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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, 2008
 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
  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 February 9, 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 Ended December 31, 2008 and 2007 (unaudited)
    
    
    1Balance Sheets at December 31, 2008 (unaudited) and September 30, 2008
    
    
    2Statements of Cash Flows for the Three Months Ended December 31, 2008 and 2007 (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
    
    
    12Item 4. Controls and Procedures
    
    
    13Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    13Item 1A. Risk Factors
    
    
    13Item 6. Exhibits
    
    
    13Signatures
    
    
    14Index to Exhibits
    
    
    15Certification 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-10.1EX-10.2EX-10.3EX-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 31,2008
    
    
    2007Operating revenues
    
    $
    80,216,000
    
    
    $
    77,599,000Operating costs:Operating expenses
    
    
    59,015,000
    
    
    
    58,125,000General and administrative
    
    
    2,155,000
    
    
    
    1,706,000Depreciation
    
    
    6,601,000
    
    
    
    5,551,00067,771,000
    
    
    
    65,382,000Income from operations
    
    
    12,445,000
    
    
    
    12,217,000Other income (expense):Interest income
    
    
    78,000
    
    
    
    218,000Interest expense
    
    
    
    
    
    
    (105,000
    )Other income (expense)
    
    
    38,000
    
    
    
    (16,000
    )Income before income tax
    
    
    12,561,000
    
    
    
    12,314,000Income tax (expense) benefit:Current
    
    
    (5,175,000
    )
    
    
    (4,540,000
    )Deferred benefit (expense)
    
    
    348,000
    
    
    
    (70,000
    )(4,827,000
    )
    
    
    (4,610,000
    )Net income
    
    $
    7,734,000
    
    
    $
    7,704,000Net income per common share
    
    $
    1.00
    
    
    $
    1.01Net income per common share-assuming dilution
    
    $
    0.99
    
    
    $
    1.00Weighted average equivalent common shares outstanding
    
    
    7,701,766
    
    
    
    7,660,100Weighted average equivalent common shares outstanding
 assuming dilution
    
    
    7,805,209
    
    
    
    7,720,101
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 December 31,
    
    
    September 30,2008
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,729,000
    
    
    $
    8,311,000Accounts receivable, net of allowance
for doubtful accounts of $300,000 in December 2008
and $55,000 in September 2008
    
    
    72,366,000
    
    
    
    76,221,000Prepaid expenses and other assets
    
    
    1,640,000
    
    
    
    877,000Current deferred tax asset
    
    
    1,735,000
    
    
    
    873,000Total current assets
    
    
    91,470,000
    
    
    
    86,282,000Property, plant and equipment
    
    
    253,749,000
    
    
    
    250,519,000Less accumulated depreciation
    
    
    (109,447,000
    )
    
    
    (103,180,000
    )Net property, plant and equipment
    
    
    144,302,000
    
    
    
    147,339,000$
    235,772,000
    
    
    $
    233,621,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,431,000
    
    
    $
    15,308,000Accrued liabilities:Payroll costs and other taxes
    
    
    2,464,000
    
    
    
    3,363,000Other
    
    
    15,328,000
    
    
    
    14,869,000Deferred revenue
    
    
    2,735,000
    
    
    
    993,000Total current liabilities
    
    
    27,958,000
    
    
    
    34,533,000Deferred tax liability
    
    
    13,642,000
    
    
    
    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
    
    
    87,527,000
    
    
    
    87,051,000Retained earnings
    
    
    104,045,000
    
    
    
    96,311,000Total stockholders equity
    
    
    194,172,000
    
    
    
    185,960,000$
    235,772,000
    
    
    $
    233,621,000
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Three Months Ended December 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    7,734,000
    
    
    $
    7,704,000Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation
    
    
    6,601,000
    
    
    
    5,551,000Noncash compensation
    
    
    424,000
    
    
    
    347,000Deferred income tax (benefit) expense
    
    
    (348,000
    )
    
    
    70,000Excess tax benefit from share-based payment arrangement
    
    
    
    
    
    
    (92,000
    )Provision for bad debts
    
    
    245,000
    
    
    
    Other
    
    
    51,000
    
    
    
    46,000Change in current assets and liabilities:Decrease in accounts receivable
    
    
    2,610,000
    
    
    
    4,074,000Increase in prepaid expenses
    
    
    (763,000
    )
    
    
    (1,836,000
    )Decrease in accounts payable
    
    
    (7,495,000
    )
    
    
    (1,353,000
    )Decrease in accrued liabilities
    
    
    (440,000
    )
    
    
    (1,399,000
    )Increase (decrease) in deferred revenue
    
    
    1,742,000
    
    
    
    (610,000
    )Net cash provided by operating activities
    
    
    10,361,000
    
    
    
    12,502,000CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from disposal of assets
    
    
    14,000
    
    
    
    5,000Partial proceeds on fire insurance claim
    
    
    1,000,000
    
    
    
    Capital expenditures, net of noncash capital expenditures
summarized below in noncash investing activities
    
    
    (3,957,000
    )
    
    
    (9,280,000
    )Net cash used in investing activities
    
    
    (2,943,000
    )
    
    
    (9,275,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    
    
    
    
    37,000Proceeds from line of credit
    
    
    
    
    
    
    Repayment on line of credit
    
    
    
    
    
    
    Excess tax benefit from share-based payment arrangement
    
    
    
    
    
    
    92,000Net cash provided by financing activities
    
    
    
    
    
    
    129,000Net increase in cash and cash equivalents
    
    
    7,418,000
    
    
    
    3,356,000CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    8,311,000
    
    
    
    14,875,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    15,729,000
    
    
    $
    18,231,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest expense
    
    $
    
    
    
    $
    96,000Cash paid during the period for income taxes
    
    $
    538,000
    
    
    $
    1,172,000NONCASH INVESTING ACTIVITIES:Change in accrued purchases of property and equipment
    
    $
    (382,000
    )
    
    $
    5,610,000
 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.
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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. DEBT
  4. STOCK-BASED COMPENSATION
  Incentive Stock Options:
     Stock Awards:
  6




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5. 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
    
    $
    1,642
    
    
    $
    579
    
    
    $
    1,014
    
    
    $
    49
    
    
    $
    
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6. NET INCOME PER COMMON SHARE
   Three Months EndedDecember 31,2008
    
    
    2007NUMERATOR:Net income and numerator for basic and diluted net income per common
share-income available to common shareholders
    
    $
    7,734,000
    
    
    $
    7,704,000DENOMINATOR:Denominator for basic net income per common share-weighted average common shares
    
    
    7,701,766
    
    
    
    7,660,100Effect of dilutive securities-employee stock options and restricted stock grants
    
    
    103,443
    
    
    
    60,001Denominator for diluted net income per common share-adjusted weighted average
common shares and assumed conversions
    
    
    7,805,209
    
    
    
    7,720,101Net income per common share
    
    $
    1.00
    
    
    $
    1.01Net income per common share-assuming dilution
    
    $
    .99
    
    
    $
    1.00
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  Overview
  8




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Results of Operations
 Operating Revenues
 Operating Costs
   9




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Taxes
 Liquidity and Capital Resources
 Introduction.
 Cash Flows.
   Capital Expenditures.
   Capital Resources.
  10




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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
    
    $
    1,642
    
    
    $
    579
    
    
    $
    1,014
    
    
    $
    49
    
    
    $
    
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Concentrations of Credit Risk.
 Revenue Recognition.
   Allowance for Doubtful Accounts.
 Impairment of Long-Lived Assets.
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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
  12




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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
  13




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: February 9, 2009
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: February 9, 2009
    By:
    /s/ Christina W. HaganChristina W. HaganExecutive Vice President, Secretary and
Chief Financial Officer 14




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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 third quarter ended June 30, 2007 (File No. 000-10144) and
incorporated herein by reference)4.1
    
    Rights Agreement by and between the Company and Mellon Investor Services, LLC (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*
    
    Master Geophysical Data Acquisition Agreement between SandRidge Energy, Inc. and the Company, dated
December 19, 2006.10.2*
    
    Master Service Contract between Chesapeake Operating, Inc. and the Company, dated December 18, 2003.10.3*
    
    Summary of Non-Employee Director Compensation.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. 15