Annual Reports

 
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  • 10-Q (Nov 3, 2017)
  • 10-Q (Aug 4, 2017)
  • 10-Q (May 5, 2017)
  • 10-Q (Nov 4, 2016)
  • 10-Q (Aug 5, 2016)
  • 10-Q (May 6, 2016)

 
8-K

 
Other

Exponent 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2

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, 2013
 
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
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
149 COMMONWEALTH DRIVE, MENLO PARK, CALIFORNIA
94025
 
(Address of principal executive office)
(Zip Code)
 
 
(650) 326-9400
(Registrant’s telephone number, including area code)
 
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x                No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  ¨
Accelerated filer  x
Non-accelerated filer ¨
Smaller reporting company  ¨
 
 
(Do not check if a smaller
 reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                           Yes ¨      No x
 
As of October 25, 2013, the latest practicable date, the registrant had 13,103,213 shares of Common Stock, $0.001 par value per share, outstanding.
 
 
 
EXPONENT, INC.
FORM 10-Q
 
TABLE OF CONTENTS 
 
Page
 
 
 
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements (unaudited):
 
 
 
 
 
Condensed Consolidated Balance Sheets
September 27, 2013 and December 28, 2012
3
 
 
 
 
Condensed Consolidated Statements of Income
Three and Nine Months Ended September 27, 2013 and September 28, 2012
4
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income
Three and Nine Months Ended September 27, 2013 and September 28, 2012
5
 
 
 
 
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 27, 2013 and September 28, 2012
6
 
 
 
 
Notes to Unaudited Condensed Consolidated Financial Statements
7
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
24
 
 
 
Item 4.
Controls and Procedures
24
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1A.
Risk Factors
24
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
 
 
 
Item 6.
Exhibits
25
 
 
 
Signatures
 
26
 
 
 
PART I – FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
EXPONENT, INC.
 
Condensed Consolidated Balance Sheets
September 27, 2013 and December 28, 2012
(in thousands, except par value)
(unaudited)
 
 
 
September 27,
 
December 28,
 
 
 
2013
 
2012
 
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
121,747
 
$
113,268
 
Short-term investments
 
 
13,296
 
 
20,881
 
Accounts receivable, net of allowance for doubtful accounts
 
 
 
 
 
 
 
of $2,772 and $2,666 at September 27, 2013 and
 
 
 
 
 
 
 
December 28, 2012, respectively
 
 
82,177
 
 
85,361
 
Prepaid expenses and other assets
 
 
9,512
 
 
8,277
 
Deferred income taxes
 
 
8,295
 
 
7,657
 
Total current assets
 
 
235,027
 
 
235,444
 
 
 
 
 
 
 
 
 
Property, equipment and leasehold improvements, net
 
 
28,372
 
 
27,446
 
Goodwill
 
 
8,607
 
 
8,607
 
Deferred income taxes
 
 
20,489
 
 
18,359
 
Deferred compensation plan assets
 
 
31,386
 
 
24,801
 
Other assets
 
 
596
 
 
760
 
Total assets
 
$
324,477
 
$
315,417
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
5,139
 
$
10,386
 
Accrued payroll and employee benefits
 
 
47,645
 
 
54,720
 
Deferred revenues
 
 
6,155
 
 
6,665
 
Total current liabilities
 
 
58,939
 
 
71,771
 
Other liabilities
 
 
1,164
 
 
988
 
Deferred compensation
 
 
31,319
 
 
24,697
 
Deferred rent
 
 
2,416
 
 
1,532
 
Total liabilities
 
 
93,838
 
 
98,988
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock, $0.001 par value; 100,000 shares authorized;
 
 
 
 
 
 
 
16,427 shares issued at September 27, 2013 and December 28, 2012
 
 
16
 
 
16
 
Additional paid-in capital
 
 
140,013
 
 
123,693
 
Accumulated other comprehensive loss
 
 
 
 
 
 
 
Investment securities, available for sale
 
 
(1)
 
 
24
 
Foreign currency translation adjustments
 
 
(155)
 
 
(274)
 
 
 
 
(156)
 
 
(250)
 
Retained earnings
 
 
219,493
 
 
206,057
 
Treasury stock, at cost; 3,327 and 3,221 shares held at
 
 
 
 
 
 
 
September 27, 2013 and December 28, 2012, respectively
 
 
(128,727)
 
 
(113,087)
 
Total stockholders’ equity
 
 
230,639
 
 
216,429
 
Total liabilities and stockholders’ equity
 
$
324,477
 
$
315,417
 
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
 
 
3

 
EXPONENT, INC.
 

Condensed Consolidated Statements of Income

 

For the Three and Nine Months Ended September 27, 2013 and September 28, 2012

(in thousands, except per share data)
(unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues before reimbursements
 
$
70,096
 
$
66,725
 
$
211,007
 
$
201,513
 
Reimbursements
 
 
5,135
 
 
6,573
 
 
12,389
 
 
18,194
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
75,231
 
 
73,298
 
 
223,396
 
 
219,707
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and related expenses
 
 
44,801
 
 
42,589
 
 
137,795
 
 
130,621
 
Other operating expenses
 
 
6,440
 
 
5,908
 
 
18,794
 
 
17,422
 
Reimbursable expenses
 
 
5,135
 
 
6,573
 
 
12,389
 
 
18,194
 
General and administrative expenses
 
 
3,695
 
 
3,500
 
 
10,814
 
 
9,565
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating expenses
 
 
60,071
 
 
58,570
 
 
179,792
 
 
175,802
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
15,160
 
 
14,728
 
 
43,604
 
 
43,905
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income, net
 
 
14
 
 
80
 
 
95
 
 
245
 
Miscellaneous income, net
 
 
2,341
 
 
1,522
 
 
5,592
 
 
3,161
 
Total other income, net
 
 
2,355
 
 
1,602
 
 
5,687
 
 
3,406
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
 
17,515
 
 
16,330
 
 
49,291
 
 
47,311
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes
 
 
6,421
 
 
6,105
 
 
19,373
 
 
18,558
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
11,094
 
$
10,225
 
$
29,918
 
$
28,753
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.82
 
$
0.75
 
$
2.19
 
$
2.08
 
Diluted
 
$
0.79
 
$
0.72
 
$
2.13
 
$
2.01
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in per share computations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
13,598
 
 
13,694
 
 
13,638
 
 
13,796
 
Diluted
 
 
13,993
 
 
14,196
 
 
14,047
 
 
14,317
 
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements
 
 
4

 
EXPONENT, INC.
 
Condensed Consolidated Statements of Comprehensive Income
 

For the Three and Nine Months Ended September 27, 2013 and September 28, 2012

(in thousands)
(unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28, 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
11,094
 
$
10,225
 
$
29,918
 
$
28,753
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
 
 
 
 
 
 
 
 
 
 
 
 
 
adjustments, net of tax
 
 
556
 
 
306
 
 
119
 
 
227
 
Unrealized loss on investments,
 
 
 
 
 
 
 
 
 
 
 
 
 
net of tax
 
 
(3)
 
 
(17)
 
 
(25)
 
 
(5)
 
Comprehensive income
 
$
11,647
 
$
10,514
 
$
30,012
 
$
28,975
 
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements
 
 
5

 
EXPONENT, INC.
 

Condensed Consolidated Statements of Cash Flows

 

For the Nine Months Ended September 27, 2013 and September 28, 2012

  (in thousands)
(unaudited)
 
 
 
Nine Months Ended
 
 
 
September 27,
2013
 
September 28,
2012
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
29,918
 
$
28,753
 
Adjustments to reconcile net income to net cash provided by
    operating activities:
 
 
 
 
 
 
 
Depreciation and amortization of property, equipment and
    leasehold improvements
 
 
3,667
 
 
3,459
 
Amortization of premiums and accretion of discounts on
    short-term investments
 
 
165
 
 
428
 
Deferred rent
 
 
884
 
 
(296)
 
Provision for doubtful accounts
 
 
822
 
 
1,304
 
Stock-based compensation
 
 
10,832
 
 
9,932
 
Deferred income tax provision
 
 
(2,770)
 
 
(2,780)
 
Tax benefit for stock plans
 
 
(4,064)
 
 
(2,762)
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
 
 
2,362
 
 
(16,594)
 
Prepaid expenses and other assets
 
 
(3,498)
 
 
(4,849)
 
Accounts payable and accrued liabilities
 
 
(521)
 
 
6,574
 
Accrued payroll and employee benefits
 
 
(3,469)
 
 
(925)
 
Deferred revenues
 
 
(510)
 
 
(610)
 
Net cash provided by operating activities
 
 
33,818
 
 
21,634
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
Capital expenditures
 
 
(4,593)
 
 
(3,425)
 
Purchase of short-term investments
 
 
(11,813)
 
 
(515)
 
Maturity of short-term investments
 
 
19,190
 
 
2,735
 
Sale of short-term investments
 
 
-
 
 
518
 
Net cash provided by (used in) investing activities
 
 
2,784
 
 
(687)
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Tax benefit for stock plans
 
 
4,064
 
 
2,762
 
Payroll taxes for restricted stock units
 
 
(6,112)
 
 
(3,531)
 
Repurchase of common stock
 
 
(21,719)
 
 
(19,437)
 
Exercise of share-based payment awards
 
 
1,497
 
 
2,071
 
Dividends paid
 
 
(5,962)
 
 
-
 
Net cash used in financing activities
 
 
(28,232)
 
 
(18,135)
 
 
 
 
 
 
 
 
 
Effect of foreign currency exchange rates on cash and cash equivalents
 
 
109
 
 
402
 
 
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
 
 
8,479
 
 
3,214
 
Cash and cash equivalents at beginning of period
 
 
113,268
 
 
84,439
 
Cash and cash equivalents at end of period
 
$
121,747
 
$
87,653
 
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
 
 
6

 
EXPONENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Exponent, Inc. (referred to as the “Company” or “Exponent”) is an engineering and scientific consulting firm that provides solutions to complex problems.  The Company operates on a 52-53 week fiscal year ending on the Friday closest to the last day of December.
 
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.  Accordingly, they do not contain all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments which are necessary for the fair presentation of the condensed consolidated financial statements have been included and all such adjustments are of a normal and recurring nature.  The operating results for the three and nine months ended September 27, 2013 are not necessarily representative of the results of future quarterly or annual periods.  The following information should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2012 which was filed with the U.S. Securities and Exchange Commission on February 28, 2013.
 
The unaudited condensed consolidated financial statements include the accounts of Exponent, Inc. and its subsidiaries, which are all wholly owned.  All intercompany accounts and transactions have been eliminated in consolidation.
 
Authorized Capital Stock.  In a letter dated May 23, 2006, the Company committed to stockholders to limit its use of authorized capital stock to 40 million common shares, and 2 million preferred shares, unless the approval of the Company’s stockholders is subsequently obtained, such as through a further amendment to the Company’s authorized capital stock.
 
Dividend.  On April 16, 2013, the Company declared a cash dividend of $0.15 per share of the Company’s common stock, paid on June 28, 2013, to stockholders of record as of June 7, 2013.   On July 22, 2013, the Company declared a cash dividend of $0.15 per share of the Company’s common stock, paid on September 27, 2013, to stockholders of record as of September 6, 2013.  On October 15, 2013, the Company declared a cash dividend of $0.15 per share of the Company’s common stock, payable on December 20, 2013, to stockholders of record as of November 29, 2013.  The Company expects to continue paying quarterly dividends in the future, subject to declaration by the Company’s Board of Directors.  
 
Recently Adopted Accounting Pronouncements.  In February 2013, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard for reporting of amounts reclassified out of accumulated other comprehensive income.  The new standard does not change the current requirements for reporting net income or comprehensive income in financial statements.  However, the new standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  Effective December 29, 2012, the Company adopted this standard.  There were no amounts reclassified from accumulated other comprehensive income to net income during the three and nine months ended September 27, 2013.    
 
Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.
 
 
7

 
 
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale fixed income securities, trading fixed income and equity securities held in its deferred compensation plan and the liability associated with its deferred compensation plan. There have been no transfers between fair value measurement levels during the nine months ended September 27, 2013 and September 28, 2012. Any transfers between fair value measurement levels would be recorded on the actual date of the event or change in circumstances that caused the transfer. The fair value of these certain financial assets and liabilities was determined using the following inputs at September 27, 2013:
 
 
 
Fair Value Measurements at Reporting Date Using
 
(In thousands)
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
 
 
 
 
 
 
 
 
 
 
 
 
securities (1)
 
$
56,938
 
$
56,938
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income available
 
 
 
 
 
 
 
 
 
 
 
 
 
for sale securities (2)
 
 
13,296
 
 
-
 
 
13,296
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income trading
 
 
 
 
 
 
 
 
 
 
 
 
 
securities held in deferred
 
 
 
 
 
 
 
 
 
 
 
 
 
compensation plan (3)
 
 
9,921
 
 
9,921
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
held in deferred
 
 
 
 
 
 
 
 
 
 
 
 
 
compensation plan (3)
 
 
25,578
 
 
25,578
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
105,733
 
$
92,437
 
$
13,296
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
plan (4)
 
 
35,431
 
 
35,431
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
35,431
 
$
35,431
 
$
-
 
$
-
 
 
(1)
Included in cash and cash equivalents on the Company’s unaudited condensed consolidated balance sheet.
(2)
Included in short-term investments on the Company’s unaudited condensed consolidated balance sheet.
(3)
Included in other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet.
(4)
Included in accrued liabilities and deferred compensation on the Company’s unaudited condensed consolidated balance sheet. 
 
 
8

 
The fair value of these certain financial assets and liabilities was determined using the following inputs at December 28, 2012:
 
 
 
Fair Value Measurements at Reporting Date Using
 
(In thousands)
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market
 
 
 
 
 
 
 
 
 
 
 
 
 
securities (1)
 
$
49,134
 
$
49,134
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income available
 
 
 
 
 
 
 
 
 
 
 
 
 
for sale securities (2)
 
 
20,881
 
 
-
 
 
20,881
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income trading
 
 
 
 
 
 
 
 
 
 
 
 
 
securities held in deferred
 
 
 
 
 
 
 
 
 
 
 
 
 
compensation plan (3)
 
 
9,911
 
 
9,911
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
held in deferred
 
 
 
 
 
 
 
 
 
 
 
 
 
compensation plan (3)
 
 
17,178
 
 
17,178
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
97,104
 
$
76,223
 
$
20,881
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
plan (4)
 
 
26,984
 
 
26,984
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
26,984
 
$
26,984
 
$
-
 
$
-
 
 
(1)
Included in cash and cash equivalents on the Company’s consolidated balance sheet.
(2)
Included in short-term investments on the Company’s consolidated balance sheet.
(3)
Included in other current assets and deferred compensation plan assets on the Company’s consolidated balance sheet.
(4)
Included in accrued liabilities and deferred compensation on the Company’s consolidated balance sheet. 
 
Fixed income available-for-sale securities as of September 27, 2013 and December 28, 2012 represent primarily obligations of state and local government agencies. Fixed income and equity trading securities represent mutual funds held in the Company’s deferred compensation plan. See Note 6 for additional information about the Company’s deferred compensation plan.
 
 
9

 
 Cash, cash equivalents and short-term investments consisted of the following as of September 27, 2013:
 
 
 
 
Amortized
 
Unrealized
 
 
Unrealized
 
 
Estimated
 
(In thousands)
 
Cost
 
Gains
 
Losses
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Classified as current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
64,809
 
$
-
 
$
-
 
$
64,809
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market securities
 
 
56,938
 
 
-
 
 
-
 
 
56,938
 
Total cash equivalents
 
 
56,938
 
 
-
 
 
-
 
 
56,938
 
Total cash and cash equivalents
 
 
121,747
 
 
-
 
 
-
 
 
121,747
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal bonds
 
 
13,299
 
 
3
 
 
(6)
 
 
13,296
 
Total short-term investments
 
 
13,299
 
 
3
 
 
(6)
 
 
13,296
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
and short-term investments
 
$
135,046
 
$
3
 
$
(6)
 
$
135,043
 
 
There were no securities in a continuous unrealized loss position for more than 12 months as of September 27, 2013.
 
Cash, cash equivalents and short-term investments consisted of the following as of December 28, 2012:
 
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Estimated
 
(In thousands)
 
Cost
 
Gains
 
Losses
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Classified as current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
64,134
 
$
-
 
$
-
 
$
64,134
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market securities
 
 
49,134
 
 
-
 
 
-
 
 
49,134
 
Total cash equivalents
 
 
49,134
 
 
-
 
 
-
 
 
49,134
 
Total cash and cash equivalents
 
 
113,268
 
 
-
 
 
-
 
 
113,268
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal bonds
 
 
20,841
 
 
41
 
 
(1)
 
 
20,881
 
Total short-term investments
 
 
20,841
 
 
41
 
 
(1)
 
 
20,881
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total cash, cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
and short-term investments
 
$
134,109
 
$
41
 
$
(1)
 
$
134,149
 
 
 
 
10

 
 
The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of September 27, 2013:
 
 
 
Amortized
 
Estimated
 
(In thousands)
 
Cost
 
Fair Value
 
 
 
 
 
 
 
 
 
Due within one year
 
$
6,069
 
$
6,066
 
Due between one and two years
 
 
6,357
 
 
6,357
 
Due between two and three years
 
 
873
 
 
873
 
Total
 
$
13,299
 
$
13,296
 
 
At September 27, 2013 and December 28, 2012, the Company did not have any assets or liabilities valued using significant unobservable inputs.
 
The following financial instruments are not measured at fair value on the Company's consolidated balance sheet at September 27, 2013 and December 28, 2012, but require disclosure of their fair values: accounts receivable, other assets and accounts payable. The estimated fair value of such instruments at September 27, 2013 and December 28, 2012 approximates their carrying value as reported on the consolidated balance sheet. The fair values of such financial instruments are determined using the income approach based on the present value of estimated future cash flows. There have been no changes in the Company’s valuation technique during fiscal 2013. The fair value of all of these instruments would be categorized as Level 2 of the fair value hierarchy.
 
There were no other-than-temporary impairments or credit losses related to available-for-sale securities during the nine months ended September 27, 2013 and September 28, 2012.

 
Basic per share amounts are computed using the weighted-average number of common shares outstanding during the period.  Diluted per share amounts are calculated using the weighted-average number of common shares outstanding during the period and, when dilutive, the weighted-average number of potential common shares from the issuance of common stock to satisfy outstanding restricted stock units and the exercise of outstanding options to purchase common stock using the treasury stock method.
 
The following schedule reconciles the shares used to calculate basic and diluted net income per share:
 
 
 
Three Months Ended
 
Nine Months Ended
 
(In thousands)
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
 
Shares used in basic per share computation
 
13,598
 
13,694
 
13,638
 
13,796
 
Effect of dilutive common stock options outstanding
 
83
 
150
 
78
 
158
 
Effect of dilutive restricted stock units outstanding
 
312
 
352
 
331
 
363
 
 
 
 
 
 
 
 
 
 
 
Shares used in diluted per share computation
 
13,993
 
14,196
 
14,047
 
14,317
 
 
There were no options excluded from the diluted per share calculations for the three and nine months ended September 27, 2013 and September 28, 2012.  

Note 4: Stock-Based Compensation
 

Restricted Stock Units

 
Restricted stock unit grants are designed to attract and retain employees, and to better align employee interests with those of the Company’s stockholders.  For a select group of employees, up to 40% of their annual bonus is settled with fully vested restricted stock unit awards.  Under these fully vested restricted stock unit awards, the holder of each award has the right to receive one share of the Company’s common stock for each fully vested restricted stock unit four years from the date of grant.  Each individual who receives a fully vested restricted stock unit award is also granted a matching number of unvested restricted stock unit awards.  Unvested restricted stock unit awards are also granted for select new hires and promotions.  These unvested restricted stock unit awards generally cliff vest four years from the date of grant, at which time the holder of each award will have the right to receive one share of the Company’s common stock for each restricted stock unit award provided the holder of each award has met certain employment conditions.  In the case of retirement at 59½ years or older, all unvested restricted stock unit awards will continue to vest, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company.
 
The value of these restricted stock unit awards is determined based on the market price of the Company’s common stock on the date of grant.  The value of fully vested restricted stock unit awards issued is recorded as a reduction to accrued bonuses.  The portion of bonus expense that the Company expects to settle with fully vested restricted stock unit awards is recorded as stock-based compensation during the period the bonus is earned.  The Company recorded stock-based compensation expense associated with accrued bonus awards of $1,557,000 and $1,568,000 during the three months ended September 27, 2013 and September 28, 2012, respectively.  For the nine months ended September 27, 2013 and September 28, 2012, the Company recorded stock-based compensation expense associated with accrued bonus awards of $4,695,000 and $4,701,000, respectively.  The value of the unvested restricted stock unit awards granted is recognized on a straight-line basis over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59½.  If the award recipient is 59½ years or older on the date of grant, the value of the entire award is expensed upon grant.  The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of $844,000 and $1,018,000 during the three months ended September 27, 2013 and September 28, 2012, respectively.  The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of $5,169,000 and $4,757,000 during the nine months ended September 27, 2013 and September 28, 2012, respectively.
 

Stock Options

 
Stock options are granted for terms of ten years and generally vest 25% per year over a four-year period from the grant date.  For options granted on or after January 1, 2012, all unvested stock option awards will continue to vest in the case of retirement at 59½ or older, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company.  The Company grants options at exercise prices equal to the fair value of the Company’s common stock on the date of grant.  The Company recorded stock-based compensation expense of $100,000 and $162,000 during the three months ended September 27, 2013 and September 28, 2012, respectively, associated with stock option grants.  The Company recorded stock-based compensation expense of $969,000 and $474,000 during the nine months ended September 27, 2013 and September 28, 2012, respectively, associated with stock option grants.
 
The Company uses the Black-Scholes option-pricing model to determine the fair value of options granted.  The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables.  These variables include expected stock price volatility over the term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividends.
 
The Company used historical exercise and post-vesting forfeiture and expiration data to estimate the expected term of options granted.  The historical volatility of the Company’s common stock over a period of time equal to the expected term of the options granted was used to estimate expected volatility.  The risk-free interest rate used in the option-pricing model was based on United States Treasury zero-coupon issues with remaining terms similar to the expected term on the options.  The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  Historical data was used to estimate pre-vesting option forfeitures and stock-based compensation expense was recorded only for those awards that are expected to vest.  All share-based payment awards are recognized on a straight-line basis over the requisite service periods of the awards.
 
 
11

 
 
On May 25, 2011, the Company’s Board of Directors authorized $35,000,000 for the repurchase of the Company’s common stock.  On February 9, 2012, the Company’s Board of Directors authorized an additional $35,000,000 for the repurchase of the Company’s common stock.  On February 15, 2013, the Company’s Board of Directors authorized an additional $35,000,000 for the repurchase of the Company’s common stock.
 
The Company repurchased 388,604 shares of its common stock for $21,211,000 during the nine months ended September 27, 2013.  The Company repurchased 404,948 shares of its common stock for $19,437,000 during the nine months ended September 28, 2012.  As of September 27, 2013, the Company had remaining authorization under its stock repurchase plans of $34,800,000 to repurchase shares of common stock.
 
The Company reissued 282,010 shares of its treasury stock with a cost of approximately $5,711,000 to settle restricted stock unit awards, stock options, dividends and purchases under the Employee Stock Purchase Plan during the nine months ended September 27, 2013.  The Company reissued 292,316 shares of its treasury stock with a cost of $7,902,000 to settle restricted stock unit awards, stock options and purchases under the Employee Stock Purchase Plan during the nine months ended September 28, 2012.

 
The Company maintains a nonqualified deferred compensation plan for the benefit of a select group of highly compensated employees.  Under this plan, participants may elect to defer up to 100% of their compensation.  Company assets that are earmarked to pay benefits under the plan are held in a rabbi trust and are subject to the claims of the Company’s creditors.  As of September 27, 2013 and December 28, 2012, the invested amounts under the plan totaled $35,499,000 and $27,089,000, respectively.  These assets are classified as trading securities and are recorded at fair value with changes recorded as adjustments to other income and expense.
 
As of September 27, 2013 and December 28, 2012, vested amounts due under the plan totaled $35,431,000 and $26,984,000, respectively.  Changes in the liability are recorded as adjustments to compensation expense. During the three months ended September 27, 2013 and September 28, 2012, the Company recognized compensation expense of $1,893,000 and $1,094,000, respectively, as a result of increases in the fair value of the trust assets with the same amount being recorded as income in other income, net.  During the nine months ended September 27, 2013 and September 28, 2012, the Company recognized compensation expense of $4,128,000 and $2,027,000, respectively, as a result of increases in the fair value of the trust assets with the same amount being recorded as income in other income, net.

Note 7: Supplemental Cash Flow Information
 
The following is supplemental disclosure of cash flow information:
   
 
 
Nine Months Ended
 
(In thousands)
 
September 27,
2013
 
September 28,
2012
 
Cash paid during period:
 
 
 
 
 
 
 
Income taxes
 
$
17,027
 
$
16,026
 
Non-cash investing and financing activities:
 
 
 
 
 
 
 
Unrealized loss on short-term investments
 
$
(25)
 
$
(5)
 
Vested stock unit awards issued to settle accrued bonuses
 
$
5,807
 
$
5,343
 

 
12

 

Note 8: Accounts Receivable, Net

 
At September 27, 2013 and December 28, 2012, accounts receivable, net, was comprised of the following:
 
 
 
September 27,
 
December 28,
 
(In thousands)
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Billed accounts receivable
 
$
52,733
 
$
54,653
 
Unbilled accounts receivable
 
 
32,216
 
 
33,374
 
Allowance for doubtful accounts
 
 
(2,772)
 
 
(2,666)
 
Total accounts receivable, net
 
$
82,177
 
$
85,361
 

Note 9: Segment Reporting

 
The Company has two operating segments based on two primary areas of service.  The Engineering and other scientific operating segment is a broad service group providing technical consulting in different practices primarily in the areas of engineering and technology development.  The Environmental and health operating segment provides services in the area of environmental, epidemiology and health risk analysis.  This operating segment provides a wide range of consulting services relating to environmental hazards and risks and the impact on both human health and the environment.
 
Segment information for the three and nine months ended September 27, 2013 and September 28, 2012 follows:
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
(In thousands)
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Engineering and other scientific
 
$
56,395
 
$
53,071
 
$
163,353
 
$
158,784
 
Environmental and health
 
 
18,836
 
 
20,227
 
 
60,043
 
 
60,923
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
75,231
 
$
73,298
 
$
223,396
 
$
219,707
 
 
Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
(In thousands)
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Engineering and other scientific
 
$
18,115
 
$
16,217
 
$
51,747
 
$
47,573
 
Environmental and health
 
 
5,624
 
 
6,933
 
 
19,104
 
 
20,722
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total segment operating income
 
 
23,739
 
 
23,150
 
 
70,851
 
 
68,295
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate operating expense
 
 
(8,579)
 
 
(8,422)
 
 
(27,247)
 
 
(24,390)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating income
 
$
15,160
 
$
14,728
 
$
43,604
 
$
43,905
 
 
 
13

 
Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
(In thousands)
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Engineering and other scientific
 
$
664
 
$
1,103
 
$
3,924