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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 September 27, 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 November 1, 2002
Common Stock $.001 par value
     
7,054,256 shares
 

 
PART I—FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 27, 2002 and December 28, 2001
(in thousands, except share data)
(unaudited)
 
    
September 27,
2002
     
December 28,
2001
  
Assets
                  
Current assets:
                  
Cash and cash equivalents
   
$
13,520
 
   
$
7,815
 
Accounts receivable, net of allowance for doubtful accounts of $1,760 and $1,865, respectively
   
 
39,802
 
   
 
38,607
 
Prepaid expenses and other assets
   
 
2,038
 
   
 
2,471
 
Deferred income taxes
   
 
1,816
 
   
 
2,165
 
    
  
Total current assets
   
 
57,176
 
   
 
51,058
 
Property, equipment and leasehold improvements, net
   
 
31,395
 
   
 
32,640
 
Goodwill
   
 
8,558
 
   
 
6,576
 
Other assets
   
 
767
 
   
 
760
 
    
  
    
$
97,896
 
   
$
91,034
 
    
  
Liabilities and Stockholders’ Equity
                  
Current liabilities:
                  
Accounts payable and accrued liabilities
   
$
3,367
 
   
$
4,646
 
Current installments of long-term obligations
   
 
325
 
   
 
359
 
Accrued payroll and employee benefits
   
 
12,288
 
   
 
12,897
 
Deferred revenues
   
 
587
 
   
 
1,409
 
    
  
Total current liabilities
   
 
16,567
 
   
 
19,311
 
Long-term obligations, net of current installments
   
 
64
 
   
 
81
 
Deferred income taxes
   
 
414
 
   
 
414
 
Other obligations
   
 
819
 
   
 
697
 
    
  
Total liabilities
   
 
17,864
 
   
 
20,503
 
    
  
Stockholders’ equity:
                  
Common stock
   
 
8
 
   
 
8
 
Additional paid-in capital
   
 
32,409
 
   
 
32,509
 
Accumulated other comprehensive losses
   
 
(69
)
   
 
(116
)
Retained earnings
   
 
54,531
 
   
 
48,374
 
Treasury shares, at cost, 962,135 and 1,435,314 shares at September 27, 2002 and December 28, 2001, respectively
   
 
(6,847
)
   
 
(10,244
)
    
  
Total stockholders’ equity
   
 
80,032
 
   
 
70,531
 
    
  
    
$
97,896
 
   
$
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 Nine Months Ended September 27, 2002 and September 28, 2001
(in thousands, except per share data)
(unaudited)
 
    
Quarters Ended
     
Nine Months Ended
    
September 27,
2002
   
September 28,
2001
     
September 27,
2002
   
September 28,
2001
Revenues
   
$
28,467
   
$
26,446
 
   
$
85,592
   
$
79,633
    
  
  
  
Operating expenses:
                              
Compensation and related expenses
   
 
18,366
   
 
16,834
 
   
 
55,767
   
 
51,715
Other operating expenses
   
 
4,560
   
 
4,517
 
   
 
12,914
   
 
13,234
General and administrative expenses
   
 
1,853
   
 
2,475
 
   
 
5,703
   
 
6,895
    
  
  
  
    
 
24,779
   
 
23,826
 
   
 
74,384
   
 
71,844
    
  
  
  
Operating income
   
 
3,688
   
 
2,620
 
   
 
11,208
   
 
7,789
Other income:
                              
Interest income (expense), net
   
 
33
   
 
(3
)
   
 
92
   
 
50
Miscellaneous income, net
   
 
20
   
 
175
 
   
 
210
   
 
805
    
  
  
  
    
 
53
   
 
172
 
   
 
302
   
 
855
Income before income taxes
   
 
3,741
   
 
2,792
 
   
 
11,510
   
 
8,644
Income taxes
   
 
1,626
   
 
1,179
 
   
 
5,353
   
 
3,653
    
  
  
  
Net income
   
$
2,115
   
$
1,613
 
   
$
6,157
   
$
4,991
    
  
  
  
Net income per share:
                              
Basic
   
$
0.31
   
$
0.25
 
   
$
0.91
   
$
0.77
Diluted
   
$
0.28
   
$
0.23
 
   
$
0.82
   
$
0.69
Shares used in per share computations:
                              
Basic
   
 
6,932
   
 
6,527
 
   
 
6,739
   
 
6,519
Diluted
   
 
7,581
   
 
7,148
 
   
 
7,478
   
 
7,217
 
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 Nine Months Ended September 27, 2002 and September 28, 2001
(in thousands)
(unaudited)
 
      
Quarters Ended
     
Nine Months Ended
  
      
September 27,
2002
       
September 28,
2001
     
September 27,
2002
     
September 28,
2001
  
Net income
     
$
2,115
 
     
$
1,613
     
$
6,157
     
$
4,991
 
Other comprehensive income (loss)—
                                        
Foreign currency translation adjustments
     
 
(13
)
     
 
8
     
 
47
     
 
(18
)
      
    
    
    
Comprehensive income
     
$
2,102
 
     
$
1,621
     
$
6,204
     
$
4,973
 
      
    
    
    
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 4 -

 
EXPONENT, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended September 27, 2002 and September 28, 2001
(in thousands)
(unaudited)
 
    
Nine Months Ended
  
    
September 27,
2002
     
September 28,
2001
  
Cash flows from operating activities:
                  
Net income
   
$
6,157
 
   
$
4,991
 
Adjustments to reconcile net income to net cash used in operating activities:
                  
Depreciation and amortization
   
 
2,567
 
   
 
3,406
 
Deferred rent expense
   
 
160
 
   
 
110
 
Provision for doubtful accounts
   
 
(105
)
   
 
247
 
Stock based compensation
   
 
134
 
   
 
133
 
Change in deferred income taxes
   
 
349
 
   
 
—  
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
430
 
   
 
(9,644
)
Prepaid expenses and other assets
   
 
607
 
   
 
(862
)
Accounts payable and accrued liabilities
   
 
(1,593
)
   
 
290
 
Accrued payroll and employee benefits
   
 
(946
)
   
 
(3,093
)
Deferred revenues
   
 
(855
)
   
 
(387
)
Other obligations
   
 
(38
)
   
 
(79
)
    
  
Net cash provided by (used in) operating activities
   
 
6,867
 
   
 
(4,888
)
    
  
Cash flows from investing activities:
                  
Acquisition of Novigen Sciences, Inc., net
   
 
(2,191
)
   
 
—  
 
Capital expenditures
   
 
(1,100
)
   
 
(1,914
)
Other assets
   
 
(36
)
   
 
77
 
    
  
Net cash used in investing activities
   
 
(3,327
)
   
 
(1,837
)
    
  
Cash flows from financing activities:
                  
Proceeds from borrowing and issuance of long-term obligations
   
 
—  
 
   
 
1,726
 
Repayments of borrowings and long-term obligations
   
 
(34
)
   
 
(26
)
Repayments of acquired long-term obligations
   
 
(259
)
   
 
—  
 
Repurchase of common stock
   
 
(748
)
   
 
(3,646
)
Issuance of common stock
   
 
3,206
 
   
 
2,292
 
    
  
Net cash provided by financing activities
   
 
2,165
 
   
 
346