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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------______________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31,APRIL 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ------------------------- --------------
Commission file number 1-7427
VeritasVERITAS DGC Inc.INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3701 KIRBY DRIVE, SUITE #112, HOUSTON, TEXAS 77098
(Address of principal executive offices) (Zip Code)
(713) 512-8300
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X/X/ No ----- ------/ /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
The number of shares of the Company's common stock (the "Common
Stock"), $.01 par value, outstanding at February 28,May 31, 1997 was 18,790,90718,865,901 (including
2,406,5832,378,551 Veritas Energy Services Inc. exchangeable shares which are identical
to the Common Stock in all material respects.)
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VERITAS DGC INC. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
July 31, 1996 and January 31,April 30, 1997 1
Consolidated Statements of Operations -
For the Three and SixNine Months Ended January 31,April 30, 1996 and 1997 3
Consolidated Statements of Cash Flows -
For the SixNine Months Ended January 31,April 30, 1996 and 1997 4
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 1413
PART II. Other Information
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 1918
Item 6. Exhibits and Reports on Form 8-K 2018
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERITAS DGC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except par value)value and number of shares)
(Unaudited)
July 31, January 31,April 30,
1996 1997
---------- ----------
----------- -------------
ASSETS (AS COMBINED - SEE NOTE 2)
Current assets:
Cash and short-term investments $ 10,072 $ 15,52314,131
Restricted cash investments 327 537542
Accounts and notes receivable (net of allowance for
doubtful accounts: July, $740; January, $505)April, $484) 65,447 105,140100,789
Materials and supplies inventory 1,659 2,1262,541
Prepayments and other 8,199 6,532
---------- ----------9,306
----------- -------------
Total current assets 85,704 129,858127,309
Property and equipment 165,104 197,682234,584
Less accumulated depreciation 86,094 102,668
---------- ----------112,286
----------- -------------
Property and equipment - net 79,010 95,014122,298
Multi-client data library 25,628 27,13927,250
Investments in and advances to joint venture 1,463 1,379770
Goodwill (net of accumulated amortization:
July, $2,214; January, $2,475)April, $2,601) 3,674 3,4133,287
Other assets 3,113 3,655
---------- ----------7,120
----------- -------------
Total $ 198,592 $ 260,458
========== ==========288,034
=========== =============
- -----------------
See Notes to Unaudited Consolidated Financial Statements.
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4
(Unaudited)
July 31, January 31,April 30,
1996 1997
---------- ------------------------ --------------
(AS COMBINED - SEE NOTE 2)
LIABILITIES AND STOCKHOLDERS' EQUITY (AS COMBINED - SEE NOTE 2)
Current liabilities:
Current maturities of long-term debt $ 13,739 $ 480484
Accounts payable - trade 27,454 28,48744,462
Accrued interest 313 2,189381
Other accrued liabilities 19,905 27,76930,580
Income taxes payable 1,814 3,133
---------- ----------2,375
------------ --------------
Total current liabilities 63,225 62,05878,282
Non-current liabilities:
Long-term debt - less current maturities 27,351 75,18679,001
Other non-current liabilities 2,093 2,129
---------- ----------3,103
------------ --------------
Total non-current liabilities 29,444 77,31582,104
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized:
400,000 shares; none issued
Common stock, $.01 par value; authorized:
40,000,000 shares; issued: 11,334,352 shares and
16,148,92616,482,016 shares (excluding 2,378,551
Exchangeable Shares) at July and January,April, respectively 113 161165
Additional paid-in capital 104,469 107,635108,108
Retained earnings (from August 1, 1991
with respect to Digicon Inc.) 2,275 13,95020,036
Cumulative foreign currency translation adjustment (934) (661)
---------- ---------------------- --------------
Total stockholders' equity 105,923 121,085
---------- ----------127,648
------------ --------------
Total $ 198,592 $ 260,458
========== ==========288,034
============ ==============
- ---------------------
See Notes to Unaudited Consolidated Financial Statements.
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5
VERITAS DGC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In thousands, except per share amounts)
Three Months Ended SixNine Months Ended
January 31, January 31,
-------------------------- --------------------------April 30, April 30,
------------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
(AS COMBINED------------- -------------- ------------ -------------
(As combined - SEE NOTESee Note 2)
Revenues $ 62,71959,140 $ 90,69186,843 $ 122,543181,683 $ 167,096253,939
Costs and expenses:
Operating expenses 53,297 67,982 100,103 126,302Cost of services 45,001 63,344 145,104 189,646
Depreciation and amortization 6,695 9,828 13,047 18,5206,953 10,142 20,000 28,662
Selling, general and administrative 1,824 2,432 3,404 4,3821,854 3,221 5,258 7,603
Other (income) expense:
Interest 1,101 2,104 3,775 5,334
Merger related costs 597
Interest 1,387 1,967 2,674 3,230
Other (72) 532 44 276
----------- ----------- -----------226 535 270 811
-------------- ------------ -------- -----------
Total costs and expenses 63,131 82,741 119,272 153,307
----------- ----------- -----------55,135 79,346 174,407 232,653
-------------- ------------ -------- -----------
Income (loss) before provision for
(benefit from) income
taxes and equity in earnings(earnings) loss
of 50% or less-owned companies
and joint ventures (412) 7,950 3,271 13,7894,005 7,497 7,276 21,286
Provision for (benefit from) income taxes (536) 1,681 1,128 2,9191,159 1,341 2,287 4,260
Equity in earnings(earnings) loss of 50% or less-
owned companies and joint ventures (1,145) (238) (816) (805)
----------- ----------- -----------23 70 (793) (735)
-------------- ------------ -------- -----------
Net income $ 1,2692,823 $ 6,5076,086 $ 2,9595,782 $ 11,675
=========== =========== =========== ===========17,761
-------------- ------------ -------- -----------
Per share of common stock:
Income per share of common stock $ .07.16 $ .35.32 $ .17.33 $ .63
=========== =========== ===========.95
============== ============ ======== ===========
Weighted average shares 17,938 18,639 17,663 18,510
=========== =========== ===========17,986 18,819 17,754 18,611
============== ============ ======== ===========
Cash dividends None None None None
=========== =========== ========================= ============ ======== ===========
- ---------------------------------------------
See Notes to Unaudited Consolidated Financial Statements.
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6
VERITAS DGC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands of dollars)
SixNine Months Ended
January 31,
----------------------------April 30,
-------------------------
1996 1997
------------ ------------
(AS COMBINED-------- ---------
(As combined - SEE NOTESee Note 2)
Operating activities:
Net income $ 2,959 $ 11,6755,782 17,761
Non-cash items included in net income:
Depreciation and amortization 13,047 18,52020,000 28,662
Amortization of deferred gain on sale/leaseback (90)(103)
Loss on disposition of property and equipment 360 439606 783
Equity in earnings of 50% or less-owned
companies and joint ventures (816) (805)(793) (735)
Write-down of multi-client data library to market 198 767297 989
Change in operating assets/liabilities:
Accounts and notes receivable (4,473) (39,693)4,973 (35,342)
Materials and supplies inventory (1,447) (467)(1,550) (882)
Prepayments and other 867 1,667(1,401) (1,107)
Multi-client data library 3,387 (2,278)2,422 (2,611)
Other (2,698) 2,319(2,749) (1,588)
Accounts payable - trade 65 (1,420)(3,115) 9,303
Accrued interest 13 1,876(67) 68
Other accrued liabilities 2,051 7,773(568) 10,675
Income taxes payable (71) 1,319(847) 561
Other non-current liabilities (651) 36
------------ ------------(820) 1,010
--------- --------
Total cash provided by operating activities 12,701 1,72822,067 27,547
Financing activities:
Borrowing of senior notes 75,000
Debt issuesissue costs (2,765)
Borrowings of long-term debt 2,290 781
Payments of long-term debt (4,618) (29,289)(10,500) (25,584)
Net payments under credit agreements (1,096) (11,458)(3,467) (8,118)
Payment of secured term loan (6,000)loans (10,072)
Net proceeds from sale of common stock 13 3,214816 3,691
Net proceeds from sale of treasury stock 3,972
------------ --------------------- --------
Total cash provided (used) by financing activities (1,729) 29,483(6,889) 32,933
- ---------------------------------------------
See Notes to Unaudited Consolidated Financial Statements.
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7
VERITAS DGC INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
UNAUDITED
(In thousands of dollars)
SixNine Months Ended
January 31,
------------------------April 30,
--------------------------
1996 1997
--------- ----------
----------
(AS COMBINED(As combined - SEE NOTESee Note 2)
Investing activities:
(Increase) decrease in restricted cash investments $ 338 $ (210)331 (215)
(Increase) decrease in investment in and advances to joint venture (260) 889(269) 1,428
Purchase of property and equipment (9,329) (27,406)(12,070) (59,063)
Sale of property and equipment 422 699650 812
Other (76)
---------- ----------(22)
------- -------
Total cash used by investing activities (8,905) (26,028)(11,380) (57,038)
Currency (gain) loss on foreign cash (55) 268
---------- ----------(77) 617
------- -------
Change in cash and cash equivalents 2,012 5,4513,721 4,059
Beginning cash and cash equivalents balance 6,691 10,072
---------- ----------------- -------
Ending cash and cash equivalents balance $ 8,703 $ 15,523
========== ==========10,412 14,131
- ---------------------------------
See Notes to Unaudited Consolidated Financial Statements.
5
8
VERITAS DGC INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands of dollars)
SixNine Months Ended
January 31,
-----------------------April 30,
----------------------------
1996 1997
--------- ----------
----------
(AS COMBINED(As combined - SEE NOTESee Note 2)
Schedule of non-cash investing and financing activities:
Increase in property and equipment for:
Equipment purchase obligations $ 2,788 $ 5,542$5,529 $6,388
Accounts payable - trade 2,040 2,453232 7,705
Accounts and notes receivable - deferred credits utilized 866
Supplemental disclosures of cash flow information:
Cash paid for:
Interest -
Senior notes 3,494
Revolving credit agreements 1,036 2051,408 236
Secured term loans 242363 274
Equipment purchase obligations 977 7481,428 755
Other 443 150620 278
Income taxes 2,509 1,3334,614 1,589
6
9
VERITAS DGC INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPINION OF MANAGEMENTOpinion of Management
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments of a normal and recurring
nature necessary to present fairly the financial position of Veritas
DGC Inc. and subsidiaries ("the Company"(the "Company") at January 31,April 30, 1997, and the
results of its operations and its cash flows for the three and sixnine
months ended January 31,April 30, 1996 and 1997. The results of operations for
any interim period are not necessarily indicative of the results to be
expected for a full year as such results could be affected by changes
in demand for geophysical services and products, which is directly
related to the level of oil and gas exploration and development
activity. Governmental actions, foreign currency exchange rate
fluctuations, seasonal factors, weather conditions and equipment
problems also could impact future operating results.
EARNINGS PER SHAREEarnings Per Share
Weighted average shares and earnings per share for all periods
presented have been restated to reflect the effect of shares issuable
upon exchange of Veritas Energy Services Inc. ("VES") Exchangeable
Shares (See Note 2).exchangeable shares.
Earnings per share are computed based on the weighted average number of
shares of common stock.stock and Exchangeable Shares. Shares issuable upon
the conversion of stock options and warrants, which are common stock
equivalents, wereare disregarded since the treasury stock method of
calculation resulted in dilution of less than 3%.
TRANSLATION OF FOREIGN CURRENCIESMulti-Client Data Library
The Company has determinedcollects and processes certain seismic data for its own
account to which it retains all ownership rights and which it resells
to clients on a non-transferable, non-exclusive basis. The Company
may obtain precommitted sales contracts to help fund the cash
requirements of these surveys which generally last from 5 to 7
months. The Company capitalizes a portion of the survey costs using
an estimated sales method. Under that method the United States ("U.S.") dollaramount capitalized
equals actual costs incurred less costs attributed to the precommitted
sales contracts 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 its primary functional currency and, accordingly, translates property
and equipment (and related depreciation) and inventories into U.S.
dollars at the exchange ratelikewise charged to operations
in effect at the time of their
acquisition while other assets and liabilities are translated at
period end rates. Operating results (other than depreciation) are
translated at the average rates of exchange prevailing during the period and remeasurement gains and losses are includedsubsequent sales occur based on the percentage of total
estimated costs to total estimated sales multiplied by actual sales.
Beginning in fiscal 1997, the determinationCompany changed the estimated life
of net income and reflected in other (income) expense
(See Note 5). Prior to the Combination (See Note 2), VES used the
Canadian dollar as its functional currency and translated all assets
and liabilities at period end exchange rates and operating results at
average exchange rates prevailing during the period. Adjustments
resulting from the translation of assets and liabilities are recorded
in the cumulative foreign currency translation adjustment account in
the stockholders' equity section.
7
10
NEW ACCOUNTING PRONOUNCEMENTSmulti-client data library so that any costs remaining 24 months
after completion of a survey are charged to operations over a
period not to exceed 24 months. The Company periodically reviews
the carrying value of the multi-client data library to assess
whether there has been a permanent impairment of value and
records losses when the total estimated costs exceed total estimated
sales or when it is determined that estimated sales would not be
sufficient to cover the carrying value of the asset.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement establishes accounting
standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This statement is effective for
financial statements with fiscal years beginning after December 15,
1995. The Company implemented this statement at the beginning of the
fiscal year 1997. Implementation of this pronouncement did not have a
material effect on the Company's consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock
Based Compensation." This statement establishes a fair value method
of accounting for stock-based compensation plans either through
recognition or disclosure. This statement is effective for fiscal
years beginning after December 15, 1995. The Company will be required
to implement this statement for the fiscal year 1997. The Company
intends to adopt this standard by disclosing the pro forma net income
(loss) and net income (loss) per share amounts assuming the fair value
method was adopted on August 1, 1995. The adoption of this statement
will have no material impact on the Company's consolidated financial
statements.
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share."
This statement requires the computation of basic earnings per share
based upon weighted-average common shares outstanding and diluted
earnings per share based upon weighted-average common shares
outstanding and additional common shares that would have been
outstanding if dilutive potential common shares had been issued under
the treasury stock method using average market prices. In addition,
previously reported earnings per share must be restated. This
statement is effective for interim and annual periods ending after
December 15, 1997. Basic earnings per share will not differ from
previously reported primary earnings per share amounts. Diluted
earnings per share will include the effect of using average market
price for the period instead of the higher of average market price or
end of period price under the treasury stock method. In addition,
diluted earnings per share will be presented for all prior periods
where fully diluted earnings per share were not previously required
because dilutive potential common shares did not result in more than
3% dilution. Diluted earnings per share are not expected to differ
materially from basic earnings per share.
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11
2. BUSINESS COMBINATION
Veritas DGC Inc. was formerly named Digicon Inc. ("Digicon"). On
August 30, 1996, Digicon and Veritas Energy Services Inc. ("VES"), a
Canadian company, consummated a business combination (the
"Combination"). VES became a wholly-owned subsidiary of Digicon, and
Digicon changed its name to Veritas DGC Inc. (the "Company"). As a
result of the Combination, each share of VES no par value common
shares outstanding was converted into the right to receive a VES no
par value exchangeable share (the "Exchangeable Shares") at an
exchange ratio of 0.8 of an Exchangeable Share per VES common share.
All of the holders of VES common shares, except for those shareholders
who perfected and properly exercised their right to dissent from the
Combination and received fair value of their shares in cash, became
holders of Exchangeable Shares and, accordingly, 7,023,701 shares of
Exchangeable Shares were issued. The aggregate stated capital of the
Exchangeable Shares is equal to the aggregate stated capital
immediately prior to the Combination of the VES common shares that
were exchanged or approximately $30.0 million. The Exchangeable Shares
are convertible, at the discretion of the stockholder, on a
one-for-one basis into shares of the Company's $0.01 par value
8
11
common stock and their holders have rights identical to the holders of
the Company's common stock. Options to purchase shares of VES common
stock ("VES Option") were converted into options to purchase shares of
the Company's common stock at an exchange ratio of 0.8 of an option in
the Company's common stock per VES Option. The VES articles of
amalgamation were amended to reduce the number of authorized VES
common shares to one which is held by the Company
The Combination has been accounted for as a pooling of interests and,
accordingly, the consolidated financial statements of Digicon and VES
have been combined and all prior periods have been restated to give
effect to the Combination. Information concerning common stock and per
share data has been restated on an equivalent share basis. As a result
of differing year ends of Digicon and VES, results of operations for
dissimilar year ends will be combined. The Company's results of
operations for the years ended July 31, 1995 and prior will be
combined with VES' results of operations for the years ended October
31, 1995 and prior. To conform year ends, Digicon's results of
operations for the year ended July 31, 1996 will be combined with VES'
results of operations for the twelve months ended July 31, 1996.
Accordingly, VES' operating results for the period August 1, 1995
through October 31, 1995 will be included in the years ended July 31,
1995 and July 31, 1996. An adjustment in an amount equal to the
results of operations for this three-month period will be included in
the consolidated statements of changes in stockholders' equity. VES'
revenues, net income and net income per share were $22,150,000,
$938,000 and $0.05, respectively, for the period August 1, 1995
through October 31, 1995.
9
12
Presented below is the effect of the pooling of interests on the
Company's reported results of operations. Amounts related to VES have
been converted into the Company's reporting currency, U.S. dollars,
using weighted average exchange rates prevailing during the period and
reflect adjustments for differences between U.S. and Canadian
generally accepted accounting principles ("GAAP") and
reclassifications to conform financial statement presentation.
Canadian to U.S. GAAP adjustments include adjustments to (i) write off
foreign exchange gainslosses on borrowings which are deferred and amortized
over the period of the debt affectingreducing net income by approximately
$17,000$47,000 and $107,000$154,000 for the three and sixnine months ended January 31,April 30,
1996, respectively, and (ii) reverse the effect of a prior period
adjustment reducingincreasing net income by approximately $90,000 for the sixnine
months ended January 31,April 30, 1996. ReclassificationReclassifications of $10,844,000$6,127,000 and
$17,829,000$23,956,000 for the three and sixnine months ended January
31,April 30, 1996,
respectively, have been made to net amounts billed to customers for
reimbursable costs against VES' revenues.
Three Months SixNine Months
Ended Ended
January 31, January 31,April 30, April 30,
1996 1996
----------- -----------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)---------------------- ----------------------
(In thousands of dollars, except per
share amounts)
Revenues:
Digicon $ 38,75535,785 $ 76,429112,214
VES 34,808 63,94329,482 93,425
Reclassifications (10,844) (17,829)
----------- -----------(6,127) (23,956)
--------------------- -------------------
Total $ 62,71959,140 $ 122,543
=========== ===========181,683
Net income:
Digicon $ 1,0771,864 $ 1,8293,693
VES 209 1,1471,006 2,153
Adjustments (17) (17)
----------- -----------(47) (64)
--------------------- -------------------
Total $ 1,2692,823 $ 2,959
=========== ===========5,782
===================== ===================
Net income per share:
As previously reported $ .10.17 $ .17
=========== ===========.34
===================== ===================
As restated $ .07.16 $ .17
=========== ===========.33
===================== ===================
There arewere no material adjustments to the net assets of VES as a
result of adopting the same accounting principles as the Company.
9
12
During the year ended July 31, 1996 and the sixnine months ended January
31,April 30, 1997, the Company incurred
and expensed $3,666,000 and $597,000
respectively, of costs associated with the merger.Combination. These costs consist
primarily of professional fees. Costs for the six months ended January
31, 1997fees and include $150,000 payable to a
stockholder who was the former Chairman of the Board of Directors for
consulting services rendered in conjunction with the merger.
10
13Combination.
3. INVESTMENT IN INDONESIAN JOINT VENTURE
Summarized financial information for the Company's Indonesian joint
venture which is accounted for under the equity method is as follows:
Three Months Ended SixNine Months Ended
January 31, January 31,
---------------------- ---------------------April 30, April 30,
---------------------------- -----------------------------
1996 1997 1996 1997
--------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS)---------- ---------- ----------
(In thousands of dollars)
Revenues $ 1,313494 $ 940718 $ 1,8172,311 $ 4,236
Operating expenses 69 679 789 3,0444,954
Cost of services 424 717 1,213 3,761
Depreciation and amortization 106 102 213 39087 79 300 469
Other (12) (4) (6) (3)(40) (8) 5 (11)
-------- --------- --------- ------------------- ---------
Total 163 777 996 3,431
Income before benefit from
income taxes 1,150 163 821 805
Benefit from income taxes (75)471 788 1,518 4,219
-------- --------- --------- ------------------- ---------
Net income $ 1,15023 $ 238(70) $ 821793 $ 805735
======== ========= ========= =================== =========
4. LONG-TERM DEBT
The Company's long-term debt is as follows:
July 31, January 31,April 30,
1996 1997
---------- ----------
(AS COMBINED--------------- ----------------
(As combined - SEE NOTESee Note 2)
(IN THOUSANDS OF DOLLARS)(In thousands of dollars)
Senior notes due October 2003, at 9 3/4% $ 75,000
Revolving credit agreement due July 1998, at
LIBOR plus 2% or prime (8.5% at April 30, 1997) $ 11,458 3,340
Secured term loan due July 1999, at prime plus 3/4% 6,000
Secured term loan due July 1999, at prime plus 1/2% 1,240
Secured term loan due July 1999, at prime plus 1/2% 2,832
Equipment purchase obligations maturing through,
July 1999,September 2000, at a weighted average rate of 8.6%9.1%
at January 31,April 30, 1997 19,319 6661,145
Mortgage note payable due October 2005, at 10% 241
---------- ----------------------- -------------
Total 41,090 75,66679,485
Less current maturities 13,739 480
---------- ----------484
------------- -------------
Due after one year $ 27,351 $ 75,186
========== ==========79,001
============= =============
1110
1413
The senior notes are due in October 2003 with interest payable
semi-annually at 9 3/4%. The senior notes are unsecured and are
effectively subordinated to secured debt of the Company with respect
to the assets securing such debt and to all debt of its subsidiaries
whether secured or unsecured. The indenture relating to the senior
notes contains certain covenants which limit the Company's ability to,
among other things, incur additional debt, pay dividends and complete
mergers, acquisitions and sales of assets. Upon a change in control
of the Company, as defined in the Indenture,indenture, the holders of the senior
notes have the right to require the Company to purchase all or a
portion of such holder's senior note at a price equal to 101% of the
aggregate principal amount. The Company has the right to redeem the
senior notes, in whole or in part, on or after October 15, 2000.
Under certain conditions, the Company may redeem up to $20.0 million
in aggregate principal amount of the senior notes prior to October 15,
1999.
The revolving credit agreement due July 1998 as amended, is with a commercial bank
and, as of April 30, 1997, provides a facility of up to $15.0 million.
In June 1997, the revolving credit agreement was amended to provide
advances up to $25.0 million of which $20.0 million are secured as
discussed below. Advances are secured by substantially all of the
receivables of the Company, bear interest, at the Company's election,
at LIBOR plus two percent or prime rate and are limited by a borrowing
formula. Covenants in the agreement limit, among other things, the
Company's right, without consent of the lender, to take certain
actions, including creating indebtedness and paying dividends, and
limit the Company's capital expenditures in any fiscal year. In
addition, the agreement requires minimum cash flow coverage and the
maintenance of minimum tangible net worth, limits the ratio of funded
debt to total capitalization, and requires the Company to maintain a
minimum current ratio.
The secured term loan due July 1999 was with a commercial bank, was
due in 36 monthly installments of $166,667 plus interest at prime plus
3/4% and was secured by a majority of the assets of the Company
(except those assets directly or indirectly owned by VES). The
secured term loan was paid with proceeds from the senior notes.
The secured term loans due July 1999 provided for advances for
equipment purchases up to Canadian $4.0 million and Canadian $5.5
million, respectively, and advances were payable in 36 equal monthly
installments. Advances bore interest at the prime rates (as defined)
plus 1/2% and were secured by the equipment purchased. The
agreements required VES to maintain certain financial ratios.
Advances under the secured term loans were paid with proceeds from the
senior notes.
The Company's equipment purchase obligations represent installment
loans and capitalized lease obligations primarily related to computer
and seismic equipment. Substantially all the equipment purchase
obligations were paid with proceeds from the senior notes.
The mortgage note was payable in monthly installments of Canadian
$4,800 including interest at 10% and was secured by a building. The
mortgage note was paid with proceeds from the senior notes.
11
14
5. COMMITMENTS AND CONTINGENCIES
On May 16, 1997, the Company entered into a 96 month charter agreement
for a vessel which is being constructed by a shipbuilder for the
owner. The charter is noncancellable unless the owner exercises its
right to cancel the shipbuilding contract due to late delivery (in
excess of 180 days of the scheduled delivery time of May 31, 1998).
6. SHAREHOLDER RIGHTS AGREEMENT
On May 27, 1997, the board of directors of the Company declared a
distribution of one right for each outstanding share of common stock
or exchangeable share to shareholders of record at the close of
business on June 12, 1997 and authorized 400,000 shares of a class of
preferred stock to be distributed under a shareholder rights
agreement. Upon the occurrence of certain events enumerated by the
shareholder rights agreement, each right entitles the registered
holder to purchase a fraction of a share of the Company's authorized
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 the Company. The rights
expire on May 15, 5.2007 but may be redeemed earlier.
7. OTHER (INCOME) EXPENSE
Other (income) expense consists of the following:
Three Months Ended SixNine Months Ended
January 31, January 31,
------------------ ------------------April 30, April 30,
------------------------------ -----------------------------
1996 1997 1996 1997
------- ------- ------- -------
(AS COMBINED---------- ---------- ----------- -----------
(As combined - SEE NOTESee Note 2)
(IN THOUSANDS OF DOLLARS)(In thousands of dollars)
Net foreign currency exchange (gain) loss $ 9(53) $ 619253 $ 29(24) $ 224477
Net loss on disposition of
property and equipment 57 215 360 439246 344 606 783
Interest income (122) (283) (295) (378)(104) (47) (399) (425)
Other (16) (19) (50) (9)
------- ------- ------- -------137 (15) 87 (24)
------------ ----------- ----------- -----------
Total $ (72)226 $ 532535 $ 44270 $ 276
======= ======= ======= =======811
============ =========== =========== ===========
6. RELATED PARTY TRANSACTION
On November 30, 1996, the Company entered into agreements to purchase
property and equipment in the amount of approximately $1.5 million
from companies which were partially owned by certain nonexecutive
employees of the Company.
1312
16
ITEM15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCESLiquidity and Capital Resources
The Company's internal sources of liquidity are cash, and short-term investments
and cash flow from operations. External sources include the unutilized portion
of a revolving credit facility, equipment financing and trade credit.
In October 1996, the Company effected a public offering of $75.0 million of 9
3/4% senior notes due 2003 (the "Senior Notes") which generated approximately
$72.2 million of net proceeds. The indenture relating to the Senior Notes (the
"Indenture") contains certain covenants, including covenants which limit the
Company's ability to, among other things, incur additional debt, pay dividends
and complete mergers, acquisitions and sales of assets. Upon a change of
control of the Company (as defined in the Indenture), holders of the Senior
Notes have the right to require the Company to purchase all or a portion of
such holder's Senior Note at a price equal to 101% of the aggregate principal
amount. Interest is payable semi-annually beginning April 1997.
The Company maintains a $15.0 million revolving credit facility, as amended
(the "Credit Facility"), with a commercial bank which will mature in July 1998.
Advances under the Credit Facility are secured by substantially all of the
Company's receivables, bear interest, at the Company's election, at LIBOR plus
two percent or prime rate and are limited by a borrowing formula which, based
on current levels of receivables, results in a borrowing base well in excess of
the maximum commitment. Covenants in the Credit Facility limit, among other
things, the Company's right, without consent of the lender, to take certain
actions, including creating indebtedness and paying dividends and limit the
Company's capital expenditures in any fiscal year. In addition, the Credit
Facility requires minimum cash flow coverage and the maintenance of minimum
tangible net worth, limits the ratio of funded debt to total capitalization,
and requires the Company to maintain a minimum current ratio.
The Company requires significant amounts of working capital to support its
operations and to fund capital spending and research and development programs.
The Company's foreign operations require greater amounts of working capital
than similar domestic activities, as the average collection period for foreign
receivables is generally longer than for comparable domestic accounts.
Approximately 57%55% of revenues for the sixnine months ended January 31,April 30, 1997 arewere
attributable to the Company's export sales and foreign operations. In
addition, the Company has increased its participation in multi-client data
surveys and has significantly expanded its library of multi-client data.
Because of the lead time between survey execution and sale, multi-client data
surveys generally require greater amounts of working capital than contract
work. Depending on timing of future sales of the data and the collection of
the proceeds from such sales, the Company's liquidity will continue to be
affected; however, the Company believes that these non-exclusive surveys have
good long-term sales, earnings and cash flow potential.
The Company maintains a $25.0 million revolving credit facility, as amended
(the "Credit Facility"), with a commercial bank which will mature in July 1998.
Advances up to $20.0 million under the Credit Facility are secured by
substantially all of the Company's receivables. All advances bear interest, at
the Company's election, at LIBOR plus two percent or prime rate and are limited
by a borrowing formula which, based on current levels of receivables, results
in a borrowing base well in excess of the maximum commitment. Covenants in the
Credit Facility prohibit the payment of cash dividends and limit, among other
things, the Company's right to create indebtedness and make capital
expenditures over a certain amount in any fiscal year. In addition, the Credit
Facility requires minimum cash flow coverage and the maintenance of minimum
tangible net worth, limits the ratio of funded debt to total capitalization,
and requires the Company to maintain a minimum current ratio.
In October 1996, the Company completed a $75.0 million public offering of
Senior Notes, which generated approximately $72.2 million of net proceeds. The
indenture relating to the Senior Notes (the "Indenture") contains certain
covenants, including covenants that limit the Company's ability to, among other
things, incur additional debt, pay dividends and complete mergers, acquisitions
and sales of assets. Upon a change of control of the Company (as defined in
the Indenture) holders of the Senior Notes have the right to require the
Company to purchase all or a portion of such holder's Senior Note at a price
equal to 101% of the aggregate principal amount. Interest is payable
semi-annually beginning April 1997. Approximately $49.8 million of the net
proceeds from the Senior Notes has beenwas used to retire outstanding indebtedness of
the Company (including borrowings
under the Credit Facility).Company. The remaining net proceeds are beingwere used to fund a portion of the
Company's $70.0$80.0 million capital expenditure budget for fiscal 1997. Of the
Company's $80.0 million capital expenditure budget for fiscal 1997,
approximately $10.3
13
16
million represents capital spending necessary to maintain the Company's
operating equipment and the remainder is for discretionary capital spending,
including approximately $22.0 million for the replacement of older operating
equipment with a view of substantially enhancing operating efficiency and $47.7
million for expansion of its equipment to meet increased demand for seismic
services. It is anticipated that the balance of the 1997 capital
14
17 expenditure
budget will be financed from internally generated funds, and, if necessary,
from the Credit Facility or other borrowings permitted by the Indenture and
Credit Facility.
OfIn June 1997, the $70.0Company has proposed an Offering (the "Offering") of
3,000,000 shares of common stock. Net proceeds from the proposed Offering,
estimated at $62.9 million ($72.4 million if the underwriters' over-allotment
option is exercised in full) would be used to fund a portion of the Company's
1998 capital expenditure budget,
approximately $7.7program of $75.0 million representsand other general corporate
purposes, including working capital, spending necessarypossible repurchases of outstanding Senior
Notes and possible acquisitions. No repurchases will be made of outstanding
Senior Notes, except at prices which are, at the time of any such repurchase,
regarded by the Company to maintainbe attractive. Accordingly there can be no assurance
that any such repurchases will be made. While the Company's operating equipmentCompany regularly evaluates
opportunities to acquire complementary businesses, it has made no present
agreements or commitments, except as described below, with respect to possible
acquisitions and no estimate can be made as to the remainder is for discretionary
capital spending, including approximately $26.2 million for the replacementamount of older operating equipment with a view of substantially enhancing operating
efficiency. The remaining $36.1 million willnet proceeds which
ultimately may be used for expansionacquisitions. The Company has recently entered into a
letter of its
equipment complementintent to meet increased demandpurchase a land acquisition company in the Middle East for
seismic services.approximately $10.0 million. The acquisition is subject to due diligence and
definitive documentation and there is no assurance that the acquisition will be
consummated.
The Company will require substantial cash flow to continue operations on a
satisfactory basis, complete its capital expenditure and research and
development programs, and meet its principal and interest obligations with
respect to the Senior Notes.outstanding indebtedness. The Company anticipates that cash and
short-term investments, cash flow generated from operations, and borrowings
permitted under the Indenture and Credit Facility and net proceeds from the
proposed Offering will provide sufficient liquidity to fund these requirements
until the Senior Notes become due in 2003.through fiscal 1998. However, the Company's ability to meet its debt service
and other obligations depends on its future performance, which, in turn, is
subject to general economic conditions, business and other factors beyond the
Company's control. If the Company is unable to generate sufficient cash flow
from operations or otherwise to comply with the terms of the Credit Facility or
the Indenture, it may be required to refinance all or a portion of its existing
debt or obtain additional financing. There can be no assurancesassurance that
the Company would be able to obtain such refinancing or financing, or that any
refinancing or financing would result in a level of net proceeds required.
1514
18
RESULTS OF OPERATIONS17
Results of Operations
Three Months Ended January 31,April 30, 1997 compared with Three Months Ended January
31,April 30,
1996.
Revenues. Land and transition zone seismic data acquisition revenues in the secondthird quarter increased
$17.6$12.8 million or 68%43% over the same period last year. Crews operating inThe Company increased the second quarter increased to 17 from 14 and the total
number of channels increasedused from 15,000 to 21,000 from 17,500 compared with the same
period22,700 primarily as a result of the prior year. Strong seasonal market demand for crews in Canada
coupled with larger
channel requirements for the U.S. highlands and transition zone markets. The
U.S. and South American land markets accounted for the higher capacity. The Canadiancontinue to experience high activity levels
resulting in contracts with longer terms, improved prices and more weather
protection clauses. An unseasonably high market is showing
stronger demand for off season work, and other land markets are experiencing
longer term contracts and increased activity. The higher activity levels are
resultingcrews in improved contract prices and weather protection clausesCanada also
contributed to ensure
crew availability.the increase in revenues in the current quarter. Marine acquisition revenues
were $1.7$1.5 million or 16%12% higher than the same quarter of the prior year
primarily due to increased vessel utilization.improved production. The marine vessels Polar Search, and Polar
Princess which were operatingand two of the three vessels in the
North Seaa multi-boat operation have been
mobilizedupgraded to Syntron equipment and are acquiring multi-client data in the Gulf of
Mexico. The Polar Princess
completed a surveyDemand remains high in Southeast Asia for the Falklands en route tomarine vessels Ross Seal
and the Gulf of Mexico and is
presently in the shipyard being upgraded to 7200 meter Syntron RDA streamer
capability. The Polar Search completed its upgrade to the 7200 meter Syntron
RDA streamers early in the second quarter. The upgrade to more channels coupled
with high production for all vessels worldwide and improving prices in the
contract market are yielding higher margins.Acadian Searcher.
Revenues from the Company's seismic data processing operations increased $3.9$6.1 million or
28%43% over the same period last yearyear. The increased capacity due to the
installation of new HP
KittyHawk, SystemsSun and NEC hardware is being utilized by
expanding workloads from both contract and multi-client data library projects
and introduction of new technology has improved productivity. The Company has
opened two new centers in Australia and Abu Dhabi and will install an NEC
supercomputer in the major marine data processing centers and the new NEC
Supercomputer in Houston as a result of risingLondon center to meet this increasing demand. Additionally, land data
processing centers set up in the prior quarter in Oklahoma City and Quito,
Ecuador were in full production. A center in Abu Dhabi was set up late in the
second quarter, and full-time production is expected to be achieved late in the
third quarter. In the coming fiscal third quarter, the long-term contract
operation of a dedicated center will be completed. The personnel from that
center will be re-deployed to the Houston and Crawley, England centers to
process the higher production requirements of those centers.
Multi-client data sales roseincreased by $4.7$7.0 million or 41%191% over the same period
last year. The higher data sales reflect increased activity levels in the North
Sea and Gulf of Mexico markets. Due to increasing customer interest in deep-water
and sub-salt areas of the Gulf of Mexico, demand for larger inventory levels in
these areas is increasing. Surveys in the Shetland-Faroes area and the
Gulf of Mexico deep-waterdeepwater basin and smaller selected Far East areas are planned over the coming months.months and are in
various stages of prefunding. The Company initiatedcompleted its first land data library
project in the U.S. during the quarter and will be expandingis preparing additional projects
beginning in this area.the fourth quarter of the current fiscal year.
Operating Expenses. Costs of services increased $14.7$18.3 million or 28%41% over the
same period last year but as a percent of revenues decreased from 85%76% to 75%73%.
The improvement in operating margins is attributable to higher prices and
better equipment utilization and production for all service groups as a
result of increased demand, higher prices, better equipment utilization and
increased capacity as discussed
above.
16
19
Depreciation and Amortization. Depreciation and amortization expense increased
47%46% from $6.7$7.0 million to $9.8$10.1 million due to the significant 1997 capital
expenditure program as previously discussed.which included the upgrade of equipment and increase in
capacity discussed above.
15
18
Selling, General and Administrative. Selling, general and administrative
expenses increased 33%74% from $1.8$1.9 million to $2.4$3.2 million, resulting primarily
from costs incurred in a more aggressive marketing strategy and in implementing
new administrative and accounting data processing systems.
Interest. Interest expense increased $580,000$1.0 million due to increased debt levels
to finance the Company's 1997 capital expenditure program.
Other. Other (income) expense decreased from income of $72,000 to an expense of
$532,000increased $309,000 resulting primarily from net foreign
currency exchange losses.
Income Taxes. Provision for income taxes increased from a $536,000 benefit$182,000 relating to a
$1.7 million provision as a result of the
increased profitability of the Company. TheCompany, however, the effective tax rate was
reduced in the current year by restructuring the operations of certain of the
Company's subsidiaries.
Equity in Earnings. Equity in earnings is attributable to the Company's
Indonesian joint venture which performed profitable marine acquisition services
in the prior year.
SixNine Months Ended January 31,April 30, 1997 compared with SixNine Months Ended January 31,April 30,
1996.
Revenues. Land and transition zone seismic data acquisition revenues for the year
increased $26.3$39.1 million or 46%45% over the same period last year dueyear. The increase is
attributable to strong marketan increase in demand in Canadaand capacity and improving prices. During the current year
the Company also added an Input/Output System Two-RSR crew to its transition
zone operations and increased the number of land crews and channels in
operation.contract terms
as previously discussed.
Marine acquisition revenues were $9.2$10.7 million or 46%33% higher than the same
period of the prior year primarily due to increased utilization of the
Company's vessels, higher productivity due to upgrading existing vessels with
Syntron equipment and the addition of a vessel. In the prior year, vessels
experienced downtime related to vessel upgrades and mobilization and bad
weather. Lower production also resulted from shooting obstructions and program
designs.
The Company's seismic dataPolar Princess in the first quarter
of fiscal 1997.
Data processing operations increased $5.7$11.8 million or 21%28% over the same period
last year due to increased capacity and increased volumes of marine data
available for processing. The Company has substantially upgraded its
marine data processing centers and addedwill be adding a new NEC supercomputer in Houston.London. The
Company also added new centers in Quito,Abu Dhabi, Australia, Ecuador and Oklahoma City.Oklahoma.
Multi-client data sales rose by $3.3$10.7 million or 19%52% over the same period last
year due to increasing customer interest in the North Sea and Gulf of Mexico
multi-client data surveys. In general, demand has increased for multi-clientsurveys, especially in the deepwater and subsalt areas of the
Gulf. The Company also plans to add additional land data library surveys.
17
20
Operating Expenses. Costs of services increased $26.2$44.5 million or 26%31%, but as a
percent of revenues decreased from 82%80% to 76%75%. The improvement in operating
margins is attributable to higher prices and better equipment utilization and
production for all service groups as a result of increased demand,
higher prices, better equipment utilization and increased capacity as discussed above.
Depreciation and Amortization. Depreciation and amortization expense increased
42% from $13.0 million to $18.5 million due to the significant 1997 capital
expenditure program.
Selling, General and Administrative. Selling, general and administrative
expenses increased 29%45% from $3.4$5.3 million to $4.4$7.6 million, resulting primarily
from costs incurred in a more aggressive marketing strategy and in implementing
new administrative and accounting data processing systems.
16
19
Depreciation and Amortization. Depreciation and amortization expense increased
43% from $20.0 million to $28.7 million due to the significant 1997 capital
expenditure program.
Interest. Interest expense increased $1.5 million due to increased debt levels
to finance the Company's 1997 capital expenditure program. The company issued
$75 million of senior notes during the current year.
Merger Related Costs. Merger related costs are a result of the Combination
discussed in Note 2 of Notes to the Unaudited Consolidated Financial
Statements. Interest. Interest expense increased $556,000 dueThese costs include $150,000 payable to increased debt levels to
financea stockholder who was the
Company's 1997 capital expenditure program.former chairman of the board of directors for consulting services in connection
with the Combination.
Other. Other expense increased $232,000$541,000 primarily due to net foreign currency
exchange losses.
Income Taxes. Provision for income taxes increased from $1.1$2.3 million to $2.9$4.3
million as a result of increased profitability of the Company. TheCompany, however, the
effective tax rate was reduced in the current year by restructuring the
operations of certain of the Company's subsidiaries.
1817
2120
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to, nor is its property the subject of, any material
pending legal proceedings, as defined by relevant rules and regulations of the
Securities and Exchange Commission.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on December 16, 1996.
Common stockholders of record on November 1, 1996 were entitled to vote. Each
of the eight directors nominated for the board of directors was elected by the
stockholders as follows:
FOR WITHHELD
---------- ------------
George F. Baker 14,197,948 100
Clayton P. Cormier 14,197,946 0
Ralph M. Eeson 14,197,946 700
Lawrence C. Fichtner 14,197,946 0
Steve J. Gilbert 12,044,174 2,340,290
Stephen J. Ludlow 14,197,746 200
Brian F. MacNeill 14,197,746 450
David B. Robson 14,197,746 200
Douglas B. Thompson 14,197,746 200
Jack C. Threet 14,197,746 1,050
19
22
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with this report:
2) Combination Agreement dated as of May 10, 1996, between Digicon Inc.
and Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 2.1 of Digicon Inc.'s Current Report on Form 8-K dated May
10, 1996)
3-A) Restated Certificate of Incorporation of Veritas DGC Inc. dated
August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report
on Form 8-K dated September 16, 1996 is incorporated herein by
reference.)
3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No.
33-43873 dated November 12, 1991 is incorporated herein by
reference.)
3-C) By-laws of New Digicon Inc. dated June 24, 1991 (Exhibit 3-I to
Digicon Inc.'s Form 10-K for the year ended July 31, 1991, is
incorporated herein by reference.)
4-A) Specimen certificate for Senior Notes. (Included as part of Section
2.2 of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No.
333-12481 dated September 20, 1996 is incorporated herein by
reference.)
4-B) Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003
of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National
Bank, as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration
Statement No. 333- 12481 dated September 20, 1996 is incorporated
herein by reference.)
4-C) Specimen Veritas DGC Inc. common stock certificate. (Exhibit 4-C to
Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996, is
incorporated herein by reference.)
4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon
Shareholder Services, L.L.C. dated as of May 15, 1997. (Incorporated
by reference to Exhibit 4.1 of Veritas DGC Inc.'s Current Report on
Form 8-K filed May 27, 1997)
10-A) Salary Continuation Agreement executed by Nicholas A. C. Bright, Kevin P.
Callaghan, Richard W. McNairy and Allan C. Pogach.Bright.
(Incorporated herein by reference to Exhibit 10-E of Digicon Inc.'s
Annual Report on Form 10-K for the year ended July 31, 1994)
10-B) Salary Continuation1994.)
*10-B) Employment Agreement executed by Stephen J. Ludlow (Incorporated
herein by reference to Exhibit 10-B of Veritas DGC Inc.'s Amendment No. 1
to Registration Statement No. 333-12481, dated October 2, 1996)Ludlow.
18
21
10-C) Asset Purchase Agreement dated August 31, 1994, between Syntron,
Inc. and Digicon Geophysical Corp., Euroseis, Inc., Digicon/GFS Inc.
and Digicon Inc. (Incorporated herein by reference to Exhibit 10-M
of Digicon Inc.'s Annual Report on Form 10-K for the year ended July
31, 1994)1994.)
10-D) 1992 Non-Employee Director Stock Option Plan. (Incorporated herein
by reference to Exhibit 10-T of Digicon Inc.'s Amendment No. 3 to
Registration Statement No. 33-54384, dated December 17, 1992)1992.)
10-E) Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
(Incorporated herein by reference to Exhibit 10-E of Veritas DGC
Inc.'s Amendment No. 1 to Registration Statement No. 333-12481,
dated October 2, 1996)
20
231996.)
10-F) Support Agreement dated August 30, 1996, between Digicon Inc. and
Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 10.1 of Veritas DGC Inc.'s Current Report on Form 8-K, dated
August 30, 1996)1996.)
10-G) Credit Agreement dated July 18, 1996, among Digicon Inc. and Digicon
Geophysical Corp., Digicon/GFS Inc., Digicon Geophysical Limited and
Digicon Exploration, Ltd., as Borrowers, each of the banks named
therein, and Wells Fargo Bank (Texas), National Association, as
issuing bank, as a bank and as agent for the banks (the "Credit
Agreement") (Incorporated herein by reference to Exhibit 10-G of
Veritas DGC Inc.'s Amendment No. 1 to Registration Statement No.
333-12481, dated October 2, 1996)1996.)
10-H) Letter dated September 27, 1996, from Wells Fargo Bank (Texas),
National Association, agreeing to amend the Credit Agreement
(Incorporated herein by reference to Exhibit 10-H of Veritas DGC
Inc.'s Amendment No. 1 to Registration Statement No. 333-12481,
dated October 2, 1996)1996.)
*10-I) Employment Agreement executed by Anthony Tripodo.
*10-J) Letter dated May 28, 1997, from Wells Fargo Bank (Texas) National
Association, agreeing to amend the Credit Agreement.
*11) Computation of income per common and common equivalent share for the
three and sixnine months ended January 31,April 30, 1996 and 1997.
*27) Financial Data Schedule
*FiledSchedule.
* Filed herewith
b) Reports on Form 8-K
1) A Form 8-K dated NovemberMay 27, 1996, as amended by Form 8-K/A-1 dated
December 4, 1996,1997 reported a change inshareholder rights
agreement approved by the Company's principal
accountants.
21board of directors on May 27, 1997.
19
2422
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERITAS DGC INC.
-------------------------------------------------------------------------------
(Registrant)
Date: March 17,June 9, 1997 By: /s/ David B. Robson
----------------------- ---------------------------------------------------------------- ---------------------------------------
David B. Robson
(Chairman of the Board
and Chief Executive Officer)
Date: March 17,June 9, 1997 By: /s/ Richard W. McNairy
----------------------- ----------------------------------------
Richard W. McNairyAnthony Tripodo
------------------------ ---------------------------------------
Anthony Tripodo
(Chief Accounting and Financial Officer)
22Off
20
2523
EXHIBIT INDEX
TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3-A) Restated Certificate of Incorporation of Veritas DGC Inc. dated
August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report on
Form 8-K dated September 16, 1996 is incorporated herein by
reference.)
3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No.
33-43873 dated November 12, 1991 is incorporated herein by reference.)
3-C) By-laws of New Digicon Inc. dated June 24, 1991 (Exhibit 3-I to
Digicon Inc.'s Form 10-K for the year ended July 31, 1991, is
incorporated herein by reference.)
4-A) Specimen certificate for Senior Notes. (Included as part of Section 2.2
of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No.
333-12481 dated September 20, 1996 is incorporated herein by
reference.)
4-B) Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003
of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank,
as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration Statement
No. 333-12481 dated September 20, 1996 is incorporated herein by
reference.)
4-C) Specimen Veritas DGC Inc. common stock certificate. (Exhibit 4-C to
Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996, is
incorporated herein by reference.)
10-A) Salary Continuation Agreement executed by Nicholas A. C. Bright, Kevin
P. Callaghan, Richard W. McNairy and Allan C. Pogach. (Incorporated
herein by reference to Exhibit 10-E of Digicon Inc.'s Annual Report on
Form 10-K for the year ended July 31, 1994)
10-B) Salary Continuation Agreement executed by Stephen J. Ludlow
(Incorporated herein by reference to Exhibit 10-B of Veritas DGC Inc.'s
Amendment No. 1 to Registration Statement No. 333-12481, dated October
2, 1996)
10-C) Asset Purchase Agreement dated August 31, 1994, between Syntron, Inc.
and Digicon Geophysical Corp., Euroseis, Inc., Digicon/GFS Inc. and
Digicon Inc. (Incorporated herein by reference to Exhibit 10-M of
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1994)
10-D) 1992 Non-Employee Director Stock Option Plan. (Incorporated herein by
reference to Exhibit 10-T of Digicon Inc.'s Amendment No. 3 to
Registration Statement No. 33-54384, dated December 17, 1992)
10-E) Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
(Incorporated herein by reference to Exhibit 10-E of Veritas DGC Inc.'s
Amendment No. 1 to Registration Statement No. 333-12481, dated October
2, 1996)
26
10-F) Support Agreement dated August 30, 1996, between Digicon Inc. and
Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 10.1 of Veritas DGC Inc.'s Current Report on Form 8-K, dated
August 30, 1996)
10-G) Credit Agreement dated July 18, 1996, among Digicon Inc. and Digicon
Geophysical Corp., Digicon/GFS Inc., Digicon Geophysical Limited and
Digicon Exploration, Ltd., as Borrowers, each of the banks named
therein, and Wells Fargo Bank (Texas), National Association, as
issuing bank, as a bank and as agent for the banks (the "Credit
Agreement") (Incorporated herein by reference to Exhibit 10-G of
Veritas DGC Inc.'s Amendment No. 1 to Registration Statement No.
333-12481, dated October 2, 1996)
10-H) Letter dated September 27, 1996, from Wells Fargo Bank (Texas),
National Association, agreeing to amend the Credit Agreement
(Incorporated herein by reference to Exhibit 10-H of Veritas DGC
Inc.'s Amendment No. 1 to Registration Statement No. 333-12481,
dated October 2, 1996)
*11) Computation of income per common and common equivalent share for the
three and six months ended January 31, 1996 and 1997.
*27) Financial Data Schedule
*Filed*10-B) Employment Agreement executed by Stephen J. Ludlow.
*10-I) Employment Agreement executed by Anthony Tripodo.
*10-J) Letter dated May 28, 1997, from Wells Fargo Bank (Texas), National
Association, agreeing to amend the Credit Agreement.
*11) Computation of income per common and common equivalent share for the
three and nine months ended April 30, 1996 and 1997.
*27) Financial Data Schedule.
* Filed herewith