FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 1, 2004
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 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 5, 2004 | |
| Common Stock $.001 par value |
7,974,809 shares |
FORM 10-Q
TABLE OF CONTENTS
- 2 -
PART I – FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
October 1, 2004 and January 2, 2004
(in thousands, except share data)
(unaudited)
| October 1, 2004 |
January 2, 2004 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 11,224 | $ | 19,490 | ||||
| Short-term investments |
31,434 | 22,268 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $1,631 and $1,248 at October 1, 2004 and January 2, 2004, respectively |
49,974 | 35,844 | ||||||
| Prepaid expenses and other assets |
3,912 | 2,095 | ||||||
| Deferred income taxes |
2,222 | 2,052 | ||||||
| Total current assets |
98,766 | 81,749 | ||||||
| Property, equipment and leasehold improvements, net |
30,215 | 30,793 | ||||||
| Goodwill |
8,607 | 8,607 | ||||||
| Other assets |
1,065 | 693 | ||||||
| $ | 138,653 | $ | 121,842 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities |
$ | 4,062 | $ | 4,838 | ||||
| Accrued payroll and employee benefits |
17,409 | 16,528 | ||||||
| Deferred revenues |
978 | 2,864 | ||||||
| Total current liabilities |
22,449 | 24,230 | ||||||
| Other liabilities |
860 | 169 | ||||||
| Deferred income taxes |
219 | 1,211 | ||||||
| Deferred rent |
1,083 | 1,031 | ||||||
| Total liabilities |
24,611 | 26,641 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $.001 par value; 20,000,000 shares authorized; 7,993,937 shares issued at October 1, 2004 and January 2, 2004, respectively |
8 | 8 | ||||||
| Additional paid-in capital |
38,797 | 34,153 | ||||||
| Deferred stock-based compensation |
(1,011 | ) | (69 | ) | ||||
| Accumulated other comprehensive income |
9 | 94 | ||||||
| Retained earnings |
76,538 | 66,464 | ||||||
| Treasury stock, at cost, 57,574 and 694,988 shares held at October 1, 2004 and January 2, 2004, respectively |
(299 | ) | (5,449 | ) | ||||
| Total stockholders’ equity |
114,042 | 95,201 | ||||||
| $ | 138,653 | $ | 121,842 | |||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
- 3 -
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Nine Months Ended October 1, 2004 and October 3, 2003
(in thousands, except per share data)
(unaudited)
| Quarters Ended |
Nine Months Ended | |||||||||||
| October 1, 2004 |
October 3, 2003 |
October 1, 2004 |
October 3, 2003 | |||||||||
| Revenues: |
||||||||||||
| Revenues before reimbursements |
$ | 35,170 | $ | 31,950 | $ | 106,669 | $ | 95,229 | ||||
| Reimbursements |
2,871 | 3,707 | 9,781 | 10,165 | ||||||||
| Revenues |
38,041 | 35,657 | 116,450 | 105,394 | ||||||||
| Operating expenses: |
||||||||||||
| Compensation and related expenses |
23,022 | 20,573 | 69,340 | 61,888 | ||||||||
| Other operating expenses |
4,690 | 4,383 | 13,917 | 13,434 | ||||||||
| Reimbursable expenses |
2,871 | 3,707 | 9,781 | 10,165 | ||||||||
| General and administrative expenses |
2,346 | 2,283 | 7,014 | 6,469 | ||||||||
| Total operating expenses |
32,929 | 30,946 | 100,052 | 91,956 | ||||||||
| Operating income |
5,112 | 4,711 | 16,398 | 13,438 | ||||||||
| Other income: |
||||||||||||
| Interest income, net |
110 | 35 | 299 | 59 | ||||||||
| Miscellaneous income, net |
156 | 128 | 377 | 478 | ||||||||
| Total other income |
266 | 163 | 676 | 537 | ||||||||
| Income before income taxes |
5,378 | 4,874 | 17,074 | 13,975 | ||||||||
| Income taxes |
2,205 | 2,026 | 7,000 | 5,984 | ||||||||
| Net income |
$ | 3,173 | $ | 2,848 | $ | 10,074 | $ | 7,991 | ||||
| Net income per share: |
||||||||||||
| Basic |
$ | 0.41 | $ | 0.39 | $ | 1.33 | $ | 1.11 | ||||
| Diluted |
$ | 0.37 | $ | 0.36 | $ | 1.19 | $ | 1.01 | ||||
| Shares used in per share computations: |
||||||||||||
| Basic |
7,834 | 7,212 | 7,574 | 7,180 | ||||||||
| Diluted |
8,645 | 7,986 | 8,469 | 7,907 | ||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
- 4 -
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Quarters and Nine Months Ended October 1, 2004 and October 3, 2003
(in thousands)
(unaudited)
| Quarters Ended |
Nine Months Ended |
|||||||||||||||
| October 1, 2004 |
October 3, 2003 |
October 1, 2004 |
October 3, 2003 |
|||||||||||||
| Net income |
$ | 3,173 | $ | 2,848 | $ | 10,074 | $ | 7,991 | ||||||||
| Other comprehensive income (loss): |
||||||||||||||||
| Foreign currency translation adjustments |
(15 | ) | 3 | (8 | ) | 62 | ||||||||||
| Unrealized gain (loss) on investments |
11 | (10 | ) | (77 | ) | (4 | ) | |||||||||
| Comprehensive income |
$ | 3,169 | $ | 2,841 | $ | 9,989 | $ | 8,049 | ||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
- 5 -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended October 1, 2004 and October 3, 2003
(in thousands)
(unaudited)
| Nine Months Ended |
||||||||
| October 1, 2004 |
October 3, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 10,074 | $ | 7,991 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
3,010 | 2,538 | ||||||
| Deferred rent expense |
52 | 137 | ||||||
| Provision for doubtful accounts |
1,304 | 1,232 | ||||||
| Stock-based compensation |
192 | 69 | ||||||
| Deferred income tax provision |
(1,162 | ) | — | |||||
| Tax benefit for stock option plans |
2,722 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(15,434 | ) | (5,722 | ) | ||||
| Prepaid expenses and other assets |
(1,972 | ) | 1,288 | |||||
| Accounts payable and accrued liabilities |
(781 | ) | 207 | |||||
| Accrued payroll and employee benefits |
1,865 | 246 | ||||||
| Deferred revenues |
(1,886 | ) | 212 | |||||
| Net cash (used in) provided by operating activities |
(2,016 | ) | 8,198 | |||||
| Cash flows from investing activities: |
||||||||
| Purchases of short-term investments |
(19,567 | ) | (10,961 | ) | ||||
| Sales and maturities of short-term investments |
9,917 | — | ||||||
| Capital expenditures |
(1,812 | ) | (1,773 | ) | ||||
| Other assets |
296 | (124 | ) | |||||
| Net cash used in investing activities |
(11,166 | ) | (12,858 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayments of borrowings and long-term obligations |
(50 | ) | (60 | ) | ||||
| Repurchase of common stock |
— | (2,454 | ) | |||||
| Proceeds from issuance of common stock |
4,954 | 1,907 | ||||||
| Net cash provided by (used in) financing activities |
4,904 | (607 | ) | |||||
| Effect of foreign currency exchange rates on cash and cash equivalents |
12 | 15 | ||||||
| Net decrease in cash and cash equivalents |
(8,266 | ) | (5,252 | ) | ||||
| Cash and cash equivalents at beginning of period |
19,490 | 22,480 | ||||||