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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, 2003

OR

(   ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-13105

Title of the Plan -

ARCH COAL, INC. EMPLOYEE THRIFT PLAN

Name and Address of the issuer of the Securities
Held Pursuant to the Plan -

Arch Coal, Inc.
One City Place Drive, Suite 300
St. Louis, Missouri 63141

 

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FINANCIAL STATEMENTS AND EXHIBITS

 
Financial Statements and Schedule
Report of Independent Registered Public Accounting Firm
Statement of Net Assets Available for Benefits
Statement of Changes in Net Assets Available for Benefits
Notes to Financial Statements
Schedule of Assets Held

Exhibits:

23   Consent of Rubin, Brown, Gornstein & Co. LLP, Independent Registered Public Accounting Firm

 

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ARCH COAL, INC.
EMPLOYEE THRIFT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002

 

Contents

         
    Page
    1  
Financial Statements
        
    2  
    3  
    4 - 9  
Supplementary Information
        
    10  
    11 - 12  
 Consent of Independent Reg. Public Accounting Firm

 

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Report of Independent Registered Public Accounting Firm

To the Pension Committee
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, 2003 and 2002 and the related statement of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 at December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Rubin, Brown, Gornstein & Co. LLP

St. Louis, Missouri
May 26, 2004

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN

STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
                 
    December 31,
    2003
   2002
Assets
                
Investments, At Fair Value (Note 3)
                
Money market
   $ 1,985,664     $ 1,564,190  
Mutual funds and common/collective fund
     142,291,793       106,587,507  
Guaranteed investment account
     59,292,820       55,380,598  
Company stock
     15,679,214       15,495,457  
Participant loans (Note 4)
     10,618,988       9,618,429  
Brokerage securities
     12,041,905       7,787,352  
 
    
 		      
 		  
Total Investments
     241,910,384       196,433,533  
 
    
 		      
 		  
Receivables
                
Employee contributions
     513,678       —  
Employer contributions
     371,371       —  
 
    
 		      
 		  
Total Receivables
     885,049       —  
 
    
 		      
 		  
Net Assets Available For Benefits
   $ 242,795,433     $ 196,433,533  
 
    
 		      
 		  
     
See the accompanying notes to financial statements.
  Page 2

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN

STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
For The Year Ended December 31, 2003
                 
    For The Years
    Ended December 31,
    2003
   2002
Additions To Net Assets Attributed To:
                
Investment Income (Loss) (Note 3)
                
Dividends and interest
   $ 5,040,693     $ 5,314,719  
Net appreciation (depreciation) in fair value of investments
     33,730,404       (26,599,478 )
 
    
 		      
 		  
Net Investment Income (Loss)
     38,771,097       (21,284,759 )
 
    
 		      
 		  
Contributions
                
Salary deferral contributions
     12,578,170       13,252,073  
Employer contribution
     9,835,130       10,224,095  
Employee after-tax contribution
     1,107,542       1,301,353  
Rollover contribution
     248,317       417,482  
 
    
 		      
 		  
Total Contributions
     23,769,159       25,195,003  
 
    
 		      
 		  
Total Additions
     62,540,256       3,910,244  
Deductions From Net Assets Attributed To:
                
Benefits paid directly to participants
     16,178,356       14,495,575  
 
    
 		      
 		  
Net Increase (Decrease)
     46,361,900       (10,585,331 )
Net Assets Available For Benefits -
Beginning Of Year
     196,433,533       207,018,864  
 
    
 		      
 		  
Net Assets Available For Benefits -
End Of Year
   $ 242,795,433     $ 196,433,533  
 
    
 		      
 		  
     
See the accompanying notes to financial statements.
  Page 3

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN

NOTES TO FINANCIAL STATEMENTS
December 31, 2003 And 2002

1.   Description Of The Plan
 
    The Arch Coal, Inc. Employee Thrift Plan was established by Arch Coal, Inc. (“Company”) for the benefit of the eligible employees of the Company, its subsidiaries and controlled affiliates.
 
    The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions.
 
    Certain provisions of the Plan as described below do not apply to or have been modified for certain subsidiaries and affiliates of the Company.
 
    General
 
    The Plan, which has been adopted by Arch Coal, Inc. is a defined contribution profit sharing plan which includes a 401(k) provision. The Plan covers all full-time salaried employees, all full-time nonunion hourly employees, and certain union employees where specified by applicable collective bargaining agreements of the Company, its subsidiaries, and any controlled affiliates that elect to participate in the Plan. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
 
    Contributions
 
    Participants may elect to defer between 1 percent and 50 percent of compensation. Highly compensated employees may contribute up to 16%, with the exception of those employed at Mingo Logan who may contribute 17%. The percentage of employer match or nondiscretionary contribution depends upon the location.
 
    Participant Accounts
 
    Each participant’s account is credited with the participant’s contributions, the employer’s matching contribution, if applicable, or employer non-discretionary contribution, if applicable, and an allocation of Plan earnings. The allocation of earnings is determined by the earnings of the participant’s investment selection based on each participant’s account balance, as defined in the Plan agreement. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.

Page 4

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)

    Vesting
 
    Participants are fully vested in their contributions plus actual earnings. All eligible employees of the Company at December 31, 1997 became fully vested in the Plan. Eligible employees hired subsequent to December 31, 1997 vest in Company contributions and earnings upon the completion of three full and consecutive years of service.
 
    All participants become fully vested upon death while employed, total disability, or normal retirement age, regardless of the number of months of participation.
 
    Participant Loans
 
    Active participants, with some exceptions, may borrow from their fund accounts a minimum of $500 or up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balances. Loan terms range from one to five years or longer for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at the prime rate listed in the Wall Street Journal on the first day of the month the loan is processed. Principal and interest is paid ratably through payroll deductions.
 
    Payment Of Benefits
 
    Upon death, termination of service, or attainment of age 70-1/2, a participant may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in his or her account, a single annuity, a joint and survivorship annuity with various survivor options or a series of installment payments.
 
    Forfeited Accounts
 
    Forfeited amounts of employer contributions are used to offset future Company matching contributions of the Plan. At December 31, 2003 and 2002, forfeited amounts available to reduce future Company contributions were $32,660 and $273,997, respectively.

Page 5

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)

2.   Summary Of Significant Accounting Policies
 
    Estimates And Assumptions
 
    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
    Basis Of Accounting
 
    The financial statements of the Plan are prepared under the accrual method of accounting.
 
    Investment Valuation And Income Recognition
 
    Investments in mutual funds are valued at reported net asset value at December 31 as determined by the fund manager.
 
    Investment income is recorded as earned on the accrual basis.
 
    Payment Of Benefits
 
    Benefits are recorded when paid.

Page 6

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)

3.   Investments
 
    The Company has established a Pension Committee to oversee the activities of the Plan and has appointed the Vice President – Human Resources as the Plan Administrator. Fleet Bank is the trustee for the Plan and Putnam Fiduciary Trust Company is the Plan recordkeeper.
 
    Investments at fair value as of December 31, 2003 and 2002 consist of the following:
                 
    December 31,
    2003
   2002
Putnam Money Market Fund
   $ 1,985,664     $ 1,564,190  
 
    
 		      
 		  
Mutual Funds And Common Collective Fund
                
American Century Income and Growth Fund
     31,939,049 *     23,606,930 *
Barclay’s Lifepath 2010
     1,231,653       599,395  
Barclay’s Lifepath 2020
     659,003       554,161  
Barclay’s Lifepath 2030
     460,762       223,176  
Barclay’s Lifepath 2040
     513,702       238,111  
Dodge & Cox Balanced Fund
     17,197,822 *     12,219,588 *
Franklin Templeton Balance Sheet Fund
     14,344,200 *     10,406,097 *
Investment Company of America
     807,633       67,188  
PIMCO Total Return Fund
     14,780,880 *     13,867,234 *
Putnam Asset Allocation: Balanced Fund
     623,708       63,475  
Putnam Growth Opportunities Fund
     18,255,101 *     14,182,019 *
Putnam International Equity Fund
     10,363,034 *     7,833,417  
Putnam OTC Emerging Growth Fund
     2,642,801       1,304,682  
Putnam S&P 500 Index
     20,739,632 *     16,023,021 *
Putnam Vista Fund
     7,732,813       5,399,013  
 
    
 		      
 		  
Total Mutual Funds And Common/Collective Fund
     142,291,793       106,587,507  
 
    
 		      
 		  
Arch Coal, Inc. Common Stock
     15,679,214 *     15,495,457 *
 
    
 		      
 		  
Putnam Direct Personal Choice Retirement Account
     12,041,905       7,787,352  
 
    
 		      
 		  
Invesco Stable Value Fund
     59,292,820 *     55,380,598 *
 
    
 		      
 		  
Participant Loans
     10,618,988 *     9,618,429  
 
    
 		      
 		  
 
   $ 241,910,384     $ 196,433,533  
 
    
 		      
 		  

*Investment represents 5 percent or more of net assets at the beginning of the respective Plan year.

Page 7

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)

    Changes In Net Assets Available For Benefits:
                 
    For The Year
    Ended December 31,
    2003
   2002
Investment Income (Loss):
                
Dividends and interest
   $ 5,040,693     $ 5,314,719  
Net appreciation (depreciation) in fair value of investments
     33,730,404       (26,599,478 )
 
    
 		      
 		  
Net Investment Income (Loss)
   $ 38,771,097     $ (21,284,759 )
 
    
 		      
 		  

    Interest income on the Invesco Stable Value Fund is calculated and credited daily based on the aggregate contract yield of the underlying investments. The investment contracts included in this fund had an average yield of 4.32% and 4.51% for the years ended December 31, 2003 and 2002, respectively. The average crediting interest rate was 4.58% and 5.52% at December 31, 2003 and 2002, respectively. The fair value of the investment contract was $59,292,820 and $55,380,598 at December 31, 2003 and 2002, respectively.
 
4.   Participants Loans
 
    Notes receivable are secured by participants’ vested balances. The notes are due in bi-weekly payments including principal and interest at varying rates reflective of the prime rate as of the time of issue. The final installments are due at various dates.
 
5.   Plan Termination
 
    Although it has not expressed intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.

Page 8

 

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
Notes To Financial Statements (Continued)

6.   Tax Status
 
    The Plan obtained its latest determination letter on September 26, 2002 in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. The Plan Administrator and the Plan’s tax counsel believe the Plan is correctly designed and operated with the applicable requirements of the Internal Revenue Code. Therefore, the Plan Administrator believes the Plan was qualified and the related trust tax exempt.

Page 9

 

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Report of Independent Registered Public Accounting Firm On Supplementary Information

    Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held at end of year is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

    /s/ Rubin, Brown, Gornstein & Co. LLP
 
    St. Louis, Missouri
    May 26, 2004

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
E.I.N. 43-0921172 PLAN 006

SCHEDULE OF ASSETS HELD AT END OF YEAR
December 31, 2003
             
        Current
Identity Of Issuer
   Description Of Investment
   Value
Money Market
            
Putnam Investments
   Putnam Money Market Fund   $ 1,985,664  
 
        
 		  
Mutual Funds And Common/ Collective Fund
            
American Century
   American Century Income and Growth Fund     31,939,049  
American Fund Corporation
   Investment Company of America     807,633  
Barclay Global Investors
   Barclay’s Lifepath 2010     1,231,653  
Barclay Global Investors
   Barclay’s Lifepath 2020     659,003  
Barclay Global Investors
   Barclay’s Lifepath 2030     460,762  
Barclay Global Investors
   Barclay’s Lifepath 2040     513,702  
Dodge & Cox Funds
   Dodge & Cox Balanced Fund     17,197,822  
Franklin Investments
   Franklin Templeton Balance Sheet Fund     14,344,200  
PIMCO Investments
   PIMCO Total Return Fund     14,780,880  
Putnam Investments
   Putnam Asset Allocation: Balanced Fund     623,708  
Putnam Investments
   Putnam Growth Opportunities Fund     18,255,101  
Putnam Investments
   Putnam OTC Emerging Growth Fund     2,642,801  
Putnam Investments
   Putnam International Equity Fund     10,363,034  
Putnam Investments
   Putnam S&P 500 Index     20,739,632  
Putnam Investments
   Putnam Vista Fund     7,732,813  
 
        
 		  
Total Mutual Funds And Common/Collective Fund
   142,291,793  
 
        
 		  
Common Stock
            
Arch Coal, Inc. *
   Common stock     15,679,214  
 
        
 		  
Participant Directed Brokerage Accounts
      
Putnam
   Putnam Direct Personal Choice        
 
   Retirement Account (Participants        
 
   Directed Brokerage Accounts)     12,041,905  
 
        
 		  
Balance Carried Forward
         171,998,576  
 
        
 		  

* Represents party-in-interest

    The above information is a required disclosure for IRS Form 5500, Schedule H, Part IV, line 4i.

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ARCH COAL, INC. EMPLOYEE THRIFT PLAN
E.I.N. 43-0921172 PLAN 006
SCHEDULE OF ASSETS HELD AT END OF YEAR

December 31, 2003
             
    Description Of   Current
Identity Of Issuer
   Investment
   Value
Balance Brought Forward
       $ 171,998,576  
 
        
 		  
Guaranteed Investment Account -
Invesco Stable Value Fund
            
Bank of America NT & SA
   01-257     9,832,625  
Bank of America NT & SA Wrapper
   01-257     (442,130 )
ING Life & Annuity
   60034     7,034,964  
ING Life & Annuity Wrapper
   60034     (268,247 )
JP Morgan Chase Bank
   433119-MGC     10,675,032  
JP Morgan Chase Bank Wrapper
   433119-MGC     (339,423 )
John Hancock Mutual Life Insurance Co.
   9601-GAC     2,364,402  
John Hancock Mutual Life Insurance Co. Wrapper
   9601-GAC     (143,570 )
Mellon Bank STIF Account
   6070002     2,374,110  
Monumental Life Insurance Co.
   MDA-00589TR     8,780,545  
Monumental Life Insurance Co. Wrapper
   MDA-00589TR     (43,864 )
State Street Bank & Trust Co.
   103077     10,384,537  
State Street Bank & Trust Co. Wrapper
   103077     (341,256 )
Union Bank of Switzerland
   5043     1,648,429  
Union Bank of Switzerland
   5155     7,776,666  
 
        
 		  
Total Guaranteed Investment Account
         59,292,820  
 
        
 		  
Participant Loans – bearing interest at 4.0% – 9.5% due at various dates through June 2013.
   10,618,988  
 
        
 		  
 
       $ 241,910,384  
 
        
 		  

Page 12

 

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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 25, 2004  By:   /s/ Sheila Feldman    
  Sheila Feldman   
  Plan Administrator   

 

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INDEX TO EXHIBIT

     
Exhibit 23
  Consent of Rubin, Brown, Gornstein & Co. LLP, Independent Registered Public Accounting Firm