Stock-Based Compensation

12 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

7.    Stock-Based Compensation

At September 30, 2011, the Company had one stock-based compensation plan. The awards outstanding under this plan and the associated accounting treatment are discussed below.

In fiscal 2007, the Company adopted the Dawson Geophysical Company 2006 Stock and Performance Incentive Plan (“the Plan”). The Plan provides 750,000 shares of authorized but unissued common stock of the Company which may be awarded to officers, directors, employees and consultants of the Company in various forms including options, grants, restricted stock grants and others. Stock option grant prices awarded under the Plan may not be less than the fair market value of the common stock subject to such option on the grant date, and the term of stock options shall extend no more than ten years after the grant date.

Incentive Stock Options:

The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. The expected volatility is based on historical volatility of the Company’s stock. The expected term represents the average period that the Company expects stock options to be outstanding and is determined based on the Company’s historical experience. The risk free interest rate used by the Company as the discounting interest rate is based on the U.S. Treasury rates on the grant date for securities with maturity dates of approximately the expected term. As the Company has not historically declared dividends and does not expect to declare dividends over the near term, the dividend yield used in the calculation is zero. Actual value realized, if any, is dependent on the future performance of the Company’s common stock and overall stock market conditions. There is no assurance the value realized by an optionee will be at or near the value estimated by the Black-Scholes model.

The fair values of stock options granted during 2009 were $8.59 and $10.49 using the Black-Scholes model and included the following assumptions:

	Group A		Group B
Expected term		4 years		6 years
Expected volatility		57.57%		56.85%
Risk free interest rate		1.67%		2.82%
Expected dividend yield		—		—

A summary of the Company’s employee stock options as of September 30, 2011, as well as activity during the year then ended is presented below.

	Number of Optioned Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value ($000)
Balance as of September 30, 2010		151,000		$	18.91
Granted		—			—
Exercised		(15,700	)		18.91			$	318
Forfeited		—			—
Balance as of September 30, 2011		135,300		$	18.91		7.173	$	632
Exercisable as of September 30, 2011		59,800		$	18.91		7.173	$	279

No options were granted during fiscal 2011 or 2010. During fiscal 2009, 152,000 options were issued to employees of the Company. These options vest 25% annually from the date of grant and expire ten years from the date of grant. These options had a weighted average grant date fair value of $9.59. The total intrinsic value of options exercised during fiscal 2011, 2010 and 2009 was $318,000, $1,000, and $206,000, respectively. The total fair value of options vested during fiscal 2011, 2010 and 2009 was $362,000, $364,000, and $84,000, respectively.

A summary of the status of the Company’s nonvested stock option awards as of September 30, 2011 and changes during the year then ended is presented below.

	Number of Nonvested Share Awards			Weighted Average Grant Date Fair Value
Nonvested option awards outstanding September 30, 2010		113,250		$	9.59
Granted		—			—
Vested		(37,750	)		9.59
Forfeited		—			—
Nonvested option awards outstanding September 30, 2011		75,500		$	9.59

Outstanding options at September 30, 2011 expire in December 2018 and have an exercise price of $18.91. As of September 30, 2011, there was approximately $416,000 of unrecognized compensation cost related to nonvested stock option awards to be recognized over a weighted average period of 1.17 years.

Stock options issued under the Company’s 2006 Plan are incentive stock options. No tax deduction is recorded when options are awarded. If an exercise and sale of vested options results in a disqualifying disposition, a tax deduction for the Company occurs. For the years ended September 30, 2011 and 2010, there were no excess tax benefits from disqualifying dispositions. For fiscal year 2009, excess tax benefits from disqualifying dispositions of options of $5,000 was reflected in cash flows from operating activities and cash flows from financing activities on the Statements of Cash Flows.

Cash received from option exercises under all share-based payment arrangements during the years ended September 30, 2011, 2010 and 2009 was $297,000, $4,000 and $416,000, respectively.

The Company recognized compensation expense associated with stock option awards of $362,000, $363,000, and $315,000 in fiscal 2011, 2010 and 2009, respectively. This amount is included in operating or general and administrative expense as appropriate in the Statements of Operations.

Stock Awards:

There were no restricted stock grants in fiscal 2011 and 2009. The Company granted 84,100 of restricted stock to employees in fiscal 2010. The weighted average grant date fair value of restricted stock awards in 2010 was $23.33. The fair value of the restricted stock granted equals the market price on the grant date and vests after three years.

	Number of Restricted Share Awards			Weighted Average Grant Date Fair Value
Nonvested restricted shares outstanding September 30, 2010		122,600		$	37.12
Granted		—			—
Vested		(37,500	)	$	67.57
Forfeited		(4,000	)	$	31.30
Nonvested restricted shares outstanding September 30, 2011		81,100		$	23.33

The Company’s tax benefit with regards to restricted stock awards is consistent with the tax election of the recipient of the award. No elections under IRC Section 83(b) have been made for the restricted stock awards granted by the Company. As a result, the compensation expense recorded for restricted stock resulted in a deferred tax asset for the Company equal to the tax effect of the amount of compensation expense recorded.

The Company recognized compensation expense related to restricted stock awards of $1,123,000, $1,035,000, and $1,352,000 in fiscal 2011, 2010 and 2009, respectively. This amount is included in operating or general and administrative expense as appropriate in the Statements of Operations. As of September 30, 2011, there was approximately $1,113,000 of unrecognized compensation cost related to nonvested restricted stock awards granted. The cost is expected to be recognized over a weighted average period of 1.8 years.

The Company granted common shares with immediate vesting to outside directors and employees in fiscal years 2011, 2010 and 2009:

	Number of Shares  Granted		Weighted Average Grant Date Fair Value
2011		6,479	$	28.69
2010		8,340	$	22.11
2009		5,000	$	18.19

The Company recognized expense of $186,000, $185,000, and $91,000 in fiscal 2011, 2010 and 2009, respectively, as well as the related tax benefit associated with these awards.