR SIMILAR PARTY MATURITY VALUE COST CURRENT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
Common stock:
Arch Coal, Inc. Stock Fund* 9,668 shares $ 94,297 $ 91,195
Mutual funds:
INVESCO Intermediate Government Bond Fund* 644,747 shares 8,098,148 $ 8,091,572
INVESCO Select Income Fund* 1,101,383 shares 7,183,420 7,346,224
INVESCO High Yield Bond Fund* 401,779 shares 2,844,858 2,904,865
INVESCO Total Return Fund* 657,391 shares 14,148,131 19,123,491
INVESCO Industrial Income Fund* 919,938 shares 12,076,366 13,716,283
INVESCO Dynamics Fund* 837,705 shares 10,926,678 11,694,364
INVESCO International Growth Fund* 128,318 shares 2,038,255 1,727,160
INVESCO Emerging Growth Fund* 308,479 shares 3,961,489 3,458,050
INVESCO Treasurer's Fund* 623,445 shares 623,445 623,445
----------- -----------
61,900,790 68,685,454
Pooled separate account:
John Hancock Mutual Life 2,020,411 units 2,020,411 2,020,411
Investment contracts:
Commonwealth Life Insurance Company, contract #00128TR-1 992,408 992,408
Commonwealth Life Insurance Company, contract #00128TR-2 947,123 947,123
Commonwealth Life Insurance Company, contract #00128TR-3 999,611 999,611
Commonwealth Life Insurance Company, contract #00128TR-4 521,357 521,357
Commonwealth Life Insurance Company, contract #00128TR-5 502,380 502,380
Commonwealth Life Insurance Company, contract #00128TR-6 516,254 516,254
Commonwealth Life Insurance Company, contract #00128TR-7 1,027,185 1,027,185
United of Omaha Life Insurance, contract#11491 501,451 501,451
---------- ----------
6,007,769 6,007,769
Collective trust:
I.R.T Stable Value Fund* 13,820,591 units 13,820,591 13,820,591
Loans to participants 8-9% - 4,786,256
-----------
$95,411,676
===========
*Indicates Party-in-interest to the Plan
14
Arch Coal, Inc. Employee Thrift Plan
Item 27d - Schedule of Reportable Transactions
EIN #43-0921172, Plan Number 006
Year Ended December 31, 1997
Current
Value of
Asset on Net
Purchase Selling Cost of Transaction Gain
Identity of Party Description of Assets Price Price Asset Date (Loss)
- --------------------- ------------------------- --------- ---------- ---------- ----------- ---------
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
INVESCO Trust Company Dynamics Fund $5,784,577 $ - $5,784,577 $5,784,577 $ -
Dynamics Fund - 3,706,718 3,340,654 3,706,718 366,064
INVESCO Trust Company Industrial Income Fund 6,006,569 - 6,006,569 6,006,569 -
Industrial Income Fund - 5,318,381 4,302,957 5,318,381 1,015,424
INVESCO Trust Company Total Return Fund 4,819,822 - 4,819,822 4,819,822 -
Total Return Fund - 2,892,031 2,151,460 2,892,031 740,571
There were no category (i), (ii), or (iv) reportable transactions during 1997.
15
SIGNATURES
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
By: /s/ Jeffry N. Quinn
-------------------------
Plan Administrator
Date: June 29, 1998
INDEX TO EXHIBITS
EXHIBIT ITEM
23 Consent of Independent Auditors
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 25, 1998, with respect to the financial statements and
schedules of the Arch Coal, Inc. Employee Thrift Plan included in this Annual
Report (Form 11-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Louisville, Kentucky
June 25, 1998
