##### 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 March 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. 0-10144
 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Title of Each Class
    
    Outstanding at May 8, 2009Common Stock, $.33 1/3 par value
    
    7,799,744 shares




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##### 



DAWSON GEOPHYSICAL COMPANY
  PageNumberPart I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Statements of Operations for the Three Months and the Six Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    1Balance Sheets at March 31, 2009 (unaudited) and September 30, 2008
    
    
    2Statements of Cash Flows for the Six Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    3Notes to Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    14Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    14Item 1A. Risk Factors
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 6. Exhibits
    
    
    15Signatures
    
    
    16Index to Exhibits
    
    
    17EX-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 March 31,
    
    
    Six Months Ended March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues
    
    $
    64,625,000
    
    
    $
    78,363,000
    
    
    $
    144,841,000
    
    
    $
    155,962,000Operating costs:Operating expenses
    
    
    45,737,000
    
    
    
    57,529,000
    
    
    
    104,752,000
    
    
    
    115,654,000General and administrative
    
    
    2,408,000
    
    
    
    1,837,000
    
    
    
    4,563,000
    
    
    
    3,543,000Depreciation
    
    
    6,529,000
    
    
    
    5,854,000
    
    
    
    13,130,000
    
    
    
    11,405,00054,674,000
    
    
    
    65,220,000
    
    
    
    122,445,000
    
    
    
    130,602,000Income from operations
    
    
    9,951,000
    
    
    
    13,143,000
    
    
    
    22,396,000
    
    
    
    25,360,000Other income (expense):Interest income
    
    
    62,000
    
    
    
    116,000
    
    
    
    140,000
    
    
    
    334,000Interest expense
    
    
    
    
    
    
    (95,000
    )
    
    
    
    
    
    
    (200,000
    )Other income
    
    
    272,000
    
    
    
    115,000
    
    
    
    310,000
    
    
    
    99,000Income before income tax
    
    
    10,285,000
    
    
    
    13,279,000
    
    
    
    22,846,000
    
    
    
    25,593,000Income tax expense:Current
    
    
    (2,951,000
    )
    
    
    (4,110,000
    )
    
    
    (8,126,000
    )
    
    
    (8,650,000
    )Deferred
    
    
    (1,164,000
    )
    
    
    (877,000
    )
    
    
    (816,000
    )
    
    
    (947,000
    )(4,115,000
    )
    
    
    (4,987,000
    )
    
    
    (8,942,000
    )
    
    
    (9,597,000
    )Net income
    
    $
    6,170,000
    
    
    $
    8,292,000
    
    
    $
    13,904,000
    
    
    $
    15,996,000Net income per common share
    
    $
    0.79
    
    
    $
    1.08
    
    
    $
    1.78
    
    
    $
    2.09Net income per common share-assuming
dilution
    
    $
    0.79
    
    
    $
    1.07
    
    
    $
    1.78
    
    
    $
    2.07Weighted average equivalent common
shares outstanding
    
    
    7,799,744
    
    
    
    7,667,071
    
    
    
    7,797,986
    
    
    
    7,663,556Weighted average equivalent common
shares outstanding-assuming dilution
    
    
    7,850,508
    
    
    
    7,728,437
    
    
    
    7,824,202
    
    
    
    7,724,269
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 March 31,
    
    
    September 30,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    45,548,000
    
    
    $
    8,311,000Accounts receivable, net of allowance
for doubtful accounts of $797,000 in March 2009
and $55,000 in September 2008
    
    
    54,259,000
    
    
    
    76,221,000Prepaid expenses and other assets
    
    
    1,526,000
    
    
    
    877,000Current deferred tax asset
    
    
    1,112,000
    
    
    
    873,000Total current assets
    
    
    102,445,000
    
    
    
    86,282,000Property, plant and equipment
    
    
    253,738,000
    
    
    
    250,519,000Less accumulated depreciation
    
    
    (115,368,000
    )
    
    
    (103,180,000
    )Net property, plant and equipment
    
    
    138,370,000
    
    
    
    147,339,000$
    240,815,000
    
    
    $
    233,621,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,430,000
    
    
    $
    15,308,000Accrued liabilities:Payroll costs and other taxes
    
    
    2,501,000
    
    
    
    3,363,000Other
    
    
    9,877,000
    
    
    
    14,869,000Deferred revenue
    
    
    2,142,000
    
    
    
    993,000Total current liabilities
    
    
    25,950,000
    
    
    
    34,533,000Deferred tax liability
    
    
    14,183,000
    
    
    
    13,128,000Stockholders 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, 7,799,744
and 7,794,744 shares issued and outstanding
in each period
    
    
    2,600,000
    
    
    
    2,598,000Additional paid-in capital
    
    
    87,867,000
    
    
    
    87,051,000Retained earnings
    
    
    110,215,000
    
    
    
    96,311,000Total stockholders equity
    
    
    200,682,000
    
    
    
    185,960,000$
    240,815,000
    
    
    $
    233,621,000
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months Ended March 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    13,904,000
    
    
    $
    15,996,000Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation
    
    
    13,130,000
    
    
    
    11,405,000Noncash compensation
    
    
    818,000
    
    
    
    612,000Deferred income tax expense
    
    
    816,000
    
    
    
    947,000Excess tax benefit from share-based payment arrangement
    
    
    
    
    
    
    (92,000
    )Provision for bad debts
    
    
    1,169,000
    
    
    
    81,000Other
    
    
    (8,000
    )
    
    
    (115,000
    )Change in current assets and liabilities:Decrease (increase) in accounts receivable
    
    
    17,312,000
    
    
    
    (9,685,000
    )Increase in prepaid expenses
    
    
    (649,000
    )
    
    
    (579,000
    )(Decrease) increase in accounts payable
    
    
    (3,496,000
    )
    
    
    2,108,000Decrease in accrued liabilities
    
    
    (5,854,000
    )
    
    
    (1,842,000
    )Increase (decrease) in deferred revenue
    
    
    1,149,000
    
    
    
    (2,335,000
    )Net cash provided by operating activities
    
    
    38,291,000
    
    
    
    16,501,000CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from disposal of assets
    
    
    89,000
    
    
    
    9,000Partial proceeds on fire insurance claim
    
    
    2,843,000
    
    
    
    Capital expenditures, net of noncash capital expenditures
summarized below in noncash investing activities
    
    
    (3,986,000
    )
    
    
    (27,370,000
    )Net cash used in investing activities
    
    
    (1,054,000
    )
    
    
    (27,361,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    
    
    
    
    37,000Proceeds from line of credit
    
    
    
    
    
    
    5,000,000Repayment on line of credit
    
    
    
    
    
    
    Excess tax benefit from share-based payment arrangement
    
    
    
    
    
    
    92,000Net cash provided by financing activities
    
    
    
    
    
    
    5,129,000Net increase (decrease) in cash and cash equivalents
    
    
    37,237,000
    
    
    
    (5,731,000
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    8,311,000
    
    
    
    14,875,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    45,548,000
    
    
    $
    9,144,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest expense
    
    $
    
    
    
    $
    232,000Cash paid during the period for income taxes
    
    $
    9,686,000
    
    
    $
    9,274,000NONCASH INVESTING ACTIVITIES:Accrued purchases of property and equipment
    
    $
    (382,000
    )
    
    $
    Equipment purchase through reduction of insurance proceeds
    
    $
    638,000
    
    
    $
    
 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
   4




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Allowance for Doubtful Accounts.
 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. DEBT
  4. STOCK-BASED COMPENSATION
  Incentive Stock Options:
    6




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Stock Awards:
     5. COMMITMENTS AND CONTINGENCIES
      7




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Payments Due by Period (in 000s)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,499
    
    
    $
    584
    
    
    $
    875
    
    
    $
    40
    
    
    $
    
   6. NET INCOME PER COMMON SHARE
   Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008NUMERATOR:Net income and numerator for basic and
diluted net income per common
share-income available to common
shareholders
    
    $
    6,170,000
    
    
    $
    8,292,000
    
    
    $
    13,904,000
    
    
    $
    15,996,000DENOMINATOR:Denominator for basic net income per
common share-weighted average common
shares
    
    
    7,799,744
    
    
    
    7,667,071
    
    
    
    7,797,986
    
    
    
    7,663,556Effect of dilutive securities-employee
stock options and restricted stock grants
    
    
    50,764
    
    
    
    61,366
    
    
    
    26,216
    
    
    
    60,713Denominator for diluted net income per
common share-adjusted weighted average
common shares and assumed conversions
    
    
    7,850,508
    
    
    
    7,728,437
    
    
    
    7,824,202
    
    
    
    7,724,269Net income per common share
    
    $
    .79
    
    
    $
    1.08
    
    
    $
    1.78
    
    
    $
    2.09Net income per common share-assuming dilution
    
    $
    .79
    
    
    $
    1.07
    
    
    $
    1.78
    
    
    $
    2.07
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  8




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Forward Looking Statements
  Overview
     9




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Results of Operations
 Operating Revenues
 Operating Costs
    Taxes
  Liquidity and Capital Resources
 Introduction.
 10




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Cash Flows.
   Capital Expenditures.
   Capital Resources.
   11




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Payments Due by Period (in 000s)Within
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,499
    
    
    $
    584
    
    
    $
    875
    
    
    $
    40
    
    
    $
    
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Concentrations of Credit Risk.
 Revenue Recognition.
   Allowance for Doubtful Accounts.
 12




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Impairment of Long-Lived Assets.
 Depreciable Lives of Property, Plant and Equipment.
 Tax Accounting.
 Stock-Based Compensation.
 Recently Issued Accounting Pronouncements
    13




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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.
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    14




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Number of SharesFor
    
    WithheldPaul H. Brown
    
    6,619,010
    
    342,016L. Decker Dawson
    
    6,589,829
    
    371,197Gary M. Hoover
    
    6,752,972
    
    208,054Stephen C. Jumper
    
    6,671,914
    
    289,112Jack D. Ladd
    
    6,793,267
    
    167,759Ted R. North
    
    6,793,696
    
    167,330Tim C. Thompson
    
    6,619,799
    
    341,227
  For
    
    
    6,173,086Against
    
    
    215,399Abstain
    
    
    572,540Broker Non-Votes
    
    
    0
 
 ITEM 6. EXHIBITS
  15




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: May 8, 2009
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: May 8, 2009
    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).3.2
    
    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 quarter ended June 30, 2007 (File No.
000-10144) and incorporated herein by reference).4.1
    
    Rights Agreement by and between the Company and BNY Mellon Shareowner Services (f/k/a
Chasemellon Shareholder Services, L.L.C.), as Rights Agent, dated July 13, 1999 (filed on
December 11, 2003 as Exhibit 4 to the Companys Annual Report on Form 10-K for the fiscal
year ended September 30, 2003 (File No. 000-10144) and incorporated herein by reference).10.1
    
    Summary of Non-Employee Director Compensation (filed on February 9, 2009 as Exhibit 10.3 to
the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 (File
No. 000-10144) and incorporated herein by reference).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. 17