##### 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, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the Transition Period
Fromto
 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(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Title of Each Class
    
    Outstanding at August 7, 2009Common Stock, $.33 1/3 par value
    
    7,822,994 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, 2009 and 2008 (unaudited)
    
    
    1Balance Sheets at June 30, 2009 (unaudited) and September 30, 2008
    
    
    2Statements of Cash Flows for the Nine Months Ended June 30, 2009 and 2008 (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
    
    
    16Item 4. Controls and Procedures
    
    
    16Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 6. Exhibits
    
    
    17Signatures
    
    
    18Index to Exhibits
    
    
    19EX-31.1EX-31.2EX-32.1EX-32.2




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ITEM 1. FINANCIAL STATEMENTS
 DAWSON GEOPHYSICAL COMPANY
 
 STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended June 30,
    
    
    Nine Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues
    
    $
    52,319,000
    
    
    $
    84,568,000
    
    
    $
    197,160,000
    
    
    $
    240,530,000Operating costs:Operating expenses
    
    
    46,374,000
    
    
    
    60,457,000
    
    
    
    151,126,000
    
    
    
    176,111,000General and administrative
    
    
    1,761,000
    
    
    
    1,649,000
    
    
    
    6,324,000
    
    
    
    5,192,000Depreciation
    
    
    6,521,000
    
    
    
    6,317,000
    
    
    
    19,651,000
    
    
    
    17,722,00054,656,000
    
    
    
    68,423,000
    
    
    
    177,101,000
    
    
    
    199,025,000Income (loss) from operations
    
    
    (2,337,000
    )
    
    
    16,145,000
    
    
    
    20,059,000
    
    
    
    41,505,000Other income (expense):Interest income
    
    
    73,000
    
    
    
    76,000
    
    
    
    213,000
    
    
    
    410,000Interest expense
    
    
    
    
    
    
    (116,000
    )
    
    
    
    
    
    
    (316,000
    )Other (expense) income
    
    
    (12,000
    )
    
    
    (141,000
    )
    
    
    298,000
    
    
    
    (42,000
    )Income (loss) before income tax
    
    
    (2,276,000
    )
    
    
    15,964,000
    
    
    
    20,570,000
    
    
    
    41,557,000Income tax benefit (expense):Current
    
    
    963,000
    
    
    
    (4,981,000
    )
    
    
    (7,163,000
    )
    
    
    (13,631,000
    )Deferred
    
    
    (313,000
    )
    
    
    (1,276,000
    )
    
    
    (1,129,000
    )
    
    
    (2,223,000
    )650,000
    
    
    
    (6,257,000
    )
    
    
    (8,292,000
    )
    
    
    (15,854,000
    )Net income (loss)
    
    $
    (1,626,000
    )
    
    $
    9,707,000
    
    
    $
    12,278,000
    
    
    $
    25,703,000Net income (loss) per common share
    
    $
    (0.21
    )
    
    $
    1.27
    
    
    $
    1.57
    
    
    $
    3.35Net income (loss) per common share-assuming dilution
    
    $
    (0.21
    )
    
    $
    1.26
    
    
    $
    1.57
    
    
    $
    3.33Weighted average equivalent common shares
outstanding
    
    
    7,810,592
    
    
    
    7,668,651
    
    
    
    7,802,186
    
    
    
    7,665,253Weighted average equivalent common shares
outstanding-assuming dilution
    
    
    7,810,592
    
    
    
    7,733,076
    
    
    
    7,839,324
    
    
    
    7,727,205
 See accompanying notes to the financial statements (unaudited).
 1




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DAWSON GEOPHYSICAL COMPANY
 
 BALANCE SHEETS
 June 30,
    
    
    September 30,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,920,000
    
    
    $
    8,311,000Short-term investments
    
    
    20,177,000
    
    
    
    Accounts receivable, net of allowance
for doubtful accounts of $795,000 in June 2009
and $55,000 in September 2008
    
    
    50,071,000
    
    
    
    76,221,000Prepaid expenses and other assets
    
    
    6,425,000
    
    
    
    877,000Current deferred tax asset
    
    
    1,722,000
    
    
    
    873,000Total current assets
    
    
    108,315,000
    
    
    
    86,282,000Property, plant and equipment
    
    
    240,833,000
    
    
    
    250,519,000Less accumulated depreciation
    
    
    (108,957,000
    )
    
    
    (103,180,000
    )Net property, plant and equipment
    
    
    131,876,000
    
    
    
    147,339,000$
    240,191,000
    
    
    $
    233,621,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    10,825,000
    
    
    $
    15,308,000Accrued liabilities:Payroll costs and other taxes
    
    
    1,638,000
    
    
    
    3,363,000Other
    
    
    10,308,000
    
    
    
    14,869,000Deferred revenue
    
    
    2,366,000
    
    
    
    993,000Total current liabilities
    
    
    25,137,000
    
    
    
    34,533,000Deferred tax liability
    
    
    15,100,000
    
    
    
    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, 7,822,494
and 7,794,744 shares issued and outstanding in each period
    
    
    2,608,000
    
    
    
    2,598,000Additional paid-in capital
    
    
    88,766,000
    
    
    
    87,051,000Other comprehensive expense, net of tax
    
    
    (9,000
    )
    
    
    Retained earnings
    
    
    108,589,000
    
    
    
    96,311,000Total stockholders equity
    
    
    199,954,000
    
    
    
    185,960,000$
    240,191,000
    
    
    $
    233,621,000
 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 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    12,278,000
    
    
    $
    25,703,000Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation
    
    
    19,651,000
    
    
    
    17,722,000Noncash compensation
    
    
    1,315,000
    
    
    
    932,000Deferred income tax expense
    
    
    1,129,000
    
    
    
    2,223,000Excess tax benefit from share-based payment arrangement
    
    
    (4,000
    )
    
    
    (104,000
    )Provision for bad debts
    
    
    1,169,000
    
    
    
    81,000Other
    
    
    32,000
    
    
    
    59,000Change in current assets and liabilities:Decrease (increase) in accounts receivable
    
    
    21,500,000
    
    
    
    (14,355,000
    )Increase in prepaid expenses
    
    
    (5,548,000
    )
    
    
    (288,000
    )(Decrease) increase in accounts payable
    
    
    (4,101,000
    )
    
    
    2,081,000Decrease in accrued liabilities
    
    
    (6,286,000
    )
    
    
    (1,172,000
    )Increase (decrease) in deferred revenue
    
    
    1,373,000
    
    
    
    (2,277,000
    )Net cash provided by operating activities
    
    
    42,508,000
    
    
    
    30,605,000CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of short-term investments
    
    
    (20,192,000
    )
    
    
    Proceeds from disposal of assets
    
    
    101,000
    
    
    
    20,000Partial proceeds on fire insurance claim
    
    
    2,843,000
    
    
    
    Capital expenditures, net of noncash capital expenditures
summarized below in noncash investing activities
    
    
    (4,062,000
    )
    
    
    (47,816,000
    )Net cash used in investing activities
    
    
    (21,310,000
    )
    
    
    (47,796,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    407,000
    
    
    
    46,000Proceeds from line of credit
    
    
    
    
    
    
    15,000,000Excess tax benefit from share-based payment arrangement
    
    
    4,000
    
    
    
    104,000Net cash provided by financing activities
    
    
    411,000
    
    
    
    15,150,000Net increase (decrease) in cash and cash equivalents
    
    
    21,609,000
    
    
    
    (2,041,000
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    8,311,000
    
    
    
    14,875,000CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    29,920,000
    
    
    $
    12,834,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest expense
    
    $
    
    
    
    $
    375,000Cash paid during the period for income taxes
    
    $
    13,137,000
    
    
    $
    14,638,000NONCASH INVESTING ACTIVITIES:Accrued purchases of property and equipment
    
    $
    (382,000
    )
    
    $
    (90,000
    )Equipment purchase through reduction of insurance proceeds
    
    $
    638,000
    
    
    $
    
 See accompanying notes to the financial statements (unaudited).
 3




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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
 The components of the Companys short-term investments are as follows:
 As of June 30, 2009 (in 000s)Estimated FairCarrying Value
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    ValueShort-term investments:U.S. Treasury bills
    
    $
    9,978
    
    
    $
    
    
    
    $
    3
    
    
    $
    9,975U.S. Treasury notes
    
    
    10,214
    
    
    
    
    
    
    
    12
    
    
    
    10,202Total
    
    $
    20,192
    
    
    $
    
    
    
    $
    15
    (a)
    
    $
    20,177
 
 (a)
    
    Other comprehensive expense reflected on the Balance Sheet reflects unrealized losses net of
the tax effect of approximately
$6,000.  4. FAIR VALUE OF FINANCIAL INSTRUMENTS
   6




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As of June 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
    
    $
    9,975
    
    
    $
    9,975
    
    
    $
    
    
    
    $
    U.S. Treasury notes
    
    
    10,202
    
    
    
    10,202
    
    
    
    
    
    
    
    Total
    
    $
    20,177
    
    
    $
    20,177
    
    
    $
    
    
    
    $
    
   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)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    1,355
    
    
    $
    585
    
    
    $
    739
    
    
    $
    31
    
    
    $
    
   8. SUBSEQUENT EVENTS
  9. NET INCOME PER COMMON SHARE
  9




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Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008NUMERATOR:Net income and numerator for
basic and diluted net income
(loss) per common share-income
available to common shareholders
    
    $
    (1,626,000
    )
    
    $
    9,707,000
    
    
    $
    12,278,000
    
    
    $
    25,703,000DENOMINATOR:Denominator for basic net income
(loss) per common share-weighted
average common shares
    
    
    7,810,592
    
    
    
    7,668,651
    
    
    
    7,802,186
    
    
    
    7,665,253Effect of dilutive
securities-employee stock options
and restricted stock grants
    
    
    
    
    
    
    64,425
    
    
    
    37,138
    
    
    
    61,952Denominator for diluted net
income (loss) per common
share-adjusted weighted average
common shares and assumed
conversions
    
    
    7,810,592
    
    
    
    7,733,076
    
    
    
    7,839,324
    
    
    
    7,727,205Net income (loss) per common share
    
    $
    (0.21
    )
    
    $
    1.27
    
    
    $
    1.57
    
    
    $
    3.35Net income (loss) per common
share-assuming dilution
    
    $
    (0.21
    )
    
    $
    1.26
    
    
    $
    1.57
    
    
    $
    3.33
 
 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
    
    $
    1,355
    
    
    $
    585
    
    
    $
    739
    
    
    $
    31
    
    
    $
    
  13




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Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Concentrations of Credit Risk.
 Revenue Recognition.
   Allowance for Doubtful Accounts.
 14




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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
     15




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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
  16




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ITEM 6.
    
    EXHIBITS
  17




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SIGNATURES
  DAWSON GEOPHYSICAL COMPANYDATE: August 7, 2009
    By:
    /s/ Stephen C. JumperStephen C. JumperPresident and Chief Executive OfficerDATE: August 7, 2009
    By:
    /s/ Christina W. HaganChristina W. HaganExecutive Vice President, Secretary and
Chief Financial Officer 18




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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 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).10.1
    
    Revolving Line of Credit Loan Agreement, dated June 2, 2009, between the Company and
Western National Bank (filed on June 5, 2009 as Exhibit 10.1 to the Companys Current
Report on Form 8-K (File No. 000-10144) and incorporated herein by reference).10.2
    
    Security Agreement, dated June 2, 2009, between the Company and Western National Bank
(filed on June 5, 2009 as Exhibit 10.2 to the Companys Current Report on Form 8-K (File
No. 000-10144) and incorporated herein by reference).31.1*
    
    Certification of Chief Executive Officer of the 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 the 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 the 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 the 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. 19