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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended December 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the Transition Period From
 to
 Commission File No. 0-34404
 DAWSON GEOPHYSICAL COMPANY
 Texas
(State or other jurisdiction of 
incorporation or organization)
    
    75-0970548
(I.R.S. Employer
identification No.)
 508 West Wall, Suite 800, Midland, Texas 79701
(Principal Executive Office)
 Telephone Number: 432-684-3000
 þ o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o o
 o þ
  Title of Each Class
    
    Outstanding at February 8, 2010Common Stock, $.33 1/3 par value
    
    7,817,756 shares




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##### 



DAWSON GEOPHYSICAL COMPANY
  PageNumberPart I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Statements of Operations for the Three Months Ended December 31, 2009 and 2008 (unaudited)
    
    
    1Balance Sheets at December 31, 2009 (unaudited) and September 30, 2009
    
    
    2Statements of Cash Flows for the Three Months Ended December 31, 2009 and 2008 (unaudited)
    
    
    3Notes to Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    14Part II. OTHER INFORMATION
    
    
    15Item 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 6. Exhibits
    
    
    15Signatures
    
    
    16Index to Exhibits
    
    
    17Certification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Rule 13a-14(b)Certification of CFO Pursuant to Rule 13a-14(b)EX-31.1EX-31.2EX-32.1EX-32.2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended December 31,2009
    
    
    2008Operating revenues
    
    $
    36,330,000
    
    
    $
    80,216,000Operating costs:Operating expenses
    
    
    34,719,000
    
    
    
    59,015,000General and administrative
    
    
    1,854,000
    
    
    
    2,155,000Depreciation
    
    
    6,477,000
    
    
    
    6,601,00043,050,000
    
    
    
    67,771,000Income (loss) from operations
    
    
    (6,720,000
    )
    
    
    12,445,000Other income:Interest income
    
    
    30,000
    
    
    
    78,000Other income
    
    
    2,000
    
    
    
    38,000Income (loss) before income tax
    
    
    (6,688,000
    )
    
    
    12,561,000Income tax benefit (expense)
    
    
    2,472,000
    
    
    
    (4,827,000
    )Net income (loss)
    
    $
    (4,216,000
    )
    
    $
    7,734,000Net income (loss) per common share
    
    $
    (0.54
    )
    
    $
    1.00Net income (loss) per common share-assuming dilution
    
    $
    (0.54
    )
    
    $
    0.99Weighted average equivalent common shares outstanding
    
    
    7,771,791
    
    
    
    7,701,766Weighted average equivalent common shares outstanding-assuming dilution
    
    
    7,771,791
    
    
    
    7,805,209
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
BALANCE SHEETS
 December 31
    
    
    September 30,2009
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,731,000
    
    
    $
    36,792,000Short-term investments
    
    
    25,192,000
    
    
    
    25,267,000Accounts receivable, net of allowance
for doubtful accounts of $639,000 in December 2009
and $533,000 in September 2009
    
    
    35,920,000
    
    
    
    40,106,000Prepaid expenses and other assets
    
    
    11,259,000
    
    
    
    7,819,000Current deferred tax asset
    
    
    1,149,000
    
    
    
    1,694,000Total current assets
    
    
    111,251,000
    
    
    
    111,678,000Property, plant and equipment
    
    
    240,546,000
    
    
    
    240,820,000Less accumulated depreciation
    
    
    (121,606,000
    )
    
    
    (115,341,000
    )Net property, plant and equipment
    
    
    118,940,000
    
    
    
    125,479,000Total assets
    
    $
    230,191,000
    
    
    $
    237,157,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,346,000
    
    
    $
    6,966,000Accrued liabilities:Payroll costs and other taxes
    
    
    1,988,000
    
    
    
    2,720,000Other
    
    
    8,760,000
    
    
    
    10,600,000Deferred revenue
    
    
    1,643,000
    
    
    
    2,230,000Total current liabilities
    
    
    19,737,000
    
    
    
    22,516,000Deferred tax liability
    
    
    16,113,000
    
    
    
    16,262,000Stockholders equity:Preferred stock-par value $1.00 per share;
5,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock-par value $.33 1/3 per share;
50,000,000 shares authorized, 7,817,756
and 7,822,994 shares issued and outstanding
in each period
    
    
    2,606,000
    
    
    
    2,608,000Additional paid-in capital
    
    
    89,387,000
    
    
    
    89,220,000Other comprehensive income, net of tax
    
    
    31,000
    
    
    
    18,000Retained earnings
    
    
    102,317,000
    
    
    
    106,533,000Total stockholders equity
    
    
    194,341,000
    
    
    
    198,379,000Total liabilities and stockholders equity
    
    $
    230,191,000
    
    
    $
    237,157,000
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended December 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (4,216,000
    )
    
    $
    7,734,000Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation
    
    
    6,477,000
    
    
    
    6,601,000Noncash compensation
    
    
    540,000
    
    
    
    424,000Deferred income tax expense (benefit)
    
    
    391,000
    
    
    
    (348,000
    )Provision for bad debts
    
    
    106,000
    
    
    
    245,000Other
    
    
    (200,000
    )
    
    
    51,000Change in current assets and liabilities:Decrease in accounts receivable
    
    
    4,080,000
    
    
    
    2,610,000Increase in prepaid expenses and other assets
    
    
    (3,440,000
    )
    
    
    (763,000
    )Increase (decrease) in accounts payable
    
    
    380,000
    
    
    
    (7,495,000
    )Decrease in accrued liabilities
    
    
    (2,572,000
    )
    
    
    (440,000
    )(Decrease) increase in deferred revenue
    
    
    (587,000
    )
    
    
    1,742,000Net cash provided by operating activities
    
    
    959,000
    
    
    
    10,361,000CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of short-term investments
    
    
    (4,984,000
    )
    
    
    Proceeds from maturity of short-term investments
    
    
    5,000,000
    
    
    
    Proceeds from disposal of assets
    
    
    5,000
    
    
    
    14,000Partial proceeds on fire insurance claim
    
    
    
    
    
    
    1,000,000Capital expenditures
    
    
    (41,000
    )
    
    
    (3,957,000
    )Net cash used in investing activities
    
    
    (20,000
    )
    
    
    (2,943,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
    
    
    
    
    Net increase in cash and cash equivalents
    
    
    939,000
    
    
    
    7,418,000CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    36,792,000
    
    
    
    8,311,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    37,731,000
    
    
    $
    15,729,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for income taxes
    
    $
    121,000
    
    
    $
    538,000NONCASH INVESTING ACTIVITIES:Unrealized gain on investments
    
    $
    49,000
    
    
    $
    
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 1. ORGANIZATION AND NATURE OF OPERATIONS
  2. OPINION OF MANAGEMENT
   Critical Accounting Policies
  Concentrations of Credit Risk.
 Revenue Recognition
   Allowance for Doubtful Accounts.
 4




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Impairment of Long-lived Assets.
 Depreciable Lives of Property, Plant and Equipment.
  Tax Accounting.
 Stock-Based Compensation.
 Reclassifications
 Recently Issued Accounting Pronouncements
  5




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3. SHORT-TERM INVESTMENTS
  As of September 30, 2009 (in 000s)Estimated FairAmortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    9,987
    
    
    $
    7
    
    
    $
    
    
    
    $
    9,994U.S. Treasury notes
    
    
    10,153
    
    
    
    20
    
    
    
    
    
    
    
    10,173FDIC guaranteed bonds
    
    
    5,096
    
    
    
    4
    
    
    
    
    
    
    
    5,100Total
    
    $
    25,236
    
    
    $
    31
    (a)
    
    $
    
    
    
    $
    25,267
 (a)
    
    Other comprehensive income reflected on the Balance Sheet reflects unrealized gains net of the
tax effect of approximately $13,000. As of December 31, 2009 (in 000s)Estimated FairAmortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    9,981
    
    
    $
    1
    
    
    $
    
    
    
    $
    9,982U.S. Treasury notes
    
    
    10,091
    
    
    
    34
    
    
    
    
    
    
    
    10,125FDIC guaranteed bonds
    
    
    5,071
    
    
    
    14
    
    
    
    
    
    
    
    5,085Total
    
    $
    25,143
    
    
    $
    49
    (a)
    
    $
    
    
    
    $
    25,192
 (a)
    
    Other comprehensive income reflected on the Balance Sheet reflects unrealized gains net of
the tax effect of approximately $18,000.  4. FAIR VALUE OF FINANCIAL INSTRUMENTS
    As of September 30, 2009 (in 000s)Fair Value Measurements at Reporting Date Using:Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Short-term investments:U.S. Treasury bills
    
    $
    9,994
    
    
    $
    9,994
    
    
    $
    
    
    
    $
    U.S. Treasury notes
    
    
    10,173
    
    
    
    10,173
    
    
    
    
    
    
    
    FDIC guaranteed bonds
    
    
    5,100
    
    
    
    5,100
    
    
    
    
    
    
    
    Total
    
    $
    25,267
    
    
    $
    25,267
    
    
    $
    
    
    
    $
    
 As of December 31, 2009 (in 000s)Fair Value Measurements at Reporting Date Using:Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Short-term investments:U.S. Treasury bills
    
    $
    9,982
    
    
    $
    9,982
    
    
    $
    
    
    
    $
    U.S. Treasury notes
    
    
    10,125
    
    
    
    10,125
    
    
    
    
    
    
    
    FDIC guaranteed bonds
    
    
    5,085
    
    
    
    5,085
    
    
    
    
    
    
    
    Total
    
    $
    25,192
    
    
    $
    25,192
    
    
    $
    
    
    
    $
    
 6




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5. DEBT
  6. STOCK-BASED COMPENSATION
  Incentive Stock Options:
     Stock Awards:
   7




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7. COMMITMENTS AND CONTINGENCIES
       Payments Due by Period (in 000s)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,063
    
    
    $
    546
    
    
    $
    505
    
    
    $
    12
    
    
    $
    
   8. SUBSEQUENT EVENTS
  8




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9. NET INCOME (LOSS) PER COMMON SHARE
   Three Months EndedDecember 31,2009
    
    
    2008NUMERATOR:Net income (loss) and numerator for basic and diluted net income (loss) per common
share-income available to common shareholders
    
    $
    (4,216,000
    )
    
    $
    7,734,000DENOMINATOR:Denominator for basic net income (loss) per common share-weighted average common shares
    
    
    7,771,791
    
    
    
    7,701,766Effect of dilutive securities-employee stock options and restricted stock grants
    
    
    
    
    
    
    103,443Denominator for diluted net income (loss) per common share-adjusted weighted average
common shares and assumed conversions
    
    
    7,771,791
    
    
    
    7,805,209Net income (loss) per common share
    
    $
    (0.54
    )
    
    $
    1.00Net income (loss) per common share-assuming dilution
    
    $
    (0.54
    )
    
    $
    0.99
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  Overview
  9




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10




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Results of Operations
 Operating Revenues
 Operating Costs
    Taxes
  Liquidity and Capital Resources
 Introduction.
 Cash Flows.
 11




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Capital Expenditures.
   Capital Resources.
    Payments Due by Period (in 000s)Within
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,063
    
    
    $
    546
    
    
    $
    505
    
    
    $
    12
    
    
    $
    
  12




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Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Concentrations of Credit Risk.
 Revenue Recognition.
   Allowance for Doubtful Accounts.
 Impairment of Long-Lived Assets.
 Depreciable Lives of Property, Plant and Equipment.
 Tax Accounting.
 13




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Stock-Based Compensation.
 Recently Issued Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Managements Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting.
 14




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  15




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: February 8, 2010
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: February 8, 2010
    By:
    /s/ Christina W. HaganChristina W. HaganExecutive Vice President, Secretary and
Chief Financial Officer 16




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INDEX TO EXHIBITS
 Number
    
    Exhibit3.1
    
    
    Second Restated Articles of Incorporation of the Company, as amended (filed on February 9,
2007 as Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended
December 31, 2006 (File No. 000-10144) and incorporated herein by reference and filed on
November 28, 2007 as Exhibit 3.1 to the Companys Current Report on Form 8-K (File No.
000-10144) and incorporated herein by reference).3.1A
    
    
    Statement of Resolution Establishing Series of Shares of Series A Junior Participating
Preferred Stock of the Company (filed on July 9, 2009 as Exhibit 3.1 to the Companys
Current Report on Form 8-K (File No. 000-10144) and incorporated herein by reference).3.2
    
    
    Amended and Restated Bylaws of the Company (filed on August 7, 2007 as Exhibit 3.2 to the
Companys Quarterly Report on Form 10-Q for the third quarter ended June 30, 2007 (File No.
000-10144) and incorporated herein by reference)4.1
    
    
    Rights Agreement effective as of July 23, 2009 between the Company and Mellon Investor
Services LLC , as Rights Agent, which includes as Exhibit A the form of Statement of
Resolution Establishing Series of Shares of Series A Junior Participating Preferred Stock
setting forth the terms of the Preferred Stock, as Exhibit B the form of Rights Certificate
and as Exhibit C the Summary of Rights to Purchase Preferred Stock (filed on July 9, 2009 as
Exhibit 4.1 to the Companys Current Report on Form 8-K (File No. 000-10144) and
incorporated herein by reference). Pursuant to the Rights Agreement, Rights Certificates
will not be mailed until after the Distribution Date (as defined in the Rights Agreement).31.1*
    
    
    Certification of Chief Executive Officer of Dawson Geophysical Company pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.31.2*
    
    
    Certification of Chief Financial Officer of Dawson Geophysical Company pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.32.1*
    
    
    Certification of Chief Executive Officer of Dawson Geophysical Company pursuant to Rule
13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section
1350 of Chapter 63 of Title 18 of the United States Code.32.2*
    
    
    Certification of Chief Financial Officer of Dawson Geophysical Company pursuant to Rule
13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section
1350 of Chapter 63 of Title 18 of the United States Code.
 
 *
    
    Filed herewith. 17