SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998.
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., Suite 300,
CityPlace One, St. Louis, Missouri 63141.
FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements and Schedules
Independent Auditors' Reports
Statements of Net Assets Available for Benefits,
With Fund Information
Statement of Changes in Net Assets Available for
Benefits, With Fund Information
Notes to Financial Statements
Schedule of Assets Held for Investment Purposes
Schedule of Reportable Transactions
Exhibits
23.1 - Consent of Ernst & Young LLP, Independent Auditors
23.2 - Consent of Stone Carlie & Company, L.L.C.,
Independent Auditors
Arch Coal, Inc. Employee Thrift Plan
St. Louis, Missouri
Financial Statements
With Supplemental Schedules
and Independent Auditors' Reports
Year Ended December 31, 1998
CONTENTS PAGE
Independent Auditors' Reports...........................1-2
Financial Statements
Statements of Net Assets Available for Benefits,
With Fund Information.................................3-6
Statement of changes in Net Assets Available for
Benefits, With Fund Information.......................7-10
Notes to Financial Statements...........................11-21
Supplemental Schedules
Schedule of Assets Held for Investment Purposes.........22-23
Schedule of Reportable Transactions.....................24-25
INDEPENDENT AUDITORS' REPORT
To the Administrator
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 as of December 31, 1998 and the
related statement of changes in net assets available for benefits for the year
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 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 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 benefits of the Plan at
December 31, 1998, and the changes in net assets available for benefits for the
year then ended in conformity with generally accepted accounting principles.
Our audit was 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, 1998 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 fund information in
the statement 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 audit 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.
STONE CARLIE & COMPANY, L.L.C.
ST. LOUIS, MISSOURI
June 25, 1999
Report of Independent Auditors
To the Administrator
Arch Coal, Inc. Employee Thrift Plan
We have audited the accompanying statement of net assets available for benefits,
with fund information of the Arch Coal, Inc. Employee Thrift Plan as of December
31, 1997. This financial statement is the responsibility of the Plan's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1997, in conformity with generally accepted accounting principles.
The fund information in the statement of net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for benefits of each fund. The fund information has been
subjected to the auditing procedures applied in our audit of the basic financial
statement and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statement taken as a whole.
Louisville, Kentucky Ernst & Young LLP
June 25, 1998
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
December 31, 1998
Barclays Twentieth
Arch Coal, ARCO S&P 500 Primco Twentieth Century
Inc. Common Common Equity Index Stable Value Century International
Total Stock Fund Stock Fund Fund Fund Ultra Fund Growth Fund
------------ ----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments
Common stock $ 24,770,870 $ 2,787,504 $20,123,472 - - - -
Mutual funds 103,913,242 - - - - $21,471,454 $6,214,873
Pooled separate account 21,601,010 - - - $21,601,010 - -
Investment contracts 19,955,691 - - - 19,955,691 - -
Collective trust 24,096,444 - - $20,826,732 3,269,712 - -
Participant notes
receivable 10,340,684 - - - - - -
------------ ----------- ----------- ----------- ----------- ----------- ----------
Total investments 204,677,941 2,787,504 20,123,472 20,826,732 44,826,413 21,471,454 6,214,873
------------ ----------- ----------- ----------- ----------- ----------- ----------
Receivables
Participant 536,310 13,307 - 66,216 92,435 83,162 25,103
Employer 278,765 6,989 - 32,003 54,606 41,863 13,333
------------ ----------- ----------- ----------- ----------- ----------- ----------
Total receivables 815,075 20,296 - 98,219 147,041 125,025 38,436
------------ ----------- ----------- ----------- ----------- ----------- ----------
Net assets available
for benefits $205,493,016 $ 2,807,800 $20,123,472 $20,924,951 $44,973,454 $21,596,479 $6,253,309
============ =========== =========== =========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements. Page 3
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
(Continued)
December 31, 1998
American Schwab
Benham Century Franklin MAS Value J.P. Morgan Dodge & Cox Personal
GNMA Income and Balance Institutional Diversified Balanced Choice Loan
Fund Growth Fund Sheet Fund Fund Fund Fund Account Fund Fund
------------ ------------- ------------ ------------ ----------- ----------- ----------- -----------
Assets
Investments
Common stock - - - - - - $1,859,894 -
Mutual funds $ 8,171,106 $30,049,366 $ 7,610,710 $10,861,857 $ 6,634,479 $12,899,397 - -
Pooled separate account - - - - - - - -
Investment contracts - - - - - - - -
Collective trust - - - - - - - -
Participant notes
receivable - - - - - - - $10,340,684
------------ ----------- ----------- ----------- ----------- ----------- ---------- -----------
Total investments 8,171,106 30,049,366 7,610,710 10,861,857 6,634,479 12,899,397 1,859,894 10,340,684
------------ ----------- ----------- ----------- ----------- ----------- ---------- -----------
Receivables
Participant 18,246 103,771 28,320 40,240 23,389 42,121 - -
Employer 9,531 51,650 13,922 21,325 11,422 22,121 - -
------------ ----------- ----------- ----------- ----------- ----------- ---------- -----------
Total receivables 27,777 155,421 42,242 61,565 34,811 64,242 - -
------------ ----------- ----------- ----------- ----------- ----------- ---------- -----------
Net assets available
for benefits $ 8,198,883 $30,204,787 $ 7,652,952 $10,923,422 $ 6,669,290 $12,963,639 $1,859,894 $10,340,684
============ =========== =========== =========== =========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements. Page 4
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
December 31, 1997
INVESCO INVESCO INVESCO
Arch Coal, Intermediate Select INVESCO Total
Inc. Common Government Income High Yield Return
Total Stock Fund Bond Fund 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
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Page 5
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
(Continued)
December 31, 1997
INVESCO INVESCO INVESCO
Industrial INVESCO International Emerging Capital
Income Dynamics Growth Growth Preservation Loan
Fund Fund Fund Fund Fund 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
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Page 6
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
Year Ended December 31, 1998
Barclays
Arch Coal, ARCO S&P 500 Primco Twentieth
Inc. Common Common Equity Index Stable Value Century
Total Stock Fund Stock Fund Fund Fund Ultra Fund
------------ ----------- ----------- ----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Realized and unrealized gains(losses) $ 8,818,097 $(1,155,885) $(3,986,260) $ 2,934,739 - $ 4,542,093
Interest and dividend income 4,694,440 82,677 458,203 - $2,162,194 -
------------ ----------- ----------- ----------- ----------- -----------
Net investment income 13,512,537 (1,073,208) (3,528,057) 2,934,739 2,162,194 4,542,093
------------ ----------- ----------- ----------- ----------- -----------
Contributions
Participant 12,801,026 269,118 - 1,566,476 2,236,043 1,808,948
Employer 7,357,213 141,429 - 893,833 1,820,822 928,101
------------ ----------- ----------- ----------- ----------- -----------
Total contributions 20,158,239 410,547 - 2,460,309 4,056,865 2,737,049
------------ ----------- ----------- ----------- ----------- -----------
Total additions 33,670,776 (662,661) (3,528,057) 5,395,048 6,219,059 7,279,142
------------ ----------- ----------- ----------- ----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants 16,285,931 190,125 541,128 1,377,106 7,858,544 650,738
Administrative expenses 40,137 332 1,634 4,164 10,775 4,711
------------ ----------- ----------- ----------- ----------- -----------
Total deductions 16,326,068 190,457 542,762 1,381,270 7,869,319 655,449
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) prior to transfers 17,344,708 (853,118) (4,070,819) 4,013,778 (1,650,260) 6,623,693
Interfund transfers, net - 1,245,890 (2,706,416) 10,606,601 (396,044) 9,385,184
Transfers from other plans 91,224,911 2,323,833 26,900,707 6,304,572 24,421,050 5,587,602
Loan principal and interest repayments (3,729,133) - - - - -
New loans issued to participants 5,114,362 - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 109,954,848 2,716,605 20,123,472 20,924,951 22,374,746 21,596,479
Net assets available for benefits,
Beginning of year 95,538,168 91,195 - - 22,598,708 -
------------ ----------- ----------- ----------- ----------- -----------
End of year $205,493,016 $ 2,807,800 $20,123,472 $20,924,951 $44,973,454 $21,596,479
============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Page 7
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION (Continued)
Year Ended December 31, 1998
Twentieth American
Century Benham Century Franklin MAS Value J.P. Morgan
International GNMA Income and Balance Institutional Diversified
Growth Fund Fund Growth Fund Sheet Fund Fund Fund
------------ ----------- ----------- ----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Realized and unrealized gains(losses) $ 646,647 $ (28,962) $ 5,006,098 $ (201,855) $ (288,464) $ 730,436
Interest and dividend income 10,428 366,264 304,624 118,100 5,629 135,307
------------ ----------- ----------- ----------- ----------- -----------
Net investment income 657,075 337,302 5,310,722 (83,755) (282,835) 865,743
------------ ----------- ----------- ----------- ----------- -----------
Contributions
Participant 592,330 384,307 2,328,507 744,655 1,148,371 562,325
Employer 318,908 220,556 1,195,812 396,808 602,106 255,945
------------ ----------- ----------- ----------- ----------- -----------
Total contributions 911,238 604,863 3,524,319 1,141,463 1,750,477 818,270
------------ ----------- ----------- ----------- ----------- -----------
Total additions 1,568,313 942,165 8,835,041 1,057,708 1,467,642 1,684,013
------------ ----------- ----------- ----------- ----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants 368,259 382,389 1,635,234 308,843 896,267 426,330
Administrative expenses 1,475 1,427 5,934 1,948 2,569 1,306
------------ ----------- ----------- ----------- ----------- -----------
Total deductions 369,734 383,816 1,641,168 310,791 898,836 427,636
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) prior to transfers 1,198,579 558,349 7,193,873 746,917 568,806 1,256,377
Interfund transfers, net 2,993,948 6,023,493 15,543,654 4,670,793 6,562,995 3,754,007
Transfers from other plans 2,060,782 1,617,041 7,467,260 2,235,242 3,791,621 1,658,906
Loan principal and interest repayments - - - - - -
New loans issued to participants - - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 6,253,309 8,198,883 30,204,787 7,652,952 10,923,422 6,669,290
Net assets available for benefits,
Beginning of year - - - - - -
------------ ----------- ----------- ----------- ----------- -----------
End of year $ 6,253,309 $ 8,198,883 $30,204,787 $ 7,652,952 $10,923,422 $ 6,669,290
============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Page 8
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION (Continued)
Year Ended December 31, 1998
Schwab INVESCO INVESCO
Dodge & Cox Personal Intermediate Select INVESCO
Balanced Choice Loan Government Income High Yield
Fund Account Fund Fund Bond Fund Fund Bond Fund
------------ ----------- ----------- ----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Realized and unrealized gains(losses) $ 365,220 $ 254,290 - - - -
Interest and dividend income 457,365 13,777 $ 579,872 - - -
------------ ----------- ----------- ----------- ----------- -----------
Net investment income 822,585 268,067 579,872 - - -
------------ ----------- ----------- ----------- ----------- -----------
Contributions
Participant 1,159,946 - - - - -
Employer 582,893 - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Total contributions 1,742,839 - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Total additions 2,565,424 268,067 579,872 - - -
------------ ----------- ----------- ----------- ----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants 1,325,536 - 325,432 - - -
Administrative expenses 3,862 - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Total deductions 1,329,398 - 325,432 - - -
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) prior to transfers 1,236,026 268,067 254,440 - - -
Interfund transfers, net 8,786,077 1,591,827 - (8,091,573) (7,346,224) (2,904,865)
Transfers from other plans 2,941,536 - 3,914,759 - - -
Loan principal and interest repayments - - (3,729,133) - - -
New loans issued to participants - - 5,114,362 - - -
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 12,963,639 1,859,894 5,554,428 (8,091,573) (7,346,224) (2,904,865)
Net assets available for benefits,
Beginning of year - - 4,786,256 8,091,573 7,346,224 2,904,865
------------ ----------- ----------- ----------- ----------- -----------
End of year $ 12,963,639 $ 1,859,894 $10,340,684 - - -
============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Page 9
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION (Continued)
Year Ended December 31, 1998
INVESCO INVESCO INVESCO INVESCO
Total Industrial INVESCO International Emerging
Return Income Dynamics Growth Growth
Fund Fund Fund Fund Fund
------------ ----------- ----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Realized and unrealized gains(losses) - - - - -
Interest and dividend income - - - - -
------------ ----------- ----------- ----------- -----------
Net investment income - - - - -
------------ ----------- ----------- ----------- -----------
Contributions
Participant - - - - -
Employer - - - - -
------------ ----------- ----------- ----------- -----------
Total contributions - - - - -
------------ ----------- ----------- ----------- -----------
Total additions - - - - -
------------ ----------- ----------- ----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants - - - - -
Administrative expenses - - - - -
------------ ----------- ----------- ----------- -----------
Total deductions - - - - -
------------ ----------- ----------- ----------- -----------
Net increase (decrease) prior to transfers - - - - -
Interfund transfers, net $(19,123,491) $(13,716,282) $(11,694,364) $(1,727,160) $(3,458,050)
Transfers from other plans - - - - -
Loan principal and interest repayments - - - - -
New loans issued to participants - - - - -
------------ ------------ ------------ ----------- -----------
Net increase (decrease) (19,123,491) (13,716,282) (11,694,364) (1,727,160) (3,458,050)
Net assets available for benefits,
Beginning of year 19,123,491 13,716,282 11,694,364 1,727,160 3,458,505
------------ ------------ ------------ ----------- -----------
End of year - - - - -
============ ============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements. Page 10
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
NOTE 1 - DESCRIPTION OF PLAN
The Arch Coal, Inc. Employee Thrift Plan (the Plan) was established by Arch
Coal, Inc. (the Company), formerly known as Arch Mineral Corporation, for
the benefit of the eligible employees of the Company, its subsidiaries and
controlled affiliates.
The following description of the Plan reflects 1998 plan amendments and
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. Chase Manhattan Bank is the Plan's
trustee. INVESCO Retirement Plan Services was the Plan Trustee through
December 31, 1997. 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.
Page 11
NOTE 1 - DESCRIPTION OF PLAN (Continued)
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.
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 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.
Page 12
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Withdrawals (Continued)
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.
The maximum loan repayment period for loans not used for the acquisition of
a participant's personal 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, 1998 is provided below:
o Arch Coal, Inc. Common Stock Fund - Funds are invested in Arch Coal,
Inc. common stock.
Page 13
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Investment Options (Continued)
o 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
on or before December 31, 2003.
o Primco Stable Value Fund - This fund, formerly known as the Capital
Preservation Fund, invests in long-term investment contracts 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
generate current income, while providing protection against loss of
capital. The investment contracts included in this fund had average
yields of 6.01% and 7.39% for the years ended December 31, 1998 and
1997, respectively. The average crediting interest rates were 5.54%
and 7.34% for December 31, 1998 and 1997, respectively. The fair value
of guaranteed insurance contracts approximates contract value at
December 31, 1998 and 1997.
o American Century Benham 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.
o 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.
o 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.
o 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.
Page 14
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Investment Options (Continued)
o MAS Value Institutional Fund - This fund invests primarily in common
stocks and seeks long-term growth by following a value-oriented
investment approach.
o 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.
o Barclays S & P 500 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.
o Twentieth Century Ultra Fund - This fund invests primarily in common
stocks with above-average growth potential and above-average price
volatility.
o Twentieth Century International Growth Fund - This fund invests
primarily in commons stocks of foreign companies and seeks long-term
growth subject to the volatility inherent in international investing.
o Schwab Personal Choice 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.
Participants are limited to investing 25% of their account balances
through this option.
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.
Page 15
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 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.
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.
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.
Page 16
NOTE 3 - PLAN MERGERS AND ASSET TRANSFERS (Continued)
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
===========
NOTE 4 - INVESTMENTS
The Plan's investments are held by a trust fund and are presented in the
following table.
December 31,
---------------------------
1998 1997
----------- -----------
Investments at fair value determined
by quoted market price:
Common stocks
Arch Coal, Inc.,160,738 and 9,668
shares $ 2,787,504 $ 91,195
Atlantic Richfield Company,
308,325 shares 20,123,472 -
Schwab Personal Choice
Accounts, various investments 1,859,894 -
----------- -----------
24,770,870 91,195
----------- -----------
Mutual funds
Twentieth Century Ultra Fund,
642,666 shares 21,471,454 -
Twentieth Century International
Growth Fund, 648,734 shares 6,214,873 -
Benham GNMA Fund, 764,369
shares 8,171,106 -
Page 17
NOTE 4 - INVESTMENTS (Continued)
December 31,
----------------------------
1998 1997
----------- -----------
Mutual Funds (continued)
American Century Income and
Growth Fund, 1,027,329 shares $30,049,366 -
Franklin Balance Sheet Fund,
240,845 shares 7,610,710 -
MAS Value Institutional Fund,
750,647 shares 10,861,857 -
J.P. Morgan Diversified Fund,
427,755 shares 6,634,479 -
Dodge & Cox Balanced Fund,
197,783 shares 12,899,397 -
INVESCO Intermediate
Government Bond Fund,
644,747 shares - $ 8,091,573
INVESCO Select Income Fund,
1,101,383 shares - 7,346,224
INVESCO High Yield Bond Fund,
288,228 shares - 2,904,865
INVESCO Total Return Fund,
657,391 shares - 19,123,491
INVESCO Industrial Income Fund,
919,938 shares - 13,716,282
INVESCO Dynamics Fund,
837,705 shares - 11,694,364
INVESCO International Growth
Fund, 128,318 shares - 1,727,160
INVESCO Emerging Growth Fund,
308,479 shares - 3,458,050
INVESCO Treasurer's Fund,
623,445 shares - 623,445
----------- -----------
103,913,242 68,685,454
----------- -----------
Page 18
NOTE 4 - INVESTMENTS (Continued)
December 31,
---------------------------
1998 1997
----------- ----------
Collective trust funds
I.R.T. Stable Value Fund - $13,820,591
Barclay S&P 500 Equity Index
Fund, 711,053 units $20,826,732 -
Chase Manhattan Bank Pooled
Cash Investment Fund 3,269,712 -
----------- -----------
24,096,444 13,820,591
----------- -----------
Investments at Contract Value
Pooled separate account
John Hancock Mutual Life 5,240,652 2,020,411
Allstate Life Insurance Co.
#77071-IOT 1,048,644 -
Bankers Trust Delaware
#98-936IOT 6,237,925 -
State Street Bank & Trust
#98239 6,043,218 -
Transamerica Life & Annuity
#76863 3,030,571 -
----------- -----------
21,601,010 2,020,411
----------- -----------
Investment contracts
Allstate Life Insurance Co.
#77057 8,070,916 -
Commonwealth Life Insurance,
#00128TR-1 - 992,408
Commonwealth Life Insurance,
#00128TR-2 - 947,123
Commonwealth Life Insurance,
#00128TR-3 1,025,478 999,611
Commonwealth Life Insurance,
#00128TR-4 518,639 521,357
Commonwealth Life Insurance,
#00128TR-5 240,378 502,380
Commonwealth Life Insurance,
#00128TR-6 515,330 516,254
Commonwealth Life Insurance,
#00128TR-7 1,025,994 1,027,185
Commonwealth Life Insurance,
#00128TR-10 1,027,171 -
Page 19
NOTE 4 - INVESTMENTS (Continued)
December 31,
---------------------------
1998 1997
----------- -----------
Investment Contracts (continued)
Commonwealth Life Insurance,
#00128TR-12 $ 1,019,159 -
Commonwealth Life Insurance,
#00128TR-13 1,012,274 -
Commonwealth Life Insurance,
#00128TR-14 953,315 -
State Street Bank & Trust
#98012 2,533,139 -
United of Omaha Life Insurance,
#11491 501,348 $ 501,451
Business Men's Assurance MBIA
#1325 1,512,550 -
----------- -----------
19,955,691 6,007,769
----------- -----------
Investments at estimated fair value
Participant notes receivable, 8-9% 10,340,684 4,786,256
----------- -----------
$204,677,941 $95,411,676
============ ===========
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 and a collective trust sponsored by
the third-party service provider of the Plan.
Page 20
NOTE 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 is 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.
Page 21
SUPPLEMENTAL SCHEDULES
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Line 27(a) - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES
December 31, 1998
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Current
Lessor, or Similar Party Maturity Value Cost Value
- ---------------------------------------- ------------------------ ------------ ------------
Common stock:
Arch Coal, Inc. Stock Fund 160,738 shares $ 3,796,016 $ 2,787,504
Atlantic Richfield Company Stock Fund 308,325 shares 24,126,431 20,123,472
Schwab various 1,605,604 1,859,894
------------ ------------
29,528,051 24,770,870
------------ ------------
Mutual funds:
Twentieth Century Ultra Fund 642,666 shares 18,948,618 21,471,454
Twentieth Century International Growth Fund 648,734 shares 5,395,695 6,214,873
Benham GNMA Fund 764,369 shares 8,185,031 8,171,106
American Century Income and Growth Fund 1,027,329 shares 26,237,333 30,049,366
Franklin Balance Sheet Fund 240,845 shares 8,113,716 7,610,710
MAS Value Institutional Fund 750,647 shares 12,847,404 10,861,857
J.P. Morgan Diversified Fund 427,755 shares 6,058,505 6,634,479
Dodge & Cox Balanced Fund 197,783 shares 13,260,046 12,899,397
------------ ------------
99,046,348 103,913,242
------------ ------------
Investment contracts:
Allstate Life Insurance Co. 8,070,916 8,070,916
Commonwealth Life Insurance Company, contract #00128TR3 1,025,478 1,025,478
Commonwealth Life Insurance Company, contract #00128TR4 518,639 518,639
Commonwealth Life Insurance Company, contract #00128TR5 240,378 240,378
Commonwealth Life Insurance Company, contract #00128TR6 515,330 515,330
Commonwealth Life Insurance Company, contract #00128TR7 1,025,994 1,025,994
Commonwealth Life Insurance Company, contract #00128TR10 1,027,171 1,027,171
Commonwealth Life Insurance Company, contract #00128TR12 1,019,159 1,019,159
Commonwealth Life Insurance Company, contract #00128TR13 1,012,274 1,012,274
Commonwealth Life Insurance Company, contract #00128TR14 953,315 953,315
State Street Bank & Trust 2,533,139 2,533,139
United of Omaha Life Insurance 501,348 501,348
Business Men's Assurance MBIA 1,512,550 1,512,550
------------ ------------
19,955,691 19,955,691
------------ ------------
See independent auditors' report. Page 22
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Line 27(a) - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES (Continued)
December 31, 1998
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Current
Lessor, or Similar Party Maturity Value Cost Value
- ---------------------------------------- ------------------------- ------------ ------------
Collective trust:
Barclay S&P 500 Equity Index Fund 711,053 units $ 17,990,212 $20,826,732
Chase Manhattan Bank Pooled Cash
Investment Fund 3,368,882 units 3,269,712 3,269,712
------------ ------------
21,259,924 24,096,444
------------ ------------
Pooled separate account:
John Hancock Mutual Life 5,240,652 5,240,652
Allstate Life Insurance Co. 1,048,644 1,048,644
Bankers Trust Delaware 6,237,925 6,237,925
State Street Bank & Trust 6,043,218 6,043,218
Transamerica Life & Annuity 3,030,571 3,030,571
------------ ------------
21,601,010 21,601,010
------------ ------------
Loans to participants 8-9% - 10,340,684
------------ ------------
$191,391,024 $204,677,941
============ ============
See independent auditors' report Page 23
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
LINE 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended December 31, 1998
Current Value
Description Purchase Selling Cost of on Transaction Net Gain
Identity of Party Involved of Asset Price Price Asset Date (Loss)
- ----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Series of Transactions in excess of 5% of the Current Value of Plan Assets at the Beginning of the Year:
Twentieth Century Mutual Fund $20,551,999 $20,551,999 $20,551,999
Ultra Fund $ 4,610,893 4,374,463 4,610,893 $ 236,430
Twentieth Century Mutual Fund 7,245,702 7,245,702 7,245,702
International Growth Fund 1,529,079 1,444,197 1,529,079 84,882
Benham GNMA Mutual Fund 10,287,688 10,287,688 10,287,688
Fund 2,463,325 2,468,568 2,463,325 (5,243)
American Century Mutual Fund 30,419,967 30,419,967 30,419,967
Income & Growth Fund 6,124,302 5,701,101 6,124,302 423,201
J.P. Morgan Diversified Fund Mutual Fund 6,916,658 6,916,658 6,916,658
1,163,040 1,110,927 1,163,040 52,113
Dodge & Cox Mutual Fund 17,480,778 17,480,778 17,480,778
Balanced Fund 5,349,788 5,285,276 5,349,788 64,512
Chase Manhattan Bank Pooled Collective 66,574,763 66,574,763 66,574,763
Cash Investment Fund Trust 63,205,881 63,205,881 63,205,881 -
Transamerica Pooled Separate 6,030,571 6,030,571 6,030,571
Contract #76862 Account 3,000,000 3,000,000 3,000,000 -
State Street Bank Investment 5,755,649 5,755,649 5,755,649
Contract #98011 Contract 3,222,510 3,222,510 3,222,510 -
Allstate Life Insurance Investment 12,006,115 12,006,115 12,006,115
Contract #77056 Contract 3,935,199 3,935,199 3,935,199 -
See independent auditors' report Page 24
ARCH COAL, INC. EMPLOYEE THRIFT PLAN
LINE 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended December 31, 1998
Current Value
Description Purchase Selling Cost of on Transaction Net Gain
Identity of Party Involved of Asset Price Price Asset Date (Loss)
- ----------------------------- ----------- ----------- ----------- ----------- ----------- -------------
Single Transaction Exceeding 5% of the Current Value of Plan Assets at the Beginning of the Year:
INVESCO Intermediate
Government Bond Fund Mutual Fund $ 8,091,573 $ 8,098,148 $ 8,091,573 $ (6,575)
INVESCO Select Income Fund Mutual Fund 7,346,224 7,183,420 7,346,224 162,804
INVESCO Total Return Fund Mutual Fund 19,123,491 14,148,131 19,123,491 4,975,360
INVESCO Industrial Income Fund Mutual Fund 13,716,282 12,076,366 13,716,282 1,639,916
INVESCO Dynamics Fund Mutual Fund 11,694,364 10,926,678 11,694,364 767,686
Twentieth Century Ultra Fund Mutual Fund $ 6,774,814 6,774,814 6,774,814
American Century Income and Mutual Fund 11,659,192 11,659,192 11,659,192
Growth Fund
Dodge & Cox Balanced Fund Mutual Fund 10,546,639 10,546,639 10,546,639
Chase Manhattan Bank Pooled Collective 66,574,763 66,574,763 66,574,763
Cash Investment Fund Trust Fund 63,205,881 63,205,881 63,205,881 -
Transamerica Pooled Separate 6,000,000 6,000,000 6,000,000
Contract #76863 Account
State Street Bank Investment 5,705,555 5,705,555 5,705,555
Contract #98012 Contract
Allstate Life Insurance Investment 11,598,905 11,598,905 11,598,905
Contract #77057 Contract
State Street Bank Pooled Separate 6,000,000 6,000,000 6,000,000
Contract #98239 Account
Bankers Trust Pooled Separate 6,000,000 6,000,000 6,000,000
Contract #98-936 Account
IRT Stable Value Fund Collective 13,820,591 13,820,591 13,820,591 -
Trust Fund
See independent auditors' report. Page 25
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
Date: June 30, 1999 By: /s/ Jeffry N. Quinn
---------------------
Jeffry N. Quinn,
Plan Administrator
INDEX TO EXHIBITS
EXHIBIT ITEM
23.1 Consent of Ernst & Young LLP,
Independent Auditors
23.2 Consent of Stone Carlie & Company, L.L.C.,
Independent Auditors
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 statement of net assets
available for benefits, with fund information of the Arch Coal, Inc. Employee
Thrift Plan as of December 31, 1997 included in this Annual Report (Form 11-K)
for the year ended December 31, 1998.
/s/ Ernst & Young LLP
-------------------------
Louisville, Kentucky Ernst & Young LLP
June 28, 1999
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, 1999, with respect to the financial statements with
supplemental schedules of Arch Coal, Inc. Employee Thrift Plan included in this
Annual Report on Form 11-K for the year ended December 31, 1998.
/s/ Stone Carlie & Company, L.L.C.
- -----------------------------------
Stone Carlie & Company, L.L.C.
St. Louis, Missouri
June 25, 1999