VERITAS DGC INC, 424B2, 2000-10-06

VERITAS DGC INC
424B2, 2000-10-06
OIL & GAS FIELD EXPLORATION SERVICES

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<PAGE> 1

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-86247

PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 26, 2000.

3,000,000 Shares

[Veritas logo]

VERITAS DGC INC.
Common Stock

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

The common stock is listed on the New York Stock Exchange under the symbol
"VTS" and on the Toronto Stock Exchange under the symbol "VER." The last
reported sale price of the common stock on the New York Stock Exchange on
October 5, 2000 was $27 7/8 per share.

See "Risk Factors" beginning on page S-6 to read about certain factors you
should consider before buying shares of the common stock.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------

<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Initial price to public..................................... $27.75 $83,250,000
Underwriting discount....................................... $ 1.39 $ 4,170,000
Proceeds, before expenses, to Veritas DGC................... $26.36 $79,080,000
</TABLE>

To the extent that the underwriters sell more than 3,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
450,000 shares from Veritas DGC at the initial price to public less the
underwriting discount.
----------------------

The underwriters expect to deliver the shares against payment in New York,
New York on October 12, 2000.

GOLDMAN, SACHS & CO.
DAIN RAUSCHER WESSELS
SIMMONS & COMPANY INTERNATIONAL

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

Prospectus Supplement dated October 5, 2000.
<PAGE> 2

Velocity Model For Pre-Stack Depth Migration

[Color graphic of geophysical data]

"Generating a more accurate image of the subsurface"
<PAGE> 3

PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights selected information from this prospectus
supplement and does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of this offering
and for a more complete understanding of the business of Veritas DGC, you should
read carefully this entire prospectus supplement, the accompanying prospectus
and the documents incorporated by reference in this prospectus supplement and
the prospectus. When we use the terms "Veritas DGC," "we" or "us," we are
referring to Veritas DGC Inc. together with its subsidiaries, unless the context
otherwise requires. Unless otherwise specified, all information in this
prospectus supplement assumes no exercise of the underwriters' over-allotment
option.

VERITAS DGC INC.

GENERAL

We are a leading provider of integrated geophysical technologies to the
petroleum industry worldwide. Our customers include major, national and
independent oil and gas companies that utilize geophysical technologies to
achieve the following:

- Identify new areas where subsurface conditions are favorable for the
production of hydrocarbons.

- Determine the size and structure of previously identified oil and gas
fields.

- Optimize development and production of hydrocarbon reserves.

We acquire, process and interpret geophysical data and produce geophysical
surveys that are either 2D or 3D images of the subsurface geology in the survey
area. We also produce 4D surveys, which record fluid movement in the reservoir,
by repeating specific 3D surveys over time. Additionally, we are increasingly
using geophysical data for reservoir characterization to enable our customers to
maximize their recovery of oil and natural gas.

We conduct our data acquisition operations as follows:

- Offshore -- by crews operating from seven vessels, including two Veritas
Viking flagships which are among the most capable and efficient
geophysical vessels in the world. We charter six of the vessels and own
one.

- On land and in swamp and tidal areas -- by crews utilizing
technologically advanced equipment having 36,000 channels of recording
capacity and capable of being configured to equip as many as 17 crews for
3D operations.

We conduct geophysical surveys on both a contract and a multi-client basis.
When operating on a contract basis, our customers purchase all rights to the
completed geophysical survey, including all related data and interpretive
manipulations of the data. When operating on a multi-client basis, we retain
ownership of the survey and all associated data and license the survey to
multiple customers. Historically, we have realized significantly higher
operating margins from our multi-client surveys than from surveys performed on a
contract basis. In line with current industry trends, multi-client survey
licensing constitutes a growing percentage of our revenues. The licensing of
multi-client surveys generated 52% of our revenues in fiscal 2000 compared to
41% of our revenues in fiscal 1999.

We process geophysical data at 19 data processing centers in 14 countries.
Three of these processing centers operate the latest NEC large-vector
supercomputers configured primarily for processing large-scale offshore surveys
and performing complex 3D imaging and pre-stack depth migrations. Pre-stack
depth migration techniques produce a more accurate image of subsurface
S-1
<PAGE> 4

geology, particularly beneath obstructions such as the complex salt formations
in the Gulf of Mexico and subsurface basalt flows in the North Atlantic. Our
processing centers run our proprietary software using advanced data processing
hardware from Hewlett-Packard, Sun Microsystems and others.

With the launch of our four data visualization centers and the formation of
a new exploration services division in fiscal 2000, we now offer advanced 3D
data visualization, interpretation and reservoir characterization services. A
visualization center provides imaging tools for advanced interpretative
techniques, which enhances the understanding of regional geology and reservoir
modeling. Our visualization centers enable teams of geoscientists and engineers
to view huge volumes of 3D geophysical data in a collaborative environment,
significantly reducing the time required to identify drilling locations.

INDUSTRY CONDITIONS

Overall demand for geophysical technologies is dependent upon the level of
expenditures by oil and gas companies for exploration, production, development
and field management activities, which depends in part on present and expected
future oil and natural gas prices. Fiscal 2000 was characterized by a sharp
increase in both oil and natural gas prices. A strong global economy worked in
tandem with increased supply discipline on the part of OPEC producers to push
oil prices to much higher levels than in the previous few years. Natural gas in
North America also experienced a sharp rise in price as a strong U.S. economy
contributed to increasing demand. Management believes that higher oil and
natural gas prices, if sustained, will result in higher levels of spending for
geophysical services.

Over the past five years, worldwide demand for advanced geophysical
technologies, such as pre-stack depth migrations, increased rapidly. The greater
precision and improved subsurface resolution obtainable from 3D geophysical
data, combined with advanced processing techniques, has assisted oil and gas
companies in finding new fields and more accurately delineating existing
reservoirs. These technologies have improved drilling success rates and lowered
finding and field extension costs. Furthermore, improved 4D technology is also
enhancing production monitoring methodologies and the management of oil and gas
reservoirs. The recent advances in geophysical technologies, coupled with
improvements in drilling and completion techniques, are significantly enhancing
oil and gas companies' ability to explore for, develop and manage oil and gas
reserves cost-effectively.

OUR STRENGTHS

- Large Multi-Client Data Library in High Demand Regions. Our multi-client
data library includes more than three million line kilometers of
geophysical survey data, more than 65% of which was acquired within the
last three years. Approximately 95% of our data library is 3D. We have
focused data acquisitions for our multi-client data library on prime
exploration regions around the world. Our four major markets are the Gulf
of Mexico, offshore Southeast Asia, onshore North America and the North
Atlantic. Our focus on these high demand areas has enabled us to generate
significant revenues from our investment. In fiscal 2000, our
multi-client revenues were equal to 78% of our multi-client data library
investment at year-end. We believe this level of revenue generation
compared to our library investment is significantly higher than that of
our major competitors and that it is an important measure of the value of
our multi-client data library. Recently, we have added surveys to our
multi-client data library in the important exploration areas of Brazil,
Canada, West and North Africa and Australia.

- Focus on Leading Edge Technologies. We are a leader in the use of
innovative technology that allows for faster, higher quality acquisition,
processing and interpretation of large amounts of geophysical data. We
maintain our technological capabilities through ongoing

S-2
<PAGE> 5

research and development, alliances with equipment manufacturers and by
acquiring technology under licenses from others.

- Strong Balance Sheet and Significant Financial Flexibility. We have a
conservative capital structure with $43 million in cash, $135 million in
long-term debt, and a debt-to-total capitalization ratio of 26% at July
31, 2000. See "Capitalization." Along with a revolving credit facility
that can provide cash advances up to $50 million, our strong balance
sheet provides us the financial flexibility and liquidity to support our
operations and fund planned capital spending.

- Experienced and Incentivized Management Team. Our senior management team
averages more than 20 years of experience in the oil field services
industry. A significant portion of the compensation for these executives,
as well as other key employees, is based on performance-related incentive
compensation and stock options.

OUR STRATEGY

Our objective is to enhance our position as a leading provider of
integrated geophysical technologies while maximizing earnings and cash flow on a
long-term basis. To achieve our objective, we are pursuing the following
business strategy:

- Expand Our Multi-Client Data Library. We continue to expand and
geographically diversify our multi-client data library to capture
increasing demand for licensed data. The high cost of acquiring and
processing geophysical data on an exclusive basis, particularly in
frontier areas, has prompted many oil and gas companies to increase their
licensing of multi-client surveys. Our multi-client data library has
tripled over the past three years and the licensing of multi-client data
has become a larger part of our business, increasing from approximately
30% of revenues in fiscal 1997 to 52% of revenues in fiscal 2000.
Historically, we have realized significantly higher operating margins
from our multi-client surveys than from surveys performed on a contract
basis.

- Invest in Leading Edge Technologies. We are continuing to invest in
advanced geophysical technologies that enhance and expand our ability to
acquire, process and interpret geophysical data. From the beginning of
fiscal 1995 through fiscal 2000, we invested over $370 million to
replace, substantially upgrade and expand our geophysical operating
assets. We have budgeted an additional $84 million of capital
expenditures for further expansions, enhancements and replacements in
fiscal 2001.

- Leverage Core Geophysical Technologies to Expand Business. We are
leveraging our core geophysical technologies to provide value-added
services to our customers, including pre-stack depth migrations and data
interpretation services, as well as reservoir characterization services,
utilizing new state-of-the-art data processing techniques and
visualization centers. These visualization centers, coupled with our
highly skilled and experienced geoscientists, form the core of our
exploration services group. We will continue to invest in the people and
technology required to develop value-added services.

- Maintain Conservative Balance Sheet and Financial Flexibility. We intend
to maintain a conservative financial structure in order to minimize the
impact of industry cycles on our earnings and cash flow. Our conservative
balance sheet, revolving credit facility and the proceeds of this
offering will allow us to pursue our strategy and capitalize on business
opportunities while maintaining our financial flexibility.

S-3
<PAGE> 6

THE OFFERING

COMMON STOCK OFFERED BY VERITAS
DGC................................. 3,000,000 shares (1)

COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING................ 30,235,001 shares (2)

USE OF PROCEEDS..................... Capital expenditures, investment in our
multi-client data library, additional working capital and general corporate
purposes, including potential
acquisitions. See "Use of Proceeds."

NEW YORK STOCK EXCHANGE SYMBOL...... VTS

TORONTO STOCK EXCHANGE SYMBOL....... VER
---------------

(1) Assumes that the underwriters' over-allotment option to purchase up to an
additional 450,000 shares is not exercised.

(2) Based on shares outstanding as of August 31, 2000. Includes 1,978,432
exchangeable shares of our subsidiary Veritas Energy Services Inc. that are
exchangeable for a like number of shares of our common stock but excludes
2,270,520 shares issuable upon exercise of outstanding stock options.

For a more complete description of our common stock and exchangeable
shares, see "Description of Capital Stock" beginning on page 9 of the
accompanying prospectus.

S-4
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The following financial data has been derived from our audited consolidated
financial statements. You should read our consolidated financial statements and
other information included elsewhere in this prospectus supplement or previously
filed with the Securities and Exchange Commission.

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenues......................................... $353,079 $388,905 $528,959 $362,715 $250,596
Costs and expenses:
Cost of services............................... 232,366 258,307 340,700 267,931 195,518
Research and development....................... 8,316 7,693 6,196 3,725 3,193
Write-off/write-down for impairment of
assets....................................... -- -- -- -- 3,628
Depreciation and amortization.................. 71,468 68,435 56,121 40,631 26,921
Selling, general and administrative............ 17,710 16,734 18,758 11,408 7,255
Interest....................................... 14,123 12,623 7,318 7,484 5,466
Merger related costs........................... -- -- -- 597 3,666
Other.......................................... (3,269) (5,050) (338) 630 546
-------- -------- -------- -------- --------
Total costs and expenses.................. 340,714 358,742 428,755 332,406 246,193
Income before provision for income taxes and
equity in (earnings) loss of joint venture..... 12,365 30,163 100,204 30,309 4,403
Provision for income taxes....................... 5,006 9,566 34,218 6,062 2,009
Equity in (earnings) loss of joint venture....... 691 303 (972) (878) 1,113
-------- -------- -------- -------- --------
Net income before extraordinary item............. 6,668 20,294 66,958 25,125 1,281
Extraordinary loss on debt repurchase (net of tax
of $95)........................................ (187) -- -- -- --
-------- -------- -------- -------- --------
Net income....................................... $ 6,481 $ 20,294 $ 66,958 $ 25,125 $ 1,281
======== ======== ======== ======== ========
Net income per common share-diluted.............. $ .25 $ .88 $ 2.87 $ 1.30 $ .07

BALANCE SHEET DATA (AT PERIOD END)
Cash and cash equivalents........................ $ 43,154 $ 73,447 $ 40,089 $ 71,177 $ 10,072
Working capital.................................. 92,944 119,250 106,040 121,702 22,479
Property and equipment -- net.................... 146,578 156,371 174,920 132,754 79,010
Multi-client data library........................ 231,274 138,753 51,143 20,904 25,628
Total assets..................................... 611,808 541,846 478,490 385,089 198,592
Long-term debt (including current maturities).... 135,106 135,251 75,561 75,971 41,090
Stockholders' equity............................. 382,944 315,558 291,696 221,301 105,923

OTHER FINANCIAL DATA
EBITDA*.......................................... $ 94,687 $106,171 $163,305 $ 79,651 $ 44,630
Cash provided by (used in) operating
activities..................................... (16,113) 18,599 62,970 43,410 20,077
Cash provided by (used in) financing
activities..................................... 32,244 56,544 3,994 106,243 (4,160)
Cash used in investing activities................ (46,413) (41,093) (95,584) (88,865) (15,820)
Capital expenditures............................. 55,884 52,370 99,549 96,050 32,860

OPERATING DATA (AT PERIOD END)
Land crews in operation.......................... 9 8 16 16 14
Marine vessels in operation...................... 7 7 9 8 7
Data processing centers in operation............. 19 21 20 20 16
</TABLE>

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

* EBITDA equals revenues less the cost of services, research and
development and selling, general and administrative expenses. Expenses
associated with the capitalized multi-client data library are included in
cost of services and, therefore, are reductions in EBITDA (industry
practice varies on this point). EBITDA is not a measurement presented in
accordance with generally accepted accounting principles. EBITDA is
presented not as an alternative measure of operating results or cash flow
from operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information
related to our debt servicing ability and our ability to fund capital
expenditures. Similarly titled captions used by other companies may be
defined differently.

S-5
<PAGE> 8

RISK FACTORS

An investment in our common stock is subject to a number of risks,
including those discussed below. You should carefully consider these risks and
the other information included or incorporated by reference in this prospectus
supplement and the accompanying prospectus before deciding whether an investment
in the common stock is appropriate for you.

AS A PROVIDER OF GEOPHYSICAL TECHNOLOGIES, OUR BUSINESS IS SUBSTANTIALLY
DEPENDENT ON THE LEVEL OF CAPITAL EXPENDITURES BY OIL AND GAS COMPANIES.

Capital expenditures by oil and gas companies have tended in the past to
follow trends in the price of oil and natural gas, which have fluctuated widely
in recent years. In the current period of increased oil and natural gas prices,
however, capital expenditures by oil and gas companies have not increased as
rapidly as we would have expected. If there continues to be a sustained period
of substantially reduced capital expenditures by oil and gas companies, such as
has existed in fiscal 1999 and fiscal 2000, the demand for geophysical
technologies likely will remain low and there will be an adverse effect on our
results of operations and cash flow during the affected period.

WEAK DEMAND OR TECHNOLOGICAL OBSOLESCENCE COULD IMPAIR THE VALUE OF OUR
MULTI-CLIENT DATA LIBRARY; CHANGES IN ACCOUNTING PRACTICES COULD AFFECT OUR
METHODS OF ACCOUNTING FOR OUR MULTI-CLIENT DATA LIBRARY.

We have invested significant amounts in acquiring and processing
multi-client data and expect to continue to do so for the foreseeable future.
There is no assurance that we will recover all the costs of such surveys.
Technological, regulatory or other industry or general economic developments
could render all or portions of our multi-client data library obsolete or reduce
its value.

In accordance with industry practice, we capitalize our investments in our
multi-client library and charge these investments to cost of services as sales
are made. Certain accounting authorities are reviewing accounting practices
relating to the capitalization of expenditures made in the development of
certain data bases, particularly in the context of "e-commerce" companies. We
cannot predict whether future accounting changes could adversely affect our
financial condition or results of operations.

WE ARE DEPENDENT ON ACHIEVING AND MAINTAINING TECHNOLOGICAL ADVANCES, WHICH
CREATES RISKS REGARDING TECHNOLOGICAL OBSOLESCENCE, REQUIREMENTS FOR SUBSTANTIAL
FUTURE CAPITAL EXPENDITURES, THE UNAVAILABILITY OF NECESSARY TECHNOLOGY AND THE
FAILURE OF NEW TECHNOLOGIES.

The development of geophysical data acquisition and processing equipment
has been characterized by rapid technological advancements in recent years. We
expect this trend to continue. We will be required to invest substantial capital
in the future to maintain our leading edge technology. Furthermore,
manufacturers of geophysical equipment may develop new systems that render our
equipment, even if recently acquired, obsolete or less desirable, requiring
significant additional capital expenditures. Since some of our competitors are
themselves leading designers and manufacturers of seismic equipment, we may not
have access to their technology. Even if critical new and advanced equipment is
available to us, we may not have funds available or be able to obtain necessary
financing on acceptable terms to acquire it. Further, any investment we may make
in a perceived technological advance may not be effective, economically
successful or otherwise accepted in the market.

WE FACE INTENSE COMPETITION IN OUR INDUSTRY, WHICH COULD ADVERSELY AFFECT OUR
RESULTS.

Competition among geophysical service providers historically has been, and
will continue to be, intense. Competitive factors in recent years have included
price, crew experience, equipment

S-6
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availability, technological expertise and reputation for quality, safety and
dependability. Some of our competitors operate substantially more data
acquisition crews than we do and have significantly greater financial and other
resources. These larger and better-financed operators could enjoy an advantage
over us in a competitive environment for contract awards or data sales and in
the development of new technologies. The pending combination of our two largest
competitors, Schlumberger's geophysical operations and Baker Hughes' geophysical
operations, will create a single very large competitor. While we cannot predict
the effect of this combination, if it is consummated, on our business or on our
ability to compete successfully, the combined entity will have significant
market power, which may disadvantage us.

HIGH FIXED COSTS COULD RESULT IN OPERATING LOSSES.

Our business has high fixed costs. As a result, downtime or low
productivity due to reduced demand, weather interruptions, equipment failures or
other causes can result in significant operating losses. As technology continues
to change rapidly, low utilization rates may impact our ability to recover the
cost of necessary capital investments in a timely manner.

OUR REVENUES ARE SUBJECT TO FLUCTUATIONS THAT ARE BEYOND OUR CONTROL, WHICH
COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS IN ANY FINANCIAL PERIOD.

Our operating results may, in the future, vary in material respects from
quarter to quarter. Factors that could cause variations include the timing of
the receipt and commencement of contracts for data acquisition, customers'
budgetary cycles, the timing of offshore lease sales and the effect of such
timing on the demand for geophysical activities, seasonal factors and the timing
of sales of geophysical data from our multi-client data library, which may be
significant to us and which are not typically made in a linear or consistent
pattern. Combined with our high fixed costs, these revenue fluctuations could
produce unexpected adverse results of operations in any financial period.

WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES, WHICH COULD ADVERSELY
AFFECT OUR BUSINESS.

Our success depends upon attracting and retaining highly skilled
professionals and other technical personnel. A number of our employees are
highly skilled scientists and highly trained technicians, and our failure to
continue to attract and retain such individuals could adversely affect our
ability to compete in the geophysical services industry. We may confront
significant and potentially adverse competition for key personnel, particularly
during periods of increased demand for geophysical services. In addition, our
success will depend to a significant extent upon the abilities and efforts of
members of our senior management, the loss of whom could adversely affect our
business.

WE FACE RISKS ASSOCIATED WITH OUR FOREIGN REVENUE GENERATING ACTIVITIES.

A substantial portion of our revenues are derived from foreign revenue
generating activities. As a result, a significant portion of our revenues are
denominated in foreign currencies. These revenues are impacted by foreign
currency fluctuations. In addition, net assets reflected on the balance sheets
of our foreign subsidiaries, and therefore on our consolidated balance sheet,
are subject to currency fluctuations. Foreign revenues are also subject to
special risks that may disrupt markets, including the risk of war, civil
disturbances, embargo and government activities. Revenue generating activities
in certain foreign countries may require prior United States government approval
in the form of an export license and otherwise be subject to tariffs and
import/export restrictions. There can be no assurance that we will not
experience difficulties in connection with future foreign revenues and, in
particular, adverse effects from foreign currency fluctuations.

S-7
<PAGE> 10

WE OPERATE UNDER HAZARDOUS CONDITIONS THAT SUBJECT US TO RISK OF DAMAGE TO
PROPERTY OR PERSONAL INJURIES AND MAY INTERRUPT OUR BUSINESS.

Our seismic data acquisition activities involve operating under extreme
weather and other hazardous conditions. These operations are subject to risks of
loss to property and injury to personnel from fires, accidental explosions, ice
floes and high seas. Although we carry insurance against these risks in amounts
we consider adequate, these events could result in an interruption of our
business or significant liability. We may not obtain insurance against all risks
or for certain equipment located from time to time in certain areas of the
world.

THE TRADING PRICE OF OUR SECURITIES COULD BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.

The trading price of our securities fluctuates. Factors such as
fluctuations in our financial performance, and that of our competitors, as well
as general market conditions could have a significant impact on the future
trading prices of our securities. The trading prices also may be affected by
weakness in oil prices, changes in interest rates and other factors beyond our
control. These factors may have an adverse effect on the trading price of our
securities.

OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATION, WHICH MAY ADVERSELY AFFECT
OUR FUTURE OPERATIONS.

Our operations are subject to a variety of federal, provincial, state,
foreign and local laws and regulations, including environmental laws. We invest
financial and managerial resources to comply with these laws and related permit
requirements. Failure to timely obtain the required permits may result in crew
downtime and operating losses. Because laws and regulations change frequently,
we cannot predict the impact of government regulations on our future operations.
The adoption of laws and regulations that have the effect of curtailing
exploration by oil and gas companies could also adversely affect our operations
by reducing the demand for our geophysical services.

CERTAIN PROVISIONS OF OUR CHARTER, DELAWARE LAW AND OUR SHAREHOLDER RIGHTS PLAN
MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, EVEN IN SITUATIONS THAT
MAY BE VIEWED AS DESIRABLE BY OUR STOCKHOLDERS.

The General Corporation Law of the State of Delaware contains provisions
that may delay or prevent an attempt by a third party to acquire control of us.
Our certificate of incorporation and bylaws contain provisions that authorize
the issuance of preferred stock, and establish advance notice requirements for
director nominations and actions to be taken at stockholder meetings. These
provisions could also discourage or impede a tender offer, proxy contest or
other similar transaction involving control of us, even if viewed favorably by
stockholders. In addition, we have adopted a stockholder rights plan that would
likely discourage a hostile attempt to acquire control of us.

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<PAGE> 11

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This prospectus supplement and the documents incorporated by reference
contain forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements include statements incorporated by reference to other Veritas
DGC documents filed with the SEC. Forward-looking statements include, among
other things, business strategy and expectations concerning industry conditions,
market position, future operations, margins, profitability, liquidity and
capital resources. Forward-looking statements generally can be identified by the
use of terminology such as "may," "will," "expect," "intend," "estimate,"
"anticipate" or "believe" or the negatives thereof. Although we believe that the
expectations reflected in such statements are reasonable, we can give no
assurance that such expectations will be correct. You are cautioned not to place
undue reliance on these forward-looking statements. Our operations are subject
to a number of uncertainties, risks and other influences, many of which are
outside our control and any one of which, or a combination of which, could cause
our actual results of operations to differ materially from the forward-looking
statements. Important factors that could cause actual results to differ
materially from our expectations are disclosed in "Risk Factors" and elsewhere
in this prospectus supplement and the accompanying prospectus.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The following table sets forth the high and low sales prices for our common
stock as reported by the New York Stock Exchange for the periods shown.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDING JULY 31, 2001:
First Quarter (through October 5, 2000)................. $32 $21 1/4
YEAR ENDED JULY 31, 2000:
Fourth Quarter.......................................... $29 15/16 $20 3/16
Third Quarter........................................... 30 15 1/2
Second Quarter.......................................... 18 1/2 12 7/16
First Quarter........................................... 22 5/8 14 1/16
YEAR ENDED JULY 31, 1999:
Fourth Quarter.......................................... $23 7/8 $16
Third Quarter........................................... 20 1/4 8 3/4
Second Quarter.......................................... 23 15/16 11 13/16
First Quarter........................................... 34 9/16 10 5/8
</TABLE>

On October 5, 2000, the last reported sales price for our common stock on
the New York Stock Exchange was $27 7/8 per share. As of July 31, 2000, there
were approximately 395 record holders of our common stock.

We have not paid any cash dividends on our common stock and we have no
present plans to pay any cash dividends. The payment of any future dividends on
our common stock would depend, among other things, upon our current and retained
earnings and financial condition, and upon a determination by our Board of
Directors that the payment of dividends would be desirable. In addition, our
outstanding debt and our revolving credit facility currently prohibit the
payment of cash dividends.

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<PAGE> 12

USE OF PROCEEDS

The net proceeds from this offering are estimated to be approximately $78.7
million ($90.5 million if the underwriters exercise their overallotment option
in full). We currently intend to use the net proceeds from this offering,
together with our available cash, for:

- capital expenditures;

- investment in our multi-client data library;

- additional working capital; and

- other general corporate purposes, including potential acquisitions.

For additional discussion of our current expectations regarding our
prospective expenditures, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources -- Sources and Uses."

CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents
and capitalization as of July 31, 2000, and as adjusted to give effect to the
sale of the common stock offered by this prospectus supplement (assuming the
underwriters do not exercise their overallotment option).

<TABLE>
<CAPTION>
AS OF JULY 31, 2000
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................. $ 43,154 $121,834
======== ========
Long-term debt, including current maturities:
Bank credit facility(1).................................. -- --
9 3/4% Senior Notes due 2003............................. $135,000 $135,000
Other.................................................... 106 106
-------- --------
Total long-term debt including current
maturities..................................... 135,106 135,106
Stockholders' equity....................................... 382,944 461,624
-------- --------
Total capitalization....................................... $518,050 $596,730
======== ========
</TABLE>

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

(1) There were no outstanding advances under the credit facility, but $5.9
million of the credit facility was utilized for letters of credit. An
additional $44.1 million was available for borrowing.

S-10
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

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

S-11
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
our consolidated financial statements and the notes thereto included elsewhere
in this prospectus supplement. This prospectus supplement contains certain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed in this prospectus
supplement. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed under the caption "Risk Factors."

OVERVIEW

Although oil and natural gas prices increased in fiscal 2000 from the prior
year, most of fiscal 2000 was characterized by reduced exploration and
geophysical spending. Oil and gas companies reacted cautiously to higher
commodity prices, concerned that prices would return to the much lower commodity
price environment that existed during fiscal 1999. A number of oil and gas
company mergers further reduced exploration and geophysical spending as the
management of these companies focused on completing the mergers and were
distracted away from day-to-day operating activities. However, a sustained
period of higher commodity prices did result in slightly higher levels of
exploration and geophysical spending toward the latter part of fiscal 2000.

RESULTS OF OPERATIONS

FISCAL 2000 COMPARED WITH FISCAL 1999

Revenues. Revenues decreased by 9%, from $388.9 million in fiscal 1999 to
$353.1 million in fiscal 2000, due to the general downturn in exploration
spending driven by our customers' concern that commodity prices would return to
the low levels of prior years. Multi-client revenues increased 13% from $161.2
million to $181.9 million, while contract revenues decreased 25%, from $227.7
million to $171.2 million. Multi-client revenues as a percent of total revenues
grew from 41% in fiscal 1999 to 52% in fiscal 2000. This reflects the trend in
customer preference to obtain geophysical data through licensing rather than
outright ownership.

Cost of services. Cost of services decreased 10% from $258.3 million in
fiscal 1999 to $232.4 million in fiscal 2000, commensurate with the drop in
revenues.

Research and development. Research and development expenses increased 8%
from $7.7 million in fiscal 1999 to $8.3 million in fiscal 2000 due to increased
emphasis on leading edge technologies, including reservoir characterization.

Depreciation and amortization. Depreciation and amortization expense
increased 5% from $68.4 million in fiscal 1999 to $71.5 million in fiscal 2000
as a result of additions of geophysical and processing equipment of $55.9
million during the year.

Selling, general and administrative. Selling, general and administrative
expenses increased 6% from $16.7 million in fiscal 1999 to $17.7 million in
fiscal 2000 resulting from termination costs related to the resignation of our
former chief executive officer.

S-12
<PAGE> 15

Interest expense. Interest expense increased from $12.6 million in fiscal
1999 to $14.1 million in fiscal 2000 due to the issuance of $60.0 million of
9 3/4% senior notes at the end of October 1998.

Other income. Other income decreased from $5.1 million in fiscal 1999 to
$3.3 million in fiscal 2000. In fiscal 1999 other income was primarily composed
of net foreign currency gains of $1.8 million and interest income of $4.2
million as compared with interest income of $3.6 million in fiscal 2000, due to
lower cash balances during the year.

Income taxes. Provision for income taxes decreased from $9.6 million in
fiscal 1999 to $5.0 million in fiscal 2000 as a result of our lower net income
and the mix between U.S. and non-U.S. source income.

Equity in (earnings) loss. Equity in (earnings) loss, related to the
Indonesian joint venture, increased from a loss of $303,000 in fiscal 1999 to a
loss of $691,000 in fiscal 2000. Decreases in contract revenues and a relatively
fixed cost base accounted for the decreased profitability for the year.

FISCAL 1999 COMPARED WITH FISCAL 1998

Revenues. Revenues decreased by 26%, from $529.0 million in fiscal 1998 to
$388.9 million in fiscal 1999, due to the general downturn in exploration
spending driven by depressed commodity prices. Multi-client revenues decreased
21% from the prior year, from $204.1 million to $161.2 million, while contract
revenues decreased 30%, from $324.9 million to $227.7 million. Due to our
increased activity in the onshore multi-client business, that revenue stream
increased to $33.0 million from $10.9 million in the previous year, somewhat
offsetting the offshore multi-client revenue decline.

Cost of services. Cost of services decreased 24% from $340.7 million to
$258.3 million, but as a percent of revenues increased from 64% to 66%. The
increase in expense as a percent of revenues was mainly due to significant price
declines in the contract business and due to fixed cost elements in cost of
services.

Research and development. Research and development expenses increased 24%
from $6.2 million in fiscal 1998 to $7.7 million in 1999 as a result of
increased emphasis on leading edge technologies.

Depreciation and amortization. Depreciation and amortization expense
increased 22% from $56.1 million to $68.4 million primarily due to the $151.9
million of capital expenditures over the past two years.

Selling, general and administrative. Selling, general and administrative
expenses decreased 11% from $18.8 million to $16.7 million resulting primarily
from the reduction of discretionary spending at corporate headquarters.

Interest expense. Interest expense increased from $7.3 million to $12.6
million due to the issuance in October 1998 of an additional $60.0 million of
the 9 3/4% senior notes.

Other income. Other income increased from $338,000 in 1998 to $5.1 million
in fiscal 1999 primarily due to net foreign currency losses of $2.3 million in
fiscal 1998 as compared with net foreign currency gains of $1.8 million in
fiscal 1999. Interest income was approximately $4.2 million in each of those
years.

Income taxes. Provision for income taxes decreased from $34.2 million to
$9.6 million as a result of our lower net income.

Equity in (earnings) loss. Equity in (earnings) loss is related to the
Indonesian joint venture, which posted a loss of $303,000 for fiscal 1999
compared to a net profit of $972,000 in fiscal

S-13
<PAGE> 16

1998. Decreases in contract revenues and a relatively fixed cost base accounted
for the decreased profitability for fiscal year 1999.

LIQUIDITY AND CAPITAL RESOURCES

SOURCES AND USES

Our internal sources of liquidity are cash, cash equivalents and cash flow
from operations. External sources include public financing, equity sales, the
unutilized portion of a revolving credit facility, equipment financing and trade
credit. We believe that these sources of funds are adequate to meet our
liquidity needs for fiscal 2001.

As of July 31, 2000, we had $135.0 million in senior notes outstanding due
in October 2003. These notes contain a change of control provision allowing them
to be callable by the holder under certain conditions. We also have a revolving
credit facility due July 2001 from commercial lenders that provides advances up
to $50.0 million. At July 31, 2000 the borrowing base exceeded the credit limit.
Advances bear interest, at our election, at LIBOR plus a margin based on certain
financial ratios maintained by us or prime rate. Advances are secured by certain
accounts receivable. As of July 31, 2000, there were no outstanding advances
under the credit facility, but $5.9 million of the credit facility was utilized
for letters of credit. An additional $44.1 million is available for borrowings.

We require significant amounts of working capital to support our operations
and fund capital spending and research and development programs. Our capital
expenditure budget for fiscal 2001 is $83.8 million, which includes expenditures
of approximately $50 million to expand or upgrade current operating equipment.
We have budgeted $9.2 million for research and development spending in fiscal
2001. We also have planned $52.7 million additional investment in our data
library (measured as the change in the balance sheet account). If demand for our
geophysical technologies continues to increase, we expect to increase our
expenditures and business investments in fiscal 2001 as we take advantage of
opportunities to expand our business. Because of the elapsed time between survey
execution, sale and ultimate cash receipt, multi-client work generally requires
greater amounts of working capital than contract work. Depending upon the timing
of the sales of the multi-client surveys and the contract terms relating to the
collection of the proceeds from such sales, our liquidity may be affected. While
we seek pre-funding commitments from customers for a portion of the cost of
these surveys, pre-funding levels do not generally affect our library spending.
We believe that these multi-client surveys have good long-term sales, earnings
and cash flow potential, but there is no assurance that we will recover the
costs of these surveys.

We will require substantial cash flow to continue operations on a
satisfactory basis, complete our capital expenditure and research and
development programs and meet our principal and interest obligations with
respect to outstanding indebtedness. While we believe that we have adequate
sources of funds to meet our liquidity needs, our ability to meet our
obligations depends on our future performance, which, in turn, is subject to
many factors beyond our control. Key internal factors affecting future results
include utilization levels of acquisition and processing assets and the level of
multi-client data library licensing, all of which are driven by the external
factors of exploration spending and, ultimately, underlying commodity prices.

To ensure that we have available as many financing options as possible, we
have filed a shelf registration allowing the issuance of up to $200 million in
debt, preferred stock or common stock. On October 26, 1999, we filed a
prospectus supplement relating to the sale of up to 2.0 million shares of our
common stock, from time to time through ordinary brokerage transactions, under
the shelf registration. As of August 31, 2000, we had issued approximately 1.3
million shares in connection with these transactions, generating approximately
$30 million in net proceeds.

S-14
<PAGE> 17

OTHER

Since our 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
additional 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. For
the year ended July 31, 2000, we recognized $2.1 million related to these
benefits, due to our U.K. operations increased profitability. (See Note 6 of
Notes to Consolidated Financial Statements.)

We receive some account receivable payments in foreign currency. We
currently do not conduct a hedging program because we do not consider our
current exposure to foreign currency fluctuations to be significant.

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. We will be required to
implement this statement in our first quarter of fiscal 2001. We have reviewed
the various elements of our business and determined that the implementation of
this standard will not have a material effect on our consolidated financial
position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

At July 31, 2000, we had no significant market risk related to foreign
currencies and had no derivative financial instruments. At July 31, 2000, we had
$135.0 million of 9 3/4% fixed rate debt maturing in October 2003 with a fair
value of $136.1 million based on the trading price of 100.85, with a yield to
maturity of 9.425% at July 31, 2000.

S-15
<PAGE> 18

BUSINESS

GENERAL

- Identify new areas where subsurface conditions are favorable for the
production of hydrocarbons.

- Determine the size and structure of previously identified oil and gas
fields.

- Optimize development and production of hydrocarbon reserves.

We acquire, process, and interpret geophysical data and produce geophysical
surveys that are either 2D or 3D images of the subsurface geology in the survey
area. We also produce 4D surveys, which record fluid movement in the reservoir,
by repeating specific 3D surveys over time. Additionally, we are increasingly
using geophysical data for reservoir characterization to enable our customers to
maximize their recovery of oil and natural gas.

We conduct our data acquisition operations as follows:

SERVICES AND MARKETS

We conduct geophysical surveys on both a contract and a multi-client basis.
The multi-client portion of our business has been steadily increasing as a
percentage of our revenues over the past three years, generating 52% of our
revenues in fiscal 2000, up from 41% in fiscal 1999 and 39% in fiscal 1998.

The high cost of acquiring and processing geophysical data on an exclusive
basis, particularly in frontier areas, has prompted many oil and gas companies
to increase their licensing of multi-client surveys. In response, we have added
significantly to our multi-client data library over the last three years,
increasing its size and geographic breadth, as well as enhancing the quality of
the data through advanced processing. Currently the library is comprised of more
than three million line kilometers of geophysical survey data, more than 65% of
which was acquired within the past three years. Approximately 95% of our data
library is 3D. The marine library covers areas in the Gulf of Mexico, the North
Atlantic, Southeast Asia, West Africa, North Africa, Canada and Brazil. The land
data library includes surveys in Texas, Alberta, Canada, Mississippi, Oklahoma
and Wyoming. We have enhanced certain of our data library surveys with advanced
processing techniques.

S-16
<PAGE> 19

These tables describe our revenues by contract type and geographic area.

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
REVENUES BY CONTRACT TYPE 2000 1999 1998
------------------------- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Contract work............................................. $171,213 $227,699 $324,873
Licensing of multi-client data............................ 181,866 161,206 204,086
-------- -------- --------
Total........................................... $353,079 $388,905 $528,959
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
REVENUES BY GEOGRAPHIC AREA 2000 1999 1998
--------------------------- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
United States............................................. $130,872 $203,667 $280,765
Canada.................................................... 95,686 32,325 47,059
Latin America............................................. 41,480 61,187 93,494
Europe.................................................... 35,388 35,850 51,089
Middle East/Africa........................................ 27,012 20,785 14,090
Asia Pacific.............................................. 22,641 35,091 42,462
-------- -------- --------
Total........................................... $353,079 $388,905 $528,959
======== ======== ========
</TABLE>

In fiscal 2000, 1999 and 1998, 63%, 48% and 47%, respectively, of our
revenues were attributable to non-U.S. operations and export sales. (See Note 13
of Notes to Consolidated Financial Statements for additional geographic
information.)

PRINCIPAL OPERATING ASSETS

We acquire, process, and interpret geophysical information utilizing a wide
array of assets as follows.

LAND ACQUISITION

Our land acquisition activities are performed with technologically advanced
geophysical equipment. The equipment, as of July 31, 2000, had a combined
recording capacity of 36,000 channels that can be configured to equip up to 17
crews for 3D operations.

Each crew consists of a surveying unit which lays out the lines to be
recorded and marks the site for shot-hole placement or equipment location, an
explosive or mechanical vibrating unit that produces the acoustical impulse and
a recording unit that synchronizes the shooting and captures the signal via
geophones. On a typical land geophysical survey, the geophysical crew is
supported by several drill crews, which are typically furnished by third parties
under short-term contracts. Drill crews operate in advance of the geophysical
crew and bore shallow holes for explosive charges which, when detonated by the
geophysical crew, produce the necessary acoustical impulse.

During fiscal 2000, we made significant progress in the development of the
Veritas Millennium II project, a plan to track and manage all aspects of
geophysical field operations from one remote location. The first phase of the
project involves the use of low earth-orbiting satellites to transmit data
directly from a surveyor's backpack in the field to a central control center
where the data is monitored and analyzed by experts. This allows for real-time
quality control and, via two-way satellite communication, permits immediate
intervention where required. The next phase in Millennium II is to make project
information available to clients in real-time via the internet.

S-17
<PAGE> 20

MARINE ACQUISITION

Marine acquisition activities are carried out by our crews operating from
both owned and chartered vessels that have been modified or equipped to our
specifications. All of the vessels we utilize are equipped to perform both 2D
and 3D geophysical surveys. During the last several years, a majority of the
marine geophysical data acquisition services we performed involved 3D surveys.
The following table sets forth certain information concerning the geophysical
vessels we operate.

<TABLE>
<CAPTION>
YEAR
ENTERED
VESSEL SERVICE LENGTH BEAM CHARTER EXPIRATION
------ ------- ------ ---- ------------------
<S> <C> <C> <C> <C>
Polar Princess...................... 1996 250 feet 46 feet October 2000 (1)
New Venture......................... 1999 250 feet 56 feet September 2001
Pacific Sword....................... 1999 189 feet 40 feet December 2001
Polar Search........................ 1992 300 feet 51 feet January 2002
Veritas Viking...................... 1998 305 feet 72 feet June 2006
Veritas Viking II................... 1999 305 feet 72 feet June 2007
Acadian Searcher.................... 1983 217 feet 44 feet Owned
</TABLE>

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

(1) Scheduled for decommissioning and return to its owner upon completion of
current survey. We plan to replace the Polar Princess with another chartered
vessel of upgraded capability.

Each vessel generally has an equipment complement consisting of geophysical
recording instrumentation, digital geophysical streamer cable, cable location
and geophysical data location systems, multiple navigation systems, a source
control system which controls the synchronization of the energy source and a
firing system which generates the acoustical impulses. Streamer cables contain
hydrophones that receive the acoustical impulses reflected by variations in the
subsurface strata. Data acquired by each channel in the digital cable is
transmitted to recording instruments for storage on magnetic media where some
processing sequences may be applied, thus reducing subsequent processing time
and the effective acquisition costs to the customer.

At present, five of our vessels are equipped with multiple streamers and
multiple energy sources. These vessels acquire more lines of data with each
pass, which reduces completion time and the effective acquisition cost. The
Veritas Viking and Viking II are both capable of deploying 12 streamer cables. A
substantial portion of our fiscal 2001 capital expenditure budget is allocated
to begin replacement of fluid-filled streamers with the latest state-of-the-art
solid streamers. These solid streamers are more efficient to use and maintain
and will improve the quality of our data.

DATA PROCESSING AND INTERPRETATION

We operate 19 data processing centers capable of processing 2D, 3D and 4D
data. A majority of our data processing services are performed on 3D seismic
data. The centers process data received from the field, both from our own and
other geophysical crews, to produce an image of the earth's subsurface using
proprietary computer software and techniques. We also reprocess older
geophysical data using new techniques designed to enhance the quality of the
data. Our data processing centers have opened at various times since 1966 and
are at present located in:

S-18
<PAGE> 21

<TABLE>
<CAPTION>
EUROPE/AFRICA/
NORTH AMERICA SOUTH AMERICA MIDDLE EAST ASIA PACIFIC
------------- ------------- -------------- ------------
<S> <C> <C> <C>
Houston Buenos Aires Crawley, England Singapore
Dallas Caracas Stavanger, Norway Perth
Midland, Texas Quito Aberdeen Jakarta
Denver Abu Dhabi Kuala Lumpur
Oklahoma City Lagos
New Orleans
Calgary
</TABLE>

Our processing centers operate high capacity, advanced technology data
processing systems, including systems based on NEC, Sun Microsystems and
Hewlett-Packard computer hardware, with high-speed networks. These systems run
our proprietary data processing software. The marine and land data acquisition
crews have software identical to that utilized in the processing centers,
allowing for ease in the movement of data from the field to the data processing
centers. We operate both land and marine data processing centers and tailor the
equipment and software deployed in an area to meet the local market demands.

To enhance our speed and capacity in processing large-scale offshore
surveys and performing complex 3D pre-stack depth migration, we upgraded our NEC
large vector supercomputers in Houston and Singapore to the latest SX-5
technology in fiscal 2000 and in Crawley in fiscal 2001. These supercomputer
installations act as global resources for all of our data processing operations.

We operate four state-of-the-art visualization centers in Houston, Calgary,
Perth and Crawley. These centers allow teams of geoscientists and engineers to
view and interpret large volumes of complex 3D data. The visualization centers
are elaborate imaging tools used for advanced interpretive techniques that
enhance the understanding of regional geology and reservoir modeling. These
visualization centers allow us to offer the type of collaborative geophysical
model building that is enabling oil companies to explore areas of complex
geology such as the large sub-salt plays in the deepwater Gulf of Mexico.

TECHNOLOGY AND CAPITAL EXPENDITURES

The geophysical industry is highly technical, and the requirements for the
acquisition and processing of geophysical data have evolved continuously during
the past 50 years. Accordingly, it is significant to us that our technological
capabilities are comparable or superior to those of our competitors. We maintain
our technological capabilities through continuing research and development,
strategic alliances with equipment manufacturers or by acquiring technology
under license from others. We have introduced several technological innovations
that have become industry standard practice in both acquisition and processing
of geophysical data.

Currently, we employ approximately 50 people in our research and
development activities, substantially all of whom are scientists, engineers or
programmers. During fiscal 2000, 1999 and 1998, research and development
expenditures were $8.3 million, $7.7 million, and $6.2 million, respectively.
Our research and development budget for fiscal 2001 is $9.2 million.

We rarely apply for patents on internally developed technology. This policy
is based upon the belief that most proprietary technology, even when regarded as
patentable, can be more effectively protected by maintaining confidentiality
than through disclosure and a patent enforcement program. Certain of the
equipment, processes and techniques we use are subject to the patent rights of
others, and we hold non-exclusive licenses with respect to a number of such
patents. While we regard access to others' technology through licensing as
beneficial, we believe that substantially all presently licensed technology
could be replaced without material disruption to our business should the need
arise.

S-19
<PAGE> 22

During fiscal 2000, 1999, and 1998, capital expenditures were $55.9
million, $52.4 million, and $99.5 million, respectively. Our capital expenditure
budget for fiscal 2001 is $83.8 million. The actual level of future capital
expenditures will depend on the availability of funding and market requirements
as dictated by oil and gas company spending levels. Much of this capital is
earmarked for the acquisition of additional leading edge equipment such as solid
streamers, new acquisition systems, data processing hardware, and
satellite-linked monitoring and quality control systems. With this new equipment
we will be able to acquire, process, and interpret data more efficiently and
effectively.

COMPETITION

The acquisition and processing of geophysical data for the oil and gas
industry has historically been highly competitive worldwide. Success in
marketing geophysical services is based on several competitive factors,
including price, crew experience, equipment availability, technological
expertise, reputation for quality and dependability and, in the case of
multi-client surveys, customer interest in the area surveyed.

As a result of changing technology and increased capital requirements, the
geophysical industry has consolidated substantially since the late 1980's. The
largest competitors remaining in the market are Western Geophysical (a division
of Baker Hughes), Schlumberger, Compagnie Generale Geophysique and Petroleum
Geo-Services. Schlumberger and Baker Hughes have announced an agreement to
combine their geophysical operations in a joint venture to be owned 70% by
Schlumberger and 30% by Baker Hughes. This joint venture, if consummated, would
combine the two largest competitors in the geophysical industry.

BACKLOG

At July 31, 2000, our backlog of commitments for services was $102.5
million, compared with $114.0 million at July 31, 1999. It is anticipated that a
majority of the July 31, 2000 backlog will be completed in the next 12 months.
This backlog consists of written orders or commitments believed to be firm.
Contracts for services are occasionally varied or modified by mutual consent and
in certain instances are cancelable by the customer on short notice without
penalty. As a result of these factors, our backlog as of any particular date may
not be indicative of our actual operating results for any succeeding period.

SIGNIFICANT CUSTOMERS

Historically, our principal customers have been major oil and gas
companies, national oil companies and independent oil and gas companies. In
fiscal 2000 and fiscal 1998 no customer accounted for 10% or more of total
revenues. In fiscal 1999 Royal Dutch/Shell and its subsidiaries accounted for
about 12% of our revenues.

EMPLOYEES

At July 31, 2000, we employed approximately 3,000 people on a full-time
basis. With the exception of 32 employees working at the Singapore data
processing center, none of our employees is subject to collective bargaining
agreements. We consider our relations with our employees to be good.

S-20
<PAGE> 23

MANAGEMENT

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David B. Robson.......................... 61 Director, Chairman of the Board, and
Chief Executive Officer
Stephen J. Ludlow........................ 50 Director, Vice Chairman
Timothy L. Wells......................... 47 President and Chief Operating Officer
Anthony Tripodo.......................... 47 Executive Vice President, Chief Financial
Officer and Treasurer
Rene M.J. VandenBrand.................... 42 Vice President -- Business Development
Larry L. Worden.......................... 48 Vice President, General Counsel and
Secretary
Clayton P. Cormier....................... 67 Director
Lawrence C. Fichtner..................... 55 Director
James R. Gibbs........................... 56 Director
Stephen J. Gilbert....................... 53 Director
Brian F. MacNeill........................ 61 Director
Jan Rask................................. 45 Director
</TABLE>

David B. Robson has been chairman of the board since consummation of the
business combination between Veritas DGC and Veritas Energy Services ("VES")
(the "Combination") in August 1996. He has also served as chief executive
officer from August 1996 through January 2000 and from July 2000 through the
present. Prior thereto, he held similar positions with VES or its predecessors
since 1974. Mr. Robson is also a director of Marine Drilling Companies, Inc.

Stephen J. Ludlow became vice chairman in January 1999. Prior to then he
held the position of president and chief operating officer since August 1996,
upon consummation of the Combination. He joined Veritas DGC in September 1971
and served as president and chief executive officer from 1994 to 1996. Prior to
1994, he served as executive vice president of Veritas DGC for four years
following eight years of service in a variety of progressively more responsible
management positions, including several years of service as the executive
responsible for operations in Europe, Africa and the Middle East.

Timothy L. Wells was appointed president and chief operating officer in
January 1999. He has been employed by Veritas DGC for 17 years, having served as
president of the Asia Pacific division, regional manager of North and South
American processing, manager of research and programming and in various other
capacities in North and South America.

Anthony Tripodo was appointed executive vice president, chief financial
officer and treasurer in April 1997. Prior thereto, he was employed by Baker
Hughes Incorporated for sixteen years in various financial management
capacities, most recently as vice president of finance and administration for
its Baker Performance Chemicals Incorporated unit. Prior to his service with
Baker Hughes, Mr. Tripodo was employed by the accounting firm of Price
Waterhouse from 1974 to 1980.

Rene M.J. VandenBrand became vice president -- business development in
August 1996, upon consummation of the Combination. Prior thereto, he had been
vice president -- finance and secretary of VES since November 1995, following
two years of service in comparable positions with Taro Industries Limited. He
was previously a partner of Coopers & Lybrand Chartered Accountants in Calgary,
Alberta.

Larry L. Worden was appointed vice president, general counsel and secretary
in December 1998. For ten years prior to that, Mr. Worden served as vice
president and general counsel of King Ranch, Inc., a privately held Texas
corporation. Prior to that he held positions at National Gypsum Company and two
private law firms.

S-21
<PAGE> 24

Clayton P. Cormier is currently a financial and insurance consultant. Prior
to that, Mr. Cormier was a senior vice president in the oil and gas division of
Johnson & Higgins, an insurance broker, from 1986 to 1991 and previously served
as chairman of the board, president, and chief executive officer of Ancon
Insurance Company, S.A. and as an assistant treasurer of Exxon.

Lawrence C. Fichtner, is president of Entrada Management. Mr. Fichtner
retired from his position as executive vice president - corporate communications
of Veritas DGC in December 1998, a position he had held since August 1996, upon
consummation of the Combination. Prior to that, he had been executive vice
president of VES or its predecessors since 1978. During the ten years prior to
joining VES, he held various positions as a geophysicist with Geophysical
Services Inc., Texaco Exploration Ltd. and Bow Valley Exploration Ltd.

James R. Gibbs is chairman, president and chief executive officer of
Frontier Oil Corporation, an oil refining and marketing company. He has been
chairman since January 1999, chief executive officer since 1992 and president
since 1987. He has been employed there for eighteen years. Mr. Gibbs is a
director of Frontier Oil Corporation, Smith International, Gundle/SLT
Environmental, Inc., Talon International Energy Ltd. and is an advisory director
of Frost Bank.

Steven J. Gilbert has been chairman of Gilbert Global Equity Partners, L.P.
since 1997. From 1992 to 1997 he was managing general partner of Soros Capital
L.P., the principal venture capital and leveraged transaction entity of Quantum
Group of Funds, and was a principal advisor to Quantum Industrial Holdings Ltd.
From 1988 to 1992, he was the managing director of Commonwealth Capital
Partners, L.P., a private equity investment fund and from 1984 to 1988, Mr.
Gilbert was the managing general partner of Chemical Venture Partners, which he
founded. Mr. Gilbert is a director of The Asian Infrastructure Fund (IRL), LLC
International Inc. (Nasdaq) and OneTel, Ltd (AUS).

Brian F. MacNeill is currently chief executive officer and, prior to
September 2000, had been president and chief executive officer of Enbridge Inc.,
a crude oil and liquids transportation and natural gas distribution company and
formerly IPL Energy Inc. ("IPL"), since 1991. He was executive vice president
and chief operating officer of IPL or its predecessors from 1990 to 1991 and
previously served as chief financial officer of Interhome Energy, Inc. and Home
Oil Company Limited and as vice president and treasurer of Hiram Walker
Resources Ltd.

Jan Rask has been president, chief executive officer and director of Marine
Drilling Companies, Inc. since July 1996. Mr. Rask served as president and chief
executive officer of Arethusa (Off-Shore) Limited ("Arethusa") from May 1993
until the acquisition of Arethusa by Diamond Offshore Drilling, Inc. in April
1996. Mr. Rask joined Arethusa's principal operating subsidiary in 1990 as its
president and chief executive officer.

S-22
<PAGE> 25

PRINCIPAL STOCKHOLDERS

The following table shows the beneficial ownership of our common stock
(including the exchangeable shares of our subsidiary, which vote with the common
stock) at September 25, 2000, by (i) each person who is known to us to own
beneficially more than 5% of our outstanding common stock, (ii) our directors,
(iii) our chief executive officer and certain of our other executive officers
and (iv) our directors and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES(1)
------------------------------------ PERCENT OF
NAME SHARES OPTIONS(2) TOTAL CLASS
---- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
David B. Robson............................ 1,254,888(3) 110,545 1,365,433 5.0
Clayton P. Cormier......................... 2,004 11,250 13,254 *
Lawrence C. Fichtner....................... 3,004 69,427 72,431 *
James R. Gibbs............................. 1,000 6,875 7,875 *
Steven J. Gilbert.......................... 1,437 11,250 12,687 *
Stephen J. Ludlow.......................... 9,626 32,374 42,000 *
Brian F. MacNeill.......................... 4,000 19,917 23,917 *
Jan Rask................................... -- 4,125 4,125 *
Anthony Tripodo............................ 5,677 25,353 31,030 *
Rene M.J. VandenBrand...................... 2,863(4) 26,138 29,001 *
Timothy L. Wells........................... -- 13,476 13,476 *
Larry L. Worden............................ 1,938 6,216 8,154 *
All directors and executive officers as a
group (12 persons named above)........... 1,286,437 336,946 1,623,383 5.96
GeoCapital LLC............................. 1,631,135 -- 1,631,135 5.98
767 Fifth Avenue
New York, NY 10153-4590
</TABLE>

---------------
* Does not exceed one percent

(1) Each person has sole voting and investment power with respect to the shares
listed except as otherwise specified.
(2) Represents options exercisable or which will be exercisable within 60 days.
(3) Includes 1,200 shares of common stock held by spouse.
(4) Includes 2,500 shares of common stock held by a minor child.

S-23
<PAGE> 26

UNDERWRITING

Veritas DGC and the underwriters for the offering named below have entered
into an underwriting agreement and a pricing agreement with respect to the
shares of common stock being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co......................................... 1,500,000
Dain Rauscher Incorporated.................................. 750,000
Simmons & Company International............................. 750,000
---------

Total............................................. 3,000,000
=========
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 450,000
shares from Veritas DGC to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Veritas DGC. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase 450,000 additional shares.

<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share...................................... $ 1.39 $ 1.39
Total.......................................... $4,170,000 $4,795,500
</TABLE>

Shares of common stock sold by the underwriters to the public will
initially be offered at the initial price to public set forth on the cover of
this prospectus supplement. Any shares of common stock sold by the underwriters
to securities dealers may be sold at a discount of up to $0.83 per share from
the initial price to public. Any such securities dealers may resell any shares
purchased from the underwriters to certain other brokers or dealers at a
discount of up to $0.10 per share from the initial price to public. If all the
shares are not sold at the initial price to public, the underwriters may change
the offering price and the other selling terms.

Veritas DGC and its executive officers and directors have agreed with the
underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus supplement continuing through the date 90 days
after the date of this prospectus supplement, except with the prior written
consent of the underwriters. This agreement does not apply to any existing
employee benefit plans.

In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of our common
stock while this offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased shares sold by
or for the account of such underwriter in stabilizing or short covering
transactions.

S-24
<PAGE> 27

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of our common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the New York
Stock Exchange, the Toronto Stock Exchange, in the over-the-counter market or
otherwise.

Veritas DGC estimates that its share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $400,000.

Veritas DGC has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

VALIDITY OF THE COMMON STOCK

The validity of the shares of our common stock offered hereby will be
passed upon for us by Fulbright & Jaworski L.L.P. and for the underwriters by
Vinson & Elkins L.L.P., Houston, Texas.

EXPERTS

We have included the consolidated financial statements as of July 31, 2000
and 1999 and for each of the three years in the period ended July 31, 2000 in
this prospectus supplement in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

S-25
<PAGE> 28

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Statements of Income and Comprehensive Income
for the Three Years Ended July 31, 2000................... F-3
Consolidated Balance Sheets as of July 31, 2000 and 1999.... F-4
Consolidated Statements of Cash Flows for the Three Years
Ended July 31, 2000....................................... F-5
Consolidated Statements of Changes in Stockholders' Equity
for the Three Years Ended July 31, 2000................... F-7
Notes to Consolidated Financial Statements.................. F-8
Financial Statement Schedule --Valuation and Qualifying
Accounts.................................................. F-29
</TABLE>

F-1
<PAGE> 29

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Veritas DGC Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and comprehensive income, of changes
in stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Veritas DGC Inc. and its subsidiaries at
July 31, 2000 and 1999 and the results of their operations and their cash flows
for each of the three years in the period ended July 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
September 26, 2000

F-2
<PAGE> 30

VERITAS DGC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues.................................................... $353,079 $388,905 $528,959
Costs and expenses:
Cost of services.......................................... 232,366 258,307 340,700
Research and development.................................. 8,316 7,693 6,196
Depreciation and amortization............................. 71,468 68,435 56,121
Selling, general and administrative....................... 17,710 16,734 18,758
Interest expense.......................................... 14,123 12,623 7,318
Other income.............................................. (3,269) (5,050) (338)
-------- -------- --------
Total costs and expenses.......................... 340,714 358,742 428,755
Income before provision for income taxes and equity in
(earnings) loss of joint venture.......................... 12,365 30,163 100,204
Provision for income taxes.................................. 5,006 9,566 34,218
Equity in (earnings) loss of joint venture.................. 691 303 (972)
-------- -------- --------
Net income before extraordinary item........................ 6,668 20,294 66,958
Extraordinary (loss) on debt repurchase (net of tax of
$95)...................................................... (187)
-------- -------- --------
Net income.................................................. $ 6,481 $ 20,294 $ 66,958
Other comprehensive income (loss) (net of tax of $0 in all
periods)
Foreign currency translation adjustments.................. 581 (692) (2,597)
Unrealized loss on investments -- available for sale...... (1,058) (557)
-------- -------- --------
Comprehensive income........................................ $ 6,004 $ 19,045 $ 64,361
======== ======== ========
Per share:
Basic:
Net income per common share before extraordinary
item................................................. $ .26 $ .89 $ 2.96
Loss per common share from extraordinary item.......... (.01)
-------- -------- --------
Net income per common share............................ $ .25 $ .89 $ 2.96
======== ======== ========
Weighted average common shares......................... 25,485 22,733 22,594
======== ======== ========
Diluted:
Net income per common share before extraordinary
item................................................. $ .26 $ .88 $ 2.87
Loss per common share from extraordinary item.......... (.01)
-------- -------- --------
Net income per common share............................ $ .25 $ .88 $ 2.87
======== ======== ========
Weighted average common shares......................... 26,114 23,001 23,315
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements
F-3
<PAGE> 31

VERITAS DGC INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31,
---------------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 43,154 $ 73,447
Restricted cash investments............................... 206 300
Accounts and notes receivable (net of allowance: 2000,
$1,749; 1999, $3,038)................................... 117,242 113,761
Materials and supplies inventory.......................... 5,055 4,417
Prepayments and other..................................... 6,435 8,259
Investments -- available for sale......................... 3,984 3,671
-------- --------
Total current assets................................ 176,076 203,855
Property and equipment:
Land...................................................... 7,256 6,837
Geophysical equipment..................................... 252,464 212,725
Data processing equipment................................. 87,377 76,320
Geophysical ship.......................................... 8,524 8,524
Leasehold improvements and other.......................... 53,663 52,991
-------- --------
Total............................................... 409,284 357,397
Less accumulated depreciation........................... 262,706 201,026
-------- --------
Property and equipment -- net....................... 146,578 156,371
Multi-client data library................................... 231,274 138,753
Investment in and advances to joint venture................. 1,949 2,640
Goodwill (net of accumulated amortization: 2000, $4,984;
1999, $3,683)............................................. 11,064 2,159
Deferred tax asset.......................................... 34,064 23,120
Long-term notes receivable (net of allowance: $1,000 in both
periods).................................................. 3,579 3,696
Other assets................................................ 7,224 11,252
-------- --------
Total............................................... $611,808 $541,846
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt...................... $ 106 $ 240
Accounts payable -- trade................................. 37,434 26,243
Accrued interest.......................................... 3,856 4,010
Other accrued liabilities................................. 39,620 48,640
Income taxes payable...................................... 2,116 5,472
-------- --------
Total current liabilities........................... 83,132 84,605
Non-current liabilities:
Long-term debt -- less current maturities................. 135,000 135,011
Other non-current liabilities............................. 10,732 6,672
-------- --------
Total non-current liabilities....................... 145,732 141,683
Commitments and contingent liabilities (See Note 7)
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: 25,069,834 and 21,470,938 shares
(excluding 2,014,205 and 1,505,595 exchangeable shares,
respectively) at July 31, 2000 and 1999, respectively... 251 214
Additional paid-in capital................................ 269,355 208,749
Accumulated earnings (from August 1, 1991 with respect to
Digicon Inc.)........................................... 121,133 114,652
Accumulated comprehensive income:
Cumulative foreign currency translation adjustment...... (3,771) (4,352)
Unrealized loss on investments -- available for sale.... (1,615) (557)
Unearned compensation....................................... (597) (602)
Treasury stock, at cost; 104,175 and 150,068 shares at July
31, 2000 and 1999, respectively........................... (1,812) (2,546)
-------- --------
Total stockholders' equity.......................... 382,944 315,558
-------- --------
Total............................................... $611,808 $541,846
======== ========
</TABLE>

See Notes to Consolidated Financial Statements
F-4
<PAGE> 32

VERITAS DGC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income.............................................. $ 6,481 $ 20,294 $ 66,958
Non-cash items included in net income:
Depreciation and amortization......................... 71,468 68,435 56,121
Loss on disposition of property and equipment......... 316 849 1,549
Equity in (earnings) loss of joint venture............ 691 303 (972)
Amortization of multi-client data library (Note 1).... 887 1,563 689
Deferred taxes........................................ (7,806) 678 (7,314)
Amortization of unearned compensation................. 1,065 466
Change in operating assets/liabilities:
Accounts and notes receivable......................... (1,457) 32,053 (30,874)
Materials and supplies inventory...................... (609) (311) (1,773)
Prepayments and other................................. 965 8,386 (5,861)
Multi-client data library............................. (92,203) (87,967) (30,928)
Accounts payable and other accrued liabilities........ (1,857) (27,905) 13,173
Income taxes payable.................................. (1,482) (5,210) 7,196
Other non-current liabilities......................... 4,060 1,601 604
Other................................................. 3,368 5,364 (5,598)
-------- -------- --------
Total cash (used in) provided by operating
activities.................................... (16,113) 18,599 62,970
Financing activities:
Payments of long-term debt.............................. (5,988) (310) (410)
Borrowings from long-term debt.......................... 5,669 60,000
Debt issue costs........................................ (37) (1,882)
Net proceeds from sale of common stock.................. 32,749 1,586 6,131
Purchase of treasury stock.............................. (149) (2,850) (1,727)
-------- -------- --------
Total cash provided by financing activities...... 32,244 56,544 3,994
Investing activities:
Decrease (increase) in restricted cash investments...... 94 (114) 364
Decrease in investment in and advances to joint
ventures.............................................. 937
Acquisitions, net of cash received...................... (2,705) (704)
Sale of KC Offshore, net................................ 6,935
Purchase of property and equipment...................... (55,782) (42,366) (97,106)
Sale of property and equipment.......................... 5,045 2,091 221
-------- -------- --------
Total cash used in investing activities.......... (46,413) (41,093) (95,584)
Currency (gain) loss on foreign cash.................... (11) (692) (2,468)
-------- -------- --------
Change in cash and cash equivalents..................... (30,293) 33,358 (31,088)
Beginning cash and cash equivalents balance............. 73,447 40,089 71,177
-------- -------- --------
Ending cash and cash equivalents balance................ $ 43,154 $ 73,447 $ 40,089
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements
F-5
<PAGE> 33

VERITAS DGC INC. AND SUBSIDIARIES

SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
---------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Schedule of non-cash investing and financing activities:
Increase in property and equipment for accounts
payable -- trade....................................... $ 102 $10,004 $ 2,443
Utilization of net operating losses existing prior to the
quasi-reorganization resulting in an increase
(decrease) in:
Deferred tax asset valuation allowance................. (2,080) (4,641) (1,630)
Additional paid-in capital............................. 2,080 4,641 1,630
Treasury stock issued for purchase of Time Seismic
Exchange Ltd........................................... 664
Treasury stock issued in lieu of cash for bonuses
payable................................................ 974
Treasury stock issued for future services resulting in an
increase (decrease) in:
Additional paid-in-capital............................. 177 (126)
Unearned compensation.................................. 1,060 280
Restricted stock issued for future services resulting in increase in:
Additional paid-in-capital............................. 42 915
Unearned compensation.................................. 42 915
Settlement of accounts receivable for long-term notes
receivable, net........................................ 3,696
Settlement of accounts receivable and interest payments
for Investments-available for sale..................... 1,371 3,809
Common stock issued for purchase of Enertec Resource
Services Inc........................................... 25,637
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amounts capitalized)
Senior notes......................................... 13,164 10,028 6,513
Equipment purchase obligations....................... 28 39 113
Credit agreements.................................... 170 53
Other................................................ 169 780 603
Income taxes........................................... 10,377 11,875 33,369
</TABLE>

See Notes to Consolidated Financial Statements
F-6
<PAGE> 34

VERITAS DGC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
COMMON STOCK
ISSUED ACCUMULATED
------------ TREASURY STOCK, EARNINGS (FROM
AT COST ADDITIONAL AUGUST 1, 1991 ACCUMULATED
PAR --------------- PAID-IN- WITH RESPECT TO UNEARNED COMPREHENSIVE
SHARES VALUE SHARES COST CAPITAL DIGICON INC.) COMPENSATION LOSS
------ ----- ------ ---- ---------- --------------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1997.... 19,982,040 $200 $194,764 $ 27,400 $(1,063)
Common stock issued for
exchangeable stock....... 871,818 9 (9)
Common stock issued for
cash upon exercise of
warrants................. 42,000 189
Common stock issued to
employees................ 407,007 4 6,704 (746)
Common stock reacquired
for cash, including
fees..................... (50,000) (1,727)
Registration and filing
costs.................... (20)
Utilization of net
operating loss
carryforwards existing
prior to
quasi-reorganization..... 1,630
Cumulative foreign
currency transaction
adjustment............... (2,597)
Net income................ 66,958
---------- ---- -------- ------- -------- -------- ------- -------
BALANCE, JULY 31, 1998.... 21,302,865 $213 (50,000) $(1,727) $203,258 $ 94,358 $ (746) $(3,660)
Common stock issued for
exchangeable stock....... 200
Common stock issued to
employees................ 167,873 1 2,031 (42)
Common stock reacquired
for cash, including
fees..................... (249,000) (3,917)
Treasury stock issued
under key contributor
incentive plan........... 80,272 1,626 (652)
Treasury stock issued in
Connection with Time
Seismic Exchange Ltd
acquisition.............. 44,898 1,066 (402)
Treasury stock issued for
services under restricted
stock agreements......... 23,762 406 (126) (280)
Registration and filing
costs.................... (1)
Utilization of net
operating loss
carryforwards existing
prior to
quasi-reorganization..... 4,641
Cumulative foreign
currency transaction
adjustment............... (692)
Amortization of unearned
compensation............. 466
Loss on
investments -- available
for sale................. (557)
Net income................ 20,294
---------- ---- -------- ------- -------- -------- ------- -------
BALANCE, JULY 31, 1999.... 21,470,938 $214 (150,068) $(2,546) $208,749 $114,652 $ (602) $(4,909)
Common stock issued for
exchangeable stock....... 1,928,917 19 (19)
Common stock issued to
employees................ 479,779 6 5,873
Common stock issued for
cash..................... 1,190,200 12 27,247
Treasury stock issued for
services under restricted
stock agreements......... 45,893 734 189 (1,060)
Registration and filing
fees..................... (401)
Class A Exchangeable
Shares issued in Enertec
acquisition.............. 25,637
Utilization of net
operating loss
carryforwards existing
prior to
quasi-reorganization..... 2,080
Cumulative foreign
currency transaction
adjustment............... 581
Amortization of unearned
compensation............. 1,065
Loss on
investments -- available
for sale................. (1,058)
Net income................ 6,481
---------- ---- -------- ------- -------- -------- ------- -------
BALANCE, JULY 31, 2000.... 25,069,834 $251 (104,175) $(1,812) $269,355 $121,133 $ (597) $(5,386)
========== ==== ======== ======= ======== ======== ======= =======
</TABLE>

See Notes to Consolidated Financial Statements
F-7
<PAGE> 35

VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2000, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

We provide integrated geophysical technologies to the petroleum industry
worldwide. The accompanying consolidated financial statements include our
accounts and the accounts of majority-owned domestic and foreign subsidiaries.
Investment in an 80% owned joint venture is accounted for on the equity method
due to provisions in the joint venture agreement that give minority shareholders
the right to exercise control. 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. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

RECLASSIFICATION OF PRIOR YEAR BALANCES

Certain prior year balances have been reclassified for consistent
presentation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial instruments include cash and short-term investments,
restricted cash investments, accounts and notes receivable, accounts payable and
debt. The fair market value of the $135.0 million senior notes included in
long-term debt is $136.1 million based on the trading price of 100.85 with a
yield to maturity of 9.425% at July 31, 2000. The carrying value is a reasonable
estimate of fair value for all other financial instruments.

NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

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. We are required to
implement this statement in our first quarter of fiscal 2001. We have reviewed
the various elements of our business and determined that the implementation of
this standard will not have a material effect on our consolidated financial
position or results of operations.

TRANSLATION OF FOREIGN CURRENCIES

The U.S. dollar is the functional currency of all of our operations except
Canada, which uses the Canadian dollar as its functional currency. Currency
gains and losses result from the remeasurement of assets and liabilities
denominated in currencies other than their functional currency. (See Note 11)

F-8
<PAGE> 36
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CASH EQUIVALENTS

For purposes of the Consolidated Statements of Cash Flows, we define "cash
equivalents" as items readily convertible into known amounts of cash with
original maturities of three months or less.

RESTRICTED CASH INVESTMENTS

Restricted cash investments in the amounts of $206,000 and $300,000 at July
31, 2000 and 1999, respectively, were pledged as collateral on certain bank
guarantees related to contracts entered into in the normal course of business.

ACCOUNTS RECEIVABLE

Included in accounts and notes receivable at July 31, 2000 and 1999, are
unbilled amounts of approximately $52.7 million and $35.2 million, respectively.
Such amounts are not billable to the customer at July 31 in accordance with the
provisions of the contract and generally will be billed in one to four months.

INVENTORIES

Inventories of materials and supplies are stated at the lower of average
cost or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method based on estimated useful lives as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
IN YEARS
-----------
<S> <C>
Geophysical equipment.................................. 3-5
Data processing equipment.............................. 3
Geophysical vessels.................................... 5
Leasehold improvements and other....................... 3-10
</TABLE>

Expenditures for routine repairs and maintenance are charged to expense as
incurred. Planned major maintenance projects such as dry-docking are accrued in
advance of the actual cash expenditure. Such accruals were $3.0 million and $2.6
million at July 31, 2000 and 1999, respectively. Expenditures for additions and
improvements, including capitalized interest, are capitalized and depreciated
over the estimated useful life of the related asset. The net gain or loss on
property and equipment that is disposed is included in other costs and expenses.
(See Note 11)

MULTI-CLIENT DATA LIBRARY

We collect and process geophysical data for our own account and retain all
ownership rights. We license the data to clients on a non-transferable basis. We
capitalize associated costs using an estimated sales method. Under that method
the amount capitalized equals actual costs incurred less costs attributed to the
pre-committed sales contracts, if any, based on the percentage of total
estimated costs to total estimated sales multiplied by actual sales. The
capitalized cost of multi-client data library is likewise charged to cost of
services in the period subsequent sales occur based on the percentage of total
estimated costs to total estimated sales
F-9
<PAGE> 37
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

multiplied by actual sales. For marine surveys, any costs remaining 24 months
after completion of a survey are charged to cost of services over a period not
to exceed 24 months. For land surveys any costs remaining 36 months after
completion of a survey are charged to cost of services over a period not to
exceed 24 months. These periods of 48 and 60 months, respectively, represent the
periods over which benefits from these surveys are expected to be derived. We
periodically review the carrying value of the multi-client data library to
assess whether there has been a permanent impairment of value and record losses
when it is determined that estimated sales would not be sufficient to cover the
carrying value of the asset. We have recorded no such losses in the years ended
July 31, 2000, 1999 and 1998.

GOODWILL

For acquisitions accounted for under the purchase method, we record the
purchase price of businesses or joint venture interests in excess of the fair
value of net assets acquired as goodwill which is amortized using the
straight-line method over a period of 10 to 20 years which approximates the
period in which benefits are expected to be derived. We periodically review the
carrying value of goodwill in relation to the current and expected operating
results of the businesses or joint ventures in order to assess whether there has
been a permanent impairment of such amounts.

MOBILIZATION COST

Transportation and other expenses incurred prior to commencement of
geophysical operations in an area, that would not have been incurred otherwise,
are deferred and amortized over the lesser of the term of the related contract
or backlog of contracts in that area or one year. Amounts applicable to
operations performed for our own account are included in the cost of the
multi-client data library. Included in other assets at July 31, 2000 and 1999,
are unamortized mobilization costs approximating $2.8 million and $1.2 million,
respectively.

LEASES

Operating leases include those for office space, specialized geophysical
equipment, and our geophysical vessels, which are chartered on a relatively
short-term basis.

REVENUES

Revenues from the licensing of multi-client data surveys are based upon
agreed rates set forth in the contract and are recognized upon delivery of such
data. Revenues from contract services are recognized on the
percentage-of-completion method measured by the amount of data collected or
processed to the total amount of data to be collected or processed or by time
incurred to total time expected to be incurred. Revenues generated from external
pre-funding of data library projects are recognized on a similar
percentage-of-completion method, modified slightly to account for the timing of
pre-funding.

STOCK-BASED COMPENSATION

We maintain stock-based compensation plans that are accounted for using the
intrinsic value based method allowed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations.
Under that method, compensation expense is recorded in the accompanying
consolidated financial statements when the quoted market price of stock at the
grant date or other measurement date exceeds the amount an employee must pay to
acquire the stock. As required by SFAS No. 123, "Accounting for Stock-Based
Compensa-
F-10
<PAGE> 38
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tion," the effect on net income and earnings per share of compensation expense
that would have been recorded using the fair value based method is reported
through disclosure. (See Note 8.)

EARNINGS PER SHARE

The computation of earnings per share -- basic is based on the weighted
average common shares outstanding (including the exchangeable shares -- see
Notes 2 and 10). The computation of earnings per share -- diluted is based upon
the weighted average common shares outstanding (including the exchangeable
shares) and additional common shares, utilizing the treasury stock method and
average market prices, that would have been outstanding if dilutive potential
common shares had been issued. (See Note 12.)

2. PURCHASE OF ENERTEC RESOURCE SERVICES INC.

On September 30, 1999, Veritas DGC, Veritas Energy Services Inc. ("VES")
and Enertec Resource Services Inc. ("Enertec"), a Canadian company, consummated
a business combination (the "Combination") whereby Enertec became a wholly owned
subsidiary of VES. As a result of the Combination, each share of Enertec stock
was converted into the right to receive VES Class A Exchangeable Series 1 stock
(the "Class A shares) at an exchange ratio of 0.345 of a Class A share for each
share of Enertec. All of the holders of Enertec common shares became holders of
Class A shares and accordingly, 2,437,527 Class A shares were issued. Each Class
A share is convertible, at the option of the holder, into one share of common
stock of Veritas DGC. Outstanding options to purchase shares of Enertec stock
were converted into options to purchase approximately 236,000 shares of common
stock of Veritas DGC.

The total purchase price of Enertec was approximately $28.0 million,
comprised of approximately $24.7 million of stock, $0.9 million of our stock
options and $2.4 million of business combination costs. The acquisition was
accounted for as a purchase with the allocation of purchase price, in accordance
with APB 16, yielding approximately $4.9 million of current assets, $13.4
million of property and long-term assets, $2.6 million of liabilities and $12.3
million of goodwill. Goodwill is being amortized over ten years.

On April 28, 2000 we sold our marine high-resolution survey business, KC
Offshore, L.L.C. and its subsidiary Kinco Operating, Inc., to the Racal
Corporation for $6.9 million.

Pro forma revenue, net income before extraordinary item, net income and
earnings per share of the combined Veritas DGC/Enertec entity, presented as if
the Combination had occurred on August 1, 1999 and 1998, are shown below. This
pro forma financial information is not

F-11
<PAGE> 39
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

necessarily indicative of the actual results that would have been achieved had
the Combination occurred at the beginning of the periods presented.

<TABLE>
<CAPTION>
FOR THE YEARS
ENDED JULY 31,
---------------------
2000 1999
---- ----
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $ 355,467 $ 414,696
Net income before extraordinary item........................ $ 5,251 $ 16,723
Net income.................................................. $ 5,064 $ 16,723
Earnings per share:
Basic
Net income per common share before extraordinary
item................................................. $ .20 $ .66
Net income per common share............................ $ .20 $ .66
Diluted
Net income per common share before extraordinary
item................................................. $ .20 $ .66
Net income per common share............................ $ .19 $ .66
</TABLE>

3. INVESTMENT IN INDONESIAN JOINT VENTURE

Below is financial information for our 80% owned 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.

<TABLE>
<CAPTION>
JULY 31,
-------------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Current assets.............................................. $ 830 $ 1,380
Property and equipment, net................................. 114 314
Multi-client data library................................... 3,070
-------- --------
Total assets...................................... $ 4,014 $ 1,694
======== ========
Current liabilities......................................... $ 234 $ 438
Advances from affiliates.................................... 15,727 12,479
Stockholders' deficit:
Common stock.............................................. 2,576 2,576
Accumulated deficit....................................... (14,523) (13,799)
-------- --------
Total stockholders' deficit....................... (11,947) (11,223)
-------- --------
Total liabilities and stockholders' deficit....... $ 4,014 $ 1,694
======== ========
</TABLE>

F-12
<PAGE> 40
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................. $1,299 $2,472 $3,346
Costs and expenses:
Cost of services....................................... 1,658 2,435 2,378
Depreciation and amortization.......................... 370 340 316
Other.................................................. (38) (320)
------ ------ ------
Total costs and expenses............................ 1,990 2,775 2,374
------ ------ ------
Net income (loss)........................................ $ (691) $ (303) $ 972
====== ====== ======
</TABLE>

During the years ended July 31, 2000, 1999 and 1998, we charged P.T.
Digicon $281,000, $157,000 and $368,000, respectively, relating to allocations
of corporate administrative expenses and actual expenses incurred by P.T.
Digicon for salary cost, insurance and equipment charges. Advances from us to
P.T. Digicon of $15.7 million and $12.5 million at July 31, 2000 and 1999,
respectively, have no formal repayment terms and do not bear interest.

4. LONG-TERM DEBT

Long-term debt is as follows:

<TABLE>
<CAPTION>
JULY 31,
-------------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Senior notes due October 2003, at 9 3/4%.................... $135,000 $135,000
Equipment purchase obligations maturing through September
2000 at 10%............................................... 251
Equipment purchase obligations maturing through July 2001 at
8.97%..................................................... 106
-------- --------
Total............................................. 135,106 135,251
Less current maturities..................................... 106 240
-------- --------
Due after one year................................ $135,000 $135,011
======== ========
</TABLE>

The senior notes are due in October 2003 with interest payable
semi-annually at 9 3/4% per annum. The senior notes are unsecured and are
effectively subordinated to all of our secured debt, with respect to the assets
securing such debt, and to all debt of our subsidiaries whether secured or
unsecured. The indenture relating to the senior notes contains certain covenants
that limit our ability to, among other things, incur additional debt, pay
dividends and complete mergers, acquisitions and sales of assets. Upon a change
in our control, as defined in the indenture, each holder of the senior notes has
the right to require us to purchase all or a portion of such holder's senior
note at a price equal to 101% of the aggregate principal amount. We have the
right to redeem the senior notes, in whole or part, on or after October 15,
2000. On September 24, 1999, we repurchased $5.5 million of 9 3/4% senior notes
on the open market at a price of $5.7 million, resulting in an extraordinary
loss of $0.2 million, net of tax. On December 3, 1999, we reissued $1.0 million
of 9 3/4% senior notes at a price of $1.0 million. On December 10, 1999, we
reissued $4.6 million of 9 3/4% senior notes at a price of $4.7 million.

F-13
<PAGE> 41
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

We maintain a revolving credit agreement due July 2001 with commercial
lenders that provides for advances up to $50.0 million. Advances are limited by
a borrowing base, which is in excess of the credit limit at July 31, 2000 and
bears interest, at our election, at LIBOR plus a margin based on certain
financial ratios maintained by us or prime rate. Advances are secured by certain
accounts receivable. Covenants in the agreement limit, among other things, our
right to take certain actions, including creating indebtedness. In addition, the
agreement requires us to maintain certain financial ratios. No advances were
outstanding at July 31, 2000 and July 31, 1999, under the credit agreement,
although $5.9 million in letters of credit had been issued under the facility.

Our equipment purchase obligations represent installment loans and
capitalized lease obligations primarily related to computer and geophysical
equipment.

Annual maturities of long-term debt for the next five years are as follows:

<TABLE>
<CAPTION>
ANNUAL
FISCAL YEAR MATURITIES
----------- ----------
(IN THOUSANDS)
<S> <C>
2001.............................................. $ 106
2002..............................................
2003.............................................. 135,000
2004..............................................
2005..............................................
--------
Total................................... $135,106
========
</TABLE>

During the year ended July 31, 2000, we incurred interest costs of $14.1
million. For the years ended July 31, 1999 and 1998, we capitalized $185,000 and
$800,000, respectively. No amount was capitalized for the year ended July 31,
2000. The capitalized amount represents costs for leasehold improvements to a
chartered vessel.

5. OTHER ACCRUED LIABILITIES

Other accrued liabilities include the following:

<TABLE>
<CAPTION>
JULY 31,
-----------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits................................ $ 9,442 $ 5,518
Deferred revenue............................................ $15,370 $10,717
Accrued taxes other than income............................. $ 4,255 $12,086
</TABLE>

F-14
<PAGE> 42
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

Pretax income was taxed under the following jurisdictions:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. ............................................... $11,019 $34,560 $ 90,690
Non-U.S. ........................................... 1,346 (4,397) 9,514
------- ------- --------
Total..................................... $12,365 $30,163 $100,204
======= ======= ========
</TABLE>

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current -- U.S. .................................... $ 5,643 $ 4,916 $36,616
Deferred -- U.S. ................................... (2,316) 3,939 (5,469)
Current -- Non-U.S. ................................ 3,663 3,742 4,952
Deferred -- Non-U.S. ............................... (1,984) (3,031) (1,881)
------- ------- -------
Total..................................... $ 5,006 $ 9,566 $34,218
======= ======= =======
</TABLE>

A reconciliation of income tax expense computed at the U.S. statutory rate
to the provision reported in the consolidated statements of income is as
follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
----------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax at the U.S. statutory rate............... $ 4,328 $10,557 $35,071
Increase (reduction) in taxes resulting from:
Tax effect resulting from foreign activities...... 2,677 (2,708) (1,158)
Prior year adjustments............................ (1,364) 890 670
State Income Tax.................................. 195 474 590
Other............................................. (830) 353 (955)
------- ------- -------
Total..................................... $ 5,006 $ 9,566 $34,218
======= ======= =======
</TABLE>

The tax effect resulting from foreign activities category includes non-U.S.
earnings taxed at other than the U.S. statutory rate, non-U.S. losses with no
tax recovery, foreign tax credits, foreign withholding taxes and U.S. tax on
Subpart F income, dividends and foreign branch operations.

F-15
<PAGE> 43
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred taxes result from the effect of transactions that are recognized
in different periods for financial and tax reporting purposes. The primary
components of our deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
JULY 31,
-------------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Difference between book and tax basis of property and
equipment.............................................. $ 9,041 $ 6,162
Difference between book and tax basis of multi-client data
library................................................ 20,977 18,107
Net operating loss carryforwards.......................... 35,624 37,121
Deferred revenues......................................... 5,525 406
Tax credit carryforwards.................................. 19
-------- --------
Total............................................. 71,167 61,815
Deferred tax liabilities.................................... (874) (617)
-------- --------
Net deferred tax asset...................................... 70,293 61,198
Valuation allowance......................................... (36,229) (38,078)
-------- --------
Net deferred tax asset...................................... $ 34,064 $ 23,120
-------- --------
</TABLE>

A valuation allowance is established when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The
valuation allowance is then adjusted when the realization of deferred tax assets
becomes more likely than not. Adjustments are also made to recognize the
expiration of net operating loss and investment tax credit carryforwards, with
equal and offsetting adjustments to the related deferred tax asset. Should the
income projections result in the conclusion that realization of additional
deferred tax assets is more likely than not, further adjustments to the
valuation allowance are made. Since the quasi-reorganization with respect to
Digicon 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.
The net reductions in the valuation allowance of $1.8 million during 2000 and
$2.7 million in 1999 resulted primarily from recognition of the expected
utilization of net operating loss carryforwards generated prior to the
quasi-reorganization and the expiration of investment tax credits.

As of July 31, 2000, we had U.S. net operating loss carryforwards of
approximately $60.2 million. Approximately $38.7 million of net operating loss
carryforwards existed prior to the quasi-reorganization.

F-16
<PAGE> 44
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following schedule sets forth the expiration dates of the U.S. and non-U.S.
net operating losses.

<TABLE>
<CAPTION>
U.S. NET NON-U.S. NET
OPERATING OPERATING
FISCAL YEAR LOSS LOSS
----------- --------- ------------
(IN THOUSANDS)
<S> <C> <C>
2001...................................................... $26,906 $ 211
2002...................................................... 1,334
2003...................................................... 4,222 5,274
2004...................................................... 6,355 2,962
2005...................................................... 1,198 1,952
2006...................................................... 1,347 7,457
2007...................................................... 2,505
2008......................................................
2009...................................................... 4,985 114
2010...................................................... 2,710 21
2011...................................................... 9,986
Indefinite................................................ 22,579
------- -------
Total........................................... $60,214 $41,904
======= =======
</TABLE>

Internal Revenue Service regulations restrict the utilization of U.S. net
operating loss carryforwards and other tax benefits (such as investment tax
credits) for any company in which an "ownership change" (as defined in Section
382 of the Internal Revenue Code) has occurred. We performed the required
testing and concluded that two "ownership changes" occurred. The first occurred
in connection with the issuance of common stock through a public offering we
made on January 6, 1992. The utilization of U.S. net operating loss
carryforwards existing at the date of the first "ownership change" is limited to
approximately $4.0 million per year. The second "ownership change" occurred in
1996 as a result of the stock acquisition of Veritas Energy Services Inc. The
utilization of U.S. net operating losses incurred between the first and second
ownership changes is limited to approximately $8.9 million per year, which
includes the limitation of approximately $4.0 million from the first ownership
change. During the years ended July 31, 2000 and 1999, we utilized approximately
$8.9 million and $8.9 million of limitation carryover, respectively.

Non-U.S. operations had net operating loss carryforwards of approximately
$41.9 million at July 31, 2000, of which approximately $11.2 million existed
prior to the quasi-reorganization. Approximately $13.5 million of the total
non-U.S. net operating loss carryforwards are related to United Kingdom
operations, have an indefinite carryforward period, and are available to offset
future profits in our current trade or business. Approximately $10.2 million of
the United Kingdom net operating loss carryforwards existed prior to the
quasi-reorganization. Approximately $6.6 million of the total non-U.S. net
operating loss carryforwards are related to Oman operations and have a
carryforward period of five years.

We consider the undistributed earnings of our non-U.S. subsidiaries to be
permanently reinvested. We have not provided deferred U.S. income tax on those
earnings, as it is not practicable to estimate the amount of additional tax that
might be payable should these earnings be remitted or deemed remitted as
dividends or if we should sell its stock in the subsidiaries.

F-17
<PAGE> 45
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENT LIABILITIES

Total rentals of vessels, equipment and office facilities charged to
operations amounted to $57.0 million, $62.5 million and $57.5 million for the
years ended July 31, 2000, 1999 and 1998, respectively.

Minimum rentals payable under operating leases, principally for office
space and vessel charters with remaining noncancellable terms of at least one
year are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR MINIMUM RENTALS
----------- ---------------
(IN THOUSANDS)
<S> <C>
2001............................................... $34,363
2002............................................... 24,134
2003............................................... 19,006
2004............................................... 16,925
2005............................................... 16,826
</TABLE>

The above amounts include rental amounts expected to be incurred under our
new office space agreement. Pursuant to the agreement, the developer purchased
land from Veritas DGC for $4.2 million, built a 220,000 square foot office
complex and will lease the facility to Veritas DGC for fifteen years. We expect
to move approximately 500 Houston-based employees into the complex in October
2000.

During 1993, we purchased occurrence-based workers compensation insurance.
The policies for the years ended July 31, 2000 and 1999 were issued under a
guaranteed cost program and, accordingly, there were no deductibles. Management
has evaluated the adequacy of the accrual for the liability for incurred but
unreported workers compensation claims and has determined that the ultimate
resolution of any such claims would not have a material adverse impact on our
financial position.

8. EMPLOYEE BENEFITS

We maintain a 401(k) plan in which employees of our majority-owned domestic
subsidiaries and certain foreign subsidiaries are eligible to participate.
Employees of foreign subsidiaries who are covered under a foreign deferred
compensation plan are not eligible. Employees are permitted to make
contributions of up to 15% of their salary to a maximum of $10,500 per year.
Generally, we contribute an amount equal to one-half of the employee's
contribution of up to $8,000 or 8% of the employee's salary (whichever is less).
However, if consolidated pre-tax income for any fiscal year is less than the
amount we are required to contribute, we may elect to reduce our contribution,
but in no event may we reduce the total contribution to less than 25% of the
employee contribution. We may make additional contributions from our current or
cumulative net profits in an amount determined by the Board of Directors. Our
matching contributions to the 401(k) plan were $821,000 in 2000, $741,000 in
1999 and $679,000 in 1998.

We have an employee nonqualified stock option plan under which options are
granted to officers and key employees. Options generally vest over a period of
time and are exercisable over a ten-year from the date of grant. The exercise
price for each option is the fair market value of the common stock on the grant
date. Our Board of Directors has authorized 3,954,550 shares of common stock to
be issued under the plan.

We also maintain a stock option plan for non-employee directors (the
"Director Plan") under which options are granted to our non-employee directors.
The Director Plan provides that

F-18
<PAGE> 46
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

every year each eligible director is granted one option to purchase 5,000 shares
of our common stock which vest over a period of three years from the date of
grant and are exercisable over ten years from the date of grant. The exercise
price for each option granted is the fair market value at the date of grant. The
Board of Directors has authorized 600,000 shares of common stock to be issued
under the Director Plan.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 2000
-----------------------------------------------
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE CONTRACTUAL
NUMBER OF EXERCISE GRANT DATE LIFE
SHARES PRICE FAIR VALUE IN YEARS
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Beginning balance....................... 1,928,048 $14.43
Options granted......................... 576,011 $26.10 $19.88 10.0
Options converted from Enertec.......... 236,000 $12.65
Options exercised....................... (349,056) $11.70
Options forfeited....................... (112,441) $18.15
---------
Ending balance................ 2,278,562 $17.43
=========
Options exercisable........... 1,232,590 $16.38
=========
Options exercisable by range of exercise
price:
$ 0.00-$ 5.65......................... 15,914 $ 5.25
$ 5.65-$11.30......................... 522,731 $ 9.42
$11.30-$16.95......................... 71,315 $12.63
$16.95-$22.60......................... 379,284 $19.41
$22.60-$28.25......................... 199,494 $26.19
$28.25-$33.90......................... 5,337 $29.18
$33.90-$39.55......................... 24,740 $37.48
$39.55-$45.20......................... 7,173 $42.85
$45.20-$50.85......................... 5,674 $46.29
$50.85-$56.50......................... 928 $54.83
---------
Ending balance................ 1,232,590
=========
Ending balance by range of exercise
price:
$ 0.00-$ 5.65......................... 15,914 $ 5.25 4.8
$ 5.65-$11.30......................... 957,815 $10.00 7.3
$11.30-$16.95......................... 91,395 $12.78 4.5
$16.95-$22.60......................... 543,697 $19.41 6.3
$22.60-$28.25......................... 606,698 $26.12 8.8
$28.25-$33.90......................... 5,850 $29.27 5.7
$33.90-$39.55......................... 34,584 $37.33 6.8
$39.55-$45.20......................... 11,816 $43.10 7.1
$45.20-$50.85......................... 8,935 $46.55 7.2
$50.85-$56.50......................... 1,858 $54.83 7.7
---------
Ending balance................ 2,278,562
=========
</TABLE>

F-19
<PAGE> 47
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1999
---------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE GRANT DATE
SHARES PRICE FAIR VALUE
--------- -------- ----------
<S> <C> <C> <C> <C>
Beginning balance....................... 1,022,539 $18.00
Options granted......................... 1,019,824 $11.08 $7.55
Options exercised....................... (23,883) $ 9.81
Options forfeited....................... (90,432) $18.91
---------
Ending balance................ 1,928,048 $14.43
=========
Options exercisable........... 789,781 $14.15
=========
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1998
---------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE GRANT DATE
SHARES PRICE FAIR VALUE
--------- -------- ----------
<S> <C> <C> <C> <C>
Beginning balance....................... 1,276,364 $15.18
Options granted......................... 133,426 $30.95 $21.41
Options exercised....................... (326,733) $11.94
Options forfeited....................... (60,518) $19.78
---------
Ending balance................ 1,022,539 $18.00
=========
Options exercisable........... 366,482 $12.38
=========
</TABLE>

The weighted average fair values of options granted are determined using
the Black-Scholes option valuation method assuming no expected dividends. Other
assumptions used are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS
ENDED JULY 31,
------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate..................................... 5.9% 5.5% 6.1%
Expected volatility......................................... 62.3% 49.7% 49.6%
Expected life in years...................................... 10.0 10.0 10.0
</TABLE>

On November 1, 1997, we initiated a compensatory employee stock purchase
plan for up to 500,000 shares of common stock. Participation is voluntary and
substantially all full-time employees meeting limited eligibility requirements
may participate. Contributions are made through payroll deductions and may not
be less than 1% or more than 15% of the participant's base pay as defined. The
participant's option to purchase common stock is deemed to be granted on the
first day and exercised on the last day of the fiscal quarter at a price which
is the lower of 85% of the market price on the first or last day of the fiscal
quarter. During the year ended July 31, 2000, 130,744 shares of common stock
were issued with a weighted average grant date fair value of $13.57 per share.
During the year ended July 31, 1999, 142,490 shares of common stock were issued
with a weighted average grant date fair value of $14.71 per share.

On June 9, 1998, we initiated a restricted stock plan. This plan was
amended and restated on March 7, 2000 for available shares of 173,975. The
eligibility of an employee and the terms

F-20
<PAGE> 48
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and amount of the grant are determined by the Board of Directors' Compensation
Committee. In addition, we have issued restricted stock in conjunction with
certain employment agreements.

These tables represent the restricted shares issued for fiscal 2000 and
1999.

<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 2000
----------------------------------------------------------------------------------------
WEIGHTED
NUMBER OF AVERAGE GRANT VESTING
SHARES GRANTED GRANT DATE PRICE PERIOD
-------------- ---------- ------------- -------
<S> <C> <C> <C>
5,000......................................... September 1999 $19.06 5 Years
2,000......................................... September 1999 $20.00 3 Years
2,250......................................... October 1999 $19.88 3 Years
25,000........................................ January 2000 $17.19 3 Years*
1,000......................................... March 2000 $25.63 3 Years
11,173........................................ March 2000 $26.19 1 Year
3,000......................................... May 2000 $22.88 3 Years
1,500......................................... June 2000 $26.00 3 Years
1,000......................................... July 2000 $24.56 3 Years
</TABLE>

* Vested upon resignation of former chief executive officer

<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1999
----------------------------------------------------------------------------------------
WEIGHTED
NUMBER OF AVERAGE GRANT VESTING
SHARES GRANTED GRANT DATE PRICE PERIOD
-------------- ---------- ------------- -------
<S> <C> <C> <C>
1,500......................................... August 1998 $27.81 3 Years
25,579........................................ March 1999 $11.31 1 Year
</TABLE>

Compensation expense relating to the stock-based compensation plans
described above was $1.1 million, $466,000 and $506,000 for the years ended July
31, 2000, 1999 and 1998, respectively. The effect on net income and earnings per
share that would have been recorded using the fair value based method as
required by SFAS 123 is as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Reported net income........................................ $6,481 $20,294 $66,958
Pro forma net income....................................... $ 303 $17,215 $64,498
Reported net income per common share -- basic.............. $ .25 $ .89 $ 2.96
Pro forma earnings per common share -- basic............... $ .01 $ .76 $ 2.85
Reported net income per common share -- diluted............ $ .25 $ .88 $ 2.87
Pro forma earnings per common share -- diluted............. $ .01 $ .75 $ 2.77
</TABLE>

The effect on net income and earnings per share may not be representative
of the effects on future net income and earnings per share because some options
vest over several years and additional awards may be granted.

We maintain a contributory defined benefit pension plan (the "Pension
Plan") for eligible participating employees in the United Kingdom. Monthly
contributions by employees are equal to 4% of their salaries. We provide an
additional contribution in an actuarially determined amount necessary to fund
future benefits to be provided under the Pension Plan. Benefits provided are

F-21
<PAGE> 49
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based upon 1/60 of the employee's final pensionable salary (as defined) for each
complete year of service up to 2/3 of the employee's final pensionable salary
and increase annually in line with inflation subject to a maximum of 5% per
annum. The Pension Plan also provides for 50% of such actual or expected
benefits to be paid to a surviving spouse upon the death of a participant.
Pension Plan assets consist mainly of investments in marketable securities which
are held and managed by an independent trustee. The net periodic pension costs
are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
-------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service costs (benefits earned during the period)........ $ 622 $ 578 $ 457
Interest costs on projected benefit obligation........... 733 581 441
Actual return on plan assets............................. (856) (491) (695)
Net amortization and deferral............................ 555 159 224
------ ------ ------
Net periodic pension costs..................... $1,054 $ 827 $ 427
====== ====== ======
</TABLE>

The funded status of the Pension Plan is as follows:

<TABLE>
<CAPTION>
JULY 31,
-----------------
2000 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value................................... $ 8,543 $ 7,573
Projected benefit obligation:
Actuarial present value of accumulated vested benefit
obligations............................................... 10,927 10,060
Effect of future salary increases........................... 512 2,420
------- -------
Total projected benefit obligation................ 11,439 12,480
Projected benefit obligation in excess of plan assets....... (2,896) (4,907)
Unrecognized net loss....................................... 1,570 2,948
------- -------
Pension liability................................. $(1,326) $(1,959)
======= =======
</TABLE>

The weighted average assumptions used to determine the projected benefit
obligation and the expected long-term rate of return on assets are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
---------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 6.0% 6.0% 6.5%
Rates of increase in compensation levels.................... 4.0% 4.0% 4.5%
Expected long-term rate of return on assets................. 6.5% 6.5% 7.0%
</TABLE>

F-22
<PAGE> 50
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a reconciliation of the beginning and ending balances of
the benefit obligation and the fair value of plan assets:

<TABLE>
<CAPTION>
JULY 31,
-----------------
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Benefit obligation at beginning of year..................... $12,480 $ 8,892
Service cost................................................ 622 578
Interest cost............................................... 733 581
Contributions by plan participants.......................... 255 249
Actuarial gains and losses.................................. 92 2,237
Benefits paid............................................... (38) (57)
Foreign currency exchange rate changes...................... (807)
Plan amendments............................................. (1,898)
------- -------
Benefit obligation at end of year........................... $11,439 $12,480
======= =======
Fair value of plan assets at beginning of year.............. $ 7,573 $ 6,443
Actual return on plan assets................................ 856 491
Employer contribution....................................... 461 447
Plan participants' contributions............................ 255 249
Benefits paid............................................... (38) (57)
Foreign currency exchange rate changes...................... (564)
------- -------
Fair value of plan assets at end of year.................... $ 8,543 $ 7,573
======= =======
</TABLE>

9. UNREALIZED LOSS ON INVESTMENTS -- AVAILABLE FOR SALE

In April 1999, we exchanged a $4.7 million account receivable from Miller
Exploration Company ("Miller"), a publicly traded company, for a long-term note
receivable bearing 18% interest. Effective October 15, 2000, the note will bear
interest at 9 3/4%. Interest is paid in Miller common stock warrants, with an
exercise price of $0.01 per share, in advance, at six month intervals. In
addition, we exchanged an account receivable from Brigham Exploration Company
("Brigham"), a publicly traded company, for shares of Brigham common stock. The
cost basis of the investments available for sale is determined by the fair
market value on the date received.

<TABLE>
<CAPTION>
JULY 31,
-------------------------------------------------------------
2000 1999
----------------------------- -----------------------------
COST UNREALIZED FAIR COST UNREALIZED FAIR
BASIS (LOSS)/GAIN VALUE BASIS (LOSS)/GAIN VALUE
----- ----------- ----- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Brigham common stock................ $4,099 $(1,411) $2,688 $3,809 $(1,143) $2,666
Miller warrants..................... 1,500 (204) 1,296 419 586 1,005
------ ------- ------ ------ ------- ------
Total...................... $5,599 $(1,615) $3,984 $4,228 $ (557) $3,671
====== ======= ====== ====== ======= ======
</TABLE>

10. COMMON AND PREFERRED STOCK AND SPECIAL VOTING STOCK AND EXCHANGEABLE SHARES

The Board of Directors, without any action by the stockholders, may issue
up to one million shares of preferred stock, par value, $.01, in one or more
series and determine the voting rights, preferences as to dividends and in
liquidation and the conversion and other rights of such stock. There are no
shares of preferred stock outstanding as of July 31, 2000.

F-23
<PAGE> 51
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On May 27, 1997, our Board of Directors declared a distribution of one
right for each outstanding share of common stock or Exchangeable Stock to
shareholders of record at the close of business on June 12, 1997 and designated
400,000 shares of the authorized preferred stock as a class to be distributed
under a shareholder rights agreement. Upon the occurrence of certain events
enumerated in the shareholder rights agreement, each right entitles the
registered holder to purchase a fraction of a share of our preferred stock or
the common stock of an acquiring company. The rights, among other things, will
cause substantial dilution to a person or group that attempts to acquire us. The
rights expire on May 15, 2007 and may be redeemed prior to that date.

Two shares of special voting stock of Veritas DGC are authorized and
outstanding, each as a series of common shares. One special voting share was
issued in connection with the combination of Digicon Inc. (Veritas DGC's former
name) and Veritas Energy Services Inc. in August of 1996. The other special
voting share was issued in connection with the combination of Veritas DGC,
Veritas Energy Services and Enertec Resources Inc. in September 1999.

These special voting shares possess a number of votes equal to the number
of outstanding Veritas Energy Services exchangeable shares and Veritas Energy
Services class A exchangeable shares, series 1 that are not owned by Veritas DGC
or any of its subsidiaries. Such exchangeable shares were issued to the former
stockholders of Veritas Energy Services and Enertec Resources in business
combinations with Veritas DGC. In any matter submitted to Veritas DGC
stockholders for a vote, each holder of a Veritas Energy Services exchangeable
share has the right to instruct a trustee as to the manner of voting for one of
the votes comprising the Veritas Energy Services special voting share for each
Veritas Energy Services exchangeable share owned by the holder. Likewise, each
holder of a Veritas Energy Services class A exchangeable share, series 1 has the
right to instruct a trustee as to the manner of voting for one of the votes
comprising the Enertec special voting share for each Veritas Energy Services
class A exchangeable shares, series 1 owned by the holder. The Veritas Energy
Services exchangeable shares and the Veritas Energy Services class A
exchangeable shares, series 1 are convertible on a one-for-one basis into shares
of the common stock and, when coupled with the voting rights afforded by the
special voting shares, have rights virtually identical to Veritas DGC common
stock.

11. OTHER COSTS AND EXPENSES

Other costs and expenses consist of the following:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
--------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net foreign currency exchange (gains) losses........... $ 99 $(1,845) $2,333
Net loss on disposition of property and equipment...... 316 849 1,549
Interest income........................................ (3,637) (4,210) (4,220)
Other.................................................. (47) 156
------- ------- ------
Total........................................ $(3,269) $(5,050) $ (338)
======= ======= ======
</TABLE>

F-24
<PAGE> 52
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. EARNINGS PER COMMON SHARE

Earnings per common share -- basic and earnings per common share -- diluted
are computed as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
---------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net income before extraordinary item........................ $ 6,668 $20,294 $66,958
Extraordinary loss on debt repurchase....................... (187)
------- ------- -------
Net Income.................................................. $ 6,481 $20,294 $66,958
======= ======= =======
Basic:
Weighted average common shares (including exchangeable
shares)................................................ 25,485 22,733 22,594
Net income per common share before extraordinary item..... $ .26 $ .89 $ 2.96
Net loss per common share from extraordinary item......... (.01)
------- ------- -------
Net income per share...................................... $ .25 $ .89 $ 2.96
======= ======= =======
Diluted:
Weighted average common shares (including exchangeable
shares)................................................ 25,485 22,733 22,594
Shares issuable from assumed conversion of:
Options................................................ 629 268 721
------- ------- -------
Total............................................. 26,114 23,001 23,315
======= ======= =======
Net income per common share before extraordinary item..... $ .26 $ .88 $ 2.87
Net loss per common share from extraordinary item......... (.01)
------- ------- -------
Net income per share...................................... $ .25 $ .88 $ 2.87
======= ======= =======
</TABLE>

The following options to purchase common shares have been excluded from the
computation assuming dilution for the years ended July 31, 2000, 1999 and 1998
because the options' exercise price exceeded the average market price of the
underlying common shares.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Number of options....................... 1,236,590 807,992 22,810
Exercise price range.................... $20 1/4-$55 1/8 $16 7/8-$56 1/2 $42-$56 1/2
Expiring through........................ March 2010 November 2008 July 2008
</TABLE>

13. SEGMENT AND GEOGRAPHICAL INFORMATION

We have two segments, land and marine operations, both of which provide
geophysical products and services to the petroleum industry. The two segments
have been aggregated as they are so similar in their economic characteristics
and the nature of their products, production

F-25
<PAGE> 53
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

processes and customers. A reconciliation of the reportable segments' results to
those of the total enterprise is given below.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 2000
---------------------------------
SEGMENTS CORPORATE TOTAL
-------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue............................................... $353,079 $353,079
Costs and expenses including joint venture............ 302,317 $ 39,088 341,405
Net income (loss) before income tax................... 50,762 (39,088) 11,674
Total assets.......................................... 530,119 81,689 611,808
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1999
---------------------------------
SEGMENTS CORPORATE TOTAL
-------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue............................................... $388,905 $388,905
Costs and expenses including joint venture............ 324,841 $ 34,204 359,045
Net income (loss) before income tax................... 64,064 (34,204) 29,860
Total assets.......................................... 456,401 85,445 541,846
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1998
---------------------------------
SEGMENTS CORPORATE TOTAL
-------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue............................................... $528,959 $528,959
Costs and expenses including joint venture............ 393,822 $ 33,961 427,783
Net income (loss) before income tax................... 135,137 (33,961) 101,176
Total assets.......................................... 419,179 59,311 478,490
</TABLE>

This table presents consolidated revenues by country based on the location
of the use of the product or service for the years ended July 31, 2000, 1999 and
1998:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Geographic areas:
United States................................... $130,872 $203,667 $280,765
Canada.......................................... 95,686 32,325 47,059
Latin America................................... 41,480 61,187 93,494
Europe.......................................... 35,388 35,850 51,089
Middle East/Africa.............................. 27,012 20,785 14,090
Asia Pacific.................................... 22,641 35,091 42,462
-------- -------- --------
Total................................... $353,079 $388,905 $528,959
======== ======== ========
</TABLE>

F-26
<PAGE> 54
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

This table presents long-lived assets by country based on the location of
the asset.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Geographic areas:
United States................................... $ 93,464 $104,594 $ 80,929
Asia Pacific.................................... 17,056 16,186 21,974
Canada.......................................... 14,560 6,609 13,008
Europe.......................................... 11,253 11,877 39,780
Latin America................................... 6,588 10,246 10,893
Middle East/Africa.............................. 3,657 6,859 8,336
-------- -------- --------
Total................................... $146,578 $156,371 $174,920
======== ======== ========
</TABLE>

In fiscal 2000 and 1998, no customer accounted for 10% or more of total
revenue. In fiscal 1999 Royal Dutch/Shell and its subsidiaries accounted for
about 12% of our revenue.

We generate our revenue in the exploration and production ("E&P") sector of
the petroleum industry and, therefore, are subject to fluctuations in E&P
spending. E&P spending is directly related to the prices of oil and gas which
are subject to wide and relatively unpredictable variations.

14. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 2000
-----------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.............................. $ 68,677 $ 91,023 $ 93,742 $ 99,637
Gross profit.......................... $ 25,936 $ 30,439 $ 30,811 $ 33,527
Net income (loss) before extraordinary
item................................ $ (580) $ 1,170 $ 2,539 $ 3,539
Net income (loss)..................... $ (767) $ 1,170 $ 2,539 $ 3,539
Net income (loss) per common
share -- basic, before extraordinary
item................................ $ (.02) $ .05 $ .10 $ .13
Net income (loss) per common
share -- diluted, before
extraordinary item.................. $ (.02) $ .05 $ .09 $ .13
Net income (loss) per common
share -- basic...................... $ (.03) $ .05 $ .10 $ .13
Net income (loss) per common
share -- diluted.................... $ (.03) $ .05 $ .09 $ .13
</TABLE>

F-27
<PAGE> 55
VERITAS DGC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1999
-----------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................. $146,799 $101,652 $ 74,610 $ 65,844
Gross profit......................... $ 45,032 $ 33,358 $ 27,194 $ 25,014
Net income........................... $ 13,622 $ 5,436 $ 505 $ 731
Net income per common share --
basic.............................. $ .60 $ .24 $ .02 $ .03
Net income per common share --
diluted............................ $ .60 $ .24 $ .02 $ .03
</TABLE>

Quarterly per share amounts may not total to annual per share amounts
because weighted average common shares for the quarter may vary from weighted
average common shares for the year.

F-28
<PAGE> 56

VERITAS DGC INC. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-------------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Beginning....................................... $ 3,038 $ 1,248 $ 646
Expenses/(Adjustments).......................... (914)(1) 1,415 602
Writeoffs....................................... 375
Recovery........................................ (375)
------- ------- -------
Ending.......................................... $ 1,749 $ 3,038 $ 1,248
======= ======= =======
ACCRUED DRY DOCK
Beginning....................................... $ 2,621 $ 1,565
Additions....................................... 3,295 2,724 $ 1,964
Reduction....................................... (2,894) (1,683) (399)
Other........................................... (64) 15
------- ------- -------
Ending.......................................... $ 2,958 $ 2,621 $ 1,565
======= ======= =======
TAX VALUATION ALLOWANCE
Beginning....................................... $38,078 $40,805 $42,484
Projected utilization of net operating
carryforwards................................ (1,849) (2,727) (1,679)
------- ------- -------
Ending.......................................... $36,229 $38,078 $40,805
======= ======= =======
</TABLE>

---------------
(1) Estimate was revised due to improved collections of past due receivables.

F-29
<PAGE> 57

PROSPECTUS

VERITAS LOGO

$200,000,000

VERITAS DGC INC.

DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK

This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. This means:

- we may issue debt securities, preferred stock and common stock covered by
this prospectus from time to time;

- we will provide a prospectus supplement each time we issue the
securities; and

- the prospectus supplement will provide specific information about the
terms of that offering and also may add, update or change information
contained in this prospectus.

The Veritas DGC common stock trades on the New York Stock Exchange under
the symbol "VTS" and on the Toronto Stock Exchange under the symbol "VER."

YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION UNDER THE HEADING
"RISK FACTORS" IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND IN OUR LATEST REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WHICH ARE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, BEFORE INVESTING IN OUR SECURITIES.

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This prospectus is dated September 26, 2000.
<PAGE> 58

YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN
OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THESE
DOCUMENTS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS

Where You Can Find More Information......................... 3
The Company................................................. 3
Risk Factors................................................ 3
Forward-Looking Statements.................................. 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 4
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 9
Plan of Distribution........................................ 13
Experts..................................................... 14
Incorporation of Certain Documents by Reference............. 14
</TABLE>

2
<PAGE> 59

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-3 registering
the securities we are offering. This prospectus, which is a part of the
registration statement, omits certain information included in the registration
statement.

You may read and copy the registration statement, including the attached
exhibits, and any reports, statements or other information that we file at the
SEC's public reference room in Washington, D.C. You may also obtain information
about Veritas DGC from the following regional offices of the SEC: Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
7 World Trade Center, 13th Floor, New York, New York 10048. Veritas DGC
maintains an Internet site at http://www.veritasdgc.com that contains
information about its business.

We file annual reports, quarterly reports, proxy statements and other
information with the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Copies of such
material can be obtained by mail from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. Our SEC filings are also available to the public on the SEC's home page
on the Internet at http://www.sec.gov.

THE COMPANY

We are a leading provider of seismic data acquisition, data processing and
multi-client data surveys and information services to the oil and gas industry
in selected markets worldwide. Oil and gas companies utilize seismic data for
the determination of suitable locations for drilling exploratory wells and,
increasingly, in reservoir management for the development and production of oil
and gas reserves. We acquire seismic data on land and in marine and transition
zone environments, and process data acquired by our own crews and crews of other
operators. We acquire seismic data both on an exclusive contractual basis for
our customers and on our own behalf for licensing to multiple customers on a
non-exclusive basis. Veritas DGC was incorporated in Texas in 1965 and was
reincorporated in Delaware in 1969. Our principal offices are located at 3701
Kirby Drive, Houston, Texas 77098, and our telephone number is (713) 512-8300.

RISK FACTORS

Before investing in our securities, you should carefully review and
consider the information under the heading "Risk Factors" in the applicable
prospectus supplement and in our latest reports filed with the Securities and
Exchange Commission, which are incorporated by reference in this prospectus.

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FORWARD-LOOKING STATEMENTS

The statements included in this prospectus, other than statements of
historical facts, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements include statements incorporated by reference to other
Veritas DGC documents filed with the SEC. Forward-looking statements include,
among other things, business strategy and expectations concerning industry
conditions, market position, future operations, margins, profitability,
liquidity and capital resources. Forward-looking statements generally can be
identified by the use of terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate" or "believe" or the negative thereof or variations
thereon or similar terminology.

Although we believe that the expectations reflected in such statements are
reasonable, we can give no assurance that such expectations will be correct. You
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this prospectus. Our operations are subject
to a number of uncertainties, risks and other influences, many of which are
outside our control and any one of which, or a combination of which, could cause
our actual results of operations to differ materially from the forward-looking
statements. Important factors that could cause actual result to differ
materially from our expectations are disclosed in "Risk Factors" in the
applicable prospectus supplement and in our latest reports filed with the
Securities and Exchange Commission, which are incorporated by reference in this
prospectus.

USE OF PROCEEDS

Except as otherwise described in any prospectus supplement, the net
proceeds from the sale of securities will be used for general corporate
purposes, which may include working capital, investment in multi-client data
library, capital expenditures, possible acquisitions and repurchases and
redemptions of securities.

RATIO OF EARNINGS TO FIXED CHARGES

Ratios of Earnings to Fixed Charges, if applicable, will be included in the
applicable prospectus supplement.

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DESCRIPTION OF DEBT SECURITIES

GENERAL

The debt securities will be:

- our direct unsecured general obligations;

- either senior debt securities or subordinated debt securities; and

- will be issued under one or more separate indentures.

We are a holding company that conducts all operations through our
subsidiaries. Holders of debt securities generally will have a junior position
to claims of creditors of our subsidiaries including trade creditors, debt
holders, secured creditors, taxing authorities, guaranty holders and any
preferred stockholders.

We will issue senior debt securities under a senior indenture and
subordinated debt securities under a subordinated indenture. We have summarized
selected provisions of the indentures below. These provisions are subject to and
may be modified by the specific terms of a particular series of debt securities
which will be set forth in a prospectus supplement. The summary is not complete.
The forms of the indentures have been filed as exhibits to the registration
statement, and you should read the indentures for provisions that may be
important to you. In the summary, we have included references to section numbers
of the indentures so that you can easily locate those provisions.

- The indentures do not limit the aggregate principal amount of debt
securities that can be issued thereunder. (Section 301)

- Debt securities may be issued in one or more series, each in an aggregate
principal amount authorized by Veritas DGC before issuance, and may be in
any currency or currency unit that we may designate. (Section 301)

- Debt securities of a series may be issued in fully registered form and
may be in global form. (Sections 201 and 203)

- Senior debt securities will rank equally with all of our other senior
debt.

- Subordinated debt securities will have a junior position to all of our
senior debt. (Section 1301)

- Debt securities will be issued in denominations of $1,000 each or
multiples thereof, unless otherwise specified in a prospectus supplement.
(Section 302)

- Debt securities may be sold at a discount (which may be substantial)
below their stated principal amount, bearing no interest or interest at a
rate below market rates.

- The indentures do not limit the amount of other unsecured indebtedness or
securities that we can issue.

A prospectus supplement and a supplemental indenture relating to any series
of debt securities being offered will include specific terms relating to the
offering. These terms will include some or all of the following:

- title and type of debt securities;

- total principal amount;

- dates on which the principal of, and premium, if any, is payable;

- interest rate (or method of determination);

- date from which interest will accrue;

- interest payment dates, if any;

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- optional redemption periods;

- sinking fund or other provisions that would obligate us to repurchase or
otherwise redeem the debt securities;

- currency in which payment of principal and interest shall be made, if
other than United States dollars or the currency in which the debt
securities are stated to be payable;

- terms of conversion or exchange if the debt securities will be
convertible into shares of common stock or exchangeable for other of our
securities;

- additional means or conditions to discharge the debt securities;

- changes to or additional events of default or covenants;

- special tax implications of the debt securities; and

- other specific terms of the debt securities. (Section 301)

SUBORDINATION

Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will be subordinated and junior
in right of payment to the prior payment in full of all our senior debt.
(Section 1301) The subordinated indenture provides that no payment of principal,
interest or any premium on the subordinated debt securities may be made in the
event:

- we fail to pay the principal, interest, any premium or any other amounts
on any senior debt when due; or

- of any insolvency, bankruptcy or similar proceeding involving us or our
property. (Sections 1302 and 1303)

Senior debt is defined to include all indebtedness including our guarantees
for money we borrowed, not expressed to be subordinate or junior in right of
payment to any of our other indebtedness. (Section 101) The subordinated
indenture will not limit the amount of senior debt that we may incur.

EVENTS OF DEFAULT

The following are events of default under each indenture:

- failure to pay principal or any premium on any debt security when due;

- failure to pay any interest on any debt security when due, continued for
30 days;

- failure to deposit any mandatory sinking fund payment when due, continued
for 30 days;

- failure to perform any other covenant in the indenture that continues for
90 days after written notice;

- certain events of bankruptcy, insolvency or reorganization; and

- any other event of default as may be specified with respect to debt
securities of such series. (Section 501)

An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities. (Section 502) The trustee may withhold notice to the holders of debt
securities of any default (except in the payment of principal, interest or any
premium) if the trustee or Veritas DGC's board of directors considers
withholding of notice to be in the best interest of the holders. (Section 602)

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ACCELERATION OF DEBT UPON AN EVENT OF DEFAULT

If an event of default occurs:

- Either the trustee or the holders of at least 25% in principal amount of
the outstanding debt securities may declare the principal amount of all
the debt securities of the applicable series to be due and payable
immediately. (Section 502)

- If this happens, subject to certain conditions, the holders of a majority
in principal amount of the outstanding debt securities of such series can
void the declaration. These conditions include the requirement that we
have paid or deposited with the trustee a sum sufficient to pay all
overdue principal, premiums (if any) and interest payments on the series
of debt securities subject to the default. (Section 502)

If an event of default occurs due to certain events of bankruptcy,
insolvency or reorganization, the principal amount of the outstanding debt
securities of all series will become immediately due and payable without any
declaration or other act on the part of either trustee or any holder. (Section
502)

Depending on the terms of our indebtedness, an event of default under an
indenture may cause a cross default on such other indebtedness.

DUTIES OF TRUSTEE

Other than its duties in the case of default, the trustee is not obligated
to exercise any of its rights or powers under any indenture at the request,
order or direction of any holders unless the holders offer the trustee
reasonable indemnity. (Section 603)

If the holders provide reasonable indemnification, the holders of a
majority of principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, or exercising any power conferred upon the trustee for any series
of debt securities. (Section 512)

COVENANTS

Under the indentures, we will:

- pay the principal, interest and any premium on the debt securities when
due;

- maintain a place of payment;

- deposit sufficient funds with any payment agent on or before the due date
for the principal, interest or any premium; and

- deliver a report to the trustee after the end of each fiscal year
reviewing our activities and performance under the indentures, and
stating whether we are in default under the indentures. (Sections 1001,
1002, 1003 and 1005)

MODIFICATION OF INDENTURES

We may modify the holders rights and obligations under the indenture, if we
first obtain the consent of the holders of a majority in aggregate principal
amount of the outstanding debt securities of each series effected by the
modification. Except, all holders must consent to modifications that:

- change the principal or interest payment terms;

- impair their right to sue to enforce payments;

- change subordination provisions in a manner adverse to them; or

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- reduce the majority requirement for modifications effective against any
holder without its consent. (Section 902)

Each Indenture provides that we and the trustee may, without the consent of
any holders, enter into supplemental indentures for the following purposes:

- adding to our covenants;

- adding additional events of default;

- establishing the form or terms of debt securities; or

- curing ambiguities or inconsistencies in the indenture, provided that
such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the holders in any material way. (Section 901)

CONSOLIDATION, MERGER AND SALE OF ASSETS

Each indenture generally permits a consolidation or merger between us and
another company. They also permit our sale of all or substantially all of our
property and assets. If this happens, the remaining or acquiring company will
assume all of our responsibilities and liabilities under the indentures,
including the payment of all amounts due on the debt securities and performance
of the covenants in the indentures. (Sections 801 and 802)

We will only consolidate or merge with or into any other company or sell
all or substantially all of our assets according to the terms and conditions of
the indentures. The remaining or acquiring company will be substituted for us in
the indentures with the same effect as if it had been an original party to the
indenture. If we sell all or substantially all of our assets, we shall be
released from all our liabilities and obligations under any indenture and under
the debt securities. (Section 801 and 802)

DISCHARGE AND DEFEASANCE

We will be discharged from our obligations under the debt securities of any
series if we:

- deposit with the trustee enough cash or government securities to pay the
principal, interest, any premium and any other sums due to the stated
maturity date or redemption date of the debt securities of the series;

- request the trustee to discharge us from our obligations on that series
of debt securities; and

- comply with any additional conditions that may be specified in an
indenture supplement regarding defeasance of that series of debt
securities.

If this happens, the holders of the debt securities of the series will not
be entitled to the benefits of the indenture except for registration, transfer
and exchange of debt securities and replacement of lost, stolen or mutilated
debt securities. However, the Company's obligations will be revived and
reinstated if the trustee is unable to apply our deposited amounts because of
any legal proceeding, order or judgment. (Sections 401, 403 and 404)

PAYMENT AND PAYING AGENTS

Unless otherwise specified in a prospectus supplement, we will pay
principal, interest and any premium on fully registered securities at the office
of the paying agent designated by us from time to time. We have the option to
make interest payments by check mailed to the person in whose name the debt
securities are registered on the day specified in the indentures or any
prospectus supplement. Holders may transfer or exchange fully registered
securities at the

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corporate trust office of the trustee or at any other office or agency
maintained by us for such purposes. The holder will not be charged for making a
transfer or exchange, except for any required tax or governmental charge.
(Sections 305, 307, 1001 and 1002)

GLOBAL SECURITIES

The debt securities of a series may be issued in the form of one or more
global certificates that will be deposited with a depositary identified in a
prospectus supplement. Beneficial interests in global certificates will be shown
on, and transfers of global certificates will be effected only through, records
maintained by the depositary. (Section 203).

DESCRIPTION OF CAPITAL STOCK

Our restated certificate of incorporation authorizes 40,000,000 ordinary
shares, par value $0.01 per share. Ordinary shares consist of common stock, a
series of Veritas Energy Services special voting stock, and a series of Enertec
special voting stock. Our restated certificate of incorporation also authorizes
1,000,000 shares of preferred stock, par value $0.01 per share.

COMMON STOCK

Voting Rights. The holders of the common stock are entitled to one vote for
each share held of record in the election of directors and on all other matters
submitted to a vote of stockholders. No pre-emptive rights, conversion rights,
redemption rights or sinking fund provisions are applicable to the common stock.
The common stock does not have cumulative voting rights. Accordingly, the
holders of more than 50% of the shares may elect all of the directors and, in
that event, the holders of the remaining shares will not be able to elect any
directors.

Dividends. Common stockholders may receive dividends when declared by the
board of directors. Dividends may be paid in cash, stock or another form.
However, certain of our existing debt agreements contain covenants that
currently restrict us from paying dividends.

Fully Paid. All outstanding shares of common stock are fully paid and
non-assessable. Any additional common stock we issue will also be fully paid and
non-assessable.

Other. We will notify common stockholders of any stockholders' meetings
according to applicable law. If we liquidate, dissolve or wind up our business,
either voluntarily or not, common stockholders will share equally in the assets
remaining after we pay our creditors and preferred stockholders.

Transfer Agent and Registrar. Our transfer agent and registrar is
ChaseMellon Shareholder Services, L.L.C., Dallas, Texas.

SPECIAL VOTING STOCK AND EXCHANGEABLE SHARES

Two shares of special voting stock of Veritas DGC are authorized and
outstanding as a series of common shares. One special voting share was issued in
connection with the combination of Digicon Inc. (Veritas DGC's former name) and
Veritas Energy Services Inc. in August of 1996. The other special voting share
was issued in connection with the combination of Veritas DGC, Veritas Energy
Services and Enertec Resources Inc. in September 1999.

comprising the Veritas Energy Services special voting share for each Veritas
Energy Services exchangeable share owned by the holder. Likewise, in any matter
submitted to Veritas DGC stockholders for a vote, each holder of a Veritas
Energy Services class A exchangeable share, series 1 has the right to instruct a
trustee as to the manner of voting for one of the votes comprising the Enertec
special voting share for each Veritas Energy Services class A exchangeable
shares, series 1 owned by the holder. The Veritas Energy Services exchangeable
shares and the Veritas Energy Services class A exchangeable shares, series 1 are
convertible on a one-for-one basis into shares of the common stock and, when
coupled with the voting rights afforded by the special voting shares, have
rights virtually identical to Veritas DGC common stock.

PREFERRED STOCK

There are no shares of preferred stock presently outstanding. A series of
400,000 shares of preferred stock has been designated for use in connection with
the rights plan (the rights plan is explained below). Our board of directors
can, without approval of our stockholders, issue one or more series of preferred
stock. If we offer preferred stock, the board will determine number of shares
and the rights, preferences and limitations of each series. This information
will be described in a prospectus supplement, including:

- specific designations;

- number of shares;

- liquidation value;

- dividend rights;

- liquidation and redemption rights;

- voting rights;

- other rights, including conversion or exchange rights, if any; and

- any other specific terms.

In some cases, the issuance of preferred stock could delay a change in control
of Veritas DGC and make it harder to remove present management. Under certain
circumstances, preferred stock could also restrict dividend payments to holders
of our common stock.

The transfer agent, registrar, and dividend disbursement agent for a series
of preferred stock will be named in a prospectus supplement. The registrar for
shares of preferred stock will send notices to stockholders of any meetings at
which holders of the preferred stock have the right to elect directors or to
vote on any other matter.

RIGHTS PLAN

General. Under the rights plan, each share of Veritas DGC common stock has
attached to it one right. The right is represented by a certificate which is the
same certificate representing the Veritas DGC common stock. Each right entitles
the registered holder to purchase from Veritas DGC one one-thousandth of a share
of series A junior participating preferred stock of Veritas DGC at a purchase
price of $100. The purchase price is subject to adjustment. Until the
distribution date, the rights will be transferred with and only with the Veritas
DGC common stock certificates. The rights are not exercisable until after the
distribution date and are subject to termination of any extended redemption
periods described below. The rights expire at the close of business on May 15,
2007, unless they are earlier redeemed by Veritas DGC. The holder of unexercised
rights has no rights as a stockholder of Veritas DGC, including, without
limitation, the right to vote or to receive dividends.

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Separation of Rights from Veritas DGC Common Stock. The rights will
separate from Veritas DGC common stock and a distribution date will occur upon
the earlier of two possible times. The first such time is 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "acquiring person") has acquired, or has the right to
acquire, the ownership of 15% or more of the outstanding shares of Veritas DGC
common stock (the "stock acquisition date"). The second possible time is 10
business days following the commencement of a tender or exchange offer which
would result in a person or group owning 15% or more of such outstanding shares
of the Veritas DGC common stock (the "tender offer date"). The board of
directors of Veritas DGC may set a later tender offer date if a majority of the
continuing directors agree to do so and there are five continuing directors then
in office.

Continuing Director. A continuing director is any member of the board of
directors of Veritas DGC who was a member of the board on May 15, 1997, or who
was elected to the board after May 15, 1997 and was recommended or approved by a
majority of at least five continuing directors. An acquiring person, or an
affiliate or associate of an acquiring person, or such representative is not a
continuing director.

Triggering Events. Each holder of a right (other than the acquiring person,
certain related parties and transferees) will have the right to purchase, upon
exercise of a right, a number of one one-thousandth fractional share interests
in series A preferred stock determined by dividing the purchase price by 50% of
the then current market price of the common stock if, among other things:

- Veritas DGC is the surviving corporation in a merger or other business
combination with an acquiring person; or

- any person shall become the beneficial owner of more than 15% of the
outstanding shares of the Veritas DGC common stock, except:

- pursuant to certain consolidations or mergers involving Veritas DGC or
sales or transfers of the combined assets or earning power of Veritas
DGC and its subsidiaries; or

- pursuant to an offer for all outstanding shares of the Veritas DGC
common stock at a price and upon terms and conditions which a majority
of the board of directors and a majority of the continuing directors
determine to be in the best interests of Veritas DGC and its
stockholders, and provided at least five continuing directors are then
in office.

Because of the nature of the voting, dividend and liquidation rights of the
series A preferred stock, each of the one-thousandth fractional share interests
in series A preferred stock should approximate the value of a share of Veritas
DGC common stock. Therefore, it is anticipated that the value of the series A
preferred stock purchased upon exercise of the rights will be approximately
twice the exercise price paid. For example, at the exercise price of $100 per
right, each right not owned by an acquiring person (or by certain related
parties and transferees) following a triggering event set forth above would
entitle its holder to purchase $200 worth of series A preferred stock for $100.
Assuming that the series A preferred stock had a per share market price of $40
at such time (with each one-thousandth share of series A preferred stock valued
at one share of common stock), the holder of each valid right would be entitled
to purchase five one one-thousandth shares of the series A preferred stock for
$100. Rights are not exercisable following the occurrence of any of the
triggering events described above until the rights are no longer redeemable by
Veritas DGC as described below. Notwithstanding any of the foregoing, following
the occurrence of any of the triggering events described in this paragraph, all
rights that are, or (under certain circumstances specified in the rights plan)
were, beneficially owned by any acquiring person will be null and void.

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If at any time following the stock acquisition date:

- Veritas DGC is acquired in a merger or other business combination
transaction in which Veritas DGC is not the surviving corporation;

- Veritas DGC is the surviving corporation in a consolidation or merger
pursuant to which all or part of the outstanding shares of Veritas DGC
common stock are changed into or exchanged for stock or other securities
of any other person or cash or any other property; or

- more than 50% of the combined assets or earning power of Veritas DGC and
its subsidiaries is sold or transferred (in each case other than certain
consolidations with, mergers with and into, or sales of assets or earning
power by or to subsidiaries of Veritas DGC as specified in the rights
agreement);

each holder of a right (except rights that previously have been voided as set
forth above) will have the right to exercise and receive common stock of the
acquiring company having a value equal to two times the exercise price of the
right. The events described in this paragraph and in the preceding paragraph are
referred to as the triggering events.

Redemption of Rights. At any time until ten business days following the
stock acquisition date, Veritas DGC may redeem the rights in whole, but not in
part, at a price of $0.001 per right. The Veritas DGC board may set a later date
to redeem the rights if a majority of the continuing directors then in office
agree. Redemption of the rights is payable in cash, shares of Veritas DGC common
stock or other consideration deemed appropriate by the board of directors.
Rights may not be redeemed during the 180 day period after any person becomes an
acquiring person unless the redemption is approved by a majority of continuing
directors.

Anti-takeover Effects. The rights have certain anti-takeover effects. They
may reduce or eliminate:

- two-tiered or other partial offers that do not offer fair value for all
Veritas DGC common stock;

- the accumulation by a third party of 15% or more of the Veritas DGC
common stock in open-market or private purchases in order to influence or
control the business and affairs of Veritas DGC without paying an
appropriate premium for a controlling position in Veritas DGC; and

- the accumulation of shares of Veritas DGC common stock by third parties
in market transactions for the primary purpose of attempting to cause
Veritas DGC to be sold.

The rights will also cause the substantial dilution of shareholder voting
strength to a person or group that attempts to acquire Veritas DGC in a manner
defined as a triggering event. This is not so if the acquiring person's offer is
conditioned on a substantial number of rights being acquired. The rights should
not affect any prospective offeror who is willing:

- to make an offer for all outstanding shares of Veritas DGC common stock
and other voting securities at a price and terms that are in the best
interests of Veritas DGC and its stockholders as determined by the board
of directors; or

- to negotiate with the board of directors because as part of any
negotiated transaction the rights would either be redeemed or otherwise
made inapplicable to the transaction.

The rights should also not interfere with any merger or other business
combination approved by the board of directors since the board may, at its
option, choose to redeem all, but not less than all, of the then outstanding
rights at the $.001 redemption price. The board may exercise this option at any
time until ten business days following the stock acquisition date.

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PLAN OF DISTRIBUTION

The specific terms of the particular securities to be issued will be set
forth in a prospectus supplement that will be delivered together with this
prospectus. In the case of common stock, a prospectus supplement would include
the number of shares to be issued. In the case of debt securities, the
prospectus supplement would include, where applicable:

- ranking as senior or subordinated debt securities;

- total principal amount;

- maturity;

- interest rate (or method of determination);

- interest payment dates, if any;

- terms for optional or mandatory redemption or repurchase, or payment of
additional amounts or any sinking fund provisions;

- conversion or exchange terms; and

- any other specific terms of such debt securities.

In the case of preferred stock, the information that will be set forth in a
prospectus supplement, will include:

- specific designations;

- number of shares;

- liquidation value;

- dividend rights;

- liquidation and redemption rights;

- voting rights;

- other rights, including conversion or exchange rights, if any; and

- any other specific terms.

We may sell the securities through underwriters, agents or dealers or
directly to purchasers. A prospectus supplement will set forth the terms of each
specific offering, including the name or names of any underwriters or agents,
the purchase price of the securities and the proceeds to us from such sales, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.

If underwriters are used in the sale, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
prospectus supplement. Unless otherwise set forth in the prospectus supplement,
the underwriters will be obligated to purchase all the securities if any are
purchased.

We may sell the securities directly or through agents we designate from
time to time. Any agent involved in the offer or sale of the securities covered
by this prospectus, other than at the

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market offerings of equity securities, will be named in a prospectus supplement
relating thereto. Any at the market offerings of equity securities will be made
through PaineWebber Incorporated as our exclusive sales agent. Commissions
payable by us to an agent will be set forth in a prospectus supplement relating
thereto. Unless otherwise indicated in a prospectus supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.

If dealers are used in any of the sales of securities covered by this
prospectus, we will sell those securities to dealers as principals. The dealers
may then resell the securities to the public at varying prices the dealers
determine at the time of resale. The names of the dealers and the terms of the
transactions will be set forth in a prospectus supplement.

We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act of
1933 with respect to any sale thereof. The terms of any such sales will be
described in a prospectus supplement.

If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. These contracts will be
subject only to those conditions set forth in the prospectus supplement, and the
prospectus supplement will set forth the commission payable for solicitation of
such contracts.

Agents, dealers and underwriters may be entitled under agreements entered
into with us to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which such agents, dealers or underwriters may be required
to make in respect thereof. Agents, dealers and underwriters may be customers
of, engage in transactions with, or perform services on our behalf.

EXPERTS

The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Veritas DGC Inc. for the year
ended July 31, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

This prospectus incorporates documents by reference which are not presented
in or delivered with it. This means that Veritas DGC can disclose certain
information by referring a reader to certain documents. These documents (other
than exhibits to such documents unless specifically incorporated by reference)
are available, without charge, upon written or oral request directed to Larry L.
Worden, Veritas DGC Inc., at Veritas DGC's principal executive offices located
at 3701 Kirby Drive, Suite 112, Houston, Texas 77098-3982; telephone (713)
512-8300.

The following documents, which have been filed by Veritas DGC with the SEC
pursuant to the Exchange Act (File No. 1-7427), are incorporated in this
prospectus by reference and shall be deemed to be a part hereof:

(a) Annual Report on Form 10-K for the year ended July 31, 1999;

(b) Current Report on Form 8-K, dated October 26, 1999;

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(d) All documents filed by Veritas DGC with the SEC pursuant to
sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this prospectus and prior to the termination of the offering of
securities by this prospectus.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.

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[Color Photos representative
of Veritas DGC Services]
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement

Prospectus Supplement Summary........ S-1
Risk Factors......................... S-6
Cautionary Statement About
Forward-Looking Statements......... S-9
Price Range of Common Stock and
Dividend Policy.................... S-9
Use of Proceeds...................... S-10
Capitalization....................... S-10
Selected Consolidated Financial
Data............................... S-11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... S-12
Business............................. S-16
Management........................... S-21
Principal Stockholders............... S-23
Underwriting......................... S-24
Validity of the Common Stock......... S-25
Experts.............................. S-25
Index to Consolidated Financial
Statements......................... F-1

Prospectus

Where You Can Find More Information.. 3
The Company.......................... 3
Risk Factors......................... 3
Forward-Looking Statements........... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 5
Description of Capital Stock......... 9
Plan of Distribution................. 13
Experts.............................. 14
Incorporation of Certain Documents
by Reference....................... 14
</TABLE>

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3,000,000 Shares
VERITAS DGC INC.
Common Stock
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VERITAS LOGO

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GOLDMAN, SACHS & CO.

DAIN RAUSCHER WESSELS

SIMMONS & COMPANY INTERNATIONAL
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