U S Liquids Inc. Announces Operating Results for the Third Quarter
of 2003 HOUSTON, Jan. 6 /PRNewswire-FirstCall/ -- U S Liquids Inc.
(OTC Pink Sheets: USLQ), a provider of waste management services,
announced results for the three and nine months ended September 30,
2003. RESULTS OF OPERATIONS For the quarter ended September 30,
2003, U S Liquids reported revenues of $17.7 million compared to
$19.6 million in the prior year quarter. Adjusted EBITDA (earnings
before interest, taxes, depreciation, amortization and asset
impairment charges) from continuing operations was a loss of $0.3
million for the quarter compared to income of $0.4 million for the
comparable 2002 quarter. Income (loss) from continuing operations
for the quarter was a loss of $14.9 million or $0.92 per share
compared to a loss of $35.6 million or $2.21 per share in the third
quarter of 2002. The Company's net income (loss) for the quarter,
including discontinued operations and cumulative effect of change
in accounting principle, was a net loss of $17.5 million or $1.08
per share compared to a net loss of $50.3 million or $3.12 per
share in the prior year period. During the third quarter of 2003,
the Company recognized an impairment charge of $12.0 million
relating to the valuation of goodwill and fixed assets at certain
business units. During the comparable 2002 period, the Company
recognized a $35.4 million impairment charge relating to the
valuation of goodwill at certain business units. For the nine
months ended September 30, 2003, U S Liquids reported revenues of
$53.2 million compared to $55.9 million in the prior year period.
Adjusted EBITDA from continuing operations was a loss of $4.2
million for the nine months ended September 30, 2003 compared to
income of $1.8 million for the comparable 2002 period. Income
(loss) from continuing operations for the nine-month period ending
September 30, 2003 was a loss of $25.2 million or $1.55 per share
compared to a loss of $38.6 million or $2.40 per share in the
comparable prior year period. The Company's net loss, including
discontinued operations and the cumulative effect of change in
accounting principle, was a net loss of $22.7 million or $1.40 per
share compared to a net loss of $136.7 million or $8.51 per share
for the nine months ended September 30, 2003 and 2002,
respectively. The Company had asset impairment charges of $12.0
million and $35.4 million during the nine months ended September
30, 2003 and 2002, respectively. In addition, the Company
recognized income of $2.7 million and a loss of $91.0 million as a
result of the cumulative effects of accounting changes in the nine
months ended September 30, 2003 and 2002, respectively. Industrial
Wastewater Division The Industrial Wastewater Division reported
revenues of $7.3 million for the quarter ended September 30, 2003,
an increase from revenues of $6.2 million during the comparable
prior year quarter. Excluding asset impairment charges, operating
income for the quarter was $0.6 million compared to $0.3 million in
the prior year quarter. The increases in revenues and operating
income were primarily due to increased revenues at the Division's
Florida and Georgia facilities as a result of new customer
contracts. Including asset impairment charges, the operating loss
for the quarter was $5.3 million compared to $16.3 million in the
prior year quarter. The Industrial Wastewater Division reported
revenues of $20.8 million for the nine months ended September 30,
2003 compared to $18.8 million in the comparable 2002 period.
Excluding asset impairment charges, operating income for the nine
months ended September 30, 2003 was $1.4 million compared to $0.7
million in the comparable 2002 period. The increase was a result of
increased revenues and operating income at the Division's Florida
facility partially offset by a decrease at the Detroit facility.
Including asset impairment charges, the operating loss for the nine
months was $4.5 million compared to $15.9 million in the prior year
period. Commercial Wastewater Division The Commercial Wastewater
Division reported revenues of $10.4 million for the quarter
compared to $13.3 million for the comparable prior year quarter.
The decrease in revenues in the current year period resulted from a
decline in event-driven revenues at the Division's Northern A-1
location. Excluding asset impairment charges, the Division reported
operating income of $0.5 million compared to $2.1 million in the
prior year quarter. The decrease in operating income is primarily
due to the decline in event-driven revenues. Including asset
impairment charges, the operating loss for the quarter was $5.3
million compared to $16.7 million in the prior year quarter. The
Commercial Wastewater Division reported revenues of $32.4 million
for the nine months ended September 30, 2003 compared to $37.1
million for the comparable prior year period. Excluding asset
impairment charges, the Division reported operating income of $1.3
million compared to $4.0 million in the comparable prior year
period. The decrease in revenues and operating income for the nine
months ended September 30, 2003 compared to the comparable prior
year period is primarily due to lower event-driven revenues at the
Division's Northern A-1 location and decreased volumes. Including
asset impairment charges, the operating loss for the nine months
was $4.5 million compared to $14.7 million in the prior year
period. ACCOUNTING AND REPORTING CHANGES Discontinued Operations
During the fourth quarter of 2002, the Company decided to divest of
or suspend certain operations at several non-core and
underperforming businesses in the Commercial Wastewater Division.
Some operations were divested of or suspended during the fourth
quarter of 2002. During the first quarter of 2003, the remaining
portions of the Company's Northeast operations were sold. During
the third quarter of 2003, the Company sold certain businesses to
ERP Environmental and sold its Waste Stream Environmental business.
In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the Company has reported the assets,
liabilities and results of operations of those businesses
separately as discontinued operations and restated all prior period
financial information to present the results of continuing and
discontinued operations separately. Asset Retirement Obligations
Effective January 1, 2003, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 143, Accounting For
Asset Retirement Obligations. SFAS No. 143 requires that the
discounted fair value of the liability for an asset retirement
obligation be recognized in the period in which it is incurred if a
reasonable estimate of the fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset. Historically, the Company had
recorded the gross estimated retirement obligation at the time the
related asset was acquired. As a result of adopting SFAS No. 143,
the Company recognized $2.7 million of income as a cumulative
effect of change in accounting principle in the first quarter of
2003. Goodwill Effective January 1, 2002, the Company adopted SFAS
No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142,
the amortization of goodwill is discontinued and an impairment test
is performed upon adoption. In accordance with SFAS No. 142, an
impairment charge of $87.8 million, net of a $3.2 million tax
benefit, was recorded on adoption in the first quarter of 2002. In
the third quarter of 2002, the Company recognized an impairment of
its goodwill. The $3.2 million tax benefit previously recorded was
reversed and reflected as a cumulative effect of change in
accounting principle. OTHER INFORMATION The Company's capital
requirements for continuing operations consist of general working
capital needs, scheduled principal and interest payments on its
debt obligations and capital leases, funding of the Company's
finite risk bonding program, certain contractual commitments and
planned capital expenditures. The Company's capital resources
consist of cash reserves, cash generated from operations, cash
proceeds from planned asset sales and funds available under its
revolving credit facility. On November 26, 2003, the Company
received a short-term extension of the credit facility to provide
for its near-term working capital needs. The facility, which
matures on February 2, 2004, had an outstanding balance of $19.8
million with additional letters of credit of $6.7 million at
September 30, 2003. Since September 30, 2003, the Company has sold
its Northern A-1, Gateway Terminal Services and National Solvent
Exchange businesses for $7.4 million and used the proceeds to
reduce debt and pay transaction expenses. The Company is in various
stages of negotiations to sell substantially all of its remaining
business units to reduce the Company's indebtedness. With the
assistance of its financial advisors, management has continued to
evaluate the viability of the Company after each business unit
sale. However, to date, management has not been able to develop a
business plan that it believes will support the Company's remaining
debt and reduced corporate overhead. As a result, the Company may
be forced to liquidate either through bankruptcy or an orderly wind
down of operations. Although the Company is in negotiations with
third parties for the sale of substantially all remaining business
units, there can be no assurance that any further sale transactions
will be successfully consummated or that the proceeds will be
adequate to satisfy the Company's indebtedness. Management believes
that a complete liquidation of the Company would result in no
return to shareholders. In November 2003, the American Stock
Exchange ("Amex" or "Exchange") notified the Company that it was no
longer in compliance with the Exchange's listing standards due to
the substantial impairment of the Company's financial condition. As
a result, the Amex notified the Company that it intended to proceed
with the filing of an application with the SEC to delist and
deregister the Company's common stock from the Exchange. The
Company did not appeal the Exchange's determination. The Exchange
suspended trading in the Company's common stock on December 10,
2003 and is proceeding with the delisting. The Company's shares now
trade on the over-the-counter "Pink Sheets." Due to improper
recording of job costs and certain other items at one of its
business units, the Company restated its results of operations for
the years ended December 31, 2002, 2001 and 2000. The Company
contacted the Securities and Exchange Commission ("SEC") and was
advised that the SEC would conduct an informal investigation of the
issues leading to the restatement. The Company is cooperating fully
with the SEC in the investigation. Adjusted EBITDA, or earnings
before interest, taxes, depreciation, amortization and asset
impairment charges, is a non-GAAP financial measure provided by the
Company in this press release. Adjusted EBITDA is not an
alternative measure of operating results or cash flows from
operations, as determined in accordance with accounting principles
generally accepted in the United States. The Company has included
adjusted EBITDA because the Company believes it is an indicative
measure of the Company's operating performance and the Company's
ability to meet its debt service requirements and because adjusted
EBITDA is used by investors and analysts to evaluate companies in
the waste management industry. Adjusted EBITDA is also a measure
utilized in financial covenants contained in our existing credit
facility. As presented by the Company, adjusted EBITDA may not be
comparable to similarly titled measures reported by other
companies. Adjusted EBITDA should be considered in addition to, not
as a substitute for, operating income, net income (loss), cash flow
and other measures of financial performance and liquidity reported
in accordance with accounting principles generally accepted in the
United States. Below is a reconciliation of net loss to adjusted
EBITDA excluding discontinued operations and the cumulative effect
of changes in accounting principles for the three and nine-month
periods ended September 30, 2003 and 2002: Three Months Ended Nine
Months Ended September 30, September 30, 2003 2002 2003 2002 (in
thousands) Net loss $(17,485) $(50,278) $(22,734) $(136,717) Add:
Interest expense 1,244 1,226 4,610 3,101 Interest income (7) (8)
(28) (31) Income taxes 40 (2,110) 75 (2,572) Depreciation and
amortization 1,317 1,489 4,293 4,552 Asset impairment 12,026 35,387
12,026 35,387 Adjusted EBITDA (2,865) (14,294) (1,758) (96,280)
Cumulative effect of change in accounting principle --- 3,180
(2,708) 91,003 (2,865) (11,114) (4,466) (5,277) Add loss from
discontinued operations, net of tax 2,523 11,516 289 7,115 Adjusted
EBITDA from continuing operations $(342) $402 $(4,177) $1,838 This
document contains forward-looking statements that are subject to
certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. Key factors that
could cause actual results to differ materially from expectations
include, but are not limited to: (1) the Company's inability to
further extend its credit facility; (2) uncertainties caused by the
Company's failure to comply with the terms of its credit facility;
(3) the impact that our financial condition may have on our
customers, suppliers and employees; (4) the Company's general lack
of liquidity; (5) the outcome of litigation and administrative
proceedings pending against the Company; (6) obtaining or
maintaining governmental permits and approvals required for the
operation of the Company's facilities; (7) changes in the laws and
regulations governing the Company's operations; (8) the failure to
comply with laws and regulations governing the Company's
operations; and (9) the insufficiency of the Company's insurance
coverage or the impact of the insolvency of Reliance Insurance
Company. These and other risks and assumptions are described in the
Company's reports that are available from the United States
Securities and Exchange Commission. U S LIQUIDS INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30,
2003 2002 2003 2002 (As restated) (As restated) Revenues $17,688
$19,567 $53,201 $55,944 Operating expenses 14,154 16,483 42,968
43,690 Operating margin 3,534 3,084 10,233 12,254 Selling, general
and administrative expenses 3,920 4,815 14,884 12,807 Depreciation
and amortization 1,317 1,489 4,293 4,552 Asset impairment 12,026
35,387 12,026 35,387 Special income --- (2,150) (425) (2,260)
Operating loss (13,729) (36,457) (20,545) (38,232) Interest expense
1,244 1,226 4,610 3,101 Other expense (income), net (51) 9 (77)
(162) Loss from continuing operations before income taxes (14,922)
(37,692) (25,078) (41,171) Income taxes 40 (2,110) 75 (2,572) Loss
from continuing operations (14,962) (35,582) (25,153) (38,599) Loss
from discontinued operations, net of tax (2,523) (11,516) (289)
(7,115) Cumulative effect of change in accounting principle ---
(3,180) 2,708 (91,003) Net loss $(17,485) $(50,278) $(22,734)
$(136,717) Adjusted EBITDA from continuing operations $(342) $402
$(4,177) $1,838 Net income (loss) per share: Continuing operations
$(0.92) $(2.21) $(1.55) $(2.40) Discontinued operations (0.16)
(0.71) (0.02) (0.45) Cumulative effect of change in accounting
principle --- (0.20) 0.17 (5.66) Total $(1.08) $(3.12) $(1.40)
$(8.51) Shares utilized 16,233 16,091 16,227 16,074 Percentage of
Revenues Revenues 100.0% 100.0% 100.0% 100.0% Operating margin
20.0% 15.8% 19.2% 21.9% Selling, general and administrative
expenses 22.2% 24.6% 28.0% 22.9% Depreciation and amortization 7.4%
7.6% 8.1% 8.1% Asset impairment 68.0% 180.9% 22.6% 63.3% Special
income 0.0% -11.0% -0.8% -4.0% Operating loss -77.6% -186.3% -38.6%
-68.3% Loss from continuing operations before income taxes -84.4%
-192.6% -47.1% -73.6% Adjusted EBITDA from continuing operations
-1.9% 2.1% -7.9% 3.3% U S LIQUIDS INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (Continued) Additional Segment Information Three Months
Ended Nine Months Ended September 30, September 30, 2003 2002 2003
2002 (As restated) (As restated) Revenues: Industrial $7,325 $6,233
$20,848 $18,841 Commercial 10,363 13,334 32,353 37,103 Total
segment revenues $17,688 $19,567 $53,201 $55,944 Operating loss:
Industrial $(5,268) $(16,315) $(4,489) $(15,886) Commercial (5,257)
(16,697) (4,468) (14,742) Total segment operating loss (10,525)
(33,012) (8,957) (30,628) General corporate expense 3,204 5,595
12,013 9,864 Operating loss before special income (13,729) (38,607)
(20,970) (40,492) Special income --- (2,150) (425) (2,260)
Operating loss $(13,729) $(36,457) $(20,545) $(38,232) Percentage
of Revenues Revenues: Industrial 41.4% 31.9% 39.2% 33.7% Commercial
58.6% 68.1% 60.8% 66.3% Total segment revenues 100.0% 100.0% 100.0%
100.0% Operating loss: Industrial -71.9% -261.8% -21.5% -84.3%
Commercial -50.7% -125.2% -13.8% -39.7% Total segment operating
loss -59.5% -168.7% -16.8% -54.7% General corporate expense 18.1%
28.6% 22.6% 17.6% Operating loss before special income -77.6%
-197.3% -39.4% -72.4% Special income 0.0% -11.0% -0.8% -4.0%
Operating loss -77.6% -186.3% -38.6% -68.3% DATASOURCE: U S Liquids
Inc. CONTACT: William DeArman, Chief Executive Officer of U S
Liquids Inc., +1-281-272-4511, or Web site:
http://www.usliquids.com/
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