corresp
DAWSON GEOPHYSICAL COMPANY
508 West Wall, Suite 800
Midland, Texas 79701
(432) 684-3000
January 23, 2009
VIA FACSIMILE AND EDGAR TRANSMISSION
Memorandum
for
Securities and Exchange Commission
100 F. Street, N.E.
Washington, D.C. 20549
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Re:
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Dawson Geophysical Company |
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Form 10-K for the Fiscal Year Ended September 30, 2008 |
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Filed December 9, 2008 |
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File No. 0-10144 |
This memorandum sets forth the responses of Dawson Geophysical Company (the Company) to the
comments provided by the staff (the Staff) of the Securities and Exchange Commission (the
Commission) in its comment letter dated January 13, 2009 (the Comment Letter) with respect to
the Companys annual report on Form 10-K for the Fiscal Year Ended September 30, 2008 (File No.
0-10144) (the Registration Statement). As requested by the Staff, the Company will address the
Staffs comments in this response letter and on an ongoing basis in our future annual and quarterly
reports and in our next proxy statement. For your convenience, we have repeated each comment of
the Staff in bold type face exactly as given in the Comment Letter and set forth below such comment
is our response. In each case below where we have proposed amending the Companys disclosure in
response to the Staffs comments, we have underlined new text and struck out old text.
Disclosure Regarding Forward-Looking Statements, page 2
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Please confirm to us in writing that, in future filings, you will revise your
introductory paragraph to limit your forward looking statements language. To say that all
statements other than those of historical fact are forward-looking statements is overly
broad. We direct your attention to Section 21E(i)(1) of the Exchange Act. |
The Company confirms that in all future filings it will amend the first sentence of the
introductory paragraph to its forward-looking statements language to read as follows:
All
statementsStatements other than statements of
historical fact included in this Form 10-K that relate to
forecasts, estimates or other expectations regarding future events, including without limitation
statements under Managements Discussion and Analysis of Financial Condition and Results of
Operations and Business regarding technological advancements and our financial position,
business strategy and plans and objectives of our management for
future operations, are
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may be
deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).
Clients, page 5
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We note that Chesapeake Energy Corporation and SandRidge Energy, Inc., represented 36%
and 20% of your revenues, respectively. Please file the master service agreements that you
have with these customers as exhibits. In this regard, we note that you have already filed
a form agreement as exhibit 10.10. |
The Company intends to file the Companys Master Service Agreements with Chesapeake Energy
Corporation and SandRidge Energy, Inc. as exhibits to its Quarterly Report on Form 10-Q for the
quarter ended December 31, 2008, to be filed on or before February 9, 2009. The Company has also
provided a copy of these agreements on a supplemental basis for the Commissions information.
Preliminary Proxy Statement on Schedule 14A
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Please confirm in writing that you will comply with the following comments in all
future filings. Provide us also with an example of the disclosure you intend to use in
each case. After our review of your responses, we may raise additional comments. |
The Company confirms that it will comply with the Staffs comments in all applicable future
filings.
Competitive Considerations, page 6
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We note your statement that [b]oth our Compensation Committee and Chief Executive
Officer (CEO) consider known information regarding the compensation practices of likely
competitors when reviewing and setting the compensation of all our officers, including the
Named Executive Officers. Please explain to us on a supplemental basis whether you
benchmark compensation to comparator companies. See Item 402(b)(2)(xiv) of Regulation S-K
and Regulation S-K Compliance and Disclosure Interpretation Question 118.05. To the extent
you benchmark compensation, please specify how each element of compensation relates to the
data you analyzed from the comparator companies. Include a discussion of where you target
each element of compensation against the peer companies and where actual payments fall
within targeted parameters. To the extent actual compensation fell outside a targeted
percentile range, please explain why. |
The Company, including the Compensation Committee, does not formally benchmark its officer
compensation against any peer group or against comparator companies. However, when making
compensation decisions, Company management does seek, on an informal basis, to understand the
general compensation practices of its likely competitors to the extent that such information is
available from public sources.
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In response to the Staffs comment, the Company will revise its disclosure in future filings to
make clear that it does not formally benchmark compensation. The new disclosure would read
generally as follows:
We believe the competition for talented employees
goes well beyond the seismic industry to include
oil and gas exploration companies, anddevelopment companies and oilfield service companies. Many of
the companies with whom we compete for top level talent are larger and have more financial
resources than we do. Both our Compensation Committee and Chief Executive Officer (CEO) consider
known information regarding the compensation practices of likely
competitors, to the extent that
such information is available from public sources, to form a general understanding of our
competitors current compensation practices when reviewing and setting the compensation of all our
officers, including the Named Executive Officers. In past years, however, the Compensation
Committee and the CEO have not formally benchmarked officer compensation against any peer group,
and they do not directly base their compensation decisions on any peer group or component company
information.
Short-Term Incentive Compensation, page 8
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For each Named Executive Officer, provide the disclosure required by Item 402(b)(1)(v)
of Regulation S-K with regard to the discretionary cash bonuses awarded in fiscal 2007.
Explain how the amount awarded was determined and if a formula was used. |
In response to the Staffs comment, the Company will revise its disclosure in future proxy
statements generally as follows:
The Named Executive Officers participate in our profit sharing program, along with all other
eligible employees. The profit sharing program is designed to award our employees for the
financial success of the Company. With respect to each fiscal year, our Board of Directors, acting
on the recommendation of our Compensation Committee, determines a pool amount available to be
allocated in the first quarter of the following fiscal year to all eligible employees, including
the Named Executive Officers. For both fiscal 2008 and
fiscal 2007, our Board of Directors set the
pool at 5% of our pre-tax net income for the applicable fiscal
2008year. The distribution of the pool
to eligible employees is based upon a variety of factors
including formula consisting of base salary,
seniority and an internal
value of the position and seniority., or position code. The position code starts at 1 for all employees and increases pursuant
to internal value of the position up to 1.25 for senior officers. The bonus pool is then allocated
to each eligible employee on a pro rata basis according to the
formula. The fiscal 2008 and fiscal
2007 profit sharing awards paid to our Named Executive Officers are included in the Summary
Compensation Table on page 12. In September 2008, our Board of Directors preliminarily set the
fiscal 2009 allocation for the profit sharing plan at 5% of our pre-tax net income for fiscal 2009.
We
also use Based upon the Companys financial results, the Board of Directors may approve an additional
cash bonus is disbursed to employees along with the profit sharing program. We believe this
additional short-term incentive compensation enables us to
maintain our flexibility to meet market
and competitive demands. Accordingly, eligible employees,
including each Named
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Executive
Officer, were awarded discretionary cash bonuses in November 2008 and
December 2007. Bonus amounts were For fiscal 2008, this bonus pool was approximately $600,000 and for
fiscal 2007, the bonus pool was approximately $500,000. Management awards bonuses
out of the available pool based upon a variety of factors including perceived competitive
pressures, base salary, internal value of the position and
seniority; however, management does not
use a set formula for distribution. In fiscal 2008, these discretionary bonuses ranged from $5,000
to $40,000 and were distributed to over 50 employees ranging from the Named Executive Officers to
field management. In fiscal 2007, these discretionary bonuses ranged from $2,500 to $40,000 and
were distributed to over 47 employees. The fiscal 2008 and fiscal 2007 bonus amounts paid to our
Named Executive Officers are included in the Summary Compensation Table on page 12.
Long-term Equity Incentive Compensation, page 8
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For each Named Executive Officer, provide the disclosure required by Item 402(b)(1)(v)
of Regulation S-K with regard to the Long-Term Equity Incentive Compensation for fiscal
2007. Explain how the amount awarded was determined and if a formula was used. |
In response to the Staffs comment, the Company will revise its disclosure in future proxy
statements generally as follows:
Our Compensation Committee recommends
to our Board of Directors the equity awards to be made to
each Named Executive Officer prior to the grant of such equity awards by the Board of Directors.
Although the Compensation Committee does not use a set formula to make these grants, the
Compensation Committee generally determines awards based on a number of factors, including the
current price of our stock, individual merit, the Companys overall performance, and the size of
the individuals overall compensation package. The Companys ultimate goal with any equity award
is to align executive interests with Company interests, to reward long-term achievement and to
promote retention. Grants of equity may be made at any time during the year, although typically an
award is made to each Named Executive Officer at the beginning of each fiscal year. We do not time
the release of material non-public information with the purpose of affecting the value of executive
compensation.
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As requested by the Commission, the Company hereby acknowledges:
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It is responsible for the adequacy and accuracy of the disclosure in its filings; |
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Staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; |
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It may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States. |
If you have any questions or comments regarding this memorandum, please contact Sarah Rechter
of Baker Botts L.L.P. at (214) 953-6419 or, in her absence, Neel Lemon of Baker Botts L.L.P. at
(214) 953-6954.
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Dawson Geophysical Company
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/s/ Christina W. Hagan
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Christina W. Hagan |
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Executive Vice President, Secretary
and Chief Financial Officer |
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cc:
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Sean Donahue |
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John Madison |
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Securities and Exchange Commission |
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Stephen C. Jumper |
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Dawson Geophysical Company |
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Sarah Rechter |
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Baker Botts L.L.P. |
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