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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2004

For the transition period from              to             

Commission File Number 333-118278

GUNDLE/SLT ENVIRONMENTAL, INC.

(Exact name of Registrant as specified in its Charter)

(Registrant’s telephone number, including area code) (281) 443-8564

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 is required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act.    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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GUNDLE/SLT ENVIRONMENTAL, INC.

INDEX

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GUNDLE/SLT ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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GUNDLE/SLT ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE DATA)

(UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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GUNDLE/SLT ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE DATA)

(UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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GUNDLE/SLT ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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GUNDLE/SLT ENVIRONMENTAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation –

General –

On May 18, 2004, GEO Sub Corp., a newly formed entity controlled by Code Hennessy & Simmons IV (“CHS IV”), merged with and into Gundle/SLT Environmental, Inc. (the “Company”), with the Company surviving the merger (the “Merger”), and each share of Company common stock converted into the right to receive $18.50 in cash, in a transaction valued at approximately $235.0 million. As a result of the Merger, all of the outstanding capital stock of the Company is owned by GEO Holdings Corp. (“GEO Holdings”) which is controlled by CHS IV, an entity controlled by Code Hennessy & Simmons LLC (“CHS”).

The financial statements included herein prior to May 18, 2004 are those of the Predecessor Company. The financial statements subsequent to May 17, 2004 are those of the Successor Company and, as a result of the purchase price allocation discussed in Note 9, are not comparable to those of the Predecessor Company.

The accompanying unaudited, condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of such financial statements for the periods indicated. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in this Form 10-Q pursuant to Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission. However, the Company believes that the disclosures herein are adequate to make the information presented not misleading. The results for periods of January 1 through May 17, 2004, and May 18 through September 30, 2004, are not necessarily indicative of future operating results. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Predecessor Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

The accounting policies followed by the Company in preparing interim condensed consolidated financial statements are similar to those described in the “Notes to Consolidated Financial Statements” in the Predecessor Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

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Organization –

The Company, through GSE Lining Technology, Inc. and the Company’s other operating subsidiaries, is primarily engaged in the manufacture, sale and installation of geosynthetic lining systems.

Stock-Based Compensation –

In accordance with the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation, prior to May 18, 2004, the Predecessor Company had elected to continue to follow the Accounting Principles Board Opinion (“APB”) 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its employee stock-based compensation plans. Under APB 25, if the exercise price of employee stock options equaled or exceeded the fair value of the underlying stock on the date of grant, no compensation expense was recognized. The Successor Company has not granted any stock options other than those rollover options discussed in Note 5. The rollover options were recorded at fair market value in connection with the purchase price allocation discussed in Note 9.

Reclassifications –

The accompanying consolidated 2003 financial statements contain certain reclassifications to conform to the presentation used in 2004.

(2) Inventory –

Inventory is stated at the lower of cost or market. Cost, which includes material, labor and overhead, is determined by the weighted average cost method, which approximates the first in, first out cost method. Inventory consisted of the following (000’s):

In connection with the Merger and the purchase price allocation discussed in Note 9, the Successor Company recorded an adjustment of approximately $900,000 to increase inventory value as of May 18, 2004. This was done to adjust inventory value to a new basis, which is current market value less a reasonable margin.

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(3) Income Taxes –

The Company’s provision for income taxes is recorded at the statutory rates adjusted for the effect of any permanent differences based on its expected total fiscal year results. The Company has various tax holidays in Thailand through 2014.

(4) Warranty Reserve –

The Company accrues a warranty reserve based on estimates for warranty claims. This estimate is based on historical claims and current business activities and is accrued as a cost of sales in the period such business activity occurs. The table below reflects a summary of activity of the Company’s warranty reserve which is included in accounts payable and accrued liabilities in the accompanying balance sheet. (000’s)

(5) Equity –

All outstanding stock options granted under the Predecessor Company’s equity incentive plans (other than certain options owned by management that were exchanged for options in the parent of the Successor Company), whether vested or unvested, entitled the holder to receive, upon completion of the Merger, cash in an amount equal to the product of (1) the excess, if any, of $18.50 per share merger consideration over the per share exercise price of the option, and (2) the number of shares of common stock underlying the option. The Company recorded a before tax compensation charge of $1,490,000 for the acceleration of stock option vesting in the period from January 1, to May 17, 2004.

Each member of management that exchanged Predecessor Company options for a GEO Holdings option entered into an executive securities agreement, a stockholders agreement and an equity registration rights agreement. Pursuant to the executive securities agreement, the executives exchanged 40% of their options to purchase the Predecessor Company’s common stock for an option to purchase the common stock of GEO Holdings. These rollover options were valued at $5.4 million using the Black-Scholes Valuation Method. The GEO Holdings stockholders agreement provides restrictions on the executive’s ability to vote their shares on certain matters and provides certain restrictions on the executive’s ability to transfer the securities, including a right of first refusal to GEO Holdings and CHS. The equity registration rights agreement provides customary “demand” and “piggyback” registration rights to certain option holders.

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(6) Related Party Transactions –

Management Agreement with CHS Management IV LP –

In connection with the Merger, the Company entered into a management agreement with GEO Holdings and CHS Management IV LP (“CHS Management”), a limited partnership (1) of which CHS is the general partner and (2) which is the general partner of CHS IV. Pursuant to the management agreement, CHS Management provides certain financial and management consulting services to GEO Holdings and to the Company. In consideration of those services, the Successor Company pays fees to CHS Management in an aggregate annual amount of $2.0 million, payable in equal monthly installments. The Successor Company also agreed to reimburse CHS Management for its reasonable travel and other out-of-pocket expenses and pay additional transaction fees to them in the event the Company or any of its affiliates complete add-on acquisitions. The Successor Company also provides customary indemnification to CHS Management. In connection with the structuring and implementation of the Merger and related financing transactions, the Company paid CHS Management fees in the aggregate amount of $5.0 million at the completion of the Merger. Under the Management Agreement, the Company agreed to pay CHS Management a fee equal to 5% of the proceeds of the Company’s capital stock purchased from time to time by CHS Management or its affiliates. The management fee is subordinated to the prior payment in full of principal, interest and premium due and owing under the Company’s new senior credit facility and the indenture governing its senior notes, but the Successor Company may pay the management fee at all times except during certain events of default under the new senior credit facility or under the indenture governing the notes. In the event any portion of the management fee is not so paid, such amount will accrue and become due and payable in the next month when payment is permitted.

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(7) Stock Based Compensation –

Predecessor Company Stock Option Pro Forma –

The following table illustrates the effect on net income (loss) and earnings (loss) per share as if the fair value method, in accordance with Statement of Financial Accounting Standards No. 123, had been applied to all outstanding and unvested awards in each period (in 000’s).

(8) Other Comprehensive Income –

The Merger resulted in the elimination of all Predecessor Company comprehensive income. During the period of May 18, 2004 through September 30, 2004, the Company had $1,212,000 of other comprehensive income due to changes in foreign exchange rates effect on translation to U.S. dollars. Total comprehensive income for the period of May 18 through September 30, 2004 was $9,246,000.

(9) Business Combinations –

CHS Transaction 2004 –

The acquisition of the Company in the Merger was accounted for under the purchase method of accounting. Under purchase accounting, the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder allocated to goodwill. The increase in basis of the assets will result in non-cash charges in future periods, principally related to the step-up in the value of property, plant and equipment and other intangible assets.

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The aggregate purchase price of $242.0 million included $229.1 million paid for all of the outstanding stock and stock options of the Company, $6.7 million of closing costs and fees, $5.4 million for the value of management options contributed, and the assumption of $0.8 million of debt. Geo Holdings had no operations prior to the acquisition of the Company.

The total purchase price was allocated among the fair value of acquired assets and liabilities, primarily property and equipment and inventory, and including $24.2 million before taxes allocated to finite life intangible assets, which are comprised primarily of the value of customer lists and contracts in the United States, Europe, and Thailand. The average amortization period for these intangible assets is slightly less than 10 years. The fair values of property, equipment and finite life intangible assets were determined utilizing a third party appraisal firm.

The following table summarizes the estimated fair values of the assets and liabilities as of May 18, 2004.

The initial purchase price allocation made by the Successor Company is preliminary and subject to change for a period of one year following the Merger, although management believes it is materially correct as of September 30, 2004.

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Unaudited pro forma information of the Company assuming the Merger was completed on January 1, 2003 and 2004 is summarized below (in 000’s). The pro forma information includes adjustments primarily for changes to interest costs related to new financing, and increased depreciation and amortization expense from the revaluation of assets in conjunction with the Merger. The pro forma information is not necessarily indicative of the results of operations had the Merger been effected on the assumed dates, or the results of operations for any future periods.

Egyptian Acquisition 2003 –

In January 2003, the Company completed the acquisition of the stock of Hyma/GSE Manufacturing Co. S.A.E., and Hyma/GSE Lining Technology Co. S.A.E. held by its joint venture partners in Cairo, Egypt, for $4 million. The Company recorded $581,725 of goodwill with the acquisition. In addition, the Company agreed to purchase a blown film round die extrusion manufacturing line currently leased to Hyma/GSE Manufacturing Co. S.A.E., at a price of $950,000, and to relocate the manufacturing equipment within 24 months of such purchase. The acquisition of the blown film round die line was completed in May 2004.

(10) Long-Term Debt –

Long-term debt consists of the following (in 000’s):

Senior Notes -

In connection with the Merger, the Company issued $150,000,000 of 11% senior notes due in 2012. These notes were sold to qualified institutional buyers in reliance on Rule 144A, and outside the United States in compliance with Regulation S. We are offering to exchange

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the senior notes for new 11% senior notes due 2012, Series B, which will be registered under the Securities Act of 1933, as amended, upon the terms and conditions set forth in the Company’s Prospectus dated October 12, 2004. The senior notes are guaranteed by all of the Company’s existing and future direct or indirect domestic subsidiaries other than Bentofix Technologies (USA), Inc., a dormant subsidiary of the Company’s 51%-owned Canadian subsidiary, Bentofix Technologies, Inc.

The indenture governing the notes, among other things: (1) restricts the Company’s ability and the ability of its subsidiaries to incur additional indebtedness, issue shares of preferred stock, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (2) prohibits certain restrictions on the ability of certain of the Company’s subsidiaries to pay dividends or make certain payments to it; and (3) places restrictions on the Company’s ability and the ability of its subsidiaries to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of assets. The indenture related to these notes and the new senior credit facility also contain various covenants that limit the Company’s discretion in the operation of its businesses.

Senior Credit Facility –

In connection with the Merger, the Company entered into a new $65.0 million senior secured credit facility with UBS Loan Finance LLC and certain other lenders.

The new senior credit facility provides a $25.0 million term loan facility and a revolving credit facility of up to $40.0 million. The revolving credit facility includes a letter of credit sub-facility of $10.0 million and a swing line sub-facility of $15.0 million. The term loan matures in May 2010 and the revolving credit facility matures in May 2009. The term loan facility amortizes on 24 consecutive equal quarterly installments. Borrowings bear interest, at the Company’s option, at either a base rate or LIBOR plus, in each case, an applicable interest margin. The applicable interest margin for the term loan is 2.00% per annum for base rate loans or 3.00% per annum for LIBOR loans. The applicable interest margin for revolving loans is 1.75% per annum for base rate loans or 2.75% per annum for LIBOR loans. The applicable interest margins for the revolving credit facility and the term loan is adjustable by the lenders based upon a grid to be determined following the delivery of the Company’s financial statements for the fiscal quarter ending at least six months after the closing of the Merger. The Company is also required to pay customary agency fees and expenses.

The new senior credit facility requires prepayment with the net proceeds of certain asset sales, the net proceeds of certain issuances of debt or preferred stock, a portion of net proceeds of certain issuances of common equity, the net proceeds from casualty and condemnation events in excess of amounts applied to repair or replace such assets, and an agreed-upon percentage of the Company’s excess cash flow (subject to certain baskets).

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The new senior credit facility is guaranteed by GEO Holdings and all of the Company’s existing and future direct or indirect domestic subsidiaries, but not the Company’s foreign subsidiaries or Bentofix Technologies (USA), Inc., a dormant subsidiary of its 51%-owned Canadian subsidiary, Bentofix Technologies, Inc., to the extent guarantees by such subsidiaries would be prohibited by applicable tax law or could result in adverse tax consequences. The senior credit facility is secured by substantially all of the Company’s U.S. assets, and by its capital stock and the capital stock of substantially all of its domestic subsidiaries and 65% of the capital stock of substantially all of its first-tier foreign subsidiaries.

The new senior credit facility requires the Company to meet certain financial tests, including but not limited to, a minimum interest coverage ratio, a maximum leverage ratio, a minimum fixed charge coverage ratio and maximum capital expenditures. In addition, the new senior credit facility contains restrictive covenants which limits, among other things, dispositions of assets, certain business changes, certain ownership changes, mergers, acquisitions, dividends, stock repurchases and redemptions, incurrence of indebtedness, issuance of preferred stock, investments, liens, transactions with affiliates, sale and leaseback transactions, and other matters customarily restricted in such agreements. The new senior credit facility provides for customary events of default.

Foreign Debt –

At September 30, 2004, the Company had five local foreign credit facilities. It had credit facilities with two German banks in the amount of EUR 5,100,000. These revolving credit facilities are secured by a corporate guarantee and bear interest at various market rates. These credit facilities are used primarily to guarantee the performance of European installation contracts and temporary working capital requirements. At September 30, 2004, the Company had EUR 2,881,000 available under these credit facilities with EUR 2,219,000 of bank guarantees outstanding.

The Company has two credit facilities with Egyptian banks in the amount of EGP 8,000,000. These credit facilities bear interest at various market rates and are primarily for cash management purposes. At June 30, 2004, the Company had EGP 6,345,000 available under these credit facilities.

The Company has an EGP 5,000,000 term loan with an Egyptian bank, bearing interest at 14%, secured by equipment. The promissory note requires quarterly payments of EGP 417,000 plus interest on July 27, October 27, January 27, and April 27, maturing in April 2007, and has a balance outstanding at September 30, 2004 of EGP 4,583,000.

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The Company has a credit facility with a Canadian bank in the amount of Canadian Dollar 500,000 that bears interest at market rate, secured by all assets. At September 30, 2004, the Company had the full amount available under this line.

Predecessor Company Notes –

On February 4, 2002, the Company entered into a note agreement with one lender in the amount of $25,000,000. This 3-year term facility was secured by the Company’s Houston, TX, and Kingstree, SC, real properties and all of the Company’s equipment at these locations. The promissory note required monthly payments of approximately $520,000 including interest at the rate of 9.22% and matures on February 5, 2005, with a balloon payment equal to the unpaid principal balance plus accrued and unpaid interest. The terms of the note placed various restrictions on the Company’s ability to pay dividends or make certain other payments, incur additional debt, consolidate or merge into another corporation or sell assets and make capital expenditures. The note also required the Company to maintain certain financial ratios and specified levels of consolidated net worth. On January 20, 2004, the Company paid off this note with a payment of $17,498,000 that included accrued interest of $85,400 and a prepayment fee of $690,600. Deferred financing costs of $735,000 were expensed in 2004 as a result of the debt pay-off.

Summarized below are the maturities of long-term debt of the Company during the next five years and thereafter (in thousands).

(11) New Accounting Pronouncements –

In January 2003, FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46) that requires the consolidation of variable interest entities, as defined. FIN 46, as revised, was applicable to financial statements of companies that have interests in “special purpose entities”, as defined, during 2003. FIN 46 is applicable to the financial statements of companies that have interest in all other types of entities, in the first quarter of 2004. Neither the Predecessor or Successor Company had any variable interest entities that were required to be consolidated as a result of FIN 46.

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(12) Litigation Update

On January 6, 2003, a judgment was entered against the Company in the United States District Court for the Northern District of Texas (District Court) for damages arising out of the alleged patent infringement activities of Serrot International, Inc. (a wholly owned subsidiary) conducted prior to the acquisition of Serrot by the Company. The jury in Dallas determined that Serrot had willfully infringed upon two patents held by Poly-America, L.P. (Poly-America), one for the manufacturing process and a second patent for the smooth edge textured sheet produced on round die blown film manufacturing equipment. On August 28, 2003, the District Court issued an opinion and order on post trial motions, including a reduced judgment in the amount of $11,965,158, together with prejudgment interest in the sum of $3,081,050, post-judgment interest at the rate of 1.29% per annum, and taxable costs of the District Court. The District Court denied the request of Poly-America for treble damages and attorneys’ fees. The Company posted an amended $18,055,699 supersedeas appeal bond and entered into a Collateral Agreement with an insurance company whereby the Company deposited funds equal to the bond amount. The amount has been recorded as Restricted Cash. The Collateral Agreement provides for interest on the deposited fund, which accrues to the Company’s benefit. On September 29, 2003, the Company filed an appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. (Court of Appeals) and on December 16, 2003, filed its appeal brief. On April 1, 2004, the Company filed its reply brief. On July 9, 2004, the Court of Appeals heard oral arguments from both parties.

On September 14, 2004, the Court of Appeals affirmed the validity of the two patents in question. However, it reversed the judgment for damages. The Court of Appeals concluded that the District Court erred in permitting Poly-America, L.P. to claim the lost profits of a related corporation and ordered that, on the District Court should determine whether there are any lost profits incurred by Poly-America, L.P. due to the infringement, and if not, the proper reasonable range of royalties to which Poly-America, L.P. may be entitled. The Company believes that its probable incurred minimum liability is $1,600,000 (inclusive of all costs and attorney’s fees), though the amount could be significantly more. The $1,600,000 minimum liability has been recorded as an adjustment to GEO Holdings’ May 18, 2004 purchase price of the Company. As a result of the Court of Appeals decision, the Company intends to seek the release of the $18,055,699 supersedeas appeal bond.

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(13) Condensed Consolidated Guarantor and Non-Guarantor Financial Information –

The payment of obligations of the Company under the senior notes is guaranteed by all of the Company’s domestic subsidiaries other than Bentofix Technologies (USA), Inc. (“Subsidiary Guarantors”). Each of these Subsidiary Guarantors is included in the Company’s consolidated financial statements and has fully and unconditionally guaranteed the senior notes on a joint and several basis. Separate financial statements and other disclosures concerning the Subsidiary Guarantors have not been presented because management believes that such information is not material to investors. The following supplemental financial information sets forth, on a combined basis, balance sheet, statement of operations and cash flows information for the Subsidiary Guarantors, the Company’s non-guarantor subsidiaries and for the Company.

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GUNDLE/SLT ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET