<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 JANUARY 31, 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)
<TABLE>
<S> <C>
DELAWARE 76-0343152
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
3701 KIRBY DRIVE, SUITE #112
HOUSTON, TEXAS 77098
(Address of principal executive offices) (Zip Code)
</TABLE>
(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 February 28, 1999 was 22,885,664 (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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<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income -
For the Three and Six Months Ended January 31, 1999 and 1998 1
Consolidated Balance Sheets - January 31, 1999 and July 31, 1998 2
Consolidated Statements of Cash Flows -
For the Six Months Ended January 31, 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
</TABLE>
<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 Six Months Ended
January 31, January 31,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 101,652 $ 123,569 $ 248,451 $ 265,755
COSTS AND EXPENSES:
Cost of services 70,015 80,804 173,526 174,057
Depreciation and amortization 17,734 12,950 34,584 25,464
Selling, general and administrative 4,501 4,254 9,057 8,793
Other expense (income):
Interest 3,551 2,018 5,603 4,052
Other (2,630) (730) (2,403) (1,038)
--------- --------- --------- ---------
Total costs and expenses 93,171 99,296 220,367 211,328
--------- --------- --------- ---------
Income before provision for income taxes and equity
in (earnings) loss of joint venture 8,481 24,273 28,084 54,427
Provision for income taxes 3,057 6,505 8,939 16,154
Equity in (earnings) loss of joint venture (12) 91 87 (723)
--------- --------- --------- ---------
NET INCOME $ 5,436 $ 17,677 $ 19,058 $ 38,996
========= ========= ========= =========
PER SHARE:
Earnings per common share $ .24 $ .79 $ .84 $ 1.74
========= ========= ========= =========
Weighted average common shares 22,712 22,513 22,704 22,473
========= ========= ========= =========
Earnings per common share - assuming dilution $ .24 $ .76 $ .83 $ 1.68
========= ========= ========= =========
Weighted average common shares - assuming dilution 22,830 23,214 22,852 23,203
========= ========= ========= =========
</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>
January 31, July 31,
1999 1998
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 75,056 $ 40,089
Restricted cash investments 280 186
Accounts and notes receivable (net of allowance for doubtful accounts:
January $3,412; July $1,248) 165,448 151,820
Materials and supplies inventory 3,967 4,106
Prepayments and other 8,711 16,290
--------- ---------
Total current assets 253,462 212,491
Property and equipment 354,656 326,024
Less accumulated depreciation 183,271 151,104
--------- ---------
Property and equipment - net 171,385 174,920
Multi-client data library 94,812 51,143
Investment in and advances to joint venture 1,673 2,943
Goodwill (net of accumulated amortization: January $3,485; July $3,233) 2,403 2,655
Deferred tax asset 19,687 19,157
Other assets 16,459 15,181
--------- ---------
Total $ 559,881 $ 478,490
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 280 $ 289
Accounts payable - trade 30,086 42,493
Accrued interest 3,780 2,234
Other accrued liabilities 75,768 50,753
Income taxes payable 131 10,682
--------- ---------
Total current liabilities 110,045 106,451
Non-current liabilities:
Long-term debt - less current maturities 135,135 75,272
Other non-current liabilities 5,020 5,071
--------- ---------
Total non-current liabilities 140,155 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: 21,380,069 shares at
January and 21,278,653 shares at July (excluding Exchangeable Shares of 1,505,595
at January and 1,505,915 at July) 214 213
Additional paid-in capital 206,460 203,258
Accumulated earnings (from August 1, 1991 with respect to Digicon Inc.) 113,416 94,358
Accumulated other comprehensive loss - cumulative foreign currency translation adjustment (6,913) (3,660)
Less: Unearned compensation (620) (746)
Less: Treasury stock, at cost; 121,143 shares at January and 50,000 shares at July (2,876) (1,727)
--------- ---------
Total stockholders' equity 309,681 291,696
--------- ---------
Total $ 559,881 $ 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>
Six Months Ended
January 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 19,058 $ 38,996
Non-cash items included in net income:
Depreciation and amortization 34,584 25,464
Net loss on disposition of property and equipment 319 433
Equity in loss (earnings) of joint venture 87 (723)
Write-down of multi-client data library to market 670 254
Deferred taxes 2,357 2,664
Amortization of unearned compensation 168 62
Change in operating assets/liabilities:
Accounts and notes receivable (12,010) (43,378)
Materials and supplies inventory 139 (682)
Prepayments and other 7,929 (1,764)
Multi-client data library (42,469) (4,581)
Other 112 (884)
Accounts payable - trade (13,440) (2,937)
Accrued interest 1,546 2
Other accrued liabilities 23,931 18,699
Income taxes payable (10,551) 8,046
Other non-current liabilities (51) (975)
-------- --------
Total cash provided by operating activities 12,379 38,696
FINANCING ACTIVITIES:
Payments of long-term debt (146) (220)
Borrowings from senior notes 60,000
Senior notes issue costs (1,737)
Net proceeds from sale of common stock 947 1,050
Purchase of treasury stock (2,869)
-------- --------
Total cash provided by financing activities 56,195 830
INVESTING ACTIVITIES:
Increase in restricted cash investments (94) (13)
Decrease in investment in and advances to joint venture 1,183 521
Purchase of Time Seismic Exchange Ltd., net of cash received (704)
Purchase of property and equipment (30,870) (38,494)
Sale of property and equipment 131 53
-------- --------
Total cash used by investing activities (30,354) (37,933)
Currency loss on foreign cash (3,253) (1,560)
-------- --------
Change in cash and cash equivalents 34,967 33
Beginning cash and cash equivalents balance 40,089 71,177
-------- --------
Ending cash and cash equivalents balance $ 75,056 $ 71,210
======== ========
</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>
Six Months Ended
January 31,
------------------------
1999 1998
-------- -------
<S> <C> <C>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in property and equipment for accounts payable - trade $ 373 $ 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 (2,887) (4,762)
Additional paid-in capital 2,887 4,762
Treasury stock issued for purchase of Time Seismic Exchange Ltd. 664
Treasury stock issued in lieu of cash for bonuses payable 383
Restricted stock issued for future services resulting in an increase in additional
paid-in capital and unearned compensation 42 594
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest -
Senior notes 3,656 3,656
Equipment purchase obligations 22 37
Other 325 277
Income taxes 16,501 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 SIX MONTHS ENDED JANUARY 31, 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.,
formerly Digicon 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.
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 fiscal year 1999. 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 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 fiscal year
1999.
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 fiscal year 2000. 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.
5
<PAGE> 8
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 1999
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>
January 31, July 31,
1999 1998
----------- --------
(Dollars in thousands)
<S> <C> <C>
Current assets $ 1,491 $ 2,740
Property and equipment, net 460 613
-------- --------
Total assets $ 1,951 $ 3,353
======== ========
Current liabilities $ 278 $ 410
Advances from affiliates 12,664 13,847
Stockholders' deficit:
Common stock 2,576 2,576
Accumulated deficit (13,567) (13,480)
-------- --------
Total stockholders' deficit (10,991) (10,904)
-------- --------
Total liabilities and stockholders' deficit $ 1,951 $ 3,353
======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
------------------ --------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $386 $ 355 $ 784 $ 1,804
Cost and expenses:
Cost of services 289 576 614 1,243
Depreciation and amortization 84 80 170 158
Other (income) expense 1 (210) 87 (320)
---- ----- ----- -------
Total 374 446 871 1,081
---- ----- ----- -------
Net income (loss) $ 12 $ (91) $ (87) $ 723
==== ===== ===== =======
</TABLE>
3. LONG-TERM DEBT
Veritas DGC Inc.'s long-term debt is as follows:
<TABLE>
<CAPTION>
January 31, 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 415 561
-------- -------
Total 135,415 75,561
Less current maturities 280 289
-------- -------
Due after one year $135,135 $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.
6
<PAGE> 9
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 1999
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 January 31, 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 January 31,
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.
4. OTHER ACCRUED LIABILITIES
Other accrued liabilities include the following:
<TABLE>
<CAPTION>
January 31, July 31,
1999 1998
----------- --------
(Dollars in thousands)
<S> <C> <C>
Accrued payroll and benefits $13,323 $12,216
Deferred revenues $32,608 $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
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 Six Months Ended
January 31, January 31,
----------------------- -----------------------
1999 1998 1999 1998
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $(1,177) $(1,066) $(1,454) $(2,140)
Net loss on disposition of property and equipment 21 239 319 433
Net foreign currency exchange (gains) losses (1,301) 259 (1,129) 854
Other (173) (162) (139) (185)
------- ------- ------- -------
Total $(2,630) $ (730) $(2,403) $(1,038)
======= ======= ======= =======
</TABLE>
7
<PAGE> 10
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 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 Six Months Ended
January 31, January 31,
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net income $ 5,436 $17,677 $19,058 $38,996
======= ======= ======= =======
Weighted average common shares 22,712 22,513 22,704 22,473
======= ======= ======= =======
Earnings per common share $ .24 $ .79 $ .84 $ 1.74
======= ======= ======= =======
Weighted average common shares - assuming dilution:
Weighted average common shares 22,712 22,513 22,704 22,473
Shares issuable from assumed conversion of:
Options 118 701 148 711
Warrants 19
------- ------- ------- -------
Total 22,830 23,214 22,852 23,203
======= ======= ======= =======
Earnings per common share - assuming dilution $ .24 $ .76 $ .83 $ 1.68
======= ======= ======= =======
</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 Six Months Ended
January 31, January 31,
---------------------------------------- ----------------------------------------
1999 1998 1999 1998
------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Number of options 810,501 49,461 801,635 49,461
Exercise price range $17 7/8 - $56 1/2 $38 1/8 - $45 5/16 $15 5/8 - $56 1/2 $38 1/8 - $45 5/16
Expiring through November 2008 March 2007 November 2008 March 2007
</TABLE>
8
<PAGE> 11
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 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 and foreign currency translation adjustments.
The following sets forth Veritas DGC Inc.'s comprehensive income for the periods
presented:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
------------------------ -------------------------
1999 1998 1999 1998
------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income $ 5,436 $ 17,677 $ 19,058 $ 38,996
Foreign currency translation adjustments (2,898) (1,400) (3,253) (1,689)
------- -------- -------- --------
Comprehensive income $ 2,538 $ 16,277 $ 15,805 $ 37,307
======= ======== ======== ========
</TABLE>
9
<PAGE> 12
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 JANUARY 31, 1999 COMPARED WITH THREE MONTHS ENDED JANUARY 31,
1998
Revenues. Revenues decreased 18% from $123.6 million to $101.7 million during
the current quarter. Decreases occurred in all 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 11% from $51.4 million
to $46.0 million as a result of decreased demand and prices. The Company was
operating 11 crews at the end of the current quarter compared to 21 crews in the
prior year.
Marine acquisition revenues decreased 19% from $25.2 million to $20.4 million.
During the current quarter, two vessels were mobilized to different geographic
regions. There was also less prefunding on multi-client surveys.
Data processing revenues decreased 8% from $22.8 million to $21.0 million. As a
result of the decline in 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 41%, from $24.2 million to $14.3
million also due to lower demand.
Operating Expenses. Costs of services decreased 13% from $80.8 million to $70.0
million relative to the decline in revenues. However, cost of services as a
percent of revenues increased from 65% to 69%. The reduction in operating
margins is attributable to a more competitive environment in the onshore markets
as a result of lower commodity prices. Cost of services as a percent of revenues
actually declined for all other service groups due to improvements in
productivity and efficiency.
Depreciation and Amortization. Depreciation and amortization expense increased
37% from $13.0 million to $17.7 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 $730,000 to $2.6 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 $6.5 million to $3.1
million as a result of Veritas DGC Inc.'s lower taxable income in the current
quarter. The increase in the effective tax rate from 27% to 36% is primarily
attributable to a benefit recorded to recognize the expected future utilization
of net operating loss carryforwards during the prior year's second quarter.
Equity in (earnings) loss. Equity in (earnings) loss is related to the
Indonesian joint venture. Improved data processing margins account for the
increased profitability in the current quarter.
SIX MONTHS ENDED JANUARY 31, 1999 COMPARED WITH SIX MONTHS ENDED JANUARY 31,
1998
Revenues. Revenues decreased 7% from $265.8 million to $248.5 million during the
current six months. The decrease was attributable to fewer data library sales.
Revenues increased for all other service groups compared to the corresponding
period last year.
Land and transition zone acquisition revenues increased 10% from $110.7 million
to $121.3 million as a result of increased utilization of an expanded base of
crews and channels during the first quarter of the
10
<PAGE> 13
current year. Operations also improved in the Middle East market during the
second quarter; however, revenues decreased in other areas as a result of
decreased demand and prices.
Marine acquisition revenues increased 4% from $43.5 million to $45.4 million
despite disruptions caused by weather and the mobilization of vessels. The
increase was primarily due to capacity added by the Veritas Viking, Veritas DGC
Inc.'s new 3-D vessel that commenced operations in July 1998.
Data processing revenues were consistent, $45.1 million in the prior year
compared to $45.4 million in the current year. 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 45%, from $66.5 million to $36.4
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 in the second quarter of the current year.
Operating Expenses. Costs of services were consistent, $174.1 million in the
prior year compared to $173.5 million in the current year, but increased as a
percent of revenues from 65% to 70%. The reduction in operating margins is
mainly attributable to a more competitive environment in the onshore markets, as
a result of lower commodity prices. Marine acquisition, data processing, and
data library sales operating margins actually increased due to improvements in
productivity and efficiency and the mix of multi-client surveys purchased.
Depreciation and Amortization. Depreciation and amortization expense increased
36% from $25.5 million to $34.6 million due to the large increase in capital
expenditures over the past two years.
Interest Expense. Interest expense increased from $4.1 million to $5.6 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 $2.4 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. The increase is partially offset by a reduction in interest
income earned as a result of lower average cash balances in the first quarter of
fiscal 1999.
Income Taxes. Provision for income taxes decreased from $16.2 million to $8.9
million as a result of Veritas DGC Inc.'s lower taxable income for the current
year. The increase in the effective tax rate from 30% to 32% is primarily
attributable to a benefit recorded to recognize the expected future utilization
of net operating loss carryforwards during the prior year's second quarter.
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, Veritas DGC Inc. completed
a $60.0 million private placement of senior notes ("Series B Notes"), both due
in October 2003. The Series B Notes were exchanged for notes with terms
identical in all material respects to those of the Series A Notes in March 1999
("Series C Notes"). This exchange was registered under the Securities Act of
1933, as amended. The net proceeds from the Series B 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. is in compliance with all covenants of the indentures as of January 31,
1999. Upon a change in control of
11
<PAGE> 14
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 January 31, 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 January
31, 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 47% of revenues for the
six months ended January 31, 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, partially
funded multi-client data surveys generally require greater amounts of working
capital than contract work. Depending on 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 ($149.0 million at January 31, 1999 compared to
$227.0 million at January 31, 1998). The continued deterioration in activity
levels and current industry outlook will result in a very difficult environment
for the balance of 1999.
Management has undertaken certain initiatives in response to the current
industry downturn to preserve the financial strength and flexibility of the
Company. Since September 1998, headcount has been decreased from approximately
4,500 to 2,500 employees. The Company has begun decommissioning the multi-boat
operation in the Gulf of Mexico. All three vessels are on short-term charters
and will be returned to the vessel owners. In order to reduce capital
expenditures, the seismic equipment outfitting these vessels will be installed
on the second Viking class 3D vessel, which is scheduled for delivery in May
1999. Management continues to monitor discretionary capital expenditures.
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
12
<PAGE> 15
refinancing or financing, or that any refinancing or financing would result in a
level of net proceeds required.
OTHER
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. In the ordinary course of business, Veritas DGC
Inc. has replaced a significant amount of its hardware and software with Year
2000 compliant systems. A replacement schedule has been prepared for its
remaining non-compliant systems and an ongoing monitoring program and
contingency procedures in the event of unanticipated non-compliance problems
have been established. 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. As of January 31, 1999, Veritas DGC Inc. estimates that it will
complete its plan, including remedial actions, by June 30, 1999. Approximately
$100,000 of costs has been incurred. Veritas DGC Inc. is not aware of any
additional material contingencies or costs that will be incurred.
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 six months ended January 31, 1999, Veritas DGC Inc. recognized $2.9
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.
13
<PAGE> 16
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>
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.)
14
<PAGE> 17
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.)
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.)
15
<PAGE> 18
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.
16
<PAGE> 19
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 15th day of March, 1999.
VERITAS DGC INC.
By:
------------------------------------
DAVID B. ROBSON
Chairman of the Board and Chief
Executive Officer
------------------------------------
ANTHONY TRIPODO
Executive Vice President, Chief
Financial and Accounting Officer and
Treasurer
17
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
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.)
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
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.)
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.)
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
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
</TABLE>
* Filed herewith
<PAGE> 1
(Face of Senior Note)
THIS SENIOR NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
UNLESS THIS SENIOR NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO VERITAS DGC INC. (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SENIOR NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SENIOR NOTE IS NOT EXCHANGEABLE FOR SENIOR NOTES REGISTERED IN THE NAME OF
A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SENIOR NOTE
(OTHER THAN A TRANSFER OF THIS SENIOR NOTE AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
<PAGE> 2
VERITAS DGC INC.
9 3/4% Senior Note due 2003, Series C
U.S. GLOBAL NOTE
No. G-1 $60,000,000.00
CUSIP No. 92343P AC 1
Veritas DGC Inc., a Delaware corporation (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to CEDE & CO. or its
registered assigns the principal sum of 60,000,000.00 Dollars, or such greater
or lesser amount as may from time to time be endorsed on Schedule A hereto, on
October 15, 2003, at the office or agency of the Company referred to below, and
to pay interest thereon, commencing on April 15, 1999 and continuing
semiannually thereafter, on April 15 and October 15 in each year, accruing from
October 28, 1998, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, at the rate of 9 3/4% per annum,
until the principal hereof is paid or duly provided for, and (to the extent
lawful) to pay on demand interest on any overdue interest at the rate borne by
the Senior Notes from the date on which such overdue interest becomes payable
to the date payment of such interest has been made or duly provided for. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Senior Note (or one or more Predecessor Senior Notes) is
registered on the Security Register at the close of business on the Regular
Record Date for such interest, which shall be the April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and such Defaulted Interest, and (to the extent lawful) interest on such
Defaulted Interest at the rate borne by the Senior Notes, may be paid to the
Person in whose name this Senior Note (or one or more Predecessor Senior Notes)
is registered on the Security Register at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Senior Notes not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Senior Notes may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on), interest, if any,
on this Senior Note will be made at the office of agency of the Company
maintained for that purpose in The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made on Senior Notes at the option of the Company on or before the due
date (i) by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register or (ii) with respect to any Holder
owning Senior Notes in the principal amount of $500,000 or more, by wire
transfer to an account maintained by the Holder located in the United States, as
specified in
2
<PAGE> 3
a written notice to the Trustee by any such Holder requesting payment by wire
transfer and specifying the account to which transfer is requested.
Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Senior
Note shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
VERITAS DGC INC.
By: /s/ ANTHONY TRIPODO
---------------------------
Vice President
Attest:
/s/ [ILLEGIBLE]
- ------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Senior Notes referred to in the within mentioned Indenture.
State Street Bank and Trust Company, Trustee
By:
----------------------------
Authorized Signatory
Dated: March 12, 1999
3
<PAGE> 4
(Reverse of Senior Note)
This Senior Note is one of a duly authorized issue of securities of the
Company designated as its 9 3/4% Senior Notes due 2003, Series C (herein
called, together with the 9 3/4% Senior Notes due 2003, Series B, the "Senior
Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $60,000,000 which may be issued under
an indenture (herein called the "Indenture") dated as of October 28, 1998
between the Company and State Street Bank and Trust Company (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Senior Notes, and of the terms upon which the Senior Notes are,
and are to be, authenticated and delivered.
The Senior Notes are subject to redemption, at the option of the Company,
in whole or in part, at any time on or after October 15, 2000, upon not less
than 30 or more than 60 days' notice at the following Redemption Prices
(expressed as percentages of principal amount) set forth below if redeemed
during the 12-month period beginning October 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000 ............................ 104.875%
2001 ............................ 102.438%
2002 and thereafter ............. 100.000%
</TABLE>
together in the case of any such redemption with accrued and unpaid interest,
if any, to the Redemption Date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date), all as provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to October 15, 1999
up to $15,000,000 in aggregate principal amount of Senior Notes may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice, from the Net Cash Proceeds of a Public Equity Offering, at a
Redemption Price equal to 109.75% of the principal amount thereof, together
with accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date, provided that at least $45,000,000 in aggregate principal
amount of Senior Notes remain Outstanding immediately after such redemption and
that such redemption occurs within 60 days following the closing of such Public
Equity Offering.
In the case of any redemption of Senior Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to
Holders of such Senior Notes, or one or
4
<PAGE> 5
more Predecessor Senior Notes, of record at the close of business on the
relevant Record Date referred to on the face hereof. Senior Notes (or portions
thereof) for whose redemption and payment provision is made in accordance with
the Indenture shall cease to bear interest from and after the Redemption Date.
In the event of redemption or purchase of this Senior Note in part only, a new
Senior Note or Senior Notes for the unredeemed or unpurchased portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.
The Senior Notes do not have the benefit of any mandatory redemption or
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase, on a Business Day not more than 60 or
less than 30 days following the occurrence of a Change of Control of the
Company, all of the then Outstanding Senior Notes at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid interest,
if any, to the Change of Control Purchase Date, all as provided in the
Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified
portion of each Holder's Senior Notes at a purchase price equal to 100% of the
principal amount of the Senior Notes, together with accrued and unpaid
interest, if any, to the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i) failure
to pay principal upon maturity, redemption or otherwise (including pursuant to a
Change of Control Offer or a Net Proceeds Offer); (ii) default for 30 days in
payment of interest, if any, on the Senior Notes; (iii) default in the
performance of agreements relating to mergers, consolidations and sales of all
or substantially all assets or the failure to make or consummate a Change of
Control Offer or a Net Proceeds Offer; (iv) failure for 30 days after notice to
comply with any other covenants in the Indenture or the Senior Notes; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Restricted Subsidiary in an aggregate
principal amount in excess of $5,000,000; (vi) certain final judgments or orders
against the Company or any Restricted Subsidiary in an aggregate amount of more
than $5,000,000 over the coverage under applicable insurance policies which
remain unsatisfied and either become subject to commencement of enforcement
proceedings or remain unstayed for a period of 30 days; and (vii) certain events
of bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the Outstanding Senior
Notes may declare the principal amount of all the Senior Notes to be due and
payable immediately, except that (a) in the case of an Event of Default arising
from certain events of bankruptcy, insolvency or reorganization of the Company
or any Restricted Subsidiary, the principal amount of the Senior Notes will
become due and payable immediately without further action or notice, and (b) in
the case of an Event of Default which relates to certain payment defaults or
acceleration with respect to certain Indebtedness, any such Event of Default and
any consequential acceleration of the Senior Notes will be automatically
5
<PAGE> 6
rescinded if any such Indebtedness is repaid or if the default relating to such
Indebtedness is cured or waived and if the holders thereof have accelerated such
Indebtedness then such holders have rescinded their declaration of acceleration.
No Holder may pursue any remedy under the Indenture unless the Trustee shall
have failed to act after notice from such Holder of an Event of Default and
written request by Holders of at least 25% in aggregate principal amount of the
Outstanding Senior Notes, and the offer to the Trustee of indemnity reasonably
satisfactory to it; however, such provision does not affect the right to sue for
enforcement of any overdue payment on a Senior Note by the Holder thereof.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Outstanding Senior Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders notice of any
continuing default (except default in payment of principal, premium or interest)
if it determines in good faith that withholding the notice is in the interest of
the Holders. The Company is required to file annual and quarterly reports with
the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Company on this Senior Note and (ii) discharge from
certain restrictive covenants and the related Defaults and Events of Default,
upon compliance by the Company with certain conditions set forth therein, which
provisions apply to this Senior Note.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Senior Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of Outstanding Senior Notes, on behalf
of the Holders of all the Senior Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by or on behalf of
the Holder of this Senior Note shall be conclusive and binding upon such Holder
and upon all future Holders of this Senior Note and of any Senior Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Senior Note. Without the consent of any Holder, the Company and the Trustee may
amend or supplement the Indenture or the Senior Notes to cure any ambiguity,
defect or inconsistency, to qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and to make certain other specified
changes and the other changes that do not material adversely affect the
interests of any Holder in any material respect.
No reference herein to the Indenture and no provision of this Senior Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any, on)
and interest on this Senior Note at the times, place, and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Senior Note is registerable on the Security Register
of the Company, upon surrender of this
6
<PAGE> 7
Senior Note for registration of transfer at the office or agency of the Company
maintained for such purpose duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, with signature guaranteed, and thereupon one or more new Senior
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Senior Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Senior
Notes are exchangeable for a like aggregate principal amount of Senior Notes of
a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any registration of transfer or
exchange of Senior Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
A director, officer, employee, incorporator, stockholder or Affiliate of
the Company, as such, past, present or future shall not have any personal
liability under this Senior Note or any other Senior Note or the Indenture by
reason of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Senior Notes or the Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder, by
accepting this Senior Note, waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of this Senior Note.
Prior to the time of due presentment of this Senior Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Senior Note is registered as
the owner hereof for all purposes, whether or not this Senior Note is overdue,
and neither the Company, the Trustee nor any agent shall be affected by notice
to the contrary.
All terms used in this Senior Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 3701 Kirby Drive, Suite 112, Houston,
Texas 77098, Attention: Chief Financial Officer (or such other address as the
Company may have furnished in writing to the Trustee).
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Senior Notes as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Senior Notes and reliance may be placed only on the other identifying
information printed hereon.
Interest on this Senior Note shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
This Senior Note shall be governed by and construed in accordance with the
laws of the State of New York.
7
<PAGE> 8
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- -------------------------------------------------------------------------------
(Insert assignee's Social Senior Note or Tax I.D. No.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________ to transfer this
Senior Note on the books of the Company or the agent appointed by the Company
to maintain such books. The agent appointed hereby may substitute another to
act for him.
- -------------------------------------------------------------------------------
Date:
-------------------------
Your signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Senior Note)
Signature Guarantee:
8
<PAGE> 9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, check the box below:
[ ] Section 10.14 [ ] Section 10.15
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 10.14 or Section 10.15 of the Indenture, state the
amount you elect to have purchased (must be an integral multiple of $1,000):
$__________________
Date:
---------------------
Your signature:
--------------------------------------
(Sign exactly as your name appears on
the Senior Note)
Social Security No.
Tax Identification No.:
------------------------------
Signature Guarantee:
9
<PAGE> 10
SCHEDULE A
CHANGES IN PRINCIPAL AMOUNT OF SENIOR NOTE
The following changes in the principal amount of this Global Note have
been recorded:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Amount of decrease in Amount of increase in Principal Amount of this Signature of
Principal Amount of Principal Amount of Global Note following authorized officer
Date of Transaction this Global Note this Global Note such decrease (or increase) of Trustee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VERITAS DGC
INC.'S FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 280
<SECURITIES> 0
<RECEIVABLES> 165,448
<ALLOWANCES> 3,412
<INVENTORY> 3,967
<CURRENT-ASSETS> 253,462
<PP&E> 354,656
<DEPRECIATION> 183,271
<TOTAL-ASSETS> 559,881
<CURRENT-LIABILITIES> 110,045
<BONDS> 135,135
0
0
<COMMON> 214
<OTHER-SE> 309,467
<TOTAL-LIABILITY-AND-EQUITY> 559,881
<SALES> 0
<TOTAL-REVENUES> 248,451
<CGS> 0
<TOTAL-COSTS> 173,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,603
<INCOME-PRETAX> 28,084
<INCOME-TAX> 8,939
<INCOME-CONTINUING> 19,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,058
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.83
</TABLE>
