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 SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended March 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 March 31, 1995
Common Stock, $.33 1/3 par value 4,145,300 shares
DAWSON GEOPHYSICAL COMPANY
INDEX
Page No.
Part I.Financial Information:
Statements of Operations --
Three Months and Six Months
ended March 31, 1995 and 1994 3
Balance Sheets --
March 31, 1995 and September 30,
1994 4
Statements of Cash Flows --
Six Months Ended March 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
<TABLE>
PART I. FINANCIAL INFORMATION
DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating revenues $7,467,000 $5,979,000 $14,483,000 $10,695,000
Operating costs:
Operating expenses 5,234,000 3,874,000 10,184,000 7,189,000
General and administrative 260,000 212,000 578,000 495,000
Depreciation 1,043,000 703,000 1,943,000 1,339,000
6,537,000 4,789,000 12,705,000 9,023,000
Income from operations 930,000 1,190,000 1,778,000 1,672,000
Other income (expense):
Interest and dividend income 137,000 53,000 233,000 105,000
Interest expense (64,000) (75,000) (165,000) (143,000)
Gain on disposal of assets 22,000 35,000 22,000 35,000
Other income - 16,000 19,000 18,000
Non-cash donation - - - (44,000)
Income before income tax 1,025,000 1,219,000 1,887,000 1,643,000
Income tax expense (378,000) (438,000) (693,000) (598,000)
Net income $ 647,000 $ 781,000 $1,194,000 $1,045,000
Net income per common share $.15 $.25 $.32 $.34
Weighted average equivalent shares
outstanding 4,188,111 3,041,822 3,784,871 3,042,443
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
DAWSON GEOPHYSICAL COMPANY
BALANCE SHEETS
<CAPTION>
March 31, 1995 September 30, 1994
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,869,000 $ 151,000
Marketable securities 3,736,000 3,102,000
Accounts receivable 5,425,000 4,304,000
Prepaid expenses 368,000 199,000
Total current assets 12,398,000 7,756,000
Marketable securities 1,750,000 2,250,000
Property, plant and equipment 35,876,000 28,851,000
Less accumulated depreciation (15,826,000) (13,915,000)
Total property, plant and
equipment 20,050,000 14,936,000
$34,198,000 $24,942,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term and current maturities
of long-term debt $ 1,000,000 $ 4,125,000
Accounts payable 987,000 134,000
Accrued liabilities:
Salaries and wages 334,000 478,000
Payroll and other taxes 69,000 65,000
Other 99,000 44,000
Federal and state income taxes payable 77,000 121,000
Total current liabilities 2,566,000 4,967,000
Long-term debt, less current maturities 1,750,000 2,250,000
Deferred income taxes 39,000 39,000
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, 4,145,300
and 2,996,050 shares issued and outstanding 1,382,000 1,001,000
Additional paid-in capital 16,958,000 6,437,000
Net unrealized loss on marketable securities (30,000) (91,000)
Retained earnings 11,533,000 10,339,000
Total stockholders' equity 29,843,000 17,686,000
$34,198,000 $24,942,000
See accompanying notes to the financial statements.
</TABLE>
DAWSON GEOPHYSICAL COMPANY
<TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
March 31
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,194,000 $1,045,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,943,000 1,339,000
Gain on disposal of assets (22,000) (35,000)
Non-cash donation - 44,000
Non-cash interest income (114,000) (18,000)
Deferred income taxes - 43,000
Change in current assets and liabilities:
Increase in accounts receivable (1,121,000) (842,000)
Decrease (increase) in prepaid expenses (169,000) 26,000
Increase in accounts payable 853,000 235,000
Increase (decrease) in accrued liabilities (85,000) 87,000
Increase (decrease) in federal and state income
taxes payable (44,000) 569,000
Net cash provided by operating activities 2,435,000 2,493,000
Cash flows from investing activities:
Proceeds from disposal of assets 22,000 35,000
Capital expenditures (7,057,000) (4,564,000)
Proceeds from maturity of marketable securities 4,000,000 -
Investment in marketable securities (3,959,000) -
Net cash used in investing activities (6,994,000) (4,529,000)
Cash flows from financing activities:
Principal payments on debt (5,125,000) (8,000,000)
Proceeds from debt 1,500,000 9,967,000
Proceeds from public offering 10,785,000 -
Proceeds from exercise of stock options 117,000 -
Net cash provided by financing activities 7,277,000 1,967,000
Net increase (decrease) in cash and cash equivalents 2,718,000 (69,000)
Cash and cash equivalents at beginning of period 151,000 95,000
Cash and cash equivalents at end of period $ 2,869,000 $ 26,000
See accompanying notes to the financial statements.
</TABLE>
DAWSON GEOPHYSICAL COMPANY
NOTES TO FINANCIAL STATEMENTS
1. OPINION OF MANAGEMENT
Although the information furnished is unaudited, in the opinion of
management 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 periods presented. The results of operations for the three months and
the six months ended March 31, 1995, are not necessarily indicative of the
results to be expected for the fiscal year.
2. NOTES PAYABLE
As of December 14, 1993, the Company entered into a $4,000,000 term note
with a bank. The term note matures December 31, 1997 (at March 31, 1995, the
principal balance was $2,750,000). The note is secured by eligible accounts
receivable and pledged marketable securities. The interest rate on the note
is the bank's prime rate (9% at March 31, 1995). The term note requires
monthly principal and interest payments. The term note is subject to a loan
agreement that contains various restrictive covenants and compliance
requirements which include limitations on the incurrence of additional
indebtedness. The Company paid off the term note on April 7, 1995 and
currently has no debt.
3. PUBLIC OFFERING
On November 21, 1994, the Company completed a public offering of 1,000,000
shares and on December 21, 1994, the underwriters, Principal Financial
Securities, Inc., exercised an option for an additional 114,000 shares. The
proceeds of the offering were approximately $11,000,000 after deducting
costs payable by the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since 1989, oil and gas industry demand for 3-D seismic services
has increased significantly. To meet this demand, the Company
converted its operations from the traditional 2-D seismic method
to the more technologically advanced 3-D seismic method. Because
of increased demand and the related expansion of its 3-D seismic
capabilities, the Company's results of operations have shown
significant improvement over the past few years.
As a result of the Company's public offering completed during the
first quarter of fiscal year 1995, the Company has issued an
additional 1,114,000 shares for net proceeds of $10,785,000. In
February 1995, the Company placed into service a new 3-D record-
ing system to increase its capabilities to five data acquisition
crews utilizing $7,057,000 of the offering proceeds. In April
1995, the Company extinguished all debt for a total of
$2,750,000.
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 six months of 1995
totaled $14,483,000 versus $10,695,000 for the same period of
fiscal 1994, an increase of 35.4%. For the three month ended
March 31, 1995, operating revenues increased $1,488,000 or 24.9%.
The increase for the six months is attributable primarily to the
increasing industry demand for 3-D data acquisition services and
the benefit of the 3-D seismic crews placed into service in
February 1994 and February 1995. The increase for the quarter
ended March 31, 1995, as compared to the same quarter of fiscal
1994, is less than expected due to the negative impact of
unfavorable weather. Minimal revenues were generated through
the acquisition and processing of 2-D seismic data.
Operating expenses for the six months ended March 31, 1995
totaled $10,184,000, an increase of $2,995,000, or 41.7%, over
the same period of fiscal 1994. For the quarter ended March 31,
1995, operating expenses increased $1,360,000, or 35.1%. Operat-
ing expenses increased primarily as a result of operating four
crews during the six months ended March 31, 1995 versus three
crews for the same period of the prior year with the additional
expenses of increased personnel and other expenses of placing
crews into service in February 1994 and February 1995.
General and administrative expenses for the six months ended
March 31, 1995 totaled $578,000, an increase of $83,000 over the
same period of fiscal 1994. For the three months ended March 31,
1995, general and administrative expenses totaled $260,000 versus
$212,000 for the same period of the prior year. General and
administrative expenses totaled 4.0% of operating revenue for the
six months ended March 31, 1995 versus 4.6% of operating revenues
for the same period of the prior year. This decline as a per-
centage of operating revenue is a result of economies of scale
and improved operating efficiency.
Depreciation for the six months ended March 31, 1995 totaled
$1,943,000, an increase of $604,000 from the same period of
fiscal 1994. For the quarter ended March 31, 1995, depreciation
increased $340,000 to $1,043,000. Depreciation increased as a
result of the capital expansion discussed below in "Liquidity and
Capital Resources."
Total operating costs increased $3,682,000 to $12,705,000 for the
six months and $1,748,000 to $6,537,000 for the quarter ended
March 31, 1995 due to the operating expenses of starting up the
new crew and the associated increase in depreciation. These
increases in costs combined with a reduction of revenues due to
adverse weather in the quarter ended March 31, 1995 produced
lower than anticipated income from operations.
Interest income increased $128,000 for the six months and $84,000
for the quarter ended March 31, 1995 as compared to the compara-
ble periods of the prior year primarily due to the interest
earned from the investment of the offering proceeds pending use
for capital expenditures and retirement of debt.
The Company's effective tax rate for the six months ended March
31, 1995 was 36.7% as compared to 36.4% for the six month period
ended March 31, 1994. These rates reflect the current income
taxes for the periods reported.
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities increased to
$2,435,000, which includes an increase in net income and depreci-
ation, represents a slight decrease from the prior year primarily
as the result of the combined increases and decreases relating to
working capital items resulting from the increased benefits
provided by 3-D technology.
Net cash used in investing activities increased to $6,994,000 for
the six months ended March 31, 1995 from $4,529,000 for the same
period of fiscal 1994. This change was primarily due to capital
expenditures. During the quarter ended March 31, 1995, capital
expenditures of $5,673,000 were made toward the total cost of
$7,057,000 for the new 3-D crew.
Net cash provided by financing activities increased primarily due
to the proceeds of the public offering used to finance the addition
of equipment for the fifth 3-D seismic crew and the extinguishment
of short-term debt.
Capital Expenditures
Capital expenditures of $7,057,000 for the six months ended
March 31, 1995 represent the addition of a fifth 3-D data acqui-
sition crew placed into service during the second quarter of
fiscal 1995. The Company expects to use the remainder of the
proceeds of approximately $1,000,000 from the public offering to
expand and enhance the equipment of the existing crews and data
processing facilities according to technological and market
demands.
Credit Agreement
As of December 14, 1993, the Company entered into a
$4,000,000 term note with a bank. The term note matures Decem-
ber 31, 1997 (at March 31, 1995, the principal balance was
$2,750,000). The note is secured by eligible accounts receivable
and pledged marketable securities and require monthly principal
and interest payments at Norwest Bank's prime interest rate (9.0%
as of March 31, 1995). The term note is subject to a loan
agreement that contains various restrictive covenants and compli-
ance requirements which include limitations on the incurrence of
additional indebtedness and the inability to borrow amounts
subsequent to the initial funding.
The Company paid off the term note on April 7, 1995 and
currently has no debt.
Capital Resources
The Company believes that cash flow from operations are
adequate to meet its current operational needs. Future capital
expenditures will depend on anticipated demand, technological
developments, and the Company's evaluation of financing alterna-
tives.
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:
L. Decker Dawson
President
Christina W. Hagan
Treasurer, Controller
DATE: April 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,869,000
<SECURITIES> 3,736,000
<RECEIVABLES> 5,425,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,398,000
<PP&E> 35,876,000
<DEPRECIATION> (15,826,000)
<TOTAL-ASSETS> 34,198,000
<CURRENT-LIABILITIES> 2,566,000
<BONDS> 0
<COMMON> 1,382,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,198,000
<SALES> 14,483,000
<TOTAL-REVENUES> 14,483,000
<CGS> 12,705,000
<TOTAL-COSTS> 12,705,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (165,000)
<INCOME-PRETAX> 1,887,000
<INCOME-TAX> (693,000)
<INCOME-CONTINUING> 1,194,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,194,000
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
