MIDLAND, Texas, May 4, 2011 /PRNewswire/ -- Dawson Geophysical
Company (Nasdaq: DWSN) today reported revenues of $78,337,000 for the quarter ending March 31, 2011, the Company's second quarter of
fiscal 2011, compared to $48,585,000
for the same quarter in fiscal 2010, an increase of 61 percent. Net
loss for the second quarter of fiscal 2011 was $4,857,000 compared to net loss of $2,706,000 in the same quarter of fiscal 2010.
Loss per share for the second quarter of fiscal 2011 was
$0.62 compared to loss per share of
$0.35 for the second quarter of
fiscal 2010. EBITDA for the second quarter of fiscal 2011 was
$1,219,000 compared to $2,488,000 in the same quarter of fiscal 2010. As
further discussed below, the Company's second quarter results
including the reported loss were exacerbated by adverse weather
conditions as well as expenses necessary to fund the Company's
investments in additional OYO channels and its previously announced
merger transaction with TGC Industries, Inc.
While revenues in the second quarter of fiscal 2011 increased
significantly over the same quarter of fiscal 2010 due in part to
an increase in active crew count to twelve crews in fiscal 2011 and
higher than normal third-party charges, revenues were severely
impacted by extreme weather conditions in Texas, Oklahoma, Arkansas, North
Dakota, West Virginia and
Pennsylvania from January through
mid-March. The harsh weather conditions negatively impacted crew
activity and productivity and caused higher than normal equipment
damage, which resulted in higher repair expenses. In addition,
heavy snowfall in the Northeastern region of the country during the
same period forced delays on several projects, which in turn,
resulted in unanticipated mobilization costs and crew downtime. The
weather impact was most severe on projects contracted in early 2010
which had less favorable weather protection terms. Revenues in the
quarter continued to include unusually high third-party charges
related to the use of helicopter support services, specialized
survey technologies and dynamite energy sources. The higher level
of these charges is driven by the Company's continued operations in
areas with limited access such as the Appalachian Basin,
East Texas and Arkansas. The Company is reimbursed for these
expenses by its clients.
In early January, the Company began taking delivery of the
previously announced purchase of 10,000 OYO GSR single-channel
units. The 10,000 GSR units were deployed on a large in-process
project in East Texas. In early
March, the Company leased and began taking delivery of 10,200
additional OYO GSR single-channel units. These additional leased
OYO channels were put into service on a large in-process project in
South Texas. The transition from
cable-based systems to the new OYO systems negatively impacted crew
productivity and revenue on both the East
Texas and South Texas
projects. Since the completion of the transition, crew productivity
on these two crews has steadily improved while overall crew expense
has decreased except for lease expenses on the second crew.
The Company has the option to purchase the leased OYO equipment
at any time with a significant portion of the lease expense applied
to the purchase price. The Company believes it will exercise this
purchase option at some point in the future. The Company has
recently added approximately 3,650 additional OYO channels under
the same lease agreement. The effect of the lease agreement on the
second fiscal quarter was approximately $0.06 per share for the month of March. The lease
expense will be a recurring cost until the lease agreement is
converted to a purchase or the lease is terminated.
On March 20, 2011, the Company
entered into a definitive merger agreement with TGC Industries, in
which, subject to the terms and conditions set forth in the merger
agreement, the Company agreed to acquire TGC in a tax-free,
stock-for-stock transaction. Additional details of the
proposed transaction are outlined in a press release issued on
March 21, 2011. A copy of such press
release is available on the Company's website and the SEC website.
During the second fiscal quarter of 2011, the Company recorded
expenses of $956,569 related to the
proposed transaction contributing approximately $0.12 per share of the Company's second fiscal
quarter loss.
Stephen Jumper, President and CEO
of Dawson Geophysical Company, said, "There is no doubt our second
quarter was challenging with severe weather conditions for much of
the quarter and operational changes on two large channel count
projects. While the operational change on these projects had an
initial negative impact on our productivity and revenue, we are
already starting to see the benefits of this transition.
Productivity on the two projects in South and East Texas has improved through April. Overall
crew expense is down. And we are very optimistic that these
measures will result in long-term operational efficiencies that
will allow us to become more productive and to better serve our
clients."
Jumper continued, "We are very excited about the proposed merger
with TGC Industries. We believe the combination of the resources
and equipment of the two companies, the expanded client base and
improvement to our operational logistics will add value to our
clients, employees and shareholders."
Despite inclement weather conditions that negatively impacted
crew downtime, demand for the Company's services remains strong.
During the quarter, the Company redeployed the 20,000 channels of
cable-based equipment which had been replaced by the OYO GSR
equipment on existing crews and on two additional contingent data
acquisition crews in order to meet client needs on projects
previously delayed for permit or weather issues. The length of time
these two contingent crews will be in operation will be determined
by demand levels for the Company's services and channel count
requirements Company-wide. The Company now operates in excess of
140,000 channels, which can be configured variably throughout the
Company on a project-by-project basis to best meet the operational
and geophysical needs of its clients. Upon completion of the merger
transaction with TGC, the combined Company will operate in excess
of 210,000 channels.
The Company's order book has grown to its highest level since
late fiscal 2008 with added projects in the Eagle Ford, Bakken,
Niobrara and Avalon liquids and oil-rich shales. Activity remains
relatively high in the Marcellus, Barnett and Haynesville natural gas shales
while demand is increasing in many conventional oil basins. Pricing
and contract terms are showing modest improvements as activity
levels in the lower 48 states continue to increase. The Company
believes it will complete work during fiscal 2011 on several more
projects contracted in early 2010 with less favorable contract
terms. The delays in starting these projects are primarily related
to permit and weather issues. Although our clients may cancel their
service contracts on short notice, we believe our current order
book reflects commitment levels sufficient to maintain operations
for twelve crews through the fall of 2011.
On March 20, 2011, the Board of
Directors approved a $5,000,000
increase to the 2011 capital budget, bringing the total amount of
the 2011 capital budget to $40,000,000. To date, $36,100,000 of the capital budget has primarily
been used to purchase the 10,000 channels of OYO GSR single-channel
units, ten INOVA vibrators, geophones and vehicles. The remaining
balance of the capital budget will be used for maintenance capital
purposes.
Jumper continued, "As commodity prices, in particular oil
prices, continue to rise, exploration and production companies are
working hard to identify and develop oil and natural gas reservoirs
efficiently. Seismic data remains the tool of choice to identify
these reservoirs and reduce finding and development costs. Our
proposed merger with TGC Industries provides the right combination
of resources and equipment to best serve our oil and natural gas
clients."
Dawson Geophysical Company is the leading provider of U.S.
onshore seismic data acquisition services as measured by the number
of active data acquisition crews. Founded in 1952, Dawson acquires
and processes 2-D, 3-D and multi-component seismic data solely for
its clients, ranging from major oil and gas companies to
independent oil and gas operators as well as providers of
multi-client data libraries.
This press release contains information about the Company's
EBITDA, a non-GAAP financial measure as defined by Regulation G
promulgated by the U.S. Securities and Exchange Commission. The
Company defines EBITDA as net income (loss) plus interest expense,
income taxes, depreciation and amortization expense. The Company
uses EBITDA as a supplemental financial measure to assess:
- the financial performance of its assets without regard to
financing methods, capital structures, taxes or historical cost
basis;
- its liquidity and operating performance over time in relation
to other companies that own similar assets and that the Company
believes calculate EBITDA in a similar manner; and
- the ability of the Company's assets to generate cash sufficient
for the Company to pay potential interest costs.
The Company also understands that such data are used by
investors to assess the Company's performance. However, the term
EBITDA is not defined under generally accepted accounting
principles and EBITDA is not a measure of operating income,
operating performance or liquidity presented in accordance with
generally accepted accounting principles. When assessing the
Company's operating performance or liquidity, investors and others
should not consider this data in isolation or as a substitute for
net income (loss), cash flow from operating activities or other
cash flow data calculated in accordance with generally accepted
accounting principles. In addition, the Company's EBITDA may not be
comparable to EBITDA or similar titled measures utilized by other
companies since such other companies may not calculate EBITDA in
the same manner as the Company. Further, the results presented by
EBITDA cannot be achieved without incurring the costs that the
measure excludes: interest, taxes, depreciation and amortization. A
reconciliation of the Company's EBITDA to its net income (loss) is
presented in the table following the text of this press
release.
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, Dawson Geophysical
Company cautions that statements in this press release which are
forward-looking and which provide other than historical information
involve risks and uncertainties that may materially affect the
Company's actual results of operations. These risks include but are
not limited to, the volatility of oil and natural gas prices,
disruptions in the global economy, dependence upon energy industry
spending, cancellations of service contracts, high fixed costs of
operations, weather interruptions, inability to obtain land access
rights of way, industry competition, limited number of customers,
credit risk related to our customers, asset impairments, the
availability of capital resources and operational disruptions. A
discussion of these and other factors, including risks and
uncertainties, is set forth in the Company's Form 10-K for the
fiscal year ended September 30, 2010.
The Company is also subject to risks related to the proposed
transaction with TGC, including risks related to the possibility
that the transaction does not close. A discussion of risks and
uncertainties related to the proposed transaction will be set forth
in a registration statement, including the proxy statement
prospectus contained therein, that relates to the proposed
transaction and which will be filed by the Company with the
Securities and Exchange Commission. Dawson Geophysical Company
disclaims any intention or obligation to revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Important Information For Investors and Shareholders
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. The transactions contemplated by the
merger agreement between the Company and TGC, including the
proposed merger and the proposed issuance of Company common stock
in the merger, will, as applicable, be submitted to the
shareholders of the Company and TGC for their consideration.
The Company will file with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-4 that will
include a joint proxy statement of the Company and TGC that also
constitutes a prospectus of the Company. The Company and TGC
will mail the joint proxy statement/prospectus to their respective
shareholders. The Company and TGC also plan to file other
documents with the SEC regarding the proposed transaction.
INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND TGC ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and
shareholders will be able to obtain free copies of the joint proxy
statement/prospectus and other documents containing important
information about the Company and TGC, once such documents are
filed with the SEC, through the website maintained by the SEC at
www.sec.gov. The Company and TGC make available free of
charge at www.dawson3d.com and www.tgcseismic.com, respectively (in
the "Investor Relations" section), copies of materials they file
with, or furnish to, the SEC, or investors and shareholders may
contact the Company at (432) 684-3000 or TGC at (972) 881-1099 or
c/o Dennard Rupp Gray & Lascar,
LLC, at (713) 529-6600 to receive copies of documents that each
company files with or furnishes to the SEC.
Participants in the Proxy Solicitation
The Company, TGC, and certain of their respective directors and
officers may be deemed to be participants in the solicitation of
proxies from the shareholders of the Company and TGC in connection
with the proposed transactions. Information about the
directors and officers of the Company is set forth in its proxy
statement for its 2011 annual meeting of shareholders, which was
filed with the SEC on December 7,
2010. Information about the directors and officers of
TGC is set forth in its Amendment No. 1 to Annual Report on Form
10-K/A, which was filed with the SEC on April 15, 2011. These documents can be
obtained free of charge from the sources indicated above.
Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the joint proxy statement/prospectus and other relevant materials
to be filed with the SEC when they become available.
Company contact:
Stephen C. Jumper, CEO and
President
Christina W. Hagan, Chief Financial
Officer
(800) 332-9766
www.dawson3d.com
DAWSON
GEOPHYSICAL COMPANY
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STATEMENTS
OF OPERATIONS
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Three Months
Ended March 31,
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Six Months
Ended March 31,
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2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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Operating
revenues
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$
78,337,000
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$
48,585,000
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$ 150,990,000
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$
84,915,000
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Operating costs:
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Operating
expenses
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73,733,000
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44,428,000
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139,893,000
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79,147,000
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General and
administrative
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3,414,000
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1,792,000
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5,592,000
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3,646,000
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Depreciation
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7,735,000
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6,695,000
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14,867,000
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13,172,000
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84,882,000
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52,915,000
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160,352,000
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95,965,000
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Loss from
operations
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(6,545,000)
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(4,330,000)
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(9,362,000)
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(11,050,000)
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Other income:
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Interest
income
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6,000
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28,000
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31,000
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58,000
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Other income
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23,000
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95,000
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582,000
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97,000
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Loss before income
tax
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(6,516,000)
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(4,207,000)
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(8,749,000)
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(10,895,000)
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Income tax
benefit
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1,659,000
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1,501,000
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2,225,000
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3,973,000
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Net loss
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$
(4,857,000)
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$
(2,706,000)
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$
(6,524,000)
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$
(6,922,000)
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Basic loss per common
share
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$
(0.62)
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$
(0.35)
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$
(0.84)
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$
(0.89)
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Diluted loss per common
share
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$
(0.62)
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$
(0.35)
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$
(0.84)
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$
(0.89)
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Weighted average equivalent
common shares outstanding
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7,797,361
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7,779,256
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7,793,836
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7,775,483
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Weighted average equivalent
common
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shares
outstanding-assuming dilution
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7,797,361
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7,779,256
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7,793,836
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7,775,483
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DAWSON
GEOPHYSICAL COMPANY
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BALANCE
SHEETS
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March
31,
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September
30,
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2011
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2010
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash
equivalents
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$
13,602,000
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$
29,675,000
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Short-term
investments
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5,500,000
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20,012,000
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Accounts receivable, net
of allowance for
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doubtful
accounts of $155,000 and $639,000 at
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March 31,
2011 and September 30, 2010, respectively
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68,704,000
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57,726,000
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Prepaid expenses and
other assets
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11,951,000
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7,856,000
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Current deferred tax
asset
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1,795,000
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1,764,000
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Total current assets
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101,552,000
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117,033,000
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Property, plant and
equipment
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280,511,000
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248,943,000
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Less accumulated
depreciation
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(141,449,000)
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(130,900,000)
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Net
property, plant and equipment
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139,062,000
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118,043,000
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Total assets
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$ 240,614,000
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$ 235,076,000
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable
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$
19,748,000
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$
14,274,000
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Accrued
liabilities:
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Payroll
costs and other taxes
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4,231,000
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3,625,000
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Other
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8,426,000
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7,963,000
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Deferred
revenue
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3,994,000
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204,000
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Total current liabilities
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36,399,000
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26,066,000
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Deferred tax
liability
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19,188,000
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18,785,000
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Stockholders'
equity:
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Preferred stock-par value
$1.00 per share;
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5,000,000
shares authorized, none outstanding
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-
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-
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Common stock-par value
$.33 1/3 per share;
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50,000,000
shares authorized, 7,918,989
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and
7,902,106 shares issued and outstanding at
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March 31,
2011 and September 30, 2010, respectively
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2,640,000
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2,634,000
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Additional paid-in
capital
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91,730,000
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90,406,000
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Accumulated other
comprehensive income, net of tax
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-
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4,000
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Retained
earnings
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90,657,000
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97,181,000
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Total stockholders' equity
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185,027,000
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190,225,000
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Total liabilities and stockholders' equity
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$ 240,614,000
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$ 235,076,000
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Reconciliation of EBITDA to Net
Loss
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Three Months
Ended
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Six Months
Ended
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March
31,
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March
31,
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2011
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2010
|
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2011
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2010
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(in
thousands)
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(in
thousands)
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Net loss
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$
(4,857)
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$
(2,706)
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$
(6,524)
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$
(6,922)
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Depreciation
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7,735
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6,695
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14,867
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13,172
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Income tax benefit
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(1,659)
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(1,501)
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(2,225)
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(3,973)
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EBITDA
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$
1,219
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$
2,488
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$
6,118
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$
2,277
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Reconciliation of EBITDA to Net
Cash Provided by Operating
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Activities
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Six Months
Ended
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March
31,
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2011
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2010
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(in
thousands)
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Net cash provided by operating
activities
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$
3,089
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$
2,510
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Changes in working capital items
and other
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4,283
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763
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Noncash adjustments to
income
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(1,254)
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(996)
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EBITDA
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$
6,118
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$
2,277
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SOURCE Dawson Geophysical Company