8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): February 25, 2004

Veritas DGC Inc.

(Exact Name of Registrant As Specified In Its Chapter)

Delaware
(State or other jurisdiction
of incorporation) 001-7427
(Commission File No.) 76-0343152
(IRS Employer
Identification No.)

10300 Town Park
Houston, Texas 77072
(Address of Principal Executive Offices) (Zip Code)

832-351-8300
(Registrant’s Telephone Number, Including Area Code)

TABLE OF CONTENTS

Press Release dated as of February 25, 2004

Press Release dated as of February 25, 2004

ITEM 5. OTHER EVENTS

Floating Rate Convertible Senior Notes

     On February 25, 2004, Veritas DGC Inc. (the “Registrant”) issued a press release announcing that it intends to offer a new issue of Floating Rate Convertible Senior Notes Due 2024. The full text of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

     The information contained in this Current Report on Form 8-K, including the exhibits hereto, is neither an offer to sell nor a solicitation of an offer to purchase any of the securities to be offered. The securities to be offered have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities laws.

Results of Second Fiscal Quarter

     On February 25, 2004, the Registrant announced its results for the second fiscal quarter. Revenue for the second quarter was $147.8 million, an increase of 18% compared to the prior year’s second quarter. Net income increased to $14.2 million, or $0.42 per share, versus $4.5 million, or $0.14 per share, in the prior year’s second quarter. Revenue for the second quarter and six months breaks down as follows:

	Three Months Ended				Six Months Ended
	January 31,				January 31,
	2004		2003		2004		2003
	(millions)				(millions)
Multi-client:
Land	$	15.9	$	18.9	$	29.8	$	29.9
Marine		67.7		46.7		93.6		92.0
Subtotal		83.6		65.6		123.4		121.9
Contract:
Land		31.7		32.0		68.4		80.3
Marine		32.5		27.7		60.3		60.6
Subtotal		64.2		59.7		128.7		140.9
Total Revenues	$	147.8	$	125.3	$	252.1	$	262.8

     Our results for the three and six months ended January 31, 2004 were as follows:

	Three Months Ended						Six Months Ended
	January 31,						January 31,
	2004			2003			2004			2003
	(unaudited)
	(in thousands, except per share amounts)
Revenues	$	147,770		$	125,321		$	252,120		$	262,828
Costs of services		114,690			102,672			231,525			221,384
Research and development		3,695			3,045			7,140			6,053
Selling, general and administrative		6,383			7,810			12,574			15,483
Operating income		23,002			11,794			881			19,908
Interest expense		4,197			4,425			8,475			8,367
Other expense (income) – net		(72	)		(22	)		(37	)		1,212
Income before provision for income taxes		18,877			7,391			(7,557	)		10,329
Income taxes		4,638			2,901			4,551			4,276
Net income (loss)	$	14,239		$	4,490		$	(12,108	)		6,053
Earnings Per Share:
Basic:
Net income (loss) per common share	$	.42		$	.14		$	(.36	)	$	.18
Weighted average common shares		33,745			33,235			33,668			33,193
Diluted:
Net income (loss) per common share	$	.42		$	.14		$	(.36	)	$	.18
Weighted average common shares		33,952			33,249			33,668			33,220

Multi-client

     Multi-client revenue increased by 27% compared with the prior year’s second quarter. Revenue from shelf sales (i.e. sales of existing data) more than doubled, while prefunding revenue decreased by more than 50% due to reduced numbers of in-progress surveys.

     Marine multi-client revenue increased by 45% compared with the prior year’s second quarter. Shelf sales were particularly strong in the Gulf of Mexico and Nigeria, with sales in Brazil and the North Sea contributing to the excellent results. Prefunding revenue was generated on surveys in the Gulf of Mexico, Nigeria and Brazil.

     Land multi-client revenue decreased by 16% compared with the prior year’s second quarter due to lower prefunding and decreased investment. Shelf sales were steady, with most of the revenue generated from surveys in Wyoming and Oklahoma.

Contract

     Contract revenue increased by 8% compared with the prior year’s second quarter. Marine contract revenue increased 17% while contract land revenue remained relatively flat. During the quarter, the Company performed contract marine surveys in West Africa, the Mediterranean and India and operated land crews in Canada, Alaska, the Lower 48, Argentina and Oman.

Operating Income

     Operating income as a percent of revenue increased to 16% compared to 9% in the prior year’s second quarter. Margins increased due to the dominance of multi-client shelf sales in the overall revenue mix. Contract margins were relatively flat.

     General and administrative expense decreased by $1.4 million from the prior year’s second quarter. The largest single portion of this decrease, $0.6 million, was due to expense reduction efforts implemented in the prior fiscal year.

Income Tax

     The Company’s effective tax rate for the quarter was 25%, significantly lower than the 39% rate in the second quarter of fiscal year 2003. The reduction is due to the utilization of previously unrecognized deferred tax assets. Most of the Company’s current tax expense comes in the form of withholding taxes in various non-U.S. jurisdictions.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

     (c) Exhibits

Exhibit No.	Description
99.1	Press Release of Veritas DGC Inc. dated as of February 25, 2004 (convertible senior notes)
99.2	Press Release of Veritas DGC Inc. dated as of February 25, 2004 (results of second fiscal quarter)

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On February 25, 2004, the Registrant issued a press release reporting financial results for its second fiscal quarter ended January 31, 2004. A copy of the press release is attached hereto as Exhibit 99.2.

     THE INFORMATION CONTAINED IN ITEM 12 OF THIS CURRENT REPORT, INCLUDING EXHIBIT 99.2 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.

SIGNATURE

     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)
	/s/ Larry L. Worden
	Larry L. Worden
Date: February 25, 2004	Vice President, General Counsel & Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of Veritas DGC Inc. dated as of February 25, 2004 (convertible senior notes)
99.2	Press Release of Veritas DGC Inc. dated as of February 25, 2004 (results of second fiscal quarter)

EX-99.1

Exhibit 99.1

VERITAS DGC INC.
ANNOUNCES PROPOSED SALE OF CONVERTIBLE SENIOR NOTES

     HOUSTON, February 25, 2004 — Veritas DGC Inc. (NYSE & TSE: VTS) announced today that it intends to sell through a private offering $125 million of Floating Rate Convertible Senior Notes Due 2024, subject to market and other conditions. The Company will grant to the initial purchaser an option to purchase up to an additional $30 million of convertible notes in connection with the offering.

     The convertible notes will be senior unsecured obligations of the Company and will be convertible under certain circumstances into a combination of cash and common stock of Veritas DGC at a fixed conversion price. In general, upon conversion of a convertible note, the holder of such note will receive cash equal to the principal amount of the note and common stock of Veritas DGC for the note’s conversion value in excess of such principal amount. Interest on the convertible notes will be based on a floating rate. The initial conversion price, the interest rate and other terms of the convertible notes will be determined upon pricing of such securities.

     The Company intends to use the net proceeds from the offering principally to prepay a portion of amounts outstanding under its existing bank credit facility but will use approximately $20 million of the net proceeds to repurchase shares of its common stock in connection with the offering.

     The convertible notes will be offered only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The convertible notes and the underlying common stock issuable upon conversion have not been registered under the Securities Act or any applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. This announcement is neither an offer to sell nor a solicitation of an offer to buy any of the securities to be offered.

     For additional information, please contact:

     Mindy Ingle, Investor Relations (832) 351-8821

# # #

EX-99.2

EXHIBIT 99.2

VERITAS DGC INC.
ANNOUNCES SECOND FISCAL QUARTER RESULTS

HOUSTON February 25, 2004 – Veritas DGC Inc. (NYSE & TSE: VTS) today announced results for its second fiscal quarter ended January 31, 2004. Revenue and earnings, with the comparative amounts for the corresponding period of the prior fiscal year, were as follows:

	Three Months Ended				Six Months Ended
	January 31,				January 31,
	2004		2003		2004*			2003
	(millions, except per share amounts)
Revenues	$	147.8	$	125.3	$	252.1		$	262.8
Net income (loss)		14.2		4.5		(12.1	)		6.0
Earnings (loss) per common share – diluted		0.42		0.14		(0.36	)		0.18

* Results for the current six-month period include a non-cash charge in the first quarter of $22.1 million, representing $0.65 per share, related to our change in accounting for multi-client library amortization.

Chairman and CEO, Dave Robson, commented on the quarter, “In our first quarter conference call we said that we were optimistic library sales would be strong as the calendar year came to a close. They were quite strong, and we ended up with the best quarter of library sales ever, with revenue of almost $67 million from shelf sales and $16 million from prefunding. While December was the peak, we have found library sales continuing to be robust. Our financial position improved as well. We ended the quarter with $70 million of cash, after paying down $13 million of bank debt. Although I am leaving, I am confident that the management team will continue to emphasize technology, operational excellence and positive cash flow.”

Revenue for the second quarter was $147.8 million, an increase of 18% compared to the prior year’s second quarter. Net income increased to $14.2 million, or $0.42 per share, versus $4.5 million, or $0.14 per share, in the prior year’s second quarter. Revenue for the second quarter and six months breaks down as follows:

	Three Months Ended				Six Months Ended
	January 31,				January 31,
	2004		2003		2004		2003
	(millions)				(millions)
Multi-client:
Land	$	15.9	$	18.9	$	29.8	$	29.9
Marine		67.7		46.7		93.6		92.0
Subtotal		83.6		65.6		123.4		121.9
Contract:
Land		31.7		32.0		68.4		80.3
Marine		32.5		27.7		60.3		60.6
Subtotal		64.2		59.7		128.7		140.9
Total Revenues	$	147.8	$	125.3	$	252.1	$	262.8

Multi-client

Multi-client revenue increased by 27% compared with the prior year’s second quarter. Revenue from shelf sales (i.e. sales of existing data) more than doubled, while prefunding revenue decreased by more than 50% due to reduced numbers of in-progress surveys.

Marine multi-client revenue increased by 45% compared with the prior year’s second quarter. Shelf sales were particularly strong in the Gulf of Mexico and Nigeria, with sales in Brazil and the North Sea contributing to the excellent results. Prefunding revenue was generated on surveys in the Gulf of Mexico, Nigeria and Brazil.

Land multi-client revenue decreased by 16% compared with the prior year’s second quarter due to lower prefunding and decreased investment. Shelf sales were steady, with most of the revenue generated from surveys in Wyoming and Oklahoma.

Contract

Contract revenue increased by 8% compared with the prior year’s second quarter. Marine contract revenue increased 17% while contract land revenue remained relatively flat. During the quarter, the Company performed contract marine surveys in West Africa, the Mediterranean and India and operated land crews in Canada, Alaska, the Lower 48, Argentina and Oman.

Operating Income

Operating income as a percent of revenue increased to 16% compared to 9% in the prior year’s second quarter. Margins increased due to the dominance of multi-client shelf sales in the overall revenue mix. Contract margins were relatively flat.

General and administrative expense decreased by $1.4 million from the prior year’s second quarter. The largest single portion of this decrease, $0.6 million, was due to expense reduction efforts implemented in the prior fiscal year.

Income Taxes

The Company’s effective tax rate for the quarter was 25%, significantly lower than the 39% rate in the second quarter of fiscal year 2003. The reduction is due to the utilization of previously unrecognized deferred tax assets. Most of the Company’s current tax expense comes in the form of withholding taxes in various non-U.S. jurisdictions.

Backlog

The Company’s backlog increased to $172 million at January 31, 2004 from $161 million at the end of the prior quarter with contract backlog up by $15 million and multi-client backlog down by $4 million.

Our customary conference call will be tomorrow, February 26th, at 9:00 a.m. EST. Following a brief presentation, participants will have the opportunity to ask questions. The dial in number to participate is 800-903-0247. Should you have difficulty with the aforementioned “800” number, phone 785-832-2422 to be connected toll free.

There will also be a real-time audio webcast of the conference call at www.veritasdgc.com. Windows Media player software is required and is available, free of charge, for download through our website. Individuals accessing the audio webcast will be “listen only” and will be unable to take part in the Q&A session.

A digital replay will be available at the conclusion of the call until the close of business Thursday, March 11, 2004. Interested persons can phone 888-566-0149 or 402-220-9180, no pin code required, or access the webcast replay at www.veritasdgc.com.

An updated investor presentation is also available on our website, in the “Investors” section on the “Investor Presentation” page at www.veritasdgc.com.

The Company cautions that statements in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements as to expectations, beliefs and future financial performance, such as statements regarding our business prospects. All of these are based on current information and expectations that are subject to a number of risks, uncertainties and assumptions. These risks and uncertainties are more fully described in our reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material respect from those currently anticipated.

The attached table of financial information contains a measure of free cash flow. We define free cash flow as cash flow from operating activities less cash multi-client investment and capital expenditures. We believe that this non-GAAP measure is useful as an addition to the most directly comparable GAAP measure of “cash provided by operating activities” because free cash flow includes investments in operational assets and therefore provides a more complete picture of cash from ongoing operations. Free cash flow does not represent the residual cash flow available for discretionary expenditures since it does not include mandatory debt service requirements or other non-discretionary cash expenditures.

Veritas DGC Inc., headquartered in Houston, Texas, is a leading provider of integrated geophysical services and reservoir technologies to the petroleum industry worldwide.

For additional information, please contact:

Mindy Ingle, Investor Relations (832) 351-8821

VERITAS DGC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	January 31,						January 31,
	2004			2003			2004			2003
Revenues	$	147,770		$	125,321		$	252,120		$	262,828
Costs of services		114,690			102,672			231,525			221,384
Research and development		3,695			3,045			7,140			6,053
Selling, general and administrative		6,383			7,810			12,574			15,483
Operating income		23,002			11,794			881			19,908
Interest expense		4,197			4,425			8,475			8,367
Other expense (income) – net		(72	)		(22	)		(37	)		1,212
Income before provision for income taxes		18,877			7,391			(7,557	)		10,329
Income taxes		4,638			2,901			4,551			4,276
Net income (loss)	$	14,239		$	4,490		$	(12,108	)		6,053
Earnings Per Share:
Basic:
Net income (loss) per common share	$	.42		$	.14		$	(.36	)	$	.18
Weighted average common shares		33,745			33,235			33,668			33,193
Diluted:
Net income (loss) per common share	$	.42		$	.14		$	(.36	)	$	.18
Weighted average common shares		33,952			33,249			33,668			33,220
Supplemental Data:
Depreciation and amortization, net	$	10,510		$	12,597		$	19,869		$	25,349
Multi-client amortization		49,518			41,532			105,731			73,558
Free Cash Flow1:
Cash flow from operating activities	$	58,575		$	70,609		$	89,002		$	92,739
Investment in multi-client data library, net cash		(29,808	)		(38,081	)		(70,315	)		(75,587	)
Purchase of property and equipment		(4,976	)		(3,582	)		(13,557	)		(12,967	)
Free Cash Flow	$	23,791		$	28,946		$	5,130		$	4,185

¹  See description of free cash flow on the preceding page of this press release.