<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 1-7427
VERITAS DGC INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3701 KIRBY DRIVE, SUITE #112
HOUSTON, TEXAS 77098
(Address of principal executive offices) (Zip Code)
(713) 512-8300
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares of Veritas DGC Inc.'s common stock (the "Common Stock"),
$.01 par value, outstanding at May 31, 1999 was 22,940,744 (including 1,505,595
Veritas Energy Services Inc. exchangeable shares which are identical to the
Common Stock in all material respects).
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<PAGE> 2
VERITAS DGC INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
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Page Number
-----------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income -
For the Three and Nine Months Ended April 30, 1999
and 1998 1
Consolidated Balance Sheets - April 30, 1999 and
July 31, 1998 2
Consolidated Statements of Cash Flows -
For the Nine Months Ended April 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERITAS DGC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 74,610 $ 122,810 $ 323,061 $ 388,565
COSTS AND EXPENSES:
Cost of services 49,630 75,381 223,156 249,438
Depreciation and amortization 17,415 14,385 51,999 39,849
Selling, general and administrative 4,525 5,405 13,582 14,198
Other expense (income):
Interest 3,553 2,009 9,156 6,061
Other (1,496) (1,009) (3,899) (2,047)
---------- ---------- ---------- ----------
Total costs and expenses 73,627 96,171 293,994 307,499
---------- ---------- ---------- ----------
Income before provision for income taxes and equity
in (earnings) loss of joint venture 983 26,639 29,067 81,066
Provision for income taxes 292 11,055 9,231 27,209
Equity in (earnings) loss of joint venture 186 (478) 273 (1,201)
---------- ---------- ---------- ----------
NET INCOME $ 505 $ 16,062 $ 19,563 $ 55,058
========== ========== ========== ==========
PER SHARE:
Earnings per common share $ .02 $ .71 $ .86 $ 2.44
========== ========== ========== ==========
Weighted average common shares 22,756 22,645 22,721 22,535
========== ========== ========== ==========
Earnings per common share - assuming dilution $ .02 $ .69 $ .85 $ 2.37
========== ========== ========== ==========
Weighted average common shares - assuming dilution 22,982 23,347 22,923 23,273
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
1
<PAGE> 4
VERITAS DGC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 77,862 $ 40,089
Restricted cash investments 294 186
Accounts and notes receivable (net of allowance for doubtful accounts: April $2,681;
July $1,248) 119,548 151,820
Materials and supplies inventory 4,000 4,106
Prepayments and other 9,693 16,290
Investments-available for sale 3,092
------------ ------------
Total current assets 214,489 212,491
Property and equipment 354,524 326,024
Less accumulated depreciation 192,804 151,104
------------ ------------
Property and equipment - net 161,720 174,920
Multi-client data library 119,200 51,143
Investment in and advances to joint venture 1,487 2,943
Goodwill (net of accumulated amortization: April $3,635; July $3,233) 2,253 2,655
Deferred tax asset 10,022 19,157
Long term notes receivable (net of allowance: $1,000) 3,696
Other assets 18,506 15,181
------------ ------------
Total $ 531,373 $ 478,490
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 255 $ 289
Accounts payable - trade 28,505 42,493
Accrued interest 744 2,234
Other accrued liabilities 52,046 50,753
Income taxes payable 10,682
------------ ------------
Total current liabilities 81,550 106,451
Non-current liabilities:
Long-term debt - less current maturities 135,074 75,272
Other non-current liabilities 5,293 5,071
------------ ------------
Total non-current liabilities 140,367 80,343
Stockholders' equity:
Preferred stock, $.01 par value; authorized: 1,000,000 shares; none issued
Common stock, $.01 par value; authorized: 40,000,000 shares; issued: 21,434,299 shares at
April and 21,278,653 shares at July (excluding Exchangeable Shares of 1,505,595
at April and 1,505,915 at July) 214 213
Additional paid-in capital 204,531 203,258
Accumulated comprehensive income
Accumulated earnings (from August 1, 1991 with respect to Digicon Inc.) 113,921 94,358
Cumulative foreign currency translation adjustment (5,087) (3,660)
Unrealized loss on investments-available for sale (837)
Unearned compensation (759) (746)
Treasury stock, at cost; 149,028 shares at April and 50,000 shares at July (2,527) (1,727)
------------ ------------
Total stockholders' equity 309,456 291,696
------------ ------------
Total $ 531,373 $ 478,490
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 5
VERITAS DGC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
April, 30
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 19,563 $ 55,058
Non-cash items included in net income:
Depreciation and amortization 51,999 39,849
Net loss on disposition of property and equipment 530 464
Equity in loss (earnings) of joint venture 273 (1,201)
Amortization of multi-client data library 1,104 460
Deferred taxes 10,154 (3,119)
Amortization of unearned compensation 318 62
Change in operating assets/liabilities:
Accounts and notes receivable 26,684 (22,574)
Materials and supplies inventory 106 (1,165)
Prepayments and other 8,007 (6,896)
Multi-client data library (67,955) (14,233)
Other (1,795) 1,111
Accounts payable - trade (19,204) 3,750
Accrued interest (1,490) (1,803)
Other accrued liabilities 381 18,708
Income taxes payable (11,737) 1,711
Other non-current liabilities 222 6,299
------------ ------------
Total cash provided by operating activities 17,160 76,481
FINANCING ACTIVITIES:
Payments of long-term debt (232) (339)
Borrowings from senior notes 60,000
Senior notes issue costs (1,882)
Net proceeds from sale of common stock 1,009 3,462
Purchase of treasury stock (2,859)
------------ ------------
Total cash provided by financing activities 56,036 3,123
INVESTING ACTIVITIES:
Increase in restricted cash investments (108) (21)
Decrease in investment in and advances to joint venture 1,183 230
Purchase of Time Seismic Exchange Ltd., net of cash received (704)
Purchase of property and equipment (34,651) (57,921)
Sale of property and equipment 284 53
------------ ------------
Total cash used by investing activities (33,996) (57,659)
Currency loss on foreign cash (1,427) (611)
------------ ------------
Change in cash and cash equivalents 37,773 21,334
Beginning cash and cash equivalents balance 40,089 71,177
------------ ------------
Ending cash and cash equivalents balance $ 77,862 $ 92,511
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 6
VERITAS DGC INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in property and equipment for accounts payable - trade $ 4,560 $ 2,443
Utilization of net operating loss carryforwards existing prior to the
quasi-reorganization resulting in an increase (decrease) in:
Deferred tax asset valuation allowance (1,019) (4,762)
Additional paid-in capital 1,019 4,762
Treasury stock issued for purchase of Time Seismic Exchange Ltd. 664
Treasury stock issued in lieu of cash for bonuses payable 974
Restricted stock issued for future services resulting in an increase in additional
paid-in capital and unearned compensation 42 594
Treasury stock issued for future services resulting in a increase (decrease) in
Additional paid-in-capital (144)
Unearned Compensation 289
Reclass accounts and notes receivable, net to long term notes receivable, net 3,696
Reclass accounts and notes receivable to investments-available for sale 3,510
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest -
Senior notes 10,026 3,656
Equipment purchase obligations 30 37
Other 590 277
Income taxes 9,994 6,200
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 7
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
Veritas DGC Inc. provides seismic data acquisition, data processing,
multi-client data sales and exploration and development information services to
the petroleum industry in selected markets worldwide. The accompanying
consolidated financial statements include the accounts of Veritas DGC Inc. and
all majority-owned domestic and foreign subsidiaries. Investments in a joint
venture are accounted for on the equity method. All material intercompany
balances and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission. All material adjustments
consisting only of normal recurring adjustments which, in the opinion of
management, are necessary for a fair statement of the results for the interim
periods, have been reflected. These interim financial statements should be read
in conjunction with the annual consolidated financial statements of Veritas DGC
Inc.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect 1) the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
2) the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATION OF PRIOR YEAR BALANCES
Certain prior year balances have been reclassified for consistent presentation.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which will supersede
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." It
will require Veritas DGC Inc. to disclose certain financial information in both
annual and interim reporting about "operating segments." Operating segments are
components of a company that are evaluated regularly by management in deciding
how to allocate its resources and in assessing its performance. The statement
also requires disclosure about the countries from which Veritas DGC Inc.
derives its revenues and in which it employs its long-lived assets. Major
customers will continue to be disclosed. Veritas DGC Inc. will be required to
implement this statement in its fiscal year 1999 annual financial statements.
Management has not completed its assessment of how the adoption of this
statement will affect its existing segment disclosures.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which will supersede the
disclosure requirements of SFAS No. 87, "Employers' Accounting for Pensions,"
SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." This
statement addresses disclosures only and will require Veritas DGC Inc. to
provide a reconciliation of the beginning and ending balances of the
5
<PAGE> 8
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
benefit obligation and the fair value of plan assets in addition to disclosures
already presented. Veritas DGC Inc. will be required to implement this
statement in its fiscal year 1999 annual financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard requires companies to record
derivative financial instruments on the balance sheet as assets or liabilities,
as appropriate, at fair value. Gains or losses resulting from changes in the
fair values of those derivatives are accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. Veritas DGC Inc. will
be required to implement this statement in its first quarter of fiscal year
2001. Veritas DGC Inc. believes that the implementation of this standard will
not have a material adverse effect on Veritas DGC Inc.'s consolidated financial
position, results of operations or liquidity.
2. INVESTMENT IN INDONESIAN JOINT VENTURE
Veritas DGC Inc. owns 80% of an Indonesian joint venture (P.T. Digicon Mega
Pratama). The joint venture is accounted for under the equity method due to
provisions in the joint venture agreement that give minority shareholders the
right to exercise control. Summarized financial information is as follows:
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Current assets $ 1,981 $ 2,740
Property and equipment, net 397 613
------------ ------------
Total assets $ 2,378 $ 3,353
============ ============
Current liabilities $ 891 $ 410
Advances from affiliates 12,664 13,847
Stockholders' deficit:
Common stock 2,576 2,576
Accumulated deficit (13,753) (13,480)
------------ ------------
Total stockholders' deficit (11,177) (10,904)
------------ ------------
Total liabilities and stockholders' deficit $ 2,378 $ 3,353
============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 1,123 $ 1,163 1,907 2,967
Cost and expenses:
Cost of services 1,220 612 1,834 1,855
Depreciation and amortization 84 61 254 219
Other (income) expense 5 12 92 (308)
------------ ------------ ------------ ------------
Total 1,309 685 2,180 1,766
------------ ------------ ------------ ------------
Net income (loss) $ (186) $ 478 $ (273) $ 1,201
============ ============ ============ ============
</TABLE>
6
<PAGE> 9
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
3. LONG-TERM DEBT
Veritas DGC Inc.'s long-term debt is as follows:
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Senior notes due October 2003, at 9 3/4% $ 135,000 $ 75,000
Equipment purchase obligations maturing through
September 2000, at a weighted average rate of
9.29% at January 31, 1999 329 561
------------ ------------
Total 135,329 75,561
Less current maturities 255 289
------------ ------------
Due after one year $ 135,074 $ 75,272
============ ============
</TABLE>
The senior notes are due in October 2003 with interest payable semi-annually at
9 3/4%. The senior notes are unsecured and are effectively subordinated to
secured debt of Veritas DGC Inc. with respect to the assets securing such debt
and to all debt of its subsidiaries whether secured or unsecured. The indenture
relating to the senior notes contains certain covenants which limit Veritas DGC
Inc.'s ability to, among other things, incur additional debt, pay dividends and
complete mergers, acquisitions and sales of assets. Upon a change in control of
Veritas DGC Inc., as defined in the indenture, the holders of the senior notes
have the right to require Veritas DGC Inc. to purchase all or a portion of such
holder's senior note at a price equal to 101% of the aggregate principal
amount. Veritas DGC Inc. has the right to redeem the senior notes, in whole or
part, on or after October 15, 2000. Under certain conditions, Veritas DGC Inc.
may redeem up to $35.0 million in aggregate principal amount of the senior
notes prior to October 15, 1999.
Veritas DGC Inc. maintains a revolving credit agreement due July 2001 with
commercial lenders that provides advances up to $50.0 million. Advances are
limited by a borrowing base and bear interest, at Veritas DGC Inc.'s election,
at LIBOR or prime rate (7 3/4% at April 30, 1999) plus a margin based on
certain ratios maintained by Veritas DGC Inc. Advances are secured by certain
accounts receivable for a limited amount. Covenants in the agreement limit,
among other things, Veritas DGC Inc.'s right to take certain actions, including
creating indebtedness. In addition, the agreement requires Veritas DGC Inc. to
maintain certain financial ratios. No advances were outstanding at April 30,
1999 and July 31, 1998 under the credit agreement.
Veritas DGC Inc.'s equipment purchase obligations represent installment loans
and capitalized lease obligations primarily related to computer and seismic
equipment.
7
<PAGE> 10
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
4. OTHER ACCRUED LIABILITIES
Other accrued liabilities include the following:
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Accrued payroll and benefits $ 7,564 $ 12,216
Deferred revenues $ 20,236 $ 19,196
</TABLE>
5. EMPLOYEE BENEFITS
In March 1999, Veritas DGC Inc. amended and restated its employee nonqualified
stock option plan to increase the number of authorized common shares that may
be issued under the plan to 3,954,550 shares.
In December 1998, Veritas DGC Inc. amended and restated its non-employee
director stock option plan. Options to purchase 5,000 shares will be granted to
each non-employee director every year and will vest 25% on the grant date and
25% on each anniversary over the following three years. All other major
provisions remain the same.
6. OTHER COSTS AND EXPENSES
Other costs and expenses consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $ (1,267) $ (1,263) $ (2,721) $ (3,403)
Net loss on disposition of property and equipment 211 31 530 464
Net foreign currency exchange (gains) losses (420) 222 (1,549) 1,076
Other (20) 1 (159) (184)
------------ ------------ ------------ ------------
Total $ (1,496) $ (1,009) $ (3,899) $ (2,047)
============ ============ ============ ============
</TABLE>
8
<PAGE> 11
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
7. EARNINGS PER COMMON SHARE
Earnings per common share and earnings per common share - assuming dilution are
computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net income $ 505 $ 16,062 $ 19,563 $ 55,058
========== ========== ========== ==========
Weighted average common shares 22,756 22,645 22,721 22,535
========== ========== ========== ==========
Earnings per common share $ .02 $ .71 $ .86 $ 2.44
========== ========== ========== ==========
Weighted average common shares - assuming dilution:
Weighted average common shares 22,756 22,645 22,721 22,535
Shares issuable from assumed conversion of:
Options 226 702 202 726
Warrants 12
---------- ---------- ---------- ----------
Total 22,982 23,347 22,923 23,273
========== ========== ========== ==========
Earnings per common share - assuming dilution $ .02 $ .69 $ .85 $ 2.37
========== ========== ========== ==========
</TABLE>
Exchangeable stock, which was issued in a business combination and may be
exchanged for Veritas DGC Inc. common stock, is included in both computations.
The following options to purchase common shares have been excluded from the
computation assuming dilution because the options' exercise prices exceeded the
average market price of the underlying common shares.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------------------- ----------------------------------------
1999 1998 1999 1998
------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Number of options 837,966 27,802 812,131 41,051
Exercise price range $12 5/16 - $56 1/2 $45 5/16 - $54 3/16 $16 5/16 - $56 1/2 $40 5/16 - $54 3/16
Expiring through March 2009 April 2008 November 2008 April 2008
</TABLE>
9
<PAGE> 12
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1999
8. COMPREHENSIVE INCOME
Effective August 1, 1998, Veritas DGC Inc. implemented SFAS No. 130, "Reporting
Comprehensive Income." This statement requires disclosure of comprehensive
income (changes in equity from non-owner sources), net of the related tax
effect. Veritas DGC Inc. will report comprehensive income and classifications
included in the accumulated balance on the consolidated statement of changes in
stockholders' equity. Veritas DGC Inc.'s sources of comprehensive income
include net income, unrealized loss on investments-available for sale, and
foreign currency translation adjustments.
The following sets forth Veritas DGC Inc.'s comprehensive income for the
periods presented:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income $ 505 $ 16,062 $ 19,563 $ 55,058
Unrealized loss on investments-available for sale (837) (837)
Foreign currency translation adjustments 1,826 949 (1,427) (740)
---------- ---------- ---------- ----------
Comprehensive income $ 1,494 $ 17,011 $ 17,299 $ 54,318
========== ========== ========== ==========
</TABLE>
9. UNREALIZED LOSS ON INVESTMENTS-AVAILABLE FOR SALE
In April 1999, Veritas DGC Inc exchanged a $4.7 million account receivable from
Miller Exploration Company (Miller), a publicly traded company, for a long term
note receivable paying 18% interest in $.01 common stock warrants, in advance,
at 6 month intervals. In addition, Veritas DGC Inc exchanged a $3.5 million
account receivable from Brigham Exploration Company (Brigham), a publicly
traded company, for 1,002,865 shares of Brigham common stock.
<TABLE>
<CAPTION>
April 30, 1999
--------------------------------------------------
Cost Unrealized Fair
Basis (Loss)/Gain Value
--------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Investments-Available for Sale:
Brigham common
Stock $ 3,510 $ (878) $ 2,632
Miller Warrants 419 41 460
--------------------------------------------------
$ 3,929 $ 837 $ 3,092
==================================================
</TABLE>
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. Veritas DGC Inc.'s actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain
factors which are more fully described in other reports filed with the
Securities and Exchange Commission and which include changes in market
conditions in the oil and gas industry as well as declines in prices of oil and
gas.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1999 COMPARED WITH THREE MONTHS ENDED APRIL 30,
1998
Revenues. Revenues decreased 39% from $122.8 million to $74.6 million during
the current quarter. Decreases occurred in most service groups as a result of
lower exploration and development spending attributable to lower oil and gas
prices.
Land and transition zone acquisition revenues decreased 48% from $54.1 million
to $28.1 million as a result of decreased demand and prices. The Company was
operating 7 crews at the end of the current quarter compared to 15 crews in the
prior year.
Marine acquisition revenues increased 13% from $15.6 million to $17.6 million.
The increase was primarily due to the added capacity of the Veritas Viking,
Veritas DGC Inc.'s new 3-D vessel that commenced operations in July 1998.
Data processing revenues decreased 18% from $23.4 million to $19.2 million. As
a result of the decline in the demand for land and transition zone acquisition
services, pricing is more competitive. The industry is still showing strong
demand for complex and computer intensive processing products such as pre-stack
time and depth migration.
Multi-client data library sales decreased 67%, from $29.7 million to $9.7
million due to a lower demand.
Cost of services. Cost of services decreased 34% from $75.4 million to $49.6
million relative to the decline in revenues. However, cost of services as a
percent of revenues increased from 61% to 67%. The reduction in operating
margins is attributable to a more competitive environment in the onshore
markets as a result of lower commodity prices.
Depreciation and Amortization. Depreciation and amortization expense increased
21% from $14.4 million to $17.4 million due to the large increase in capital
expenditures over the past two years.
Interest Expense. Interest expense increased from $2.0 million to $3.6 million
due to the addition of the $60.0 million senior notes discussed below at the
end of the first quarter in the current year.
Other Income. The increase in other income from $1.0 million to $1.5 million
primarily relates to net foreign currency exchange gains resulting from the
Canadian dollar strengthening against the U.S. dollar.
Income Taxes. Provision for income taxes decreased from $11.1 million to $.3
million as a result of Veritas DGC Inc.'s lower taxable income in the current
quarter. The decrease in the effective tax rate from 41% to 30% is primarily
attributable to the amounts recorded for differences between Veritas DGC Inc.'s
taxable income estimates and taxable income as reported on its tax return.
Equity in (earnings) loss. Equity in (earnings) loss is related to the
Indonesian joint venture. Decrease in marine acquisition surveys accounts for
the decreased profitability in the current quarter.
NINE MONTHS ENDED APRIL 30, 1999 COMPARED WITH NINE MONTHS ENDED APRIL 30, 1998
Revenues. Revenues decreased 17% from $388.6 million to $323.1 million during
the current nine months. Decreases occurred in most service groups as a result
on decreases in demand.
Land and transition zone acquisition revenues decreased 9% from $164.8 million
to $149.5 million as a result of decreased crew levels and the industry
downturn. Operations improved in the Middle East
11
<PAGE> 14
market during the second quarter; however, revenues decreased in other areas as
a result of decreased demand and prices.
Marine acquisition revenues increased 7% from $59.1 million to $63.0 million
despite disruptions caused by weather and the mobilization of vessels. The
increase was primarily due to capacity added by the Veritas Viking.
Data processing revenues decreased 6% from $68.5 million to $64.6 million.
Veritas DGC Inc. substantially upgraded its processing centers, including the
addition of a third NEC supercomputer in Singapore this year, to meet the
demand for complex and computer intensive processing products such as pre-stack
time and depth migration.
Multi-client data library sales decreased 52%, from $96.2 million to $46.0
million, primarily due to the higher level of data sales in the first quarter
of fiscal year 1998 related to a new data sales program in the Gulf of Mexico
and decreased demand, reflective of the industry downturn, in the second and
third quarters of the current year.
Cost of services. Cost of services decreased 11% from $249.4 million to $223.2
million relative to the decline in revenue, but increased as a percent of
revenues from 61% to 67%. The reduction in operating margins is mainly
attributable to a more competitive environment in the onshore markets, as a
result of lower commodity prices.
Depreciation and Amortization. Depreciation and amortization expense increased
31% from $39.8 million to $52.0 million due to the large increase in capital
expenditures over the past two years.
Interest Expense. Interest expense increased from $6.1 million to $9.2 million
due to the addition of the $60.0 million senior notes discussed below at the
end of the first quarter in the current year.
Other Income. The increase in other income from $2.0 million to $3.9 million
primarily relates to net foreign currency exchange gains resulting from the
Canadian dollar strengthening against the U.S. dollar. In the prior year,
Veritas DGC Inc. recognized losses as the U.S. dollar strengthened against the
Australian dollar.
Income Taxes. Provision for income taxes decreased from $27.2 million to $9.2
million as a result of Veritas DGC Inc.'s lower taxable income for the current
year. The decrease in the effective tax rate from 34% to 32% is primarily
attributable to the amounts recorded for differences between Veritas DGC Inc.'s
taxable income estimates and taxable income as reported on its tax return.
Equity in (earnings) loss. Equity in (earnings) loss is related to the
Indonesian joint venture. A decrease in marine acquisition surveys accounts for
the decreased profitability in the current year.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES
Veritas DGC Inc.'s internal sources of liquidity are cash, cash equivalents and
cash flow from operations. External sources include public and private
financing, the unutilized portion of a revolving credit facility, equipment
financing and trade credit.
In October 1996, Veritas DGC Inc. completed a $75.0 million public offering of
senior notes ("Series A Notes"), and in October 1998, completed a $60.0 million
private placement of senior notes ("Series B Notes"), both due in October 2003.
In March 1999, the Series B Notes were exchanged for notes ("Series C Notes")
with terms identical in all material respects to those of the Series A Notes.
This exchange was registered under the Securities Act of 1933, as amended. The
net proceeds from the Series C Notes will be used for general corporate
purposes, including capital expenditures and additions to Veritas DGC Inc.'s
data library as discussed below. The indentures relating to the senior notes
contain certain covenants, including covenants that limit Veritas DGC Inc.'s
ability to, among other things, incur additional debt, pay dividends, and
complete mergers, acquisitions and sales of assets. Veritas DGC Inc.
12
<PAGE> 15
is in compliance with all covenants of the indentures as of April 30, 1999.
Upon a change in control of Veritas DGC Inc., as defined in the indentures,
holders of the senior notes have the right to require Veritas DGC Inc. to
purchase all or a portion of such holder's senior note at a price equal to 101%
of the aggregate principal amount. Interest is payable semi-annually.
In July 1998, Veritas DGC Inc. obtained a new revolving credit facility due
July 2001 from commercial lenders that provides advances up to $50.0 million.
Advances are limited by a borrowing base and bear interest, at Veritas DGC
Inc.'s election, at LIBOR or prime rate plus a margin based on certain ratios
maintained by Veritas DGC Inc. Advances are secured by certain accounts
receivable for a limited amount. The borrowing base is well in excess of the
maximum commitment as of April 30, 1999. Covenants in the agreement limit,
among other things, Veritas DGC Inc.'s right to take certain actions, including
creating indebtedness. In addition, the agreement requires Veritas DGC Inc. to
maintain certain financial ratios. Veritas DGC Inc. is in compliance with all
covenants of the agreement, and there were no outstanding advances as of April
30, 1999.
Veritas DGC Inc. requires significant amounts of working capital to support its
operations and to fund capital spending and research and development programs.
Veritas DGC Inc.'s foreign operations require greater amounts of working
capital than similar domestic activities, as the average collection period for
foreign receivables is generally longer than for comparable domestic accounts.
In addition, receivables and payables denominated in foreign currencies are
subject to fluctuations in foreign money markets. Approximately 41% of revenues
for the nine months ended April 30, 1999 were attributable to Veritas DGC
Inc.'s foreign operations. Veritas DGC Inc. has also increased its
participation in multi-client data surveys and has significantly expanded its
multi-client data library. Because of the lead-time between survey execution
and sale, those multi-client data surveys which are not fully funded, generally
require greater amounts of working capital than contract work. Depending upon
the timing of future sales of the data and the collection of the proceeds from
such sales, Veritas DGC Inc.'s liquidity will be affected; however, Veritas DGC
Inc. believes that these non-exclusive surveys have good long-term sales,
earnings and cash flow potential.
Veritas DGC Inc.'s revised capital budget for fiscal 1999 is $78.8 million
which includes expenditures of $30.0 million to maintain or replace Veritas DGC
Inc.'s current operating equipment and $48.8 million to expand capacity.
Research and development costs are estimated at $8.1 million in fiscal 1999.
Veritas DGC Inc. will require substantial cash flow to continue operations on a
satisfactory basis, complete its capital expenditure and research and
development programs and meet its principal and interest obligations with
respect to outstanding indebtedness. However, Veritas DGC Inc.'s ability to
meet its obligations depends on its future performance, which, in turn, is
subject to general economic conditions, business and other factors beyond
Veritas DGC Inc.'s control. Since the end of the first quarter, many oil and
gas companies have announced annual budgets that are substantially lower than
previously anticipated. Key factors affecting future results will include
utilization levels for both land and marine crews and the level of data library
sales. The ability to forecast future earnings is more difficult as a result of
a substantial reduction in backlog ($152.4 million at April 30, 1999 compared
to $355.1 million at April 30, 1998). The continued deterioration in activity
levels and current industry outlook will result in a very difficult environment
for fiscal year 1999.
Management has undertaken certain initiatives in response to the current
industry downturn to preserve the financial strength and flexibility of Veritas
DGC Inc. Since September 1998, headcount has decreased from approximately 4,500
to 2,360 employees. Veritas DGC Inc. completed the decommissioning of the
multi-boat operation in the Gulf of Mexico in March 1999. All three vessels
were on short-term charters and have been returned to the vessel owners. In
order to reduce capital expenditures, the seismic equipment outfitting these
vessels has been installed on the second Viking class 3D vessel, which launched
in June 1999. Management continues to monitor discretionary capital
expenditures.
13
<PAGE> 16
Veritas DGC Inc. anticipates that cash and cash equivalents, cash flow from
operations, the unutilized portion of the revolving credit facility and
borrowings permitted under the indentures and revolving credit facility will
provide sufficient liquidity to fund these requirements through fiscal 1999. If
Veritas DGC Inc. is unable to generate sufficient cash flow from operations or
otherwise to comply with the terms of the revolving credit facility or the
indentures, it may be required to refinance all or a portion of its existing
debt or obtain additional financing. Veritas DGC Inc. cannot assure that it
would be able to obtain such refinancing or financing, or that any refinancing
or financing would result in a level of net proceeds required.
YEAR 2000
Year 2000 Issue. Some software applications, hardware, equipment and embedded
chip systems identify dates using only the last two digits of the year. These
products may be unable to distinguish between dates in the Year 2000 and dates
in the year 1900. That inability (referred to as the "Year 2000" issue), if not
addressed, could cause applications, equipment or systems to fail or provide
incorrect information after December 31, 1999, or when using dates after
December 31, 1999. This in turn could have an adverse effect on Veritas DGC
Inc., because it directly depends on its own applications, equipment and
systems and indirectly depends on those of other entities with which Veritas
DGC Inc. interacts.
Compliance Program. Veritas DGC Inc. has prepared a formal plan to address Year
2000 issues as they relate to Veritas DGC Inc.'s business and its operations.
In accordance with that plan, Veritas DGC Inc. has evaluated all internal
hardware and software used in its operations, including those used to support
Veritas DGC Inc.'s activities, such as seismic data acquisition and processing
equipment and accounting and payroll systems.
Veritas DGC Inc.'s State of Readiness. In the ordinary course of business,
Veritas DGC Inc. has replaced a significant amount of its hardware and software
with Year 2000 compliant systems. Veritas DGC Inc. has also identified all
external relationships, mainly suppliers and customers, and mailed each entity
an internally prepared questionnaire regarding Year 2000 issues. Responses
returned indicate a state of readiness and non-responses do not pertain to
critical systems. Currently, Veritas DGC Inc. estimates that it will complete
its plan, including remedial actions, by September 30, 1999.
Contingency Planning. As part of the Year 2000 project, Veritas DGC Inc. will
seek to determine which of its business activities may be vulnerable to a Year
2000 disruption. A replacement schedule has been prepared for its remaining
non-compliant systems. An ongoing monitoring program and contingency procedures
have been established in the event of unanticipated non-compliance problems.
Costs to Address Year 2000 Compliance Issues. Approximately $125,000 of costs
has been incurred. Veritas DGC Inc. is not aware of any additional material
contingencies or costs that will be incurred.
Risk of Non-Compliance. If implementation of the Year 2000 compliance program
is not successful, the major applications that pose the greatest Year 2000
risks for Veritas DGC Inc. are internal hardware and software used in its
operations. The potential problem, if the Year 2000 compliance program is not
successful, are disruptions of Veritas DGC Inc.'s revenue and customer and
vendor distributions. In addition, if the Year 2000 compliance program is not
successful, the potential exists that Veritas DGC Inc. may not be able to
perform its other financial and accounting functions.
While Veritas DGC Inc. believes that its Year 2000 project will substantially
reduce the risks associated with the Year 2000 issue, there can be no assurance
that it will be successful in completing each and every aspect of the project
on schedule, and if successful, that the project will produce the expected
results. Due to the general uncertainty inherent in the Year 2000 issues,
Veritas DGC Inc. cannot conclude that its failure or the failure of third
parties to achieve Year 2000 compliance will not adversely affect its financial
position, results of operations or cash flows.
14
<PAGE> 17
OTHER
Since Veritas DGC Inc.'s quasi-reorganization with respect to Digicon Inc. on
July 31, 1991, the tax benefits of net operating loss carryforwards existing at
the date of the quasi-reorganization have been recognized through a direct
addition to paid-in capital, when realization is more likely than not.
Additionally, the utilization of the net operating loss carryforwards existing
at the date of the quasi-reorganization is subject to certain limitations.
During the nine months ended April 30, 1999, Veritas DGC Inc. recognized $1.1
million related to these benefits, due to increased profitability of Veritas
DGC Inc.'s U.K. operations.
Veritas DGC Inc. maintains operations in Europe, which are predominately
conducted from its U.K. offices. Although the U.K. has not currently elected to
convert to the new "euro" currency, Veritas DGC Inc. does have transactions
with companies in countries that have adopted the new currency. Veritas DGC
Inc. has made a preliminary assessment and does not anticipate any material
effect to the consolidated financial statements as a result of the new
currency.
See Note 1 of Notes to Consolidated Financial Statements regarding new
accounting pronouncements not yet adopted.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 9, 1998 at the Annual Meeting of Stockholders of Veritas DGC Inc.,
stockholders voted to elect each of the ten directors nominated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For Against
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Clayton P. Cormier 17,761,286 36,212
- --------------------------------------------------------------------------------------------------------
Ralph M. Eeson 17,768,906 28,592
- --------------------------------------------------------------------------------------------------------
Lawrence C. Fichtner 17,770,131 27,367
- --------------------------------------------------------------------------------------------------------
James R. Gibbs 17,770,906 26,592
- --------------------------------------------------------------------------------------------------------
Steven J. Gilbert 12,507,171 5,290,327
- --------------------------------------------------------------------------------------------------------
Stephen J. Ludlow 17,770,706 26,792
- --------------------------------------------------------------------------------------------------------
Brian F. MacNeill 17,770,906 22,952
- --------------------------------------------------------------------------------------------------------
Jan Rask 17,769,800 27,698
- --------------------------------------------------------------------------------------------------------
David B. Robson 17,769,800 22,952
- --------------------------------------------------------------------------------------------------------
Jack C. Threet 17,760,886 36,612
- --------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS FILED WITH THIS REPORT:
Exhibit
-------
2) Combination Agreement between Digicon Inc. and Veritas Energy
Services Inc. dated as of May 10, 1996. (Refer to Exhibit 2.1
to Digicon Inc.'s Current Report on Form 8-K dated May 10,
1996.)
3-A) Restated Certificate of Incorporation with amendments of
Digicon Inc. dated August 30, 1996. (Refer to Exhibit 3.1 to
Veritas DGC Inc.'s Current Report on Form 8-K dated September
16, 1996.)
3-B) Certificate of Ownership and Merger of New Digicon Inc. and
Digicon Inc. (Refer to Exhibit 3-B to Digicon Inc.'s
Registration Statement No. 33-43873 dated November 12, 1991.)
3-C) By-laws of New Digicon Inc. dated June 24, 1991. (Refer to
Exhibit 3-C to Digicon Inc.'s Registration Statement No.
33-43873 dated November 12, 1991.)
4-A) Specimen certificate for Senior Notes. (Refer to Section 2.2
of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement
No. 333-12481 dated September 20, 1996.)
4-B) Form of Trust Indenture relating to the 9 3/4% Senior Notes
due 2003 of Veritas DGC Inc. between Veritas DGC Inc. and
Fleet National Bank, as trustee. (Refer to Exhibit 4-B to
Veritas DGC Inc.'s Registration Statement No. 333-12481 dated
September 20, 1996.)
4-C) Specimen Veritas DGC Inc. Common Stock certificate. (Refer to
Exhibit 4-C to Veritas DGC Inc.'s Form 10-K for the year
ended July 31, 1996.)
4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon
Shareholder Services, L.L.C. dated May 15, 1997. (Refer to
Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K
dated May 27, 1997.)
4-E) Form of Restricted Stock Grant Agreement. (Refer to Exhibit
4.8 to Veritas DGC Inc.'s Registration Statement No.
333-48953 dated March 31, 1998.)
4-F) Restricted Stock Plan. (Refer to Exhibit 4.1 to Veritas DGC
Inc.'s Registration Statement No. 333-57603 dated June 24,
1998.)
4-G) Key Contributor Incentive Plan as Amended and Restated dated
March 9, 1999. (Refer to Exhibit 4.9 to Veritas DGC Inc.'s
Registration Statement No. 333-74305 dated March 12, 1999.)
4-H) Purchase Agreement relating to the 9 3/4% Senior Notes due
2003, Series B of Veritas DGC Inc. between Veritas DGC Inc.
and Warburg Dillon Read L.L.C. dated October 23, 1998. (Refer
to Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form
8-K dated November 12, 1998.)
4-I) Registration Rights Agreement relating to the 9 3/4% Senior
Notes due 2003, Series B of Veritas DGC Inc. between Veritas
DGC Inc. and Warburg Dillon Read L.L.C. dated October 28,
1998. (Refer to Exhibit 4.2 to Veritas DGC Inc.'s Current
Report on Form 8-K dated November 12, 1998.)
4-J) Indenture relating to the 9 3/4% Senior Notes due 2003,
Series B and Series C of Veritas DGC Inc. between Veritas DGC
Inc. and State Street Bank and Trust Company dated October
28, 1998. (Refer to Exhibit 4.3 to Veritas DGC Inc.'s Current
Report on Form 8-K dated November 12, 1998.)
4-K) Specimen of certificate for Senior Notes Series C.
9) Voting and Exchange Trust Agreement among Digicon Inc.,
Veritas Energy Services Inc. and the R-M Trust Company dated
August 30, 1996. (Refer to Exhibit 9.1 to Veritas DGC Inc.'s
Current Report on Form 8-K dated September 16, 1996.)
10-A) Support Agreement between Digicon Inc. and Veritas Energy
Services Inc. dated August 30, 1996. (Refer to Exhibit 10.1
to Veritas DGC Inc.'s Current Report on Form 8-K dated August
30, 1996.)
16
<PAGE> 19
10-B) Second Amended and Restated 1992 Non-Employee Director Stock
Option Plan as Amended and Restated dated December 9, 1998.
(Refer to Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for
the quarter ended October 31, 1998.)
10-C) Fourth Amended and Restated 1992 Employee Nonqualified Stock
Option Plan as amended and restated dated March 9, 1999.
(Refer to Exhibit 4.6 to Veritas DGC Inc.'s Registration
Statement No. 333-74305 dated March 12, 1999.)
10-D) 1997 Employee Stock Purchase Plan. (Refer to Exhibit 4.1 to
Veritas DGC Inc.'s Registration Statement No. 333-38377 dated
October 21, 1997.)
10-E) Restricted Stock Agreement between Veritas DGC Inc. and
Anthony Tripodo dated April 1, 1997. (Refer to Exhibit 10-O
to Veritas DGC Inc.'s Form 10-K for the year ended July 31,
1997.)
10-F) Employment Agreement executed by David B. Robson. (Refer to
Exhibit 10-L to Veritas DGC Inc.'s Form 10-K for the year
ended July 31, 1997.)
10-G) Employment Agreement executed by Stephen J. Ludlow. (Refer to
Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter
ended April 30, 1997.)
10-H) Employment Agreement executed by Lawrence C. Fichtner. (Refer
to Exhibit 10-M to Veritas DGC Inc.'s Form 10-K for the year
ended July 31, 1997.)
10-I) Employment Agreement executed by Anthony Tripodo. (Refer to
Exhibit 10-I to Veritas DGC Inc.'s Form 10-Q for the quarter
ended April 30, 1997.)
10-J) Employment Agreement executed by Rene M.J. VandenBrand.
(Refer to Exhibit 10-N to Veritas DGC Inc.'s Form 10-K for
the year ended July 31, 1997.)
10-K) Credit Agreement among Veritas DGC Inc., as borrower, and
Bank One, Texas, N.A., as issuing bank, as a bank and as
agent for the banks, and the banks named therein dated July
27, 1998. (Refer to Exhibit 10-K to Veritas DGC Inc.'s Form
10-K for the year ended July 31, 1998.)
10-L) First Amendment to Credit Agreement among Veritas DGC Inc.,
as borrower, and Bank One, Texas, N.A., as issuing bank, as a
bank and as agent for the banks, and the banks named therein
dated October 23, 1998. (Refer to Exhibit 10-L to Veritas DGC
Inc.'s Form 10-Q for the quarter ended October 31, 1998.)
10-M) Second Amendment to Credit Agreement among Veritas DGC Inc.,
as borrower, and Bank One, Texas, N.A., as issuing bank, as a
bank and as agent for the banks, and the banks named therein
dated November 20, 1998. (Refer to Exhibit 10-M to Veritas
DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998.)
*27) Financial Data Schedule
* Filed herewith
b) REPORTS ON FORM 8-K
Veritas DGC Inc. filed a Form 8-K on November 12, 1998 with respect to its
$60.0 million of 93/4% Senior Notes due 2003, Series B to give notice of
unregistered offerings under Rule 135C.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned; thereunto duly authorized, on the 14th day of June, 1999.
VERITAS DGC INC.
By: /s/ David B. Robson
--------------------------------------
DAVID B. ROBSON
Chairman of the Board and Chief
Executive Officer
/s/ Anthony Tripodo
--------------------------------------
ANTHONY TRIPODO
Executive Vice President, Chief
Financial Officer and Treasurer
18
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1999
<PERIOD-END> APR-30-1999
<CASH> 294
<SECURITIES> 0
<RECEIVABLES> 119,548
<ALLOWANCES> 2,681
<INVENTORY> 4,000
<CURRENT-ASSETS> 214,489
<PP&E> 354,524
<DEPRECIATION> 192,804
<TOTAL-ASSETS> 531,373
<CURRENT-LIABILITIES> 81,550
<BONDS> 135,074
0
0
<COMMON> 214
<OTHER-SE> 309,242
<TOTAL-LIABILITY-AND-EQUITY> 531,373
<SALES> 0
<TOTAL-REVENUES> 323,061
<CGS> 0
<TOTAL-COSTS> 223,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,156
<INCOME-PRETAX> 29,067
<INCOME-TAX> 9,231
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,563
<EPS-BASIC> .86
<EPS-DILUTED> .85
</TABLE>
