U S Liquids Inc. Announces Operating Results for the Third Quarter of 2003

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.,

[phone], or  



Web site:  http://www.usliquids.com/ 

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