7. Stock-Based Compensation

At September 30, 2013, the Company had one stock-based compensation plan. The awards outstanding under this plan and the associated accounting treatment are discussed below.

In fiscal year 2007, the Company adopted the Dawson Geophysical Company 2006 Stock and Performance Incentive Plan (the “Plan”). The Plan provides for the issuance of up to 750,000 shares of authorized Company common stock which may be awarded to officers, directors, employees and consultants of the Company in various forms including options, common stock grants, restricted stock grants, restricted stock units 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 in 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 option holder will be at or near the value estimated by the Black-Scholes model.

A summary of the Company’s employee stock options as of September 30, 2013, 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, 2012		125,550		$	18.91
Exercised		(32,150	)		18.91

Balance as of September 30, 2013		93,400		$	18.91		5.17	$	1,267

Exercisable as of September 30, 2013		93,400		$	18.91		5.17	$	1,267

No options were granted during fiscal years 2013, 2012 or 2011. The total intrinsic value of options exercised during fiscal years 2013, 2012 and 2011 was $518,000, $173,000, and $318,000, respectively. The total fair value of options vested during fiscal years 2013, 2012 and 2011 was $362,000, $362,000, and $362,000, respectively.

A summary of the status of the Company’s nonvested stock option awards as of September 30, 2013 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, 2012		37,750		$	9.59
Vested		(37,750	)		9.59

Nonvested option awards outstanding September 30, 2013		__		$	__

Outstanding options at September 30, 2013 expire in December 2018 and have an exercise price of $18.91. There was no unrecognized compensation costs related to stock option awards as of September 30, 2013.

Stock options issued under the 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, 2013, 2012 and 2011, there were no excess tax benefits from disqualifying dispositions.

Cash received from option exercises under all share-based payment arrangements during the years ended September 30, 2013, 2012 and 2011 was $608,000, $184,000 and $297,000, respectively.

The Company recognized compensation expense associated with stock option awards of $62,000, $362,000 and $362,000 in fiscal years 2013, 2012 and 2011, respectively, which are included in operating or general and administrative expense as appropriate in the Consolidated Statements of Operations.

Restricted Stock Awards:

There were no restricted stock grants in 2013 or 2011. The Company granted 103,500 shares of restricted stock to employees in fiscal year 2012. The weighted average grant date fair value of restricted stock awards in fiscal year 2012 was $23.55. The fair value of the restricted stock granted equals the market price on the grant date and vests after three years.

A summary of the status of the Company’s nonvested restricted stock awards as of September 30, 2013 and changes during the year then ended is presented below.


	Number of Restricted Share Awards			Weighted Average Grant Date Fair Value
Nonvested restricted shares outstanding September 30, 2012		184,600		$	23.45
Vested		(80,200	)	$	23.33
Forfeited		(900	)	$	23.33

Nonvested restricted shares outstanding September 30, 2013		103,500		$	23.55

The Company recognized compensation expense related to restricted stock awards of $1,307,000, $883,000 and $1,123,000 in fiscal years 2013, 2012 and 2011, respectively, which are included in operating or general and administrative expense as appropriate in the Consolidated Statements of Operations. As of September 30, 2013, there was approximately $1,337,000 of unrecognized compensation cost related to nonvested restricted stock awards granted. This cost is expected to be recognized over a weighted average period of 1.69 years.

Restricted Stock Units:

Beginning in 2013, the Company began granting restricted stock units. The Company granted 2,000 restricted stock units to employees during fiscal year 2013. The weighted average grant date fair value of restricted stock units in fiscal year 2013 was $27.14. The fair value of restricted stock units equals the market price on the grant date. The Company recognized compensation expense related to restricted stock units of approximately $25,000 during 2013, which is included in operating or general and administrative expense as appropriate in the Consolidated Statements of Operations. As of September 30, 2013, there was approximately $29,000 of unrecognized compensation cost related to nonvested restricted stock units. This cost is expected to be recognized over a weighted average period of 0.81 years.

Common Stock Awards:

The Company granted common shares with immediate vesting to outside directors and employees in fiscal years 2013, 2012 and 2011:


	Number of Shares Granted		Weighted Average Grant Date Fair Value
2013		14,484	$	27.83
2012		7,234	$	33.64
2011		6,479	$	28.69

The Company recognized expense of $403,000, $244,000 and $186,000 in fiscal years 2013, 2012 and 2011, respectively, as well as the related tax benefit associated with these awards in operating or general and administrative expense as appropriate in the Consolidated Statements of Operations.