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 27, 1996

                                       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 0-15067

                          GROUNDWATER TECHNOLOGY, INC.
             (Exact Name of Registrant as Specified in its Charter)

             Delaware                                    02-0324047
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)             

                    100 River Ridge Drive, Norwood, MA 02062
               (Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (617) 769-7600


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.  Yes  x  No
                                       ----   ----

At March 5, 1996 the  registrant  had issued and  outstanding  an  aggregate  of
6,963,974 shares of its common stock.

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS





<TABLE>
<CAPTION>
PART I     FINANCIAL INFORMATION                                                                              PAGE NUMBER

<S>                                                                                                             <C>
Item 1   Financial Statements

          Consolidated Balance Sheets
              January 27, 1996 (Unaudited) and April 29, 1995.................................................. 1-2

          Consolidated Statements of Operations
              Thirteen weeks ended January 27, 1996 (Unaudited) and January 28, 1995 (Unaudited)...............   3

          Consolidated Statements of Operations
              Thirty-nine weeks ended January 27, 1996 (Unaudited) and January 28, 1995 (Unaudited)............   4

          Consolidated Statements of Cash Flows
              Thirty-nine weeks ended January 27, 1996 (Unaudited) and January 28, 1995 (Unaudited)............   5

          Notes to Consolidated Financial Statements (Unaudited)...............................................   6

Item 2    Management's Discussion and Analysis of Financial Condition and Results of Operations................ 7-9


PART II   OTHER INFORMATION

Item 6    Exhibits and Reports on Form 8-K.....................................................................  10

          Signatures...........................................................................................  11
</TABLE>

<PAGE>

Item 1.    Financial Statements

                           GROUNDWATER TECHNOLOGY, INC

                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                       January 27,       April 29,
                                                                                              1996         1995(1)
                                                                                        (Unaudited)
<S>                                                                                      <C>             <C>      
ASSETS

Current Assets
   Cash and cash equivalents                                                             $    9,351      $  10,747
   Marketable securities                                                                     23,491         15,173
   Accounts receivable, less allowances of $2,873 at January 27, 1996
      and $3,100 at April 29, 1995                                                           43,215         46,139
   Unbilled revenues                                                                         16,327         21,172
   Other current assets                                                                       9,649          6,839
                                                                                        -----------    -----------
      Total Current Assets                                                                  102,033        100,070

Property, plant and equipment, net                                                            8,643         10,150

Other assets, net of accumulated amortization of $543 at January 27, 1996
      and $339 at April 29, 1995                                                              8,958          6,249

Net assets held for sale or disposal                                                             --          3,535
                                                                                    ---------------    -----------

                                                                                           $119,634       $120,004
                                                                                           ========       ========
</TABLE>

(1) Reflects reclassification of discontinued laboratory operations.

The accompanying notes are an integral part of the financial statements.

                                      -1-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                           CONSOLIDATED BALANCE SHEETS

               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                                       January 27,       April 29,
                                                                                              1996         1995(1)
                                                                                        (Unaudited)
<S>                                                                                     <C>             <C>      
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Accounts payable                                                                     $    6,613      $  10,499
   Accrued salaries and benefits                                                             3,508          4,441
   Other accrued liabilities                                                                 8,269          7,799
   Income taxes payable                                                                      1,512            495
                                                                                       ------------  ------------
      Total Current Liabilities                                                             19,902         23,234

Stockholders' Equity
   Preferred stock, $.01 par value, 1,000,000 shares authorized,
      none issued                                                                               --             --
   Common stock, $.01 par value, 25,000,000 shares authorized, 8,098,748
      issued at January 27, 1996 and 8,078,748 at April 29, 1995                                81             80
   Capital in excess of par value                                                           55,965         54,315
   Retained earnings                                                                        62,088         60,980
   Treasury stock, at cost, 1,135,198 shares at January 27, 1996 and
      1,145,116 at April 29, 1995                                                          (17,210)       (17,353)
   Cumulative currency translation adjustment                                               (1,192)        (1,252)
                                                                                       ------------   ------------
      Total Stockholders' Equity                                                            99,732         96,770
                                                                                        -----------    ----------
                                                                                          $119,634       $120,004
                                                                                          ========       ========
</TABLE>

(1) Reflects reclassification of discontinued laboratory operations.

The accompanying notes are an integral part of the financial statements.

                                       -2-

<PAGE>


                          GROUNDWATER TECHNOLOGY, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                           Thirteen weeks ended

                                                                                        January 27,    January 28,
                                                                                               1996        1995(1)
<S>                                                                                        <C>            <C>    
Gross revenue                                                                              $41,901        $44,778
Cost of subcontracted services                                                              17,077         18,578
                                                                                          ---------      --------

Net revenue                                                                                 24,824         26,200

Cost of net revenue                                                                         14,962         14,964
                                                                                          ---------      --------

Gross profit                                                                                 9,862         11,236

Selling, general and administrative expenses                                                (9,586)        (9,774)
Licenses and other income                                                                      188            167
                                                                                        -----------    ----------

Income from continuing operations and other income                                             464          1,629
Investment and other income, net                                                               471            274
                                                                                        -----------    ----------

Income from continuing operations before provision for income taxes                            935          1,903
Provision for income taxes                                                                     354            767
                                                                                        -----------    ----------

Net income from continuing operations                                                          581          1,136
                                                                                        -----------     ---------

Income from discontinued operations, net of
   tax (expense)                                                                                --             56
                                                                                     --------------   -----------

Net Income                                                                               $     581       $  1,192
                                                                                         ==========      ========

Earnings per common share
   Income from continuing operations                                                          0.08           0.16
   Income from discontinued laboratory operations                                               --           0.01
                                                                                      -------------    ----------
Earnings per common share                                                                $    0.08      $    0.17
                                                                                         ==========     =========


Shares used to compute earnings per common share                                             7,063          7,017
                                                                                         ==========     =========
</TABLE>

(1) Reflects reclassification of discontinued laboratory operations.

                                       -3-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.


                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                          Thirty-nine weeks ended

                                                                                        January 27,    January 28,
                                                                                               1996        1995(1)
<S>                                                                                       <C>            <C>     
Gross revenue                                                                             $128,881       $133,036
Cost of subcontracted services                                                              49,277         52,963
                                                                                        -----------    ----------

Net revenue                                                                                 79,604         80,073

Cost of net revenue                                                                         48,433         45,690
                                                                                        -----------    ----------

Gross profit                                                                                31,171         34,383

Selling, general and administrative expenses                                               (28,867)       (29,650)
Licenses and other income                                                                      562            438
                                                                                      -------------  ------------

Income from continuing operations and other income                                           2,866          5,171
Investment and other income, net                                                             1,038            903
                                                                                       ------------  ------------

Income from continuing operations before provision for income taxes                          3,904          6,074
Provision for income taxes                                                                   1,544          2,477
                                                                                       ------------   -----------

Net income from continuing operations                                                        2,360          3,597
                                                                                       ------------   -----------

Income (loss) from discontinued operations, net of
   tax (expense)/benefit                                                                    (1,334)           487
                                                                                       ------------  ------------

Net Income                                                                              $    1,026     $    4,084
                                                                                        ===========    ==========

Earnings (loss) per common share
   Income from continuing operations                                                          0.34           0.51
   Income (loss) from discontinued laboratory operations                                     (0.19)          0.07
                                                                                      -------------  ------------
Earnings per common share                                                              $      0.15    $      0.58
                                                                                       ============   ===========


Shares used to compute earnings per common share                                             7,042          7,085
                                                                                       ============   ===========
</TABLE>

(1) Reflects reclassification of discontinued laboratory operations.

                                       -4-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                          Thirty-nine weeks ended

                                                                                        January 27,    January 28,
                                                                                               1996           1995
<S>                                                                                         <C>            <C>   
Cash Flows From Operating Activities
   Net income                                                                               $1,026         $4,084
   Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
         Depreciation and amortization                                                       4,874          6,118
         Deferred income taxes                                                              (2,839)            --

Changes in operating assets and liabilities:
      Accounts receivable                                                                    7,769        (14,016)
      Other current assets                                                                     263            139
      Other assets                                                                          (1,398)            --
      Accounts payable                                                                      (4,376)         1,899
      Accrued salaries and benefits                                                           (934)         1,159
      Other accrued liabilities                                                                220         (2,914)
      Income taxes payable                                                                   1,017             88
                                                                                           --------     ---------

Net Cash provided by (used in) Operating Activities                                          5,622         (3,443)

Cash Flows From Investing Activities
      Expenditures for property, plant and equipment                                        (2,430)        (3,268)
      Purchase of marketable securities                                                    (14,334)          (450)
      Sale of marketable securities                                                          6,222          6,687
      Assets acquired net of cash                                                               --         (1,007)
      Other                                                                                  2,027            (97)
                                                                                           --------     ----------

Net Cash (used in) provided by Investing Activities                                         (8,515)         1,865

Cash Flows From Financing Activities
      Purchase of treasury stock                                                              (893)        (2,735)
      Proceeds from issuance of stock warrants                                               1,650             --
      Proceeds of stock under employee stock purchase plans                                    675            544
                                                                                          ---------      --------

Net Cash (used in) Financing Activities                                                      1,432         (2,191)

Effect of Exchange Rate Changes on Cash and Cash Equivalents                                    65            144
                                                                                         ----------      --------

Decrease in Cash and Cash Equivalents                                                       (1,396)        (3,625)

Cash and Cash Equivalents at Beginning of Quarter                                           10,747          4,909
                                                                                            -------       -------

Cash and Cash Equivalents at End of Quarter                                                 $9,351         $1,284
                                                                                            =======        ======

Non-Cash Investing Activities:
   Reissued $180,000 of Treasury Stock related to a prior acquisition.
</TABLE>

                                       -5-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)




NOTE 1. Consolidated Financial Statements

     The  consolidated  balance  sheet as of January  27,  1996 and the  related
consolidated  statements of operations  for the thirteen and  thirty-nine  weeks
ended  January  27,  1996 and January  28,  1995,  and the related  consolidated
statements of cash flows for the  thirty-nine  weeks ended  January  27,1996 and
January  28,  1995,  have been  prepared by the Company  without  audit.  In the
opinion of management, all adjustments necessary to present fairly the financial
position, results of operations and changes in cash flows at January 27,1996 and
for all periods presented have been made.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed or omitted.  It is suggested  this  information  be read in
conjunction  with the Annual Report on Form 10-K for fiscal year ended April 29,
1995 (SEC File No.  0-15067).  The results of  operations  for the period  ended
January 27,1996 are not necessarily  indicative of the operating results for the
year.

NOTE 2.  Discontinued Operations

     In the first quarter of fiscal 1996, the Company  determined that a captive
laboratory did not provide a strategic  advantage to either the Company or GTEL,
the   analytical   laboratory   business.   The  Company  sold  GTEL  to  Nytest
Environmental  Inc. on December 31, 1995 and has accounted for the business as a
discontinued  operation.  Results of operations of the GTEL laboratory  business
have been reflected in the loss from operations of  discontinued  operations and
have been  removed from the  continuing  operation  portion of the  consolidated
statements of operations. The net assets of the discontinued operation have been
shown separately on the balance sheet at April 29, 1995.

                                       -6-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

Item 2.    Management's Discussion and Analysis of Financial Condition and 
           Results of Operations

Results of Continuing Operations

     The  Company's  services  are  primarily  related  to  the  assessment  and
remediation of  contaminated  soil and groundwater for customers in a variety of
industries and for federal and state  governments.  The demand for the Company's
services  is a result of  governmental  regulation  and  enforcement  related to
hazardous  contaminants in the environment and public awareness of environmental
issues.

     The  Company,   in  the  course  of  providing  its   services,   routinely
subcontracts for certain specialized services. These costs are passed through to
customers  and, in  accordance  with  industry  practice,  are included in gross
revenue.  Because subcontractor  services can vary significantly from project to
project,  changes  in gross  revenue  may not be truly  indicative  of  business
activity or trends.  Accordingly,  the Company views net revenue, which excludes
the cost of services performed by  subcontractors,  as a more meaningful measure
of business performance.

     Net revenue  includes  fees billed for  services  provided  directly by the
Company and fees charged by the Company for arranging and managing subcontractor
services.  Cost  of net  revenue  includes  professional  salaries  incurred  in
rendering services to customers,  other direct labor, purchases of equipment and
materials and certain direct and indirect overhead costs.  Selling,  general and
administrative  expenses  include  management  salaries,   facility  costs,  and
clerical and administrative overhead.  License and other income includes license
and royalty income earned on the Company's intellectual property and income from
direct equity investments in the environmental industry.

     The  Company's  operating  results may  fluctuate  from quarter to quarter.
Factors  influencing  such  variations  include:  spending  decisions  by  major
customers,  delays  in the  release  of  committed  projects,  modifications  of
delivery  orders issued by  contracting  government  entities,  and holidays and
vacation time which limit the amount of time Company personnel and subcontracted
services have in the field.

     The Company ended the third  quarter with 59  consulting  offices 30 states
and 6 foreign countries. Additionally, the Company's joint venture with a German
company had  offices in Germany,  Austria and  Hungary.  Total  employees  as of
January  27,  1996 was 1,298 as compared to 1,465 as of April 29, 1995 and 1,404
as of January 28, 1995.

     On December 11, 1995,  the Company  reached an agreement with Fluor Daniel,
Inc. for it to acquire approximately 55% of the Company.  Under the terms of the
agreement,  Fluor  Daniel will  contribute  cash of $35  million  along with the
ownership of its Fluor Daniel Environmental  Services, Inc. unit to the Company.
As part of the  transaction,  the Company  will undergo a  recapitalization  and
current shareholders will receive a cash distribution of $8.62, or approximately
$60 million in aggregate, and 0.5274 of a "new" share in the Company in exchange
for each "old" share of stock.  The Company  issued an option to Fluor Daniel in
connection with the agreement for it to acquire  1,366,000  shares at $17.00 per
share, which is exercisable between December 11, 1996 and December 11, 1998. The
agreement with Fluor Daniel is subject to the approval of shareholders and other
customary conditions. It is anticipated that a proxy statement will be mailed in
the  beginning  of March for a  shareholders  meeting at the end of April.  Upon
approval, the Company will change its name to "Fluor Daniel GTI, Inc."

     In the first quarter of fiscal 1996, the Company  determined that a captive
laboratory did not provide a strategic  advantage to either the Company or GTEL,
the analytical  laboratory  business.  Effective  December 31, 1995, the Company
sold GTEL to Nytest  Environmental  Inc. and has accounted for the business as a
discontinued  operation.  Results of operations of the GTEL laboratory  business
have been  reflected  in the loss  from  discontinued  operations  and have been
removed from the continuing operations portion of the consolidated statements of
operations.  The net  assets  of the  discontinued  operation  have  been  shown
separately on the balance sheet at April 29, 1995.

                                       -7-

<PAGE>

     Gross  revenue was $41.9  million for the third  quarter of fiscal  1996, a
decrease of 6.4%  compared to gross revenue of $44.8 million for the same period
last year,  and a decrease of 3.4% from $43.4  million in the second  quarter of
fiscal  1996.  Historically,  the third  quarter  of the fiscal  year  generally
results  in  reduced  hours  billed due to  weather  conditions,  vacations  and
holidays. Hours billed in the third quarter of fiscal 1996 were also impacted by
a reduction  in headcount to 1,298 from 1,404 from the same period last year and
1,314 at the end of the second  quarter of fiscal  1996.  Gross  revenue for the
nine months ended January 27, 1996, was $128.9 million,  a decrease of 3.1% from
$133.0 million for the nine months ended January 28, 1995. Net revenue was $24.8
million for the three month  period,  a decrease of 5.3% from $26.2  million for
the  corresponding  period  last year,  and down 9.6% from $27.5  million in the
previous  quarter.  Net  revenue was $79.6  million  for the nine  months  ended
January 27, 1996, virtually unchanged from the $80.1 million for the same period
in fiscal 1995.

     Gross profit for the three months ended January 27, 1996, was $9.9 million,
a decrease of 12.2% and 12.4%  compared to $11.2  million and $11.3  million for
the same  quarter last year and the  previous  quarter this year,  respectively.
Gross profit for the nine months ended January 27, 1996,  was $31.2  million,  a
decrease of 9.3%  compared to $34.4  million for the same period last year. As a
percentage  of net revenue,  gross profit for the three months ended January 27,
1996 was 39.7%  compared  to 42.9% for the same  period in fiscal 1995 and 41.0%
for the previous  quarter.  Gross  profit for the nine months ended  January 27,
1996 was 39.2%  compared to 42.9% for the same period in fiscal 1995.  The three
month decrease in gross profit  reflects the decrease in gross and net revenues.
The nine month  decrease in gross  profit  primarily  reflects  the  competitive
pressure on market pricing which continues to push the profit margins downward.

     Selling, general and administrative expenses were $9.6 million, or 38.6% of
net  revenue,  in the three  months  ended  January 27,  1996,  compared to $9.8
million, or 37.3% of net revenue, in the same period of the prior year. Selling,
general and administrative expenses were $28.9 million, or 36.3% of net revenue,
in the nine months ended January 27, 1996,  compared to $29.6 million,  or 37.0%
of net revenue, in the same period of the prior year.

     License and other income was $188,000 in the third  quarter  ended  January
27, 1996 compared to $167,000 for the same period of the prior year. License and
other  income was  $562,000 in the first nine months of fiscal 1996  compared to
$438,000 for the same period of the prior year.

     Investment  and other  income,  net, was  $471,000 in the third  quarter of
fiscal 1996 compared to $274,000 in the third quarter of fiscal 1995. Investment
and other  income,  net was  $1,038,000  in the first nine months of fiscal 1996
compared to $903,000 in the same period of the prior year. The increase from the
prior year is due to interest  received on notes receivables not in existence in
prior  years  and from  gains  realized  on the  sale of some of the  marketable
securities in the third quarter of fiscal 1996.

     The  Company's  effective  tax rate was 37.9% for the  three  months  ended
January  27, 1996 and was 39.6% for the nine  months  ended  January 27, 1996 as
compared to 40.0% and 40.1% for the three  months and nine months ended  January
28, 1995, respectively.

Liquidity and Capital Resources

     Cash and cash equivalents and marketable  securities increased $6.9 million
to $32.8 million in the nine months ended January 27, 1996 from $25.9 million at
April 29, 1995.  Approximately  $2.4 million of expenditures in plant,  property
and equipment were made primarily for computer and rental equipment. The Company
had no material  commitments for capital expenditures as of January 27, 1996 and
estimates spending for the remaining year to be approximately  $3.5 million.  In
conjunction with the Fluor Daniel  agreement,  the Company expects to distribute
to its  shareholders  most of its cash along with the cash  contributed by Fluor
Daniel  ($35  million)  in  the   recapitalization   of  the  Company.   Current
shareholders   will  receive   approximately   $60  million  in  cash.   Funding
requirements  for  operations are expected to be met from existing cash and cash
equivalents, marketable securities, and cash generated from operations. Although
the Company believes that cash provided from these sources will be sufficient to
meet its operating  requirements for the near term, the Company is negotiating a
line of  credit  to  support  ongoing  needs.  There  can be no  assurance  that
financing will be available on terms acceptable to the Company.

                                       -8-

<PAGE>

     Operating  activities  provided $5.6 million in net cash for the first nine
months  of  fiscal  1996  principally  due to  improvements  in  collections  of
receivables.  The Company  used  approximately  $3.4  million to fund  operating
activities  for the same  period  in  fiscal  1995.  The  decrease  in  accounts
receivable balances in the first nine months of fiscal 1996 compared to the same
period of fiscal 1995 reflects  improvements  in the management of invoicing and
collections.

     At January 27,  1996,  the  Company's  working  capital  increased to $82.1
million from $76.8 million at April 29, 1995.  Total assets  decreased to $119.6
million at January 27, 1996 from $120.0 million at April 29, 1995.

     In August 1993, the Board of Directors authorized the Company to repurchase
an aggregate  of 2,173,500  shares of its common stock from time to time through
open market  purchases or privately  negotiated  transactions.  The Company used
$893,000  in cash to finance  the  purchase  of 70,000  shares  during the first
quarter of fiscal 1996.  No shares were  purchased  during the third  quarter of
fiscal 1996.

                                       -9-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                                     PART II


Item 6.    Exhibits and Reports on Form 8-K

           a.) The  exhibits  listed  on  the accompanying index to exhibits are
 filed herewith.

           b.) No  reports  on  Form  8-K  were  filed  during the quarter ended
January 27, 1996.

                                      -10-

<PAGE>

                          GROUNDWATER TECHNOLOGY, INC.

                                   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.


                                          GROUNDWATER TECHNOLOGY, INC.



Date:      March 5, 1996                  /s/ Walter C. Barber
                                                                Walter B. Barber
                                           President and Chief Executive Officer





Date:      March 5, 1996                  /s/ Robert E. Sliney, Jr.
                                                           Robert E. Sliney, Jr.
                                                   Vice President, Treasurer and
                                                         Chief Financial Officer

                                      -11-

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<S>           <C>
EX 2.1        Investment Agreement by and among Fluor Daniel, Inc., Fluor Daniel Environmental Services,
              Inc., Groundwater Technology, Inc. and GTI Acquisition Corporation dated as of December
              11, 1995.


EX 10.1       Stock Option Agreement between Fluor Daniel, Inc. and Groundwater Technology, Inc. dated
              as of December 11, 1995.


EX 27         Financial Data Schedule Period Ended January 27, 1996.
</TABLE>