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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, 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o o
 o þ
  Title of Each Class
    
    Outstanding at February 4, 2011Common Stock, $.33 1/3 par value
    
    7,911,285 shares




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##### 



DAWSON GEOPHYSICAL COMPANY
  PageNumberPart I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    3Statements of Operations for the Three Months Ended December
31, 2010 and 2009 (unaudited)
    
    3Balance Sheets at December 31, 2010 (unaudited) and September
30, 2010
    
    4Statements of Cash Flows for the Three Months Ended December
31, 2010 and 2009 (unaudited)
    
    5Notes to Financial Statements (unaudited)
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    14Item 4. Controls and Procedures
    
    14Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    15Item 1A. Risk Factors
    
    15Item 6. Exhibits
    
    15Signatures
    
    16Index 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
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended December 31,2010
    
    
    2009Operating revenues
    
    $
    72,653,000
    
    
    $
    36,330,000Operating costs:Operating expenses
    
    
    66,160,000
    
    
    
    34,719,000General and administrative
    
    
    2,178,000
    
    
    
    1,854,000Depreciation
    
    
    7,132,000
    
    
    
    6,477,00075,470,000
    
    
    
    43,050,000Loss from operations
    
    
    (2,817,000
    )
    
    
    (6,720,000
    )Other income:Interest income
    
    
    25,000
    
    
    
    30,000Other income
    
    
    559,000
    
    
    
    2,000Loss before income taxes
    
    
    (2,233,000
    )
    
    
    (6,688,000
    )Income tax benefit
    
    
    566,000
    
    
    
    2,472,000Net loss
    
    $
    (1,667,000
    )
    
    $
    (4,216,000
    )Basic loss per common share
    
    $
    (0.21
    )
    
    $
    (0.54
    )Diluted loss per common share
    
    $
    (0.21
    )
    
    $
    (0.54
    )Weighted average equivalent common
shares outstanding
    
    
    7,786,472
    
    
    
    7,771,791Weighted average equivalent common
shares outstanding
-assuming dilution
    
    
    7,786,472
    
    
    
    7,771,791
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 December 31,
    
    
    September 30,2010
    
    
    2010(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,997,000
    
    
    $
    29,675,000Short-term investments
    
    
    12,498,000
    
    
    
    20,012,000Accounts receivable, net of allowance for
doubtful accounts of $537,000 and $639,000 at
December 31, 2010 and September 30, 2010, respectively
    
    
    58,852,000
    
    
    
    57,726,000Prepaid expenses and other assets
    
    
    13,867,000
    
    
    
    7,856,000Current deferred tax asset
    
    
    2,529,000
    
    
    
    1,764,000Total current assets
    
    
    111,743,000
    
    
    
    117,033,000Property, plant and equipment
    
    
    273,991,000
    
    
    
    248,943,000Less accumulated depreciation
    
    
    (135,377,000
    )
    
    
    (130,900,000
    )Net property, plant and equipment
    
    
    138,614,000
    
    
    
    118,043,000Total assets
    
    $
    250,357,000
    
    
    $
    235,076,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    22,636,000
    
    
    $
    14,274,000Accrued liabilities:Payroll costs and other taxes
    
    
    3,005,000
    
    
    
    3,625,000Other
    
    
    8,574,000
    
    
    
    7,963,000Deferred revenue
    
    
    2,665,000
    
    
    
    204,000Total current liabilities
    
    
    36,880,000
    
    
    
    26,066,000Deferred tax liability
    
    
    24,255,000
    
    
    
    18,785,000Stockholders 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, 7,908,335
and 7,902,106 shares issued and outstanding at
December 31, 2010 and September 30, 2010, respectively
    
    
    2,636,000
    
    
    
    2,634,000Additional paid-in capital
    
    
    91,072,000
    
    
    
    90,406,000Accumulated other comprehensive income, net of tax
    
    
    
    
    
    
    4,000Retained earnings
    
    
    95,514,000
    
    
    
    97,181,000Total stockholders equity
    
    
    189,222,000
    
    
    
    190,225,000Total liabilities and stockholders equity
    
    $
    250,357,000
    
    
    $
    235,076,000
 See accompanying notes to the financial statements (unaudited).
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DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Three Months Ended December 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (1,667,000
    )
    
    $
    (4,216,000
    )Adjustments to reconcile net loss to
net cash provided by operating activities:Depreciation
    
    
    7,132,000
    
    
    
    6,477,000Noncash compensation
    
    
    595,000
    
    
    
    540,000Deferred income tax expense
    
    
    4,708,000
    
    
    
    391,000Provision for bad debts
    
    
    23,000
    
    
    
    106,000Other
    
    
    (423,000
    )
    
    
    (200,000
    )Change in current assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (1,907,000
    )
    
    
    4,080,000Increase in prepaid expenses and other assets
    
    
    (6,061,000
    )
    
    
    (3,440,000
    )(Decrease) increase in accounts payable
    
    
    (1,638,000
    )
    
    
    380,000Decrease in accrued liabilities
    
    
    (9,000
    )
    
    
    (2,572,000
    )Increase (decrease) in deferred revenue
    
    
    2,461,000
    
    
    
    (587,000
    )Net cash provided by operating activities
    
    
    3,214,000
    
    
    
    959,000CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, net of noncash capital expenditures
summarized below in noncash investing activities
    
    
    (17,830,000
    )
    
    
    (41,000
    )Acquisition of short-term investments
    
    
    (2,500,000
    )
    
    
    (4,984,000
    )Proceeds from maturity of short-term investments
    
    
    10,000,000
    
    
    
    5,000,000Proceeds from disposal of assets
    
    
    606,000
    
    
    
    5,000Partial proceeds on fire insurance claim
    
    
    758,000
    
    
    
    Net cash used in investing activities
    
    
    (8,966,000
    )
    
    
    (20,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    74,000
    
    
    
    Net cash provided by financing activities
    
    
    74,000
    
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (5,678,000
    )
    
    
    939,000CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    29,675,000
    
    
    
    36,792,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    23,997,000
    
    
    $
    37,731,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for income taxes
    
    $
    
    
    
    $
    121,000Cash received during the period for income taxes
    
    $
    202,000
    
    
    $
    NONCASH INVESTING ACTIVITIES:Unrealized (loss) gain on investments
    
    $
    (2,000
    )
    
    $
    49,000Accrued purchases of property and equipment
    
    $
    10,000,000
    
    
    $
    
 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
  6




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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.
 Recently Issued Accounting Pronouncements
  7




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3. SHORT-TERM INVESTMENTS
  As of December 31, 2010 (in 000s)Estimated FairAmortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    10,000
    
    
    $
    
    
    
    $
    2
    
    
    $
    9,998Certificates of Deposit
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Total
    
    $
    12,500
    
    
    $
    
    
    
    $
    2
    (a)
    
    $
    12,498
 
 (a)
    
    Accumulated other comprehensive income reflected on the Balance Sheet reflects
unrealized gains and losses net of the tax effect of approximately $2,000. As of September 30, 2010 (in 000s)Estimated FairAmortized Cost
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    14,991
    
    
    $
    2
    
    
    $
    
    
    
    $
    14,993FDIC guaranteed bonds
    
    
    5,015
    
    
    
    4
    
    
    
    
    
    
    
    5,019Total
    
    $
    20,006
    
    
    $
    6
    (a)
    
    $
    
    
    
    $
    20,012
 
 (a)
    
    Accumulated other comprehensive income reflected on the Balance Sheet reflects
unrealized gains and losses net of the tax effect of approximately $2,000.  4. FAIR VALUE OF FINANCIAL INSTRUMENTS
    As of December 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
    
    $
    9,998
    
    
    $
    9,998
    
    
    $
    
    
    
    $
    Certificates of Deposit
    
    
    2,500
    
    
    
    2,500
    
    
    
    
    
    
    
    Total
    
    $
    12,498
    
    
    $
    12,498
    
    
    $
    
    
    
    $
    
 As of September 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
    
    $
    14,993
    
    
    $
    14,993
    
    
    $
    
    
    
    $
    FDIC guaranteed bonds
    
    
    5,019
    
    
    
    5,019
    
    
    
    
    
    
    
    Total
    
    $
    20,012
    
    
    $
    20,012
    
    
    $
    
    
    
    $
    
  8




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5. DEBT
  6. 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
    
    $
    1,909
    
    
    $
    755
    
    
    $
    632
    
    
    $
    522
    
    
    $
    
  9




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7. SUBSEQUENT EVENTS
  8. NET INCOME (LOSS) PER COMMON SHARE
   Three Months EndedDecember 31,2010
    
    
    2009NUMERATOR:Net loss and numerator for basic and diluted net loss per common share-income
available to common shareholders
    
    $
    (1,667,000
    )
    
    $
    (4,216,000
    )DENOMINATOR:Denominator for basic net loss per common share-weighted average common shares
    
    
    7,786,472
    
    
    
    7,771,791Effect of dilutive securities-employee stock options and restricted stock grants
    
    
    
    
    
    
    Denominator for diluted net loss per common share-adjusted weighted average
common shares and assumed conversions
    
    
    7,786,472
    
    
    
    7,771,791Basic loss per common share
    
    $
    (0.21
    )
    
    $
    (0.54
    )Diluted loss per common share
    
    $
    (0.21
    )
    
    $
    (0.54
    )
  Three Months EndedDecember 31,2010
    
    
    2009Stock options
    
    
    150,106
    
    
    
    152,000Restricted stock
    
    
    121,948
    
    
    
    40,326
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  10




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Overview
     11




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Results of Operations
 Operating Revenues
 Operating Costs
    Taxes
 Liquidity and Capital Resources
 Introduction.
 12




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Cash Flows.
   Capital Expenditures.
   Capital Resources.
   13




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Payments
Due by Period (in 000s)Within
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,909
    
    
    $
    755
    
    
    $
    632
    
    
    $
    522
    
    
    $
    
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
  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 4, 2011
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: February 4, 2011
    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
    
    Second Amended and Restated Bylaws of the Company, as amended
(filed July 28, 2010 as Exhibit 3.2 to the Companys Current
Report on Form 8-K (File No. 001-34404) and incorporated herein
by reference and filed on November 23, 2010 as Exhibit 3.2 to
the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2010 (File No. 001-34404) 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).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.