================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NUMBER 1-815 CONSOL ENERGY INC. INVESTMENT PLAN FOR SALARIED EMPLOYEES CONSOL PLAZA 1800 WASHINGTON ROAD PITTSBURGH, PENNSYLVANIA 15241 (FULL TITLE OF THE PLAN) CONSOL ENERGY INC. 300 DELAWARE AVENUE SUITE 567 WILMINGTON, DELAWARE 19801 ================================================================================ AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE CONSOL Energy Inc. Investment Plan for Salaried Employees Years ended December 31, 2001 and 2000 with Report of Independent Auditors CONSOL Energy Inc. Investment Plan for Salaried Employees Audited Financial Statements and Supplemental Schedule Years ended December 31, 2001 and 2000 Contents Report of Independent Auditors........................................ 1 Audited Financial Statements Statements of Net Assets Available for Benefits....................... 2 Statement of Changes in Net Assets Available for Benefits............. 3 Notes to Financial Statements......................................... 4 Supplemental Schedule Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year)....... 11 Report of Independent Auditors To the Investment Plan Committee CONSOL Energy Inc. We have audited the accompanying statements of net assets available for benefits of the CONSOL Energy Inc. Investment Plan for Salaried Employees as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits for the year ended December 31, 2001. 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 auditing standards generally accepted in the 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 of the Plan at December 31, 2001 and 2000, and the changes in its net assets available for benefits for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held at end of year as of December 31, 2001 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement 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 our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. June 6, 2002 1 CONSOL Energy Inc. Investment Plan for Salaried Employees Statements of Net Assets Available for Benefits (Dollars in Thousands) December 31 2001 2000 ----------- ---------- Investment at contract value: Stable Value Fund $505,379 $ 496,674 Investments at fair value: Noninterest-bearing cash and cash equivalents 951 196 Interests in registered investment companies 149,128 175,234 Barclays 3-Way Fund 17,621 20,907 Aggressive Asset Allocation Portfolio 941 1,310 Conservative Asset Allocation Portfolio 289 418 Moderate Asset Allocation Portfolio 1,291 1,197 Merrill Lynch Small Cap Index Trust 1,112 880 Merrill Lynch International Index Trust 862 936 Merrill Lynch Equity Index Trust 15,672 18,635 E.I. DuPont de Nemours & Company common stock 189,099 245,939 CONSOL Stock Fund 35,827 19,960 Daimler Chrysler common stock 131 146 Participant loans 16,504 18,350 ----------- ---------- Total investments 934,807 1,000,782 Employee contributions receivable 1,769 1,535 Employer contributions receivable 4,999 4,871 Pending Settlement Fund 57 2,494 ----------- ---------- Net assets available for benefits $941,632 $1,009,682 =========== ========== See accompanying notes. 2 CONSOL Energy Inc. Investment Plan for Salaried Employees Statement of Changes in Net Assets Available for Benefits Year ended December 31, 2001 (Dollars in Thousands) Contributions: Employer contributions $ 11,401 Employee contributions 20,299 Rollover contributions 7,774 ----------- Total contributions 39,474 Investment income (dividends and interest) 11,803 Net realized and unrealized depreciation in fair value of investments (42,570) ----------- 8,707 Benefits paid to participants (76,757) ----------- Decrease in net assets available for benefits (68,050) Net assets available for benefits at beginning of year 1,009,682 ----------- Net assets available for benefits at end of year $ 941,632 =========== See accompanying notes. 3 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements December 31, 2001 (Dollars in Thousands) 1. Description of the Plan The following description of the CONSOL Energy Inc. Investment Plan for Salaried Employees (the Plan) provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan established in 1953. Salaried, operations and maintenance and, in certain circumstances, production and maintenance employees of CONSOL Energy Inc. (CONSOL or the Company) and participating employers are eligible to participate in the Plan on the first of the month following regular full-time employment. In addition, temporary employees are eligible to participate in the Plan upon completion of a period of 12 consecutive months, commencing upon their employment date or anniversary date thereof, during which the employee completes 1,000 or more hours of service. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). On April 29, 1999, CONSOL Energy Inc. underwent an initial public offering. In connection with the public offering, the Plan offers CONSOL Energy Inc. common stock (CONSOL Stock Fund) as an investment option. Participants of the Plan were able to transfer funds into the CONSOL Stock Fund in June 1999 and to allocate contributions to this fund in July 1999. In addition, participants were no longer able to allocate contributions to E.I. DuPont de Nemours & Company common stock (DuPont Stock Fund). Contributions Each year participants may, with certain restrictions, contribute up to 19% of monthly base pay to the Plan exclusive of supplemental make-up deposits. CONSOL and participating employers match these contributions, dollar for dollar, up to 6% of base pay (as defined by the Plan). Contributions may be made with before-tax or after-tax dollars. In addition, subject to certain limitations, a participant is allowed to make lump-sum savings deposits in cash to the Plan. 4 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 1. Description of the Plan (continued) Participant Accounts Each participant's account is credited with the participant's contributions and allocations of the Company's contributions and plan investment earnings and is charged with an allocation of administrative expenses and plan investment losses. Allocations are based on participant earnings or account balances, as defined. Forfeited balances of terminated participants' nonvested accounts are used to reduce future company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Vesting Through December 31, 2001, Plan participants generally become vested upon completion of five years participation in the Plan or five cumulative years of service. Effective January 1, 2002, Plan participants will vest upon completion of three cumulative years of service. Participants are always 100% vested in their deposits and in the earnings on both their deposits and the Company's contributions. Participant Loans Participants may borrow up to one-half of their nonforfeitable account balances subject to certain minimum and maximum loan limitations. Such loans are repayable over periods of 12 to 60 months (120 months maximum if for the purchase of a principal residence) and bear an interest rate equal to the average rate charged by selected major banks for secured personal loans. Principal and interest are paid ratably through payroll deductions. Payment of Benefits Participants who retire from active service may elect to withdraw their entire account in a lump-sum, to defer withdrawal until April 1 of the calendar year following the year in which the participant attains age 70 1/2, or to elect an option to have their account distributed over a period of not less than two years or more than a period which would pay the account balance during the employee's actuarial life in either a fixed or variable amount. Before-tax deposits may be withdrawn only in the event of an employee's retirement, death, termination, attainment of age 59 1/2 or defined hardship. At December 31, 2001, approximately $903,430 was payable to withdrawing participants. The Plan has recorded this amount as a liability on the Form 5500 as these claims have been processed and approved for payment but not paid prior to year-end. For financial statement purposes, the payments have been deducted from the respective assets. Accordingly, benefit distributions and net assets available for benefits included in the financial statements are consistent with those reported on the Form 5500. 5 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 1. Description of the Plan (continued) Plan Termination Although it has not expressed any intent to do so, CONSOL 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. 2. Summary of Significant Accounting Policies Investment Valuation and Income Recognition For financial reporting purposes, the assets of the Plan are reflected on the accrual basis of accounting. The underlying assets of the Stable Value Fund consist primarily of guaranteed investment contracts (GIC), separate account portfolios (SAP), and synthetic guaranteed investment contracts (SYN). These contracts are held for investment purposes by the Plan and are fully benefit responsive. The Stable Value Fund is stated at cost plus accrued interest, using the contracted interest rates applied to the daily account balances. The contract value of the investment contracts is provided by the Plan's trustee and approximates market value. Changes in contract value are recognized in the statement of changes in net assets available for benefits as they occur. Investments in common stock funds and interests in registered investment companies are stated at fair value based on publicly quoted market prices. Investments in the Merrill Lynch Small Cap Index Trust, Merrill Lynch International Index Trust, Merrill Lynch Equity Index Trust, Barclays 3-Way Fund, and Aggressive Asset Allocation, Conservative Asset Allocation and Moderate Asset Allocation Portfolios are stated at the fair value of all underlying assets as reported by the applicable custodian. The unit value or price of all investments reflects the dollar amount at which participants' accounts are valued at the end of the period reported. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Gains and losses on the sale of the E.I. DuPont de Nemours & Company (DuPont) and CONSOL Energy Inc. common stock are based on average cost of the securities sold and are recognized on the trade date. Brokerage commissions and Securities and Exchange Commission fees in connection with the sale of E.I. DuPont de Nemours & Company common stock, CONSOL Energy Inc. common stock and Daimler Chrysler common stock are added to the cost thereof or deducted from the sales proceeds derived therefrom. 6 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States, requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Investments The following investments represent 5% or more of the Plan's net assets: December 31 2001 2000 ------------- ----------- E.I. DuPont de Nemours & Company common stock, 4,448,339 and 5,090,636 shares, respectively $ 189,099 $ 245,939 Monumental Life Insurance Company--5.92%, 12/31/2005 52,146 33,805 Monumental Life Insurance Company--6.87%, 1/1/2004 - 50,620 Morgan Guaranty Trust Company--6.21%, 12/31/2025 52,236 41,585 Aetna Life Insurance and Annuity Company--6.24%, 1/1/2025 48,338 - Aetna Life Insurance and Annuity Company--6.98%, 4/1/2025 53,519 49,696 Deutsche Bank--6.29%, 12/31/2025 52,294 39,979 Union Bank of Switzerland--6.14%, 12/31/2025 52,245 45,396 Fidelity Investments Magellan Fund, 417,694 and 426,260 shares, respectively 43,532 50,853 7 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Investments (continued) During 2001, the Plan's investments (including investments bought, sold, as well as held during the year) (depreciated) appreciated as follows: Net (Depreciation) Appreciation in Fair Value During Fair Value at End Year of Year ------------------- ----------------- Fair value as determined by quoted market price: Interests in registered investment companies $ (35,618) $ 149,128 Common stock: CONSOL Stock Fund (5,001) 35,827 DuPont Stock Fund (30,124) 189,099 Other 3 131 Stable Value Fund 31,946 505,379 Fair value reported by applicable custodian (3,776) 37,788 Noninterest-bearing cash and cash equivalents - 951 ------------------- ----------------- $ (42,570) $ 918,303 =================== ================= The Stable Value Fund is a nonpooled separate account held by the Plan. Prior to March 1999, the Plan and the Thrift Plan for Employees of Conoco Inc., a wholly owned subsidiary of DuPont, jointly owned the Stable Value Fund. During 1999, the balance of all investment contracts, as of December 31, 1998, was allocated to the two plans by Merrill Lynch based on the relationship of the Plan's Stable Value Fund participant balances to total Stable Value Fund participant balances. The investment contracts are entered into based on an evaluation of the credit risk of the contract issuers and/or third party guarantors. Collateral is generally not provided. The composition of assets of the Stable Value Fund as of December 31, 2001 and 2000 are as follows: 2001 2000 --------- --------- Investment contracts $ 505,379 $ 495,908 Short-term investments - 766 --------- --------- $ 505,379 $ 496,674 ========= ========= 8 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 3. Investments (continued) The composition of changes in net assets of the Stable Value Fund as of December 31, 2001 is as follows: Employer contributions $ 5,563 Employee contributions 9,308 Rollover contributions 5,987 ----------- Total contributions 20,858 Interest and dividend income 609 Net realized/unrealized appreciation in fair value 31,946 Benefits paid to participants (51,592) Net loan activity (12) Interfund transfers 6,896 ----------- Increase in net assets available for benefits 8,705 Net assets at beginning of year 496,674 ----------- Net assets at end of year $ 505,379 =========== The aggregate crediting rates for all contracts as of December 31, 2001 was 6.39%. The crediting rates for SAP and SYN contracts are reset annually and are based on the market value of the underlying portfolio of assets backing these contracts. Inputs used to determine the crediting rate include each contract's portfolio market value, current yield-to-maturity, duration (i.e., weighted average life), and market value relative to contract value. The average yield of the Stable Value Fund was approximately 6.59% in 2001. Participants investing in the Stable Value Fund, Barclays 3-Way Fund, Merrill Lynch Equity Index Trust, Merrill Lynch Small Cap Index Trust, Merrill Lynch International Index Trust, and Aggressive Asset Allocation, Conservative Asset Allocation and Moderate Asset Allocation Portfolios are assigned units at the time of investment based on the net asset value per unit. 9 CONSOL Energy Inc. Investment Plan for Salaried Employees Notes to Financial Statements (continued) 4. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service (IRS) dated November 18, 1994, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan was amended subsequent to the IRS determination letter. Therefore, the amendments are not covered by the determination letter. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt. The plan sponsor has indicated that it will take the necessary steps, if any, to maintain the Plan's qualified status. 5. Transactions with Parties-in-Interest Plan investments in the Merrill Lynch Small Cap Index Trust, the Merrill Lynch International Index Trust and the Merrill Lynch Equity Index Trust are managed by Merrill Lynch. Merrill Lynch is the trustee as defined by the Plan and, therefore, these transactions qualify as those conducted with a party-in-interest to the Plan. Trustee and investment fees paid during 2001 were based upon customary and reasonable rates for such services. One of the investment vehicles available to employees, the CONSOL Stock Fund, contains stock of CONSOL. The Plan held 1,442,310 shares and 714,454 shares of the Company's common stock at December 31, 2001 and 2000, respectively. 6. Subsequent Event - ESOP Amendment Effective January 1, 2002, the Plan was amended to convert the CONSOL Stock Fund within the CONSOL Investment Plan to an Employee Stock Ownership Plan (ESOP). As amended, a participant in the Plan will be given the opportunity for dividends on CONSOL stock held in the Plan to be paid in the form of cash for any dividends declared on or after January 23, 2002. If a participant does not make an election, default election requiring reinvestment of dividends into the CONSOL Stock Fund shall be enacted. 10 Supplemental Schedule CONSOL Energy Inc. Investment Plan for Salaried Employees EIN: 51-0337383 Plan Number: 002 Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year) December 31, 2001 (Dollars in Thousands) Identity of Issue, Borrower, Description of Number of Lessor or Similar Party Investment Shares/Units Current Value ------------------------------- -------------- ------------ ------------- Noninterest-bearing cash and cash equivalents - $ 951 Common stock CONSOL Stock Fund 1,442,310 35,827 E.I. DuPont de Nemours & Company 4,448,339 189,099 Daimler Chrysler 3,141 131 ------------- Total common stock 225,057 Interests in registered investment companies Merrill Lynch* Global Holdings Fund 250,609 1,744 Balanced Capital Fund 159,483 4,263 Basic Value Fund 276,191 8,087 Fundamental Growth Fund 44,651 809 ------------- 14,903 Janus Investments Enterprise Fund 447,285 14,313 Mercury Fund 1,306,587 27,164 ------------- 41,477 Fidelity Investments Fidelity Fund 171,520 4,953 Equity Income Fund 33,516 1,635 Magellan Fund 417,694 43,532 Low Priced Stock Fund 282,388 7,743 Growth & Income Fund 187,129 6,995 ------------- 64,858 Franklin Value Investors Trust Small Cap Growth Fund 206,175 6,426 Balance Sheet 70,805 2,834 Custodian Fund Inc. 17,136 540 ------------- 9,800 11 Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year) (continued) Identity of Issue, Borrower, Description of Number of Lessor or Similar Party Investment Shares/Units Current Value ------------------------------ -------------- ------------ ------------- Interests in registered investment companies (continued) AIM Value Fund 654,827 7,118 Equity Constellation Fund 120,930 2,673 ------------- 9,791 Franklin Templeton Growth Fund 62,680 1,128 Foreign Fund 293,774 2,717 ------------- 3,845 MFS Investment Management Total Return Fund 98,705 1,429 Research Fund 86,987 1,635 ------------- 3,064 Hotchkis and Wiley 71,357 1,390 ------------- Total interests in registered investment companies International Fund 149,128 Stable Value Fund Aetna Life Insurance Co. SYNGIC, 6.98%, 4/1/2025 53,519,382 53,519 Aetna Life Insurance and Annuity SYNGIC 6.24%, Company 1/1/2025 48,337,847 48,338 Bankers' Trust SYNGIC, 5.43%, 12/1/2002 17,654,352 17,654 CDC Investment Mgmt. Corp. SYNGIC, 6.95%, 10/1/2002 17,005,257 17,005 Connecticut Life Insurance Company SYNGIC, 7.14%, 5/31/2008 38,920,127 38,920 Deutsche Bank SYNGIC, 6.29%, 12/31/2025 52,294,313 52,294 Monumental Life Ins. Co. SYNGIC, 5.92%, 12/31/2025 52,145,750 52,146 12 Schedule H, Line 4(i--Schedule of Assets (Held at End of Year) (continued) Identity of Issue, Borrower, Description of Number of Lessor or Similar Party Investment Shares/Units Current Value ----------------------------- -------------- ------------ ------------- Stable Value Fund (continued) Transamerica Life Ins. SAGIC, 7.10%, 9/1/2006 42,254,363 42,254 John Hancock Mutual Life SAGIC, 6.01%, 7/1/2003 17,104,754 17,105 Union Bank of Switzerland SYNGIC, 6.14%, 12/31/2025 52,244,603 52,245 Morgan Guarantee Trust Co. SYNGIC, 6.21%, 12/31/2025 52,236,243 52,236 Morgan Guarantee Trust Co. SYNGIC, 8.01%, 12/31/2025 40,446,365 40,447 Security Life of Denver SYNGIC, 6.19%, 3/3/2008 10,018,117 10,018 Merrill Lynch Premier Institutional Money Market, 2.08%, Fund 12/31/2025 11,197,805 11,198 ------------- Total Stable Value Fund 505,379 Common/collective trusts Aggressive Asset Allocation Portfolio 73,352 941 Conservative Asset Allocation Portfolio 21,172 289 Moderate Asset Allocation Portfolio 96,924 1,291 Merrill Lynch* Small Cap Index Trust 84,970 1,112 International Index Trust 86,229 862 Equity Index Trust 192,650 15,672 BZW Global Investors* Barclays 3-Way Fund 659,478 17,621 ------------- Total common/collective trusts 37,788 Participant loans* 6.25% to 9.00% 16,504 ------------- Total investments $ 934,807 ============= *Indicates parties-in-interest 13