##### 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, 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
(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
 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 7, 2010Common Stock, $.33 1/3 par value
    
    7,817,756 shares




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##### 



DAWSON GEOPHYSICAL COMPANY
  PageNumberPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsStatements of Operations for the Three Months and the Six Months
Ended March 31, 2010 and 2009 (unaudited)
    
    
    1Balance Sheets at March 31, 2010 (unaudited) and September 30, 2009
    
    
    2Statements of Cash Flows for the Six Months Ended March 31, 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 INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 2. Unregistered Sales of Equity Security and Use of Proceeds
    
    
    16Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    18Signatures
    
    
    19Index to ExhibitsCertification 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
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues
    
    $
    48,585,000
    
    
    $
    64,625,000
    
    
    $
    84,915,000
    
    
    $
    144,841,000Operating costs:Operating expenses
    
    
    44,428,000
    
    
    
    45,737,000
    
    
    
    79,147,000
    
    
    
    104,752,000General and administrative
    
    
    1,792,000
    
    
    
    2,408,000
    
    
    
    3,646,000
    
    
    
    4,563,000Depreciation
    
    
    6,695,000
    
    
    
    6,529,000
    
    
    
    13,172,000
    
    
    
    13,130,00052,915,000
    
    
    
    54,674,000
    
    
    
    95,965,000
    
    
    
    122,445,000(Loss) income from operations
    
    
    (4,330,000
    )
    
    
    9,951,000
    
    
    
    (11,050,000
    )
    
    
    22,396,000Other income:Interest income
    
    
    28,000
    
    
    
    62,000
    
    
    
    58,000
    
    
    
    140,000Other income
    
    
    95,000
    
    
    
    272,000
    
    
    
    97,000
    
    
    
    310,000(Loss) income before income tax
    
    
    (4,207,000
    )
    
    
    10,285,000
    
    
    
    (10,895,000
    )
    
    
    22,846,000Income tax benefit (expense)
    
    
    1,501,000
    
    
    
    (4,115,000
    )
    
    
    3,973,000
    
    
    
    (8,942,000
    )Net (loss) income
    
    $
    (2,706,000
    )
    
    $
    6,170,000
    
    
    $
    (6,922,000
    )
    
    $
    13,904,000Net (loss) income per common share
    
    $
    (0.35
    )
    
    $
    0.79
    
    
    $
    (0.89
    )
    
    $
    1.78Net (loss) income per common share-assuming dilution
    
    $
    (0.35
    )
    
    $
    0.79
    
    
    $
    (0.89
    )
    
    $
    1.78Weighted average equivalent common shares
outstanding
    
    
    7,779,256
    
    
    
    7,799,744
    
    
    
    7,775,483
    
    
    
    7,797,986Weighted average equivalent common shares
outstanding
-assuming dilution
    
    
    7,779,256
    
    
    
    7,850,508
    
    
    
    7,775,483
    
    
    
    7,824,202
 See accompanying notes to the financial statements (unaudited).
 1




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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 March 31,
    
    
    September 30,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,117,000
    
    
    $
    36,792,000Short-term investments
    
    
    30,123,000
    
    
    
    25,267,000Accounts receivable, net of allowance
for doubtful accounts of $639,000 in March 2010
and $533,000 in September 2009
    
    
    54,009,000
    
    
    
    40,106,000Prepaid expenses and other assets
    
    
    7,143,000
    
    
    
    7,819,000Current deferred tax asset
    
    
    921,000
    
    
    
    1,694,000Total current assets
    
    
    111,313,000
    
    
    
    111,678,000Property, plant and equipment
    
    
    246,333,000
    
    
    
    240,820,000Less accumulated depreciation
    
    
    (118,322,000
    )
    
    
    (115,341,000
    )Net property, plant and equipment
    
    
    128,011,000
    
    
    
    125,479,000Total assets
    
    $
    239,324,000
    
    
    $
    237,157,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    16,894,000
    
    
    $
    6,966,000Accrued liabilities:Payroll costs and other taxes
    
    
    3,160,000
    
    
    
    2,720,000Other
    
    
    9,822,000
    
    
    
    10,600,000Deferred revenue
    
    
    1,512,000
    
    
    
    2,230,000Total current liabilities
    
    
    31,388,000
    
    
    
    22,516,000Deferred tax liability
    
    
    15,987,000
    
    
    
    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
    
    
    89,690,000
    
    
    
    89,220,000Other comprehensive income, net of tax
    
    
    42,000
    
    
    
    18,000Retained earnings
    
    
    99,611,000
    
    
    
    106,533,000Total stockholders equity
    
    
    191,949,000
    
    
    
    198,379,000Total liabilities and stockholders equity
    
    $
    239,324,000
    
    
    $
    237,157,000
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months EndedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (6,922,000
    )
    
    $
    13,904,000Adjustments to reconcile net (loss) income to
net cash provided by operating activities:Depreciation
    
    
    13,172,000
    
    
    
    13,130,000Noncash compensation
    
    
    840,000
    
    
    
    818,000Deferred income tax expense
    
    
    486,000
    
    
    
    816,000Provision for bad debts
    
    
    156,000
    
    
    
    1,169,000Other
    
    
    (273,000
    )
    
    
    (8,000
    )Change in current assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (14,059,000
    )
    
    
    17,312,000Decrease (increase) in prepaid expenses and other assets
    
    
    676,000
    
    
    
    (649,000
    )Increase (decrease) in accounts payable
    
    
    9,490,000
    
    
    
    (3,496,000
    )Decrease in accrued liabilities
    
    
    (338,000
    )
    
    
    (5,854,000
    )(Decrease) increase in deferred revenue
    
    
    (718,000
    )
    
    
    1,149,000Net cash provided by operating activities
    
    
    2,510,000
    
    
    
    38,291,000CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, net of noncash capital additions
summarized below in noncash investing activities
    
    
    (15,220,000
    )
    
    
    (3,986,000
    )Proceeds from disposal of assets
    
    
    6,000
    
    
    
    89,000Proceeds from maturity of short-term investments
    
    
    5,000,000
    
    
    
    Acquisition of short-term investments
    
    
    (9,971,000
    )
    
    
    Partial proceeds on fire insurance claim
    
    
    
    
    
    
    2,843,000Net cash used in investing activities
    
    
    (20,185,000
    )
    
    
    (1,054,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
    
    
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (17,675,000
    )
    
    
    37,237,000CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    36,792,000
    
    
    
    8,311,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    19,117,000
    
    
    $
    45,548,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for income taxes
    
    $
    121,000
    
    
    $
    9,686,000Cash received during the period for income taxes
    
    $
    6,000,000
    
    
    $
    NONCASH INVESTING ACTIVITIES:Accrued purchases of property and equipment
    
    $
    438,000
    
    
    $
    Equipment purchase through reduction of insurance proceeds
    
    $
    
    
    
    $
    638,000Equipment purchase through asset trade in
    
    $
    2,170,000
    
    
    $
    Unrealized gain on investments
    
    $
    37,000
    
    
    $
    
 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. SHORT-TERM INVESTMENTS
  As of March 31, 2010 (in 000s)Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    14,980
    
    
    $
    
    
    
    $
    1
    
    
    $
    14,979U.S. Treasury notes
    
    
    10,029
    
    
    
    47
    
    
    
    
    
    
    
    10,076FDIC guaranteed bonds
    
    
    5,047
    
    
    
    21
    
    
    
    
    
    
    
    5,068Total
    
    $
    30,056
    
    
    $
    68
    (a)
    
    $
    1
    
    
    $
    30,123
 (a)
    
    Other comprehensive income reflected on the Balance Sheet
reflects unrealized gains and losses net of
the tax effect of approximately $25,000.
 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)
    
    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
   6




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As of March 31, 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
    
    $
    14,979
    
    
    $
    14,979
    
    
    $
    
    
    
    $
    U.S. Treasury notes
    
    
    10,076
    
    
    
    10,076
    
    
    
    
    
    
    
    FDIC guaranteed bonds
    
    
    5,068
    
    
    
    5,068
    
    
    
    
    
    
    
    Total
    
    $
    30,123
    
    
    $
    30,123
    
    
    $
    
    
    
    $
    
 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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Payments Due by Period (in 000s)Within
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,706
    
    
    $
    576
    
    
    $
    708
    
    
    $
    326
    
    
    $
    96
   8. SUBSEQUENT EVENTS
  9. NET INCOME (LOSS) PER COMMON SHARE
   Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009NUMERATOR:Net (loss) income and numerator for basic and
diluted net (loss) income per common
share-income available to common shareholders
    
    $
    (2,706,000
    )
    
    $
    6,170,000
    
    
    $
    (6,922,000
    )
    
    $
    13,904,000DENOMINATOR:Denominator for basic net (loss) income per
common share-weighted average common shares
    
    
    7,779,256
    
    
    
    7,799,744
    
    
    
    7,775,483
    
    
    
    7,797,986Effect of dilutive securities-employee stock
options and restricted stock grants
    
    
    
    
    
    
    50,764
    
    
    
    
    
    
    
    26,216Denominator for diluted net (loss) income per
common share-adjusted weighted average common
shares and assumed conversions
    
    
    7,779,256
    
    
    
    7,850,508
    
    
    
    7,775,483
    
    
    
    7,824,202Net (loss) income per common share
    
    $
    (0.35
    )
    
    $
    0.79
    
    
    $
    (0.89
    )
    
    $
    1.78Net (loss) income per common share-assuming dilution
    
    $
    (0.35
    )
    
    $
    0.79
    
    
    $
    (0.89
    )
    
    $
    1.78
 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
 Operating Costs
 11




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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
    
    $
    1,706
    
    
    $
    576
    
    
    $
    708
    
    
    $
    326
    
    
    $
    96
  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.
 Depreciable Lives of Property, Plant and Equipment.
 14




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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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number ofShares Purchased as
    
    Maximum Number ofa Part of a
    
    Shares That May beTotal Number of
    
    Average Price Paid
    
    Publicly Announced
    
    Purchased UnderPeriod
    
    Shares Purchased (1)
    
    per Share
    
    Plan (2)
    
    Plan (2)October 1-31, 2009
    
    
    13,578
    
    
    $
    25.99
    
    
    
    N/A
    
    
    
    N/ANovember 1-30, 2009
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ADecember 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AJanuary 1-31, 2010
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AFebruary 1-28, 2010
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AMarch 1-31, 2010
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Represents the surrender of shares of our common stock to satisfy tax withholding obligations
in connection with the vesting of
restricted stock issued to employees under our stockholder-approved long-term incentive plan.(2)
    
    We did not have at any time during the first six months of
fiscal 2010, and currently do not have, a share repurchase
program in place. 16




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ITEM 5. OTHER INFORMATION    Number of SharesBrokerFor
    
    
    Withheld
    
    
    Non-VotesPaul H. Brown
    
    
    2,536,795
    
    
    
    2,213,738
    
    
    
    2,097,351L. Decker Dawson
    
    
    2,539,637
    
    
    
    2,210,897
    
    
    
    2,097,351Gary M. Hoover
    
    
    2,552,594
    
    
    
    2,197,939
    
    
    
    2,097,351Stephen C. Jumper
    
    
    2,547,477
    
    
    
    2,203,056
    
    
    
    2,097,351Jack D. Ladd
    
    
    2,543,706
    
    
    
    2,206,827
    
    
    
    2,097,351Ted R. North
    
    
    2,556,327
    
    
    
    2,194,206
    
    
    
    2,097,351Tim C. Thompson
    
    
    2,537,367
    
    
    
    2,213,166
    
    
    
    2,097,351
 
 2.
    
    To ratify the appointment of KPMG LLP as the Companys independent registered public accounting
firm for the fiscal year ending September 30, 2010. For
    
    
    5,954,316Against
    
    
    221,721Abstain
    
    
    671,848
 17




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ITEM 6. EXHIBITS
  18




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: May 7, 2010
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: May 7, 2010
    By:
    /s/ Christina W. HaganChristina W. HaganExecutive Vice President, Secretary and
Chief Financial Officer 19




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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. 20