FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-34875
1,318,188 Shares
U S LIQUIDS INC.
Common Stock
The stockholders of U S Liquids Inc. listed under the caption "Selling
Stockholders" on page 12 of this prospectus are offering and selling up to
1,318,188 shares of our common stock. Of these shares, 318,188 shares are
currently issued and outstanding and 1,000,000 shares are issuable upon exercise
of an outstanding warrant. We will not receive any of the proceeds from the sale
of the shares. However, we will pay substantially all of the expenses of this
offering. See "Selling Stockholders."
The selling stockholders may offer their shares through public or private
transactions, on or off any national securities exchange or quotation service on
which the shares are listed or quoted at the time of sale, at prevailing market
prices or at privately negotiated prices. See "Plan of Distribution."
Our common stock is traded on the American Stock Exchange under the symbol
"USL." On April 16, 1999, the closing sale price of the common stock as reported
on the American Stock Exchange was $20 3/8 per share.
Our executive offices are located at 411 N. Sam Houston Parkway East, Suite
400, Houston, Texas 77060-3545, and our telephone number is (281) 272-4500.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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THE DATE OF THIS PROSPECTUS IS APRIL 19, 1999
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission ("SEC") allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the
selling stockholders sell all of the shares included in this offering:
o Annual Report on Form 10-K for the year ended December 31,1998;
o Current Report on Form 8-K filed with the SEC on January 29,
1999, as amended on February 16, 1999;
o The description of our common stock contained in our
registration statement on Form 8-A filed with the SEC on August
11, 1997 pursuant to Section 12 of the Securities Exchange Act
of 1934.
You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address:
Mr. Gary J. Van Rooyan
Vice President and General Counsel
U S Liquids Inc.
411 N. Sam Houston Parkway East, Suite 400
Houston, Texas 77060-3545
Tel: (281) 272-4500
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available on the
SEC's web site at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933 with respect to the
shares of common stock offered hereby. As permitted by the SEC, this prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information included in the Registration Statement. Such additional
information may be obtained from the locations described above. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete. You should refer to the contract or other
document for all of the details.
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THE COMPANY
GENERAL
We are a rapidly growing provider of liquid waste management services,
including collection, processing, recovery and disposal services. Our primary
focus of operations is industrial and commercial wastewater treatment, although
we also collect, process and dispose of oilfield waste. We operate 39 processing
facilities located in eleven states and serve over 40,000 customers. The
services that we provide to any particular customer vary depending on the type
of liquid waste generated, local regulations and the treatment capabilities of
local publicly-operated treatment works.
We provide liquid waste management services through a number of subsidiaries
that are organized into two divisions. The Wastewater Division collects,
processes and disposes of liquid waste (such as industrial wastewater, grease
and grit trap waste, bulk liquids and dated beverages, and certain hazardous
wastes) and recovers saleable by-products (such as fats, oils, feed proteins,
ethanol and solvents) from certain of the waste streams. Typically, we process
the liquid waste using a variety of physical, chemical, thermal and biological
techniques. Saleable by-products are recovered and sold, and any remaining
materials are sent to independent disposal sites. The Oilfield Waste Division
collects, processes and disposes of waste generated in oil and gas exploration
and production. The Wastewater Division generated $104.1 million, or 85.7%, of
our revenues for the year ended December 31, 1998 and the Oilfield Waste
Division generated the remaining $17.4 million, or 14.3%, of such revenues.
STRATEGY
Our objective is to be the largest and most profitable liquid waste
management company in each of the markets in which we operate. Our management
team, which has significant operating and consolidation experience in the waste
management industry, intends to continue pursuing a focused growth strategy
based on the following key elements:
o ACQUISITIONS. We pursue acquisitions of liquid waste management
businesses in existing and new geographic markets. We also make
smaller "tuck-in" acquisitions in our existing markets in order to
increase our facility and equipment utilization and expand our market
penetration and range of services. We believe that the liquid waste
management industry is highly fragmented and that substantial
acquisition opportunities exist throughout North America. From our
inception in November 1996 through April 12, 1999, we have acquired
45 businesses.
o INTERNAL GROWTH. In order to further expand our customer base, we
have positioned ourselves as a multi-city, single source provider of
liquid waste management services for national and regional generators
of liquid waste. We also intend to expand the capacity and processing
capabilities of our existing liquid waste facilities, and to amend
our permits for certain facilities in order to receive additional
liquid waste streams.
o OPERATIONAL ENHANCEMENTS. We intend to continue to improve our
operations through collection route densification and consolidation
and increased facility and equipment utilization. We also expect to
realize economies of scale and cost savings by consolidating certain
administrative functions at our corporate offices.
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o DECENTRALIZED MANAGEMENT. We manage our various businesses on a
decentralized basis, with local management maintaining responsibility
for the day-to-day operations, profitability and growth of the
business. We believe that this structure allows us to capitalize on
the considerable local and regional market knowledge and customer
relationships possessed by local management.
RECENT DEVELOPMENTS
From January 1, 1999 through April 12, 1999, we acquired eight additional
businesses engaged in the collection, processing, recovery and disposal of
liquid waste, including Romic Environmental Technologies Corporation. Romic
operates liquid waste processing, and chemical and solvent recovery facilities
in California and Arizona. It also operates collection and transfer facilities
in California, Oregon and Washington. Romic had approximately $46.8 million of
revenues during 1998. The seven other businesses acquired during this time
period collectively had approximately $9.5 million of revenues during 1998.
John N. Hatsopoulos became a director of the Company in December 1998. Mr.
Hatsopoulos is the retired president of Thermo Electron Corporation. Roger A.
Ramsey became a director of the Company in January 1999. Mr. Ramsey is the
retired chairman and chief executive officer of Allied Waste Industries, Inc.
To accommodate the growth in our business, we increased the size of our
credit facility in February 1999 from $100.0 million to $225.0 million.
On March 17, 1999, we completed a public offering of 3,000,000 shares of
our common stock. The $56.8 million of net proceeds that we received from the
2,875,000 shares that we sold in this offering were applied against the
outstanding balance of our credit facility, the vast majority of which
indebtedness was incurred in connection with acquisitions completed in 1998 and
1999.
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RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, together with all the other information included or
incorporated by reference in this prospectus, before you decide whether to
purchase shares of our common stock.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they (i) discuss our
future expectations; (ii) contain projections of our future results of
operations or of our financial condition; or (iii) state other "forward-looking"
information. We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or over which we have no control. The risk factors listed in
this section, as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, results of
operations and financial condition.
RISKS RELATED TO OPERATING AND INTERNAL GROWTH STRATEGY
Key elements of our strategy are to improve the profitability and increase
the revenues of our existing operations and any subsequently acquired
businesses. We intend to improve the profitability of our existing operations
and any subsequently acquired businesses by various means, including achieving
operating efficiencies and economies of scale. Our ability to increase the
revenues of our existing operations and any subsequently acquired businesses
will be affected by various factors, including:
o The demand for liquid waste collection, processing and
disposal services;
o Our ability to expand the range of services offered to
customers;
o Our ability to develop national and regional accounts for our
liquid waste management services and other marketing programs;
and
o The demand for by-products we recover from certain liquid
waste streams.
Many of these factors are beyond our control, and there can be no
assurance that our operating and internal growth strategies will be successful
or that we will be able to generate cash flows adequate for our operations and
to support internal growth.
MANAGEMENT OF GROWTH
To manage our growth effectively, we must implement and improve our
operational, financial and management information systems and controls, and
train, motivate and manage our employees. We periodically review and upgrade our
management information systems, as well as hire additional management and other
personnel in order to maintain the adequacy of our operational, financial and
management controls. If we fail to
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manage our growth effectively, our business, results of operations and financial
condition could be materially and adversely affected.
RISKS RELATED TO OUR ACQUISITION STRATEGY AND ACQUISITION FINANCING
The Company was organized in November 1996. Since that time, we have
experienced rapid growth, primarily through acquisitions, and we intend to
acquire additional liquid waste management businesses. We expect to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities and may lead to higher acquisition prices. We may not
be able to identify, acquire or manage additional businesses profitably or to
integrate successfully any acquired businesses without material costs, delays or
other operational or financial problems. Businesses that we acquire may have
liabilities that we underestimate or do not discover during our pre-acquisition
investigations. These liabilities may include those arising from environmental
contamination or non-compliance by prior owners with environmental laws or
regulatory requirements, and for which we, as a successor owner or operator, may
be responsible. Certain environmental liabilities, even if not expressly assumed
by us, may be imposed on us under certain legal principles of successor
liability, including those under the Comprehensive Environmental Response
Compensation and Liability Act, as amended. Further, each acquisition involves a
number of other special risks that could cause the acquired business to fail to
meet our expectations. For example:
o The acquired business may not achieve expected results.
o We may not be able to retain key personnel of the acquired
business.
o We may not be able to successfully integrate the acquired
business in a timely manner or we may incur substantial costs,
delays or other operational or financial problems during the
integration process.
o It may be difficult to integrate a business with personnel who
have different business backgrounds and corporate cultures than
ours.
o Our management group may not be able to effectively manage the
combined entity or to effectively implement our acquisition
program and internal growth strategy simultaneously.
We cannot readily predict the timing, size or success of our future
acquisitions or the associated capital requirements. We currently intend to
finance future acquisitions by using a combination of common stock and cash. If
shares of common stock are issued in connection with future acquisitions or
earn-out provisions of completed acquisitions, you may experience dilution in
the net tangible book value of your stock. If the common stock does not maintain
a sufficient market value, or potential acquisition candidates are not willing
to accept common stock as part of the consideration for the sale of their
businesses, we may be required to use more of our cash resources, if available,
or incur indebtedness in order to continue our acquisition program. We have a
$225.0 million credit facility with a group of banks under which we may borrow
to fund acquisitions and working capital requirements; however, under the credit
facility, the banks' consent is required for us to make certain acquisitions or
incur significant indebtedness (including, without limitation, debt assumed in
connection with acquisitions). As of April 12, 1999, the outstanding principal
balance of the credit facility was approximately $53.0 million. If we do not
have sufficient cash resources to fund our acquisition plans, our growth could
be limited unless we are able to obtain additional capital through debt or
equity financings. We
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may not be able to obtain such financing when required or such financing may
only be available on terms and conditions that are unacceptable to us.
COMPETITION
The liquid waste management industry is highly fragmented and very
competitive. We compete with other liquid waste processing facilities and
alternative methods of disposal of certain waste streams provided by area
landfills and injection wells, as well as the alternative of illegal disposal.
In addition, competitive products and services have been and are likely to
continue to be developed and marketed by others. Furthermore, future
technological change and innovation may result in a reduction in the amount of
liquid waste being generated or alternative methods of processing and disposal
being developed. The markets for the various by-products that we sell are also
very competitive. With respect to our oilfield waste operations, we must compete
with alternative methods of off-site disposal of oilfield waste. We also face
competition from customers who develop or enhance their own methods of disposal
instead of using the services of liquid waste management companies. Future
technological change and innovation may increase the amount of internal oilfield
waste processing and disposal as well as the number of competitors in this
market. Increased use of internal processing and disposal methods and other
competitive factors could have a material adverse effect on our business,
results of operations and financial condition.
Our competitors may be better capitalized, have greater name recognition
or be able to provide services or products at a lower cost. In addition, as the
liquid waste market matures, competition can be expected to increase. As a
result of these and other competitive factors, our strategy may not be
successful and we may not be able to generate adequate cash flows to fund our
operations.
FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS
Our business is subject to numerous federal, state and local laws,
regulations and policies that govern environmental protection, zoning and other
matters. These laws and regulations have changed frequently in the past and it
is reasonable to expect additional changes in the future. If existing regulatory
requirements change, we may be required to make significant capital and
operating expenditures. Although we believe that we are presently in material
compliance with applicable laws and regulations, our operations may not continue
to comply with future laws and regulations. Governmental authorities may seek to
impose fines and penalties on us or seek to revoke or deny the issuance or
renewal of operating permits for failure to comply with applicable laws and
regulations. Under these circumstances, we might be required to curtail or cease
operations or conduct site remediation until a particular problem is remedied,
which could have a material adverse effect on our business, results of
operations and financial condition.
IMPACT OF FAILURE TO OBTAIN OR MAINTAIN NECESSARY GOVERNMENTAL APPROVALS
We operate in a highly regulated environment and are required to have
permits and approvals from federal, state and local governments. Any of these
permits or approvals or applications could be denied, revoked or modified under
various circumstances. In addition, if new environmental legislation or
regulations are enacted or existing legislation or regulations are amended or
are enforced differently, we might be required to obtain additional operating
permits or approvals. The process of obtaining or renewing a required permit or
approval can be lengthy and expensive and our efforts to obtain permits,
renewals or approvals may be opposed by citizens groups, adjacent landowners or
others. Our City Environmental facility in Detroit, Michigan has never been
granted a permit under the Resource Conservation and Recovery Act of 1976
("RCRA") and is continuing to operate under interim status, as allowed by RCRA.
In addition, our Romic facility in East Palo Alto,
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California is operating under a RCRA permit that expired in 1991, but that
allows for ongoing operations. With respect to both facilities, all necessary
applications, renewal applications and other documentation were timely filed and
applicable regulations allow the facilities to continue to operate. However, we
may not be successful in obtaining or maintaining these and other required
permits and approvals and that failure could have a material adverse effect on
our business, results of operations and financial condition.
POTENTIAL ENVIRONMENTAL LIABILITY
We may be subject to liability for environmental damage that our
processing facilities and collection operations may have caused or may cause
nearby landowners, particularly as a result of the contamination of drinking
water sources or soil, including damage resulting from conditions existing prior
to our acquisition of the facilities or operations. Liability may also arise
from any off-site environmental contamination caused by hazardous substances,
the transportation, treatment or disposal of which we arranged or which was
arranged by the owners of businesses that we have acquired. Any substantial
liabilities for environmental damage could have a material adverse effect on our
business, results of operations and financial condition. During the ordinary
course of our business, we may become involved in a variety of legal and
administrative proceedings relating to land use and environmental laws and
regulations, including actions or proceedings:
o By governmental agencies seeking to impose civil or criminal
penalties on us;
o By governmental agencies seeking to revoke or deny renewal of one or
more of our permits;
o By citizens groups, adjacent landowners or governmental agencies
opposing the issuance of a permit or approval to us or alleging
violations of the permits under which we operate; or
o By citizens groups and adjacent landowners seeking to impose
liability on us for environmental damage at any of our facilities (or
facilities formerly owned by us or any acquired business) or damage
that those facilities or other properties may have caused.
The adverse outcome of one or more of these proceedings could have a
material adverse effect on our business, results of operations and financial
condition.
During the ordinary course of our operations, we have from time to time
received, and expect that we may in the future receive, citations or notices
from governmental authorities that our operations are not in compliance with our
permits or certain applicable environmental or land use laws and regulations. We
generally seek to work with the authorities to resolve the issues raised by
these citations or notices. However, we may not always be successful in this
regard and future citations or notices could have a material adverse effect on
our business, results of operations and financial condition.
Our subsidiary, Romic Environmental Technologies Corporation, has entered
into an administrative consent order with the United States Environmental
Protection Agency ("EPA") relating to the cleanup of soil and groundwater
contamination at its facility in East Palo Alto, California. A study to
determine the nature of the contamination has been completed and Romic submitted
a corrective measures study to the EPA in March 1999. Based upon the information
gathered from these studies, as of December 31, 1998, Romic had reserved
approximately $2.2 million to cover its estimated costs at this facility.
However, the ultimate cost may exceed this reserve. Romic has also entered into
administrative consent orders and agreements with the EPA and the California
Department of Toxic Substances Control relating to three drum reconditioning or
disposal sites to which it delivered waste. Based upon the studies and remedial
actions completed, as of December 31, 1998,
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Romic had reserved approximately $775,000 to cover its share of the estimated
costs for these sites. However, the ultimate cost may exceed this reserve.
INSUFFICIENCY OF INSURANCE
While we maintain liability insurance, it is subject to coverage limits
and certain policies exclude coverage for damages resulting from environmental
contamination. Although there are currently numerous sources from which such
coverage may be obtained, it may not continue to be available to us on
commercially reasonable terms or the possible types of liabilities that may be
incurred by us may not be covered by our insurance. In addition, our insurance
carriers may not be able to meet their obligations under the policies or the
dollar amount of the liabilities may exceed our policy limits. Even a partially
uninsured claim, if successful and of significant magnitude, could have a
material adverse effect on our business, results of operations and financial
condition.
DEPENDENCE UPON OILFIELD WASTE EXEMPTION UNDER RCRA AND OTHER ENVIRONMENTAL
REGULATIONS
Oilfield waste is currently exempt from the requirements of RCRA, which is
the principal federal statute governing the handling and disposal of waste. In
recent years, proposals have been made to rescind or modify this exemption. The
repeal or modification of the exemption covering oilfield waste or modification
of applicable regulations or interpretations regarding the processing and
disposal of oilfield waste would require us to alter our method of processing
and disposing of oilfield waste. This could have a material adverse effect on
our business, results of operations and financial condition.
Each of our operations is also dependent to varying degrees on the
existence and enforcement of local, state and federal environmental regulations.
Any repeal or relaxation of those regulations, or a failure of governmental
authorities to enforce the regulations, could result in decreased demand for our
services and, therefore, could have a material adverse effect on our business,
results of operations and financial condition. Our operations may also be
adversely affected by new regulations or changes in other applicable
regulations.
DEPENDENCE ON OIL AND GAS INDUSTRY
Demand for our oilfield waste processing and disposal services depends in
large part upon the level of exploration for and production of oil and gas,
particularly in the Gulf Coast region. This demand, in turn, depends on, among
other things, oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the discovery rate of new
oil and gas reserves and the ability of oil and gas companies to raise capital.
Historically, prices for oil and gas have been extremely volatile and have
reacted to changes in the supply of and demand for oil and natural gas, domestic
and worldwide economic conditions and political instability in oil-producing
countries. Current levels of oil and gas exploration and production activities
may not be maintained. Prices for oil and natural gas are expected to continue
to be volatile and affect demand for our oilfield waste services. A material
decline in oil or natural gas prices or exploration activities could materially
affect the demand for our oilfield waste services and, therefore, our business,
results of operations and financial condition.
RELIANCE ON KEY PERSONNEL
We are highly dependent on our executive officers and senior management,
and we likely will depend on the senior management of any significant business
we acquire in the future. The loss of the services of any of our current
executive officers or key employees or any member of senior management of any
acquired business could
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have a material adverse effect on our business, results of operations and
financial condition. In addition, debt outstanding under our credit facility may
be accelerated by the lenders if, among other things, Michael P. Lawlor, W.
Gregory Orr or Earl J. Blackwell ceases to serve as an executive officer of the
Company and is not replaced within 60 days by an individual reasonably
satisfactory to the lenders. We have tried to reduce some of this risk by
maintaining key man life insurance in the amount of $5.0 million on each of
Messrs. Lawlor, Orr and Blackwell.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results can occur from quarter to
quarter as a result of a number of factors, including:
o The consummation of acquisitions;
o The demand for our services by our customers;
o Weather conditions;
o The level of oil and gas exploration and production activity in the
Gulf Coast;
o The number of business days in a quarter; and
o General economic conditions.
Because a significant portion of our expenses are relatively fixed, a variation
in revenues could cause a significant variation in our quarterly operating
results and could result in losses.
VOLATILITY OF OUR STOCK PRICE
Our common stock was first publicly traded on August 20, 1997 and has
traded from a low of $12 5/8 per share to a high of $26 3/8 per share. The
market price of our common stock could continue to fluctuate substantially due
to a variety of factors, including:
o Quarterly fluctuations in results of operations;
o Changes in the regulatory environment or market conditions affecting
the liquid waste management industry;
o Announcement and market acceptance of acquisitions;
o Changes in earnings estimates by analysts;
o Loss of key personnel;
o Changes in accounting principles or policies;
o Sales of common stock by existing stockholders;
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o Announcements of key developments by competitors; and
o Economic and political conditions.
The market price for our common stock may also be affected by our ability
to meet analysts' expectations. Any failure to meet such expectations, even
slightly, could have an adverse effect on the market price of our common stock.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies for reasons unrelated to the operating
performance of these companies. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been instituted against the company. If similar litigation were
instituted against us, it could result in substantial costs and a diversion of
our management's attention and resources, which could have an adverse effect on
our business, results of operations and financial condition.
LACK OF DIVIDENDS
We have not paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future. We intend to retain future earnings,
if any, to finance the expansion of our operations and for general corporate
purposes, including future acquisitions. In addition, our credit facility
prohibits us from paying dividends on our capital stock.
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
Our Board of Directors is divided into three classes, with each class
serving a staggered three-year term. This classification system makes it more
difficult for stockholders to replace directors and may tend to discourage a
third party from making a tender offer or otherwise attempting to obtain control
of the Company. In addition, our Board of Directors is authorized to issue,
without further stockholder action, up to 5,000,000 shares of Preferred Stock
with rights that could adversely affect the rights of holders of common stock.
No shares of Preferred Stock are presently outstanding, and we have no present
plans to issue any such shares. The issuance of shares of Preferred Stock under
certain circumstances could have the effect of delaying, deterring or preventing
a change in control of the Company or other corporate action and of discouraging
bids for the common stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by
the selling stockholders. All proceeds from the sale of the shares will be for
the account of the selling stockholders. However, all proceeds that we receive
upon the exercise of the warrant held by Sanifill, Inc. will be used for general
corporate purposes.
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SELLING STOCKHOLDERS
The following table sets forth the name of each selling stockholder and,
for each selling stockholder, the number of shares of common stock owned, the
number of such shares offered for sale in this offering and the number of shares
and percentage of the outstanding common stock to be owned after this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING(1) NUMBER OF OWNED AFTER OFFERING(1)
------------------------- SHARES BEING ----------------------
SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C>
W. Gregory Orr ........................................ 621,000(2) 3.9% 96,550 524,450 3.3%
Earl J. Blackwell ..................................... 355,000(3) 2.2 92,500 262,500 1.7
William H. Wilson, Jr ................................. 276,350(4) 1.7 63,663 212,687 1.3
Sanifill, Inc. ........................................ 1,000,000(5) 5.9 1,000,000 -- 0
Michael K. Clann ...................................... 29,862 * 7,559 22,303 *
Carlos Guerra ......................................... 21,300 * 3,557 17,743 *
Michael W. Minick ..................................... 65,000 * 9,048 55,952 *
Holden H. Wallace ..................................... 102,458 * 30,737 71,721 *
Hilton Wilson ......................................... 6,156 * 552 5,604 *
William H. Wilson ..................................... 37,740 * 14,022 23,718 *
</TABLE>
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* Less than one percent.
(1) Applicable percentage ownership is based on 15,873,370 shares of common
stock issued and outstanding and assumes all the shares held by the selling
stockholder and registered hereby will be offered and sold.
(2) Includes 250,000 shares held by The Wiley Gregory & Genene M. Orr Family
LLC, a limited liability company, over which Mr. Orr, as the manager, has sole
voting and investment power, 15,000 shares held by Mr. Orr's wife, Genene Orr,
15,000 shares held by Mr. Orr's wife as custodian for two of Mr. Orr's children,
and 7,500 shares held individually by one of Mr. Orr's children. Mr. Orr
disclaims beneficial ownership of all shares held individually by his children.
(3) Includes 180,000 shares held by The Earl J. and Christine J. Blackwell
Family LLC, a limited liability company, over which Mr. Blackwell, as the
manager, has sole voting and investment power and 100,000 shares held in an
individual retirement account for the benefit of Mr. Blackwell.
(4) Includes 20,375 shares held in an individual retirement account for the
benefit of Mr. Wilson, 20,375 shares held by Mr. Wilson's wife, Debi Wilson, and
2,000 shares held by a trust for the benefit of Mr. Wilson's child..
(5) Represents shares which Sanifill, Inc. has the right to acquire pursuant to
the terms of a warrant (the "Sanifill Warrant") issued to Sanifill on December
13, 1996.
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Mr. Orr is a co-founder of the Company and served as Chairman of the Board,
Chief Executive Officer and President of the Company from November 1996 to
August 1997. Mr. Orr currently serves as a director and the Chief Operating
Officer and President of the Company.
Mr. Blackwell is a co-founder of the Company and has served as Chief
Financial Officer, Senior Vice President-Finance and Secretary of the Company
from November 1996 to the present.
From 1992 until May 1998, Mr. Wilson was the Chief Executive Officer of
American WasteWater Inc. On June 17, 1997, we acquired all of the outstanding
stock of American WasteWater in exchange for 637,500 shares of common stock, of
which Mr. Wilson received 245,625 shares. In connection with our initial public
offering, we paid certain indebtedness of American WasteWater owed to or
guaranteed by Mr. Wilson. In May 1998, we engaged Dana Financial Corporation, a
corporation controlled by Mr. Wilson, to assist us in, among other things,
identifying and evaluating acquisition candidates. This engagement was
terminated in February 1999.
On December 13, 1996, we acquired five oilfield waste landfarms and landfills
from Sanifill, Inc. and its subsidiaries. In May 1988, we acquired three
businesses from Waste Management, Inc., the parent of Sanifill.
Messrs. Clann, Guerra, Minick, Wallace, Hilton Wilson and William H. Wilson
are former stockholders of American WasteWater. On June 17, 1997, we acquired
all of the outstanding stock of American WasteWater in exchange for 637,500
shares of common stock, of which Messrs. Clann, Guerra, Minick, Wallace, Hilton
Wilson and William H. Wilson received 31,862, 25,347, 79,931, 102,458, 8,006 and
46,740 shares, respectively. Mr. Hilton Wilson and Mr. William H. Wilson are the
brother and the father, respectively, of William H. Wilson, Jr.
45,950 shares of common stock beneficially owned by William M. DeArman and
previously included in this offering have been withdrawn from registration.
These shares were acquired by Mr. DeArman in November 1996 and, thus, are now
eligible for sale under Rule 144(k) of the Securities Act of 1933.
PLAN OF DISTRIBUTION
We will not receive any proceeds from the sale of the shares offered by the
selling stockholders. The selling stockholders or their respective donees,
pledgees, transferees or other successors in interest may offer and sell their
shares at various times in one or more of the following transactions:
o on any national securities exchange or quotation service on which the
shares are listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions other than on any exchange, quotation service or in the
over-the-counter market;
o in connection with short sales of shares;
o by pledge to secure debts and other obligations;
o in connection with the writing of call options, in hedging transactions
and in settlement of other transactions in standardized or over-the-
counter options; or
o in a combination of any of the above transactions.
Selling stockholders may sell their shares at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices.
13
<PAGE>
A selling stockholder may use broker-dealers to sell their shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling stockholder, or they will receive commissions from purchasers of shares
for whom they have acted as agents.
If required at the time that a particular offer of shares is made, a
supplement to this prospectus will be delivered that describes any material
arrangements for the distribution of the shares and the terms of the offering
including, without limitation, the names of any broker-dealers and any
commissions and other items constituting compensation from the selling
stockholder or otherwise. We may agree to indemnify participating broker-dealers
against certain civil liabilities, including liabilities under the Securities
Act of 1933, and to reimburse them for certain expenses in connection with the
offering and sale of shares. The Company and certain of the selling stockholders
are obligated to indemnify each other against certain civil liabilities arising
under the Securities Act of 1933.
The selling stockholders or their respective donees, pledgees, transferees or
other successors in interest and any broker-dealers or agents that participate
with the selling stockholders or their respective donees, pledgees, transferees
or other successors in interest in the distribution of the shares may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, in which
event any commissions received by such broker-dealers or agents and any profit
on the resale of shares purchased by such broker-dealers or agents may be deemed
to be underwriting commissions or discounts under the Securities Act of 1933.
Accordingly, any person engaged in a distribution of the shares will be
prohibited from engaging in certain market making activities with respect to our
common stock under applicable rules under the Securities Exchange Act of 1934.
In addition, the selling stockholders will be subject to certain other rules
under the Securities Exchange Act of 1934 while they are engaged in a
distribution of the shares, including Rules 10b-6 and 10b-7, which rules may
limit the timing of their purchases and sales of our common stock and limit the
marketability of their shares.
We have agreed to pay certain expenses of the offering of the shares,
including the printing, legal and accounting expenses we incur and the
registration fees imposed by the SEC. We will not pay brokerage commissions or
taxes associated with sales by the selling stockholders or any legal, accounting
or other expenses of the selling stockholders.
Selling stockholders may also offer shares by means of prospectuses under
other available registration statements or pursuant to exemptions from the
registration requirements of the Securities Act of 1933, including sales which
meet the requirements of Rule 144 or Rule 145(d) under the Securities Act of
1933.
We have agreed to keep the Registration Statement effective until the earlier
of three years after the date of final exercise of the Sanifill Warrant and such
time as the holder of the Sanifill Warrant has sold all of the shares of common
stock issuable upon exercise thereof. However, subject to certain exceptions,
the number of shares of common stock offered by the holder of the Sanifill
Warrant pursuant to this prospectus in any calendar year cannot exceed the
following limitations without our prior consent:
MAXIMUM NUMBER OF
YEAR SHARES TO BE OFFERED
1999......................................... 200,000
2000......................................... 250,000
2001-2006.................................... 300,000
14
<PAGE>
The selling stockholders are not restricted as to the price or prices at
which they may sell their shares. Sales of shares by the selling stockholders
may have an adverse effect on the market price of our common stock. Moreover,
excepting Sanifill, Inc., the selling stockholders are not restricted as to the
number of shares that may be sold at any time, and it is possible that a
significant number of shares could be sold at the same time which may also have
an adverse effect on the market price of our common stock.
LEGAL MATTERS
Our counsel, Hartzog Conger & Cason, Oklahoma City, Oklahoma, will give an
opinion that the shares of common stock covered by this prospectus are valid.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving these reports.
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
U S LIQUIDS INC. PRO FORMA
Introduction to Unaudited Pro Forma Financial Statements.... F-2
Pro Forma Balance Sheet (Unaudited)......................... F-3
Notes to Pro Forma Balance Sheet (Unaudited) ............... F-4
Pro Forma Statement of Operations (Unaudited) .............. F-5
Notes to Pro Forma Statement of Operations (Unaudited) ..... F-6
F-1
<PAGE>
U S LIQUIDS INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements present the balance
sheet and statement of operations data from the consolidated financial
statements of U S Liquids Inc. (U S Liquids or the Company) combined with the
historical financial data of companies acquired by the Company from January 1,
1998 through March 19, 1999 (the "Acquired Companies") as follows: (i) the
unaudited pro forma balance sheet includes the historical consolidated balance
sheet data of U S Liquids at December 31, 1998 combined with those of the
Acquired Companies acquired after December 31, 1998 as if each had been acquired
on December 31, 1998 and (ii) the unaudited pro forma statement of operations
for the year ended December 31, 1998 includes the historical consolidated
statement of operations of U S Liquids for the year ended December 31, 1998
combined with those of all Acquired Companies, as if each had been acquired on
January 1, 1998. Additionally, the effects of the Company's public offering of
3,450,000 shares in June 1998 and its public offering of 2,875,000 shares in
March 1999 and the application of the net proceeds from these offerings are
included in the unaudited pro forma financial statements as if they had each
occurred on January 1, 1998.
The pro forma financial statements include certain adjustments to the
historical financial statements of the Acquired Companies, including adjustments
to depreciation and amortization expenses to reflect purchase price allocations,
adjustments to interest expense to reflect debt issued in connection with the
acquisitions, and certain reductions of salaries and benefits payable to the
previous owners of the Acquired Companies. With respect to these reductions in
salaries and benefits payable to previous owners, the Company has preliminarily
analyzed the savings that it expects to be realized. To the extent the former
owners of the Acquired Companies have agreed prospectively to reductions in
salary, bonuses and benefits, these reductions have been reflected in the pro
forma statement of operations. With respect to other expected potential cost
savings, U S Liquids has not and cannot quantify these savings and, accordingly,
they have not been included in the pro forma financial information of the
Company.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial statements do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact occurred on those dates or
project the Company's financial position or results of operations for any future
period. Since the Company and the Acquired Companies were not under common
control or management for all periods, the pro forma financial results may not
be comparable to, or indicative of, future performance.
F-2
<PAGE>
U S LIQUIDS INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS PRO FORMA
------------ --------- --------------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 3,285 $ 3 $ $ 3,288
Accounts receivable, net of
allowance....................... 29,123 6,059 156 (a) 35,338
Inventories........................ 672 542 167 1,381
Prepaid expenses and other current
assets.......................... 5,416 1,834 (214)(a) 7,036
------------ --------- --------------- ---------
Total current assets....... 38,496 8,438 109 47,043
PROPERTY, PLANT AND EQUIPMENT, net... 85,958 15,347 2,567 (a) 103,872
INTANGIBLE ASSETS, net............... 125,871 -- 29,444 (a) 155,315
OTHER ASSETS, net.................... 1,840 1,236 (1,225)(a) 1,851
------------ --------- --------------- ---------
Total assets............... $252,165 $25,021 $ 30,895 $ 308,081
============ ========= =============== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations..................... $ 4,004 $ 1,925 $ (1,040)(a) $ 4,889
Accounts payable................... 11,611 2,905 (154) 14,362
Accrued liabilities................ 15,445 2,572 (91)(a) 17,926
Current portion of contract reserve 4,500 -- 4,500
------------ --------- --------------- ---------
Total current
liabilities............ 35,560 7,402 (1,285) 41,677
LONG-TERM OBLIGATIONS, net of current
maturities......................... 64,390 3,782 33,324 (a) 44,740
(56,756)(c)
PROCESSING RESERVE................... 5,747 -- 5,747
CLOSURE AND REMEDIATION RESERVES..... 4,952 3,887 (652)(a) 8,187
CONTRACT RESERVE..................... 14,421 -- 14,421
DEFERRED INCOME TAXES................ 2,151 -- 450 (a) 2,601
------------ --------- --------------- ---------
Total liabilities.......... 127,221 15,071 (24,919) 117,373
------------ --------- --------------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock....................... 125 19 (15)(a) 158
29 (b)
Additional paid-in capital......... 110,404 -- 9,004 (a) 176,135
56,727 (b)
Retained earnings.................. 14,415 9,931 (9,931)(a) 14,415
---------- --------- --------------- ---------
Total stockholders'
equity.................. 124,944 9,950 55,814 190,708
------------ --------- --------------- ---------
Total liabilities and
stockholders' equity.... $252,165 $25,021 $ 30,895 $ 308,081
============ ========= =============== =========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-3
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA BALANCE SHEET (UNAUDITED)
(a) These adjustments reflect the acquisition of those Acquired Companies
that were acquired subsequent to December 31, 1998 through March 19,
1999, including approximately 431,588 shares issued. These adjustments
also reflect preliminary purchase price allocations with respect to
these Acquired Companies, including allocating the deferred income tax
liability attributable to the temporary differences between the
financial reporting and income tax bases on assets and liabilities
previously held as S Corporations.
(b) Reflects the proceeds from the issuance of 2,875,000 shares of common
stock from the March 1999 offering, net of estimated offering costs.
(c) Reflects the repayment of certain debt obligations with proceeds from
the March 1999 offering.
F-4
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS PRO FORMA
------------- ----------- ------------ ----------
<S> <C> <C> <C>
REVENUES............................. $ 121,460 $ 108,532 $ $ 229,992
OPERATING EXPENSES................... 79,027 70,242 (1,359)(a) 147,910
DEPRECIATION AND
AMORTIZATION....................... 8,146 5,789 247 (b) 14,182
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 12,927 20,794 -- 33,721
------------- ----------- ------------ ----------
INCOME FROM OPERATIONS............... 21,360 11,707 1,112 34,179
INTEREST (INCOME) EXPENSE,
net................................ 3,517 1,450 (4,189)(c) 778
OTHER (INCOME) EXPENSE, net.......... 38 (398) -- (360)
------------- ----------- ------------ ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 17,805 10,655 5,301 33,761
PROVISION FOR INCOME
TAXES.............................. 7,033 70 6,739 (d) 13,842
------------- ----------- ------------ ----------
NET INCOME........................... $ 10,772 $ 10,585 $ (1,438) $ 19,919
============= =========== ============ ==========
BASIC EARNINGS PER COMMON SHARE...... $ 1.27
==========
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE............ $ 1.17
==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 15,714(e)
==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 17,081(e)(f)
==========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-5
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
(a) Adjusts compensation expense to the level the previous owners of the
Acquired Companies have agreed to receive as employees of the Company
subsequent to their respective acquisitions.
(b) Adjusts depreciation and amortization expenses to reflect purchase price
allocations with respect to the Acquired Companies.
(c) Records interest expense on the debt incurred to effect the acquisition of
the Acquired Companies, net of a reduction in interest expense on debt
repaid in connection with the acquisitions, our public offering in June
1998 and our public offering in March 1999.
(d) Reflects the incremental provision for federal income taxes on the Acquired
Companies previously taxed as S corporations or limited liability companies
as well as federal and state income taxes relating to the pro forma
adjustments.
(e) Includes (1) 10,316,739 shares outstanding for the year ended December 31,
1998, and (2) 5,397,190 shares for the year ended December 31, 1998 issued
in connection with the acquisition of the Acquired Companies, our June
1998 public offering and our March 1999 public offering,as if each had
occurred on January 1, 1998.
(f) Includes 1,367,336 shares for the year ended December 31, 1998,
representing the effect of outstanding warrants and options to purchase
common stock, using the treasury stock method. Excludes 125,000 shares
issuable pursuant to options, the vesting of which is contingent upon the
successful completion of certain corporate development activities.
F-6
<PAGE>
You should rely only on the information contained in this document or that
we have referred to you. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
-----------
TABLE OF CONTENTS
PAGE
Incorporation of Certain Documents by Reference......................... 2
Available Information................................................... 2
The Company............................................................. 3
Risk Factors............................................................ 5
Use of Proceeds.......................................................... 11
Selling Stockholders..................................................... 12
Plan of Distribution..................................................... 13
Legal Matters............................................................. 15
Experts................................................................... 15
Index to Financial Statements............................................. F-1
=======================================
U S LIQUIDS INC.
1,318,188 Shares of
Common Stock
----------------------
PROSPECTUS
---------------------
April 19, 1999
=======================================
