FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-
TIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-
TIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended December 31, 1995 Commission File number
2-71058
DAWSON GEOPHYSICAL COMPANY
(Exact name of Registrant as specified in its Charter)
TEXAS 75-0970548
(State or other jurisdiction of (IRS Employer Identification
No.)
incorporation or organization)
208 S. Marienfeld, Midland, Texas 79701
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 915/682-7356
NONE
(Former Name, Former Address & Former Fiscal Year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90
days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest
practicable date.
CLASS Outstanding at
December 31, 1995
Common Stock, $.33 1/3 par value
4,149,050 shares
DAWSON GEOPHYSICAL COMPANY
INDEX
Page No.
Part I. Financial Information:
Statements of Operations --
Three Months ended December 31,
1995 and 1994 3
Balance Sheets --
December 31, 1995 and September 30,
1995 4
Statements of Cash Flows --
Three Months Ended December 31, 1995
and 1994 5
Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II. Other Information
PART I. FINANCIAL
INFORMATION
DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31
1995 1994
Operating revenues $7,358,000 $7,016,000
Operating costs:
Operating expenses 5,619,000 4,950,000
General and administrative 383,000 318,000
Depreciation 1,300,000 900,000
7,302,000 6,168,000
Income from operations 56,000 848,000
Other income (expense):
Interest income 57,000 96,000
Other - 19,000
Interest expense - (101,000)
Gain on disposal of assets 7,000 -
Income before income tax 120,000 862,000
Income tax benefit (expense):
Current (135,000) (315,000)
Deferred 92,000 -
(43,000) (315,000)
Net income $ 77,000 $ 547,000
Net income per common share $.02 $.16
Weighted average equivalent shares
outstanding 4,204,797 3,405,677
See accompanying note to the financial statements.
DAWSON GEOPHYSICAL COMPANY
BALANCE SHEETS
December 31, 1995 September 30, 1995
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,321,000 $ 1,671,000
Marketable securities 3,070,000 3,767,000
Accounts receivable 5,513,000 5,008,000
Income taxes receivable - 126,000
Prepaid expenses 116,000 220,000
Total current assets 10,020,000 10,792,000
Property, plant and equipment 40,919,000 39,248,000
Less accumulated depreciation (18,950,000) (17,698,000)
Net property, plant and equipment 21,969,000 21,550,000
$31,989,000 $32,342,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 426,000 $ 682,000
Accrued liabilities:
Payroll costs and other taxes 312,000 291,000
Other 48,000 178,000
Income taxes payable 9,000 -
Total current liabilities 795,000 1,151,000
Deferred income taxes 243,000 335,000
Stockholders' 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;
10,000,000 shares authorized, 4,149,050
shares issued and outstanding 1,383,000 1,383,000
Additional paid-in capital 16,973,000 16,973,000
Net unrealized gain (loss) on marketable
securities 5,000 (13,000)
Retained earnings 12,590,000 12,513,000
Total stockholders' equity 30,951,000 30,856,000
$31,989,000 $32,342,000
Contingencies (See Note 2)
See accompanying notes to the financial statements.
DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31
1995 1994
Cash flows from operating activities:
Net income $ 77,000 $ 547,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,300,000 900,000
Gain on disposal of assets (7,000) -
Non-cash interest income (30,000) (44,000)
Deferred income taxe benefit (92,000) -
Change in current assets and liabilities:
Increase in accounts receivable (505,000) (749,000)
Decrease in income taxes receivable 126,000 -
Decrease in prepaid expenses 104,000 184,000
Increase (decrease) in accounts payable (256,000) 1,687,000
Decrease in accrued liabilities (109,000) (308,000)
Increase in federal and state income taxes
payable 9,000 225,000
Net cash provided by operating activities 617,000 2,442,000
Cash flows from investing activities:
Proceeds from disposal of assets 7,000 -
Capital expenditures (1,719,000) (1,384,000)
Proceeds from sale of marketable securities 745,000 -
Investment in marketable securities - (2,959,000)
Net cash used in investing activities (967,000) (4,343,000)
Cash flows from financing activities:
Principal payments on debt - (4,875,000)
Proceeds from debt - 1,500,000
Issuance of common stock - 10,785,000
Proceeds from exercise of stock options - 27,000
Net cash provided by financing activities - 7,437,000
Net increase (decrease) in cash and cash
equivalents (350,000) 5,536,000
Cash and cash equivalents at beginning of period 1,671,000 151,000
Cash and cash equivalents at end of period $1,321,000 $5,687,000
See accompanying notes to the financial statements.
DAWSON GEOPHYSICAL COMPANY
NOTES TO FINANCIAL STATEMENTS
1. OPINION OF MANAGEMENT
Although the information furnished is unaudited, in the opinion of manage-
ment of the Registrant, the accompanying financial statements reflect all
adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the financial condition and results of operations for
the period presented. The results of operations for the three months
ended December 31, 1995, are not necessarily indicative of the results to
be expected for the fiscal year.
2. CONTINGENCIES
On July 1, 1995, an accident involving an automobile owned by the Company
claimed the lives of four employees. The Company is a defendant in a
lawsuit by the families of two of the employees whose deaths resulted from
the accident. The families filed suit against the Company under the gross
negligence provisions of the Texas Workers' Compensation Act.
Accordingly, the Company believes its exposure is limited to exemplary
damages of $36 million. The litigation is currently in the discovery
stage. The Company has approximately $12 million of insurance coverage
available to provide against an unfavorable outcome in this matter. Due to
the uncertainties inherent in litigation, no absolute assurance can be
given as to the ultimate outcome of this suit. However, the Company
believes, based on knowledge of the facts to date and consultation with its
legal advisors, that liabilities, if any, from this suit should not have a
material adverse effect on the Company's financial position.
The Company is party to other legal actions arising in the ordinary course
of its business, none of which management believes will result in a
material adverse effect on the Company's financial position or results of
operations, as the Company believes it is adequately insured.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company has expanded significantly over the last few years with state
of the art equipment and experienced personnel in response to demand for
3-D seismic technology. As this technology is increasingly successful in
the search for oil and gas, the surveys have become larger in size and more
complex in design. Although the Company utilizes all of its resources to
meet demand, uncontrollable factors of weather and problems in obtaining
permits from land and mineral owners and lessees delay production causing a
negative impact on revenues. During the quarter ended December 31, 1995
these negative factors resulted in revenues that the Company believes to be
significantly below potential.
In reviewing the Company's financial statements, it should be noted that
fluctuations in the Company's results of operations can occur due to
weather and other factors.
Results of Operations
The Company's operating revenues for the first quarter of 1996 totaled
$7,358,000 versus $7,016,000 for the same period of fiscal 1995, an
increase of 4.9%. This increase is attributable primarily to continued
industry demand for 3-D data acquisition services, and capacity from the
additions of new equipment and technological upgrades to existing equip-
ment. The Company believes that weather and other factors had a negative
impact on revenues during the first quarter of 1996 such that revenues are
not indicative of the results to be expected for the remainder of the
fiscal year. Minimal revenues were generated through the acquisition and
processing of 2-D seismic data.
Operating expenses for the quarter ended December 31, 1995 totaled
$5,619,000, an increase of $669,000 over the same period of fiscal 1995.
Operating expenses increased primarily as a result of increased personnel
and other expenses associated with the equipment acquisitions and techno-
logical upgrades made during the second quarter of fiscal 1995.
General and administrative expenses for the quarter ended December 31, 1995
totaled $383,000, an increase of $65,000 over the same period of fiscal
1995. General and administrative expenses totaled 5.2% of operating
revenue for the quarter ended December 31, 1995 versus 4.5% of operating
revenues for the same period of the prior year. General and administrative
costs have increased as additional support services have been incurred in
response to the growth of the Company during the last few years.
Depreciation for the quarter ended December 31, 1995 totaled $1,300,000, an
increase of $400,000 from the same quarter of fiscal 1994. Depreciation
increased as a result of the capital expansion discussed below in "Liquidi-
ty and Capital Resources."
Total operating costs for the first quarter of fiscal 1996 totaled
$7,302,000, an increase of 18.4%, over the first quarter of fiscal 1995 due
to the factors described above. Income from operations decreased to
$56,000 from $848,000 in the comparable period of the prior year. This
decrease is the direct result of the Company's operating expenses being
relatively fixed as compared to revenue trends. Because of the high
proportion of relatively fixed total operating costs (including personnel
costs for active crews and depreciation costs), income from operations
reflects the significant negative effects on revenues of the largely
uncontrollable factors of weather and permit problems.
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities decreased to $617,000 for
the quarter ended December 31, 1995 from $2,442,000 from the same period of
the prior year. This decrease was primarily the result of decreased income
from operations and an increase in depreciation. An increase in activity
resulted in an increase to accounts receivable for the quarter ended
December 31, 1995 as compared to the same period of the prior year. The
paydown of short-term debt from funds received from the public offering
resulted in a decrease in accounts payable for the first quarter of fiscal
1996 as compared to the same quarter of the prior year.
Net cash used in investing activities decreased to $967,000 for the
first quarter of fiscal 1996 from $4,343,000 in the same period of fiscal
1995. This 1995 amount was primarily due to a short term investment in
marketable securities of proceeds from the public offering pending the
delivery of equipment for the expansions of 3-D acquisition equipment and
data processing facilities as required by anticipated market demand.
Net cash provided by financing activities decreased from the prior
year which reflects proceeds of the public offering used in the pay down of
long-term debt. In addition to cash flow from operations the Company is
currently negotiating with a bank to finance future capital needs as
determined by market demand and technological developments.
Capital Expenditures
Capital expenditures of $10,961,000 during fiscal year 1995 positioned
the Company to supply market demand with expanded technologically advanced
3-D data acquisition recording systems and leading edge data processing
capabilities.
Capital expenditures of $1,719,000 for the quarter ended
December 31, 1995 represent additional capacity of the existing crews and
data processing facilities.
Capital Resources
The Company believes that its capital resources, including the poten-
tial availability of bank borrowings, and cash flow from operations are
adequate to meet its current operational needs and will allow the Company
to continue its practice of acquiring new technologically advanced equip-
ment.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DAWSON GEOPHYSICAL COMPANY
(REGISTRANT)
By: /s/ L. Decker Dawson
L. Decker Dawson
President
/s/ Christina W. Hagan
Christina W. Hagan
Treasurer, Controller
DATE: February 12, 1996
5
1,000
3-MOS
SEP-30-1996
DEC-31-1995
1,321,000
3,070,000
5,513,000
0
0
10,020,000
40,919,000
(18,950,000)
31,989,000
795,000
0
1,383,000
0
0
0
31,989,000
7,358,000
7,358,000
7,302,000
7,302,000
0
0
0
120,000
(43,000)
77,000
0
0
0
77,000
.02
0
