##### Table of Contents



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 June 30, 2010
 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. 001-34404
 DAWSON GEOPHYSICAL COMPANY
 Texas
    
    75-0970548(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    identification No.)
 508 West Wall, Suite 800, Midland, Texas 79701
(Principal Executive Office)
 Telephone Number: 432-684-3000
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Title of Each Class
    
    Outstanding at August 6, 2010Common Stock, $.33 1/3 par value
    
    7,901,856 shares




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##### 



DAWSON GEOPHYSICAL COMPANY
  PageNumberPart I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Statements of Operations for the Three Months and the Nine Months Ended June 30, 2010 and 2009 (unaudited)
    
    
    1Balance Sheets at June 30, 2010 (unaudited) and September 30, 2009
    
    
    2Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009 (unaudited)
    
    
    3Notes to Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    16Part II. OTHER INFORMATION
    
    
    16Item 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 6. Exhibits
    
    
    16Signatures
    
    
    17Index to Exhibits
    
    
    18EX-10.3EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF OPERATIONS  (UNAUDITED)
 Three Months Ended June 30,
    
    
    Nine Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues
    
    $
    61,178,000
    
    
    $
    52,319,000
    
    
    $
    146,093,000
    
    
    $
    197,160,000Operating costs:Operating expenses
    
    
    54,098,000
    
    
    
    46,374,000
    
    
    
    133,245,000
    
    
    
    151,126,000General and administrative
    
    
    1,635,000
    
    
    
    1,761,000
    
    
    
    5,281,000
    
    
    
    6,324,000Depreciation
    
    
    7,016,000
    
    
    
    6,521,000
    
    
    
    20,188,000
    
    
    
    19,651,00062,749,000
    
    
    
    54,656,000
    
    
    
    158,714,000
    
    
    
    177,101,000(Loss) income from operations
    
    
    (1,571,000
    )
    
    
    (2,337,000
    )
    
    
    (12,621,000
    )
    
    
    20,059,000Other income (expense):Interest income
    
    
    20,000
    
    
    
    73,000
    
    
    
    78,000
    
    
    
    213,000Other income (expense)
    
    
    126,000
    
    
    
    (12,000
    )
    
    
    223,000
    
    
    
    298,000(Loss) income before income taxes
    
    
    (1,425,000
    )
    
    
    (2,276,000
    )
    
    
    (12,320,000
    )
    
    
    20,570,000Income tax benefit (expense)
    
    
    406,000
    
    
    
    650,000
    
    
    
    4,379,000
    
    
    
    (8,292,000
    )Net (loss) income
    
    $
    (1,019,000
    )
    
    $
    (1,626,000
    )
    
    $
    (7,941,000
    )
    
    $
    12,278,000Net (loss) income per common share
    
    $
    (0.13
    )
    
    $
    (0.21
    )
    
    $
    (1.02
    )
    
    $
    1.57Net (loss) income per common share-assuming dilution
    
    $
    (0.13
    )
    
    $
    (0.21
    )
    
    $
    (1.02
    )
    
    $
    1.57Weighted average equivalent common shares outstanding
    
    
    7,779,256
    
    
    
    7,810,592
    
    
    
    7,776,740
    
    
    
    7,802,186Weighted average equivalent common shares outstanding
-assuming dilution
    
    
    7,779,256
    
    
    
    7,810,592
    
    
    
    7,776,740
    
    
    
    7,839,324
 See accompanying notes to the financial statements (unaudited).
 1




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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 June 30,
    
    
    September 30,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,207,000
    
    
    $
    36,792,000Short-term investments
    
    
    20,056,000
    
    
    
    25,267,000Accounts receivable, net of allowance
for doubtful accounts of $639,000 in June 2010
and $533,000 in September 2009
    
    
    52,877,000
    
    
    
    40,106,000Prepaid expenses and other assets
    
    
    8,183,000
    
    
    
    7,819,000Current deferred tax asset
    
    
    1,062,000
    
    
    
    1,694,000Total current assets
    
    
    109,385,000
    
    
    
    111,678,000Property, plant and equipment
    
    
    245,862,000
    
    
    
    240,820,000Less accumulated depreciation
    
    
    (124,091,000
    )
    
    
    (115,341,000
    )Net property, plant and equipment
    
    
    121,771,000
    
    
    
    125,479,000Total assets
    
    $
    231,156,000
    
    
    $
    237,157,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,958,000
    
    
    $
    6,966,000Accrued liabilities:Payroll costs and other taxes
    
    
    1,951,000
    
    
    
    2,720,000Other
    
    
    8,993,000
    
    
    
    10,600,000Deferred revenue
    
    
    
    
    
    
    2,230,000Total current liabilities
    
    
    23,902,000
    
    
    
    22,516,000Deferred tax liability
    
    
    16,006,000
    
    
    
    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
    
    
    90,000,000
    
    
    
    89,220,000Accumulated other comprehensive income, net of tax
    
    
    50,000
    
    
    
    18,000Retained earnings
    
    
    98,592,000
    
    
    
    106,533,000Total stockholders equity
    
    
    191,248,000
    
    
    
    198,379,000Total liabilities and stockholders equity
    
    $
    231,156,000
    
    
    $
    237,157,000
 See accompanying notes to the financial statements (unaudited).
 2




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DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF CASH FLOWS  (UNAUDITED)
 Nine Months Ended June 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (7,941,000
    )
    
    $
    12,278,000Adjustments to reconcile net (loss) income to
net cash provided by operating activities:Depreciation
    
    
    20,188,000
    
    
    
    19,651,000Noncash compensation
    
    
    1,153,000
    
    
    
    1,315,000Deferred income tax expense
    
    
    360,000
    
    
    
    1,129,000Excess tax benefit from share-based payment arrangement
    
    
    
    
    
    
    (4,000
    )Provision for bad debts
    
    
    199,000
    
    
    
    1,169,000Other
    
    
    (234,000
    )
    
    
    32,000Change in current assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (12,970,000
    )
    
    
    21,500,000Increase in prepaid expenses and other assets
    
    
    (364,000
    )
    
    
    (5,548,000
    )Increase (decrease) in accounts payable
    
    
    5,687,000
    
    
    
    (4,101,000
    )Decrease in accrued liabilities
    
    
    (2,376,000
    )
    
    
    (6,286,000
    )(Decrease) increase in deferred revenue
    
    
    (2,230,000
    )
    
    
    1,373,000Net cash provided by operating activities
    
    
    1,472,000
    
    
    
    42,508,000CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, net of noncash capital additions
summarized below in noncash investing activities
    
    
    (16,585,000
    )
    
    
    (4,062,000
    )Proceeds from disposal of assets
    
    
    499,000
    
    
    
    101,000Proceeds from maturity of short-term investments
    
    
    15,000,000
    
    
    
    Acquisition of short-term investments
    
    
    (9,971,000
    )
    
    
    (20,192,000
    )Partial proceeds on fire insurance claim
    
    
    
    
    
    
    2,843,000Net cash used in investing activities
    
    
    (11,057,000
    )
    
    
    (21,310,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    
    
    
    
    407,000Excess tax benefits from share-based payment arrangement
    
    
    
    
    
    
    4,000Net cash provided by financing activities
    
    
    
    
    
    
    411,000Net (decrease) increase in cash and cash equivalents
    
    
    (9,585,000
    )
    
    
    21,609,000CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    36,792,000
    
    
    
    8,311,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    27,207,000
    
    
    $
    29,920,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for income taxes
    
    $
    797,000
    
    
    $
    13,137,000Cash received during the period for income taxes
    
    $
    6,000,000
    
    
    $
    NONCASH INVESTING ACTIVITIES:Accrued purchases of property and equipment
    
    $
    305,000
    
    
    $
    Equipment purchase through reduction of insurance proceeds
    
    $
    
    
    
    $
    638,000Equipment purchase through asset trade in
    
    $
    2,170,000
    
    
    $
    Unrealized gain on investments
    
    $
    48,000
    
    
    $
    
 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 June 30, 2010 (in 000s)Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    9,988
    
    
    $
    3
    
    
    $
    
    
    
    $
    9,991U.S. Treasury notes
    
    
    4,967
    
    
    
    55
    
    
    
    
    
    
    
    5,022FDIC guaranteed bonds
    
    
    5,021
    
    
    
    22
    
    
    
    
    
    
    
    5,043Total
    
    $
    19,976
    
    
    $
    80
    (a)
    
    $
    
    
    
    $
    20,056
 
 (a)
    
    Accumulated other comprehensive income reflected on the Balance Sheet reflects unrealized
gains and losses net of the tax effect of approximately $30,000. As of September 30, 2009 (in 000s)Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated FairCost
    
    
    Gains
    
    
    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)
    
    Accumulated other comprehensive income reflected on the Balance Sheet reflects unrealized
gains and losses net of the tax effect of approximately $13,000.  4. FAIR VALUE OF FINANCIAL INSTRUMENTS
    As of June 30, 2010 (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
    
    $
    9,991
    
    
    $
    9,991
    
    
    $
    
    
    
    $
    U.S. Treasury notes
    
    
    5,022
    
    
    
    5,022
    
    
    
    
    
    
    
    FDIC guaranteed bonds
    
    
    5,043
    
    
    
    5,043
    
    
    
    
    
    
    
    Total
    
    $
    20,056
    
    
    $
    20,056
    
    
    $
    
    
    
    $
    
 6




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




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Stock Awards:
      7. COMMITMENTS AND CONTINGENCIES
       8




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8. SUBSEQUENT EVENTS
  9. NET INCOME (LOSS) PER COMMON SHARE
   Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009NUMERATOR:Net (loss) income and numerator for basic and
diluted net (loss) income per common
share-income available to common shareholders
    
    $
    (1,019,000
    )
    
    $
    (1,626,000
    )
    
    $
    (7,941,000
    )
    
    $
    12,278,000DENOMINATOR:Denominator for basic net (loss) income per
common share-weighted average common shares
    
    
    7,779,256
    
    
    
    7,810,592
    
    
    
    7,776,740
    
    
    
    7,802,186Effect of dilutive securities-employee stock
options and restricted stock grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,138Denominator for diluted net (loss) income per
common share-adjusted weighted average common
shares and assumed conversions
    
    
    7,779,256
    
    
    
    7,810,592
    
    
    
    7,776,740
    
    
    
    7,839,324Net (loss) income per common share
    
    $
    (0.13
    )
    
    $
    (0.21
    )
    
    $
    (1.02
    )
    
    $
    1.57Net (loss) income per common share-assuming dilution
    
    $
    (0.13
    )
    
    $
    (0.21
    )
    
    $
    (1.02
    )
    
    $
    1.57
 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  Overview
    10




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Results of Operations
 Operating Revenues
 11




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Operating Costs
    Taxes
  Liquidity and Capital Resources
 Introduction.
 Cash Flows.
 12




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Capital Expenditures.
  Capital Resources.
    Payments Due by Period (in 000s)Within
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,562
    
    
    $
    586
    
    
    $
    597
    
    
    $
    324
    
    
    $
    55
 13




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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.
 14




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Depreciable Lives of Property, Plant and Equipment.
 Tax Accounting.
 Stock-Based Compensation.
 Recently Issued Accounting Pronouncements
    
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  15




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ITEM 4. CONTROLS AND PROCEDURES
 Managements Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  16




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: August 6, 2010
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: August 6, 2010
    By:
    /s/ Christina W. HaganChristina W. HaganExecutive Vice President, Secretary and
Chief Financial Officer 17




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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).3.1
    A
    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
    
    Second Amended and Restated Bylaws of the Company (filed on
July 28, 2010 as Exhibit 3.1 to the Companys Current Report on
Form 8-K (File No. 000-34404) 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).10.3
    †*
    Form of Restricted Stock Agreement for the Dawson Geophysical Company 2006 Stock and Performance Incentive Plan.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.†
    
    Management contract or compensatory plan or arrangement. 18