UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0405
DIVISION OF
CORPORATION FINANCE
October 15, 2004
via U.S. mail via facsimile
Greg A. Walker, Esq. Edward P. Tolley III, Esq.
General Counsel Simpson Thacher & Bartlett LLP
Foundation Coal Holdings, Inc. (F) (212) 455-2502
999 Corporate Boulevard
Suite 300
Linthicum Heights, Maryland 21090-2227
Re: Foundation Coal Holdings, Inc.
Form S-1/A#1 filed on September 29, 2004
File No. 333-118427
Dear Mr. Walker:
We have reviewed your filing and have the following comments. Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your explanation
as to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation. In some of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other aspect
of our review. Feel free to call us at the telephone numbers listed
at the end of this letter.
Form S-1
General
1. We note your response to our prior comments 2, 3 and 29. We may
have further comments upon reviewing the additional disclosure and
information you intend to provide.
Prospectus Cover Page
2. Notwithstanding your response to prior comment 6, you did not
remove the sentence. Delete the last sentence in the paragraph
preceding the table of contents as it is inappropriate.
Risk Factors - page 13
3. Prior comment 14 asked you to eliminate mitigating language, but
the new sentence you added at page 21 to "If our assumptions
regarding the likely future expenses" mitigates the risk you present.
Revise accordingly.
Directed Share Program - Exhibit E to response letter
4. It is inappropriate to require the reader to indicate that it has
read or understands information or disclosure that you propose.
Please revise the materials accordingly.
Opinion of Counsel - Exhibit 5.1
5. Prior to effectiveness, you will need to file an executed and
dated opinion of counsel that indicates the number of shares covered
by the registration statement. Also, the list of exhibits should
reflect the fact that the document is only a "form of" opinion at
this point.
Financial Statements and Related Disclosure
Summary Historical and Pro Forma Financial Data, page 8
6. We note your response to our prior comment 38 and believe that
your additional disclosure does not appropriately address our
concern. Please clarify that historical financial data have been
derived from the audited consolidated financial statements of RAG and
that Foundational Coal Holdings, Inc., does not have historical
operations or balance sheet data prior to July 30, 2004, if that is
the case.
7. We note your response to our prior comment 42 and disagree with
your conclusion. We do not object to your including in your
footnotes a list of and/or discussion of certain components of income
and expense. However, we believe that the subtotals "Non-cash
charges" and "Unusual (income) expense" are impermissible non-GAAP
measures. As such, please remove the subtotals from your table and
footnotes.
Financial Statements of RAG
Note 2 - Summary of Significant Accounting Policies
Reclassification, page F-13
8. We note your response to our prior comment 51. Please update the
"Reclassification" section of your footnote disclosures to reflect
the changes that you made in response to our comment.
Note 7 - Property, Plant, Equipment and Leased Mineral Rights
9. We note your response to our prior comment 55, and it is not clear
to us that you have confirmed the second sentence of that comment.
You tell us that future costs are capitalized and that the DD&A rate
is revised when those assets are placed in service. Confirm to us
that prior to that time, the corresponding reserves are not included
when calculating DD&A, or amend your financial statements to comply.
We reissue the second sentence of prior comment 55.
Engineering Comments
General
10. The responses to questions 57 & 58 have been reviewed. The
supplied Wabush mines cost information indicates this operation has
not had a positive balance between revenues and operating costs for
the last three years. Please review the operating costs and confirm
that no corporate overhead charges are included in the operating
costs. Operating cost is defined as all costs of operation excluding
depreciation, depletion, and amortization charges.
11. The data provided in the response to question 59 was reviewed.
This included the "Coal Reserve Audit prepared for RAG American Coal
Holding, Inc." report performed by John T. Boyd Company.
Supplementally address the following:
* Tables 4.1 on page 4-6 states portions of the Wabush Mines reserves
are "controlled", "partially controlled", and "not controlled".
Define the "controlled" and "partially controlled" land status. Did
Wabush Mines have the legal right to mine these reserves through
lease or ownership when the reserves were declared? If not, remove
these reserves from the reserve tabulation and restate the reserves.
* The Wabush mines permit status is subdivided into, "permitted",
"permit pending", and "not permitted". Elaborate in some detail the
status of the pending permits.
* The Riverton Coal - Area 49, which may be found on page 14 of 18 of
the summary tables, indicates that while the mineral rights are
owned, the surface rights are not. Does the Riverton Coal Production
have the legal right to mine these reserves as of the date the
reserves were declared?
* The Riverton Coal Production Inc. includes several thin seams in
the reserve statement for the Simmons Fork area. Provide general
strategraphic column of the Simmons Fork area illustrating the
relationship of the C1 through C14 coal seams and the expected
partings, shale, or sandstone units.
12. The data provided in response to questions 63 was reviewed.
Supplementally address the following:
* What are the current equipment specifications in regard to maximum
mining height at Rock Springs?
* What are the current equipment specifications related to the
minimum mining height at both the Emerald & Rock Springs mines?
Closing Comments
Please amend your registration statement in response to these
comments. You may wish to provide us with a marked copy of the
amendment to expedite our review. Please furnish a cover letter with
your amendment that keys your responses to our comments and provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your amendment and responses to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to be
certain that they have provided all information investors require for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the effective
date of the registration statement as a confirmation of the fact that
those requesting acceleration are aware of their respective
responsibilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934 as they relate to the proposed public offering
of the securities specified in the above registration statement. We
will act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
No other review of the registration statement has been made. All
persons who are by statute responsible for the adequacy and accuracy
of the registration statement are urged to be certain that all
information required under the Securities Act of 1933 has been
included. You are also reminded to consider applicable requirements
regarding distribution of the preliminary prospectus.
Please direct questions regarding accounting issues and related
disclosures to Sandra Eisen at (202) 824-1805, or in her absence to
Kim Calder, Assistant Chief Accountant, at (202) 942-1879. You may
contact Roger Baer, Mining Engineer, at (202) 942-2965 if you have
questions regarding the engineering comments. Direct all other
questions to Perry Hindin at (202) 942-2822 or, in his absence, to
Timothy Levenberg, Special Counsel, at (202) 942-1896. Please send
all correspondence to us at the following ZIP code: 20549-0405.
Sincerely,
H. Roger Schwall
Assistant Director
cc: P. Hindin
T. Levenberg
R. Baer
S. Eisen
K. Calder
via facsimile
Edward P. Tolley III, Esq.
Foundation Coal Holdings, Inc.
October 15, 2004
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