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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-13105
ARCH COAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-0921172
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
One CityPlace Drive, Suite 300, St. Louis, MO 63141
(Address of principal executive offices) (Zip Code)
(314) 994-2700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At March 1, 2002, based on the closing price of the registrant's common
stock on the New York Stock Exchange on that date, the aggregate market value
of the voting stock held by non-affiliates of the registrant was approximately
$759,718,072. In determining this amount, the registrant has assumed that all
of its executive officers and directors, and persons known to it to be the
beneficial owners of more than five percent of its common stock, are
affiliates. Such assumption shall not be deemed conclusive for any other
purpose.
At March 1, 2002, there were 52,354,501 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission no later than April 1, 2002, are
incorporated by reference into Part III of this Form 10-K.
2. Portions of the registrant's Annual Report to Stockholders for the year
ended December 31, 2001 are incorporated by reference into Parts I, II and IV
of this Form 10-K.
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TABLE OF CONTENTS
Page
----
Part I
Item 1. Business ............................................... 1
Item 2. Properties ............................................. 9
Item 3. Legal Proceedings ...................................... 12
Item 4. Submission of Matters to a Vote of Security Holders .... 12
Part II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters .................................... 13
Item 6. Selected Financial Data ................................ 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 13
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk ................................................... 13
Item 8. Financial Statements and Supplementary Data ............ 13
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure .................... 13
Part III
Item 10. Directors and Executive Officers of the Registrant ..... 14
Item 11. Executive Compensation ................................. 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................. 14
Item 13. Certain Relationships and Related Transactions ......... 14
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K .............................................. 15
PART I
Item 1. BUSINESS
General
Arch Coal, Inc. ("Arch Coal" or the "Company") is one of the largest coal
producers in the United States. The Company mines, processes and markets
compliance and low-sulfur coal from mines located in both the eastern and
western United States, enabling it to ship coal cost-effectively to most of the
major domestic coal-fired electric generation facilities. As of December 31,
2001, the Company had 25 operating mines and controlled approximately 3.43
billion tons of proven and probable coal reserves, approximately 1.83 billion
tons of which were assigned reserves and approximately 1.60 billion tons of
which were unassigned reserves. Arch Coal sold 109.5 million tons of coal in
2001. The Company sells substantially all of its coal to producers of electric
power.
The Company owns a 99% membership interest in Arch Western Resources, LLC
("Arch Western"), a joint venture that was formed in connection with the
Company's acquisition of the United States coal operations of Atlantic
Richfield Company on June 1, 1998. The principal operating units of Arch
Western are Thunder Basin Coal Company, L.L.C., which operates the Black
Thunder mine in the Southern Powder River Basin in Wyoming; Mountain Coal
Company, L.L.C., which operates the West Elk mine in Colorado; Canyon Fuel
Company, LLC ("Canyon Fuel"), which operates three mines in Utah; and Arch of
Wyoming, LLC, which operates two mines in the Hanna Basin of Wyoming. Arch
Western owns 100% of the membership interests of Thunder Basin Coal Company,
L.L.C., Mountain Coal Company, L.L.C. and Arch of Wyoming, LLC. Arch Western
owns a 65% membership interest in Canyon Fuel, with the remaining 35%
membership interest owned by ITOCHU Coal International Inc., a subsidiary of
ITOCHU Corporation of Japan.
Business Environment
United States Coal Markets. Production of coal in the United States has
increased from 434 million tons in 1960 to over 1.1 billion tons in 2001. The
following table sets forth demand trends for United States coal by consuming
sector through 2020 as compiled, preliminary(p) or forecasted(f) by the United
States Department of Energy/Energy Information Agency.
Annual
Growth
2000-
Consumption by Sector 1999 2000 2001p 2005f 2010f 2015f 2020f 2020f
-------------------------------- -------- -------- ------- ------- ------- ------- ------- -----------
(tons in millions)
Electric Generation ............ 953 991 1,013 1,065 1,141 1,183 1,366 1.3%
Industrial ..................... 65 65 62 80 81 83 86 0.2%
Steel Production ............... 28 29 27 26 24 22 20 (1.9%)
Residential/Commercial ......... 5 5 4 5 6 6 6 0.8%
Export ......................... 58 58 49 56 54 53 55 (0.3%)
----- ----- ----- ----- ----- ----- ----- ---
Total ......................... 1,109 1,148 1,155 1,232 1,306 1,347 1,533 1.2%
===== ===== ===== ===== ===== ===== ===== ===
Electricity Generation. Coal has consistently maintained a 50% to 53%
market share over competing energy sources to generate electricity during the
past ten years because of its relatively low cost and its availability
throughout the United States. Coal is the lowest cost fossil-fuel used for
base-load electric power generation--considerably less expensive than natural
gas or oil. Coal-fired generation is also competitive with nuclear power
generation, especially on an all-in cost per megawatt-hour basis. Hydroelectric
power is inexpensive but is limited by both geography and susceptibility to
seasonal and climatic conditions. Non hydropower renewable power generation
accounts for less than 3% of all the electricity generated in the U.S. and is
limited by resources and/or technology. Consequently, approximately 88% of the
coal produced in the United States in 2001 was sold in the domestic market as a
fuel to the electric generation segment. The remainder of the tons were sold in
2001 as steam coal for industrial
1
and residential purposes, into the export market, and as metallurgical coal. In
addition to the relative competitiveness of coal-fired generation plants, coal
consumption patterns are also influenced by the demand for electricity,
governmental regulation impacting coal production and power generation,
technological developments and the location, availability and quality of
competing sources of coal, as well as alternative fuels such as natural gas,
oil and nuclear and alternative energy sources such as hydroelectric power.
Long-term demand for electric power will depend upon a variety of
economic, regulatory, technological and climatic factors beyond our control.
Historically, domestic demand for electric power has increased as the United
States economy has grown. Two important regulatory initiatives, one designed to
increase competition among utilities and lower the cost of electricity for
consumers, and another to improve air quality by reducing the level of sulfur
emitted from coal-burning power generation plants, have had and are expected to
continue to have significant effects on the electric utility industry and its
coal suppliers.
According to the Energy Information Agency, coal is expected to remain the
primary fuel for electricity generation through 2020. The following table sets
forth the source fuel for electricity generation from 1990 through 2020 as
compiled, preliminary(p), annualized(a) or forecasted(f) by the Energy
Information Agency.
1990 1995 2000p 2001a 2005f 2010f 2015f 2020f
------- ------- ------- ------- ------- ------- ------- --------
(billion kilowatt hours)
Coal .......................... 1,590 1,710 1,968 1,980 2,135 2,264 2,341 2,472
Petroleum ..................... 124 75 109 145 49 38 43 49
Natural Gas ................... 378 499 597 642 847 1,153 1,488 1,733
Nuclear ....................... 577 673 754 771 759 737 707 702
Hydro/Renewable/other ......... 356 401 373 324 429 452 472 488
----- ----- ----- ----- ----- ----- ----- -----
Total ........................ 3,025 3,358 3,801 3,862 4,219 4,644 5,051 5,444
===== ===== ===== ===== ===== ===== ===== =====
Coal's primary advantage is its relatively low cost compared to other
fuels used to generate electricity. The following table sets forth the Energy
Information Agency's forecast of delivered fuel prices to electric utilities
through 2020 as compiled, preliminary(p) or forecasted(f) by the Energy
Information Agency. The data-set is derived from the Energy Information
Agency's Long-Term forecast published in December 2001 and is presented in 2000
dollars.
1998 1999 2000 2001p 2002f 2005f 2010f 2015f 2020f
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars per million Btus)
Annual Energy Outlook
Petrol (Residual) ......... $2.08 $2.44 $4.29 $3.91 $3.45 $3.53 $3.60 $3.69 $3.81
Natural Gas ............... 2.38 2.57 4.30 5.08 2.59 3.19 3.38 3.65 3.87
Coal ...................... 1.25 1.22 1.20 1.24 1.16 1.13 1.05 1.01 0.97
2
Coal Production. United States coal production was over 1.1 billion tons
in 2001. The following table, derived from data prepared by the Energy
Information Agency, sets forth principal United States production statistics
for the periods indicated.
1980 1985 1990 1995 2000 2001*
----------- ----------- ---------- ---------- ---------- ----------
Total Tons (in millions) .......... 830 884 1,029 1,033 1,074 1,118
Percent of Total Tons
East ............................. 68% 63% 61% 53% 47% 47%
West ............................. 32 37 39 47 53 53
Underground ...................... 40 39 41 38 35 34
Surface .......................... 60 61 59 62 65 66
Number of Mines
Underground ...................... 1,875 1,695 1,422 977 707 682
Surface .......................... 1,997 1,660 1,285 1,127 746 757
------- ------- ------ ------ ------ ------
Total ............................ 3,872 3,355 2,707 2,104 1,453 1,439
Average Number of Mine Employees
Underground ...................... 150,328 107,357 63,960 44,254 31,825 33,128
Surface .......................... 74,610 61,924 43,402 31,777 24,640 26,029
Average Production per Mine
(tons in thousands)
Underground ...................... 177 203 297 402 531 558
Surface .......................... 249 325 472 568 935 975
* estimate
Sales and Marketing
The Company sells coal both under long-term contracts, the terms of which
are greater than 12 months, and on a current market or spot basis. When the
Company's coal sales contracts expire or are terminated, it is exposed to the
risk of having to sell coal into the spot market, where demand is variable and
prices are subject to greater volatility. Historically, the price of coal sold
under long-term contracts has exceeded prevailing spot prices for coal.
However, in the past several years new contracts have been priced at or near
existing spot rates.
The terms of the Company's coal sales contracts result from bidding and
extensive negotiations with customers. Consequently, the terms of these
contracts typically vary significantly in many respects, including price
adjustment features, provisions permitting renegotiation or modification of
coal sale prices, coal quality requirements, quantity parameters, flexibility
and adjustment mechanisms, permitted sources of supply, treatment of
environmental constraints, options to extend and force majeure, suspension,
termination and assignment provisions.
Provisions permitting renegotiation or modification of coal sale prices
are present in many of the Company's more recently negotiated long-term
contracts and usually occur midway through a contract or every two to three
years, depending upon the length of the contract. In some circumstances,
customers have the option to terminate the contract if prices have increased by
a specified percentage from the price at the commencement of the contract or if
the parties cannot agree on a new price. The term of sales contracts has
decreased significantly over the last two decades as competition in the coal
industry has increased and, more recently, as electricity generators have
prepared themselves for federal Clean Air Act requirements and the impending
deregulation of their industry.
There are some contract terms that differ between a standard "eastern
United States" contract and a standard "western United States" contract. In the
eastern United States, many customers require that the coal be sampled and
weighed at the destination. In the western United States, virtually all samples
are taken at the source. More eastern United States coal is purchased on the
spot market. The eastern United States market has more recently been a
shorter-term market because of the larger number of smaller
3
mining operations in that region. Western United States contracts sometimes
stipulate that some production taxes and coal royalties be reimbursed in full
by the buyer rather than as a pricing component within the contract. These
items comprise a significant portion of western United States coal pricing.
A factor that may impact the Company's sale of coal in the future is the
development of coal commodity trading. The New York Mercantile Exchange
initiated electricity commodity trading a few years ago and has recently
initiated coal contract trading. The coal contract trading is based on a
Huntington, West Virginia barge loading hub. In addition, some brokerage and
marketing firms have entered the coal markets and devised transactions that
mimic commodity activity. Today, limited, but growing, over-the-counter trading
is being conducted on both firm-forward transactions as well as put, call and
other options. The trend to more commodity-type transactions could mark a
significant change in how coal is sold. The Company is unable to predict
whether this trend will have a material effect on its sales and whether any
such effect would be positive or negative on its operating results.
Competition
The coal industry is intensely competitive, primarily as a result of the
existence of numerous producers in the coal producing regions in which the
Company operates. The Company competes with several major coal producers in the
Central Appalachian and Powder River Basin areas. It also competes with a
number of smaller producers in those and its other market regions.
Operations
As of December 31, 2001, the Company operated a total of 25 mines, all
located in the United States. Coal is transported from the Company's mining
complexes to customers by means of railroad cars, river barges or trucks, or a
combination of these means of transportation. As is customary in the industry,
virtually all the Company's coal sales are made F.O.B. mine or loadout, meaning
that customers are responsible for the cost of transporting purchased coal to
their facilities. The following table provides the location and a summary of
information regarding the Company's principal mining complexes and the coal
reserves associated with these operations as of December 31, 2001:
4
Captive Contract Mining
Mining Complex (Location) Mine(s)(1) Mine(s)(1) Equipment(2) Transportation
------------------------- ------------ ------------ ---------------- ---------------
Central Appalachia
Mingo Logan (WV) ................... U U LW, C NS
Coal-Mac (WV) ...................... S S L Barge/NS
Dal-Tex (WV)(3) .................... -- -- -- CSX
Hobet 21 (WV) ...................... S U(2) D, L, S, C(4) CSX
Arch of West Virginia (WV) ......... S U D, L, S(5) CSX
Samples (WV) ....................... S U, S D, L, S(6) Barge/CSX
Campbells Creek (WV) ............... -- U -- Barge
Lone Mountain (KY) ................. U(2) -- C NS/CSX
Pardee (VA) ........................ S, U U L, C NS
Western United States
Black Thunder (WY) ................. S -- D, S(7) UP/BN
Coal Creek (WY)(8) ................. -- -- -- UP/BN
West Elk (CO) ...................... U -- LW, C UP
Skyline (UT)(9) .................... U -- LW, C UP
SUFCO (UT)(9) ...................... U -- LW, C UP
Dugout Canyon (UT)(9) .............. U -- LW, C UP
Arch of Wyoming (WY) ............... S(2) -- D, S(10) UP
S = Surface Mine LW = Longwall
U = Underground Mine C = Continuous Miner
D = Dragline UP = Union Pacific Railroad
L = Loader/Truck CSX = CSX Transportation
S = Shovel/Truck BN = Burlington Northern Railroad
NS = Norfolk Southern Railroad
Total Assigned
Tons Recoverable
Produced Cost(11)/ Reserves Proven Probable
in 2001 Book Value (in millions (in millions (in millions
Mining Complex (Location) (in millions) (in millions) of tons) of tons) of tons)
------------------------- --------------- --------------- --------------- -------------- -------------
Central Appalachia
Mingo Logan (WV) ................... 6.5 113/25 27.2 23.8 3.4
Coal-Mac (WV) ...................... 2.7 32/10 14.1 14.1 --
Dal-Tex (WV) (3) ................... -- 1/1 100.5 72.8 27.7
Hobet 21 (WV) ...................... 5.8 78/40 99.0 62.1 36.9
Arch of West Virginia (WV) ......... 3.6 115/20 29.7 27.7 2.0
Samples (WV) ....................... 6.1 140/58 45.2 41.9 3.3
Campbells Creek (WV) ............... 1.3 4/0 10.9 10.9 --
Lone Mountain (KY) ................. 2.8 93/37 50.0 43.6 6.4
Pardee (VA) ........................ 1.7 43/11 20.6 18.6 2.0
Western United States
Black Thunder (WY) ................. 67.6 273/210 918.6 886.1 32.5
Coal Creek (WY) (8) ................ -- 41/34 233.3 227.3 6.0
West Elk (CO) ...................... 5.4 116/70 126.1 95.5 30.6
Skyline (UT) (9) ................... 3.8 N/A 36.1 18.1 18.0
SUFCO (UT) (9) ..................... 7.1 N/A 80.8 29.4 51.4
Dugout Canyon (UT) (9) ............. 1.8 N/A 37.5 29.1 8.4
Arch of Wyoming (WY) ............... 0.7 54/3 1.3 1.3 --
----- --------- ------- ------- -----
Totals .............................. 116.9 1,103/519 1,830.9 1,602.3 228.6
===== ========= ======= ======= =====
5
----------
(1) Amounts in parenthesis indicate the number of captive and contract mines
at the mining complex or location. Captive mines are mines which the
Company owns and operates on land owned or leased by it. Contract mines
are mines which other operators mine for the Company under contracts on
land owned or leased by the Company.
(2) Reported for captive operations only.
(3) The Company idled its mining operations at the Dal-Tex complex on July
23, 1999 due to a delay in obtaining mining permits resulting from legal
action in the U.S. District Court for the Southern District of West
Virginia.
(4) Utilizes an 83-cubic-yard dragline and a 51-cubic-yard shovel. A dragline
is a large machine used in the surface mining process to remove layers of
earth and rock covering coal.
(5) Utilizes a 49-cubic-yard dragline, a 43-cubic-yard shovel, a
22-cubic-yard shovel and a 28-cubic-yard loader at the Ruffner mine.
(6) Utilizes a 118-cubic-yard dragline, two 53-cubic-yard shovels and three
28-cubic-yard loaders.
(7) Utilizes 170-cubic-yard, 130-cubic-yard, 90-cubic-yard and 45-cubic-yard
draglines and 53-cubic-yard, 60-cubic-yard and 82-cubic-yard shovels.
(8) The Company idled its mining operations at Coal Creek during the third
quarter of 2000 because its cost structure was not competitive in the
market environment that existed at that time.
(9) Mines are operated by Canyon Fuel. Canyon Fuel is an equity investment
and its financial statements and tons produced are not consolidated into
the Company's financial statements and tons produced. Amounts represent
100% of Canyon Fuel's production and assigned reserves of which the
Company has a 65% interest.
(10) Utilizes 76-cubic-yard and 64-cubic-yard draglines at Medicine Bow and a
32-cubic-yard dragline at Seminoe II.
(11) Reflects the cost of plant, equipment and development at the mine as of
December 31, 2001.
Transportation
Coal from the mines of the Company's subsidiaries is transported by rail,
truck and barge to domestic customers and to Atlantic or Pacific coast
terminals for shipment to domestic and international customers.
The Company's Arch Coal Terminal is located on a 60-acre site on the Big
Sandy River approximately seven miles upstream from its confluence with the
Ohio River. Arch Coal Terminal provides coal storage and transloading services.
Company subsidiaries together own a 17.5% interest in Dominion Terminal
Associates ("DTA"), which leases and operates a ground storage-to-vessel coal
transloading facility (the "DTA Facility") in Newport News, Virginia. The DTA
Facility has a rated throughput capacity of 20 million tons of coal per year
and ground storage capacity of approximately 1.7 million tons. The DTA Facility
serves international customers, as well as domestic coal users located on the
eastern seaboard of the United States.
As of December 31, 2001, Arch Western owned a 5.3% equity interest and
Canyon Fuel owned a 9.0% equity interest in the Los Angeles Export Terminal
("LAXT"), which owns and operates a dry bulk terminal operation within the Port
of Los Angeles. LAXT is served by the Union Pacific railroad. Current annual
rated capacity at the terminal is 10 million tons. The City of Los Angeles owns
the land upon which the facility has been constructed. LAXT has entered into a
35 year lease with the City which provides compensation for its contribution of
cash and land to the venture. The total cost of the facility was approximately
$144 million.
Regulations Affecting Coal Mining
The information contained in the "Contingencies--Reclamation" and "Certain
Trends and Uncertainties--Environmental and Regulatory Factors" sections of
"Management's Discussion and Analysis" of the Company's 2001 Annual Report to
Stockholders is incorporated herein by reference.
6
Glossary of Selected Mining Terms
Assigned Reserves. Recoverable coal reserves that have been designated for
mining by a specific operation.
Auger Mining. Auger mining employs a large auger, which functions much
like a carpenter's drill. The auger bores into a coal seam and discharges coal
out of the spiral onto waiting conveyor belts. After augering is completed, the
openings are reclaimed. This method of mining is usually employed to recover
any additional coal left in deep overburden areas that cannot be reached
economically by other types of surface mining.
Btu--British Thermal Unit. A measure of the energy required to raise the
temperature of one pound of water one degree Fahrenheit.
Coal Seam. A bed or stratum of coal.
Coal Washing. The process of removing impurities, such as ash and sulfur
based compounds, from coal.
Compliance Coal. Coal which, when burned, emits 1.2 pounds or less of
sulfur dioxide per million Btus. Compliance coal requires no mixing with other
coals or use of sulfur dioxide reduction technologies by generators of
electricity to comply with the requirements of the federal Clean Air Act.
Continuous Mining. One of two major underground mining methods now used in
the United States (also see "Longwall Mining"). This process utilizes a
machine--a "continuous miner"--that mechanizes the entire coal extraction
process. The continuous miner removes or "cuts" the coal from the seam. The
loosened coal then falls on a conveyor for removal to a shuttle car or larger
conveyor belt system.
Dragline. A large machine used in the surface mining process to remove the
overburden, or layers of earth and rock, covering a coal seam. The dragline has
a large bucket suspended from the end of a long boom. The bucket, which is
suspended by cables, is able to scoop up great amounts of overburden as it is
dragged across the excavation area.
Longwall Mining. One of two major underground coal mining methods now used
in the United States (see also "Continuous Mining"). This method employs a
rotating drum, which is pulled mechanically back and forth across a face of
coal that is usually several hundred feet long. The loosened coal falls onto a
conveyor for removal from the mine. Longwall operations include a hydraulic
roof support system that advances as mining proceeds, allowing the roof to fall
in a controlled manner in areas already mined.
Low-Sulfur Coal. Coal which, when burned, emits 1.6 pounds or less of
sulfur dioxide per million Btus.
Metallurgical Coal. The various grades of coal suitable for distillation
into carbon in connection with the manufacture of steel. Also known as "met"
coal.
Overburden. Layers of earth and rock covering a coal seam. In surface
mining operations, overburden is removed prior to coal extraction.
Preparation Plant. A preparation plant is a facility for crushing, sizing
and washing coal to prepare it for use by a particular customer. The washing
process has the added benefit of removing some of the coal's sulfur content.
Probable Reserves. Reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves, but the
sites for inspection, sampling and measurement are farther apart; therefore,
the degree of assurance, although lower than that for proven (measured)
reserves, is high enough to assume continuity between points of observation.
Proven Reserves. Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling and (b) the
sites for inspection, sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape, depth and mineral
content of reserves are well established.
7
Reclamation. The restoration of land and environmental values to a mining
site after the coal is extracted. Reclamation operations are usually underway
where the coal has already been taken from a mine, even as mining operations
are taking place elsewhere at the site. The process commonly includes
"recontouring" or shaping the land to its approximate original appearance,
restoring topsoil and planting native grass and ground covers.
Recoverable Reserves. The amount of proven and probable reserves that can
actually be recovered from the reserve base taking into account all mining and
preparation losses involved in producing a saleable product using existing
methods and under current law.
Spot Market. Sales of coal under an agreement for shipments over a period
of one year or less.
Steam Coal. Coal used in steam boilers to produce electricity.
Surface Mine. A mine in which the coal lies near the surface and can be
extracted by removing overburden.
Tons. References to a "ton" mean a "short" or net tonne, which is equal to
2,000 pounds.
Unassigned Reserves. Recoverable coal reserves that have not yet been
designated for mining by a specific Company operation.
Underground Mine. Also known as a "deep" mine. Usually located several
hundred feet below the earth's surface, an underground mine's coal is removed
mechanically and transferred by shuttle car or conveyor to the surface.
Employees
As of March 1, 2002, the Company employed a total of 3,292 persons,
approximately 600 of whom were represented by the UMWA under a collective
bargaining agreement that expires in 2006 and approximately 160 of whom are
represented by the Scotia Employees Association under a collective bargaining
agreement that expires in 2003.
Executive Officers
The following is a list of the Company's executive officers, their ages
and their positions and offices held with the Company during the last five
years.
Bradley M. Allbritten, 44, is Vice President--Human Resources of the
Company and has served in such capacity since March 1, 2000. Mr. Allbritten
served as the Company's Director of Human Resources from February 1999 through
February 2000.
C. Henry Besten, Jr., 53, is Vice President--Strategic Marketing of the
Company and President of the Company's Arch Energy Resources, Inc. subsidiary
and has served in such capacities since July 1997. Mr. Besten also served as
Acting Chief Financial Officer of the Company from January 2000 to December
2000. During the past five years, Mr. Besten has also served as Senior Vice
President--Marketing for Ashland Coal, Inc., ("Ashland Coal"), which merged
with a subsidiary of the Company in July 1997.
John W. Eaves, 44, is Senior Vice President--Marketing of the Company and
President of the Company's Arch Coal Sales Company, Inc. and has served in such
capacities from March 1, 2000 and September 1995, respectively. Mr. Eaves
served as Vice President--Marketing of the Company from July 1997 through
February 2000.
Robert G. Jones, 45, is Vice President--Law, General Counsel and Secretary
of the Company and has served in such capacity since March 1, 2000. Mr. Jones
served the Company as Assistant General Counsel from July 1997 through February
2000 and as Senior Counsel from August 1993 to July 1997.
Steven F. Leer, 49, is President and Chief Executive Officer and a
Director of the Company and has served in such capacity since 1992.
Robert J. Messey, 56, is Senior Vice President and Chief Financial Officer
of the Company and has served in such capacity since December 2000.
8
David B. Peugh, 47, is Vice President--Business Development of the Company
and has served in such capacity since 1993.
Robert W. Shanks, 48, is Vice President--Operations of the Company and has
served in such capacity since July 1997. Since June 1998 he has also served as
President of Arch Western Resources. During the past five years, Mr. Shanks has
also served as President of the Company's Apogee Coal Company subsidiary.
Kenneth G. Woodring, 52, is Executive Vice President--Mining Operations of
the Company and has served in such capacity since July 1997. During the past
five years, Mr. Woodring has also served as Senior Vice President--Operations
of Ashland Coal.
Item 2. PROPERTIES
The Company estimates that it owned or controlled, as of December 31,
2001, approximately 3.43 billion tons of proven and probable recoverable
reserves, approximately 1.83 billion tons of which were assigned reserves and
approximately 1.60 billion tons of which were unassigned reserves. Assigned
reserves are recoverable coal reserves that have been designated to be mined by
a specific operation. Unassigned reserves are recoverable reserves that have
not yet been designated for mining by a specific Company operation. Recoverable
reserves include only saleable coal and do not include coal which would remain
unextracted, such as for support pillars, and processing losses, such as
washery losses. Reserve estimates are prepared by the Company's engineers and
geologists and reviewed and updated periodically. Total recoverable reserve
estimates and reserves dedicated to mines and complexes change from time to
time to reflect mining activities, analysis of new engineering and geological
data, changes in reserve holdings and other factors. The following table
presents the Company's estimated recoverable coal reserves at December 31,
2001:
9
Total Recoverable Reserves (tonnage in millions)
Sulfur Content Reserve
(lbs. per million Btus) Control Mining Method
Total ---------------------------------------- -------------- ---------------------
Recoverable (less than) (greater than)
Reserves Proven Probable 1.2 1.2 - 2.5 2.5 Owned Leased Underground Surface
------------ -------- ---------- ------------ ----------- --------------- ----- ------ ----------- --------
Wyoming ........... 1,633 1,422 211 1,510 115 8 91 1,542 165 1,468
Central Appalachia 1,134 763 371 351 710 73 461 673 864 270
Illinois .......... 254 213 41 -- 4 250 216 38 236 18
Utah* ............. 215 103 112 198 17 -- 6 209 215 --
Colorado .......... 192 140 52 192 -- -- 5 187 192 --
----- ----- --- ----- --- --- --- ----- --- -----
Total ............ 3,428 2,641 787 2,251 846 331 779 2,649 1,672 1,756
===== ===== === ===== === === === ===== ===== =====
Assigned Recoverable Reserves (tonnage in millions)
Sulfur Content Reserve
(lbs. per million Btus) Control Mining Method
Total ---------------------------------------- -------------- ---------------------
Recoverable (less than) (greater than)
Reserves Proven Probable 1.2 1.2 - 2.5 2.5 Owned Leased Underground Surface
------------ -------- ---------- ------------ ----------- --------------- ----- ------ ----------- --------
Wyoming ........... 1,153 1,115 38 1,080 65 8 5 1,148 -- 1,153
Central Appalachia 397 315 82 125 241 31 86 311 247 150
Illinois .......... -- -- -- -- -- -- -- -- -- --
Utah* ............. 155 77 78 151 4 -- 2 153 155 --
Colorado .......... 126 95 31 126 -- -- 4 122 126 --
----- ----- -- ----- --- -- -- ----- --- -----
Total ............ 1,831 1,602 229 1,482 310 39 97 1,734 528 1,303
===== ===== === ===== === == == ===== === =====
Unassigned Recoverable Reserves (tonnage in millions)
Sulfur Content Reserve
(lbs. per million Btus) Control Mining Method
Total ---------------------------------------- -------------- ---------------------
Recoverable (less than) (greater than)
Reserves Proven Probable 1.2 1.2 - 2.5 2.5 Owned Leased Underground Surface
------------ -------- ---------- ------------ ----------- --------------- ----- ------ ----------- --------
Wyoming ........... 480 307 173 430 50 -- 86 394 165 315
Central Appalachia 737 448 289 226 469 42 375 362 617 120
Illinois .......... 254 213 41 -- 4 250 216 38 236 18
Utah* ............. 60 26 34 47 13 -- 4 56 60 --
Colorado .......... 66 45 21 66 -- -- 1 65 66 --
----- ----- --- --- --- --- --- --- --- ---
Total ............ 1,597 1,039 558 769 536 292 682 915 1,144 453
===== ===== === === === === === === ===== ===
----------
* Represents 100% of the reserves held by Canyon Fuel, in which the Company has
a 65% interest.
Over 98% of the Company's recoverable reserves consists of steam coal,
which is coal used in steam boilers to make electricity. Less than 2% of the
Company's recoverable reserves consists of metallurgical coal, which is a grade
of coal used in the production of steel. Metallurgical coal represents an
immaterial amount of the Company's operations.
As of December 31, 2001, approximately 86,528 acres (which includes 100%
of the acreage held by Canyon Fuel) out of the Company's total of approximately
670,000 acres of coal land was leased from the federal government. These leases
have terms expiring between 2001 and 2019, subject to readjustment or extension
and to earlier termination for failure to meet diligent development
requirements. The Company has entered into leases covering substantially all of
its leased reserves which are not scheduled to expire prior to expiration of
projected mining activities. The Company also controls, through ownership or
long-term leases, approximately 5,310 acres of land which are used either for
its coal processing facilities or are being held for possible future
development. Royalties are paid to lessors either as a fixed-price per-ton or
as a percentage of the gross sales price of the mined coal. The Company pays
percentage-based royalties under the majority of its significant leases. The
terms of most of these leases extend until the exhaustion of mineable and
merchantable coal. The remaining leases have initial terms ranging from one to
40 years from the date of their execution, with most containing options to
renew. In some cases, a lease bonus, or prepaid royalty, is required, payable
either at the time of execution of the lease or in annual installments. In most
cases, the prepaid royalty amount is applied to reduce future production
royalties.
10
The Pine Creek, Black Bear, Campbells Creek, Samples, Ruffner and Holden
25/Ragland preparation plants and related loadout facilities are located on
properties held under leases which expire at varying dates over the next thirty
years with either optional 20-year extensions or with unlimited extensions, and
the balance of the Company's preparation plants and loadout facilities are
located on property owned by the Company.
All of the identified coal reserves held by the Company's subsidiaries
have been subject to preliminary coal seam analysis to test sulfur content. Of
these reserves, approximately 66% consist of compliance coal while an
additional 25% could be sold as low-sulfur coal. The balance is classified as
high-sulfur coal. Some of the Company's low-sulfur coal can be marketed as
compliance coal when blended with other compliance coal. Accordingly, most of
the Company's reserves are primarily suitable for the domestic steam coal
markets. However, a substantial portion of the low-sulfur and compliance coal
reserves at the Mingo Logan operations may also be used as a high-volatile,
low-sulfur, metallurgical coal.
Title to coal properties held by lessors or grantors to the Company and
its subsidiaries and the boundaries of properties are normally verified at the
time of leasing or acquisition. However, in cases involving less significant
properties and consistent with industry practices, title and boundaries are not
completely verified until such time as the Company's independent operating
subsidiaries prepare to mine such reserves. If defects in title or boundaries
of undeveloped reserves are discovered in the future, control of and the right
to mine such reserves could be adversely affected.
From time to time, lessors or sublessors of land leased by the Company's
subsidiaries have sought to terminate such leases on the basis that such
subsidiaries have failed to comply with the financial terms of the leases or
that the mining and related operations conducted by such subsidiaries are not
authorized by the leases. Some of these allegations relate to leases upon which
the Company conducts operations material to the Company's consolidated
financial position, results of operations and liquidity, but the Company does
not believe any pending claims by such lessors or sublessors have merit or will
result in the termination of any material lease or sublease.
The Company must obtain permits from applicable state regulatory
authorities before it begins to mine particular reserves. Applications for
permits require extensive engineering and data analysis and presentation, and
must address a variety of environmental, health and safety matters associated
with a proposed mining operation. These matters include the manner and
sequencing of coal extraction, the storage, use and disposal of waste and other
substances and other impacts on the environment, the construction of overburden
fills and water containment areas, and reclamation of the area after coal
extraction. The Company is required to post bonds to secure performance under
its permits. As is typical in the coal industry, the Company strives to obtain
mining permits within a time frame that allows it to mine reserves as planned
on an uninterrupted basis. The Company generally begins preparing applications
for permits for areas that it intends to mine up to three years in advance of
their expected issuance date. Regulatory authorities have considerable
discretion in the timing of permit issuance and the public has rights to
comment on and otherwise engage in the permitting process, including through
intervention in the courts.
The Company's reported coal reserves are those that could be economically
and legally extracted or produced at the time of their determination. In
determining whether the Company's reserves meet this standard, it takes into
account, among other things, the Company's potential inability to obtain a
mining permit, the possible necessity of revising a mining plan, changes in
estimated future costs, changes in future cash flows caused by changes in costs
required to be incurred to meet regulatory requirements and obtaining mining
permits, variations in quantity and quality of coal, and varying levels of
demand and their effects on selling prices. Except as described elsewhere in
this document with respect to permits to conduct mining operations involving
valley fills, which has been taken into account in determining the Company's
reserves, the Company is not currently aware of matters which would
significantly hinder its ability to obtain future mining permits with respect
to its reserves.
The carrying cost of the Company's coal reserves at December 31, 2001
(which does not include the Company's 65% share of Canyon Fuel) was $902.0
million, consisting of $37.2 million of prepaid royalties and the $864.8
million net book value of coal lands and mineral rights.
11
The Company's executive headquarters occupy approximately 50,000 square
feet of leased space at One CityPlace Drive, in St. Louis, Missouri. See "Item
1. Business" for a further description of the Company's subsidiaries' mining
complexes, mines, transportation facilities and other operations. The Company's
subsidiaries currently own or lease the equipment utilized in their mining
operations.
Item 3. LEGAL PROCEEDINGS
The information required by this Item is contained in the
"Contingencies--Legal Contingencies" section of "Management's Discussion and
Analysis" contained in the Company's 2001 Annual Report to Stockholders and is
incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the
Company through the solicitation of proxies or otherwise during the fourth
quarter of 2001.
12
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is contained in the Company's 2001
Annual Report to Stockholders under the caption "Stockholder Information" and
is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information required by this Item is contained in the Company's 2001
Annual Report to Stockholders under the caption "Selected Financial
Information", and is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is contained in the Company's 2001
Annual Report to Stockholders under the caption "Management's Discussion and
Analysis", and is incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is contained in the Company's 2001
Annual Report to Stockholders under the caption "Management's Discussion and
Analysis", and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Part IV, Item 14 of this Annual Report for the
information required by Item 8.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the subcaptions "Nominees For a Three-Year
Term That Will Expire in 2005", "Directors Whose Terms Will Expire in 2004",
and "Directors Whose Terms Will Expire in 2003" which appear under the caption
"Election of Directors" in the Company's Proxy Statement to be distributed to
Company stockholders in connection with the Company's 2002 Annual Meeting (the
"2002 Proxy Statement"). See also the list of the Company's executive officers
and related information under "Executive Officers" in Part I, Item 1 herein.
Item 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing in the "Summary Compensation Table", the sections
entitled "Stock Option Grants", "Stock Option Exercises and Year-End Values",
and the Pension Plan section (including the table therein), the Employment
Agreements section, and the Compensation of Directors section in the 2002 Proxy
Statement. No portion of the Personnel and Compensation Committee Report on
Executive Compensation for 2001 or the Arch Coal Performance Graph is
incorporated herein in reliance on Regulation S-K, Item 402(a)(8).
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the caption "Ownership of Arch Coal Common
Stock" in the 2002 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
14
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of Arch Coal, Inc.
and subsidiaries included in the Company's 2001 Annual Report to Stockholders
are incorporated by reference:
Consolidated Statements of Operations--Years Ended December 31, 2001, 2000
and 1999
Consolidated Balance Sheets--December 31, 2001 and 2000
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
2001, 2000 and 1999
Consolidated Statements of Cash Flows--Years Ended December 31, 2001, 2000
and 1999
Notes to Consolidated Financial Statements
The following financial statements of Canyon Fuel Company, LLC are
incorporated by reference to Exhibit 99 to this Annual Report on Form 10-K:
Statements of Operations--Years Ended December 31, 2001, 2000 and 1999
Balance Sheets--December 31, 2001 and 2000
Statements of Members' Equity--Years Ended December 31, 2001, 2000 and
1999
Statements of Cash Flows--Years Ended December 31, 2001, 2000 and 1999
Notes to Financial Statements
(a)(2) The following consolidated financial statement schedule of Arch
Coal, Inc. and subsidiaries is included in Item 14 at the page indicated:
II--Valuation and Qualifying Accounts at page 21.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
(a)(3) Exhibits filed as part of this Report are as follows:
3.1 Restated Certificate of Incorporation of Arch Coal, Inc.
(incorporated herein by reference to Exhibit 3.1 of the Company's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2000)
3.2 Restated and Amended Bylaws of Arch Coal, Inc. (incorporated herein
by reference to the Company's Annual Report on Form 10-K for the
Year Ended December 31, 2000)
4.1 Stockholders Agreement, dated as of April 4, 1997, among Carboex
International, Ltd., Ashland Inc. and Arch Coal, Inc. (formerly
Arch Mineral Corporation) (incorporated herein by reference to
Exhibit 4.1 of the Company's Registration Statement on Form S-4
(Registration No. 333-28149) filed on May 30, 1997)
4.2 Assignment of Rights, Obligations and Liabilities under the
Stockholders Agreement between Carboex International, Limited and
Carboex, S.A. effective as of October 15, 1998 (incorporated herein
by reference to Exhibit 4.2 of the Company's Annual Report on Form
10-K for the Year Ended December 31, 1998)
4.3 Registration Rights Agreement, dated as of April 4, 1997, among
Arch Coal, Inc. (formerly Arch Mineral Corporation), Ashland Inc.,
Carboex International, Ltd. and the entities listed on Schedules I
and II thereto (incorporated herein by reference to Exhibit 4.2 of
the Company's Registration Statement on Form S-4 (Registration No.
333-28149) filed on May 30, 1997, except for amended Schedule I
thereto, incorporated herein by reference to Exhibit 4.2 of the
Company's Quarterly Report on Form 10-Q for the Quarter Ended June
30, 1998)
15
4.4 Assignment of Registration Rights between Carboex International,
Limited and Carboex, S.A. effective as of October 15, 1998
(incorporated herein by reference to Exhibit 4.4 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1998)
4.5 Agreement Relating to Nonvoting Observer, executed as of April 4,
1997, among Carboex International, Ltd., Ashland Inc., Ashland
Coal, Inc. and Arch Coal, Inc. (formerly Arch Mineral Corporation)
(incorporated herein by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-4 (Registration No. 333-28149)
filed on May 30, 1997)
4.6 Assignment of Right to Maintain a Non-Voting Observer at Meetings
of the Board of Directors of Arch Coal, Inc. between Carboex
International, Limited and Carboex, S.A. effective as of October
15, 1998 (incorporated herein by reference to Exhibit 4.6 of the
Company's Annual Report on Form 10-K for the Year Ended December
31, 1998)
4.7 $600,000,000 Revolving Credit Facility, $300,000,000 Term Loan
Credit Agreement by and among Arch Coal, Inc., the Lenders party
thereto, PNC Bank, National Association, as Administrative Agent,
Morgan Guaranty Trust Company of New York, as Syndication Agent,
and First Union National Bank, as Documentation Agent, dated as of
June 1, 1998 (incorporated herein by reference to Exhibit 4.1 of
the Company's Current Report on Form 8-K filed June 15, 1998)
4.8 Amendment 1 to Credit Agreement by and among Arch Coal, Inc., the
Lenders party thereto, PNC Bank, National Association, as
Administrative Agent, Morgan Guaranty Trust Company of New York, as
Syndication Agent, and First Union National Bank, as Documentation
Agent, dated as of January 21, 2000 (incorporated by reference to
the Company's Annual Report on Form 10-K for the Year Ended
December 31, 2000)
4.9 $675,000,000 Term Loan Credit Agreement by and among Arch Western
Resources LLC, the Banks party thereto, PNC Bank, National
Association, as Administrative Agent, Morgan Guaranty Trust Company
of New York, as Syndication Agent, and NationsBank N.A., as
Documentation Agent dated as of June 1, 1998 (incorporated herein
by reference to Exhibit 4.2 of the Company's Current Report on Form
8-K filed June 15, 1998)
4.10 Omnibus Amendment Agreement dated as of June 1, 1998 in respect to
Arch Coal Trust no. 1998-1, Parent Guaranty and Suretyship
Agreement, Lease Intended as Security, Subsidiary Guaranty and
Suretyship Agreement, each dated as of January 15, 1998, among
Apogee Coal Company, Catenary Coal Company, Hobet Mining, Inc.,
Arch Coal, Inc., Great-West Life & Annuity Insurance Company, Bank
of Montreal, Barclays Bank, PLC, First Union National Bank, BA
Leasing and Capital Corporation, First Security Bank, National
Association, Arch Coal Sales Company, Inc., Ark Land Company and
Mingo Logan Coal Company (incorporated herein by reference to
Exhibit 4.3 of the Company's Current Report on Form 8-K filed June
15, 1998)
4.11 Lease Intended as Security dated as of January 15, 1998, among
Apogee Coal Company, Catenary Coal Company and Hobet Mining, Inc.,
as Lessees; The First Security Bank, National Association, as
Lessor, and the Certificate Purchasers named therein (incorporated
herein by reference to Exhibit 4.5 of the Company's Annual Report
on Form 10-K for the Year Ended December 31, 1997)
4.12 Form of Rights Agreement, dated March 3, 2000, between Arch Coal,
Inc. and First Chicago Trust Company of New York, as Rights Agent
(incorporated herein by reference to Exhibit 1 to a current report
on Form 8-A filed on March 9, 2000)
4.13 Description of Indenture pursuant to Shelf Registration Statement
(incorporated herein by reference to the Company's Registration on
Form S-3 (Registration No. 333-58738) filed on April 11, 2001)
10.1 Retention Agreement between Arch Coal, Inc. and Steven F. Leer,
dated June 5, 2000 (incorporated herein by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 2000)
16
10.2 Form of Retention Agreement between Arch Coal, Inc. and each of its
Executive Officers (other than its Chief Executive Officer)
(incorporated herein by reference to Exhibit 10.2 of the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000)
10.3 Coal Off-Take Agreement, executed as of April 4, 1997, among Arch
Coal, Inc. (formerly Arch Mineral Corporation), Carboex
International, Ltd. and Ashland Inc. (incorporated herein by
reference to Exhibit 10.1 of the Company's Registration Statement
on Form S-4 (Registration No. 333-28149) filed on May 30, 1997)
10.4 Sales Agency Agreement, executed as of April 4, 1997, among Arch
Coal, Inc. (formerly Arch Mineral Corporation), Ashland Inc. and
Carboex S.A. (incorporated herein by Reference to Exhibit 10.2 of
the Company's Registration Statement on Form S-4 (Registration No.
333-28149) filed on May 30, 1997)
10.5 Assignment, Assumption and Amendment of Coal Sales Agency
Agreement, executed as of April 4, 1997, among Arch Coal, Inc.
(formerly Arch Mineral Corporation), Ashland Coal, Inc.,
Saarbergwerke AG and Carboex International, Ltd. (incorporated
herein by reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-4 (Registration No. 333-28149) filed on May 30,
1997)
10.6 Deed of Lease and Agreement between Dingess-Rum Coal Company and
Amherst Coal Company (predecessor to Ark Land Company), dated June
1, 1962, as supplemented January 1, 1968, June 1, 1973, July 1,
1974 and November 12, 1987; Lease Exchange Agreement dated July 2,
1979 amended as of January 1, 1984, January 7, 1993 and February
24, 1993; Partial Release dated as of May 6, 1988; Assignments
dated March 15, 1990 and October 5, 1990 (incorporated herein by
reference to Exhibit 10.8 of the Company's Registration Statement
on Form S-4 (Registration No. 333-28149) filed on May 30, 1997)
10.7 Agreement of Lease by and between Shonk Land Company, Limited
Partnership and Lawson Hamilton (predecessor to Ark Land Company),
dated February 8, 1983, as amended October 7, 1987, March 9, 1989,
April 1, 1992, October 31, 1992, December 5, 1992, February 16,
1993, August 4, 1994, October 1, 1995, July 31, 1996 and November
27, 1996 (incorporated herein by reference to Exhibit 10.9 of the
Company's Registration Statement on Form S-4 (Registration No.
333-28149) filed on May 30, 1997)
10.8 Lease between Little Coal Land Company and Ashland Land &
Development Co., a wholly-owned subsidiary of Ashland Coal, Inc.
which was merged into Allegheny Land Company, a second tier
subsidiary of the Company (incorporated herein by reference to
Exhibit 10.11 of a Post-Effective Amendment No. 1 to a Registration
Statement on Form S-1 (Registration No. 33-22425), as amended,
filed by Ashland Coal, Inc., a subsidiary of the Company, on August
11, 1988)
10.9 Agreement of Lease dated January 1, 1988, between Courtney Company
and Allegheny Land Company (legal successor by merger with
Allegheny Land Co. No. 2, the assignee of Primeacre Land
Corporation under October 5, 1992, assignments), a second-tier
subsidiary of the Company (incorporated herein by reference to
Exhibit 10.3 to the Annual Report on Form 10-K for the Year Ended
December 31, 1995, filed by Ashland Coal, Inc., a subsidiary of the
Company)
10.10 Lease between Dickinson Properties, Inc., the Southern Land
Company, and F. B. Nutter, Jr. and F. B. Nutter, Sr., predecessors
in interest to Hobet Mining & Construction Co., Inc., an
independent operating subsidiary of the Company that subsequently
changed its name to Hobet Mining, Inc. (incorporated herein by
reference to Exhibit 10.14 of a Post-Effective Amendment No. 1 to a
Registration Statement on Form S-1 (Registration No. 33-22425), as
Amended, filed by Ashland Coal, Inc., a subsidiary of the Company,
on August 11, 1988)
10.11 Lease Agreement between Fielden B. Nutter, Dorothy Nutter and Hobet
Mining & Construction Co., Inc., an independent operating
subsidiary of the Company that subse-
17
quently changed its name to Hobet Mining, Inc. (incorporated
herein by reference to Exhibit 10.22 of a Post-Effective
Amendment No. 1 to a Registration Statement on Form S-1
(Registration No. 33-22425), as amended, filed by Ashland Coal,
Inc., a subsidiary of the Company, on August 11, 1988)
10.12 Lease and Modification Agreement between Horse Creek Coal Land
Company, Ashland and Hobet Mining & Construction Co., Inc., an
independent operating subsidiary of the Company that subsequently
changed its name to Hobet Mining, Inc. (incorporated herein by
reference to Exhibit 10.24 of a Post-Effective Amendment No. 1 to a
Registration Statement on Form S-1 (Registration No. 33-22425), as
amended, filed by Ashland Coal, Inc., a subsidiary of the Company,
on August 11, 1988)
10.13 Lease Agreement between C. C. Lewis Heirs Limited Partnership and
Allegheny Land Company, a second-tier subsidiary of the Company
(incorporated herein by reference to Exhibit 10.25 of a
Post-Effective Amendment No. 1 to a Registration Statement on Form
S-1 (Registration No. 33-22425), as amended, filed by Ashland Coal,
Inc., a subsidiary of the Company, on August 11, 1988)
10.14 Sublease between F. B. Nutter, Sr., et al., and Hobet Mining &
Construction Co., Inc., an independent operating subsidiary of the
Company that subsequently changed its name to Hobet Mining, Inc.
(incorporated herein by reference to Exhibit 10.27 of a
Post-Effective Amendment No. 1 to a Registration Statement on Form
S-1 (Registration No. 33-22425), as amended, filed by Ashland Coal,
Inc., a subsidiary of the Company, on August 11, 1988)
10.15 Coal Lease Agreement dated as of March 31, 1992, among Hobet
Mining, Inc. (successor by merger with Dal-Tex Coal Corporation) as
lessee and UAC and Phoenix Coal Corporation, as lessors, and
related Company Guarantee (incorporated herein by reference to a
Current Report on Form 8-K dated April 6, 1992 filed by Ashland
Coal, Inc., a subsidiary of the Company)
10.16 Lease dated as of October 1, 1987, between Pocahontas Land
Corporation and Mingo Logan Collieries Company whose name is now
Mingo Logan Coal Company (incorporated herein by reference to
Exhibit 10.3 to Amendment No. 1 to a Current Report on Form 8-K
filed on February 14, 1990 by Ashland Coal, Inc., a subsidiary of
the Company)
10.17 Consent, Assignment of Lease and Guaranty dated January 24, 1990,
among Pocahontas Land Corporation, Mingo Logan Coal Company,
Mountain Gem Land, Inc. and Ashland Coal, Inc. (incorporated herein
by reference to Exhibit 10.4 to Amendment No. 1 to a Current Report
on Form 8-K filed on February 14, 1990 by Ashland Coal, Inc., a
subsidiary of the Company)
10.18 Federal Coal Lease dated as of June 24, 1993 between the United
States Department of the Interior and Southern Utah Fuel Company
(incorporated herein by reference to Exhibit 10.17 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1998)
10.19 Federal Coal Lease between the United States Department of the
Interior and Utah Fuel Company (incorporated herein by reference to
Exhibit 10.18 of the Company's Annual Report on Form 10-K for the
Year Ended December 31, 1998)
10.20 Federal Coal Lease dated as of July 19, 1997 between the United
States Department of the Interior and Canyon Fuel Company, LLC
(incorporated herein by reference to Exhibit 10.19 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1998)
10.21 Federal Coal Lease dated as of January 24, 1996 between the United
States Department of the Interior and the Thunder Basin Coal
Company (incorporated herein by reference to Exhibit 10.20 of the
Company's Annual Report on Form 10-K for the Year Ended December
31, 1998)
10.22 Federal Coal Lease Readjustment dated as of November 1, 1967
between the United States Department of the Interior and the
Thunder Basin Coal Company (incorporated herein by reference to
Exhibit 10.21 of the Company's Annual Report on Form 10-K for the
Year Ended December 31, 1998)
18
10.23 Federal Coal Lease effective as of May 1, 1995 between the United
States Department of the Interior and Mountain Coal Company
(incorporated herein by reference to Exhibit 10.22 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1998)
10.24 Federal Coal Lease dated as of January 1, 1999 between the
Department of the Interior and Ark Land Company (incorporated
herein by reference to Exhibit 10.23 of the Company's Annual Report
on Form 10-K for the Year Ended December 31, 1998)
10.25 Federal Coal Lease dated as of October 1, 1999 between the United
States Department of the Interior and Canyon Fuel Company, LLC
(incorporated herein by reference to Exhibit 10 of the Company's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1999)
10.26 Form of Indemnity Agreement between Arch Coal, Inc. and Indemnitee
(as defined therein) (incorporated herein by reference to Exhibit
10.15 of the Company's Registration Statement on Form S-4
(Registration No. 333-28149) filed on May 30, 1997)
10.27 Arch Coal, Inc. 1998 Incentive Compensation Plan (incorporated
herein by reference to Exhibit 10.22 of the Company's Annual Report
on Form 10-K for the Year Ended December 31, 1997)
10.28 Arch Coal, Inc. (formerly Arch Mineral Corporation) Deferred
Compensation Plan (incorporated herein by reference to Exhibit 4.1
of the Company's Registration Statement on Form S-8 (Registration
No. 333-68131) filed on December 1, 1998)
10.29 Arch Coal, Inc. 1997 Stock Incentive Plan (incorporated herein by
reference to Annex E to Appendix A to the Proxy
Statement/Prospectus forming part of the Company's Registration
Statement on Form S-4 (Registration No. 333-28149) filed on May 30,
1997)
10.30 Arch Mineral Corporation 1996 ERISA Forfeiture Plan (incorporated
herein by reference to Exhibit 10.20 to the Company's Registration
Statement on Form S-4 (Registration No. 333-28149) filed on May 30,
1997)
10.31 Arch Coal, Inc. Outside Directors' Deferred Compensation Plan
effective January 1, 1999 (incorporated herein by reference to
Exhibit 10.30 of the Company's Annual Report on Form 10-K for the
Year Ended December 31, 1998)
10.32 Second Amendment to the Arch Mineral Corporation Supplemental
Retirement Plan effective January 1, 1998 (incorporated herein by
reference to Exhibit 10.31 of the Company's Annual Report on Form
10-K for the Year Ended December 31, 1998)
13 Portions of the Company's Annual Report to Stockholders for the
year ended December 31, 2001 (filed herewith)
18 Preferability Letter of Ernst & Young LLP dated May 11, 1999
(incorporated herein by reference to Exhibit 18 of the Company's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1999)
21 Subsidiaries of the Company (filed herewith)
23.1 Consent of Ernst & Young LLP (filed herewith)
24 Power of Attorney (filed herewith)
99 Financial Statements of Canyon Fuel Company, LLC (filed herewith)
----------
* Exhibits 10.27, 10.28, 10.29, 10.30 and 10.32 are executive compensation
plans.
** Upon written or oral request to the Company's Secretary, a copy of any of
the above exhibits will be furnished at cost.
19
(b) Reports on Form 8-K
Report on Form 8-K announcing the Company's third quarter 2001
earnings was filed by the Company on October 23, 2001.
(d) Financial Statements of Canyon Fuel Company, LLC (incorporated by
reference to Exhibit 99 of this Annual Report on Form 10-K for the Year
Ended December 31, 2001).
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ARCH COAL, INC.
(Registrant)
Date: March 15, 2002
By: /s/ Steven F. Leer
-----------------------------------------
Steven F. Leer
President and Chief Executive Officer
Signatures Capacity
---------- --------
/s/ Steven F. Leer President and Chief Executive Officer and Director
----------------------------------
Steven F. Leer
/s/ Robert J. Messey Senior Vice President and Chief Financial Officer
---------------------------------- (Principal Financial Officer)
Robert J. Messey
/s/ John W. Lorson Controller
----------------------------------
John W. Lorson
* Director
----------------------------------
James R. Boyd
* Director
----------------------------------
Frank M. Burke
* Director
----------------------------------
Ignacio Dominguez Urquijo
* Director
----------------------------------
Douglas H. Hunt
* Director
----------------------------------
James L. Parker
* Director
----------------------------------
A. Michael Perry
* Director
----------------------------------
Robert G. Potter
* Director
----------------------------------
Theodore D. Sands
*By: /s/ Robert G. Jones
------------------------------
Robert G. Jones
As Attorney-in-fact
ORIGINAL POWERS OF ATTORNEY AUTHORIZING STEVEN F. LEER AND ROBERT G. JONES, AND
EACH OF THEM, TO SIGN THIS ANNUAL REPORT ON FORM 10-K AND AMENDMENTS THERETO ON
BEHALF OF THE ABOVE-NAMED PERSONS HAVE BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AS EXHIBIT 24 TO THIS REPORT
21
SCHEDULE II
ARCH COAL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions(1) of Year
----------- ------------ ------------ --------------- --------
Year Ended December 31, 2001
Reserves Deducted from Asset Accounts
Other Assets--Other Notes and Accounts Receivable ......... 59 544 59 544
Current Assets--Supplies Inventory ........................ 19,839 1,674 4,915 16,598
Year Ended December 31, 2000
Reserves Deducted from Asset Accounts
Other Assets--Other Notes and Accounts Receivable ......... 541 -- 482 59
Current Assets--Supplies Inventory ........................ 23,542 4,223 7,926 19,839
Year Ended December 31, 1999
Reserves Deducted from Asset Accounts
Other Assets--Other Notes and Accounts Receivable ......... 582 325 366 541
Current Assets--Supplies Inventory ........................ 23,901 5,966 6,325 23,542
----------
(1) Reserves utilized, unless otherwise indicated.
22