U S AGGREGATES INC, S-1, 1999-05-25

U S AGGREGATES INC
S-1, 1999-05-25

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

U.S. AGGREGATES, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1400 57-0990958
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

400 SOUTH EL CAMINO REAL, SUITE 500, SAN MATEO, CALIFORNIA 94402
TELEPHONE: (650) 685-4880
(Address, including zip code, and telephone number, including area code, of
Registrant's principal offices)

MICHAEL J. STONE
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
U.S. AGGREGATES, INC.
400 SOUTH EL CAMINO REAL, SUITE 500
SAN MATEO, CALIFORNIA 94402
TELEPHONE: (650) 685-4880
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

WILLARD G. FRAUMANN, P.C. BRUCE A. TOTH
Kirkland & Ellis Winston & Strawn
200 East Randolph Drive 35 West Wacker Drive
Chicago, Illinois 60601 Chicago, Illinois 60601
(312) 861-2000 (312) 558-5600

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share.......................... $150,000,000 $41,700
</TABLE>

(1) Estimated solely for the purposes of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
EXPLANATORY NOTE

This registration statement contains two forms of prospectus: one to be used
in connection with an underwritten public offering in the United States and
Canada and one to be used in connection with a concurrent underwritten public
offering outside the United States and Canada. The U.S. prospectus and the
international prospectus are identical except for the front and back cover
pages. The form of the U.S. prospectus is included herein and is followed by the
alternate pages to be used in the international prospectus. The alternate pages
for the international prospectus included herein are each labeled "International
Prospectus Alternate Page." Final forms of each prospectus will be filed with
the SEC under Rule 424(b) under the Securities Act.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION,
DATED , 1999

[LOGO]

U.S. AGGREGATES, INC.

COMMON STOCK

---------

This is the initial public offering of our common stock. The U.S.
underwriters are offering shares in the United States and Canada and the
international managers are offering shares outside the United States and
Canada.

We have applied to have our common stock listed on the New York Stock
Exchange under the symbol " ."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 10.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public offering price.................................................................... $ $
Underwriting discounts................................................................... $ $
Proceeds, before expenses, to U.S. Aggregates, Inc....................................... $ $
</TABLE>

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.

Certain of our stockholders have granted the U.S. underwriters and the
international managers the right to purchase up to shares to cover any
over-allotments.

--------------

BT ALEX. BROWN

THE ROBINSON-HUMPHREY COMPANY

SCHRODER & CO. INC.

, 1999
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[Pictures to come]

2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 10
Forward-Looking Statements...................... 16
Use of Proceeds................................. 16
Dividend Policy................................. 17
Capitalization.................................. 18
Dilution........................................ 19
Selected Unaudited Pro Forma Financial Data..... 20
Selected Historical Financial Data.............. 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 25
Industry Overview............................... 31
Business........................................ 35

<CAPTION>
PAGE
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<S> <C>
Management...................................... 42
Principal and Selling Stockholders.............. 46
Certain Relationships and Related
Transactions.................................. 48
Description of Certain Indebtedness............. 50
Description of Capital Stock.................... 53
Shares Eligible for Future Sale................. 56
Material United States Federal Tax Consequences
to Non-United States Holders.................. 58
Underwriting.................................... 61
Experts......................................... 64
Legal Matters................................... 64
Where You Can Find More Information............. 64
Index to Financial Statements................... F-1
</TABLE>

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In this prospectus, "U.S. Aggregates," "USAI," the "company," "we," "us" and
"our" each refers to U.S. Aggregates, Inc., "WAHC" refers to Western Aggregates
Holding Corp., one of our subsidiary holding companies, and "SRMHC" refers to
SRM Holdings Corp., the other of our subsidiary holding companies. "Tons," as
used in this prospectus, means "short" or "U.S." tons, equalling a weight of
2,000 pounds.

--------------

You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell, nor a
solicitation to buy shares of our common stock in any circumstances under which
the offer or solicitation is unlawful. Neither the delivery of this prospectus
nor sale of our common stock means that the information contained in this
prospectus is correct after the date of this prospectus.

--------------

Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our common stock, whether or not participating
in the offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.

3
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. WE URGE YOU TO READ THIS ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND THE FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS. UNLESS OTHERWISE NOTED, THE
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES CONSUMMATION OF THE
RECAPITALIZATION AND STOCK SPLIT DESCRIBED ON PAGE 7.

U.S. AGGREGATES

U.S. Aggregates, Inc. is a leading producer and marketer of aggregates and
associated aggregate-based materials and services. Aggregates consist of crushed
stone, sand and gravel. Our products are used primarily for the construction and
maintenance of highways and other infrastructure projects and for commercial and
residential construction. We serve local markets in nine states in two fast
growing regions of the United States, the Mountain states and the Southeast. As
a result of our geographic diversification, we believe that our results of
operations are less subject to any single market's economic conditions. We
believe that we are a market leader in most of the local markets that we serve.
Our current estimated aggregate reserve position exceeds 1.3 billion tons, and
in most of our markets we have a 20 to 40 year supply of aggregates. We were
founded in 1994 with the goal of becoming a leading national producer of
aggregates. From our inception in January 1994 through 1998, our net sales have
increased to $228.7 million while operating profit has increased to $24.4
million.

Our growth has been driven by a number of factors, including:

- WE SERVE ATTRACTIVE, HIGH GROWTH MARKETS. According to the U.S. Geological
Survey, from 1993 to 1998, compound annual growth in consumption of
aggregates in the nine states we serve was 6.7%. During the same period,
the United States compound annual increase was 5.1%. In the nine states
that we serve, average annual federal highway spending through 2003 is
projected to be 61% higher than under the predecessor six year federal
program.

- WE ARE A MARKET LEADER IN MOST OF THE LOCAL MARKETS WE SERVE. We have
utilized our management and financial resources to strengthen our position
in our markets and to expand into contiguous markets.

- WE HAVE WELL LOCATED, LONG-TERM AGGREGATE RESERVES. Our long-term,
high-quality aggregate reserves located near our customers are key to our
success. Since 1996, we have started eight major greenfield aggregate
production sites serving large metropolitan markets to complement our
existing operations.

- WE HAVE INVESTED SIGNIFICANT CAPITAL IN OUR BUSINESS. We believe that our
plant and equipment are among the most modern and cost-competitive in our
industry and should enable us to take advantage of increasing demand in
our markets.

- WE HAVE A STRONG TRACK RECORD OF COMPLETING, INTEGRATING AND DEVELOPING
BUSINESS AND ASSET ACQUISITIONS. We have focused on the acquisition and
development of aggregate production sites and companies that are well
located to serve growing markets. Since our inception, we have completed
28 business and asset acquisitions in the aggregates industry and have
generally seen a substantial increase in revenues and profits relative to
their performance prior to our ownership.

Approximately 70% of our production of aggregates is sold directly to
customers. The balance is used to produce asphalt, which generally contains
approximately 90% aggregates by volume, and ready-mix concrete, which generally
contains approximately 80% aggregates by volume. Our integration into these
aggregate-based products and related services generally occurs in markets where
our competitors also produce and market these products.

4
<PAGE>
INDUSTRY OVERVIEW

Aggregates are a basic construction material, approximately 50% of which are
used for highway and infrastructure construction and maintenance. Demand for
aggregates has historically been only moderately cyclical due to the stability
of federal and state spending on road maintenance and construction.
Additionally, the national average per ton market price for aggregates has not
experienced an annual decline between 1985 and 1998. The United States market
for all aggregates was approximately 2.8 billion tons in 1998 with a value of
$13.5 billion. This represents an increase of 7.5% in volume and 9.7% in dollar
value above 1997 levels.

In 1998, the six year, $218 billion Transportation Equity Act for the 21st
Century, or TEA-21, was passed which designates a minimum of $158 billion
nationally for federal highway construction and maintenance projects. This
represents a 44% increase above average annual federal highway spending levels
under the predecessor six year federal program. In the nine states we serve,
average annual federal highway spending under the new program is projected to be
61% higher than under the predecessor program.

Due to the high cost of transportation relative to the value of the product,
competition within the aggregates industry favors producers with suitable
aggregate reserves closest to the market. Difficulty in obtaining the necessary
permits for new, economically viable aggregate production sites located near
customers has constrained, and will continue to constrain, the number of
competitors able to serve each market. Because of the local nature of the
aggregates industry and its historical development, the ownership within the
industry continues to be highly fragmented, with the top five producers combined
holding an estimated 25% market share in 1997.

GROWTH STRATEGY

We plan to increase sales and profits through five main strategies:

- SERVE GROWTH IN EXISTING MARKET AREAS. We will take advantage of our
existing aggregate reserve capacity and the maturation of our developing
aggregate production sites to serve additional demand in our markets.

- EXPAND CAPACITY. We will expand production capacity and invest capital so
that we can serve additional demand in our markets while remaining
cost-competitive.

- MAKE ACQUISITIONS AND DEVELOP NEW AGGREGATE RESERVES IN EXISTING MARKETS.
We will continue to make add-on acquisitions and develop new aggregate
reserves to increase our competitive position in our markets.

- SERVE MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and
additional reserves so that we can move into contiguous markets when
opportunities arise.

- EXPAND INTO NEW MARKETS THROUGH ACQUISITIONS. We may make acquisitions in
new market areas or, where economically attractive, new regions.

MANAGEMENT

Our executive officers have an average of 26 years of experience in the
aggregates industry and have a strong track record of building profitable
aggregates businesses. Immediately after the offering, our management team will
own approximately % of our common stock.

--------------

Our corporate headquarters are located at 400 South El Camino Real, Suite
500, San Mateo, California 94402. Our telephone number is (650) 685-4880.

5
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered by USAI:

U.S. offering..................... shares

International offering............ shares

Total........................... shares
--------------
--------------

Common stock to be outstanding
immediately after the offering.... shares (1)
</TABLE>

<TABLE>
<S> <C>
Use of proceeds..................... Our net proceeds from the offering will be used to
repay outstanding indebtedness and to redeem our
preferred stock. See "Use of Proceeds" for a further
description of the application of the net proceeds of
the offering.

Proposed New York Stock Exchange
symbol............................ " "
</TABLE>

- ------------------------

(1) The number of shares of our common stock to be outstanding immediately after
the offering does not include approximately shares of our common stock
that will be issuable pursuant to stock options to be granted concurrently
with the offering. For a discussion of these stock options, see
"Management--Incentive Plan."

6
<PAGE>
RECAPITALIZATION

USAI currently owns 82.99% of the common stock of WAHC and 90.84% of the
common stock of SRMHC with the remainder held primarily by certain officers and
employees of WAHC and SRMHC. Immediately prior to the consummation of the
offering, each outstanding share of common stock of WAHC not held by USAI will
be converted into 0.62 shares of our common stock and each outstanding share of
common stock of SRMHC not held by USAI will be converted into 8.07 shares of our
common stock. Each share of our common stock will then be subject to an
approximate 35.19 to 1 stock split. See "Certain Relationships and Related
Transactions" for a further discussion of these events.

7
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table presents summary historical and unaudited pro forma
financial information for USAI. You should read this along with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Selected Unaudited Pro Forma Financial Data," "Selected Historical Financial
Data" and the financial statements and the accompanying notes included elsewhere
in this prospectus.

The summary unaudited pro forma financial data are derived from the
application of unaudited pro forma adjustments related to the offering detailed
below and in the notes to "Selected Unaudited Pro Forma Financial Data" on page
20.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
FISCAL YEARS ENDED DECEMBER 31, 31,
---------------------------------------------- ------------------------
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
1998
PRO FORMA
AS
ADJUSTED(1)
-------------
(UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales...................................... $ 131,710 $ 163,243 $ 228,739 $249,224 $ 28,513 $ 49,171
Gross profit................................... 38,889 44,111 60,519 65,771 7,179 11,461
Selling, general and administrative expenses... 16,571 18,275 25,001 26,448 5,190 7,213
Depreciation, depletion and amortization(2).... 6,301 7,830 11,098 12,333 2,056 3,285
Income (loss) from operations.................. 16,017 18,006 24,420 26,990 (67 ) 963
Interest, net.................................. (5,036) (8,344) (14,886) (8,469 ) (2,394 ) (4,360 )
Other income and expense, net.................. (150) (150) (1,104) (946 ) (1,195 ) (162 )
Income (loss) from continuing operations before
provision for income taxes, minority
interest, discontinued operations and
extraordinary item........................... 10,831 9,512 8,430 17,575 (3,656 ) (3,559 )
Benefit (provision) for income taxes........... (3,660) (3,384) (3,547) (7,167 ) 1,346 1,296
Income (loss) before minority interest,
discontinued operations and extraordinary
item......................................... 7,171 6,128 4,883 10,408 (2,310 ) (2,263 )
Minority interest.............................. (727) (623) (624) -- 277 588
Income (loss) from continuing operations....... 6,444 5,505 4,259 10,408 (2,033 ) (1,675 )

Income (loss) from continuing operations per common share
--basic...................................... $0.63
--diluted.................................... $0.63
Weighted average number of common shares(3)
--basic....................................... 16,619,133
--diluted.................................... 16,619,133

SELECTED STATISTICAL AND OPERATING DATA:
EBITDA(4)...................................... $22,318 $25,836 $35,518 $39,323
Capital expenditures (excluding
acquisitions)................................ 19,594 15,251 22,372 28,538
Capital expenditures (including
acquisitions)................................ 57,504 19,289 106,256 112,422
Tons of aggregates shipped (in millions)....... 7.2 9.5 15.8 21.6
Tons of asphalt sold (in millions)............. 0.9 1.3 1.6 1.6
Yards of ready-mix concrete sold (in
millions).................................... 0.9 0.9 1.4 1.7
Estimated tons of aggregate reserves (in
millions).................................... 757 935 1,360 1,360
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------
PRO FORMA
AS
HISTORICAL ADJUSTED(5)
----------- -------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................................... $ 344,992 $ 356,232
Total debt............................................................................. 207,654 113,654
Mandatory redeemable preferred stock................................................... 44,652 --
Stockholders' equity................................................................... 9,606 162,300
</TABLE>

- ------------------------------

(1) Pro forma to give effect as if all 1998 acquisitions and dispositions had
occurred on January 1, 1998 and certain other pro forma adjustments to the
historical financial statements described in the notes to "Selected
Unaudited Pro Forma Financial Data" on page 20; as adjusted to give effect
to the sale of shares of our common stock in the offering at the
public offering price of $ per share, and the application of the net
proceeds therefrom, as well as certain other resulting pro

8
<PAGE>
forma adjustments as described in the notes to "Selected Unaudited Pro Forma
Financial Data" on page 20. See "Use of Proceeds" for a further description
of the application of net proceeds from the offering.

(2) In 1996, we began using a 20 percent salvage value in providing depreciation
on certain of our assets. In 1997, we also extended the estimated lives of
certain depreciable assets, resulting in an approximate $1,550 reduction of
1997 depreciation expense compared to what it would have been had the
estimated lives not been changed.

(3) Assumes exercise of all warrants outstanding and the conversion of minority
stock into our common stock prior to the closing of the offering.

(4) EBITDA represents earnings before interest, taxes, depreciation, depletion
and amortization. We have included EBITDA data (which are not measures of
financial performance under generally accepted accounting principles)
because such data are used by certain investors.

(5) Gives effect to the sale of shares of our common stock in the
offering at the public offering price of $ per share, and the application
of the net proceeds therefrom, as well as certain other resulting pro forma
adjustments as described in the notes to "Selected Unaudited Pro Forma
Financial Data" on page 20. See "Use of Proceeds" for a further description
of the application of net proceeds from the offering.

9
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS AND ALL OF THE
OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK. INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH
AN EQUITY OWNERSHIP INTEREST IN USAI. AS A STOCKHOLDER OF USAI, YOU MAY BE
EXPOSED TO RISKS INHERENT IN OUR BUSINESS. THE PERFORMANCE OF YOUR SHARES WILL
REFLECT THE PERFORMANCE OF OUR BUSINESS RELATIVE TO, AMONG OTHER THINGS,
COMPETITION, INDUSTRY CONDITIONS AND GENERAL ECONOMIC AND MARKET CONDITIONS. THE
VALUE OF YOUR INVESTMENT MAY INCREASE OR DECREASE AND COULD RESULT IN A LOSS.

IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES DEVELOP INTO ACTUAL EVENTS,
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY
ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.

RISK FACTORS RELATING TO OUR BUSINESS AND INDUSTRY

OUR BUSINESS IS SUBJECT TO THE FOLLOWING RISKS, WHICH INCLUDE RISKS RELATING
TO THE INDUSTRY IN WHICH WE OPERATE.

SEASONALITY AND WEATHER CONDITIONS COULD ADVERSELY AFFECT OUR SALES AND
PROFITS

Our business is seasonal, with peak sales and profits occurring primarily in
the months of April through November. Poor weather conditions during this period
could adversely affect operating income and cash flow and could therefore have a
disproportionate impact on our results for a quarter or a full year.

GENERAL AND LOCAL ECONOMIC CONDITIONS MAY AFFECT OUR BUSINESS

A majority of our sales are to customers who are in industries and
businesses that are cyclical in nature and subject to changes in general
economic conditions. In addition, because we conduct our operations in a variety
of geographic markets, our business is subject to the economic conditions in
each such geographic market. Our business is located in the Mountain states and
the Southeast and is dependent upon the economies of those regions. General
economic downturns or localized downturns in those regions where we have
operations, including any downturns in the construction industry, could have a
material adverse effect on our business, financial condition and results of
operations.

A DECREASE IN GOVERNMENT FUNDING OF HIGHWAY CONSTRUCTION AND MAINTENANCE AND
OTHER INFRASTRUCTURE PROJECTS MAY ADVERSELY AFFECT US

Many of the customers we serve and intend to serve in the future depend
substantially on government funding of highway construction and maintenance and
other infrastructure projects. Thus, a decrease or delay in government funding
of highway construction and maintenance and other infrastructure projects could
have a material adverse effect on our business, financial condition and results
of operations.

AN INCREASE IN THE PRICE OR DECREASE IN THE AVAILABILITY OF OIL MAY
ADVERSELY AFFECT US

A material rise in the price or a material decrease in the availability of
oil could adversely affect our operating results. Federal, state and municipal
government spending on roads is subject to appropriations by the respective
government entity. Asphalt prices are correlated to the price of oil. Therefore,
if there is a material rise in the price or a material decrease in the
availability of oil, there will be a resulting increase in the cost of producing
asphalt, which we would likely attempt to pass along to our customers. As a
result of any price increase, our customers may use less asphalt, thereby
decreasing our asphalt sales volumes. A material increase in the price or
decrease in the availability of oil could also lead to higher gasoline costs
which would also increase our operating costs. An increase in our operating
costs could adversely affect our operating results if we cannot pass these
increased costs through to our customers.

10
<PAGE>
OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT

Certain of our executive officers are of significant importance to our
business and operations, particularly James A. Harris, the Chairman and Chief
Executive Officer, Morris L. Bishop, Jr., the President and Chief Operating
Officer, and Michael J. Stone, the Executive Vice President--Development, Chief
Financial Officer, Treasurer and Secretary. The loss of the services of these
executives could have a material adverse effect on our business, financial
condition and results of operations. It is possible that we would not be able to
find replacements for such persons with comparable business experience. We do
not maintain key man life insurance with respect to such executive officers. See
"Management--Directors and Executive Officers" for a further description of our
management personnel.

OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR GROWTH AND OUR ABILITY TO
RESPOND TO CHANGING CONDITIONS

We have incurred substantial indebtedness. Our level of indebtedness could,
among other things:

- limit our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
pay interest;

- limit our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service requirements
or other purposes; and

- limit our ability to react to changing market conditions, changes in our
industry and economic downturns.

After giving effect to the offering and the application of the net proceeds,
at March 31, 1999 we would have had approximately $113.7 million of indebtedness
outstanding. We may incur additional indebtedness in the future to finance
acquisitions, capital expenditures, working capital and for other purposes.

OUR SUCCESS MAY BE LIMITED BY OUR INABILITY TO SUCCESSFULLY INTEGRATE
ACQUIRED BUSINESSES AND RAISE ADDITIONAL CAPITAL

We intend to grow in part through the acquisition of additional aggregates
businesses. This strategy will involve reviewing and potentially reorganizing
acquired business operations, corporate infrastructure and systems and financial
controls. Our success may be limited because of unforeseen expenses,
difficulties, complications, delays and other risks, including the following:

- We may not be able to compete successfully for available acquisition
candidates, complete future acquisitions or accurately estimate the
financial effect on our company of any businesses we acquire;

- Future acquisitions may require us to spend significant cash amounts or
may decrease our operating income;

- We may have trouble integrating acquired businesses and retaining
personnel;

- Acquisitions may disrupt our business and distract our management from
other responsibilities;

- To the extent that any of the companies which we acquire fail, the growth
of our business could be harmed; and

- Future acquired companies may have undiscovered liabilities that could
require us to spend significant amounts of additional capital.

Future acquisitions may require substantial capital investment. We intend to
pay for any future acquisitions using cash, capital stock, notes and/or
assumption of indebtedness. To the extent available cash is not sufficient to
provide the capital required for such acquisitions, we will require additional
debt and/or equity financing in order to provide for such capital. There can be
no assurance, however, that such financing will be available or, if available,
will be available on terms we consider satisfactory.

11
<PAGE>
Failure to obtain sufficient additional capital in the future could limit our
ability to implement our business strategy. Future debt financings, if
available, may result in increased interest and amortization expense, increased
leverage and decreased income available to fund further acquisitions and
expansion. This may limit our ability to withstand competitive pressures and
render us more vulnerable to economic downturns. Future equity financings may
dilute the equity interest of existing stockholders.

WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE HIGHLY COMPETITIVE
AGGREGATES INDUSTRY

The construction aggregates industry is local by nature. Transporting
aggregates over relatively short distances is costly in relation to the value of
the delivered materials. As a result, strategically located aggregate production
sites with substantial mineral reserves enjoy a significant competitive
advantage, generally within a geographic area roughly half the distance to the
nearest competitor's location. Although asphalt and ready-mix concrete represent
higher value-added products, the nature of their use and dependence on
aggregates as a raw material also result in localized competition. The
importance of tight scheduling of asphalt pick-ups and deliveries to maximize
productivity at both the production plant and paving site, as well as the
significant cost per ton of transportation relative to the value per ton, limits
the effective ranges of asphalt producers and contractors. Access to aggregate
production sites in or near metropolitan areas represents a significant
competitive advantage in relation to competitors seeking to enter that market.
The difficulties associated with locating a suitable mineral source, obtaining
proper permits and establishing operations, both with respect to cost and
timing, represent an important barrier to entry. Although competitive dynamics
vary across local markets, aggregates competitors within a market generally
compete on the basis of price and, to a lesser extent, service and quality. Some
of our competitors have greater financial resources and are more geographically
diverse than us. We have significant investment in fixed locations in specific
geographic areas. In the event one or more of our aggregate production sites is
competitively disadvantaged in its market, it could have a material adverse
effect on our business, financial condition and results of operations. It is
possible that we will encounter increased competition from existing competitors
or new market entrants that may be significantly larger and have greater
financial and marketing resources. In addition, to the extent existing or future
competitors seek to gain or retain market share by reducing prices, we may be
required to lower our prices and rates, thereby adversely affecting operating
results.

WE MAY BE ADVERSELY AFFECTED BY GOVERNMENTAL REGULATIONS

Our operations are subject to and affected by federal, state and local laws
and regulations including such matters as land usage, street and highway usage,
noise levels and health, safety and environmental matters. In many instances, we
must have various permits. We cannot assure you that we have been or will at all
times be in compliance with all regulatory requirements or that we will not
incur material costs or liabilities in connection with regulatory requirements.

Certain of our operations may from time to time involve the use of
substances that are classified as toxic or hazardous substances within the
meaning of these laws and regulations. Despite our compliance efforts, risk of
environmental liability is inherent in the operation of our business. As a
result, it is possible that environmental liabilities will have a material
adverse effect on us in the future. In addition, future events, such as changes
in existing laws or regulations or enforcement policies, or further
investigation or evaluation of the potential health hazards of certain of our
products or business activities, may give rise to additional compliance and
other costs that could have a material adverse effect on our business, financial
condition and results of operations. See "Business--Governmental and
Environmental Regulation" for a further discussion of the effects of regulation
on our business.

GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P. HAS SUBSTANTIAL CONTROL OF OUR
COMMON STOCK AND HAS THE ABILITY TO MAKE DECISIONS THAT COULD ADVERSELY AFFECT
STOCKHOLDERS

After the completion of the offering and assuming no exercise of the
underwriters' over-allotment option, Golder, Thoma, Cressey, Rauner Fund IV,
L.P. will own approximately % of the outstanding shares of our common stock.
As long as Golder, Thoma, Cressey, Rauner Fund IV, L.P. has substantial

12
<PAGE>
control of our outstanding common stock, Golder, Thoma, Cressey, Rauner Fund IV,
L.P. will continue to have the ability to influence the election of our board of
directors and the outcome of all corporate actions requiring stockholder
approval. As a result, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be in a
position to continue to influence all matters affecting USAI, including:

- the composition of our board of directors and, through it, any
determination with respect to the direction and policies of USAI,
including the appointment and removal of our officers;

- any determinations with respect to mergers or other business combinations
involving USAI;

- the acquisition or disposition of assets by USAI;

- future issuances of common stock or other securities of USAI;

- the incurrence of debt by USAI; and

- the payment of dividends on our common stock.

OUR OPERATIONS ARE SUBJECT TO A VARIETY OF RISKS THAT MAY RESULT IN CLAIMS
OF PERSONAL INJURY, PROPERTY DAMAGE OR OTHER LIABILITIES

The drivers of our heavy delivery trucks are subject to traffic and other
hazards associated with providing services on construction sites. Our plant
personnel are subject to the hazards associated with moving and storing large
quantities of heavy raw materials.

Our operating hazards can cause personal injury and death, damage to or
destruction of property and environmental damage. We maintain insurance coverage
in amounts and against the risks we believe are in accord with industry
practice. This insurance may not be adequate to cover all losses or liabilities
we may incur in our operations, and we may not be able to maintain insurance of
the types or at levels we deem necessary or adequate or at rates we consider
reasonable. Our failure to maintain adequate insurance could have a material
adverse effect on our business, financial condition and results of operations.

WE MAY INCUR LIABILITIES IN CONNECTION WITH OUR AGGREGATE CERTIFICATION
ACTIVITIES

We operate independent material testing laboratories which determine and
certify aggregates for compliance with material specifications for ourselves and
for third parties. We may be subject to lawsuits alleging negligence or other
legal claims that could involve claims for substantial damages. For example, we
may become involved in litigation with a third party for whom we certified
aggregates if such certification was in error or did not otherwise meet a
particular project's specification. Damages assessed in connection with, and the
costs of defending, any such lawsuit could have a material adverse effect on our
business, financial condition and results of operations.

WE SELL TO THE COMMERCIAL AND RESIDENTIAL CONSTRUCTION INDUSTRIES, WHICH ARE
CYCLICAL

Approximately one-half of our shipments are made to contractors in
connection with commercial and residential construction projects. The level of
activity in residential construction markets depends on many factors not within
our control, including general economic conditions, mortgage and other interest
rates, inflation, unemployment, demographic trends, gross domestic product
growth and consumer confidence in each of the regions in which we operate.
Historically, both new housing starts and residential remodeling decrease in
slow economic periods. The level of activity in the commercial construction
market depends largely on vacancy rates and general economic conditions. Because
residential and commercial construction markets are sensitive to cyclical
changes in the economy, downturns in the economy or lack of substantial
improvement in the economy of any of our geographic markets could adversely
affect our business, financial condition and results of operations. Because of
these and other factors, there may be substantial fluctuations in our operating
results and the results for any period may not be indicative of results for any
future period.

13
<PAGE>
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE, WHICH MAY IMPACT
OUR STOCK PRICE

Our quarterly revenues, expenses and operating results have varied
significantly in the past and are likely to vary significantly from quarter to
quarter in the future. As a result, our operating results may fall below market
analysts' expectations in some future quarters, which could have a material
adverse effect on the market price of our common stock. Delays in customer
orders can cause our revenues and results of operations to significantly
fluctuate from period to period. Quarterly fluctuations may also result from
factors such as:

- adverse weather conditions;

- changes in our operating expenses;

- the effect of integration of acquired businesses;

- price changes in response to competitive factors; and

- general economic factors.

We believe that quarterly revenues, expenses and operating results are likely to
vary significantly in the future. Therefore, period-to-period comparisons of
such items are not necessarily meaningful and, as a result, should not be relied
upon as indications of future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a further
discussion of the fluctuation in our quarterly operating results.

THERE WILL BE IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW STOCKHOLDERS IN THIS
OFFERING

The initial public offering price is substantially higher than the net
tangible book value per share of our common stock that will be applicable
immediately after the offering. The common stock you purchase in the offering
will have a post-offering net tangible book value per share of $ less than
the price paid for the share.

THE YEAR 2000 ISSUE MAY MATERIALLY AFFECT US

Our business, financial condition and results of operations may be adversely
impacted by information technology issues related to the Year 2000. We use
software and related computer technologies in our operations that use two digit
rather than four to specify the year, which could result in a date recognition
problem with the transition to the year 2000. We may not be successful in
implementing Year 2000 solutions at a cost that does not materially adversely
affect our business, financial condition and results of operations. Any failure
on our part to have Year 2000 compliant programs and systems in place in a
timely manner could have a material adverse effect on our business, financial
condition or results of operations. There is uncertainty about the broader scope
of the Year 2000 issue as it may affect third parties, including our suppliers
and customers, which are critical to our operations. In the event our suppliers
and customers do not have Year 2000 compliant programs and systems in place,
there could be a material adverse effect on our business, financial condition
and results of operations.

RISK FACTORS RELATING TO SECURITIES MARKETS

THERE ARE RISKS RELATING TO SECURITIES MARKETS THAT YOU SHOULD CONSIDER IN
CONNECTION WITH YOUR INVESTMENT IN AND OWNERSHIP OF OUR COMMON STOCK.

OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY AFTER THE OFFERING AND YOU COULD
LOSE ALL OR PART OF YOUR INVESTMENT AS A RESULT

Prior to the offering, there has been no public market for our common stock.
We intend to list our common stock on the New York Stock Exchange. We do not
know how our common stock will trade in

14
<PAGE>
the future. The initial public offering price will be determined through
negotiations between the underwriters and us. You may not be able to resell your
shares at or above the initial public offering price due to a number of factors,
including:

- actual or anticipated fluctuations in our operating results;

- changes in expectations as to our future financial performance or changes
in financial estimates of securities analysts; and

- the operating and stock price performance of other comparable companies.

In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.

A SUBSTANTIAL NUMBER OF OUR SHARES WILL BE AVAILABLE FOR SALE IN THE PUBLIC
MARKET AFTER THE OFFERING AND SALES OF THOSE SHARES COULD ADVERSELY AFFECT OUR
STOCK PRICE

The market price of our common stock could drop as a result of sales of a
substantial number of shares of our common stock into the market after the
offering, or the perception that such sales could occur. These factors also
could impair our ability to raise funds through an offering of equity
securities. After the offering, shares of our common stock will be
outstanding. Except for certain exceptions, all of the shares sold in this
offering will be freely transferable without restriction or further registration
under the Securities Act.

PROVISIONS IN OUR CORPORATE DOCUMENTS COULD DELAY OR PREVENT A CHANGE IN
CONTROL OF USAI, WHICH COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK

Immediately following the offering, our restated certificate of
incorporation and bylaws will contain several provisions which may discourage,
delay or prevent a takeover attempt which could adversely affect the price of
our common stock. These provisions include:

- a classified board of directors;

- the authority of our board of directors to issue preferred stock without
stockholder approval with such terms as our board of directors may
determine; and

- with respect to annual stockholders' meetings, requirements that
stockholders must comply with the timing and procedural requirements of
the federal proxy rules in order for a stockholder proposal to be included
in our proxy statement.

- the ability of our board to adopt a rights plan, more commonly called a
"poison pill," without shareholder approval.

We will also be subject to Section 203 of Delaware corporate law, which imposes
some restrictions on mergers and other business combinations between us and any
holder of 15% or more of our common stock. For a description of these
provisions, see "Description of Capital Stock."

WE MAY ISSUE PREFERRED STOCK, THE TERMS OF WHICH COULD ADVERSELY AFFECT THE
RIGHTS OF HOLDERS OF OUR COMMON STOCK

Immediately following the offering, our restated certificate of
incorporation will authorize us to issue one or more classes or series of
preferred stock without the approval of our stockholders. Our preferred stock
may have preferences, powers and relative, participating, optional and other
rights and preferences over our common stock respecting dividends and
distributions, as our board of directors may determine. The terms of one or more
classes or series of our preferred stock could adversely impact the rights of
holders of our common stock. See "Description of Capital Stock" for a further
description of our preferred stock.

15
<PAGE>
FORWARD-LOOKING STATEMENTS

Certain statements made in this prospectus are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are subject to the safe harbor provisions of the Securities Act
and the Exchange Act. Such forward-looking statements include statements about:

- our strategies;

- effects of government funding;

- cost of raw materials; and

- other statements that are not historical facts.

When used in this prospectus, the words "anticipate," "believe," "estimate,"
"should," "could" and similar expressions are generally intended to identify
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the following:

- changes in general economic and business conditions (including in the
aggregates industry);

- actions of competitors;

- the implementation of our acquisition strategy;

- changes in government funding; and

- other factors discussed under "Risk Factors."

We undertake no obligation to publicly update or revise any forward-looking
statements. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus may not occur.

USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of our
common stock in the offering, after deducting estimated expenses of $ and
underwriting discounts and commissions, will be approximately $ million. We
intend to use approximately $ million of such net proceeds to repay
indebtedness outstanding under our existing credit facility, $ million to
repay the HTSB Note (as defined) and approximately $44.7 million to redeem our
preferred stock, most of which is owned by Golder, Thoma, Cressey, Rauner Fund
IV, L.P. Our existing credit facility and our outstanding senior subordinated
notes prohibit us from redeeming our preferred stock, and our outstanding senior
subordinated notes prohibit us from repaying the HTSB Note. We plan on amending
our credit facility and our senior subordinated note documents prior to or
concurrently with the offering to allow us to redeem the preferred stock and
repay the HTSB Note. There can be no assurance, however, that we will be able to
amend those items to allow us to redeem the preferred stock and repay the HTSB
Note.

Our existing credit facility provides for a term loan in the aggregate
amount of $115 million and a revolving loan of up to $60 million. The term loan
consists of an "A" tranche and "B" tranche. The term loan A accrues interest at
a rate per annum based on the Eurodollar rate plus a spread of 0.875% to 2.125%
and the term loan B accrues interest at a rate per annum based on the Eurodollar
rate plus a spread of 1.875% to 2.500%. The term loan A matures in March 2004
and the term loan B matures in March 2006. The revolving facility terminates in
June 2004 and accrues interest at a rate per annum based on the Eurodollar rate
plus a spread of 0.875% to 2.125%. As of March 31, 1999, we had

16
<PAGE>
borrowings of approximately $31.4 million outstanding under the revolving
facility, $53.5 million of term loan A outstanding and $58.5 million of term
loan B outstanding.

As of March 31, 1999, our outstanding preferred stock totaled approximately
$30.1 million, excluding accrued and unpaid dividends of approximately $14.6
million. Our preferred stock was sold to Golder, Thoma, Cressey, Rauner Fund IV,
L.P. and certain members of our management for a purchase price of approximately
$30.1 million. The yield on our preferred stock is 10% compounded quarterly.

We have entered into a $17.5 million revolving line of credit pursuant to
which the HTSB Note was issued. Interest on the note accrues quarterly at an
announced prime rate which was 7.750% as of March 31, 1999. As of March 31,
1999, there was $8.2 million outstanding on this note. In April 1999, we
borrowed an additional $7.5 million under the HTSB Note for working capital and
other general corporate purposes. The HTSB Note is payable on demand. The HTSB
Note is guaranteed by Golder, Thoma, Cressey, Rauner Fund IV, L.P. Upon
repayment of the HTSB Note, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be
released from the guaranty. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,"
"Certain Relationships and Related Transactions--The Preferred Stock Redemption"
and "Description of Certain Indebtedness" for a further description of our
credit facility, our preferred stock and the HTSB Note.

DIVIDEND POLICY

Beginning in the fourth quarter of 1999, with respect to earnings generated
during the third quarter of 1999, we intend to pay quarterly cash dividends at
an initial rate of $0.03 per share of our common stock. Any determination to pay
dividends will be at the discretion of our board of directors. The determination
of the board of directors to pay dividends will depend upon, among other
factors, our results of operations, financial condition, capital requirements,
future prospects, contractual restrictions and other factors deemed relevant by
our board of directors. Under our existing credit facility, we are prohibited
from paying dividends. We plan on amending our credit facility prior to or
concurrently with the offering to allow us to pay dividends. There is no
assurance, however, that we will be able to amend our credit facility to allow
us to pay dividends.

17
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)

The following table sets forth: (1) our unaudited actual capitalization as
of March 31, 1999, and (2) our unaudited pro forma as adjusted capitalization as
of such date, after giving effect to the sale of shares of our
common stock in the offering at the offering price of $ per share, and the
application of the net proceeds therefrom of $ . See "Use of
Proceeds" for a further description of the application of the net proceeds of
the offering. This table should be read in conjunction with our financial
statements and notes thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AT MARCH 31, 1999
-----------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(UNAUDITED)
<S> <C> <C>
Debt:
Revolving loan...................................................................... $ 31,400 $ --
Term loan A......................................................................... 53,500 26,287
Term loan B......................................................................... 58,500 31,288
Notes payable to former stockholders................................................ 4,954 4,954
Other long-term debt................................................................ 6,856 6,856
10.34% senior subordinated notes.................................................... 30,000 30,000
10.09% senior subordinated notes.................................................... 15,000 15,000
Discount on the senior subordinated notes......................................... (731) (731)
Demand note......................................................................... 8,175 --
---------- -----------
Total debt(1)................................................................... 207,654 113,654

Minority interest..................................................................... 2,803 --
Mandatory redeemable preferred stock, $0.01 par value, 500,000 shares authorized;
300,842 shares initially issued and outstanding; none issued following the
offering............................................................................ 44,652 --

Stockholders' equity:
Common stock, $0.0003 par value, 8,796,975 shares initially authorized; 7,198,459
shares initially issued and outstanding, including 8,938 shares of Treasury stock;
16,619,133 shares issued and oustanding, as adjusted(2)........................... 2 5
Additional paid-in capital.......................................................... 2,946 155,637
Notes receivable from sale of stock................................................. (653) (653)
Treasury stock, at cost............................................................. (2) (2)
Retained earnings................................................................... 7,313 7,313
---------- -----------
Total stockholders' equity........................................................ 9,606 162,300
---------- -----------
Total capitalization.............................................................. $ 264,715 $ 275,954
---------- -----------
---------- -----------
</TABLE>

- ------------------------

(1) Includes historical current maturities of $16,316 and pro forma as adjusted
current maturities of $5,342.

(2) Includes 7,198,459 shares outstanding less 8,938 shares of treasury stock,
shares issued in the offering, the conversion of 335,517 warrants
into shares and 760,762 shares issued to minority stockholders in connection
with the recapitalization described on page 7.

18
<PAGE>
DILUTION

As of March 31, 1999, our unaudited pro forma net tangible book value was
approximately $ million, or $ per share. After giving effect to the
offering and the application of the net proceeds therefrom described in "Use of
Proceeds," our unaudited pro forma net tangible book value as of March 31, 1999,
would be $ million or $ per share. This represents an immediate increase
in net tangible book value of $ per share to our existing stockholders and an
immediate dilution of $ per share to new stockholders. The following table
illustrates this per share dilution:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............................................. $
Pro forma net tangible book value per share before the offering (1)......................... $
Increase per share attributable to payments by new investors................................ $
Adjusted pro forma net tangible book value per share after the offering..................... $ $
--------- ---------
Dilution per share to new stockholders (2).................................................. $
---------
---------
</TABLE>

- ------------------------

(1) Net tangible book value per share of our common stock is determined by
dividing our net tangible book value at March 31, 1999 of $ million by
the aggregate number of shares of our common stock outstanding. This
calculation gives effect to the recapitalization and stock split described
on page 7.

(2) Dilution is determined by subtracting pro forma, as adjusted, net tangible
book value per share after the offering from the initial public offering
price per share.

The following table summarizes, on a pro forma basis, as of March 31, 1999,
the difference between our existing stockholders and the new stockholders with
respect to the number of shares of our common stock purchased (or to be
purchased) from USAI, the total consideration paid (or to be paid) and the
average price per share paid (or to be paid) by our existing stockholders and
new stockholders, before deducting the estimated offering expenses and
underwriting discounts and commissions:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders (3)..................................... % $ % $
New stockholders..............................................
--------- --- --------- --- ---------
Total....................................................... % $ % $
--------- --- --------- --- ---------
--------- --- --------- --- ---------
</TABLE>

- ------------------------

(3) Does not include shares of our common stock reserved for issuance under
the incentive plan. See "Management--Incentive Plan" for a further
description of these shares.

19
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

PRO FORMA

In 1998, we acquired Falcon Ridge Quarry, Inc. on February 18th, Geodyne
Transport, Inc. on February 20th and Monroc, Inc. on June 5th in separate
transactions. These acquisitions constitute the 1998 Acquired Businesses.
Subsequently, we disposed of the precast division assets of Monroc, Inc. and
certain other non-business related land assets. These assets constitute the
Disposed Assets. While these acquisitions and dispositions occurred at various
dates during 1998, the unaudited pro forma data are presented as if such
acquisitions and dispositions had occurred on January 1, 1998 and also include
the effect of certain pro forma adjustments to the historical financial
statements described below.

The selected unaudited pro forma financial data for the year ended December
31, 1998 have been derived from our financial information, the financial
statements and notes thereto of certain of the 1998 Acquired Businesses and
Disposed Assets and the audited financial statements and notes thereto of
Monroc, Inc., which are included elsewhere in this prospectus. Historical, pro
forma and pro forma as adjusted balance sheet data are reflected as of March 31,
1999. The unaudited pro forma and unaudited pro forma as adjusted information
presented below is not necessarily indicative of what results of operations
actually would have been if the transactions had occurred on the date indicated.

PRO FORMA AS ADJUSTED

The selected unaudited pro forma as adjusted financial data gives effect to
the consummation of the offering as if it occurred on January 1, 1998, and also
includes the effects of certain adjustments to the unaudited pro forma
statements as described below.

The selected unaudited pro forma and unaudited pro forma as adjusted
financial data should be read in conjunction with "Selected Historical Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and notes
thereto of Monroc, Inc. included elsewhere in this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------
HISTORICAL
---------- PRO FORMA PRO FORMA
------------- AS ADJUSTED
(UNAUDITED) -----------
(UNAUDITED)
<S> <C> <C> <C>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS:
Net sales.......................................................... $ 228,739 $ 249,224(1) $ 249,224
Cost of products sold.............................................. 168,220 183,453(2) 183,453
---------- ------------- -----------
Gross profit....................................................... 60,519 65,771 65,771
Selling, general and administrative expenses....................... 25,001 26,448(3) 26,448
Depreciation, depletion and amortization........................... 11,098 12,075(4) 12,333(8)
---------- ------------- -----------
Income from operations............................................. 24,420 27,248 26,990
Interest, net...................................................... (14,886) (16,611)(5) (8,469)(9)
Other income and expense, net...................................... (1,104) (1,096) (946)(10)
---------- ------------- -----------
Income from continuing operations before provision for income
taxes, minority interest, discontinued operations and
extraordinary item............................................... 8,430 9,541 17,575
Provision for income taxes......................................... 3,547 3,975(6) 7,167(11)
---------- ------------- -----------
Income before minority interest, discontinued operations and
extraordinary item............................................... 4,883 5,566 10,408
Minority interest.................................................. (624) (741)(7) --(12)
---------- ------------- -----------
Income from continuing operations.................................. $4,259 $4,825 $10,408
---------- ------------- -----------
---------- ------------- -----------
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------
HISTORICAL
------------ PRO FORMA PRO FORMA
------------ AS ADJUSTED
(UNAUDITED) -------------
(UNAUDITED)
<S> <C> <C> <C>

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED):
Income per common share--basic
Income from continuing operations available for common
stockholders................................................ $0.02 $0.10 $0.63(13)
Weighted average common shares outstanding.................... 7,189,521 7,189,521 16,619,133(14)
Income per common share--diluted
Income from continuing operations available for common
stockholders................................................ $0.02 $0.10 $0.63(13)
Weighted average common shares outstanding.................... 7,525,038 7,525,038 16,619,133(14)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------
HISTORICAL
------------ PRO FORMA PRO FORMA
------------ AS ADJUSTED
(UNAUDITED) -------------
(UNAUDITED)
<S> <C> <C> <C>

BALANCE SHEET DATA:
Total assets.................................................. $344,992 $344,992 $356,232(15)
Total debt.................................................... 207,654 207,654 113,654(15)
Mandatory redeemable preferred stock.......................... 44,652 44,652 --
Stockholders' equity.......................................... 9,606 9,606 162,300(15)
</TABLE>

Notes to Selected Unaudited Pro Forma Financial Data:

(1) Net sales includes $20,485 from the 1998 Acquired Businesses (excluding
sales related to Disposed Assets) for the period January 1, 1998 to their
respective dates of acquisition in 1998.

(2) Cost of products sold includes $15,233 from the 1998 Acquired Businesses
(excluding costs related to Disposed Assets) for the period January 1, 1998
to their respective dates of acquisition in 1998.

(3) Selling, general and administrative expenses include $2,051 from the 1998
Acquired Businesses (excluding expenses related to Disposed Assets) for the
period January 1, 1998 to their respective dates of acquisition in 1998,
less $604 of expenses incurred by Monroc, Inc. relating to the sale of
Monroc to USAI.

(4) Depreciation, depletion and amortization include $977 from the 1998 Acquired
Businesses (excluding amounts related to Disposed Assets) for the period
January 1, 1998 to their respective dates of acquisition to reflect
depreciation, depletion and amortization of fixed assets, goodwill and other
intangibles from their ongoing operations adjusted for USAI's depreciation,
depletion and amortization policies and estimated lives of assets. It also
includes amounts recorded as a result of purchase accounting.

(5) Interest expense includes $1,725 from the 1998 Acquired Businesses for the
period January 1, 1998 to their respective dates of acquisition in 1998. The
$1,725 is comprised of: $228 of interest expense on the debt assumed by USAI
from the 1998 Acquired Businesses; interest expense of $1,984 on the new
debt incurred to acquire such businesses and interest savings of $487
resulting from debt reduction using the proceeds from the Disposed Assets.
These adjustments reflect the acquisitions and dispositions as if they
occurred on January 1, 1998.

(6) Provision for income taxes includes $428 as if the 1998 Acquired Businesses
(excluding Disposed Assets) had been combined with USAI for the period
January 1, 1998 to their respective dates of acquisition, and those
additional earnings were subject to a blended federal and state statutory
tax rate of 38.5%.

(7) Minority interest has been adjusted by $117 to reflect the minority
interest's share in other pro forma adjustments.

(8) Includes $257 of amortization of goodwill resulting from the acquisition of
minority interest shares (concurrent with the offering) in exchange for
shares of USAI assuming a per share value of $ .

(9) Interest expense has been adjusted to reflect interest savings or interest
income from the application of $94,000 of the proceeds of the offering to
repay indebtedness or investment of excess cash assuming a return of 5% as
if the offering and the appreciation of the proceeds occurred on January 1,
1998.

(10) Other income and expense reflects the discontinuance of a $150 management
fee paid to Golder, Thoma, Cressey, Rauner, Inc.

21
<PAGE>
(11) Provision for income taxes includes $3,192 as if the offering had occurred
on January 1, 1998, and the interest and other savings were subject to a
blended federal and state statutory rate of 38.5%.

(12) Minority interest has been adjusted to reflect the exchange of the minority
stockholders' stock for USAI's common stock prior to the closing of the
offering.

(13) The impact on income per share available for common stockholders of the
accretion of the 1998 mandatory redeemable preferred stock dividend has been
eliminated.

(14) Includes the conversion of 335,517 warrants into shares of our common stock
and the conversion of minority shares into 760,762 shares of our common
stock upon closing of the offering and the sale of shares of our
common stock.

(15) Reflects the impact of the following items as of March 31, 1999: the sale
of shares of our common stock in the offering at the public offering
price of $ per share, less estimated offering costs; the use of $94,000 in
offering proceeds to pay down existing debt of USAI; the payment of a
dividend of $14,567 to our preferred stockholders, the repurchase of all of
our outstanding preferred stock for $30,084 and the exchange of the minority
stockholders stock for USAI's common stock prior to the closing of the
offering.

22
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The selected historical financial data for the year ended December 31, 1994
through the year ended December 31, 1998 have been derived from our audited
financial statements and notes thereto, which financial statements for the years
ended December 31, 1996, 1997 and 1998 appear elsewhere in this prospectus. The
following data represent historical results and include the results of the
business and asset acquisitions listed in footnote (1) below following their
acquisition by USAI.

The selected historical financial data should be read in conjunction with
the information contained in the "Selected Unaudited Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated financial statements and notes thereto, and the
individual financial statements and notes thereto of Monroc, Inc. included
elsewhere herein.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................................ $35,442 $97,527 $131,710 $163,243 $228,739
Cost of products sold................................ 24,653 70,006 92,821 119,132 168,220
---------- ---------- ---------- ---------- ----------
Gross profit......................................... 10,789 27,521 38,889 44,111 60,519
Selling, general and administrative expenses......... 6,448 12,977 16,571 18,275 25,001
Depreciation, depletion and amortization(2).......... 1,227 4,139 6,301 7,830 11,098
---------- ---------- ---------- ---------- ----------
Income from operations............................... 3,114 10,405 16,017 18,006 24,420
Interest, net........................................ (844) (2,828) (5,036) (8,344) (14,886)
Other income and expense, net........................ (112) 391 (150) (150) (1,104)
---------- ---------- ---------- ---------- ----------
Income from continuing operations before provision
for income taxes, minority interest, discontinued
operations and extraordinary item.................. 2,158 7,968 10,831 9,512 8,430
Provision for income taxes........................... (756) (2,630) (3,660) (3,384) (3,547)
---------- ---------- ---------- ---------- ----------
Income before minority interest, discontinued
operations and extraordinary item.................. 1,402 5,338 7,171 6,128 4,883
Minority interest.................................... (282) (759) (727) (623) (624)
---------- ---------- ---------- ---------- ----------
Income from continuing operations.................... 1,120 4,579 6,444 5,505 4,259
Operating income from discontinued operations, less
applicable income tax expense(3)................... 372 (5) -- -- 844
Gain on disposal of discontinued operations and
income during phase out period, less applicable
income tax expense(3).............................. -- 247 -- -- 565
---------- ---------- ---------- ---------- ----------
Income before extraordinary item..................... 1,492 4,821 6,444 5,505 5,668
Extraordinary item: loss on extinguishment of debt,
less applicable income tax benefit................. -- -- -- -- (338)
---------- ---------- ---------- ---------- ----------
Net income........................................... $1,492 $4,821 $6,444 $5,505 $5,330
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income per common share--basic.......................
Income from continuing operations available for
common stockholders.............................. $0.06 $0.38 $0.49 $0.25 $0.02
Net income available for common stockholders....... 0.13 0.41 0.49 0.25 0.17
Weighted average common shares outstanding......... 5,169,615 7,106,408 7,116,719 7,166,193 7,189,521
Income per common share--diluted.....................
Income from continuing operations available for
common stockholders.............................. $0.06 $0.38 $0.47 $0.24 $0.02
Net income available for common stockholders....... 0.13 0.41 0.47 0.24 0.16
Weighted average common shares outstanding......... 5,169,615 7,106,408 7,339,353 7,388,827 7,525,038
</TABLE>

23
<PAGE>

BALANCE SHEET DATA:
Total assets......................................... $54,300 $83,560 $150,139 $172,266 $339,388
Total debt........................................... 22,269 37,992 78,475 92,788 200,591
Stockholders' equity(5).............................. 18,473 26,271 9,336 10,897 12,383
</TABLE>

- ------------------------------
(1) In 1994, we acquired Southern Ready Mix, Inc., Western Rock Products Corp.,
DeKalb Stone, Inc. and G.M. Aldred & Sons, Inc. in separate transactions; in
1995, we acquired Cox Rock Products, Inc. and related businesses, Jensen
Construction and Development, Inc., Verlie quarry (Alabaster), Mulberry Rock
Corporation and certain assets of Ence Construction Company and related
businesses in separate transactions; in 1996, we acquired or started-up the
following: Southern Sand, Inc., Vance Materials, L.L.C., BHY Ready Mix,
Inc., Jasper Sand, Inc., New Hope Farms, Inc., the O'Neal quarry operations,
Mohave Concrete and Materials, Inc. and related businesses and Valley
Asphalt, Inc. in separate transactions; in 1997, we acquired or started-up
the following: Southwest Stone, Inc., A-T Asphalt, Inc., Ekins quarry and
Lehi quarry in separate transactions; in 1998, we acquired or started-up the
following: Pride quarry, Fort Pearce Aggregates, Geodyne Transport, Inc.,
Falcon Ridge Quarry, Inc., Beck Paving, Inc., Monroc, Inc. and Sandia
Construction, Inc. in separate transactions.

(2) In 1996, we began assuming a 20 percent salvage value in providing
depreciation on certain of our assets. In 1997, we changed the estimated
lives of certain depreciable assets, resulting in an approximate $1,550
reduction of 1997 depreciation expense compared to what it would have been
had the estimated lives not been changed.

(3) Effective February 7, 1995, we disposed of the concrete pipe plant of
Southern Ready Mix, Inc. Effective December 31, 1998, we sold the Precast
Division assets of Monroc, Inc.

(5) In 1996, USAI modified the terms of our preferred stock, making it
mandatorily redeemable. The liquidation value, at that date, of the
preferred stock of $32,792, including accreted dividends of $2,711, was
removed from Stockholders' Equity and classified as Mandatory Redeemable
Preferred Stock.

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR RESULTS OF OPERATIONS,
FINANCIAL CONDITION AND LIQUIDITY SHOULD BE READ IN CONJUNCTION WITH "SELECTED
HISTORICAL FINANCIAL DATA" AND THE FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED ELSEWHERE IN THIS PROSPECTUS.

GENERAL

We conduct our operations through the quarrying and distribution of
aggregate products in nine states in two fast growing regions of the United
States, the Mountain states and the Southeast. Our operations have the same
general economic characteristics including the nature of the products,
production processes, type and class of customers, methods of distribution and
governmental regulations.

Over the last three years, our net sales and profitability have increased as
a result of internal growth, the maturation of our recently developed aggregate
production sites and the completion of several business and asset acquisitions.
In February 1998, we completed the acquisition of Falcon Ridge Quarry, Inc. and
the acquisition of Geodyne Transport, Inc. In June 1998, we completed our
largest acquisition to date, Monroc, Inc. Collectively, these acquisitions are
referred to as the 1998 Acquired Businesses. The 1998 Acquired Businesses and
the start-up of several other operations significantly expanded our business in
the Mountain states and increased our presence in a number of local markets.

Since 1996, we have started eight major greenfield aggregate production
sites serving large metropolitan markets. The development of greenfield
aggregate production sites includes securing all necessary permits and zoning to
ensure that commercially economic quantities of aggregates can be produced.
These new sites include both sites which have never been permitted or mined, as
well as sites which may have been properly zoned, but were not operating at
sufficient volumes to be economically viable. Based on our experience, a new
aggregate production site's net sales, cash flow and profitability tend to
increase over the first five years of operation as production increases and the
site matures.

Our business is seasonal, with peak sales and profits occurring primarily in
the months of April through November. Accordingly, our results of operations for
any individual quarter are not indicative of our results for the full year.

RESULTS OF OPERATIONS

The following table presents net sales, gross profit, selling, general and
administrative expenses, income (loss) from operations and net interest expense
for USAI:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
FISCAL YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- ---------
1996 1997 1998 1998
-------------------- -------------------- -------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
$ % $ % $ % $
--------- --------- --------- --------- --------- --------- ---------

Net sales....................................... 131,710 100.0 163,243 100.0 228,739 100.0 28,513
Gross profit.................................... 38,889 29.5 44,111 27.0 60,519 26.5 7,179
Selling, general and administrative expenses.... 16,571 12.6 18,275 11.2 25,001 10.9 5,190
Income (loss) from operations................... 16,017 12.2 18,006 11.0 24,420 10.7 (67)
Interest, net................................... (5,036) 3.8 (8,344) 5.1 (14,886) 6.5 (2,394)

1999
--------------------

<S> <C> <C> <C>
% $ %
--------- --------- ---------
Net sales....................................... 100.0 49,171 100.0
Gross profit.................................... 25.2 11,461 23.3
Selling, general and administrative expenses.... 18.2 7,213 14.7
Income (loss) from operations................... (0.2) 963 2.0
Interest, net................................... 8.4 (4,360) 8.9
</TABLE>

FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998

NET SALES. Net sales for the three months ended March 31, 1999 increased
72.5% to $49.2 million from $28.5 million for the three months ended March 31,
1998. This increase consists of $10.8 million of net sales from the 1998
Acquired Businesses and an increase in net sales by our existing businesses

25
<PAGE>
of $9.9 million, a 34.7% increase. The increase in sales from our existing
businesses was due to strong demand for our aggregates and related products and
increased shipments from new and developing aggregate production sites of
267,000 tons. Total shipments of aggregates increased from 2.1 million tons in
the first quarter of 1998 to 4.2 million tons in the first quarter of 1999, a
100% increase. Although volumes increased, our mix of products sold in 1999
included more lower priced aggregates than in 1998. We also experienced an
approximate 5% increase in selling prices per ton during the period.

GROSS PROFIT. Gross profit for the three months ended March 31, 1999
increased 59.6% to $11.5 million from $7.2 million for the three months ended
March 31, 1998. The 1998 Acquired Businesses contributed $1.5 million to gross
profit for the three months ended March 31, 1999 and the existing businesses
contributed $10.0 million, a 38.9% increase. The increase in gross profit at our
existing businesses was primarily due to our increased sales. Gross margins fell
from 25.2% in 1998 to 23.3% in 1999 due to the inclusion of the 1998 Acquired
Businesses. Gross margins from existing businesses were 25.9%, compared to 25.2%
in 1998. The gross margin at the 1998 Acquired Businesses of 13.9% was less than
the existing businesses due to seasonal factors.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $7.2 million for the three months ended
March 31, 1999 from $5.2 million for the three months ended March 31, 1998,
primarily due to the inclusion of the 1998 Acquired Businesses. As a percentage
of net sales, selling, general and administrative expenses decreased from 18.2%
for the three months ended March 31, 1998 to 14.7% for the three months ended
March 31, 1999, due to the leveraging of fixed costs over a larger sales base.

INCOME FROM OPERATIONS. Income from operations for the three months ended
March 31, 1999 increased to $963,000 from a loss of $67,000 for the three months
ended March 31, 1998.

INTEREST, NET. Net interest expense increased to $4.4 million for the three
months ended March 31, 1999 from $2.4 million for the three months ended March
31, 1998 as a result of significantly increased borrowings used to fund the
purchase of the 1998 Acquired Businesses and other expansion and capital needs.

1998 COMPARED TO 1997

NET SALES. Net sales for 1998 increased 40.1% to $228.7 million from $163.2
million in 1997. This increase reflects the inclusion of $37.8 million of net
sales from the 1998 Acquired Businesses since their date of acquisition. The
increase in 1998 net sales from our existing businesses of $27.7 million, a
17.0% increase, resulted from increased sales demand in our established
businesses plus the start up of new aggregate production sites and related
activity in both 1997 and 1998. Shipments of aggregates increased from 9.5
million tons in 1997 to 15.8 million tons in 1998, a 66% increase. Although
volumes increased, our mix of products sold in 1998 included more lower priced
aggregates than in 1997. Approximately one-half of this increase in volume came
from the 1998 Acquired Businesses. Our selling prices per ton also increased
approximately 5% during the period.

GROSS PROFIT. Gross profit for 1998 increased 37.2% to $60.5 million in
1998 from $44.1 million in 1997. The 1998 Acquired Businesses contributed $10.4
million to gross profit in 1998. Gross profit at existing businesses increased
13.6% to $50.1 million from $44.1 million in 1997. Gross margins from existing
businesses were 26.5% in 1998 compared to 27.0% in 1997, due to a change in the
mix of products sold through the Utah operations.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $18.3 million in 1997 to $25.0 million in
1998 primarily due to the 1998 Acquired Businesses. As a percentage of net
sales, selling, general and administrative expenses decreased from 11.2% in 1997
to 10.9% in 1998, due to the leveraging of fixed costs over a larger sales base.

26
<PAGE>
INCOME FROM OPERATIONS. Income from operations increased 35.6% to $24.4
million in 1998 from $18.0 million in 1997.

INTEREST, NET. Net interest expense increased to $14.9 million in 1998 from
$8.3 million in 1997 as a result of significantly increased borrowings used to
fund the purchase of the 1998 Acquired Businesses and other expansion and
capital needs.

1997 COMPARED TO 1996

NET SALES. Net sales for 1997 increased 23.9% to $163.2 million from $131.7
million in 1996. Shipments of aggregates increased from 7.2 million tons in 1996
to 9.5 million tons in 1997, a 32% increase. Although volumes increased, our mix
of products sold in 1997 was different than 1996. Although volumes of both
aggregates and associated products were up, the growth rate in associated
products was less than the growth rate of aggregates in 1997. The associated
products have a higher "per ton" sales price; accordingly the growth in total
tons shipped exceed our growth in total sales. In 1997, we developed and
expanded three new aggregate production sites acquired in 1995 and started
operations at two new aggregate production sites acquired in late 1996. Our
selling prices per ton also increased approximately 12% during the period.

GROSS PROFIT. Gross profit for 1997 increased 13.4% to $44.1 million from
$38.9 million in 1996 due to increased sales. Gross profit margins decreased
from 29.5% to 27.0% due to our starting operations at five aggregate production
sites in 1996 and 1997, and due to a change in the product mix in Utah, where we
expanded our asphalt business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $18.3 million in 1997 from $16.6 million in
1996. As a percentage of net sales, selling, general and administrative expenses
decreased from 12.6% in 1996 to 11.2% in 1997, primarily due to the leveraging
of fixed costs over a larger sales base.

INCOME FROM OPERATIONS. Income from operations increased 12.4% to $18.0
million in 1997 from $16.0 million in 1996.

INTEREST, NET. Net interest expense increased to $8.3 million in 1997 from
$5.0 million in 1996.

LIQUIDITY AND CAPITAL RESOURCES

From our inception in 1994, we have financed our operations and growth from
the issuance of preferred and common stock and debt. We have also used operating
leases to finance the acquisition of equipment used in the business.

Through December 31, 1998, $32.1 million of common and preferred stock was
sold to Golder, Thoma, Cressey, Rauner Fund IV L.P. and certain members of
management. Substantially all of this stock was issued before 1996.

At December 31, 1998, we had $200.6 million of debt outstanding. This level
of debt increased from $92.8 million in 1997 and $78.5 million in 1996. The
terms of this debt are discussed further below and in Note 7 to the audited
financial statements included herein and "Use of Proceeds."

We lease aggregate production sites and equipment under operating leases
with terms generally ranging from 5 to 40 years. Our minimum commitment under
these leases was $42.9 million at December 31, 1998 versus $23.0 million in 1997
and $15.0 million in 1996.

Our primary capital requirements are for working capital, acquisitions and
equipment purchases.

During 1997, our cash provided by operating activities provided net cash
flow of $2.8 million compared to $5.2 million in 1996. The decrease was due to a
reduction in net income of $0.9 million

27
<PAGE>
and increased working capital requirements due to growth in the business. In
1998, we used $0.7 million in operating activities. Net income of $5.3 million
in 1998 was $0.2 million less than in 1997, but we again had increased working
capital requirements due to growth. As of December 31, 1996, 1997 and 1998,
working capital was $8.5 million, $14.2 million and $29.7 million, respectively.
Working capital needs will continue to increase with growth in our business.

Net cash used in investing activities was $57.5 million in 1996. Of this
amount, $37.9 million was used for acquisitions and $19.6 was used for property,
plant and equipment purchases as we expanded our operations. Net cash used in
investing activities was $18.0 million in 1997. Of this amount, $4.0 million was
used for acquisitions and $14.0 million was used for the purchase of property,
plant and equipment. Net cash used in investing activities was $97.0 million in
1998. Of this amount, $83.9 million was used for acquisitions $67.8 million of
which was for the purchase of Monroc and related fees. Also of this amount,
$22.4 million was for the purchase of property, plant and equipment offset by
proceeds of $9.3 million from the sale of certain properties, including
non-business land at Monroc.

Cash provided by financing activities was $48.7 million in 1996, $14.3
million in 1997 and $100 million in 1998. Of the cash provided by financing
activities in 1996, $12.4 million was from common and preferred stock sales and
$36.3 million was provided by net borrowings. All of the cash provided by
financing activities in 1997 and 1998 was from increased borrowings under
existing or restructured debt agreements.

In June 1998, we amended our existing credit facility with a syndicate of
lenders. The term portion of the facility was increased to an aggregate
principal amount of $115.0 million. The term loan consists of an "A" tranche and
a "B" tranche. The term loan A accrues interest at a rate per annum based on the
Eurodollar rate plus a spread of 0.875% to 2.125% and the term loan B accrues
interest at a rate per annum based on the Eurodollar rate plus a spread of
1.875% to 2.500%. The term loan A matures in March 2004 and the term loan B
matures in March 2006. The revolving portion of the facility was increased to
$60.0 million from $40 million in April 1999. The revolving facility terminates
in June 2004 and accrues interest quarterly based on the Eurodollar rate plus a
spread of 0.875% to 2.125%. As of March 31, 1999, we had borrowings of $31.4
million outstanding under the revolving facility, $53.5 million of term loan A
outstanding and $58.5 million of term loan B outstanding. Borrowings under the
revolver were increased to $32.4 million when the available line was modified in
April, 1999. The credit facility is secured by all of our assets.

In March 1998, we entered into a $9 million revolving line of credit
facility with a bank. Interest accrues quarterly at an announced prime rate
which was 7.75% as of March 31, 1999. The facility matures in June 1999 although
the note is due on demand. We increased the facility to $17.5 million in April
1999. Borrowings under the credit facility are guaranteed by a stockholder.

In November 1996 and June 1998, we issued $30.0 million and $15.0 million of
senior subordinated notes to an institutional investor. Interest accrues
quarterly at an annual rate of 10.34% and 10.09%, respectively. The notes mature
in November 2006 and June 2008 and are subject to annual required principal
payments beginning in 2003. In connection with this debt, we issued warrants to
purchase 335,517 shares of common stock.

We believe the proceeds of the offering, cash flow from operations, our
existing credit facility as amended prior to the offering and existing cash
balances will be sufficient to meet working capital requirements and fund future
acquisitions during the next twelve months. To the extent we pursue additional
acquisitions, or require additional working capital, we may need to obtain
additional sources of financing. There can be no assurance that such financing
will be commercially available through an increased commitment under our credit
facility or otherwise be obtained pursuant to favorable terms, if at all. If we
are unable to obtain additional financing to finance our future operations, we
may not be able to implement our business strategy which could have a material
adverse effect on our business, financial condition and results of operation.

28
<PAGE>
Our credit facility provides us with a $115 million term loan and permits us
to borrow up to an additional $60 million of revolving loans provided that
certain conditions and financial tests are met. We also have a $17.5 million
floating rate bank demand note. Borrowings under the credit facility bear
interest, at our option, at either the Eurodollar rate or the ABR rate, plus a
margin. At April 30, 1999, we had total borrowings under the credit facility and
of $156.2 million, all of which is subject to interest rate risk. The floating
rate bank demand note floats with the prime rate. The outstanding balance at
April 30, 1999 was $15.7 million. Each 1.0% increase in interest rates on the
total of the debt above would impact pretax earnings by approximately $1.7
million. We do not use interest rate swap contracts to hedge the impact of
interest rate fluctuations on certain variable rate debt.

YEAR 2000 ISSUE

The past practice of computer programs being written using two digits rather
than four to define the applicable year has resulted in the "Year 2000 Issue."
Any of our computer programs or hardware that has date sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations or a temporary inability to engage in normal business
activities. In response to this issue, in 1998, we developed Year 2000 task
forces whose project scopes included the assessment and ongoing monitoring of
all information technology computer hardware and software and non-information
technology equipment affected by the Year 2000 issue. The task forces are
granted the authority and resources to address the Year 2000 issue and receive
supervisory support, as needed, from our Chief Financial Officer. Our plan to
resolve the Year 2000 issue involves the following four phases: systems and
hardware assessment, resolution, testing and implementation. To date, the task
forces have completed their assessment of all systems that could be
significantly affected by the Year 2000 issue and are in the process of
resolving hardware and software shortfalls. We have installed or are in the
process of installing new hardware and system solutions.

In 1998 we spent $499,400 on system improvements and have budgeted $500,000
to complete the process in 1999. We believe these improvements will resolve our
Year 2000 issues. The results of ongoing system resolution and testing, however,
could result in additional costs to us.

Management believes it has an effective program in place to resolve the
impact of the Year 2000 issue in a timely manner and does not expect the Year
2000 issue to have a material adverse effect on our business, financial
condition and results of operations. However, we have not yet completed the
conversion of all information technologies identified in our Year 2000 program.
If we do not complete any additional Year 2000 work, we might be unable to
effectively account for or report its financial position and results of
operations using its current information technology. In addition, the ultimate
effectiveness of the remediated information technology will be unknown until
January 1, 2000, and there is no assurance that there will not be a material
adverse effect on our business, financial condition and results of operations.
Further, disruptions in the economy, generally resulting from Year 2000 issues,
could have a material adverse effect on our business, financial condition and
results of operations. The amount of the potential liability and lost revenue,
if any, resulting from these risks cannot be reasonably estimated at this time.

We currently have no formal contingency plans in place if we do not complete
all phases of the Year 2000 program. However, the progress of the Year 2000
program is being closely monitored, and additional measures will be taken as
risks are identified. We will continue to evaluate the status of completion
throughout 1999 and determine whether such a plan is necessary.

EFFECT OF INFLATION

Management believes that inflation has not had a material effect on USAI.

29
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("FAS 131"), DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which superceded
Statement of Financial Accounting Standard No. 14, FINANCIAL REPORTING FOR
SEGMENTS OF A BUSINESS ENTERPRISE. FAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. We have determined that it operates in a
single reportable segment. Accordingly, the adoption of FAS 131 did not affect
net earnings or financial position, nor did it significantly change the
disclosure of segment information.

In April 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all
costs related to start-up activities, including organizational costs, be
expensed as incurred. The cumulative effect of the adoption of SOP 98-5 impacted
our net earnings by $84, which has been recorded as a nonoperating expense in
the 1st quarter of 1999.

In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use ("SOP
98-1"). We adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. We expensed
such costs as incurred through December 31, 1998. We do not expect the impact of
the adoption of SOP 98-1 to be material.

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income, ("FAS 130"). FAS 130 requires all
non-owner changes in equity that are excluded from net earnings under existing
FASB standards be included as comprehensive income. We presently do not have any
material transactions that directly affect equity other than those transactions
with owners in their capacity as owners. Therefore, the provisions of FAS 130
did not materially affect net earnings or financial position.

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), which is required to be adopted
in years beginning after June 15, 1999. Because of our minimal use of
derivatives, management does not anticipate that the adoption of FAS 133 will
have a significant impact on net earnings or the financial position of USAI.

30
<PAGE>
INDUSTRY OVERVIEW

Aggregates are a basic construction material used extensively for highway
and infrastructure construction and maintenance as well as for commercial and
residential construction. For these purposes, aggregates have few, if any,
substitutes. The United States market for all aggregates was approximately 2.8
billion tons in 1998 with a value of $13.5 billion. This represents an increase
of 7.5% in volume and 9.7% in dollar value above 1997 levels.

The following chart sets forth data on the total production of aggregates
and value of annual shipments of aggregates in the United States for the periods
shown.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
TOTAL AGGREGATES PRODUCTION IN THE
<S> <C> <C>
UNITED STATES AND VALUE OF ANNUAL SHIPMENTS
Million Tons
Tons of Aggregates Production (left
scale)
1985 1800.9
1986 1906.2
1987 2096.33
1988 2171.2
1989 2110.73
1990 2132.6
1991 1879.44
1992 2076.75
1993 2192.5
1994 2338
1995 2388.71
1996 2473.59
1997 2614.68
1998 2777.82
Source: U.S. Geological Survey
$ Billion
Value of Aggregates Production (right
scale)
1985 6.49
1986 7
1987 8.25
1988 8.68
1989 8.75
1990 8.84
1991 7.99
1992 8.94
1993 9.46
1994 10.36
1995 10.64
1996 11.18
1997 12.33
1998 13.2
</TABLE>

Historically, demand for aggregates has been only moderately cyclical, as the
chart above illustrates, especially relative to other building materials such as
cement and gypsum wallboard. In addition to moderate cycles, the national per
ton average price for aggregates has not experienced an annual decline between
1985 and 1998 as indicated in the chart below.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AGGREGATE PRICES - NATIONAL AVERAGE
<S> <C>
$/ ton
DATE
1985 $3.60
1986 $3.67
1987 $3.94
1988 $4.00
1989 $4.15
1990 $4.15
1991 $4.25
1992 $4.30
1993 $4.31
1994 $4.43
1995 $4.45
1996 $4.52
1997 $4.70
1998 $4.81
Source: U.S. Geological Survey
</TABLE>

31
<PAGE>
Demand for aggregates is driven significantly by spending on highway and
infrastructure construction and maintenance. Spending levels are influenced by
public sector expenditures for construction and regional economic conditions.
Residential and commercial construction spending is influenced by general
economic conditions and prevailing interest rates and thus is generally more
cyclical than public construction spending. Demand is also seasonal because of
the impact of weather conditions on construction activity.

The table below illustrates total United States public infrastructure
spending over the periods shown.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
UNITED STATES PUBLIC INFRASTRUCTURE SPENDING
<S> <C>
SEASONALLY ADJUSTED, ANNUAL RATE
$ Billions
Through 3/99
DATE
01/1988 56.272
02/1988 56.694
03/1988 60.868
04/1988 60.491
05/1988 60.04
06/1988 58.772
07/1988 62.037
08/1988 57.041
09/1988 58.18
10/1988 59.478
11/1988 59.705
12/1988 63.42
01/1989 62.16
02/1989 59.039
03/1989 54.71
04/1989 59.642
05/1989 62.478
06/1989 59.28
07/1989 58.711
08/1989 59.278
09/1989 60.616
10/1989 59.1
11/1989 61.798
12/1989 62.503
01/1990 64.264
02/1990 66.522
03/1990 62.885
04/1990 62.567
05/1990 63.487
06/1990 62.186
07/1990 66.132
08/1990 63.553
09/1990 60.396
10/1990 65.071
11/1990 66.677
12/1990 64.24
01/1991 56.825
02/1991 63.316
03/1991 63.192
04/1991 61.052
05/1991 62.802
06/1991 63.195
07/1991 60.603
08/1991 62.863
09/1991 62.656
10/1991 65.441
11/1991 64.066
12/1991 64.496
01/1992 66.924
02/1992 69.694
03/1992 71.539
04/1992 68.248
05/1992 69.833
06/1992 65.205
07/1992 63.723
08/1992 63.64
09/1992 63.014
10/1992 61.846
11/1992 64.39
12/1992 67.619
01/1993 60.479
02/1993 66.204
03/1993 64.409
04/1993 68.543
05/1993 65.768
06/1993 69.772
07/1993 67.531
08/1993 65.822
09/1993 68.248
10/1993 65.618
11/1993 68.594
12/1993 71.794
01/1994 69.296
02/1994 67.222
03/1994 67.565
04/1994 68.32
05/1994 68.445
06/1994 70.566
07/1994 75.616
08/1994 71.809
09/1994 72.287
10/1994 72.552
11/1994 69.11
12/1994 71.485
01/1995 72.016
02/1995 69.609
03/1995 73.554
04/1995 72.849
05/1995 73.362
06/1995 75.531
07/1995 73.088
08/1995 76.088
09/1995 75.726
10/1995 77.316
11/1995 77.177
12/1995 77.23
01/1996 80.071
02/1996 78.313
03/1996 76.575
04/1996 81.671
05/1996 80.933
06/1996 77.911
07/1996 77.83
08/1996 75.882
09/1996 79.779
10/1996 79.441
11/1996 79.251
12/1996 75.788
01/1997 79
02/1997 84.68
03/1997 86.685
04/1997 82.806
05/1997 83.648
06/1997 83.187
07/1997 83.403
08/1997 84.722
09/1997 83.404
10/1997 82.499
11/1997 84.142
12/1997 83.416
01/1998 82.624
02/1998 82.764
03/1998 82.65
04/1998 81.962
05/1998 76.804
06/1998 82.344
07/1998 81.827
08/1998 81.573
09/1998 84.511
10/1998 81.383
11/1998 82.269
12/1998 83.433
01/1999 90.146
02/1999 93.228
03/1999 94.779
Source: U.S. Census Bureau
</TABLE>

TEA-21, the largest federal public works spending bill in the history of the
United States, became law in June 1998. This legislation will be a key driver of
federal highway and infrastructure spending and the resulting demand for
aggregates over the next six years. This bill provides for total federal
spending over the 1998 through 2003 period of $218 billion on highway and
infrastructure projects. This spending level represents a 41% increase in
funding above the prior federal highway and infrastructure program, the
Intermodel Surface Transportation Efficiency Act, or ISTEA, which covered the
1992 to 1997 period. TEA-21 authorizes average annual federal spending on
highways and roads of at least $26 billion, nearly 44% higher than the average
annual spending of $18 billion that was spent under ISTEA. In the nine states
that we serve, average annual federal highway spending through 2003 under TEA-21
is projected to be 61% higher than under ISTEA and should provide a strong
underpinning for future aggregates demand.

32
<PAGE>
The table below compares average annual federal highway spending under
TEA-21 relative to spending under ISTEA in the nine states that we serve.

FEDERAL HIGHWAY SPENDING IN STATES SERVED BY USAI

<TABLE>
<CAPTION>
AVERAGE ANNUAL SPENDING
------------------------
ISTEA TEA-21
STATE 1992-1997 1998-2003 % INCREASE
- --------------------------------------------------------------------------- ------------ ---------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Alabama.................................................................... $330.3 $530.5 61%
Arizona.................................................................... 255.7 407.8 60
Florida.................................................................... 768.4 1,208.6 57
Georgia.................................................................... 541.4 918.8 69
Idaho...................................................................... 124.8 202.0 62
Mississippi................................................................ 202.3 319.0 58
Nevada..................................................................... 117.3 189.7 62
Tennessee.................................................................. 365.6 592.7 62
Utah....................................................................... 129.9 205.0 58
------------ ---------- ---
Total for states served by USAI.......................................... $2,835.7 $4,574.1 61%
Total United States...................................................... $18,162.5 $26,173.8 44%
</TABLE>

Source: United States Senate Environment and Public Works Committee

The aggregates industry is currently undergoing significant consolidation,
although generally the industry remains fragmented nationally as well as in many
regional areas. The estimated market share of the top five producers was 25% in
1997. From 1980 to 1998, the number of independent producers of crushed stone in
the United States declined by 22% from approximately 1,865 to approximately
1,450, although crushed stone consumption increased by 71%. From 1980 to 1998,
the number of independent sand and gravel producers declined by 19% from 4,512
to 3,642, although sand and gravel consumption increased by 47%.

Due to the high cost of transportation relative to the value of the product,
competition within the aggregates industry tends to be localized. Generally,
individual aggregate production sites compete for customers within a limited
geographic area, which may be as small as 20-30 miles depending on local
availability of suitable aggregates and the geographic density of demand. As a
result, the proximity of aggregate production sites to customers is an important
factor in competition for customers.

In certain areas of the United States including markets encompassing our
Gulf Coast operations, sources of aggegates may be located much further from
customers due to factors including a lack of suitable aggregates, local
permitting issues and zoning restrictions. In these areas, aggregates must be
transported from more distant sites and thus transportation becomes a greater
component of overall product cost. This has resulted in shipments into these
markets over long distances by rail and water, which favor large operators like
USAI that can invest in the infrastructure necessary to accommodate these modes
of transportation.

There are four primary factors which limit the availability of economically
viable aggregates reserves in a particular market:

- the geological existence of suitable aggregates within a particular
market;

- the physical characteristics of available aggregates and the difficulty in
satisfying increasingly rigorous specifications required by customers;

- the difficulty in and increasingly higher cost of obtaining the necessary
permits for potential reserves; and

- the feasibility of cost-effectively extracting, processing and delivering
available reserves.

33
<PAGE>
In addition to factors that limit the availability of suitable aggregates,
increasing levels of operational, technical and financial sophistication in the
aggregates industry have rewarded efficient producers with a competitive
advantage in terms of their ability to meet the increasing demand for quality
aggregates and to satisfy increasingly demanding and technically sophisticated
customers. Other factors that operate as constraints on competition in the
aggregates industry include:

- High transportation costs relative to the value of the product, which
generally result in very localized competition, with individual aggregate
production sites competing for customers within a limited geographical
area;

- The increasingly capital intensive nature of aggregate mining and
processing;

- Increasing demand for certain types of aggregates that can meet rigorous
material specifications and quality requirements, particularly the new
federal "SuperPave" program. This gives a competive advantage to efficient
and technically sophisticated producers such as USAI that have access to
and are able to make efficient use of suitable aggregate reserves;

- Increasingly difficult and expensive zoning and regulatory compliance
requirements, such as obtaining the necessary permits for new aggregate
production sites and the reclamation of depleted sites; and

- Increasing levels of technical sophistication required to compete
effectively, including expertise in geological engineering and planning,
blasting technology, processing facility design, computer automation
technology and reclamation planning.

The difficulty and related expense of complying with environmental and other
regulations also make it difficult for small producers to open new aggregate
production sites, enter new markets and compete effectively. In ongoing
aggregate mining and processing, aggregates producers must adhere to various
mining regulations, such as rules and regulations regarding dust and water
emissions, sediment and erosion control, noise limitations, wetlands protection,
reclamation of depleted quarry sites and the safety of blasting and other mining
techniques. Often new aggregate production sites require, among other things,
zoning changes and local, state and federal permits and plans regarding mining,
reclamation and air and water emissions. New site approval procedures may
require the preparation of archaeological surveys, endangered species studies
and other studies to assess the environmental impact of new sites. Compliance
with these regulatory requirements necessitates a significant up-front
investment and adds to the length of time to develop a new site.

While governmental compliance issues can be challenging, aggregates
producers often face opposition from the communities in which new aggregate
production sites are to be located. Public concerns center on noise levels and
blasting safety, the visual impact of an aggregate production site on
neighboring properties and high volume of truck traffic. To respond to these
issues, producers must operate in a more sophisticated manner such as developing
blasting techniques to minimize surface vibrations and noise and developing an
effective community communications program. Producers are often required to
acquire larger tracts of property to allow for extended buffer zones between
aggregate production sites and surrounding properties and to invest significant
capital to improve road and highway access.

Regulatory requirements and public concerns typically add from one to two
years to the time required by us to develop a new site, and in extreme cases may
require significantly longer time. In addition, at many locations regulatory and
community obstacles may prevent the development of an attractive site. We
anticipate that environmental compliance, operating considerations and community
relations issues will become more difficult in the future, enhancing the
competitive advantage of larger, more sophisticated producers such as USAI,
further encouraging consolidation in the industry, and making entry into the
construction aggregates business increasingly expensive.

34
<PAGE>
BUSINESS

THE COMPANY

U.S. Aggregates is a leading producer and marketer of aggregates and
associated aggregate-based materials and services. Aggregates consist of crushed
stone, sand and gravel. Our products are used primarily for the construction and
maintenance of highways and other infrastructure projects and for commercial and
residential construction. We serve local markets in nine states in two fast
growing regions of the United States, the Mountain states and the Southeast. We
believe that we are a market leader in most of the local markets that we serve.
Our current estimated aggregate reserve position exceeds 1.3 billion tons, which
at most of our aggregate production sites represents in excess of a 20 year
supply. USAI was founded in January 1994 with the goal of becoming a leading
national producer of aggregates. From our inception in January 1994 through
1998, through internal growth and acquisitions, our net sales have increased to
$228.7 million while operating profit has increased to $24.4 million.

Our growth in sales and profitability has been driven by several factors. We
hold strong positions in a number of fast growing local markets in the Mountain
states and Southeast regions of the United States. A majority of our aggregate
sales are in the highway and infrastructure construction and maintenance
markets. During the 1990s, our markets benefitted from increased public sector
spending on highway projects and should continue to see significant growth in
the future as a result of a new, six year $218 billion federal commitment to
highway and infrastructure projects. Through our management and technical
expertise, we have positioned ourselves as an efficient, low-cost producer and
supplier of high-quality aggregates. We have expanded into contiguous and new
markets by acquiring, integrating, developing and further strengthening
facilities, operations and aggregate sites. Additionally, we have enhanced the
performance of our acquired facilities through increased capital investment and
our management and technical expertise.

In the Mountain states, we serve markets in Utah, Idaho, Nevada and Arizona.
In the Southeast, we serve markets in Alabama, Tennessee, the Florida panhandle,
Mississippi and Georgia. We are well positioned to benefit from continued strong
economic activity in these states and in the local markets where we operate.
According to the Bureau of Labor Statistics, from 1993 to 1998, compound annual
growth in employment in these nine states was 3.7%. The United States compound
annual growth in employment over this period was 2.5%. According to the U.S.
Geological Survey, from 1993 to 1998, compound annual growth in consumption of
aggregates in the nine states we serve was 6.7%. The United States compound
annual growth in consumption of aggregates over this period was 5.1%.

Nationally, approximately 50% of aggregate production is used in highway and
infrastructure construction and maintenance. As a result, we will benefit from
the 1998 passage of the six year, $218 billion Transportation Equity Act for the
21st Century, or TEA-21. TEA-21 designates a minimum of $158 billion nationally
for federal highway construction and maintenance projects. This represents a 44%
increase above average annual federal highway spending levels under the
predecessor six year federal program. In the nine states we serve, average
annual federal highway spending under TEA-21 is projected to be 61% higher than
under the predecessor program. This federal spending, along with programs by
state and local governments, should provide strong underpinnings for our future
growth.

GROWTH STRATEGY

We believe that long-term, high-quality aggregate reserves located near
customers are central to our success. Accordingly, we have focused on the
acquisition and development of aggregate production sites and companies that are
well positioned to serve growing markets. Since our inception in January 1994,
we have completed and integrated 28 business and asset acquisitions, including
both operating

35
<PAGE>
companies and aggregate production facilities. Our strategy is to utilize our
management and financial resources to strengthen our position in local markets
by:

SERVING GROWTH IN EXISTING MARKET AREAS. Demand for aggregates in the
markets we serve has meaningfully outpaced overall United States demand for
aggregates over the past five years. We will continue to take advantage of our
established aggregate reserve capacity and the maturation of our newly developed
aggregate production sites to meet our customers' demands. We have increased our
annual production by 4.1 million tons to 21.6 million tons by opening eight new
major aggregate sites during the 1996 to 1998 period. We believe that our
financial performance does not yet fully reflect the benefit of these new
operations. Based on our experience, a new aggregate production site's sales,
cash flow and profitability usually increase over the first five years of
operation as production is increased and the new aggregate site matures.

EXPANDING CAPACITY AND MAINTAINING COST-COMPETITIVENESS. Where appropriate,
we will expand our production capacity and invest capital in additional plant
and equipment so that we can serve additional demand in our existing local and
remote markets. As we continue to increase capacity we will focus on maintaining
our cost-competitiveness.

MAKING ADD-ON ACQUISITIONS AND DEVELOPING NEW AGGREGATE RESERVES IN EXISTING
MARKETS. We will continue to make add-on acquisitions and to develop well
positioned aggregate reserves. Our primary objective is to increase our
competitive position within the local and remote markets we serve.

SERVING MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and
additional reserves so that we can move into contiguous markets when
opportunities arise.

EXPANDING INTO NEW MARKETS PRIMARILY THROUGH ACQUISITIONS. We will evaluate
and may make acquisitions in new market areas. These potential acquisitions may
be made in the regions we currently serve or, where economically attractive, in
new regions. These acquisitions may entail further add-on acquisitions and
additional capital expenditures to expand our operations in these new areas.

OPERATIONS

We are a leading producer and marketer of aggregates and associated
aggregate-based materials and services. Approximately 70% of our aggregates
production is sold directly to customers. The balance is used to produce
asphalt, which generally contains approximately 90% aggregates by volume and
ready-mix concrete, which generally contains approximately 80% aggregates by
volume. Our integration into these aggregates-based materials and related
services generally occurs in markets where our main competitors are integrated
into these products.

Our entries into markets in the fast growing Mountain states and Southeast
regions have provided the incremental market demand to justify the development
of a number of new aggregate production sites as well as upgrades of existing
facilities. Approximately 48% of our production in 1998 was produced at
aggregate production sites which are less than three years old. We are currently
developing these new aggregate production sites.

Our production capacity has increased to approximately 30 million tons per
year since 1994 while unit costs have been reduced substantially from the level
of costs incurred in individual operations at the time they were acquired or
started. This cost reduction is the result of comprehensive mining plans
combined with the installation of state of the art equipment permitting the
implementation of "best practices" throughout our operations. In addition,
asphalt plants and transportation infrastructure for delivery of asphalt and
concrete have been upgraded.

36
<PAGE>
The following table shows, for the periods indicated, our total shipments of
aggregates, asphalt and ready-mix concrete.

U.S. AGGREGATES, INC.
SHIPMENTS OF AGGREGATES, ASPHALT AND READY-MIX CONCRETE
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Tons of aggregates produced:
Sold directly to customers..................................... 1.5 3.1 5.1 6.6 11.9
Used internally................................................ 0.6 1.7 2.0 2.9 3.9
--- --- --- --- ---
Total tons of aggregates produced............................ 2.1 4.8 7.2 9.5 15.8
PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 28.6% 35.4% 27.8% 30.5% 24.7%

Tons of asphalt sold............................................. 0.1 0.6 0.9 1.3 1.6
Yards of ready-mix concrete sold................................. 0.4 0.8 0.9 0.9 1.4

PRO FORMA
1998(1)
-------------

<S> <C>
Tons of aggregates produced:
Sold directly to customers..................................... 17.6
Used internally................................................ 4.0
---
Total tons of aggregates produced............................ 21.6
PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 18.5%
Tons of asphalt sold............................................. 1.6
Yards of ready-mix concrete sold................................. 1.7
</TABLE>

- ------------------------

(1) Gives effect to the 1998 Acquired Businesses as if they were acquired on
January 1, 1998.

PRODUCT DESCRIPTION AND MANUFACTURING PROCESS

We manufacture and distribute aggregates as well as construction materials
with high aggregate content, including asphalt and ready-mix concrete.

We have also developed state of the art material quality control and
application design laboratories to ensure the highest levels of quality are
maintained. These laboratories permit us to provide aggregates customers with
the most cost effective and consistent materials for downstream applications,
ensuring their compliance with increasingly stringent specifications. We also
provide third party aggregates producers with these certification services. The
laboratories have also contributed to our record of achieving bonuses on
projects where control of variances in materials within a tight range can result
in additional profits.

AGGREGATES

We have developed extensive mining plans at key sites to ensure the long
term competitive position of our aggregate reserves. Typically, we mine raw
aggregates from an open aggregate production site, crush the material and
separate it by size for specific uses. Aggregates are then either shipped by
truck or rail to customers, stockpiled for customer pick-up or used in producing
asphalt, ready-mix concrete and related products.

ASPHALT

Asphalt generally has an aggregates content of approximately 90% by volume.
We produce paving asphalt by heating and mixing aggregates with hot liquid
asphalt in accordance with the specifications of each customer. Once produced,
we transfer asphalt into mixer trucks and deliver it directly to job sites for
immediate application. We produce asphalt in many of our markets in the Mountain
states, including throughout Utah and in Las Vegas and northwestern Arizona,
where our competitors are largely also integrated producers. Generally, we have
expanded our asphalt operations in the Mountain states in order to benefit from
government spending on highway construction and maintenance projects.

37
<PAGE>
READY-MIX CONCRETE

Ready-mix concrete generally has an aggregates content of approximately 80%
by volume. We produce ready-mix concrete by mixing aggregates with cement, water
and additives, which have the effect of controlling the concrete's strength,
drying speed and other characteristics. We deliver the concrete by mixer trucks
to construction sites for immediate use. We produce ready-mix concrete in a
number of markets including Chattanooga, Tennessee and throughout Alabama, Utah
and Idaho, among other areas. Generally, we have not expanded ready-mix
operations other than as a result of acquiring an operating company that had an
existing ready-mix business.

RESERVES

We estimate that our total recoverable aggregate reserves are in excess of
1.3 billion tons. The yield from the extraction of reserves is based on an
estimate of the volume of materials which can be economically extracted to meet
current market and product applications. Our mining plans are developed by
experienced mining and operating personnel based on internal and outside
drilling and geological studies and surveys. In some cases, zoned properties
must be extracted in phases as reserves in a particular area of the reserve are
exhausted.

A portion of our aggregate reserves are owned and the remainder are leased.
Leases usually provide for royalty payments based on revenues from aggregates
sold at a specific location. Leases usually expire after a specific time period
and may be renewable for additional terms. Most leases have extension options
providing for at least 20 years of operation based on 1998 extraction rates.
With minor exceptions, where lease options total less than 20 years, we have
developed and zoned additional reserves that will allow us to serve our markets
on a competive basis and ensure long term availability. Generally, reserves at
our aggregate production sites are adequate for in excess of 20 years production
at 1998 rates of extraction. In certain cases, leases may require us to extract
a minimum amount of tonnage to maintain our right to mine reserves on the leased
property.

The following table presents our aggregate reserves by market area:

USAI AGGREGATE RESERVES BY MARKET AREA

<TABLE>
<CAPTION>
ZONED/ ZONED/
PERMITTED UNPERMITTED UNZONED TOTAL
----------- --------------- ----------- ---------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C>
Alabama............................................................. 450 50 -- 500
Eastern Tennessee................................................... 70 -- -- 70
Northern Utah....................................................... 350 -- -- 350
Central Utah........................................................ 110 -- 50 160
So. Utah/SE Nevada/NW Arizona....................................... 125 -- 80 205
Idaho............................................................... 35 -- 40 75
----------- --- ----- ---------
TOTAL............................................................. 1,140 50 170 1,360
----------- --- ----- ---------
----------- --- ----- ---------
</TABLE>

We also have two aggregate production sites in Georgia, one of which is
leased to a major building materials producer under a long term lease. The other
aggregate production site is not anticipated to provide us with a base of
operations in Georgia in 1999.

Because transportation represents such a large component of overall cost of
aggregates delivered to the customer, we operate a large number of small to
medium size aggregate sites. In 1998, no single aggregate production site
accounted for more than 4.0% of consolidated net sales.

38
<PAGE>
TRANSPORTATION

We have a modern transportation infrastructure that allows us to maintain
our competitive position. We have expanded our infrastructure to accommodate
rail shipments of aggregates to our remote markets and we will have the option
of shipping by water from one site by the end of 1999. We own or lease
approximately 500 trucks which we use primarily to deliver ready-mix concrete
and asphalt, which represent approximately 30% of our total volume of aggregates
sold of our net sales, on a timely basis to our customers. We also contract for
additional trucks to transport aggregates and asphalt to meet short term peak
demand.

PROPERTIES

In 1998, 26 of our aggregate production sites each had shipments of greater
than 100,000 tons. We conducted mining operations in 1998 at all of these
aggregate production sites, of which 12 are located on property we own, two are
on land owned in part and leased in part, 11 are on leased property, and one is
on facilities leased on a job basis. We own 61 pieces of real property and lease
property at 62 locations. We have six pieces of property which are owned in part
and leased in part. Leases typically provide for royalty payments based on
revenues from material extracted from the facility, with specified minimum
monthly royalties. Our leases generally expire after an established number of
years and are renewable for a specified series of additional terms. Our
aggregate production sites are generally small-to medium-sized by industry
standards and we believe that no single aggregate production site is of major
significance to our operations.

Our policy has been to obtain surveys and title opinions on significant real
estate purchases. In addition, we evaluate on a case by case basis whether to
purchase title insurance in connection with real estate purchases and did in
fact obtain title insurance on many of our owned parcels.

RECLAMATION

We are required by the laws of various states to reclaim aggregate sites
after reserves have been depleted. Each site's mining plan includes a
reclamation plan which has been developed for that site to maximize the value of
the end use of the site. In some cases, depleted sites have been sold for
commercial or residential properties generating additional profits.
Historically, we have not incurred and do not anticipate incurring substantial
costs in excess of residual land values in connection with the closing of
aggregate operations due to depletion of reserves.

MANAGEMENT INFORMATION SYSTEMS

In general, we use networked management information systems for immediate
access to production and sales data from our production facilities, tracking
thousand of transactions each day. Automated sales and invoicing systems weigh
trucks at the aggregate production site and related facilities and immediately
generate customer invoicing and sales information. These streamlined procedures
reduce both transportation costs and customer turnaround-time at the aggregate
production site, increasing our productivity and providing us with a competitive
advantage over producers who do not use similar systems.

CUSTOMERS

We market our aggregates products to customers in a variety of industries,
including public infrastructure, commercial and residential construction
contractors; producers of asphaltic concrete, ready-mixed concrete, concrete
blocks, and concrete pipes; and railroads. A substantial amount of our
aggregates is used in publicly funded projects.

39
<PAGE>
COMPETITION

Because of the impact of high transportation costs on the aggregates
business, competition in each of our markets tends to be limited to producers in
proximity to our production facilities. Although we experience competition in
all of our markets, we believe that we are generally a leading producer in the
market areas we serve. Competition is based primarily on aggregate production
site location and price, but quality of aggregates and level of customer service
are also important factors. We compete directly with a number of large and small
producers in the markets we serve. Certain of our competitors have greater
financial resources than we have.

EMPLOYEES

We employ approximately 2,000 employees, of which approximately 1,600 are
hourly and approximately 400 are salaried. Approximately 600 of our employees
are represented by labor unions. We consider our relations with our employees to
be good.

GOVERNMENTAL AND ENVIRONMENTAL REGULATION

Our facilities are subject to various evolving federal, state and local laws
and regulations relating to the environment, including those relating to
discharges to air, water and land, the handling and disposal of solid and
hazardous waste and the cleanup of properties affected by hazardous substances.
Certain environmental laws impose substantial penalties for noncompliance, and
others, such as the federal Comprehensive Environmental Response, Compensation,
and Liability Act, as amended, impose strict, retroactive, joint and several
liability upon persons responsible for releases of hazardous substances.

In connection with our corporate acquisitions, we usually obtain
environmental assessments from independent environmental consultants. These
assessments generally consist of a site visit, historical record review,
interviews with key personnel and preparation of a report. The purpose of the
consultant's work is to identify potential environmental conditions or
compliance issues associated with the subject property and operations. Some risk
of environmental liability is inherent in the nature of our business, however,
and we might incur future material costs to meet current or more stringent
compliance, cleanup or other obligations pursuant to environmental laws.

We continually evaluate whether we must take additional steps at our
locations to ensure compliance with certain environmental laws. We believe that
our operations are in substantial compliance with applicable laws and
regulations and that any noncompliance is not likely to have a material adverse
effect on our business, financial condition or results of operations. However,
future events, such as changes in or modified interpretations of existing laws
and regulations or enforcement policies, or further investigation or evaluation
of the potential health hazards of certain products or business activities, may
give rise to additional compliance and other costs that could have a material
adverse effect on us.

USAI, as well as other companies in the aggregates industry, produce certain
products containing varying amounts of crystalline silica. Excessive and
prolonged inhalation of very small particles of crystalline silica has been
associated with non-malignant lung disease. The carcinogenic potential of
excessive exposure to crystalline silica has been evaluated for over a decade by
a number of research groups including the International Agency for Research on
Cancer, the National Institute for Occupational Safety and Health and the
National Toxicology Program, a part of the Department of Health and Human
Services. Results of various studies have ranged from classifying crystalline
silica as a probable to a known carcinogen. Other studies concluded higher
incidences of lung cancer in some operations was due to cigarette smoking, not
silica. Governmental agencies, including the Occupational Safety and Health
Administration and Mine Safety Health Administration, coordinate to establish
standards for controlling permissible limits on crystalline silica. In the early
1990s, they considered lowering silica exposure limits but decided to retain
existing limits.

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<PAGE>
Recently, the Occupational Safety and Health Administration has announced a
deadline of June 2000 for release of new rules to implement more stringent
regulations. We believe we currently meet government guidelines for crystalline
silica exposure and will continue to employ advanced technologies as they become
available to ensure worker safety and comply with regulations.

We believe that our compliance with environmental laws has not had a
material adverse effect on our business, financial condition or results of
operations. See "Risk Factors" for a further description for the effect of
environmental regulation on our business.

LEGAL PROCEEDINGS

From time to time, we have been involved in various legal proceedings, all
of which we believe are routine in nature and incidental to the conduct of our
business. Our ultimate legal and financial liability with respect to such
proceedings cannot be estimated with certainty, but we believe, based on its
examination of such matters, that none of such proceedings, if determined
adversely, would have a material adverse effect on our business, financial
condition or results of operations.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information as of May 15, 1999, with
respect to our directors and executive officers. Our executive officers serve at
the discretion of our board of directors.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
James A. Harris............... 65 Chief Executive Officer and Chairman of the Board

Morris L. Bishop, Jr.......... 54 President, Chief Operating Officer and Director

Michael J. Stone.............. 55 Executive Vice President--Development, Chief
Financial Officer, Treasurer, Secretary and
Director

Bruce V. Rauner............... 43 Director

David A. Donnini.............. 34 Director

Charles R. Pullin............. 75 Director

Edward A. Dougherty........... 41 Director
</TABLE>

JAMES A. HARRIS. Mr. Harris has been Chief Executive Officer and Chairman of
the Board since he founded USAI with Michael J. Stone and Golder, Thoma,
Cressey, Rauner Fund IV, L.P. in January 1994. Prior to 1994 Mr. Harris held a
number of senior executive positions at Koppers Co., Inc. including a ten year
period when he was responsible for acquisitions for Koppers Construction
Materials and Services Group. This division of Koppers grew from $70 million in
sales and $6 million in profit in 1970 to over $1.2 billion in sales and $140
million in profit in 1988. This growth includes 14 major acquisitions including
several purchases of companies with revenues in the $100 million to $300 million
range and numerous small add-on acquisitions. This growth positioned Koppers as
the second largest producer of aggregates in the United States in 1988.

MORRIS L. BISHOP, JR. Mr. Bishop has been President and Chief Operating
Officer of USAI since May 1997. Mr. Bishop has been a Director since May 1999.
Prior to joining USAI, Mr. Bishop was with Hoover, Inc., Koppers Company, Inc.
and Vulcan Materials Company serving in senior management positions in their
respective construction materials businesses.

MICHAEL J. STONE. Mr. Stone has been Executive Vice President--Development,
Chief Financial Officer, Treasurer, Secretary and Director since Mr. Harris and
he founded USAI with Golder, Thoma, Cressey, Rauner Fund IV, L.P. in January
1994. Prior to joining USAI, Mr. Stone was Chief Financial Officer of Genstar
Building Materials and Services Group, a $1.0 billion division of Genstar
Corporation. This group included Genstar Stone Products, the tenth largest
crushed stone producer in the United States.

BRUCE V. RAUNER. Mr. Rauner has served as a director of USAI since its
founding in January 1994. Mr. Rauner is the Managing Principal of GTCR Golder
Rauner, LLC, a private equity investment company in Chicago, Illinois formed in
January 1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc., where he
has been a Principal since 1981. Mr. Rauner is also a director of Coinmach
Corporation, Lason, Inc., Province Healthcare Company and AnswerThink Consulting
Group, Inc.

DAVID A. DONNINI. Mr. Donnini has served as a director of USAI since its
founding in January 1994. Mr. Donnini is a Principal of GTCR Golder Rauner, LLC,
a private equity investment company in Chicago, Illinois formed in January 1998
as a successor to Golder, Thoma, Cressey,

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<PAGE>
Rauner, Inc., where he has been a Principal since 1993. Mr. Donnini is also a
director of Coinmach Corporation and Polymer Group, Inc.

CHARLES R. PULLIN. Mr. Pullin has been a director of USAI since August 1994.
From 1967 until 1981, when he was appointed Vice Chairman of Koppers Company,
Inc., he served in a number of executive positions at Koppers. Mr. Pullin was
appointed Chief Executive Officer and Chairman of Koppers in 1982 and served in
those positions until his retirement in June 1988. During Mr. Pullin's tenure,
Koppers Construction Materials and Services Group grew from a small acquisition
in 1966 to be the second largest producer of aggregates in the United States in
1988.

EDWARD A. DOUGHERTY. Mr. Dougherty has served as a director of USAI since
July 1997. Mr. Dougherty has provided consulting services to USAI since its
founding in January 1994. Since 1991, Mr. Dougherty has been an independent
financial advisor, having previously been employed by Bear, Stearns & Co. Inc.,
an investment banking firm. Mr. Dougherty is also a director of Cardinal
Logistics Management, Inc.

Our board of directors currently consists of seven directors, divided into
three classes. At each annual meeting of our stockholders, successors to the
class of directors whose term expires at such meeting will be elected to serve
for three-year terms or until their successors are duly elected and qualified.
Messrs. Dougherty and Stone are members of the class whose terms expire in 2000,
Messrs. Bishop, Pullin and Rauner are members of the class whose terms expire in
2001, and Messrs. Donnini and Harris are members of the class whose terms expire
in 2002. Our board of directors has the power to appoint our officers. Each
officer will hold office for such term as may be prescribed by our board of
directors and until such person's successor is chosen and qualified or until
such person's death, resignation or removal.

COMPENSATION OF DIRECTORS

Directors currently do not receive a salary or an annual retainer for their
services. Following the offering we expect however, that non-employee directors
not otherwise affiliated with us or our stockholders will be paid an annual cash
retainer. All directors are reimbursed for out-of-pocket expenses related to
their service as directors including expenses incurred in connection with
attending meetings. Directors may also be issued options pursuant to our
incentive plan. See "--Incentive Plan" for a further discussion of director
compensation.

COMPENSATION OF EXECUTIVE OFFICERS

The compensation of our executive officers will be determined by our board
of directors. The following table sets forth information regarding the
compensation paid or accrued by us to our chief executive officer and each of
our other top executive officers for services rendered to USAI in all capacities
during the years indicated.

43
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------------ RESTRICTED
OTHER ANNUAL STOCK STOCK ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($) ($) (#) ($)
- ------------------------------------- --------- ---------- ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
James A. Harris...................... 1998 258,333 -- -- -- 2,500
Chief Executive Officer and 1997 200,000 75,000 -- -- -- 4,750
Chairman of the Board 1996 200,000 200,000 -- -- -- 2,375
Morris L. Bishop..................... 1998 220,833 -- -- -- 2,500
President, Chief Operating 1997 167,500 75,000 -- -- -- 2,375
Officer and Director 1996 150,000 100,000 -- -- -- 2,250
Michael J. Stone..................... 1998 208,333 -- -- -- 2,500
Executive Vice President-- 1997 150,000 75,000 -- -- -- 4,750
Development, Chief Financial 1996 150,000 150,000 -- -- -- 2,375
Officer,
Treasurer, Secretary
and Director
</TABLE>

(1) In 1998, Messrs. Harris, Bishop and Stone did not receive bonuses. In May
1999, in recognition of USAI's successful completion of its recent Southeast
expansion program, Mr. Harris was awarded a bonus of $200,000, Mr. Bishop
was awarded a bonus of $125,000 and Mr. Stone was awarded a bonus of
$200,000.

MANAGEMENT EMPLOYMENT AGREEMENTS

JAMES A. HARRIS. On January 24, 1994, we entered into an employment
agreement with Mr. James A. Harris, our President and Chief Executive Officer.
Currently, Mr. Harris is entitled to a base salary of $300,000 and a bonus, as
determined from time to time by our board of directors, that is not to exceed
one-half of Mr. Harris' annual base salary for the year. If Mr. Harris'
employment is terminated without cause, or as a result of death or disability,
Mr. Harris is entitled to payment of $16,667 per month for a period of twelve
months following his termination. We plan to amend Mr. Harris' employment
agreement prior to the offering to provide for a three-year term, create a
discretionary bonus and revise the existing severance provisions.

MORRIS L. BISHOP, JR. On August 5, 1995, we entered into an employment
agreement with Mr. Morris Bishop, Jr., our President and Chief Operating
Officer. Under the terms of this agreement, Mr. Bishop is entitled to a base
salary of $250,000 and a bonus in such amount not exceeding one-half of Mr.
Bishop's base salary and based on such criteria as may be established from time
to time by our board of directors. If Mr. Bishop's employment is terminated
without cause, he is entitled to payment of $12,500 per month for twelve months
after termination. We plan to amend Mr. Bishop's employment agreement prior to
the offering to provide for a three-year term, create a discretionary bonus and
revise the existing severance provisions.

MICHAEL J. STONE. On January 24, 1994, we entered into an employment
agreement with Mr. Michael J. Stone, our Executive Vice President--Development,
Chief Financial Officer, Treasurer and Secretary. Under this agreement, Mr.
Stone is entitled to a base salary of $250,000 and a bonus, as determined from
time to time by our board of directors, which is not to exceed one-half of Mr.
Stone's base salary for the year. If Mr. Stone's employment is terminated
without cause, or as a result of death or disability, he is entitled to payment
of $12,500 per month for twelve months after his termination. We

44
<PAGE>
plan to amend Mr. Stone's employment agreement prior to the offering to provide
for a three-year term, create a discretionary bonus and revise the existing
severance provisions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1998, the compensation committee of our board of directors held no
meetings. Accordingly, decisions concerning compensation of our executive
officers were made by the entire board. Other than Messrs. Harris and Stone,
none of our officers or employees participated in deliberations concerning such
compensation matters.

401(k) PLAN

We maintain a savings plan qualified under Section 401(a) and 401(k) of the
Internal Revenue Code. Generally, all full-time employees of USAI other than
union employees are eligible to participate in the plan. Employees electing to
participate in the plan are fully vested in their contributions. In addition, we
may make discretionary contributions under the plan each year. Participating
employees increase their vested interest in the discretionary contributions
based upon years of employment in which a minimum of 1,000 hours are worked and
they become fully vested after seven years. The maximum contribution for any
participant for any year is the maximum amount permitted under the Internal
Revenue Code.

COMMITTEES OF THE BOARD OF DIRECTORS

We have two standing committees of our board of directors: the compensation
committee and the audit committee. The compensation committee, which currently
consists of Messrs. Rauner, Donnini and Pullin, makes recommendations regarding
the incentive plan and decisions concerning salaries and incentive compensation
for our executive officers, key employees and consultants. The audit committee,
which currently consists of Messrs. Rauner, Donnini and Pullin, is responsible
for making recommendations to our board regarding the selection of independent
auditors, reviewing the results and scope of the audit and other services
provided by our independent accountants and reviewing and evaluating our audit
and control functions. Our board may also create other committees.

INCENTIVE PLAN

Prior to the completion of the offering, we will establish the U.S.
Aggregates, Inc. Long Term Incentive Plan. A maximum of shares of our
common stock, subject to adjustment, have been initially authorized for the
granting of stock options under the incentive plan. To date, no options have
been granted pursuant to the incentive plan. Options granted under the incentive
plan may be either "incentive stock options," which qualify for special tax
treatment under the Internal Revenue Code, or nonqualified stock options. The
purposes of the incentive plan are to advance the interests of USAI and
stockholders by providing our employees with an additional incentive to continue
their efforts on behalf of USAI, as well as to attract people of experience and
ability to USAI. The incentive plan is intended to comply with Rule 16b-3 of the
Exchange Act.

It is expected that all of our and our subsidiaries' officers, directors and
other employees and consultants will be eligible to participate under the
incentive plan, as deemed appropriate by our compensation committee. Eligible
employees will not pay any cash consideration to us to receive the options. The
incentive plan will be administered by our compensation committee. The exercise
price for incentive stock options must be no less than the fair market value of
our common stock on the date of grant. The exercise price of nonqualified stock
options is not subject to any limitation based upon the then current market
value of our common stock. Options will expire no later than the tenth
anniversary of the date of grant. An option holder will be able to exercise
options from time to time, subject to vesting. Options will vest immediately
upon death or disability of a participant and upon certain change of control
events. Upon termination for cause or at will, the unvested portion of the
options will be forfeited. Subject to the above conditions, the exercise price,
duration of the options and vesting provisions will be set by our compensation
committee in its discretion.

45
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The table below sets forth certain information regarding the equity
ownership of USAI:

- each person or entity who beneficially owns five percent or more of our
common stock;

- each of our directors and executive officers;

- each of the selling stockholders; and

- all of our directors and executive officers as a group.

Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned by
it, him or her as set forth opposite its, his or her name. Beneficial ownership
of our common stock listed in the table has been determined in accordance with
the applicable rules and regulations under the Exchange Act.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING OFFERING(1)
----------------------- -----------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P.(2)(3)................... 5,982,300 72.2% 5,982,300

James A. Harris(2)(4)................................................ 582,887 7.0% 582,887

Morris L. Bishop, Jr................................................. 145,159 1.8% 145,159

Michael J. Stone(2)(5)............................................... 398,104 4.8% 398,104

Bruce V. Rauner(2)(3)................................................ 5,982,300 72.2% 5,982,300

David A. Donnini(2)(3)............................................... 5,982,300 72.2% 5,982,300

Charles R. Pullin.................................................... 17,384 * 17,384

Edward A. Dougherty.................................................. 23,929 * 23,929

The Prudential Insurance Company of America(6)....................... 335,537 4.1% 335,537

All directors and executive officers as a group (7 persons).......... 7,485,300 89.9% 7,485,300
</TABLE>

- ------------------------

* Represents less than one percent.

(1) Assumes no exercise of the U.S. underwriters' and international managers'
over-allotment option and does not give effect to any purchases, if any, by
such persons named in the table in the offering.

(2) Certain of our stockholders have granted the U.S. underwriters and the
international managers the right to purchase up to shares to cover any
over-allotments. If the over-allotment option is exercised in full, Golder,
Thoma, Cressey, Rauner Fund IV, L.P. will beneficially own shares, The
Prudential Insurance Company of America will beneficially own shares,
James A. Harris will beneficially own shares and Michael J. Stone will
beneficially own shares.

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<PAGE>
(3) All of such shares are held of record by Golder, Thoma, Cressey, Rauner Fund
IV, L.P. Golder, Thoma, Cressey, Rauner, Inc. is the general partner of GTCR
IV, L.P., which is the general partner of Golder, Thoma, Cressey, Rauner
Fund IV, L.P. Messrs. Rauner and Donnini are Principals of Golder, Thoma,
Cressey, Rauner, Inc., and may be deemed to share the power to vote and
dispose of such shares. The address of Golder, Thoma, Cressey, Rauner Fund
IV, L.P. is 6100 Sears Tower, Chicago, Illinois 60606. Each of Messrs.
Rauner and Donnini disclaims beneficial ownership of the shares of our
common stock owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P.

(4) Includes (A) 58,275 shares held by a charitable remainder trust and (B)
233,169 shares held by a grantor retained annuity trust for the benefit of
Mr. Harris' sons. Mr. Harris disclaims beneficial ownership of the shares of
our common stock owned by the trusts.

(5) All of such shares are held by a trust for the benefit of Mr. Stone and his
wife for which they also serve as trustees. Mr. Stone disclaims beneficial
ownership of the shares of our common stock held by the trust.

(6) The Prudential Insurance Company of America owns warrants to purchase up to
335,536 shares of our common stock and has indicated that it intends to
convert all of its warrants into common stock upon the consummation of this
offering.

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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

THE RECAPITALIZATION

In connection with and immediately prior to the consummation of the
offering, each outstanding share of WAHC common stock not held by USAI will be
converted into approximately 0.62 shares of our common stock, and each
outstanding share of SRMHC common stock not held by USAI will be converted into
approximately 8.07 shares of our common stock. Each share of our common stock
will then be subject to an approximate 35.19 to 1 stock split. Concurrent with
the consummation of the offering, we will use a portion of the proceeds of the
offering to redeem shares of our preferred stock owned by Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and certain other stockholders at an aggregate
price of approximately $ million or $ per share. Dividends have accrued
daily at a rate of 10% per annum on the preferred stock since the date of
issuance. See "Use of Proceeds" and "Description of Capital Stock--The
Recapitalization" for a further description of these events.

CERTAIN LOANS TO EXECUTIVES

As of March 31, 1999, we have outstanding loans of approximately $146,000 to
James A. Harris, our Chief Executive Officer and Chairman of the Board, $100,000
to Michael J. Stone, our Executive Vice President, Chief Financial Officer,
Treasurer and Secretary and a Director, $247,000 to Morris L. Bishop, Jr., our
President and Chief Operating Officer and a Director, pursuant to promissory
notes to finance their purchase of our securities. Each of the notes is secured
by a pledge of the securities purchased with the note pursuant to a pledge
agreement between us and each of Messrs. Harris, Stone and Bishop. The notes
bear interest at a rate per annum equal to 8%. The principal amount of the notes
and all interest accrued thereon mature in part on various dates beginning in
October 2001, with the remainder maturing in October 2005. The notes may be
prepaid in full or in part at any time.

PROFESSIONAL SERVICES AGREEMENT

We have a professional services agreement with Golder, Thoma, Cressey,
Rauner, Inc. pursuant to which it provides financial and management consulting
services to us. Under the professional services agreement, Golder, Thoma,
Cressey, Rauner, Inc. receives an annual management fee equal to 0.25% of the
aggregate purchase price paid by Golder, Thoma, Cressey, Rauner Fund IV, L.P. to
us for our common and preferred stock (plus reimbursement of out-of-pocket
expenses) up to a maximum of $150,000 per year and an investment fee payable at
the time of any purchase of our common or preferred stock by Golder, Thoma,
Cressey, Rauner Fund IV, L.P. equal to 1.0% of the amount of the purchase price
paid to USAI by Golder, Thoma, Cressey, Rauner Fund IV, L.P. for the common or
preferred stock. For the year ended December 31, 1997 and for the year ended
December 31, 1998, we paid or accrued $153,477 and $196,508, respectively, in
fees under the professional services agreement. The professional services
agreement will be terminated immediately prior to the consummation of the
offering, and no fee will be payable to Golder, Thoma, Cressey, Rauner, Inc.
with respect to the issuance of our common stock in the offering. Messrs. Rauner
and Donnini will continue to serve as directors of USAI and they will be
compensated as non-employee directors. See "Management--Compensation of
Directors."

STOCKHOLDERS AGREEMENT

- two representatives designated by Golder, Thoma, Cressey, Rauner Fund IV,
L.P.;

- two members of our management designated by Messrs. Harris, Stone and
Richey, determined by a majority vote of our common stock held by Messrs.
Harris, Stone and Richey; and

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<PAGE>
- three representatives chosen jointly by Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Mr. Harris provided that such representatives are not
members of our management or an employee or officer of us.

Members of our board of directors may only be removed from the board, with
or without cause, upon the written request of the party originally entitled to
designate such director. If either Messrs. Harris or Stone ceases to be employed
by us or our subsidiaries, they shall be removed from our board.

The stockholders agreement generally restricts the transfer of any shares of
our common stock held by James A. Harris Grantor Retained Annuity Trust, The
James A. Harris Charitable Remainder Unitrust, Mrs. Jeanne T. Richey and Messrs.
Harris, Stone, Richey, Bishop, Dougherty and Pullin by granting certain parties
thereto rights of first offer and participation rights in connection with any
proposed transfer by Messrs. Harris, Stone and Richey. The transfer restrictions
of the stockholders agreement automatically terminate upon the sale by us of our
common stock in an underwritten public offering. In addition, the stockholders
agreement requires us to authorize and reserve for issuance to additional
members of our management and our subsidiaries shares of our common stock in an
amount equal to 3% of our common stock on a fully diluted basis. In addition,
each party to the stockholders agreement has agreed to consent to our sale if
such sale is approved by our board and the holders of a majority of our
outstanding common stock. The parties to the stockholders agreement plan to
amend the agreement prior to or concurrently with the offering.

REGISTRATION AGREEMENT

USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A. Harris Grantor
Retained Annuity Trust, The James A. Harris Charitable Remainder Unitrust, Mrs.
Jeanne T. Richey and Messrs. Harris, Stone, Richey, Bishop, Dougherty and Pullin
are parties to a registration agreement. Pursuant to the registration agreement,
the holders of a majority of our common stock issued pursuant to an equity
purchase agreement, or issued or issuable in respect of such securities may
request, after the offering of our common stock, up to three registrations of
all or any part of their common stock on Form S-1 or any similar long-form
registration statement, if available, an unlimited number of registrations on
Form S-2 or S-3 or any similar short-form registration statement, each at our
expense. In the event the holders of a majority of our common stock make such a
request, all other parties to the registration agreement will be entitled to
participate in such registration. The registration agreement also grants the
parties piggyback registration rights with respect to registrations by us of our
securities (other than the offering) and we will pay all expenses related to
such piggyback registrations.

FINANCIAL ADVISORY ARRANGEMENTS

Pursuant to certain financial advisory agreements between USAI and Edward A.
Dougherty, a Director of USAI, Mr. Dougherty has served as an advisor to us with
respect to strategic financial planning from time to time in connection with our
acquisition program and securing and completing specific financing arrangements.
We paid Mr. Dougherty a total of $404,000 in 1998 for financial advisory
services rendered to USAI. In 1999, to date, we have paid Mr. Dougherty $261,515
and will pay him $140,000 upon the consummation of the offering.

CERTAIN FAMILY RELATIONSHIPS

David Harris, the son of James A. Harris, our Chief Executive Officer and
Chairman, is a full-time employee of Southern Ready Mix, Inc., one of our
subsidiaries. David Harris receives a salary of approximately $90,000 for
performing services as an employee.

Christopher M. Bishop, the son of Morris L. Bishop, Jr., our President and
Chief Operating Officer and a Director, and Timothy K. Bishop, the brother of
Morris L. Bishop, Jr., are full-time employees of Southern Ready Mix, Inc., one
of our subsidiaries. Each receives a salary of approximately $60,000 for
services performed as an employee.

Ashia H. Stone, the wife of Michael J. Stone, our Executive Vice President,
Chief Financial Officer, Treasurer and Secretary and a Director, acts as one of
our financial advisors. We paid Ms. Stone a total of $151,180 in 1998 for
financial advisory services provided to us.

49
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS

SENIOR CREDIT FACILITY

GENERAL. On June 5, 1998, USAI, Bank of America National Trust and Savings
Association, as agent, and certain other financial institutions entered into a
third amended and restated bank credit facility and, on April 14, 1999, USAI,
the agent and certain other financial institutions amended the credit facility.
The borrowings under our credit facility were used to refinance indebtedness
under our prior credit facility and to finance the acquisition of Monroc, Inc.
As of April 14, 1999, we had unused borrowing capacity under our credit facility
of $15.8 million.

The credit facility provides for two tranches of term loans to USAI for
$55.0 million and $60.0 million and revolving loans to USAI for up to $60.0
million. Subject to certain restrictions, our credit facility may be used for
working capital and general corporate purposes of USAI and our subsidiaries,
including permitted acquisitions.

REPAYMENT. The revolving loans must be repaid on June 5, 2004. The
principal repayment schedule for the $55.0 million term loan is $3.75 million in
1999, $8.75 million in 2000, $11.5 million in 2001, $12.75 million in 2002,
$14.5 million in 2003, and $3.75 million in 2004. The principal repayment
schedule for the $60.0 million term loan is $0.45 million in 1999, $0.60 million
in 2000, $0.60 million in 2001, $0.60 million in 2002, $0.60 million in 2003,
$0.60 million in 2004, $0.60 million in 2005, and $55.95 million in 2006. Loans
made pursuant to our credit facility may be repaid and, in the case of the
revolving loans, borrowed and reborrowed, without premium or penalty (other than
prepayments of eurodollar loans which may be subject to customary breakage
costs), from time to time until maturity, subject to the satisfaction of certain
conditions on the date of any such borrowing. In addition, subject to certain
exceptions, our credit facility provides for mandatory repayments of any
outstanding borrowings out of any net cash proceeds received from a sale of
assets. Net cash proceeds of permitted debt issuances; 50.0% of net cash
proceeds of permitted equity issuances, reducing to 0.0% when our leverage ratio
is less than 3.5:1.0; net cash proceeds from insurance recovery and condemnation
events (subject to certain reinvestment rights) and 50.0% of annual excess cash
flow, reducing to 0.0% when our leverage ratio is less than 3.5:1.0.

SECURITY; GUARANTY. Our obligations under our credit facility are
guaranteed by each of our existing subsidiaries and will be guaranteed by each
or our future subsidiaries. Our obligations under our credit facility and each
of our subsidiaries under its guarantee is or will be secured by (1) a first
priority security interest in substantially all of the assets of such person,
(2) a pledge of all of the capital stock of each of our direct and indirect
domestic subsidiaries and (3) a pledge of 65.0% of the capital stock of each of
our foreign subsidiaries.

INTEREST. At our option, the interest rates per annum applicable to the
loans under our credit facility are a fluctuating rate of interest measured by
reference to one or a combination of the following: (1) the base rate, plus the
applicable borrowing margin, or (2) the relevant eurodollar rate, plus the
applicable borrowing margin. The applicable borrowing margins are subject to
adjustment in based on our leverage ratio.

FEES. We have agreed to pay certain fees in connection with our existing
credit facility, including: (1) letter of credit fees; (2) agency fees; (3)
arranger fees; and (4) commitment fees. Commitment fees are payable on the daily
unused amount of the revolver.

COVENANTS. Our existing credit facility requires us to meet certain
financial tests, including, without limitation, a maximum leverage ratio, a
minimum interest coverage ratio and a minimum fixed charge coverage ratio. Our
credit facility also contains covenants which, among other things, restrict our
ability and the ability of our subsidiaries to incur liens, transact with
affiliates, incur indebtedness,

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declare dividends or redeem or repurchase capital stock, make loans and
investments, engage in mergers, acquisitions, consolidations and asset sales,
acquire assets, stock or debt securities of any person, have additional
subsidiaries, amend our or its certificate of incorporation and make capital
expenditures. Our existing credit facility also requires us and our subsidiaries
to satisfy certain customary affirmative covenants and to make certain customary
indemnifications to the lenders and the administrative agent under our credit
facility.

EVENTS OF DEFAULT. Our existing credit facility contains customary events
of default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control.

THE SENIOR SUBORDINATED NOTES

GENERAL. On November 21, 1996, The Prudential Insurance Company of America
purchased $30.0 million principal amount of our 10.34% senior subordinated notes
due November 22, 2006 and on June 8, 1998, it purchased $15.0 million principal
amount of our 10.09% senior subordinated notes due November 22, 2008. The
proceeds of the 1998 senior subordinated notes were used for working capital and
other general corporate purposes and to finance the acquisition of Monroc, Inc.

WARRANTS. In connection with the issuance of the senior subordinated notes
in 1996, we issued warrants to purchase 6,327 shares of our common stock for
$0.01 per share to Prudential. In connection with the issuance of the senior
subordinated notes in 1998, we issued warrants to purchase 3,208 shares of
shares of our common stock for $0.01 per share to Prudential. Prudential has
certain registration rights with respect to the warrants.

REPAYMENT. The principal repayment schedule for the senior subordinated
notes issued in 1996 is $6.0 million in 2003, $6.0 million in 2004, $6.0 million
in 2005 and $12.0 million in 2006. The principal repayment schedule for the
senior subordinated notes issued in 1998 is $4.5 million in 2006, $4.5 million
in 2007 and $6.0 million in 2008. Subject to certain exceptions, the senior
subordinated notes may not be prepaid without premium or penalty.

GUARANTY. Our obligations under the senior subordinated notes are
guaranteed by each of our existing subsidiaries and will be guaranteed by each
or our future subsidiaries.

INTEREST. The senior subordinated notes issued in 1996 bear interest at a
rate of 10.34% per year and the senior subordinated notes issued in 1998 bear
interest at a rate of 10.09% per year. Interest on the senior subordinated notes
is paid quarterly.

COVENANTS. Our senior subordinated notes require us to meet certain
financial tests, including, without limitation, a maximum leverage ratio, a
minimum interest expense coverage ratio and a minimum fixed charge coverage
ratio. Our senior subordinated notes also contain covenants which, among other
things, restrict our ability and the ability of our subsidiaries to incur liens,
transact with affiliates, incur indebtedness, declare dividends or redeem or
repurchase capital stock, make loans and investments, engage in mergers,
acquisitions, consolidations and asset sales, acquire assets, stock or debt
securities of any person, have additional subsidiaries, amend our or its
certificate of incorporation and make capital expenditures. Our senior
subordinated notes also require us and our subsidiaries to satisfy certain
customary affirmative covenants and to make certain customary indemnifications
to Prudential.

EVENTS OF DEFAULT. Our senior subordinated note documents contain customary
events of default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults and a change in control
cross-defaults to certain other indebtedness.

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THE HTSB UNSECURED DEMAND NOTE

GENERAL. On April 15, 1999, we entered into a floating rate loan with
Harris Trust and Savings Bank providing for a $17,500,000 revolving line of
credit and evidenced by a note (the "HTSB NOTE"). We borrowed $7.5 million for
working capital and other general corporate purposes and $8.2 million to repay
borrowings under an existing facility with Harris Trust and Savings Bank. As of
April 30, 1999, we had $15.7 million outstanding under the HTSB Note. The HTSB
Note is a general unsecured obligation of USAI.

REPAYMENT. The HTSB Note is due and payable on demand and may be repaid by
USAI without premium or penalty, from time to time.

INTEREST. The interest rate per annum applicable to the HTSB Note is the
prime commercial rate announced by Harris Trust and Savings Bank. Interest is
payable quarterly and upon demand.

GUARANTY. Golder, Thoma, Cressey, Rauner Fund IV, L.P. has guaranteed the
repayment of the HTSB Note. In addition, we entered into a letter agreement
among Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust and Savings
Bank, Bank of America Trust and National Association, and The Prudential
Insurance Company of America. Under the letter agreement, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. has agreed to contribute capital to fund the
repayment of the HTSB Note upon the request of Harris Trust and Savings Bank.

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DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

Immediately prior to the offering, the total amount of our authorized
capital stock will consist of shares of our common stock, par value $0.01
per share, and shares of preferred stock, par value $0.01 per share. Upon
completion of the offering, shares of common stock will be issued and
outstanding and no shares of our preferred stock will be issued and outstanding.
The discussion below describes our capital stock, the restated certificate of
incorporation and by-laws as anticipated to be in effect upon consummation of
the offering. The following summary of certain provisions of our capital stock
describes all material provisions of, but does not purport to be complete and is
subject to, and qualified in its entirety by, our restated certificate of
incorporation and by-laws that are included as exhibits to the registration
statement of which this prospectus forms a part and by the provisions of
applicable law.

Immediately following the offering, the restated certificate of
incorporation and by-laws will contain certain provisions that are intended to
enhance the likelihood of continuity and stability in the composition of our
board of directors. These provisions may have the effect of delaying, deferring
or preventing a future takeover or change in control of USAI unless such
takeover or change in control is approved by the our board of directors.

THE RECAPITALIZATION

In connection with and immediately prior to the consummation of the
offering, each outstanding share of WAHC common stock not held by us will be
converted into approximately 0.62 shares of our common stock. Each outstanding
share of SRMHC common stock not held by us will be converted into approximately
8.07 shares of our common stock. Each share of our common stock will then be
subject to an approximate 35.19 to 1 stock split. See "Certain Relationships and
Related Transactions" for a further description of these transactions.

COMMON STOCK

All outstanding shares of our common stock are fully paid and
non-assessable. Subject to the prior rights of the holders of our preferred
stock, the holders of our common stock are entitled to receive dividends at such
time and in such amounts as our board of directors may determine. See "Dividend
Policy" for a further description of your dividend rights. The shares of our
common stock are not convertible and the holders thereof have no preemptive or
subscription rights to purchase any of our securities. Upon our liquidation,
dissolution or winding up, the holders of our common stock are entitled to
receive pro rata all of our assets which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior rights
of any holders of our preferred stock which is then outstanding. Each
outstanding share of our common stock is entitled to one vote on all matters
submitted to a vote of stockholders. There is no cumulative voting.

We have applied to have our common stock listed on the New York Stock
Exchange under the symbol " ."

PREFERRED STOCK

Our board of directors may, without further action by our stockholders,
direct the issuance of up to shares of our preferred stock. At the time
of issuance, they may determine the series and rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of our
preferred stock would reduce the amount of funds available for the payment of
dividends on shares of our common stock. Holders of our preferred stock may be
entitled to receive a preference payment in the event of our liquidation,
dissolution or winding-up before any payment is made to the holders of our
common stock. Under certain circumstances, the issuance of our preferred stock
may render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a

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holder of a large block of our securities or the removal of incumbent
management. Upon the approval of a majority of the total number of our directors
then in office, our board of directors, without stockholder approval, may issue
shares of our preferred stock with voting and conversion rights which could
adversely affect the holders of shares of our common stock. Upon consummation of
the offering, there will be no shares of our preferred stock outstanding, and we
have no present intention to issue any additional shares of our preferred stock.

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS

Our restated certificate of incorporation provides for our board of
directors to be divided into three classes, as nearly equal in number as
possible, serving staggered terms. Approximately one-third of our board will be
elected each year. See "Management" for a further discussion of our directors.
Under Delaware law, directors serving on a classified board can only be removed
for cause. The provision for a classified board could prevent a party who
acquires control of a majority of our outstanding voting stock from obtaining
control of our board until the second annual stockholders meeting following the
date the acquiror obtains the controlling stock interest. This provision could
have the effect of discouraging a potential acquiror from making a tender offer
or otherwise attempting to obtain control of us and could increase the
likelihood that incumbent directors will retain their positions.

Our restated certificate of incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be
taken by written consent in lieu of a meeting. Our restated certificate of
incorporation and the by-laws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of our board or by our chief executive officer.
Stockholders will not be permitted to call a special meeting or to require our
board to call a special meeting.

The by-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board.

Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of our board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and who
has given to our Secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting. Although the
by-laws do not give our board the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted
at a special or annual meeting, the by-laws may have the effect of precluding
the conduct of certain business at a meeting if the proper procedures are not
followed or may discourage or defer a potential acquiror from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of USAI.

Our restated certificate of incorporation and by-laws provide that the
approval of holders of at least 80% of the total votes eligible to be cast in
the election of directors is required to amend, alter, change or repeal certain
of their provisions. This requirement of a super-majority vote to approve
amendments to our restated certificate of incorporation and by-laws could enable
a minority of our stockholders to exercise veto power over any such amendments.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

We are a Delaware corporation and subject to Section 203 of the Delaware
corporate law. Generally, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the time such stockholder became
an interested stockholder unless, as described below, certain conditions are
satisfied. Thus, it

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may make acquisition of control of our company more difficult. The prohibitions
in Section 203 do not apply if:

- prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming
an interested stockholder;

- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or

- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder.

Under Section 203, a "business combination" includes:

- any merger or consolidation of the corporation with the interested
stockholder;

- any sale, lease, exchange or other disposition, except proportionately as
a stockholder of such corporation, to or with the interested stockholder
of assets of the corporation having an aggregate market value equal to 10%
or more of either the aggregate market value of all the assets of the
corporation or the aggregate market value of all the outstanding stock of
the corporation;

- certain transactions resulting in the issuance or transfer by the
corporation of stock of the corporation to the interested stockholder;

- certain transactions involving the corporation which have the effect of
increasing the proportionate share of the stock of any class or series of
the corporation which is owned by the interested stockholder; or

- certain transactions in which the interested stockholder receives
financial benefits provided by the corporation.

Under Section 203, an "interested stockholder" generally is:

- any person who owns 15% or more of the outstanding voting stock of the
corporation;

- any person who is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period prior to the date on which it is
sought to be determined whether such person is an interested stockholder;
and

- the affiliates or associates of any such person.

Because Golder, Thoma, Cressey, Rauner Fund IV, L.P. owned more than 15% of
our voting stock prior to the offering, Section 203 by its terms is currently
not applicable to business combinations with Golder, Thoma, Cressey, Rauner Fund
IV, L.P. If any other person acquires 15% or more of our outstanding voting
stock, such person will be subject to the provisions of Section 203.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our restated certificate of incorporation limits the liability of our
directors to the fullest extent permitted by Delaware law. In addition, our
restated certificate of incorporation will provide that we shall indemnify our
directors and officers to the fullest extent permitted by Delaware law. We
anticipate entering into indemnification agreements with our current directors
and executive officers prior to the completion of the offering and any new
directors or executive officers following such time.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to the offering there has been no market for our common stock. We can
make no predictions as to the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price of our common
stock. Nevertheless, sales of significant amounts of our common stock in the
public market, or the perception that such sales may occur, could adversely
affect prevailing market prices. See "Risk Factors" for a further description of
the effect of sales of our common stock.

Upon completion of the offering, we expect to have shares of our
common stock outstanding. In addition, shares of common stock will be
issuable upon the exercise of outstanding stock options pursuant to our
incentive plan. Of the shares outstanding after the offering, the shares
of our common stock ( shares if the U.S. underwriters' and international
managers' over-allotments are exercised in full) sold in the offering will be
freely tradeable without restriction under the Securities Act, except for any
such shares which may be acquired by an "affiliate" of USAI under Rule 144 of
the Securities Act. Those shares will be subject to the volume limitations and
other restrictions of Rule 144 described below. An aggregate of shares of
our common stock held by existing stockholders will be "restricted securities"
under Rule 144 and may not be resold in the absence of registration under the
Securities Act or pursuant to an exemption from such registration, including
among others, the exemption provided by Rule 144.

In general, under Rule 144 as currently in effect, beginning ninety days
after the date of this prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" were acquired from us or
the date they were acquired from an affiliate, then the holder of such
restricted securities is entitled to sell in the public market a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of our common stock (approximately shares
immediately after the offering) or the average weekly reported volume of trading
of our common stock on the New York Stock Exchange during the four calendar
weeks preceding such sale. The holder may only sell such shares through
"brokers' transactions" or in transactions directly with a "market maker". Sales
under Rule 144 are also subject to certain requirements regarding providing
notice of such sales and the availability of current public information
concerning USAI. Affiliates may sell shares not constituting restricted shares
in accordance with the foregoing volume limitations and other requirements but
without regard to the one-year holding period. Under Rule 144(k), if a period of
at least two years has elapsed between the later of the date restricted
securities were acquired from us or the date they were acquired from an
affiliate, a holder of such restricted securities who is not an affiliate at the
time of the sale and has not been an affiliate for at least three months prior
to the sale would be entitled to sell the shares in the public market without
regard to the volume limitations and other restrictions described above.
Beginning , 1999, approximately shares of our common stock will
be eligible for sale in the public market pursuant to Rule 144, subject to the
volume limitations and other restrictions described above.

Notwithstanding the foregoing, our executive officers, directors and certain
of the existing stockholders, who own in aggregate approximately shares of
our common stock, have agreed that, without the prior consent of BT Alex. Brown
Incorporated, they will not (1) directly or indirectly, sell, offer to sell,
grant any option for the sale of or otherwise dispose of any shares of our
common stock or securities or rights convertible into or exercisable or
exchangeable for our common stock (except through gifts to persons who agree in
writing to be bound by such restrictions) or (2) make any demand for or exercise
any right with respect to the registration of any shares of our common stock or
other such securities, for a period of 180 days after the date of this
prospectus.

Approximately shares of our common stock are reserved for issuance under
the incentive plan. We currently intend to file a registration statement on Form
S-8 under the Securities Act to register all shares of our common stock issuable
pursuant to the incentive plan. We expect to file such registration statement
within 90 days following the date of this prospectus and such registration
statement will

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become effective upon filing. Shares covered by the registration statement will
thereafter be eligible for sale in the public markets, subject to Rule 144 under
the Securities Act.

USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., Messrs. Harris, Stone,
Richey, Bishop, Dougherty and Pullin and certain related entities are parties to
a registration agreement. Pursuant to this agreement, the holders of a majority
of our common stock issued pursuant to an equity purchase agreement, or issued
or issuable in respect of such securities, may request, after the offering, up
to three registrations of all or any part of our common stock on Form S-1 or any
similar long-form registration statement, if available, and an unlimited number
of registrations on Form S-2 or S-3 or any similar short-form registration
statement, each at our expense. In the event such holders make such request, all
other parties to the registration agreement will be entitled to participate in
such registration. The registration agreement also grants the parties piggyback
registration rights with respect to registrations by us of our securities (other
than in the offering) and we have agreed to pay all expenses related to such
piggyback registrations. The parties to the registration agreement will own
approximately % of our common stock immediately after the offering.

USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., Messrs. Harris and Stone
and The Prudential Insurance Company of America have entered into a registration
rights and stockholders' agreement pursuant to which Prudential has been granted
registration rights with respect to shares of our common stock issuable upon
warrants held by Prudential. If we propose at any time to register any of our
common stock for sale to the public, we have agreed to use our best efforts to
include in the registration shares requested to be registered by Prudential. We
have agreed to pay all expenses related to any shares which are registered on
behalf of Prudential. Upon exercise of the warrants in full, Prudential would
own approximately % of our common stock immediately after the offering.

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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

GENERAL

The following is a general discussion of the principal United States federal
income and estate tax consequences of the ownership and disposition of common
stock by a non-U.S. holder. For this purpose, the term "non-U.S. holder" means
any person or entity that is, for United States federal income tax purposes, a
foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust. This discussion is based on currently existing
provisions of the Internal Revenue Code, final, temporary and proposed
regulations promulgated thereunder, and administrative and judicial
interpretations thereof. All of these provisions, regulations and
interpretations are subject to change, possibly with retroactive effect, or
different interpretations. This discussion is limited to non-U.S. holders who
hold shares of our common stock as capital assets within the meaning of Section
1221 of the Code. Moreover, this discussion is for general information only and
does not address all of the tax consequences that may be relevant to particular
non-U.S. holders in light of their personal circumstances. It does not describe
certain tax provisions which may apply to individuals who relinquish their
United States citizenship or residence.

An individual may, subject to certain exceptions, be deemed to be a resident
alien, as opposed to a nonresident alien, by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar
year. For such purposes all of the days present in the current year, one-third
of the days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year are counted. Resident aliens are subject to
United States federal income tax as if they were United States citizens.

EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FEDERAL, STATE, MUNICIPALITY
OR OTHER TAXING JURISDICTION.

DIVIDENDS

In the event that dividends are paid on shares of our common stock,
dividends paid to a non-U.S. holder of our common stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty. To claim the benefit of
a lower rate under an income tax treaty, a non-U.S. holder of common stock must
properly file a form with the payor, claiming an exemption from or reduction in
withholding under such tax treaty.

Any dividends paid on shares of common stock to a non-U.S. holder will not
be subject to withholding tax, but instead are subject to United States federal
income tax on a net basis at applicable graduated individual or corporate rates
if:

- dividends are effectively connected with the conduct of a trade or
business by the non-U.S. holder within the United States and, where a tax
treaty applies, will be attributable to a United States permanent
establishment of the non-U.S. holder; and

- an IRS Form 4224, or successor form, is filed with the payor.

Any such effectively connected dividends received by a foreign corporation may,
under certain circumstances, be subject to an additional "branch profits tax" at
a rate of 30% or such lower rate as may be specified by an applicable income tax
treaty.

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Unless the payor has knowledge to the contrary, dividends paid prior to
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of such country for purposes of the withholding discussed above
and for purposes of determining the applicability of a tax treaty rate. However,
recently finalized Treasury regulations pertaining to United States federal
withholding tax provide that a non-U.S. holder must comply with new
certification procedures with respect to dividends paid after December 31, 2000.
In the case of payments made outside the United States with respect to an
offshore account, a non-U.S. holder must comply with certain documentary
evidence procedures, directly or under certain circumstances through an
intermediary, to obtain the benefits of a reduced rate under an income tax
treaty with respect to dividends paid after December 31, 2000. In addition, tax
regulations will require a non-U.S. holder to provide its United States taxpayer
identification number.

A non-U.S. holder of our common stock eligible for a reduced rate of
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.

GAIN ON DISPOSITION OF OUR COMMON STOCK

A non-U.S. holder generally will not be subject to federal income tax with
respect to gain recognized on a sale or other disposition of our common stock
unless:

(1) the gain is effectively connected with a trade or business of the
non-U.S. holder in the United States and, where a tax treaty applies, is
attributable to a United States permanent establishment of the non-U.S.
holder;

(2) in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met; or

(3) USAI is or has been a "U.S. real property holding corporation" for
federal income tax purposes, as discussed below.

An individual non-U.S. holder who falls under clause (1) above will, unless
an applicable treaty provides otherwise, be taxed on his or her net gain derived
from the sale or other disposition of our common stock under regular graduated
individual United States federal income tax rates. An individual non-U.S. holder
who falls under clause (2) above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by certain United States capital
losses.

A non-U.S. holder that is a foreign corporation falling under clause (1)
above will be taxed on its gain under regular graduated corporate United States
federal income tax rates and may be subject to an additional branch profits tax
equal to 30% of its effectively connected earnings and profits within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.

A corporation is a U.S. real property holding corporation if the fair market
value of the United States real property interests held by the corporation is
50% or more of the aggregate fair market value of its United States and foreign
real property interests and any other assets used or held for use by the
corporation in a trade or business. Based on our current and anticipated assets,
we believe that we are likely a U.S. real property holding corporation.

If we are a U.S. real property holding corporation, then gain on the sale or
other disposition of our common stock by a non-U.S. holder generally would be
subject to United States federal income tax unless both:

- the common stock was "regularly traded" on an established securities
market within the meaning of applicable regulations; and

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- the non-U.S. holder actually or constructively owned 5% or less of the
common stock during the shorter of the five-year period preceding such
disposition or the non-U.S. holder's holding period.

Non-U.S. holders should consult their tax advisors concerning any tax
consequences that may arise if we are a U.S. real property holding company.

FEDERAL ESTATE TAX

Common stock owned or treated as owned by an individual non-U.S. holder at
the time of death will be included in such holder's gross estate for federal
estate tax purposes, and may be subject to federal estate tax unless an
applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

We must report annually to the IRS and to each non-U.S. holder the amount of
dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty or certain other
agreements.

Backup withholding is imposed at the rate of 31% on certain payments to
persons that fail to furnish certain identifying information to the payer.
Backup withholding generally will not apply to dividends paid prior to January
1, 2001 to a non-U.S. holder at an address outside the United States, unless the
payor has knowledge that the payee is a United States person. In the case of
dividends paid after December 31, 2000, the regulations provide that a non-U.S.
holder generally will be subject to withholding tax at a 31% rate unless certain
certification procedures, or, in the case of payments made outside the United
States with respect to an offshore account, certain documentary evidence
procedures, are complied with, directly or under certain circumstances through
an intermediary. Backup withholding and information reporting generally will
also apply to dividends paid on common stock at addresses inside the United
States to non-U.S. holders that fail to provide certain identifying information
in the manner required. Regulations provide certain presumptions under which a
non-U.S. holder would be subject to backup withholding and information reporting
unless certification from the holder of the non-U.S. holder's non-United States
status is provided.

Payment of the proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner provides the payor with its
name and address and certifies under penalties of perjury that it is a non-U.S.
holder, or otherwise establishes an exemption. In general, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of common stock by or through a foreign office of a broker. If, however, such
broker is, for federal income tax purposes, a United States person, a controlled
foreign corporation, or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, or, in addition, for periods after December 31, 2000, a foreign
partnership that at any time during its tax year either is engaged in the
conduct of a trade or business in the United States or has as partners one or
more United States persons that, in the aggregate, hold more than 50% of the
income or capital interest in the partnership, such payments will be subject to
information reporting, but not backup withholding, unless such broker has
documentary evidence in its records that the beneficial owner is a non-U.S.
holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the non-U.S. holder's federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

60
<PAGE>
UNDERWRITING

BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and Schroder
& Co. Inc. are the U.S. representatives of the U.S. underwriters named below and
are acting together as lead U.S. managers. BT Alex. Brown International, The
Robinson-Humphrey Company, LLC, and J. Henry Schroder & Co. Limited are acting
as the international representatives for the international managers named below
and are acting together as lead international managers. Upon the terms and
conditions of a U.S. underwriting agreement and an international underwriting
agreement, the underwriters and managers named below have severally agreed
through their representatives to purchase from us the number of shares of our
common stock set forth opposite the name of the underwriter and manager below:

<TABLE>
<CAPTION>
U.S. UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
BT Alex. Brown Incorporated................................................
The Robinson-Humphrey Company, LLC.........................................
Schroder & Co. Inc.........................................................
Total....................................................................
-----------------
</TABLE>

<TABLE>
<CAPTION>
INTERNATIONAL MANAGERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
BT Alex. Brown International, division of Bankers Trust International
PLC.......................................................................
The Robinson-Humphrey Company, LLC.........................................
J. Henry Schroder & Co. Limited............................................
Total....................................................................
-----------------
</TABLE>

The U.S. underwriters and international managers will purchase all of the
shares of common stock offered in the offering, other than those shares covered
by the over-allotment option described below, if they purchase any shares. The
U.S. offering and the international offering are each conditioned upon the
closing of the other.

The representatives have advised us that the U.S. underwriters and
international managers propose initially to offer the shares of our common stock
to the public at the offering price set forth on the cover page of this
prospectus and to certain dealers at that price less a concession not in excess
of $ per share. The U.S. underwriters, international managers and dealers
may re-allow a concession not in excess of $ per share to certain other
dealers. After the purchase from us of all of the shares of common stock offered
in this offering, the representatives may change the public offering price and
other selling terms.

The following table summarizes the compensation and the estimated expenses
payable by USAI and the selling stockholders:

<TABLE>
<CAPTION>
TOTAL
----------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
----------- ------------- -------------
<S> <C> <C> <C>
Underwriting discounts and commissions..................................
Expenses payable by USAI................................................
Expenses payable by the selling stockholders............................
</TABLE>

The selling stockholders have granted to the U.S. underwriters and
international managers a 30-day option, exercisable by BT Alex. Brown
Incorporated, to purchase up to additional shares of our common stock at
the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus. The option may only
be exercised to cover orders

61
<PAGE>
for more shares than are being offered in the offering. Each of the U.S.
underwriters and international managers will have a firm commitment to purchase
approximately the same percentage of additional shares of our common stock as
the number of shares of our common stock to be purchased by it in the above
table bears to the total offering size. The selling stockholders are obligated
to sell the additional shares to the U.S. underwriters and international
managers.

We and the selling stockholders have agreed to indemnify the U.S.
underwriters and international managers against certain liabilities, including
liabilities under the Securities Act. In order to facilitate the offering of our
common stock, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the market price of our common stock. Specifically,
the underwriters may accept orders for more shares of the common stock than are
being offered in the offering, creating a short position in the underwriters'
syndicate account. Additionally, to cover those orders or to stabilize the
market price of the common stock, the underwriters may bid for and purchase
shares of our common stock in the open market. Finally, the underwriters'
representatives may reclaim selling concessions allowed to an underwriter or
dealer if the underwriting syndicate repurchases shares distributed by that
underwriter or dealer. Any of these activities may maintain the market price of
our common stock at a level above that which might otherwise prevail in the open
market. The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.

Pursuant to an agreement between the U.S. underwriters and international
managers relating to the offering, each of the U.S. underwriters named herein
has agreed that, as a part of the distribution of the shares offered hereby and
subject to certain exceptions, it will offer, sell or deliver the shares of our
common stock, directly or indirectly, only in the United States, its
territories, its possessions and other areas subject to its jurisdiction, in
Canada and to U.S. persons. U.S. person means: (1) any individual who is a
resident of the United States or (2) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the international managers has agreed
pursuant to the agreement that, as a part of the distribution of the shares
offered as a part of the international offering, and subject to certain
exceptions, it will (1) not, directly or indirectly, offer, sell or deliver
shares of our common stock (a) in the United States or to any U.S. persons or
(b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (2) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.

Pursuant to the agreement, sales may be made between the U.S. underwriters
and the international managers of such number of shares of our common stock as
may be mutually agreed. The price of any shares so sold shall be the initial
public offering price, less an amount not greater than the selling concession.
To the extent that there are sales between the U.S. underwriters and the
international managers pursuant to the agreement, the number of shares initially
available for sale by the U.S. underwriters and the international managers may
be more or less than the number of shares appearing on the cover page of this
prospectus.

USAI and our officers, directors and stockholders have each agreed to
restrictions on the ability to dispose of any shares of our common stock for a
period of 180 days after the date of this prospectus. These restrictions
prohibit the offer, sale, contract to sell or other disposition of any shares of
our common stock, or entering into any transaction designed to, or which could
be expected to, result in the disposition of any portion of our common stock
without the prior written consent of BT Alex. Brown Incorporated. BT Alex. Brown
Incorporated may give its consent at any time without public notice. The
restriction on disposition of our common stock includes shares of our common
stock exchanged for shares of stock of our subsidiaries.

62
<PAGE>
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales of more than 5% of the offering to
any account over which they exercise discretionary authority.

Prior to the closing of the offering, there has been no public market for
our common stock. Consequently, the initial public offering price for our common
stock will be determined by negotiation among us and the representatives of the
underwriters. Among the factors to be considered in determining the public
offering price will be:

- prevailing market conditions;

- our results of operations in recent periods;

- the present stage of our development;

- the market capitalizations and stages of development of other companies
that we and the representatives believe to be comparable to us;

- estimates of our business potential; and

- other factors deemed relevant by us and the representatives.

63
<PAGE>
EXPERTS

The financial statements of USAI included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.

The consolidated financial statements of Monroc, Inc. and Subsidiary for the
year ended December 31, 1997, included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

The financial statements of Monroc, Inc. included in this registration
statement have been audited by Grant Thornton LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

LEGAL MATTERS

Certain legal matters in connection with our common stock offered hereby
will be passed upon for us by Kirkland & Ellis. Certain legal matters will be
passed upon for the U.S. underwriters and the international managers by Winston
& Strawn.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock offered hereby. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules thereto. Certain items are omitted in accordance
with the rules and regulations of the SEC. For further information with respect
to the company and its common stock, reference is made to the registration
statement and the exhibits and any schedules filed therewith. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance, if such
contract or document is filed as an exhibit, reference is made to the copy of
such contract or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by such reference. A
copy of the registration statement, including the exhibits and schedules
thereto, may be read and copied at the SEC's public reference room in
Washington, D.C. and at the SEC's regional offices in New York, New York and
Chicago, Illinois. Information on the operation of the public reference room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
an Internet site at http://www.sec.gov, from which interested persons can
electronically access the registration statement, including the exhibits and any
schedules thereto.

As a result of the offering, we will become subject to the full
informational requirements of the Exchange Act. We will fulfill our obligations
with respect to such requirements by filing periodic reports and other
information with the SEC. We intend to furnish our shareholders with annual
reports containing consolidated financial statements certified by an independent
public accounting firm.

64
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
U.S. Aggregates, Inc. and Subsidiaries
Financial Statements--December 31, 1996, 1997 and 1998 and March 31, 1998 and 1999
Report of Independent Public Accountants......................................... F-2
Consolidated Balance Sheets...................................................... F-3
Consolidated Statements of Operations............................................ F-4
Consolidated Statements of Shareholders' Equity.................................. F-6
Consolidated Statements of Cash Flows............................................ F-7
Notes to Consolidated Financial Statements....................................... F-8

Monroc, Inc. and Subsidiary
Financial Statements--December 31, 1997
Independent Auditors' Report..................................................... F-26
Consolidated Statements of Operations............................................ F-27
Consolidated Statements of Shareholders' Equity.................................. F-28
Consolidated Statements of Cash Flows............................................ F-29
Notes to Consolidated Financial Statements....................................... F-30
Financial Statements--December 31, 1996
Report of Independent Certified Public Accountants............................... F-42
Consolidated Statement of Operations............................................. F-43
Consolidated Statement of Shareholders' Equity................................... F-44
Consolidated Statement of Cash Flows............................................. F-45
Notes to Consolidated Financial Statements....................................... F-46
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
U.S. Aggregates, Inc.:

We have audited the accompanying consolidated balance sheets of U.S.
Aggregates, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U.S. Aggregates, Inc. and
Subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

San Francisco, California,
January 29, 1999

F-2
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------- ------------- MARCH 31,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 479 $ 2,849 $ 1,794
Trade accounts receivable, net of allowance for doubtful accounts of
$629, $1,163 and $1,241............................................. 19,113 43,853 37,633
Income tax receivable................................................. -- -- 591
Notes receivable...................................................... 77 1,954 705
Inventories........................................................... 11,280 25,480 28,963
Prepaid expenses and other assets..................................... 2,915 4,314 6,484
------------- ------------- -----------
Total current assets............................................ 33,864 78,450 76,170
------------- ------------- -----------

PROPERTY, PLANT AND EQUIPMENT, net...................................... 112,370 224,812 227,462
------------- ------------- -----------

INTANGIBLE ASSETS, net:
Goodwill.............................................................. 10,852 17,139 18,679
Covenants not to compete.............................................. 2,521 1,607 1,378
Deferred financing charges............................................ 4,511 7,427 7,763
------------- ------------- -----------
Total intangible assets......................................... 17,884 26,173 27,820
------------- ------------- -----------

OTHER ASSETS............................................................ 8,148 9,953 13,540
------------- ------------- -----------
Total assets.................................................... $ 172,266 $ 339,388 $ 344,992
------------- ------------- -----------
------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable................................................ $ 9,428 $ 24,110 $ 24,190
Accrued payroll....................................................... 1,202 1,270 2,770
Other accrued liabilities............................................. 2,890 7,676 8,399
Income tax payable.................................................... -- 890 --
Current portion of long-term debt..................................... 6,139 14,801 16,316
------------- ------------- -----------
Total current liabilities....................................... 19,659 48,747 51,675

LONG TERM DEBT, net of current portion.................................. 86,649 185,790 191,338

OTHER................................................................... 258 192 178

DEFERRED INCOME TAXES, net.............................................. 12,656 45,313 44,740

MINORITY INTEREST, net.................................................. 2,681 3,400 2,803
------------- ------------- -----------
Total liabilities............................................... 121,903 283,442 290,734
------------- ------------- -----------

COMMITMENTS AND CONTINGENCIES

MANDATORY REDEEMABLE PREFERRED STOCK, $.01 par value, 500,000 shares
authorized............................................................ 39,466 43,563 44,652

SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 8,796,975 shares authorized............. 2 2 2
Additional paid-in capital............................................ 2,646 2,946 2,946
Notes receivable from sale of stock................................... (593) (640) (653)
Treasury stock, at cost............................................... (2) (2) (2)
Retained earnings..................................................... 8,844 10,077 7,313
------------- ------------- -----------
Total shareholders' equity...................................... 10,897 12,383 9,606
------------- ------------- -----------
Total liabilities, mandatory redeemable preferred stock and
shareholders' equity.......................................... $ 172,266 $ 339,388 $ 344,992
------------- ------------- -----------
------------- ------------- -----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

COST OF PRODUCTS SOLD................... 92,821 119,132 168,220 183,453 21,334 37,710
--------- --------- --------- ------------ --------- ---------
Gross profit........................ 38,889 44,111 60,519 65,771 7,179 11,461

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 16,571 18,275 25,001 26,448 5,190 7,213

DEPRECIATION, DEPLETION AND
AMORTIZATION.......................... 6,301 7,830 11,098 12,075 2,056 3,285
--------- --------- --------- ------------ --------- ---------
Income (loss) from operations....... 16,017 18,006 24,420 27,248 (67) 963
--------- --------- --------- ------------ --------- ---------

OTHER EXPENSE:
Interest, net......................... (5,036) (8,344) (14,886) (16,611) (2,394) (4,360)
Loss on sale of real estate........... -- -- (386) (386) -- --
Other, net............................ (150) (150) (718) (710) (1,195) (162)
--------- --------- --------- ------------ --------- ---------
Income (loss) from continuing
operations before provision
for income taxes, minority
interest, discontinued
operations and extraordinary
item.......................... 10,831 9,512 8,430 9,541 (3,656) (3,559)

BENEFIT (PROVISION) FOR INCOME TAXES.... (3,660) (3,384) (3,547) (3,975) 1,346 1,296
--------- --------- --------- ------------ --------- ---------
Income (loss) before minority
interest, discontinued
operations and extraordinary
item.......................... 7,171 6,128 4,883 5,566 (2,310) (2,263)

MINORITY INTEREST....................... (727) (623) (624) (741) 277 588
--------- --------- --------- ------------ --------- ---------
Income (loss) from continuing
operations.................... 6,444 5,505 4,259 4,825 (2,033) (1,675)

DISCONTINUED OPERATIONS:
Operating income from discontinued
Precast Division, less applicable
income tax of $568.................. -- -- 844 -- -- --
Gain on disposal of Precast Division,
including operating income of $829
income during phase-out period, less
applicable income tax of $333....... -- -- 565 -- -- --
--------- --------- --------- ------------ --------- ---------
Income (loss) before
extraordinary item............ 6,444 5,505 5,668 4,825 (2,033) (1,675)

EXTRAORDINARY ITEM: Loss on
extinguishment of debt, less
applicable income tax benefit of
$212.................................. -- -- (338) -- -- --
--------- --------- --------- ------------ --------- ---------
Net income (loss)............... $ 6,444 $ 5,505 $ 5,330 $ 4,825 $ (2,033) $ (1,675)
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
</TABLE>

F-4
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
PRO FORMA
YEAR ENDED
DECEMBER 31,
1998
------------
(UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income per common share--basic
Income (loss) from continuing
operations available for common
shareholders........................ $ 0.49 $ 0.25 $ 0.02 $ 0.10 $ (0.42) $ (0.38)
Operating income from discontinued
Precast Division, net of tax........ -- -- .12 -- -- --
Gain on disposal of Precast Division,
including operating income during
the phase out period, net of tax.... -- -- 0.08 -- -- --
Extraordinary item, net of tax........ -- -- (0.05) -- -- --
--------- --------- --------- ------------ --------- ---------
Net income (loss) available for common
shareholders........................ 0.49 0.25 0.17 0.10 (0.42) (0.38)
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
Weighted average common shares
outstanding......................... 7,116,719 7,166,193 7,189,521 7,189,521 7,189,521 7,189,521

Income per common share--diluted
Income (loss) from continuing
operations available for common
shareholders........................ $ 0.47 $ 0.24 $ 0.02 $ 0.10 $ (0.42) $ (0.38)
Operating income from discontinued
Precast Division, net of tax........ -- -- .11 -- -- --
Gain on disposal of Precast Division,
including operating income during
the phase out period, net of tax.... -- -- .08 -- -- --
Extraordinary item, net of tax........ -- -- (.05) -- -- --
--------- --------- --------- ------------ --------- ---------
Net income (loss) available for common
shareholders........................ 0.47 0.24 0.16 0.10 (0.42) (0.38)
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
Weighted average common shares
outstanding......................... 7,339,353 7,388,827 7,525,038 7,525,038 7,412,155 7,525,038
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TREASURY
NOTES STOCK
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE -----------
---------------------- ------------------------- PAID-IN FROM SALE SHARES HELD
SHARES AMOUNT SHARES AMOUNT CAPITAL OF STOCK IN TREASURY
--------- ----------- ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.... 182,842 $ 2 7,106,408 $ 2 $ 23,012 $ (310) --

Issuance of stock............. 118,000 1 92,051 -- 11,824 -- --
Issuance of stock warrants.... -- -- -- -- 600 -- --
Notes receivable, net of
payments.................... -- -- -- -- -- (51) --
Conversion to mandatory
redeemable preferred
stock....................... (300,842) (3) -- -- (32,792) -- --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996.... -- -- 7,198,459 2 2,644 (361) --

Purchase of treasury stock,
net......................... -- -- -- -- -- -- 50,600
Notes receivable, net of
payments.................... -- -- -- -- 2 (232) (41,662)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997.... -- -- 7,198,459 2 2,646 (593) 8,938

Notes receivable, net of
payments.................... -- -- -- -- -- (47) --
Issuance of stock warrants.... -- -- -- -- 300 -- --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998.... -- -- 7,198,459 2 2,946 (640) 8,938

Notes receivable, net of
payments (unaudited)........ -- -- -- -- -- (13) --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net loss (unaudited).......... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT MARCH 31, 1999
(UNAUDITED)................... -- $ -- 7,198,459 $ 2 $ 2,946 $ (653) 8,938
--
--
--------- --- ---------- ----------- ----------- -----------
--------- --- ---------- ----------- ----------- -----------

TOTAL
RETAINED SHAREHOLDERS'
AMOUNT EARNINGS EQUITY
--------- ----------- -------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.... $ -- $ 3,565 $ 26,271
Issuance of stock............. -- -- 11,825
Issuance of stock warrants.... -- -- 600
Notes receivable, net of
payments.................... -- -- (51)
Conversion to mandatory
redeemable preferred
stock....................... -- -- (32,795)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (2,958) (2,958)
Net income.................... -- 6,444 6,444

--------- ----------- -------------
BALANCE AT DECEMBER 31, 1996.... -- 7,051 9,336
Purchase of treasury stock,
net......................... (220) -- (220)
Notes receivable, net of
payments.................... 218 -- (12)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (3,712) (3,712)
Net income.................... -- 5,505 5,505

--------- ----------- -------------
BALANCE AT DECEMBER 31, 1997.... (2) 8,844 10,897
Notes receivable, net of
payments.................... -- -- (47)
Issuance of stock warrants.... -- -- 300
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (4,097) (4,097)
Net income.................... -- 5,330 5,330

--------- ----------- -------------
BALANCE AT DECEMBER 31, 1998.... (2) 10,077 12,383
Notes receivable, net of
payments (unaudited)........ -- -- (13)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (1,089) (1,089)
Net loss (unaudited).......... -- (1,675) (1,675)

--------- ----------- -------------
BALANCE AT MARCH 31, 1999
(UNAUDITED)................... $ (2) $ 7,313 $ 9,606

--------- ----------- -------------
--------- ----------- -------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before extraordinary item................. $ 6,444 $ 5,505 $ 5,668 $ (2,033) $ (1,675)
Adjustments to reconcile income (loss) before
extraordinary item to net cash provided by (used in)
operating activities:
Depreciation, depletion and amortization............ 6,301 7,830 11,098 2,056 3,285
Provision for doubtful accounts, net................ 15 (88) (49) (68) 77
Deferred income taxes............................... 2,626 3,129 3,225 (1,041) (1,455)
Loss (gain) on disposal of fixed assets and real
estate............................................ (13) (63) 330 -- 1
Minority interest................................... 727 981 1,015 (267) (588)
Extraordinary item.................................. -- -- (338) -- --
Change in operating assets and liabilities:
Trade accounts and notes receivable............... 2,900 (2,589) (13,018) 459 7,370
Inventories....................................... (2,797) (3,160) (8,280) (2,215) (3,483)
Prepaid expenses and other assets................. (5,216) (6,717) (2,068) (855) (5,793)
Trade accounts payable and accrued liabilities.... (5,678) (2,309) 347 3,130 2,301
Income taxes payable.............................. (39) 615 916 (341) (1,481)
Other............................................. (35) (347) 454 (23) 141
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities.................................... 5,235 2,787 (700) (1,198) (1,300)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.............. (19,594) (15,251) (22,372) (6,998) (6,669)
Acquisition of subsidiaries, net of cash acquired....... (37,910) (4,038) (83,884) (11,171) --
Proceeds from sale of fixed assets...................... -- 1,310 9,285 18 29
--------- --------- --------- --------- ---------
Net cash used in investing activities............. (57,504) (17,979) (96,971) (18,151) (6,640)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt.................... (41,773) (693) (85,990) (201) (350)
New borrowings.......................................... 78,075 14,946 185,731 19,609 7,200
Sale of stock........................................... 12,426 -- -- -- --
Other................................................... (18) -- 300 31 35
--------- --------- --------- --------- ---------
Net cash provided by financing activities......... 48,710 14,253 100,041 19,439 6,885
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH........................... (3,559) (939) 2,370 90 (1,055)

CASH, beginning of period................................. 4,977 1,418 479 479 2,849
--------- --------- --------- --------- ---------
CASH, end of period....................................... $ 1,418 $ 479 $ 2,849 $ 569 $ 1,794
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest.............................................. $ 5,018 $ 8,311 $ 13,364 $ 2,286 $ 3,488
Taxes................................................. 937 (639) 131 36 728
NON CASH TRANSACTIONS:
Value assigned to warrants.............................. 600 -- 300 -- --
Accretion of preferred stock dividend................... 2,958 3,712 4,097 987 1,089
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

1. BUSINESS:

U.S. Aggregates, Inc. (a Delaware corporation, hereinafter referred to as
USAI or the Company) was incorporated in 1994. USAI is a leading producer of
aggregates, primarily crushed stone, sand and gravel and associated
aggregate-based materials and services. Its products are used primarily for the
construction and maintenance of highways and other infrastructure projects and
for commercial and residential construction, in nine states. The Company
operates through two subsidiaries: SRM Holdings Corp. (SRMHC) and Western
Aggregates Holding Corp. (WAHC). The capital structure of USAI includes common
stock with voting rights and preferred stock without voting rights.

The Company conducts its operations through one reportable segment: the
quarrying and distribution of aggregate products. The Company operates in nine
states which have been aggregated for segment reporting purposes.

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

The interim consolidated financial statements as of March 31, 1999, and for
the three months ended March 31, 1998 and 1999, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting
principles, have been omitted. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to fairly present
the financial position, results of operations and cash flows with respect to the
interim financial statements, have been included. The results of operations for
the interim periods are not indicative of the results for the entire fiscal
year.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of USAI and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent funds on deposit in noninterest and
interest-bearing operating and/or highly liquid investment accounts, with
original maturities of three months or less.

INVENTORIES

Inventories are stated at the lower of average manufactured cost (which
approximates the first-in, first-out method of accounting) or market. Average
manufactured cost includes all direct labor and material costs and those
indirect costs related to aggregate production, including indirect labor,
repairs, depreciation and depletion.

INCOME PER SHARE

F-8
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
presented and all share data reflect the Company's proposed 35.1879 for 1 stock
split effective at the time of the Company's initial public offering of common
stock.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RISK FACTORS RELATING TO THE COMPANY'S BUSINESS AND INDUSTRY

The Company's business is seasonal, with peak revenue and profits occurring
primarily in the months of April through November. Bad weather conditions during
this period could adversely affect operating income and cash flow and could
therefore have a disproportionate impact on the Company's results for the full
year. Quarterly results have varied significantly in the past and are likely to
vary significantly from quarter to quarter in the future.

A majority of the Company's revenues are from customers who are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions. In addition, since operations occur in a variety of
geographic markets, the Company's business is subject to the economic conditions
in each such geographic market. General economic downturns or localized
downturns in the regions where the Company has operations, including any
downturns in the construction industry, could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company's operations are subject to and affected by federal, state and
local laws and regulations including such matters as land usage, street and
highway usage, noise levels and health, safety and environmental matters. In
many instances, various permits are required. Although management believes that
the Company is in compliance with regulatory requirements, there can be no
assurance that the Company will not incur material costs or liabilities in
connection with regulatory requirements.

Certain of the Company's operations may from time to time involve the use of
substances that are classified as toxic or hazardous substances within the
meaning of these laws and regulations. Risk of environmental liability is
inherent in the operation of the Company's business. As a result, it is possible
that environmental liabilities will have a material adverse effect on the
Company in the future.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, which are as follows:

<TABLE>
<CAPTION>
<S> <C>
10-40
Plant and equipment............................................. years
Transportation and delivery equipment........................... 4-15 years
Furniture and fixtures.......................................... 5-10 years
</TABLE>

F-9
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
The Company uses a 20 percent salvage value in providing depreciation on
certain of its assets. In 1997, USAI changed the estimated lives of certain
depreciable assets, resulting in an approximate $1,550 reduction of 1997
depreciation expense compared to what it would have been had the estimated lives
not been changed.

Expenditures for development, renewals and betterments of developing
quarries and gravel pits are capitalized. Depletion of acquired or leased
mineral deposits is calculated on the units-of-production method over the
estimated remaining recoverable reserves. Repairs and maintenance that do not
improve or extend the lives of the assets are charged against operations in the
year benefited. When properties are retired or otherwise disposed of, related
costs and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in operations.

INTANGIBLES

Goodwill is amortized on a straight-line basis over 40 years. Covenants not
to compete are amortized on a straight-line basis over the lesser of 5 years or
the life of the agreement. Deferred finance charges are amortized on a
straight-line basis over the life of the related loan. As of December 31, 1997
and 1998, the accumulated amortization applicable to the intangible assets was
$4,067 and $6,208, respectively.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates its plant and other long-term assets for impairment
and assesses their recoverability based upon anticipated future cash flows. If
facts and circumstances lead the Company's management to believe that the cost
of one of its assets may be impaired, the Company will (a) evaluate the extent
to which that cost is recoverable by comparing the future undiscounted cash
flows estimated to be associated with that asset to the asset's carrying amount
and (b) write-down that carrying amount to market value or discounted cash flow
value to the extent necessary. Using this approach, the Company's management
determined that the cash flows would be sufficient to recover the carrying value
of the Company's long lived assets as of December 31, 1997 and 1998.

F-10
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
VALUATION ACCOUNTS

Below is a summary of the changes in the Company's valuation accounts for
1996, 1997 and 1998:

<TABLE>
<CAPTION>
ADDITIONS
------------------------
BEGINNING BALANCE ACQUIRED PROVIDED DEDUCTIONS FUNDING BALANCE
------------------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful accounts........ $ 297 $ 554 $ 275 $ (259) $ 867
Inventory valuation reserve............ 450 -- 350 (450) 350
1997
Allowance for doubtful accounts........ $ 867 $ -- $ 50 $ (288) $ 629
Inventory valuation reserve............ 350 -- 500 (559) 291
1998
Allowance for doubtful accounts........ $ 629 $ 583 $ 409 $ (458) $ 1,163
Inventory valuation reserve............ 291 -- 500 (291) 500
</TABLE>

ENVIRONMENTAL MATTERS

Remediation costs are accrued based on estimates of known environmental
remediation exposure. Ongoing environmental compliance costs, including
maintenance and monitoring costs, are expensed as incurred. Quarry and pit
reclamation costs are treated as normal ongoing costs and are expensed, as
incurred.

INCOME TAXES

USAI accounts for income taxes using the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement and
tax bases, as well as the effect of operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period of
change.

REVENUE RECOGNITION

Revenues are recognized at the time the related products are shipped.

Contract revenues and costs are recognized under the
percentage-of-completion method, measured by the percentage of costs incurred to
date to estimated total costs for each contract. Revisions in cost estimates
during the course of a contract are reflected in the accounting period in which
the change of costs becomes known. Provision for estimated losses on incomplete
contracts is made in the period in which such losses become evident.

F-11
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
DEFERRED OFFERING COSTS

As of December 31, 1998 and March 31, 1999 costs of $348 and $667
(unaudited), respectively, have been incurred in connection with the Company's
initial public offering. Such costs will be treated as a reduction of the
proceeds from the offering.

FINANCIAL INSTRUMENTS

USAI'S financial instruments, other than debt, consist of cash, short-term
accounts receivable and accounts payable for which current carrying amounts are
equal to or approximate fair market value. The estimated fair values of the
Company's debt instruments at December 31, 1998, aggregated approximately
$197,120 compared with a carrying amount of $200,591. The fair values were
estimated based on the quoted market prices for similar issues, or on current
rates anticipated by the Company for debt of the same remaining maturities.

INTERNAL USE SOFTWARE

In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use ("SOP
98-1"). The Company adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. The Company
expensed such costs as incurred through December 31, 1998. The Company does not
expect the impact of the adoption of SOP 98-1 to be material.

COSTS OF START-UP ACTIVITIES

In April 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all
costs related to certain start-up activities, including organizational costs, be
expensed as incurred. The cumulative effect of the adoption of SOP 98-5 reduced
net earnings by $84, which has been recorded as an expense in the period ended
March 31, 1999.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income, ("FAS 130"). FAS 130 requires all
non-owner changes in equity that are excluded from net earnings under existing
FASB standards be included as comprehensive income. The Company presently does
not have any material transactions that directly affect equity other than those
transactions with owners in their capacity as owners. Therefore, the provisions
of FAS 130 did not materially affect net earnings or financial position.

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), which is required to be adopted
in years beginning after June 15, 1999. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of FAS 133 will
have a significant impact on net earnings or the financial position of the
Corporation.

F-12
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
COLLECTIVE BARGAINING AGREEMENTS

The Company is a party to various collective bargaining agreements with
labor unions. The agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements will expire at
various times through 2001.

3. ACQUISITIONS:

On June 5, 1998, USAI, through WAHC, purchased all of the outstanding common
stock of Monroc, Inc. (Monroc). Monroc's purchase price was approximately
$67,800 in cash plus costs and certain assumed liabilities. The acquisition has
been accounted for under the purchase method of accounting. The amount by which
the total cost exceeded the fair value of the tangible net assets acquired of
$3,850 as of December 31, 1998 was recognized as goodwill and is being amortized
over 40 years.

In addition, at various dates during 1996, 1997 and 1998, USAI, through its
subsidiaries, acquired assets and businesses of several small companies. The
operating results of the acquired businesses are included in the accompanying
financial statements from their respective dates of acquisition.

The following table reflects supplemental disclosure of noncash transactions
related to these acquisitions for 1998:

<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired, including goodwill of $6,808....... $ 138,683
Liabilities assumed............................................... (54,799)
---------
Cash paid for assets.............................................. $ 83,884
---------
---------
</TABLE>

Subsequent to the acquisition of Monroc, acquired land, not related to the
business, was sold for $6,945. No gain or loss was recognized on this
disposition.

The following unaudited selected pro forma financial data are presented as
if the acquisitions (excluding Monroc's discontinued operations) had occured on
January 1, 1997. The pro forma financial information is based upon certain
estimates and assumptions that management of the Company believes are reasonable
in the circumstances. The unaudited pro forma information presented below is not
necessarily indicative of what results of operations actually would have been if
the acquisition had occured on the date indicated. Moreover, they are not
necessarily indicative of future results.

<TABLE>
<CAPTION>
1997 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales............................................................. $ 212,910 $ 249,224
Income from continuing operations..................................... 3,622 4,825
Net income............................................................ 3,622 4,825
Net income per share.................................................. (.01) .10
</TABLE>

F-13
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

3. ACQUISITIONS: (CONTINUED)
DISCONTINUED OPERATIONS

During 1998, the Company decided to discontinue the Precast Division
operations of Monroc and on December 31, 1998 sold certain assets and inventory
related to this division. Net sales from such operations were $15,639 in 1998.

4. UNAUDITED PRO FORMA INFORMATION

In 1998, the Company acquired Monroc, Inc. on June 5th, Geodyne Transport,
Inc. on Feb. 20th and Falcon Ridge Quarry, Inc. on Feb. 18th ("Acquired
Businesses") in separate transactions. In addition, the Company disposed of the
Precast Division assets of Monroc, Inc. and certain other non-business related
land assets ("Disposed Assets"). While these acquisitions occurred at various
dates during 1998, the Pro Forma data are presented as if such acquisitions and
dispositions had occurred on the first day of the related period and also
include the effect of certain pro forma adjustments to the historical financial
statements described below.

The selected pro forma financial data for the year ended December 31, 1998
has been derived from the Company (including the Acquired Businesses and
Disposed Assets) prepared financial information, and the financial statements
and notes thereto of certain of the Acquired Businesses and Disposed Assets for
certain periods.

(1) Net sales includes $20,485 from the Acquired Businesses (excluding sales
related to Disposed Assets, for the period January 1, 1998 to their
respective dates of acquisition in 1998.

(2) Cost of products sold includes $15,233 from the Acquired Businesses
(excluding costs related to Disposed Assets) for the period January 1, 1998
to their respective dates of acquisition in 1998.

(3) Selling, general and administrative expenses include $2,051 from the 1998
Acquired Businesses (excluding sales related to Disposed Assets, for the
period January 1, 1998 to their respective dates of acquisition in 1998 less
$604 of expenses incurred by Monroc, Inc. relating to the sale of Monroc to
U.S. Aggregates.

(4) Depreciation, depletion and amortization includes $977 from the 1998
Acquired Businesses (excluding amounts related to Disposed Assets) for the
period January 1, 1998 to their respective dates of acquisition to reflect
depreciation, depletion and amortization of fixed assets, goodwill and other
intangibles from their ongoing operations as well as amounts recorded as a
result of purchase accounting.

(6) Provision for income tax expense includes $428 as if the 1998 Acquired
Businesses (excluding Disposed Assets) had been combined with the USAI for
the period January 1, 1998 to their

F-14
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

4. UNAUDITED PRO FORMA INFORMATION (CONTINUED)
respective dates of acquisition, and those additional earnings were subject
to a blended federal and state statutory tax rate of 38.5%.

(7) Minority Interest has been adjusted to reflect the Minority Interest's share
in other pro forma adjustments.

5. INVENTORIES:

Inventories consist of the following as of December 31:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Finished products....................................................... $ 6,300 $ 19,014
Raw materials........................................................... 4,831 5,730
Supplies and parts...................................................... 236 888
Fuel.................................................................... 204 348
Less: Allowances........................................................ (291) (500)
--------- ---------
$ 11,280 $ 25,480
--------- ---------
--------- ---------
</TABLE>

Inventories are pledged as security under various debt agreements (see Note
6).

6. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consist of the following as of December 31:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Land.................................................................. $ 7,889 $ 31,988
Mineral deposits...................................................... 19,083 89,554
Plant and equipment................................................... 96,107 119,675
Furniture and fixtures................................................ 1,669 4,148
Construction in progress.............................................. 2,018 1,038
---------- ----------
126,766 246,403
Less: Accumulated depreciation and depletion.......................... (14,396) (21,591)
---------- ----------
$ 112,370 $ 224,812
---------- ----------
---------- ----------
</TABLE>

Property, plant and equipment are pledged as security for various debt
agreements (see Note 6).

F-15
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

7. LONG-TERM DEBT:

Long-term debt consists of the following as of December 31:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Prudential Insurance subordinated notes, net of discount of $530 and
$753, respectively.................................................. $ 29,470 $ 44,247
Bank of America term loan............................................. 25,875 --
Bank of America term loan A........................................... -- 53,500
Bank of America term loan B........................................... -- 58,500
Bank of America revolving loan........................................ 13,800 24,200
Bank of America acquisition loan...................................... 16,400 --
Demand note........................................................... -- 8,020
Notes payable to former stockholders.................................. 5,737 4,997
Other................................................................. 1,506 7,127
---------- ----------
Total long-term debt.............................................. 92,788 200,591

Less: Current portion................................................. (6,139) (14,801)
---------- ----------
Long-term debt, net of current portion............................ $ 86,649 $ 185,790
---------- ----------
---------- ----------
</TABLE>

The Bank of America credit facilities are secured by all of the assets of
USAI. The Prudential Insurance notes are subordinated to the Bank of America
credit facilities. Among other financial covenants, the debt agreements specify
a minimum interest coverage ratio, a minimum fixed charge coverage ratio and a
maximum leverage ratio. The agreements also prohibit the payment of dividends,
or purchase or redemption of stock without the lenders' consent. The Company is
in compliance with these covenants at December 31, 1997 and 1998.

PRUDENTIAL INSURANCE COMPANY SUBORDINATED NOTES

In November 1996 and June 1998, USAI issued $30,000 and $15,000,
respectively, in subordinated notes to the Prudential Insurance Company of
America (Prudential Insurance). Interest is due quarterly at a rate of 10.34
percent and 10.09 percent, respectively, per annum. Principal payments are
scheduled as follows:

In connection with the issuance of the subordinated notes, USAI issued to
Prudential Insurance warrants to purchase 335,517 shares of the common stock of
USAI at a nominal cost. USAI has estimated the fair value of the warrants at
$900 ($600 recorded in 1996 and $300 in 1998) and reflected this amount as a
discount on the subordinated notes, with the offsetting credit to additional
paid-in

F-16
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

7. LONG-TERM DEBT: (CONTINUED)
capital. The discount is being amortized on a straight-line basis (which
approximates the interest method) over the life of the notes.

BANK OF AMERICA TERM LOANS

USAI has a syndicated term loan facility with Bank of America NT & SA, as
agent, and certain other financial institutions (Bank of America). In June 1998,
the term loan agreement was amended to increase the total principal amount of
the Term Loan from $30,000 to $115,000 of Term Loan A and Term Loan B. In
connection with the restructuring of the Company's debt, previously capitalized
fees and costs of $338, net of a tax benefit of $212, were recorded as an
Extraordinary Item--Loss on Extinguishment of Debt in 1998.

TERM LOAN A has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 2.125 percent, or approximately 7.6875 percent as of
December 31, 1998. Principal payments are scheduled as follows:

TERM LOAN A

<TABLE>
<S> <C>
June 1999 through March 2000....... $1,250 per quarter
June 2000 through March 2001....... $2,500 per quarter
June 2001 through March 2002....... $3,000 per quarter
June 2002 through March 2003....... $3,250 per quarter
June 2003 through March 2004....... $3,750 per quarter
</TABLE>

TERM LOAN B has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 2.5 percent, or approximately 8.0625 percent as of
December 31, 1998. Principal payments are scheduled as follows:

TERM LOAN B

<TABLE>
<S> <C>
June 1999 through December 2005.... $138 per quarter
March 2006......................... $51,288
</TABLE>

BANK OF AMERICA REVOLVING LOAN

In June 1998, the Company's revolving loan facility was increased to
$40,000. Subsequent to year end, this loan facility was increased to $60,000.
The revolving loan is to be paid in full by the revolving termination date in
December 2006; however, USAI may terminate revolving commitments at any time
provided that USAI pays, in full, all obligations. Interest on the unpaid
principal amount of each revolving loan is due quarterly. If the loan is a
floating rate loan, interest is payable at a rate per annum equal to the sum of
the alternate reference rate from time to time in effect plus 1 percent. If the
loan is a Eurodollar loan, interest is payable at a rate per annum equal to the
sum of the Eurodollar rate applicable to each interest period for such loan plus
1.125 percent. In addition, USAI

F-17
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

7. LONG-TERM DEBT: (CONTINUED)
pays fees of .5 percent per annum on the daily average of the unused amount of
the revolver. The interest rate on this debt as of December 31, 1998 was 8.875%.

The interest rate and commitment fee on unused amounts of the revolving loan
vary based on certain performance criteria established by USAI's banks. However,
the rates cannot exceed the Eurodollar rate plus 2.125%, the alternate reference
rate plus 1.125%, or, in relation to committment fees, 0.5% of the unused
portion of the revolver.

HARRIS TRUST & SAVINGS BANK DEMAND NOTE

In March 1998, Harris Trust & Savings Bank granted USAI a $9,000 revolving
line of credit guaranteed by a shareholder. Interest is due quarterly at a rate
per annum equal to the rate announced from time to time by Harris Trust &
Savings Bank as prime commercial rate or approximately 7.75% as of December 31,
1998. The demand note is due in full on June 30, 1999.

Subsequent to the end of year, the Company retired the above note and was
granted a $17,500 revolving line of credit also guaranteed by a shareholder. The
note is due on demand.

NOTES PAYABLE TO FORMER SHAREHOLDERS

In connection with the acquisition of certain companies, USAI subsidiaries
have issued from time to time notes payable to the selling shareholders, several
of whom remain employees and shareholders of subsidiaries. These notes payable
bear interest at rates from 6% to 10.65% per annum and have varying maturity
dates continuing to 2001.

OTHER DEBT

Other debt consists primarily of various borrowings from banks, generally
secured by equipment. Interest rates range from 7.9% to 10.0% and have varying
maturity dates through 2018.

SCHEDULED PAYMENTS OF LONG-TERM DEBT

Scheduled long-term debt maturities are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- ------------------------------------------------------------------------------
<S> <C>
1999.......................................................................... $ 14,801
2000.......................................................................... 12,756
2001.......................................................................... 14,202
2002.......................................................................... 13,949
2003.......................................................................... 21,621
Thereafter.................................................................... 124,193
--------------
201,522
Less: Unamortized discount.................................................... (931)
--------------
$ 200,591
--------------
--------------
</TABLE>

F-18
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

8. EMPLOYEE BENEFIT PLANS:

U.S. AGGREGATES INC. 401(K) PLAN

Prior to 1998, some of USAI's subsidiaries had 401(k) plans with various
vesting and discretionary contribution formulas. For the year ended December 31,
1997, the subsidiaries provided contributions of $255.

In 1998, USAI established a 401(k) plan that is funded by both employees and
at the discretion of USAI. This plan is administered by a third party.
Subsequently, the subsidiaries' 401(k) plans were merged into the USAI plan.

All full-time employees other than union employees are eligible to
participate in the U.S. Aggregates, Inc. 401(k) Plan. USAI may make
discretionary contributions each year. Participants increase their vested
interest in these discretionary contributions based upon years of employment in
which at least 1,000 hours are worked, and they become fully vested after seven
years. Participants are fully vested in their contributions. For the years ended
December 31, 1997 and 1998, USAI provided contributions of $255 and $0,
respectively.

SRM

SRM had a noncontributory defined benefit pension plan covering
substantially all of its employees. SRM's funding policy was to contribute
amounts that were actuarially determined to provide this plan with sufficient
assets to meet future benefit payment requirements.

In February 1997, a total distribution of plan assets to participants and
termination of the plan occurred. The Company has no ongoing liability related
to this plan.

SRM also maintains a benefit plan partially funded by key-man life insurance
for current and former key employees of SRM. Benefits under the plan are
discretionary and are payable over a ten-year period upon retirement at age 65
or upon death. As of December 31, 1997 and 1998, the present value of long-term
benefits payable are $79 and $76, respectively.

MULTIEMPLOYER PLANS

The Company participates in various multiemployer union pension plans
through two of its subsidiaries. Contributions to these plans in 1996, 1997 and
1998 were approximately $253, $292 and $586, respectively.

F-19
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

9. INCOME TAXES:

USAI files a consolidated federal tax return. Its subsidiaries file tax
returns in the states in which they conduct business.

The provision for income taxes for 1996, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal........................................... $ 888 $ 255 $ 884
State............................................. 146 -- 127
------------ ------------ ------------
1,034 255 1,011
------------ ------------ ------------
Deferred:
Federal........................................... 2,276 2,718 2,806
State............................................. 350 411 419
------------ ------------ ------------
2,626 3,129 3,225
------------ ------------ ------------
$ 3,660 $ 3,384 $ 4,236
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The provision for income taxes is reflected in the accompanying statements
of operations includes the following components:

<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Provision for income taxes.......................... $ 3,660 $ 3,384 $ 3,547
Provision for income taxes on discontinued
operations........................................ -- -- 901
Benefit for income taxes on extraordinary item...... -- -- (212)
------------ ------------ ------------
$ 3,660 $ 3,384 $ 4,236
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-20
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

9. INCOME TAXES: (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:

<TABLE>
<CAPTION>
1997 1998
-------------- --------------
<S> <C> <C>
Deferred tax assets;
Accruals and reserves....................................... $ 559 $ 308
Alternative minimum tax credit.............................. 1,541 2,424
Net operating loss.......................................... 1,554 3,922
Other....................................................... 154 1,211
-------------- --------------
Total deferred tax assets................................. 3,808 7,865
-------------- --------------
Deferred tax liabilities:
Depreciation and depletion.................................. (12,171) (24,147)
Book basis in fixed assets over tax basis................... (3,845) (27,782)
Other....................................................... (448) (1,249)
-------------- --------------
Total deferred tax liabilities............................ (16,464) (53,178)
-------------- --------------
Net deferred tax liability................................ $ (12,656) $ (45,313)
-------------- --------------
-------------- --------------
</TABLE>

The reconciliation of the statutory rate to the effective rate is as
follows:

<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Tax at federal statutory rate....................... $ 3,682 $ 3,234 $ 3,658
State taxes, net of federal benefit................. 357 358 366
Effect of tax rate increase to 35 percent........... -- -- 546
Depletion........................................... (432) (365) (491)
Other............................................... 53 157 157
------------ ------------ ------------
$ 3,660 $ 3,384 $ 4,236
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

At December 31, 1997 and 1998 the Company had net operating loss
carryforwards of $4,487 and $10,437 available to offset future taxable income.
These carryforwards expire through 2013. Alternative minimum tax credit
carryforwards of $1,541 and $2,424 at December 31, 1997 and 1998 have no
expiration date. Prior to 1998, the Company provided federal income taxes using
a rate of 34%. In the year ended December 31, 1998 this rate was increased to
35% and deferred taxes were adjusted accordingly.

10. COMMON STOCK

The Company has a stock purchase plan periodically made available to select
members of management. Under this formula plan, individuals are allowed to
purchase stock in the Company or its subsidiaries. The Company sold 50,600
shares of its common stock under this program in 1997. Also 50 shares of SRMHC
and 2,500 shares of WAHC common stock were sold under this program in 1998.
Shares issued under this program are generally sold for a combination of cash
and notes and are subject to vesting over a 6 year period. The vested and
unvested shares are subject to various call or

F-21
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

10. COMMON STOCK (CONTINUED)
put options upon termination. The repurchase price is at fair market value for
vested shares or original cost for unvested shares. The total number of shares
outstanding under this program are 50,600 (20,240 vested) for the Company, 3,857
(952 vested) for WAHC and 170 (67 vested) for SRM. Upon completion of the
Initial Public Offering contemplated, the employees shares in subsidiary stock
will be exchanged for stock of the Company, and the Company's and employees
rights with regard to vested shares will cease.

11. PREFERRED STOCK

There are 500,000 shares of non-voting preferred stock authorized with a .01
per share par value. At December 31, 1996, 1997 and 1998 there were 300,842
shares outstanding. The preferred stock has certain liquidation preferences and
a liquidation value of $100 per share. It entitles the holders to receive
cumulative dividends of 10% per annum of the sum of the liquidation value plus
all accumulated and unpaid dividends when and as declared. The net proceeds from
any public offering must be used to redeem these shares at their liquidation
value plus all accrued and unpaid dividends.

Effective November, 1996 the terms of the preferred stock agreement were
modified, allowing the holders to redeem their shares at liquidation value plus
all accrued and unpaid dividends at any date after January 2000, subject to the
approval of the Company's lenders. As of December 31, 1998 the Company's debt
agreements do not allow such a redemption.

The preferred stock is reflected as Mandatorily Redeemable Preferred Stock
on the balance sheet and is not considered a component of Shareholders' Equity.
Dividends are accreted at a compound rate of 10% per quarter. Accumulated
accreted dividends of $14,568 have been charged against retained earnings and
reflected in mandatory redeemable preferred stock through December 31, 1998.

Upon completion of the Initial Public Offering contemplated, this stock will
be redeemed.

12. INCOME PER SHARE

Basic income per share was calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share include the impact of outstanding Warrants, using the
treasury stock method. Net income per share for all periods presented and all
share data reflect the Company's proposed 35.1879 for 1 stock split effective at
the time of the Company's initial public offering of common stock.

F-22
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

12. INCOME PER SHARE (CONTINUED)
Income used in the per common share calculations are the same for basic and
diluted calculations. The following table reconciles the weighted average shares
outstanding used for basic and diluted income per share:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------
1996 1997 1998
------------------------------------- ------------------------------------- ----------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES
----------- --------- ------------- ----------- --------- ------------- ----------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations... $ 6,444 $ 5,505 $ 4,259
Less: Accretion of
Preferred stock
dividend.............. 2,959 3,712 4,097
Basic income available to
common stockholders..... 3,485 7,116,719 $ 0.49 1,793 7,166,193 $ 0.25 162 7,189,521
----- -----
----- -----
Effect of warrants........ 222,634 222,634 335,517
--------- ---------
Dilutive income available
to common
stockholders............ $ 3,485 7,339,353 $ 0.47 $ 1,793 7,388,827 $ 0.24 $ 162 7,525,038
----------- --------- ----- ----------- --------- ----- ----------- ---------
----------- --------- ----- ----------- --------- ----- ----------- ---------

Pro Forma
1998
-------------------------------------

(UNAUDITED)
PER SHARE PER SHARE
AMOUNT INCOME SHARES AMOUNT
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations... $ 4,825
Less: Accretion of
Preferred stock
dividend.............. 4,097
Basic income available to
common stockholders..... $ 0.02 728 7,189,521 $ 0.10
----- -----------
----- -----------
Effect of warrants........ 335,517
-----------
Dilutive income available
to common
stockholders............ $ 0.02 $ 728 7,525,038 $ 0.10
----- ----------- ----------- -----------
----- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------------
1998 1999
------------------------------------- -----------
(UNAUDITED) (UNAUDITED)
PER SHARE
INCOME SHARES AMOUNT INCOME
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Income (loss) from continuing operations............................ $ (2,033) $ (1,675)
Less: Accretion of preferred stock dividend....................... 987 1,089
Basic income available to common stockholders....................... (3,020) 7,189,521 $ (0.42) (2,764)
Effect of warrants.................................................. 335,517
Dilutive income available to common stockholders.................... $ (3,020) 7,412,155 $ (0.42) $ (2,764)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

PER SHARE
SHARES AMOUNT
----------- -----------
<S> <C> <C>
Income (loss) from continuing operations............................
Less: Accretion of preferred stock dividend.......................
Basic income available to common stockholders....................... 7,189,521 $ (0.38)
Effect of warrants.................................................. 335,517
Dilutive income available to common stockholders.................... 7,525,038 $ (0.38)
----------- -----------
----------- -----------
</TABLE>

13. CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject USAI to concentrations of
credit risk consist primarily of cash and trade receivables.

USAI places its cash on deposit with credit-worthy financial institutions,
in accounts or instruments with maturities of three months or less.
Concentration of credit risk with respect to trade receivables is limited due to
the large number of customers who service a large base of clients dispersed
across many different industries throughout the southeastern and southwestern
sections of the United States.

14. COMMITMENTS AND CONTINGENCIES:

USAI and its subsidiaries lease office facilities, trucks, equipment and
certain quarry sites under operating lease arrangements. Lease expense (other
than royalties) was $3,933 and $8,951 for the years

F-23
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

14. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
ended December 31, 1997 and 1998, respectively. Total future minimum rentals
under noncancelable operating leases as of December 31, 1998 are:

<TABLE>
<S> <C>
1999........................................................... $ 9,720
2000........................................................... 9,005
2001........................................................... 7,790
2002........................................................... 6,210
2003........................................................... 4,701
Thereafter..................................................... 5,488
----------
$ 42,914
----------
----------
</TABLE>

The Company operates several quarries on land owned entirely or in part by
unrelated third parties. Pursuant to related agreements, the Company pays
monthly royalties to the owner based on the quantity of aggregates sold. The
initial terms of these agreements range from 5 to 40 years and generally include
renewal options. The minimum royalty payments are included in the above table.
Royalty expenses recorded pursuant to these arrangements in 1996, 1997 and 1998
totaled 2,490, $2,725 and $4,748, respectively.

USAI and its subsidiaries are subject to various laws and regulations
relating to the protection of the environment. It is not possible to quantify
with certainty the potential impact of actions regarding environmental matters,
particularly any future remediation and other compliance efforts. In the opinion
of management, future compliance with existing environmental protection laws
will not have a material adverse effect on the financial condition or results of
operations of USAI.

USAI acquired SRM from Lohja, Inc. (Lohja) in 1994. In connection with the
purchase, USAI agreed to make semiannual payments to Lohja (the Lohja
obligation) through December 31, 1999, under an initial $3,760 obligation,
contingent upon the continuing operations and earnings of one of the Company's
quarries. In September 1998, the Company chose to terminate the balance of the
contract, and final payment of $1,149 was made in full satisfaction of the
contract.

The Company has a quarry under development in DeKalb County, Georgia which
is inactive but currently permitted as a dimensional stone quarry site. The
Company has filed a lawsuit against the county regarding a dispute over the
issuance of a blasting permit to start a crushed stone operation. The DeKalb
site development-stage activities to date have consisted primarily of site
preparation work such as road construction, the placement of scales and legal
fees. DeKalb has also made advance minimum royalty payments under a sublease
agreement to be applied against payments due upon the commencement of operations
at this site. Capitalized costs as of December 31, 1998 in connection with this
site were $1,524. Management feels that they will eventually open the quarry;
however, in the event that DeKalb is not permitted to conduct operations at this
quarry, the quarry will likely be leased to a dimensional stone producer.

USAI is subject to various legal proceedings and claims that have arisen in
the ordinary course of its business and have not been finally adjudicated. In
the opinion of management, the ultimate resolution of these issues would not
have a material adverse effect on USAI's financial condition or results of
operations.

F-24
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

15. RELATED-PARTY TRANSACTIONS:

During 1998, SRMHC issued 50 shares of SRMHC common stock to one management
member of SRMHC and received a note receivable of $57 for the issuance of such
shares. This note bears interest at 8 percent per annum and is due on December
31, 2003.

In 1998, WAHC issued 2,500 shares of WAHC common stock to several members of
WAHC management and received notes receivable of $250 for the issuance of these
shares. Additionally, a member of Valley Asphalt, Inc.'s (Valley) management
elected to purchase 625 shares of WAHC's outstanding common stock, in lieu of
amounts owed to them.

In October 1997, USAI issued 50,600 shares of stock for $220 to a member of
USAI's management. Additionally, during the same period, members of Valley's
management elected to purchase 1,875 shares of WAHC's outstanding common stock,
in lieu of amounts owed to them. Included in long-term debt is $1,449 and $1,682
as of December 31, 1997 and 1998 that is due to employees or shareholders who
were former owners of acquired companies.

Shares of the Company or its subsidiaries owned by members of management are
subject to repurchase agreements with the Company.

USAI pays an advisory fee to one of its major shareholders. Such fee
amounted to $150 for each of the years ended December 31, 1997 and 1998.

Also, USAI paid advisory fees of approximately $308 and $404 to a common and
preferred shareholder of USAI for each of the years ended December 31, 1997 and
1998, respectively. These fees were paid in connection with various financing
transactions undertaken by USAI during these years.

All related-party transactions are considered to be conducted at arm's
length.

16. SUBSEQUENT EVENTS:

OFFERING

The Company is in the process of filing a Registration Statement with the
Securities and Exchange Commission in connection with the offering by the
Company of shares of common stock for sale to the public.

F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Stockholders of Monroc, Inc.:

We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary (the
Company) for the year ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated results of operations and cash flows of
Monroc, Inc. and Subsidiary for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

Salt Lake City, Utah
March 31, 1998

F-26
<PAGE>
MONROC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1997 1997 1998
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net Sales............................................................ $ 61,383 $ 14,913 $ 12,307
Cost and Expenses:
Cost of sales...................................................... 52,584 12,868 10,156
General and administrative expenses................................ 6,925 1,611 1,699
Contribution to ESOP............................................... 800 200 200
------------ ------------- -------------
TOTAL COSTS AND EXPENSES............................................. 60,309 14,679 12,055
------------ ------------- -------------
OPERATING PROFIT (LOSS).............................................. 1,074 234 252
Other income (expense):
Interest, net...................................................... (1,013) (231) (390)
Gain (loss) on sale of real estate................................. (16) 4 --
------------ ------------- -------------
Total other expense................................................ (1,029) (227) (390)
------------ ------------- -------------
EARNINGS (LOSS) BEFORE INCOME TAXES.................................. 45 7 (138)
Income tax (benefit)................................................. (194) -- --
------------ ------------- -------------
NET EARNINGS (LOSS).................................................. $ 239 $ 7 $ (138)
------------ ------------- -------------
------------ ------------- -------------
Basic earnings (loss) per common share............................... $ 0.05 $ 0.00 $ (0.03)
Diluted earnings (loss) per common share............................. $ 0.05 $ 0.00 $ (0.03)
</TABLE>

The accompanying notes are an integral part of these statements.

F-27
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
---------------------- EXCESS
SHARES AMOUNT OF PAR VALUE
--------- ----------- ----------------
<S> <C> <C> <C>
Balance at January 1, 1997.............................................................. 4,467,000 $ 45 $ 24,482
Common stock issued................................................................... 47,200 -- 236
Purchase of stock warrants............................................................ -- -- --
Net earnings for the year............................................................. -- -- --
Reduction of ESOP note receivable..................................................... -- -- --
--------- ----------- ----------------
Balance at December 31, 1997............................................................ 4,514,200 45 24,718
Net loss for the period (unaudited)................................................... -- -- --
Reduction of ESOP note receivable (unaudited)......................................... -- -- --
--------- ----------- ----------------
Balance at March 31, 1998 (unaudited)................................................... 4,514,200 $ 45 $ 24,718
--------- ----------- ----------------
--------- ----------- ----------------

<CAPTION>
ESOP
ACCUMULATED NOTE
DEFICIT RECEIVABLE
------------ ----------
<S> <C> <C>
Balance at January 1, 1997.............................................................. $ (3,332) $ (2,524)
Common stock issued................................................................... -- --
Purchase of stock warrants............................................................ (208) --
Net earnings for the year............................................................. 239 --
Reduction of ESOP note receivable..................................................... -- 800
------------ ----------
Balance at December 31, 1997............................................................ (3,301) (1,724)
Net loss for the period (unaudited)................................................... (138) --
Reduction of ESOP note receivable (unaudited)......................................... -- 200
------------ ----------
Balance at March 31, 1998 (unaudited)................................................... $ (3,439) $ (1,524)
------------ ----------
------------ ----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-28
<PAGE>
MONROC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)............................................................. $ 239 $ 7 $ (138)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and amortization of property, plant, and equipment............... 2,303 569 704
Deferred income tax expense................................................... (194) -- --
Provision for contribution to ESOP and repayment of ESOP note receivable...... 800 200 200
Amortization of other assets.................................................. 57 18 13
Provision for discounts and doubtful accounts................................. 396 (1) (72)
Depletion of aggregate deposits............................................... 107 15 28
Loss on sale of property, plant and equipment, and land....................... 16 259 --
Changes in assets and liabilities:
Accounts receivable......................................................... 3,624 1,130 (150)
Note receivable from officer................................................ (140)
Costs and estimated earnings in excess of billings on uncompleted
contracts................................................................. (33) (151) 210
Inventories................................................................. (761) 128 (339)
Prepaid expenses............................................................ 140 547 (214)
Other assets................................................................ (25) --
Trade accounts payable...................................................... (1,747) (2,065) 847
Accrued liabilities......................................................... 870 267 415
Billings in excess of costs and estimated earnings on uncompleted
contracts................................................................. (529) 142 (119)
Deferred compensation....................................................... (31) (29) 14
------------ --------- ---------
Net cash provided by operating activities..................................... 5,117 1,011 1,399
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment................................... (4,357) (1,043) (4,774)
Proceeds from sale of property, plant, equipment, and land.................... 306 -- --
Additions to aggregate deposits............................................... (2,917) -- --
Addition to land.............................................................. (638) -- --
------------ --------- ---------
Net cash used in investing activities....................................... (7,606) (1,043) (4,774)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in line of credit..................................... $ 544 $ (1,237) $ (400)
Principal payments on long-term obligations................................... (1,656) (125) (308)
Issuance of long-term obligations............................................. 3,136 565 3,997
Purchase of stock warrants.................................................... (209) -- --
Issuance of common stock...................................................... 236 -- --
------------ --------- ---------
Net cash provided by (used in) financing activities......................... 2,051 (797) 3,289
------------ --------- ---------
Net decrease in cash and cash equivalents....................................... (438) (829) (86)
Cash and cash equivalents at beginning of period................................ 1,190 1,190 752
------------ --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 752 $ 361 $ 666
------------ --------- ---------
------------ --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................................... $ 981,672 $ 203 $ 401
</TABLE>

NONCASH INVESTING AND FINANCING ACTIVITIES--The Company acquired equipment under
capital lease obligations totaling $418 in 1997. Additionally, inventory valued
at a cost of $55 was transferred to the cost of land due to land reclamation
activities during 1997.

See notes to consolidated financial statements.

F-29
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS ACTIVITY -- Monroc, Inc. and subsidiary (the Company) operate in
one industry segment; the production and sale of sand and gravel products,
ready-mix concrete, prestress/precast concrete products, and accessories for the
building and construction industry, principally in Utah, Idaho, and Wyoming.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, Big Horn
Redi-Mix, Inc. (Big Horn). All significant intercompany accounts and
transactions have been eliminated in consolidation.

INTERIM FINANCIAL STATEMENTS -- The interim consolidated financial
statements for the three months ended March 31, 1998 and 1997, are unaudited. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
indicative of the results for the entire fiscal year.

PROPERTY, PLANT, AND EQUIPMENT AND AGGREGATE DEPOSITS -- Property, plant,
and equipment are depreciated over their estimated useful lives. Leased property
under capital leases is amortized over the lives of the respective leases or
over the service lives of the assets for those leases which substantially
transfer ownership. The straight-line method of depreciation is followed for
financial reporting purposes; however, straight-line and accelerated methods are
used for tax purposes. Depletion on aggregate deposits is calculated on a
units-of-production basis. The estimated lives used in determining depreciation
and amortization are:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Mobile equipment................................................... 5-12
Plant equipment.................................................... 5-12
Administrative equipment and buildings............................. 5-50
</TABLE>

OTHER ASSETS -- Other assets include miscellaneous amortizable assets
including financing commitment fees, which fees are being amortized on the
interest method over the term of the notes payable to banks. Other assets also
includes goodwill which is being amortized on the straight-line method over 20
years. Impairment of long-lived assets is determined by evaluating long-lived
assets on a periodic basis in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and of Long-Lived Assets to be Disposed Of,"
which was adopted on January 1, 1996. Assets determined to be impaired are
written down to their fair value. There were no significant impairments during
1997.

REVENUE RECOGNITION -- Revenues on contracts which are primarily for
prestress/precast concrete products are recognized on the
percentage-of-completion method. The percentage-of-completion is determined on
the units-of-production basis. Under this method, revenues, costs, and estimated
profits are recognized as individual units are completed.

F-30
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During 1997, the Company recognized revenue of approximately $6,349 on a
significant project which was completed during 1997.

Contract costs are included in cost of sales and include all direct labor
and benefits, materials unique to or installed in the project, and indirect cost
allocations, including employee benefits and construction equipment expense. As
long-term contracts extend over one or more years, revision in cost and earnings
estimates during the course of the work are reflected in the accounting period
in which the facts which require the revision become known. At the time a loss
on a contract becomes known, the entire amount of the estimated ultimate loss is
recognized in the financial statements.

Costs attributable to contract claims or disputes are recorded only when
realization is probable. The amounts are recorded at the lesser of actual costs
incurred or the amount expected to be realized.

Revenues on other product sales are recognized when the product is shipped.

INCOME TAXES -- The Company utilizes an asset and liability approach for
financial accounting and reporting for income taxes. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. An allowance against deferred tax assets is recorded when
it is more likely than not that such tax benefits will not be realized.

ESOP ACCOUNTING -- The Company established an Employee Stock Ownership
Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor
company. In conjunction with the acquisition, the Company loaned the ESOP $10
million, which the ESOP used to finance the acquisition of its interest in the
Company. Generally accepted accounting principles require that the note
receivable from the ESOP be included in the balance sheet as a reduction of
stockholders' equity.

The ESOP allocates the shares issued to the ESOP in 1986 to the participants
of the ESOP as described below. The Company makes contributions to the ESOP
which allow the ESOP to make the debt payments back to the Company on the note
receivable from the ESOP. Upon a commitment to release shares, ESOP
contributions by the Company are expensed and charged against income for
accounting purposes and are deductible for income tax purposes. Shares allocable
to participants for a given year are determined based on the ratio of the
current year's ESOP debt service payments (principal and interest) on the
original note from the Company as compared to the total remaining required debt
service on that loan. The contribution to the ESOP is a noncash expense of the
Company because the contributions are paid back to the Company and reduce the
note receivable from the ESOP. Consequently, no cash is consumed as a result of
the contributions. Furthermore, since the note receivable from the ESOP is
reduced by contributions, total stockholders' equity is not affected by the
contributions to the ESOP.

CASH EQUIVALENTS -- For financial statement purposes, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK -- A significant portion of the Company's
sales are to customers whose activities are related to the building and
construction industry. These customers are located

F-31
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
primarily in the intermountain west. The Company generally extends credit to
these customers and, therefore, collection of receivables is affected by the
economy of the building and construction industry. However, the Company closely
monitors extensions of credit.

ESTIMATES AND ASSUMPTIONS -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

RELATED PARTIES -- The Company made consulting fee payments of $200 during
the year ended December 31, 1997 to an entity with controlling ownership of the
Company (see Note 8). This payment is included in general and administrative
expenses in the consolidated statements of operations.

2. LONG-TERM OBLIGATIONS

The following is a schedule of equipment capital lease obligations at
December 31, 1997:

<TABLE>
<S> <C>
Year ending December 31:
1998............................................ $ 552,748
1999............................................ 489,657
2000............................................ 448,589
2001............................................ 356,722
----------
Total minimum lease payments...................... 1,847,716
Less amount representing interest................. 274,744
----------
Present value of minimum lease payments........... $1,572,972
----------
----------
</TABLE>

The Company has entered into several operating leases on certain equipment
expiring through 2003. Lease expense for the year ended December 31, 1997, was
$2,627. The following is a schedule of future minimum lease payments on the
Company's operating leases at December 31, 1997:

<TABLE>
<S> <C>
Year ending December 31:
1998.............................................................. $ 2,650
1999.............................................................. 2,146
2000.............................................................. 1,830
2001.............................................................. 1,360
2002.............................................................. 539
Thereafter........................................................ 97
---------
Total............................................................... $ 8,622
---------
---------
</TABLE>

Not included in the above schedule are production royalties which the
Company has agreed to pay on aggregate deposits mined on lease property. The
payments are based on a progressive scale ranging

F-32
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

2. LONG-TERM OBLIGATIONS (CONTINUED)
from $0.25 per ton in 1997 to $0.48 per ton in 2000. The annual expense for
these royalties was $117 for 1997.

3. INCOME TAXES

Income tax benefit for the year ended December 31, 1997 consists of the
following:

<TABLE>
<S> <C>
Current--Federal..................................................... $ --
Deferred--Federal.................................................... (194)
---------

Total................................................................ $ (194)
---------
---------
</TABLE>

At December 31, 1997, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $5,100, which expire through the year
2012. The net operating loss carryforwards are subject to limitation in any
given year upon the occurrence of certain events, including significant changes
in ownership.

The net change in the Company's valuation allowance for the deferred tax
assets was $(82) for 1997, principally due to changes in net operating loss
carry forward, excess tax depreciation, and other items.

F-33
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

3. INCOME TAXES (CONTINUED)

Reconciliation of income taxes computed at the federal statutory rate and
income tax expense (benefit) is as follows:

<TABLE>
<CAPTION>
1997
---------
<S> <C>
Income tax (benefit) computed at the
Federal statutory rate of 35%....................................................... $ 16
Net operating loss (utilized)......................................................... (82)
Percentage depletion.................................................................. (145)
Nondeductible expenses................................................................ 17
---------

Income tax (benefit).................................................................. $ (194)
---------
---------
</TABLE>

4. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

The Company has an ESOP covering substantially all full-time employees who
have at least one year of service. Under the terms of the ESOP, the Company
contributes amounts as determined by the Board of Directors. Shares of stock
allocated for a given year are further allocated to individual participants
based on the ratio of the participants' annual compensation to total
compensation for all participants. Shares allocated to participants vest over
six years.

In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock
representing a 68% interest, in exchange for a $10,000 promissory note. The
balance on the note receivable from the ESOP was $1,724 at December 31, 1997. As
of December 31, 1997, there were 1,164,075 shares of the Company's common stock
remaining in the ESOP with 920,569 shares allocated to participants' accounts
and 243,506 remaining to be allocated based on future contributions by the
Company. All shares in the ESOP are considered issued and outstanding for
purposes of calculating earnings per share. Participants vote the shares in
their accounts on any stockholder vote while the unallocated shares are voted by
the ESOP trustee under instructions from the Company's Board of Directors.

As of December 31, 1997, the fair value of the 243,506 shares still to be
allocated to participants' accounts was $2,465. The principal reductions on the
ESOP note were $800 for the year ended December 31, 1997 was shown as
contributions to the ESOP. The accumulated deficit at December 31, 1997 includes
$8,276 of contributions since 1986 to the ESOP, which have been used to reduce
principal on the ESOP note.

5. RETIREMENT PLANS

The Company makes payments to a defined contribution pension plan (Plan)
covering most full-time nonbargaining employees who have completed at least one
full year of service with the Company based on a percentage of the employee's
salary. Payments are made to the Plan as they accrue. The contribution for the
year ended December 31, 1997 was $523. There were also certain bargaining
employees who are covered under this Plan. The Company has no liability under
the Plan beyond the amounts contributed. The Company also makes payments to
various bargaining union trust funds, as negotiated under union contracts. The
contribution for the year ended December 31, 1997 was $286.

F-34
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

6. COMMITMENTS AND CONTINGENCIES

DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS -- In May 1996, the
Company amended the employment agreement with its former president and chief
executive officer (president). The amended agreement stipulates that the Company
will no longer accrue amounts towards the former president's deferred
compensation effective May 22, 1996. In addition, the amount accrued in the
former president's unfunded deferred compensation account will continue to earn
interest at 1% below the prime interest rate (7.5% at December 31, 1997). The
total accrued amount will be paid over a period equal to one and one-fourth
times the length of Company service of the president as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------------
<S> <C>
1998.................................................................................. $ 112
1999.................................................................................. 30
2000.................................................................................. 32
2001.................................................................................. 35
2002.................................................................................. 38
Thereafter............................................................................ 599
---------

Total................................................................................. $ 846
---------
---------
</TABLE>

The Company has entered into employment agreements with certain officers.
These agreements provide for annual compensation through July 1998 as determined
by the Board of Directors. The Board of Directors has approved annual
compensation of $255 for these officers as of December 31, 1997.

ENVIRONMENTAL MATTERS -- The Company is currently the owner of 9.9 acres
of land located in Murray, Utah that contains mining slag previously deposited
by the former owner. The slag contains certain heavy metals including lead and
arsenic that may have leached from the slag into the environment. This and
adjoining properties have been proposed by the Environmental Protection Agency
(EPA) for listing on the National Priorities List for cleanup of the lead slag
and potential groundwater contamination. Although the Company did not generate
the slag material, under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the current owner of a property may be liable for
cleanup costs. In such case, the Company would have a claim against the former
owner for its respective share of these costs. All the landholders and the City
of Murray entered, in May 1997, into an Agreement in Principle in which
landholders agreed to donate land for a roadway through the properties which
would be used as a depository for some of the hazardous wastes on the site. In
addition, the parties agreed to cooperate in the remediation efforts to be
conducted by the former owner. The parties are currently in negotiations
regarding a proposed draft, Remedial Design/ Remedial Action Consent Decree
("CD"). As proposed, the CD requires the Company to (i) contribute a certain
amount of its property for the roadway (approximately 1.8 acres with a book
value of about $19) as its share of the cleanup costs, (ii) participate in a
local improvement district for the installation of a curb, gutter, and sidewalks
along the proposed roadway (approximately a $30 assessment over a ten-year
period), and (iii) implement certain institutional controls. In return, the
Company will receive protection from making further contributions and a covenant
not to sue. Under the current

F-35
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
draft of the CD, the Company's obligations terminate upon sale of the property.
The Company's estimated cost to satisfy these requirements of the CD as outlined
above are immaterial.

On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of
approximately $1.9 million. The agreement is subject to the purchaser obtaining
necessary approvals. Pursuant to the agreement, the purchaser will assume the
Company's liabilities under the agreement in principle and the proposed consent
agreement described above including the dedication of the land for the roadway
and the participation in the improvement district. If the sale to the Boyer
Group does not occur, then the Company would be responsible for those costs.
Subject to certain conditions, the Company expects the sale of the Murray
property to close on or before January 1, 1999.

Prior to learning of the potential presence of lead in the slag from the
Murray site, the Company sold some of the slag for use in road base and railroad
fill. The Company has not sold any slag material from this site since 1988. The
Company may be liable for cleanup costs if it is determined that the lead from
this slag poses an environmental hazard. The Company has not received any notice
of government or private action on this matter. The potential cost to the
Company, if any, is not ascertainable at the present time because no action
currently is pending by any party and it is unknown whether any action will be
taken in the future. The Company's management believes that there are
economically reasonable methods of containing the slag should this become
necessary.

OTHER -- The Company is engaged in various lawsuits as plaintiff or
defendant arising in the normal course of business. In the opinion of
management, based upon advice of counsel, the ultimate outcome of these lawsuits
will not have a material impact on the Company's financial statements.

7. CAPITAL STOCK

EARNINGS (LOSS) PER SHARE -- Effective December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share", and retroactively restated its
earnings per share (EPS) for 1997 to conform with SFAS No. 128.

F-36
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

7. CAPITAL STOCK (CONTINUED)
Basic and diluted earnings per share are calculated as follows for the year
ended December 31, 1997:

<TABLE>
<CAPTION>
PER
AVERAGE SHARE
INCOME SHARES AMOUNT
----------- ---------- -----------
<S> <C> <C> <C>
Income........................................................ $ 239
-----

EPS basic:
Income available to common stockholders..................... 239 4,485,376 $ 0.05
----- -----
-----

Effect of dilutive securities--options and warrants........... 546,524
----------

EPS diluted:
Income available to common stockholders
with assumed conversions.................................. $ 239 5,031,900 $ 0.05
----- ---------- -----
----- ---------- -----
</TABLE>

Earnings per common share diluted are computed using the treasury stock
method.

8. STOCK OPTIONS AND WARRANTS

In 1997, the Company amended its 1994 stock option plan and increased the
shares available under the 1994 plan to 260,000. As of December 31, 1997, the
Company had granted stock options under the 1994 stock option plan to various
officers, directors, and employees of the Company covering the aggregate amount
of 119,600 shares of common stock.

In 1997, the Company amended its 1996 stock option plan and increased the
shares available under the 1996 plan to 600,000. As of December 31, 1997, the
Company had granted stock options under the 1996 stock option plan covering
296,000 shares of common stock. Of these, 136,000 options had vested as of
December 31, 1997. The remaining 160,000 options vest annually through July 2000
with 60,000 to vest in 1998 and 1999 with the remaining 40,000 to vest in 2000.

In conjunction with its initial public offering in 1994, the Company issued
60,000 warrants at $5.50 per share to various entities involved in helping the
Company go public. During 1997, 58,750 of these warrants were repurchased at a
cost of $209. As of December 31, 1997, none of the remaining 1,250 warrants had
been exercised.

On December 28, 1995, in connection with the issuance of 1,650,000 shares of
common stock, the Company issued a warrant to a single purchaser to purchase
1,500,000 shares of common stock at an exercise price of $6.25 per share. The
warrant was exercisable at the issuance date and expires in December 2000. As of
December 31, 1997, the warrant has not been exercised.

The Company accounts for stock-based compensation under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations under
which no compensation cost has been recognized because all options were issued
at fair value. During 1996, the Company adopted the

F-37
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

8. STOCK OPTIONS AND WARRANTS (CONTINUED)
disclosure provision of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed by FAS 123, the
Company's net earnings (loss) and earnings (loss) per share would be reduced to
the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1997
---------
<S> <C>
Net earnings (loss):
As reported......................................................................... $ 239
Pro Forma........................................................................... 161

Earnings (loss) per common share:
As reported--basic.................................................................. $ 0.05
Pro forma--basic.................................................................... 0.04

As reported--diluted................................................................ 0.05
Pro forma--diluted.................................................................. 0.03
</TABLE>

These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs related to
grants made before 1995. The fair value of the applicable options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for 1997: expected volatility of 57%,
risk-free interest rate of 5.18%, and expected life of .25 years (See Note 11).
The weighted average fair value of options granted during 1997 was $.70.

F-38
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

8. STOCK OPTIONS AND WARRANTS (CONTINUED)

Option pricing models require the input of highly subjective assumptions
including the expected stock price volatility. Also, the Company's employee
stock options have characteristics significantly different from those of traded
options and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and the resulting option values are
reasonable.

Information with respect to the Company's stock option plans at December 31,
1997 and changes for the year then ended is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
STOCK EXERCISE EXERCISE
OPTIONS PRICE PRICE
--------- ----------- -----------
<S> <C> <C> <C>
Outstanding at January 1, 1997............................. 367,600 $ 5.00-8.75 $ 5.95
Granted.................................................... 112,000 5.25-7.50 5.94
Canceled................................................... 16,800 5.00 5.00
Exercised.................................................. 47,200 5.00 5.00
---------

Outstanding at December 31, 1997........................... 415,600 $ 5.00-8.75 $ 6.11
---------
---------

Exercisable at December 31, 1997........................... 255,600 $ 5.00-7.50 $ 5.35
---------
---------
</TABLE>

Additional information about stock options outstanding and exercisable at
December 31, 1997 is summarized as follows:

OPTIONS OUTSTANDING

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING WEIGHTED-
CONTRACTUAL AVERAGE
NUMBER LIFE (YEARS) EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING (SEE NOTE 11) PRICE
- ------------------------------------------------------ ----------- --------------- -----------
<S> <C> <C> <C>
$5.00-$5.75........................................... 259,600 2.69 $ 5.25
6.60.................................................. 40,000 5.00 6.60
6.80.................................................. 20,000 5.00 6.80
7.50.................................................. 16,000 4.50 7.50
7.60.................................................. 40,000 5.00 7.60
8.75.................................................. 40,000 5.00 8.75
----------- -----

415,600 $ 6.11
----------- -----
----------- -----
</TABLE>

F-39
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

8. STOCK OPTIONS AND WARRANTS (CONTINUED)
OPTIONS EXERCISABLE

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
RANGE OF EXERCISE PRICES EXERCISABLE PRICE
- ---------------------------------------------------------------------- ----------- -----------

<S> <C> <C>
$5.00-$5.75........................................................... 239,600 $ 5.21
7.50.................................................................. 16,000 7.50
----------- -----

255,600 $ 5.35
----------- -----
----------- -----
</TABLE>

9. QUARTERLY FINANCIAL RESULTS (UNAUDITED)

Quarterly financial results for the year ended December 31, 1997 is as
follows:

<TABLE>
<CAPTION>
BASIC DILUTED
OPERATING NET EARNINGS EARNINGS
NET PROFIT EARNINGS (LOSS) (LOSS)
SALES (LOSS) (LOSS) PER SHARE PER SHARE
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1997
First quarter.......................................... $ 14,913 $ 234 $ 7 N/A N/A
Second quarter......................................... 16,352 804 764 $ 0.17 $ 0.15
Third quarter.......................................... 16,193 1,198 1,051 0.23 0.19
Fourth quarter......................................... 13,925 (1,162) (1,583) (0.35) (0.29)
--------- ----------- ----------- ----------- -----------

Total.................................................... $ 61,383 $ 1,074 $ 239 $ 0.05 $ 0.05
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
</TABLE>

Year end adjustments to accrued liabilities, accounts receivable, property,
and contract estimates made in the fourth quarter of 1997 had the effect of
decreasing net income by approximately $925 or $.25 per common share --
basic/$.18 per common share -- diluted. Additionally, the Company experienced
operating losses during the fourth quarter of 1997.

10. SUBSEQUENT EVENTS

On January 6, 1998, the Company acquired all the outstanding common stock of
Treasure Valley Concrete, Inc., an Idaho corporation, for $3,350 in cash and the
assumption of $1,141 of liabilities. Treasure Valley Concrete, Inc., with annual
revenues of approximately $7 million, is a producer of ready mix concrete,
serving the Boise, Idaho area. With the close of the transaction, Treasure
Valley Concrete becomes a wholly owned subsidiary of Monroc, Inc.

The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of January 29, 1998 and amended and restated as of March 4, 1998
(the Merger Agreement) with U.S. Aggregates, Inc., a Delaware corporation
(USAI), and Western Acquisition, Inc., a Delaware corporation and a subsidiary
of USAI (Sub), providing for the merger of Sub with and into the Company (the
Merger), with the Company continuing as the surviving corporation and a
subsidiary of USAI. Pursuant to the Merger Agreement, each outstanding share of
common stock, par value $.01 per share, of the Company (the Common Stock) will
be converted into the right to receive $10.771 per share in cash. In addition,
the Merger Agreement provides that each option or warrant to purchase

F-40
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

10. SUBSEQUENT EVENTS (CONTINUED)
shares of Common Stock will be canceled in consideration for the right to
receive in cash an amount equal to the number of shares subject to such option
or warrant multiplied by the difference between $10.771 and the exercise price
of such option or warrant, less any applicable tax withholdings.

The Merger is conditioned upon, among other things, the approval of the
stockholders of the Company, certain regulatory and governmental approvals and
other customary conditions. In connection with the proposed Merger, the Board of
Directors of the Company received a fairness opinion from SBC Warburg Dillion
Read Inc. to the effect that, as of the date of the opinion, the merger
consideration is fair to the stockholders of the Company from a financial point
of view.

11. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general purpose financial statements. This Statement requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS No. 130 may require the
Company to add disclosure to the financial statements about comprehensive
income.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which redefines how public business
enterprises report information about operating segments in annual financial
statements. It also establishes standards for related disclosures about products
and services, geographical areas, and major customers. SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier years is to be
restated. The adoption of SFAS No. 131 may result in additional disclosures
regarding the Company's segments.

******

F-41
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Monroc, Inc.

We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary, for the
year ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations, changes in
stockholders' equity and cash flows of Monroc, Inc. and Subsidiary, for the year
ended December 31, 1996 in conformity with generally accepted accounting
principles.

/s/ Grant Thornton LLP

Salt Lake City, Utah
February 11, 1997

F-42
<PAGE>
MONROC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
Net Sales....................................................................... $ 70,401
Cost and Expenses:
Cost of sales................................................................. 63,045
General and administrative expenses........................................... 5,941
Contribution to ESOP.......................................................... 800
Restructuring charges......................................................... 1,500
-----------
OPERATING PROFIT (LOSS)......................................................... (885)
Other income (expense):
Interest, net................................................................. (736)
Gain (loss) on sale of real estate............................................ 36
-----------
EARNINGS (LOSS) BEFORE INCOME TAXES............................................. (1,585)
Income taxes (benefit).......................................................... (217)
-----------
NET LOSS........................................................................ $ (1,368)
-----------
-----------
Loss per common share........................................................... $ (0.31)
Weighted average common shares outstanding...................................... 4,467,000
</TABLE>

The accompanying notes are an integral part of this statement.

F-43
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
---------------------- EXCESS OF ACCUMULATED ESOP NOTE
SHARES AMOUNT PAR VALUE DEFICIT RECEIVABLE
--------- ----------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ 4,467,000 $ 45 $ 24,482 $ (1,964) $ (3,325)
Reduction of ESOP note receivable............... -- -- -- -- 800
Net loss for the year........................... -- -- -- (1,368) --
--------- ----------- ---------- --------------- ----------
Balance at December 31, 1996...................... 4,467,000 45 24,482 (3,332) (2,525)
--------- ----------- ---------- --------------- ----------
--------- ----------- ---------- --------------- ----------
</TABLE>

The accompanying notes are an integral part of this statement.

F-44
<PAGE>
MONROC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................................... $ (1,368)
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation, depletion and amortization of property, plant and equipment and
other assets.................................................................... 2,377
Provision for contribution to ESOP and repayment of ESOP note receivable.......... 800
Amortization of other assets...................................................... 82
Provision for discounts and doubtful accounts, net................................ 537
Depletion of aggregate deposits................................................... 107
Gain on sale of property, plant and equipment..................................... (35)
Deferred income taxes............................................................. (218)
Restructuring charges............................................................. 1,500
Change in operating assets and liabilities:
Accounts receivable............................................................. (7,099)
Costs and estimated earnings in excess of bilings on uncompleted contracts...... (29)
Inventories..................................................................... (1,161)
Prepaid expenses................................................................ (216)
Other assets.................................................................... 518
Trade accounts payable.......................................................... 1,022
Accrued liabilities............................................................. 27
Billings in excess of costs and estimated earnings on uncompleted contracts..... 448
Deferred compensation........................................................... 19
-------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................................. (2,689)
-------
Cash flow from investing activities:
Additions to property, plant and equipment.......................................... (4,503)
Additions to aggregate deposits..................................................... (22)
Additions to land................................................................... (842)
Proceeds from sale of property, plant, equipment and land........................... 329
-------
NET CASH USED IN INVESTING ACTIVITIES............................................... (5,038)
-------
Cash flows from financing activities:
Net increase (decrease) in line of credit........................................... 5,268
Principal payments on long-term obligations......................................... (3,627)
Issuance of long-term obligations................................................... 769
-------
NET CASH PROVIDED BY FINANCING ACTIVITIES........................................... 2,410
-------
Net increase (decrease) in cash..................................................... (5,317)
Cash, beginning of year............................................................. 6,507
-------

CASH, END OF YEAR................................................................... $ 1,190
-------
-------
DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.......................................................................... $ 907
Taxes............................................................................. 32

NON CASH INVESTING AND FINANCING ACTIVITIES:
The Company acquired equipment under capital lease obligations totalling $1,424 in
1996.
</TABLE>

The accompanying notes are an integral part of this statement.

F-45
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.

1. BUSINESS ACTIVITY

Monroc, Inc. and Subsidiary (the Company), operate in one industry segment;
the production and sale of sand and gravel products, ready-mix concrete,
prestress/precast concrete products and accessories for the building and
construction industry, principally in Utah, Idaho, and Wyoming.

2. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Big Horn Redi-Mix, Inc. (Big Horn). Effective
December 1995, the Company merged Cody Concrete, Inc. (Cody Concrete), and
Powell Ready Mix, Inc. (Powell Ready Mix) with and into Big Horn with Big Horn
as the surviving corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.

3. INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method, except for sand and gravel which
uses the lower of average cost or market.

4. PROPERTY, PLANT AND EQUIPMENT AND AGGREGATE DEPOSITS

Property, plant and equipment are stated at cost. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives. Leased
property under capital leases is amortized over the lives of the respective
leases or over the service lives of the assets for those leases which
substantially transfer ownership. The straight-line method of depreciation is
followed for financial reporting purposes; however, straight-line and
accelerated methods are used for tax purposes. Depletion on aggregate deposits
is calculated on a units-of-production basis. The estimated lives used in
determining depreciation and amortization are:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Mobile equipment............................................................. 5-12
Plant equipment.............................................................. 5-12
Administrative equipment and buildings....................................... 5-50
</TABLE>

5. OTHER ASSETS

Other assets include miscellaneous amortizable assets including financing
commitment fees, which fees are being amortized on the interest method over the
term of the notes payable to banks. Other assets also includes goodwill which is
being amortized on the straight-line method over 20 years. The Company evaluates
its goodwill annually to determine potential impairment by comparing the
carrying value to the undiscounted estimated expected future cash flows of the
related asset.

F-46
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
6. REVENUE RECOGNITION

Revenues on contracts which are primarily for prestress/precast concrete
products are recognized on the percentage-of-competion method. The
percentage-of-completion is determined on the units-of-production basis. Under
this method, revenues, costs, and estimated profits are recognized as individual
units are completed. The amounts included in the accompanying balance sheets as
"costs and estimated earnings in excess of billings on uncompleted contracts"
represent revenues recognized in excess of amounts billed (underbillings) and
"billings in excess of costs and estimated earnings on uncompleted contracts"
represent billings in excess of revenues recognized (overbillings).

During 1996, the Company recognized revenue of approximately $15,600 on a
significant project which is scheduled to be completed during 1997. No single
project with revenues recognized in excess of 10% of total consolidated revenues
existed during 1995.

Contract costs include all direct labor and benefits, materials unique to or
installed in the project, and indirect cost allocations, including employee
benefits and construction equipment expense. As long-term contracts extend over
one or more years, revisions in cost and earnings estimates during the course of
the work are reflected in the accounting period in which the facts which require
the revision become known. At the time a loss on a contract becomes known, the
entire amount of the estimated ultimate loss is recognized in the financial
statements.

Costs attributable to contract claims or disputes are carried in the
accompanying balance sheets only when realization is probable. The amounts are
recorded at the lesser of actual costs incurred or the amount expected to be
realized.

Revenues on all other products are recognized when the product is shipped.

7. INCOME TAXES

The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities and are measured using enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.

8. ESOP ACCOUNTING

As described in Note D, the Company established an Employee Stock Ownership
Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor
company. In conjunction with the acquisition, the Company loaned the ESOP $10
million, which the ESOP used to finance the acquisition of its interest in the
Company. Generally accepted accounting principles require that the note
receivable from the ESOP be included in the balance sheet as a reduction of
stockholders' equity.

F-47
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company are expensed and charged against income for accounting purposes and are
deductible for income tax purposes. Shares allocable to participants for a given
year are determined based on the ratio of the current year's ESOP debt service
payments (principal and interest) on the original note from the Company as
compared to the total remaining required debt service on that loan. The
contribution to the ESOP is a noncash expense of the Company because the
contributions are paid back to the Company and reduce the note receivable from
the ESOP. Consequently, no cash is consumed as a result of the contributions.
Furthermore, since the note receivable from the ESOP is reduced by
contributions, total stockholders' equity is not affected by the contributions
to the ESOP.

9. CASH EQUIVALENTS

For financial statement purposes, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents.

10. CONCENTRATION OF CREDIT RISK

A significant portion of the Company's sales are to customers whose
activities are related to the building and construction industry. These
customers reside primarily in the intermountain west. The Company generally
extends credit to these customers and, therefore, collection of receivables is
affected by the economy of the building and construction industry. However, the
Company closely monitors extensions of credit.

The Company maintains cash and money market balances at several financial
institutions in the intermountain west. Accounts at each institution are insured
up to $100 by the Federal Deposit Insurance Corporation. Uninsured balances
aggregate to approximately $860 at December 31, 1996.

11. EARNINGS (LOSS) PER SHARE

Earnings (loss) per common and common equivalent share are computed by
dividing net earnings (loss) by the weighted average common shares outstanding
during each year. Common stock equivalents are antidilutive in the loss year and
are not included in the weighted average common shares outstanding.

12. ESTIMATES AND ASSUMPTIONS

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's cash, and short-term trade receivables
and payables approximate their fair values.

F-48
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE B--CONTRACTS IN PROCESS

Costs incurred to date, estimated earnings, and the related progress
billings are as follows:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Costs incurred to date............................................................. $ 20,418
Estimated earnings................................................................. 1,304
---------
Revenue recognized................................................................. 21,722

Less billings to date.............................................................. 22,230
---------
$ (508)
---------
---------
</TABLE>

The above are included in the accompanying balance sheet under the following
captions:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Costs and estimated earnings in excess of billings on uncompleted contracts $ 182

Billings in excess of costs and estimated earnings on uncompleted contracts (690)
---------
$ (508)
---------
---------
</TABLE>

Retainage on uncompleted contracts amounted to $870 at December 31, 1996.
All accounts receivable, including retainage, under contracts in process are
expected to be collected within one year.

F-49
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE C--INCOME TAXES

Income taxes (benefit) consist of the following:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Current-Federal....................................................................... $ --
Deferred-Federal...................................................................... (217)
---------
$ (217)
---------
---------
</TABLE>

The components of the Company's deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Deferred tax assets (liabilities)
Net operating loss carryforward................................................... $ 1,915
Deferred compensation............................................................. 243
Allowance for doubtful accounts................................................... 103
Accrued expenses.................................................................. 258
Inventory cost capitalization..................................................... 74
Other............................................................................. 11
Excess of tax depreciation and amortization....................................... (1,096)
Difference in assigned values and tax basis in purchase of subsidiaries........... (972)
Valuation allowance............................................................... (1,508)
---------
Net deferred tax liability.......................................................... $ (972)
---------
---------
</TABLE>

There were no deferred tax assets or income tax benefits recorded in the
financial statements for net deductible temporary differences or net operating
loss carryforwards due to the fact that the likelihood of realization of the
related tax benefits cannot be established. A deferred tax liability was
recognized upon the purchase of three subsidiary corporations during 1994. The
initial deferred liability was calculated on the differences between the
assigned values and tax bases of the assets and liabilities acquired in the
purchase.

At December 31, 1996, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $5,850, which expire through the year
2011. The net operating loss carryforwards are subject to limitation in any
given year upon the occurrence of certain events, including significant changes
in ownership.

F-50
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE C--INCOME TAXES (CONTINUED)
Reconciliation of income taxes computed at the federal statutory rate and
income tax expense (benefit) is as follows:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Income taxes (benefit) computed at the Federal statutory rate......................... $ (555)
Net operating loss (utilized) generated............................................... 402
Percentage depletion.................................................................. (89)
Alternative minimum tax............................................................... --
Nondeductible expenses................................................................ 33
All other, net........................................................................ (8)
---------
Income taxes (benefit)................................................................ $ (217)
---------
---------
</TABLE>

NOTE D--EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

The Company has an ESOP covering substantially all full-time employees who
have at least one year of service. Under the terms of the ESOP, the Company
contributes amounts as determined by the Board of Directors, except as discussed
below. Shares of stock allocated for a given year are further allocated to
individual participants based on the ratio of the participants' annual
compensation to total compensation for all participants. Shares allocated to
participants vest over six years.

In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock
representing a 68% interest, in exchange for a $10,000 promissory note. The
interest rate and payment terms of the note receivable were identical to those
of the Company's notes payable to banks, which were paid in full during 1993.
The balance on the note receivable from ESOP was $2,525 and at December 31,
1996.

The principal reduction on the ESOP note is $800 the year ended December 31,
1996 and is shown as contributions to the ESOP. The accumulated deficit at
December 31, 1996, includes $7,476 of contributions since 1986 to the ESOP,
which have been used to reduce principal on the ESOP note.

NOTE E--RETIREMENT PLANS

The Company makes payments to a defined contribution pension plan (Plan)
covering most full-time nonbargaining employees who have completed at least one
full year of service with the Company based on a percentage of the employee's
salary. Payments are made to the Plan as they accrue. The contributions for the
year ended December 31, 1996 was $481. There are also certain bargaining
employees who are covered under this Plan. The Company has no liability under
the Plan beyond the amounts contributed. The Company also makes payments to
various bargaining union trust funds, as negotiated under union contracts. The
contribution for the year ended December 31, 1996 was $334.

F-51
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE F--COMMITMENTS AND CONTINGENCIES

1. DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS

In May 1996, the Company amended the employment agreement with its former
president and chief executive officer (president). The amended agreement
stipulates that the Company will no longer accrue amounts towards the former
president's deferred compensation effective May 22, 1996. In addition, the
amount accrued in the former president's deferred compensation account will
continue to earn interest at 1% below the prime interest rate (7.25% at December
31, 1996). The total accrued amount plus interest will be paid over a period
equal to one and one-fourth times the length of Company service of the president
as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1997................................................................................. $ --
1998................................................................................. 33
1999................................................................................. 78
2000................................................................................. 78
2001................................................................................. 78
Thereafter........................................................................... 1,106
---------
$ 1,373
---------
---------
</TABLE>

Deferred compensation of $779 was accrued in this account as of December 31,
1996.

2. ENVIRONMENTAL MATTERS

The Company is currently the owner of certain property located in Murray,
Utah, which contains lead slag deposited by the former owner. The slag contains
heavy metals including lead and arsenic which may have leached from the slag
into the environment. This and adjoining properties have been proposed by the
Environmental Protection Agency (EPA) for listing on the National Priorities
List for cleanup of the lead slag, and potential groundwater contamination.
Although the Company did not generate the slag material, under the Comprehensive
Environmental Response, Compensation and Liability Act, the current owner of a
property may be liable for clean-up costs. In such case, the Company would have
a claim against the former owner for its respective share of these costs. The
Company has not been designated a Potentially Responsible Party by the EPA with
respect to cleanup of any waste at this site.

The Company has been participating in a study group with the EPA, the former
owner, Murray City and the other current landowners to develop a plan that would
result in the remediation of the problems described above. An agreement in
principal has been reached among all parties, and upon executing of a formal
understanding, the EPA will begin the process of preparing a consent agreement

F-52
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE F--COMMITMENTS AND CONTINGENCIES (CONTINUED)
in 1997. Cleanup will take several years to accomplish and involves a
combination of offsite disposal, redevelopment of the area including new road
construction, and on site treatment. Development of the land for commercial
purposes will be possible at the end of the process. The remediation plan calls
for the dedication of a certain amount of the Company's property for the
extension of a roadway in Murray City. Until approval of a consent agreement, it
is difficult to estimate the possible financial impact to the Company, if any.

Prior to learning of the potential presence of lead in the slag from this
site, the Company sold some of the slag for use in road base and railroad fill.
The Company may be liable for cleanup costs if it is determined that the lead
from this slag poses an environmental hazard to drinking water. The Company has
not received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at the present time.
The Company's management believes that there are economically reasonable methods
of containing the slag should this become necessary.

3. OPERATING LEASES

The Company has entered into several operating leases on certain equipment
expiring through 2002. Lease expense for the year ended December 31, 1996 was
$1,493. The following is a schedule of future minimum lease payments on the
Company's operating leases at December 31, 1996:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................. $ 2,888
1998............................................................................. 2,805
1999............................................................................. 2,263
2000............................................................................. 1,892
2001............................................................................. 1,430
Thereafter....................................................................... 842
---------
$ 12,120
---------
---------
</TABLE>

Not included in the above schedule are production royalties which the Company
has agreed to pay on aggregate deposits mined on leased property. The payments
are based on a progressive scale ranging from $0.25 per ton in 1997 to $0.31 per
ton in 2000.

4. OTHER

The Company is engaged in various lawsuits as plaintiff or defendant arising
in the normal course of business. In the opinion of management, based upon
advice of counsel, the ultimate outcome of these lawsuits will not have a
material impact on the Company's financial statements.

F-53
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE G--STOCK OPTIONS AND WARRANTS

Effective January 20, 1994, the Company adopted a stock option plan which
provides for the granting of stock options to purchase up to 200,000 shares of
common stock, subject to adjustment under certain circumstances. As of December
31, 1996, the Company had granted stock options under the Company's 1994 stock
option plan to various officers, directors and employees of the Company covering
the aggregate amount of 167,600 shares of common stock.

On May 22, 1996, the stockholders approved the Company's 1996 stock option
plan which provides for the granting of stock options to purchase up to 300,000
shares of common stock. As of December 31, 1996, the Company had granted stock
options under the 1996 stock option plan covering 200,000 shares of common
stock. Of these, 40,000 options vested immediately. The remaining 160,000
options vest at 40,000 annually through July 2000.

On December 28, 1995, in connection with the issuance of 1,650,000 shares of
common stock (Note L), the Company issued a warrant to a single purchaser to
purchase 1,500,000 shares of common stock at an exercise price of $6.25 per
share. The warrant vested immediately and expires in December 2000. As of
December 31, 1996, none of the warrants have been exercised.

During 1996 the Company adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). Therefore, the Company accounts for stock based compensation under APB
Opinion No. 25. "Accounting for Stock Issued to Employees," and related
Interpretations under which no compensation cost has been recognized. If the
Company had elected to recognize compensation expense based upon the fair value
at the grant date for awards under these plans consistent with the methodology
prescribed by FAS 123, the Company's net earnings (loss) and earnings (loss) per
share would be reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Net earnings (loss)
As reported....................................................................... $ (1,368)
Pro forma......................................................................... (1,566)
Earnings (loss) per common share
As reported....................................................................... $ (0.31)
Pro forma......................................................................... (0.35)
</TABLE>

These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs related to
grants made before 1995. The fair value of these options was estimated at the
date of grant using the modified Black-Scholes American option-pricing model
with the following weighted-average assumptions for 1996: expected volatility of
61%, risk-free interest rate of 6%, and expected life of 3.6 years for the
period. The weighted average fair value of options granted during 1996 was
$3.07.

F-54
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE G--STOCK OPTIONS AND WARRANTS (CONTINUED)
affect the fair value estimate. Management believes the best input assumptions
available were used to value the options and the resulting option values are
reasonable.

Information with respect to the Company's stock option plans at December 31,
1996, and changes for the three years then ended, is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
STOCK EXERCISE AVERAGE
OPTIONS PRICE EXERCISE PRICE
------------ ----------- ---------------
<S> <C> <C> <C>
Outstanding at January 1, 1994......................................... -- $ -- $ --
Granted.............................................................. 136,500 5.00 5.00
------------
Outstanding at December 31, 1994....................................... 136,500 5.00 5.00
Granted.............................................................. 20,100 5.00 5.00
------------
Outstanding at December 31, 1995....................................... 156,600 5.00 5.00
Granted.............................................................. 217,700 5.00-8.75 6.61
Canceled............................................................. 6,700 5.00-8.75 5.00
------------
Outstanding at December 31, 1996....................................... 367,600 5.00-8.75 5.95
------------ ----------- -----
------------ ----------- -----
Exercisable at December 31, 1996....................................... 207,600 $ 5.00-5.38 $ 5.01
------------ ----------- -----
------------ ----------- -----
</TABLE>

Additional information about stock options outstanding and exercisable at
December 31, 1996, is summarized as follows:

OPTIONS OUTSTANDING

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-
REMAINING AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE
- ----------------------------------------------- ----------- ---------------- ------------
<S> <C> <C> <C>
$5.00-5.75..................................... 247,600 3.1 years $ 5.13
6.60.......................................... 40,000 4.5 years 6.60
7.60.......................................... 40,000 4.5 years 7.60
8.75.......................................... 40,000 4.5 years 8.75
-----------
367,600
-----------
-----------
</TABLE>

OPTIONS EXERCISABLE

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
RANGE OF NUMBER EXERCISE
EXERCISE PRICES EXERCISABLE PRICE
- ----------------------------------------------- ----------- ----------------
<S> <C> <C> <C>
$5.00-5.38..................................... 207,600 $ 5.01
</TABLE>

F-55
<PAGE>
MONROC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 1996

(DOLLARS IN THOUSANDS)

NOTE H--QUARTERLY FINANCIAL RESULTS (UNAUDITED)

Quarterly financial results for the year ended December 31, 1996 is as
follows:

<TABLE>
<CAPTION>
EARNINGS
OPERATING NET EARNINGS (LOSS) PER
1996 NET SALES PROFIT (LOSS) (LOSS) COMMON SHARE
- ------------------------------------------------------------ --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
First quarter............................................... $ 9,204 $ (916) $ (1,041) $ (0.23)
Second quarter.............................................. 19,416 888 771 0.17
Third quarter............................................... 22,246 (459) (657) (0.15)
Fourth quarter.............................................. 19,535 (398) (441) (0.10)
--------- ----- ------------ ------
$ 70,401 $ (885) $ (1,368) $ (0.31)
--------- ----- ------------ ------
--------- ----- ------------ ------
</TABLE>

NOTE I--RESTRUCTURING CHARGES AND PLANT CLOSING

A change in control of the Company occurred in December 1995. The Company's
management has restructured the operations so that the Company can be more
responsive to the needs of the marketplace and improve operating efficiencies.
Due to these changes, the Company incurred certain restructuring charges
totaling $1,500 ($0.34 per share) during 1996. These one time restructuring
charges included: (i) the write-off of certain facilities and equipment
obsoleted by new operating strategies ($715); (ii) the closure of undersized and
unprofitable operations in Utah and Wyoming ($351); (iii) the payout remaining
on the Company's two-year employment agreement with its former president and
chief executive officer ($333); and (iv) costs associated with restructuring
management ($101).

F-56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

U.S. AGGREGATES, INC.

COMMON STOCK

[LOGO]

--------------

PROSPECTUS

, 1999
--------------

BT ALEX. BROWN
THE ROBINSON-HUMPHREY
COMPANY
SCHRODER & CO. INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION,
DATED , 1999

[LOGO]

U.S. AGGREGATES, INC.

COMMON STOCK

---------

This is the initial public offering of our common stock. The international
managers are offering shares outside the United States and Canada and the
U.S. underwriters are offering shares in the United States and Canada.

We have applied to have our common stock listed on the New York Stock
Exchange under the symbol " ."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 10.

-------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Public offering price............................................................ $ $
Underwriting discounts........................................................... $ $
Proceeds, before expenses, to U.S. Aggregates, Inc............................... $ $
</TABLE>

Certain of our stockholders have granted the international managers and the
U.S. underwriters the right to purchase up to shares to cover any
over-allotments.

--------------

BT ALEX. BROWN INTERNATIONAL

THE ROBINSON-HUMPHREY COMPANY

J. HENRY SCHRODER & CO. LIMITED

, 1999

[International Prospectus Alternative Cover Page]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

U.S. AGGREGATES, INC.

COMMON STOCK

[LOGO]

--------------

PROSPECTUS

, 1999
--------------

BT ALEX. BROWN INTERNATIONAL
THE ROBINSON-HUMPHREY
COMPANY
J. HENRY SCHRODER & CO. LIMITED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[International Prospectus Alternative Back Cover Page]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses, to be paid solely by the
Company, of the issuance and distribution of the securities being registered:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 41,700
NASD filing fee................................................... 15,500
New York Stock Exchange original listing fee...................... *
Blue Sky fees and expenses (including attorneys' fees and
expenses)....................................................... *
Printing expenses................................................. *
Accounting fees and expenses...................................... *
Transfer agent's fees and expenses................................ *
Legal fees and expenses........................................... *
Miscellaneous expenses............................................ *
---------
Total......................................................... $ *
---------
---------
</TABLE>

- ------------------------

* To be provided by Amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action or
suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorney's fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporation's best interests except that
no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director has actually and reasonably incurred.

Section 145 further provides that the indemnification provisions of Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office. The certificate of incorporation of the Company provides that, to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, no director of the Company shall be liable to the Company or its

II-1
<PAGE>
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the corporation of its stockholders.

Article V of the by-laws of the Company provides that any person who was or
is a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he or she is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the corporation to the fullest extent to which it is empowered to do so unless
prohibited from doing so by the General Corporation Law of the State of
Delaware, as may be amended against all expense, liability and loss (including
attorneys' fees actually and reasonably incurred by such person in connection
with such proceeding) and such indemnification shall continue as to an
indemnitee who has ceased to a be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators, provided that, such person shall be indemnified only (subject to
certain limited exceptions) in connection with a proceeding initiated by such
person only if such proceeding was authorized by the board of directors of the
corporation. The right to indemnification of such person shall be a contract
right and shall include the right to be paid expenses incurred in defending any
proceeding in advance of its final disposition.

Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, arising out of his or her status as such, whether or not the
corporation would otherwise have the power to indemnify him or her under Section
145.

Article V of the by-laws of the Company further provides that the Company
may purchase and maintain insurance on its own behalf and on behalf of any
person who is or was a director, officer, employee, fiduciary, or agent of the
Company or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, whether or not the corporation would have
the power to indemnify such person against such liability under Article V of its
by-laws. All of the directors and officers of the Company are covered by
insurance policies maintained and held in effect by the Company against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since May 15, 1996, the Company has sold and issued the following
unregistered securities:

(1) In June 1996, the Company sold 50,000 shares of Preferred Stock to
Golder, Thoma, Cressey, Rauner Fund IV, L.P. for a cash purchase price of
$5,000,000.00.

(2) In November 1996, the Company sold 810.5 shares of Common Stock to James
Harris for a purchase price of $8,105.00. Mr. Harris purchased the shares
with $8.11 cash and a promissory note for $8,096.89 due November 20,
2001.

(3) In November 1996, the Company sold 810.5 shares of Common Stock to
Michael Stone for a purchase price of $8,105.00. Mr. Stone purchased the
shares with $8.11 cash and a promissory note for $8,096.89 due November
20, 2001.

II-2
<PAGE>
(4) In November 1996, the Company sold 995 shares of Common Stock to Morris
Bishop, Jr. for a purchase price of $9,950.00. Mr. Bishop purchased the
shares with $9.95 cash and a promissory note for $9,940.05 due November
20, 2001.

(5) In November 1996, the Company issued Warrants to purchase 6,327 shares
of Common Stock (the "1996 Warrants") to The Prudential Insurance Company
of America ("Prudential") in connection with Prudential's purchase of
$30,000,000.00 principal amount of the Company's 10.34% Senior
Subordinated Notes due November 22, 2006 (the "1996 Notes"). Prudential
purchased the 1996 Warrants and the 1996 Notes for a purchase price of
$30,000,000.00.

(6) In October 1997, the Company sold 1,438 shares of Common Stock to Morris
Bishop, Jr. for a purchase price of $220,000.00. Mr. Bishop purchased the
shares with $14.38 cash and a demand note for $219,985.62.

(7) In June 1998, the Company issued Warrants to purchase 3,208 shares of
Common Stock (the "1998 Warrants") to Prudential in connection with
Prudential's purchase of $15,000,000.00 principal amount of the Company's
10.09% Senior Subordianted Notes due November 22, 2008 (the "1998
Notes"). Prudential purchased the 1998 Warrants and the 1998 Notes for a
purchase price of $15,000,000.00.

The above-described transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act as transactions
not involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<C> <S>
1.1 Form of U.S. Underwriting Agreement among the Company, the Selling Stockholders,
BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and J. Henry
Schroder & Co. Limited.

1.2 Form of International Underwriting Agreement among the Company, the Selling
Stockholders, BT Alex. Brown International, division of Bankers Trust
International PLC, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co.
Limited.*

3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994.

3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of
Capital of the Company dated as of January 14, 1994.

3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of February 24, 1994.

3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of November 21, 1996.

3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of June 3, 1998.

3.1 (vi) Form of Restated Certificate of Incorporation of the Company.*

3.2 (i) Restated By-laws of the Company.

3.2 (ii) Form of Restated By-laws of the Company.*

4.1 (i) Third Amended and Restated Credit Agreement dated as of June 5, 1998 by and among
the Company, various financial institutions and Bank of America National Trust and
Savings Association, individually and as agent.*

4.1 (ii) First Amendment to Third Amended and Restated Credit Agreement dated as of April
14, 1999 by and among the Company, various financial institutions and Bank of
America National Trust and Savings Association, individually and as agent.*
</TABLE>

II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)

(a) Exhibits.
<TABLE>
<C> <S>
4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the
Company, its subsidiaries and Bank of America National Trust and Savings
Association.*

4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and
between the Company and Bank of America National Trust and Savings Association.*

4.4 Amended and Restated Subsidiary Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp., Western Rock Products Corp., SRM Holdings
Corp., Southern Ready Mix, Inc., Monroc, Inc. and Bank of America National Trust
and Savings Association.*

4.5 Amended and Restated Shareholder Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp.'s stockholders, SRM Holdings Corp.'s
stockholders and Bank of America National Trust and Savings Association.*

4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries, various financial institutions and Bank of America National Trust
and Savings Association.*

4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998
by and between the Company and The Prudential Insurance Company of America.*

4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated
as of April 14, 1999 by and between the Company and The Prudential Insurance
Company of America.*

4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company
and The Prudential Insurance Company of America.*

4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries and The Prudential Insurance Company of America.*

4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by
and among the Company, the Company's stockholders and The Prudential Insurance
Company of America.*

4.9 (ii) First Amendment to Registration Rights and Stockholders' Agreement dated as of
June 5, 1998 by and among, the Company, the Company's stockholders and The
Prudential Insurance Company of America.*

4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The
Prudential Insurance Company of America.*

4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America.*

4.12 Letter Agreement dated as of April 15, 1999 by and among Golder, Thoma, Cressey,
Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America National
Trust and Savings Association, as Agent, The Prudential Insurance Company of
America and the Company.*

4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between
Harris Trust and Savings Bank and the Company.*

4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed
by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.*

5.1 Opinion and consent of Kirkland & Ellis.*
</TABLE>

II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)

(a) Exhibits.
<TABLE>
<C> <S>
10.1 Professional Services Agreement dated as of January 24, 1994 by and between the
Company and Golder, Thoma, Cressey, Rauner, Inc.

10.2 Equity Purchase Agreement dated as of January 24, 1994 between the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P.

10.3 Stockholders Agreement dated as of January 24, 1994 by and among the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein.

10.4 Stockholders Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.

10.5 Stockholders Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.

10.6 Stockholders Joinder Agreement dated as of October 31, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin.

10.7 Stockholders Joinder Agreement dated as of July 31, 1998 by and among the Company,
James A. Harris and James A. Harris Grantor Retained Annuity Trust.

10.8 Stockholders Joinder Agreement dated as of October 1, 1998 by and among the
Company, James A. Harris and The James A. Harris Charitable Remainder Unitrust.

10.9 Registration Rights Agreement dated as of January 24, 1994 by and among the
Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives
named therein.

10.10 Registration Rights Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.

10.11 Registration Rights Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.

10.12 Registration Rights Joinder Agreement dated as of October 31, 1994 by and among
the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin.

10.13 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.**

10.14 Senior Management Agreement dated as of May 10, 1994 by and between the Company
and James A. Harris.* **

10.15 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris.**

10.16 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.**

10.17 Senior Management Agreement dated as of May 10, 1994 by and between the Company
and Michael J. Stone.* **

10.18 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone.**

10.19 Senior Management Agreement dated as of August 5, 1994 by and between the Company
and Morris L. Bishop, Jr.* **

10.20 Senior Management Agreement dated as of October 1, 1997 by and between the Company
and Morris L. Bishop, Jr.**
</TABLE>

II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)

(a) Exhibits.
<TABLE>
<C> <S>
10.21 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.

10.22 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and James A. Harris.

10.23 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris. (Included as Exhibit B to exhibit 10.15)

10.24 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.

10.25 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and Michael J. Stone.

10.26 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone. (Included as Exhibit B to exhibit 10.18)

10.27 Executive Stock Pledge Agreement dated as of August 5, 1994 by and between the
Company and Morris L. Bishop, Jr.

10.28 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.43)

10.29 Executive Stock Pledge Agreement dated as of October 1, 1997 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.20)

10.30 Promissory Note dated as of January 24, 1994 by James A. Harris in favor of the
Company in the principal amount of $16,223.76.

10.31 Promissory Note dated as of May 10, 1994 by James A. Harris in favor of the
Company in the principal amount of $121,638.24.

10.32 Promissory Note dated as of November 20, 1996 by James A. Harris in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to exhibit
10.15)

10.33 Promissory Note dated as of January 24, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $10,809.18.

10.34 Promissory Note dated as of May 10, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $81,098.82.

10.35 Promissory Note dated as of November 20, 1996 by Michael J. Stone in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to Exhibit
10.18)

10.36 Promissory Note dated August 5, 1994 by Morris L. Bishop in favor of the Company
in the principal amount of $16,903.08.

10.37 Promissory Note dated November 20, 1996 by Morris L. Bishop in favor of the
Company in the principal amount of $9,940.05. (Included as Exhibit A to exhibit
10.43)

10.38 Demand Note dated October 1, 1997 by Morris L. Bishop in favor of the Company in
the principal amount of $219,985.62. (Included as an exhibit A to exhibit 20)

10.39 Employment Agreement dated as of January 24, 1994 by and between the Company and
James A. Harris.

10.40 Employment Agreement dated as of January 24, 1994 by and between the Company and
Michael J. Stone.
</TABLE>

II-6
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)

(a) Exhibits.
<TABLE>
<C> <S>
10.41 Employment Agreement dated as of August 5, 1994 by and between the Company and
Morris L. Bishop, Jr.

10.42(i) Agreement and Plan of Merger dated as of January 29, 1998 by and among the
Company, Western Acquisition, Inc. and Monroc, Inc.

10.42(ii) Amended and Restated Agreement and Plan of Merger dated as of March 4, 1998 by and
among the Company, Western Acquisition, Inc. and Monroc, Inc.

10.43 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr.

10.44 Stockholders Joinder Agreement dated as of December 31, 1997 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Jeanne T. Richey.*

10.45 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.*

10.46 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.*

10.47 Letter Agreement dated as of December 30, 1998 by and between the Company and
Edward A. Dougherty.*

11.1 Statement re computation of per share earnings.*

12.1 Statement re computation of ratios.*

21.1 Subsidiaries of the Company.*

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Deloitte & Touche LLP.

23.3 Consent of Grant Thornton LLP.

23.4 Consent of Kirkland & Ellis (Included in Exhibit 5.1)*

24.1 Powers of Attorney of Directors and Officers of the Company (Included on signature
page).

27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* To be filed by amendment.

** Management contract or compensatory plan or arrangement.

(b) Financial Statement Schedules.

All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the underwriter to
permit prompt delivery to each purchaser.

II-7
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-8
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on May 24, 1999.

U.S. AGGREGATES, INC.

By: /s/ JAMES A. HARRIS
-----------------------------------------
James A. Harris
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James A. Harris, Morris L. Bishop, Jr. and
Michael J. Stone, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this registration statement (and any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, for the Offering which this Registration Statement relates),
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

* * * *

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:

SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
Chief Executive Officer
/s/ JAMES A. HARRIS and Chairman of the
- ------------------------------ Board (principal May 24, 1999
James A. Harris executive officer)

Executive Vice President,
/s/ MICHAEL J. STONE Chief Financial Officer
- ------------------------------ and Director (principal May 24, 1999
Michael J. Stone financial and accounting
officer)

/s/ MORRIS L. BISHOP, JR.
- ------------------------------ President, Chief Operating May 24, 1999
Morris L. Bishop, Jr. Officer and Director

/s/ BRUCE V. RAUNER
- ------------------------------ Director May 24, 1999
Bruce V. Rauner

/s/ DAVID A. DONNINI
- ------------------------------ Director May 24, 1999
David A. Donnini

/s/ CHARLES R. PULLIN
- ------------------------------ Director May 24, 1999
Charles R. Pullin

/s/ EDWARD A. DOUGHERTY
- ------------------------------ Director May 24, 1999
Edward A. Dougherty

II-9
<PAGE>
EXHIBIT INDEX

3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994.

3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of
Capital of the Company dated as of January 14, 1994.

3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of February 24, 1994.

3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of November 21, 1996.

3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of June 3, 1998.

3.1 (vi) Form of Restated Certificate of Incorporation of the Company.*

3.2 (i) By-laws of the Company.

3.2 (ii) Form of Restated By-laws of the Company.*

4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the
Company, its subsidiaries and Bank of America National Trust and Savings
Association.*

4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and
between the Company and Bank of America National Trust and Savings Association.*

4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries, various financial institutions and Bank of America National Trust
and Savings Association.*

4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998
by and between the Company and The Prudential Insurance Company of America.*

4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated
as of April 14, 1999 by and between the Company and The Prudential Insurance
Company of America.*

4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company
and The Prudential Insurance Company of America.*
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4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries and The Prudential Insurance Company of America.*

4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by
and among the Company, the Company's stockholders and The Prudential Insurance
Company of America.*

4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The
Prudential Insurance Company of America.*

4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America.*

4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between
Harris Trust and Savings Bank and the Company.*

4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed
by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.*

5.1 Opinion and consent of Kirkland & Ellis.*

10.1 Professional Services Agreement dated as of January 24, 1994 by and between the
Company and Golder, Thoma, Cressey, Rauner, Inc.