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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
    
 
SECURITIES EXCHANGE ACT OF 1934
 
           For the quarterly period ended June 28, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    
 
SECURITIES EXCHANGE ACT OF 1934
 
  For the transition period from                      to                     
 
Commission File Number 0-18655
 
 
EXPONENT, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
  
77-0218904
(State or other jurisdiction
of incorporation)
  
(I.R.S. Employer
Identification Number)
 
149 COMMONWEALTH DRIVE, MENLO PARK, CALIFORNIA
  
94025
(Address of principal executive office)
  
(Zip Code)
 
Registrant’s telephone number, including area code (650) 326-9400
 
 
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 August 2, 2002
Common Stock $.001 par value
  
6,916,428 shares
 

 
PART I—FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
June 28, 2002 and December 28, 2001
(in thousands, except share data)
(unaudited)
 
    
June 28,
     
December 28,
  
    
2002
     
2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
11,671
 
   
$
7,815
 
Accounts receivable, net of allowance for doubtful accounts
of $1,744 and $1,865, respectively
   
 
39,451
 
   
 
38,607
 
Prepaid expenses and other assets
   
 
2,777
 
   
 
2,471
 
Deferred income taxes
   
 
1,816
 
   
 
2,165
 
    
  
Total current assets
   
 
55,715
 
   
 
51,058
 
Property, equipment and leasehold improvements, net
   
 
31,859
 
   
 
32,640
 
Goodwill
   
 
8,553
 
   
 
6,576
 
Other assets
   
 
794
 
   
 
760
 
    
  
    
$
96,921
 
   
$
91,034
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable and accrued liabilities
   
$
3,246
 
   
$
4,646
 
Current installments of long-term obligations
   
 
42
 
   
 
359
 
Accrued payroll and employee benefits
   
 
14,299
 
   
 
12,897
 
Deferred revenues
   
 
708
 
   
 
1,409
 
    
  
Total current liabilities
   
 
18,295
 
   
 
19,311
 
Long-term obligations, net of current installments
   
 
76
 
   
 
81
 
Deferred income taxes
   
 
414
 
   
 
414
 
Other obligations
   
 
759
 
   
 
697
 
    
  
Total liabilities
   
 
19,544
 
   
 
20,503
 
    
  
Stockholders’ equity:
                  
Common stock
   
 
8
 
   
 
8
 
Additional paid-in capital
   
 
32,384
 
   
 
32,509
 
Accumulated other comprehensive losses
   
 
(56
)
   
 
(116
)
Retained earnings
   
 
52,416
 
   
 
48,374
 
Treasury shares, at cost, 1,124,162 and 1,435,314 shares at
June 28, 2002 and December 28, 2001, respectively
   
 
(7,375
)
   
 
(10,244
)
    
  
Total stockholders’ equity
   
 
77,377
 
   
 
70,531
 
    
  
    
$
96,921
 
   
$
91,034
 
    
  
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2

 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Six Months Ended June 28, 2002 and June 29, 2001
(in thousands, except per share data)
(unaudited)
 
    
Quarters Ended
     
Six Months Ended
    
June 28, 2002
   
June 29, 2001
     
June 28, 2002
   
June 29, 2001
Revenues
   
$
28,894
   
$
25,326
 
   
$
57,125
   
$
53,187
    
  
  
  
Operating expenses:
                              
Compensation and related expenses
   
 
18,923
   
 
16,702
 
   
 
37,401
   
 
34,881
Other operating expenses
   
 
4,321
   
 
4,647
 
   
 
8,354
   
 
8,717
General and administrative expenses
   
 
2,032
   
 
2,521
 
   
 
3,850
   
 
4,420
    
  
  
  
    
 
25,276
   
 
23,870
 
   
 
49,605
   
 
48,018
    
  
  
  
Operating income
   
 
3,618
   
 
1,456
 
   
 
7,520
   
 
5,169
Other income:
                              
Interest income (expense), net
   
 
40
   
 
(11
)
   
 
60
   
 
53
Miscellaneous income, net
   
 
98
   
 
212
 
   
 
190
   
 
630
    
  
  
  
    
 
138
   
 
201
 
   
 
250
   
 
683
Income before income taxes
   
 
3,756
   
 
1,657
 
   
 
7,770
   
 
5,852
Income taxes
   
 
1,633
   
 
704
 
   
 
3,728
   
 
2,474
    
  
  
  
Net income
   
$
2,123
   
$
953
 
   
$
4,042
   
$
3,378
    
  
  
  
Net income per share:
                              
Basic
   
$
0.32
   
$
0.15
 
   
$
0.61
   
$
0.52
Diluted
   
$
0.28
   
$
0.13
 
   
$
0.54
   
$
0.47
Shares used in per share computations:
                              
Basic
   
 
6,739
   
 
6,560
 
   
 
6,642
   
 
6,516
Diluted
   
 
7,480
   
 
7,312
 
   
 
7,420
   
 
7,244
 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Quarters and Six Months Ended June 28, 2002 and June 29, 2001
(in thousands)
(unaudited)
 
    
Quarters Ended
     
Six Months Ended
  
    
June 28, 2002
   
June 29, 2001
     
June 28, 2002
   
June 29, 2001
  
Net income
   
$
2,123
   
$
953
 
   
$
4,042
   
$
3,378
 
Other comprehensive income (loss)—
                                
Foreign currency translation adjustments
   
 
57
   
 
(1
)
   
 
60
   
 
(26
)
    
  
  
  
Comprehensive income
   
$
2,180
   
$
952
 
   
$
4,102
   
$
3,352
 
    
  
  
  
 
 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 28, 2002 and June 29, 2001
(in thousands)
(unaudited)
 
    
Six Months Ended
  
    
June 28, 2002
     
June 29, 2001
  
Cash flows from operating activities:
                  
Net income
   
$
4,042
 
   
$
3,378
 
Adjustments to reconcile net income to net cash used in operating activities:
                  
Depreciation and amortization
   
 
1,806
 
   
 
2,342
 
Provision for doubtful accounts
   
 
(121
)
   
 
28
 
Stock based compensation
   
 
67
 
   
 
67
 
Change in deferred income taxes
   
 
349
 
   
 
—  
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
770
 
   
 
(6,425
)
Prepaid expenses and other assets
   
 
(856
)
   
 
(1,229
)
Accounts payable and accrued liabilities
   
 
(1,714
)
   
 
(1,449
)
Accrued payroll and employee benefits
   
 
1,050
 
   
 
(946
)
Deferred revenues
   
 
(734
)
   
 
(420
)
Other obligations
   
 
(38
)
   
 
(72
)
    
  
Net cash provided by (used in) operating activities
   
 
4,621
 
   
 
(4,726
)
    
  
Cash flows from investing activities:
                  
Acquisition of Novigen Sciences, Inc., net
   
 
(2,144
)
   
 
—  
 
Capital expenditures
   
 
(717
)
   
 
(1,507
)
Other assets
   
 
127
 
   
 
36
 
    
  
Net cash used in investing activities
   
 
(2,734
)
   
 
(1,471
)
    
  
Cash flows from financing activities:
                  
Repayments of borrowings and long-term obligations
   
 
—  
 
   
 
(18
)
Repurchase of common stock
   
 
(217
)
   
 
(1,788
)
Issuance of common stock
   
 
2,186
 
   
 
1,813
 
    
  
Net cash provided by financing activities
   
 
1,969
 
   
 
7
 
    
  
Net increase (decrease) in cash and cash equivalents
   
 
3,856
 
   
 
(6,190
)
Cash and cash equivalents at beginning of period
   
 
7,815
 
   
 
6,379
 
    
  
Cash and cash equivalents at end of period
   
$
11,671
 
   
$
189