2020
Annual Report
(cid:24)(cid:286)(cid:258)(cid:396)(cid:3)(cid:38)(cid:286)(cid:367)(cid:367)(cid:381)(cid:449)(cid:3)(cid:94)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:853)(cid:3)(cid:3)
(cid:47)(cid:374)(cid:3)(cid:258)(cid:3)(cid:272)(cid:346)(cid:258)(cid:367)(cid:367)(cid:286)(cid:374)(cid:336)(cid:349)(cid:374)(cid:336)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:853)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:282)(cid:286)(cid:373)(cid:381)(cid:374)(cid:400)(cid:410)(cid:396)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:282)(cid:437)(cid:396)(cid:258)(cid:271)(cid:349)(cid:367)(cid:349)(cid:410)(cid:455)(cid:3)(cid:381)(cid:296)(cid:3)(cid:349)(cid:410)(cid:400)(cid:3)(cid:271)(cid:437)(cid:400)(cid:349)(cid:374)(cid:286)(cid:400)(cid:400)(cid:3)(cid:373)(cid:381)(cid:282)(cid:286)(cid:367)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:400)(cid:410)(cid:396)(cid:286)(cid:374)(cid:336)(cid:410)(cid:346)(cid:3)(cid:381)(cid:296)(cid:3)
(cid:381)(cid:437)(cid:396)(cid:3)(cid:373)(cid:258)(cid:396)(cid:364)(cid:286)(cid:410)(cid:3)(cid:381)(cid:393)(cid:393)(cid:381)(cid:396)(cid:410)(cid:437)(cid:374)(cid:349)(cid:410)(cid:349)(cid:286)(cid:400)(cid:856)(cid:3)(cid:47)(cid:374)(cid:3)(cid:400)(cid:393)(cid:349)(cid:410)(cid:286)(cid:3)(cid:381)(cid:296)(cid:3)(cid:373)(cid:258)(cid:272)(cid:396)(cid:381)(cid:286)(cid:272)(cid:381)(cid:374)(cid:381)(cid:373)(cid:349)(cid:272)(cid:3)(cid:346)(cid:286)(cid:258)(cid:282)(cid:449)(cid:349)(cid:374)(cid:282)(cid:400)(cid:3)(cid:272)(cid:396)(cid:286)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:271)(cid:455)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:18)(cid:75)(cid:115)(cid:47)(cid:24)(cid:882)(cid:1005)(cid:1013)(cid:3)(cid:393)(cid:258)(cid:374)(cid:282)(cid:286)(cid:373)(cid:349)(cid:272)(cid:853)(cid:3)(cid:449)(cid:286)(cid:3)
(cid:336)(cid:396)(cid:286)(cid:449)(cid:3)(cid:286)(cid:258)(cid:396)(cid:374)(cid:349)(cid:374)(cid:336)(cid:400)(cid:3)(cid:393)(cid:286)(cid:396)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:853)(cid:3)(cid:373)(cid:258)(cid:349)(cid:374)(cid:410)(cid:258)(cid:349)(cid:374)(cid:286)(cid:282)(cid:3)(cid:258)(cid:3)(cid:400)(cid:410)(cid:396)(cid:381)(cid:374)(cid:336)(cid:3)(cid:271)(cid:258)(cid:367)(cid:258)(cid:374)(cid:272)(cid:286)(cid:3)(cid:400)(cid:346)(cid:286)(cid:286)(cid:410)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:272)(cid:381)(cid:374)(cid:410)(cid:349)(cid:374)(cid:437)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:396)(cid:286)(cid:410)(cid:437)(cid:396)(cid:374)(cid:3)(cid:272)(cid:258)(cid:393)(cid:349)(cid:410)(cid:258)(cid:367)(cid:3)(cid:410)(cid:381)(cid:3)
(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:3)(cid:410)(cid:346)(cid:396)(cid:381)(cid:437)(cid:336)(cid:346)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:3)(cid:396)(cid:286)(cid:393)(cid:437)(cid:396)(cid:272)(cid:346)(cid:258)(cid:400)(cid:286)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:282)(cid:349)(cid:448)(cid:349)(cid:282)(cid:286)(cid:374)(cid:282)(cid:400)(cid:856)(cid:3)(cid:38)(cid:381)(cid:396)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:1009)(cid:1006)(cid:882)(cid:449)(cid:286)(cid:286)(cid:364)(cid:3)(cid:296)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1004)(cid:853)(cid:3)(cid:286)(cid:258)(cid:396)(cid:374)(cid:349)(cid:374)(cid:336)(cid:400)(cid:3)(cid:393)(cid:286)(cid:396)(cid:3)
(cid:282)(cid:349)(cid:367)(cid:437)(cid:410)(cid:286)(cid:282)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:3)(cid:349)(cid:374)(cid:272)(cid:396)(cid:286)(cid:258)(cid:400)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:936)(cid:1005)(cid:856)(cid:1009)(cid:1009)(cid:3)(cid:296)(cid:396)(cid:381)(cid:373)(cid:3)(cid:936)(cid:1005)(cid:856)(cid:1009)(cid:1007)(cid:3)(cid:349)(cid:374)(cid:3)(cid:1006)(cid:1004)(cid:1005)(cid:1013)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:381)(cid:410)(cid:258)(cid:367)(cid:3)(cid:396)(cid:286)(cid:448)(cid:286)(cid:374)(cid:437)(cid:286)(cid:400)(cid:3)(cid:282)(cid:286)(cid:272)(cid:396)(cid:286)(cid:258)(cid:400)(cid:286)(cid:282)(cid:3)(cid:361)(cid:437)(cid:400)(cid:410)(cid:3)(cid:1008)(cid:1081)(cid:3)(cid:258)(cid:400)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:258)(cid:396)(cid:286)(cid:282)(cid:3)
(cid:410)(cid:381)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:1009)(cid:1007)(cid:882)(cid:449)(cid:286)(cid:286)(cid:364)(cid:3)(cid:296)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:3)(cid:1006)(cid:1004)(cid:1005)(cid:1013)(cid:856)(cid:3)(cid:75)(cid:437)(cid:396)(cid:3)(cid:400)(cid:437)(cid:272)(cid:272)(cid:286)(cid:400)(cid:400)(cid:296)(cid:437)(cid:367)(cid:3)(cid:286)(cid:454)(cid:286)(cid:272)(cid:437)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:282)(cid:286)(cid:373)(cid:381)(cid:374)(cid:400)(cid:410)(cid:396)(cid:258)(cid:410)(cid:286)(cid:400)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:396)(cid:286)(cid:400)(cid:349)(cid:367)(cid:349)(cid:286)(cid:374)(cid:272)(cid:455)(cid:3)(cid:381)(cid:296)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:271)(cid:437)(cid:400)(cid:349)(cid:374)(cid:286)(cid:400)(cid:400)(cid:3)
(cid:373)(cid:381)(cid:282)(cid:286)(cid:367)(cid:853)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:282)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:449)(cid:381)(cid:396)(cid:367)(cid:282)(cid:882)(cid:272)(cid:367)(cid:258)(cid:400)(cid:400)(cid:3)(cid:410)(cid:286)(cid:258)(cid:373)(cid:853)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:400)(cid:410)(cid:396)(cid:286)(cid:374)(cid:336)(cid:410)(cid:346)(cid:3)(cid:381)(cid:296)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:396)(cid:286)(cid:393)(cid:437)(cid:410)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:856)(cid:3)
(cid:3)
(cid:100)(cid:346)(cid:286)(cid:3)(cid:349)(cid:373)(cid:393)(cid:381)(cid:396)(cid:410)(cid:258)(cid:374)(cid:272)(cid:286)(cid:3)(cid:381)(cid:296)(cid:3)(cid:400)(cid:272)(cid:349)(cid:286)(cid:374)(cid:410)(cid:349)(cid:296)(cid:349)(cid:272)(cid:3)(cid:286)(cid:454)(cid:272)(cid:286)(cid:367)(cid:367)(cid:286)(cid:374)(cid:272)(cid:286)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:282)(cid:349)(cid:400)(cid:272)(cid:349)(cid:393)(cid:367)(cid:349)(cid:374)(cid:258)(cid:396)(cid:455)(cid:3)(cid:282)(cid:349)(cid:448)(cid:286)(cid:396)(cid:400)(cid:349)(cid:410)(cid:455)(cid:3)(cid:349)(cid:374)(cid:3)(cid:258)(cid:282)(cid:448)(cid:258)(cid:374)(cid:272)(cid:349)(cid:374)(cid:336)(cid:3)(cid:400)(cid:381)(cid:367)(cid:437)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)(cid:272)(cid:367)(cid:349)(cid:286)(cid:374)(cid:410)(cid:3)
(cid:272)(cid:346)(cid:258)(cid:367)(cid:367)(cid:286)(cid:374)(cid:336)(cid:286)(cid:400)(cid:3)(cid:346)(cid:258)(cid:400)(cid:3)(cid:374)(cid:286)(cid:448)(cid:286)(cid:396)(cid:3)(cid:271)(cid:286)(cid:286)(cid:374)(cid:3)(cid:346)(cid:349)(cid:336)(cid:346)(cid:286)(cid:396)(cid:856)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:336)(cid:396)(cid:286)(cid:449)(cid:3)(cid:349)(cid:410)(cid:400)(cid:3)(cid:258)(cid:374)(cid:374)(cid:437)(cid:258)(cid:367)(cid:3)(cid:396)(cid:286)(cid:448)(cid:286)(cid:374)(cid:437)(cid:286)(cid:400)(cid:3)(cid:296)(cid:396)(cid:381)(cid:373)(cid:3)(cid:393)(cid:396)(cid:381)(cid:258)(cid:272)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:349)(cid:272)(cid:286)(cid:400)(cid:3)(cid:349)(cid:374)(cid:3)(cid:271)(cid:381)(cid:410)(cid:346)(cid:3)
(cid:271)(cid:437)(cid:400)(cid:349)(cid:374)(cid:286)(cid:400)(cid:400)(cid:3)(cid:400)(cid:286)(cid:336)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:282)(cid:286)(cid:400)(cid:393)(cid:349)(cid:410)(cid:286)(cid:3)(cid:393)(cid:258)(cid:374)(cid:282)(cid:286)(cid:373)(cid:349)(cid:272)(cid:3)(cid:396)(cid:286)(cid:367)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:396)(cid:286)(cid:400)(cid:410)(cid:396)(cid:349)(cid:272)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:853)(cid:3)(cid:381)(cid:374)(cid:286)(cid:3)(cid:367)(cid:286)(cid:400)(cid:400)(cid:3)(cid:449)(cid:286)(cid:286)(cid:364)(cid:3)(cid:410)(cid:346)(cid:258)(cid:374)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:393)(cid:396)(cid:349)(cid:381)(cid:396)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:853)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)
(cid:282)(cid:349)(cid:448)(cid:286)(cid:400)(cid:410)(cid:349)(cid:410)(cid:437)(cid:396)(cid:286)(cid:3)(cid:381)(cid:296)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:39)(cid:286)(cid:396)(cid:373)(cid:258)(cid:374)(cid:3)(cid:286)(cid:374)(cid:410)(cid:349)(cid:410)(cid:455)(cid:856)(cid:3)(cid:47)(cid:374)(cid:282)(cid:437)(cid:400)(cid:410)(cid:396)(cid:455)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:336)(cid:381)(cid:448)(cid:286)(cid:396)(cid:374)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:258)(cid:367)(cid:349)(cid:364)(cid:286)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:258)(cid:282)(cid:448)(cid:258)(cid:374)(cid:272)(cid:349)(cid:374)(cid:336)(cid:3)(cid:410)(cid:346)(cid:286)(cid:349)(cid:396)(cid:3)(cid:373)(cid:349)(cid:400)(cid:400)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:349)(cid:374)(cid:3)
(cid:373)(cid:437)(cid:367)(cid:410)(cid:349)(cid:296)(cid:258)(cid:272)(cid:286)(cid:410)(cid:286)(cid:282)(cid:3)(cid:449)(cid:258)(cid:455)(cid:400)(cid:853)(cid:3)(cid:296)(cid:396)(cid:381)(cid:373)(cid:3)(cid:282)(cid:286)(cid:400)(cid:349)(cid:336)(cid:374)(cid:349)(cid:374)(cid:336)(cid:3)(cid:374)(cid:381)(cid:448)(cid:286)(cid:367)(cid:3)(cid:393)(cid:396)(cid:381)(cid:282)(cid:437)(cid:272)(cid:410)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:374)(cid:258)(cid:448)(cid:349)(cid:336)(cid:258)(cid:410)(cid:349)(cid:374)(cid:336)(cid:3)(cid:374)(cid:286)(cid:449)(cid:3)(cid:396)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:381)(cid:396)(cid:455)(cid:3)(cid:272)(cid:346)(cid:258)(cid:367)(cid:367)(cid:286)(cid:374)(cid:336)(cid:286)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)
(cid:349)(cid:374)(cid:374)(cid:381)(cid:448)(cid:258)(cid:410)(cid:349)(cid:374)(cid:336)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:286)(cid:448)(cid:258)(cid:367)(cid:437)(cid:258)(cid:410)(cid:349)(cid:374)(cid:336)(cid:3)(cid:374)(cid:286)(cid:449)(cid:3)(cid:393)(cid:258)(cid:396)(cid:258)(cid:282)(cid:349)(cid:336)(cid:373)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:393)(cid:396)(cid:381)(cid:272)(cid:286)(cid:400)(cid:400)(cid:286)(cid:400)(cid:856)(cid:3)(cid:116)(cid:286)(cid:258)(cid:396)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:410)(cid:286)(cid:272)(cid:346)(cid:374)(cid:381)(cid:367)(cid:381)(cid:336)(cid:455)(cid:853)(cid:3)(cid:258)(cid:437)(cid:410)(cid:381)(cid:374)(cid:381)(cid:373)(cid:381)(cid:437)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)
(cid:286)(cid:367)(cid:286)(cid:272)(cid:410)(cid:396)(cid:349)(cid:272)(cid:3)(cid:448)(cid:286)(cid:346)(cid:349)(cid:272)(cid:367)(cid:286)(cid:400)(cid:853)(cid:3)(cid:448)(cid:349)(cid:396)(cid:410)(cid:437)(cid:258)(cid:367)(cid:3)(cid:396)(cid:286)(cid:258)(cid:367)(cid:349)(cid:410)(cid:455)(cid:853)(cid:3)(cid:286)(cid:374)(cid:286)(cid:396)(cid:336)(cid:455)(cid:3)(cid:400)(cid:410)(cid:381)(cid:396)(cid:258)(cid:336)(cid:286)(cid:853)(cid:3)(cid:393)(cid:346)(cid:258)(cid:396)(cid:373)(cid:258)(cid:272)(cid:286)(cid:437)(cid:410)(cid:349)(cid:272)(cid:258)(cid:367)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:373)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:282)(cid:286)(cid:448)(cid:349)(cid:272)(cid:286)(cid:400)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:271)(cid:437)(cid:410)(cid:3)(cid:258)(cid:3)(cid:296)(cid:286)(cid:449)(cid:3)(cid:381)(cid:296)(cid:3)
(cid:410)(cid:346)(cid:286)(cid:3)(cid:349)(cid:374)(cid:374)(cid:381)(cid:448)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:282)(cid:396)(cid:349)(cid:448)(cid:349)(cid:374)(cid:336)(cid:3)(cid:400)(cid:381)(cid:272)(cid:349)(cid:286)(cid:410)(cid:455)(cid:859)(cid:400)(cid:3)(cid:448)(cid:349)(cid:400)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:258)(cid:3)(cid:400)(cid:258)(cid:296)(cid:286)(cid:396)(cid:853)(cid:3)(cid:346)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:349)(cid:286)(cid:396)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:373)(cid:381)(cid:396)(cid:286)(cid:3)(cid:400)(cid:437)(cid:400)(cid:410)(cid:258)(cid:349)(cid:374)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:449)(cid:381)(cid:396)(cid:367)(cid:282)(cid:856)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:349)(cid:400)(cid:3)
(cid:437)(cid:374)(cid:349)(cid:395)(cid:437)(cid:286)(cid:367)(cid:455)(cid:3)(cid:400)(cid:437)(cid:349)(cid:410)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:346)(cid:286)(cid:367)(cid:393)(cid:3)(cid:437)(cid:374)(cid:410)(cid:258)(cid:374)(cid:336)(cid:367)(cid:286)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:367)(cid:286)(cid:454)(cid:349)(cid:410)(cid:455)(cid:3)(cid:258)(cid:400)(cid:3)(cid:410)(cid:346)(cid:286)(cid:400)(cid:286)(cid:3)(cid:258)(cid:400)(cid:393)(cid:349)(cid:396)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:271)(cid:286)(cid:272)(cid:381)(cid:373)(cid:286)(cid:3)(cid:396)(cid:286)(cid:258)(cid:367)(cid:349)(cid:410)(cid:455)(cid:856)(cid:3)(cid:3)
(cid:3)
(cid:47)(cid:374)(cid:410)(cid:286)(cid:336)(cid:396)(cid:349)(cid:410)(cid:455)(cid:3)(cid:373)(cid:258)(cid:374)(cid:258)(cid:336)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:258)(cid:282)(cid:448)(cid:349)(cid:400)(cid:381)(cid:396)(cid:455)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:349)(cid:272)(cid:286)(cid:400)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:437)(cid:410)(cid:349)(cid:367)(cid:349)(cid:410)(cid:349)(cid:286)(cid:400)(cid:3)(cid:349)(cid:374)(cid:282)(cid:437)(cid:400)(cid:410)(cid:396)(cid:455)(cid:3)(cid:396)(cid:286)(cid:373)(cid:258)(cid:349)(cid:374)(cid:286)(cid:282)(cid:3)(cid:400)(cid:410)(cid:396)(cid:381)(cid:374)(cid:336)(cid:3)(cid:258)(cid:400)(cid:3)(cid:272)(cid:367)(cid:349)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)
(cid:396)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:381)(cid:396)(cid:400)(cid:3)(cid:296)(cid:381)(cid:272)(cid:437)(cid:400)(cid:286)(cid:282)(cid:3)(cid:381)(cid:374)(cid:3)(cid:393)(cid:381)(cid:449)(cid:286)(cid:396)(cid:3)(cid:396)(cid:286)(cid:367)(cid:349)(cid:258)(cid:271)(cid:349)(cid:367)(cid:349)(cid:410)(cid:455)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:400)(cid:258)(cid:296)(cid:286)(cid:410)(cid:455)(cid:3)(cid:349)(cid:374)(cid:3)(cid:258)(cid:3)(cid:410)(cid:349)(cid:373)(cid:286)(cid:3)(cid:381)(cid:296)(cid:3)(cid:349)(cid:374)(cid:272)(cid:396)(cid:286)(cid:258)(cid:400)(cid:349)(cid:374)(cid:336)(cid:3)(cid:286)(cid:454)(cid:410)(cid:396)(cid:286)(cid:373)(cid:286)(cid:3)(cid:449)(cid:286)(cid:258)(cid:410)(cid:346)(cid:286)(cid:396)(cid:3)(cid:410)(cid:346)(cid:396)(cid:286)(cid:258)(cid:410)(cid:400)(cid:856)(cid:3)(cid:100)(cid:346)(cid:286)(cid:3)
(cid:271)(cid:349)(cid:381)(cid:373)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:410)(cid:286)(cid:258)(cid:373)(cid:3)(cid:258)(cid:282)(cid:448)(cid:349)(cid:400)(cid:286)(cid:282)(cid:3)(cid:272)(cid:367)(cid:349)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:258)(cid:400)(cid:3)(cid:410)(cid:346)(cid:286)(cid:455)(cid:3)(cid:374)(cid:258)(cid:448)(cid:349)(cid:336)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:286)(cid:448)(cid:381)(cid:367)(cid:448)(cid:349)(cid:374)(cid:336)(cid:3)(cid:396)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:381)(cid:396)(cid:455)(cid:3)(cid:296)(cid:396)(cid:258)(cid:373)(cid:286)(cid:449)(cid:381)(cid:396)(cid:364)(cid:400)(cid:3)(cid:258)(cid:396)(cid:381)(cid:437)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:449)(cid:381)(cid:396)(cid:367)(cid:282)(cid:853)(cid:3)
(cid:349)(cid:374)(cid:272)(cid:367)(cid:437)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:286)(cid:373)(cid:286)(cid:396)(cid:336)(cid:286)(cid:374)(cid:272)(cid:455)(cid:3)(cid:437)(cid:400)(cid:286)(cid:3)(cid:258)(cid:437)(cid:410)(cid:346)(cid:381)(cid:396)(cid:349)(cid:460)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:18)(cid:75)(cid:115)(cid:47)(cid:24)(cid:882)(cid:1005)(cid:1013)(cid:3)(cid:282)(cid:349)(cid:258)(cid:336)(cid:374)(cid:381)(cid:400)(cid:410)(cid:349)(cid:272)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:349)(cid:373)(cid:393)(cid:286)(cid:374)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:68)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:24)(cid:286)(cid:448)(cid:349)(cid:272)(cid:286)(cid:3)
(cid:90)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:381)(cid:396)(cid:455)(cid:3)(cid:282)(cid:286)(cid:258)(cid:282)(cid:367)(cid:349)(cid:374)(cid:286)(cid:400)(cid:3)(cid:349)(cid:374)(cid:3)(cid:28)(cid:437)(cid:396)(cid:381)(cid:393)(cid:286)(cid:856)(cid:3)(cid:75)(cid:437)(cid:396)(cid:3)(cid:272)(cid:346)(cid:286)(cid:373)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:396)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:296)(cid:381)(cid:381)(cid:282)(cid:3)(cid:400)(cid:258)(cid:296)(cid:286)(cid:410)(cid:455)(cid:3)(cid:393)(cid:396)(cid:258)(cid:272)(cid:410)(cid:349)(cid:272)(cid:286)(cid:3)(cid:272)(cid:381)(cid:374)(cid:410)(cid:349)(cid:374)(cid:437)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:336)(cid:396)(cid:381)(cid:449)(cid:3)(cid:258)(cid:400)(cid:3)
(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:859)(cid:400)(cid:3)(cid:400)(cid:272)(cid:349)(cid:286)(cid:374)(cid:410)(cid:349)(cid:400)(cid:410)(cid:400)(cid:3)(cid:286)(cid:448)(cid:258)(cid:367)(cid:437)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:286)(cid:296)(cid:296)(cid:286)(cid:272)(cid:410)(cid:400)(cid:3)(cid:381)(cid:296)(cid:3)(cid:272)(cid:346)(cid:286)(cid:373)(cid:349)(cid:272)(cid:258)(cid:367)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:374)(cid:286)(cid:449)(cid:3)(cid:393)(cid:396)(cid:381)(cid:282)(cid:437)(cid:272)(cid:410)(cid:400)(cid:3)(cid:381)(cid:374)(cid:3)(cid:346)(cid:437)(cid:373)(cid:258)(cid:374)(cid:3)(cid:346)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)
(cid:286)(cid:374)(cid:448)(cid:349)(cid:396)(cid:381)(cid:374)(cid:373)(cid:286)(cid:374)(cid:410)(cid:853)(cid:3)(cid:349)(cid:374)(cid:272)(cid:367)(cid:437)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:396)(cid:286)(cid:336)(cid:349)(cid:400)(cid:410)(cid:396)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:282)(cid:349)(cid:400)(cid:349)(cid:374)(cid:296)(cid:286)(cid:272)(cid:410)(cid:258)(cid:374)(cid:410)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)(cid:393)(cid:396)(cid:286)(cid:448)(cid:286)(cid:374)(cid:410)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:400)(cid:393)(cid:396)(cid:286)(cid:258)(cid:282)(cid:3)(cid:381)(cid:296)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:272)(cid:381)(cid:396)(cid:381)(cid:374)(cid:258)(cid:448)(cid:349)(cid:396)(cid:437)(cid:400)(cid:856)(cid:3)
(cid:3)
(cid:116)(cid:286)(cid:3)(cid:272)(cid:367)(cid:381)(cid:400)(cid:286)(cid:282)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1004)(cid:3)(cid:449)(cid:349)(cid:410)(cid:346)(cid:3)(cid:936)(cid:1006)(cid:1008)(cid:1007)(cid:3)(cid:373)(cid:349)(cid:367)(cid:367)(cid:349)(cid:381)(cid:374)(cid:3)(cid:349)(cid:374)(cid:3)(cid:272)(cid:258)(cid:400)(cid:346)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:400)(cid:346)(cid:381)(cid:396)(cid:410)(cid:882)(cid:410)(cid:286)(cid:396)(cid:373)(cid:3)(cid:349)(cid:374)(cid:448)(cid:286)(cid:400)(cid:410)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:853)(cid:3)(cid:374)(cid:286)(cid:410)(cid:3)(cid:381)(cid:296)(cid:3)(cid:936)(cid:1008)(cid:1004)(cid:3)(cid:373)(cid:349)(cid:367)(cid:367)(cid:349)(cid:381)(cid:374)(cid:3)(cid:381)(cid:296)(cid:3)(cid:272)(cid:381)(cid:373)(cid:373)(cid:381)(cid:374)(cid:3)
(cid:400)(cid:410)(cid:381)(cid:272)(cid:364)(cid:3)(cid:396)(cid:286)(cid:393)(cid:437)(cid:396)(cid:272)(cid:346)(cid:258)(cid:400)(cid:286)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:936)(cid:1008)(cid:1004)(cid:3)(cid:373)(cid:349)(cid:367)(cid:367)(cid:349)(cid:381)(cid:374)(cid:3)(cid:349)(cid:374)(cid:3)(cid:282)(cid:349)(cid:448)(cid:349)(cid:282)(cid:286)(cid:374)(cid:282)(cid:3)(cid:393)(cid:258)(cid:455)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:856)(cid:3)(cid:4)(cid:400)(cid:3)(cid:381)(cid:296)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:882)(cid:286)(cid:374)(cid:282)(cid:853)(cid:3)(cid:258)(cid:374)(cid:3)(cid:258)(cid:282)(cid:282)(cid:349)(cid:410)(cid:349)(cid:381)(cid:374)(cid:258)(cid:367)(cid:3)
(cid:936)(cid:1011)(cid:1009)(cid:3)(cid:373)(cid:349)(cid:367)(cid:367)(cid:349)(cid:381)(cid:374)(cid:3)(cid:396)(cid:286)(cid:373)(cid:258)(cid:349)(cid:374)(cid:286)(cid:282)(cid:3)(cid:258)(cid:448)(cid:258)(cid:349)(cid:367)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:400)(cid:410)(cid:381)(cid:272)(cid:364)(cid:3)(cid:396)(cid:286)(cid:393)(cid:437)(cid:396)(cid:272)(cid:346)(cid:258)(cid:400)(cid:286)(cid:400)(cid:3)(cid:437)(cid:374)(cid:282)(cid:286)(cid:396)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:272)(cid:437)(cid:396)(cid:396)(cid:286)(cid:374)(cid:410)(cid:3)(cid:393)(cid:396)(cid:381)(cid:336)(cid:396)(cid:258)(cid:373)(cid:856)(cid:3)(cid:47)(cid:374)(cid:3)(cid:38)(cid:286)(cid:271)(cid:396)(cid:437)(cid:258)(cid:396)(cid:455)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1005)(cid:853)(cid:3)(cid:449)(cid:286)(cid:3)
(cid:258)(cid:374)(cid:374)(cid:381)(cid:437)(cid:374)(cid:272)(cid:286)(cid:282)(cid:3)(cid:258)(cid:3)(cid:1009)(cid:1081)(cid:3)(cid:349)(cid:374)(cid:272)(cid:396)(cid:286)(cid:258)(cid:400)(cid:286)(cid:3)(cid:349)(cid:374)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:395)(cid:437)(cid:258)(cid:396)(cid:410)(cid:286)(cid:396)(cid:367)(cid:455)(cid:3)(cid:282)(cid:349)(cid:448)(cid:349)(cid:282)(cid:286)(cid:374)(cid:282)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:396)(cid:286)(cid:349)(cid:410)(cid:286)(cid:396)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:349)(cid:374)(cid:410)(cid:286)(cid:374)(cid:410)(cid:3)(cid:410)(cid:381)(cid:3)(cid:272)(cid:381)(cid:374)(cid:410)(cid:349)(cid:374)(cid:437)(cid:286)(cid:3)(cid:410)(cid:381)(cid:3)(cid:393)(cid:258)(cid:455)(cid:3)
(cid:395)(cid:437)(cid:258)(cid:396)(cid:410)(cid:286)(cid:396)(cid:367)(cid:455)(cid:3)(cid:282)(cid:349)(cid:448)(cid:349)(cid:282)(cid:286)(cid:374)(cid:282)(cid:400)(cid:856)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:349)(cid:400)(cid:3)(cid:272)(cid:381)(cid:373)(cid:373)(cid:349)(cid:410)(cid:410)(cid:286)(cid:282)(cid:3)(cid:410)(cid:381)(cid:3)(cid:272)(cid:396)(cid:286)(cid:258)(cid:410)(cid:349)(cid:374)(cid:336)(cid:3)(cid:367)(cid:381)(cid:374)(cid:336)(cid:882)(cid:410)(cid:286)(cid:396)(cid:373)(cid:3)(cid:448)(cid:258)(cid:367)(cid:437)(cid:286)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:856)(cid:3)(cid:3)
(cid:38)(cid:381)(cid:396)(cid:3)(cid:373)(cid:381)(cid:396)(cid:286)(cid:3)(cid:410)(cid:346)(cid:258)(cid:374)(cid:3)(cid:1009)(cid:1004)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:400)(cid:853)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:346)(cid:258)(cid:400)(cid:3)(cid:367)(cid:286)(cid:448)(cid:286)(cid:396)(cid:258)(cid:336)(cid:286)(cid:282)(cid:3)(cid:349)(cid:410)(cid:400)(cid:3)(cid:296)(cid:349)(cid:396)(cid:400)(cid:410)(cid:882)(cid:349)(cid:374)(cid:882)(cid:272)(cid:367)(cid:258)(cid:400)(cid:400)(cid:3)(cid:296)(cid:258)(cid:349)(cid:367)(cid:437)(cid:396)(cid:286)(cid:3)(cid:258)(cid:374)(cid:258)(cid:367)(cid:455)(cid:400)(cid:349)(cid:400)(cid:3)(cid:286)(cid:454)(cid:393)(cid:286)(cid:396)(cid:349)(cid:286)(cid:374)(cid:272)(cid:286)(cid:3)(cid:410)(cid:381)(cid:3)(cid:258)(cid:282)(cid:448)(cid:349)(cid:400)(cid:286)(cid:3)
(cid:272)(cid:367)(cid:349)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:381)(cid:374)(cid:3)(cid:393)(cid:396)(cid:381)(cid:282)(cid:437)(cid:272)(cid:349)(cid:374)(cid:336)(cid:3)(cid:400)(cid:258)(cid:296)(cid:286)(cid:396)(cid:853)(cid:3)(cid:346)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:349)(cid:286)(cid:396)(cid:853)(cid:3)(cid:373)(cid:381)(cid:396)(cid:286)(cid:3)(cid:400)(cid:437)(cid:400)(cid:410)(cid:258)(cid:349)(cid:374)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:373)(cid:381)(cid:396)(cid:286)(cid:3)(cid:396)(cid:286)(cid:367)(cid:349)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:393)(cid:396)(cid:381)(cid:282)(cid:437)(cid:272)(cid:410)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:393)(cid:396)(cid:381)(cid:272)(cid:286)(cid:400)(cid:400)(cid:286)(cid:400)(cid:856)(cid:3)(cid:100)(cid:346)(cid:286)(cid:349)(cid:396)(cid:3)
(cid:286)(cid:448)(cid:286)(cid:396)(cid:882)(cid:349)(cid:374)(cid:272)(cid:396)(cid:286)(cid:258)(cid:400)(cid:349)(cid:374)(cid:336)(cid:3)(cid:410)(cid:286)(cid:272)(cid:346)(cid:374)(cid:381)(cid:367)(cid:381)(cid:336)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:367)(cid:286)(cid:454)(cid:349)(cid:410)(cid:455)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:286)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)(cid:258)(cid:373)(cid:393)(cid:367)(cid:349)(cid:296)(cid:455)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:282)(cid:286)(cid:373)(cid:258)(cid:374)(cid:282)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:859)(cid:400)(cid:3)(cid:286)(cid:374)(cid:336)(cid:349)(cid:374)(cid:286)(cid:286)(cid:396)(cid:349)(cid:374)(cid:336)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)
(cid:400)(cid:272)(cid:349)(cid:286)(cid:374)(cid:410)(cid:349)(cid:296)(cid:349)(cid:272)(cid:3)(cid:286)(cid:454)(cid:393)(cid:286)(cid:396)(cid:410)(cid:349)(cid:400)(cid:286)(cid:856)(cid:3)(cid:100)(cid:346)(cid:286)(cid:3)(cid:373)(cid:258)(cid:396)(cid:364)(cid:286)(cid:410)(cid:3)(cid:282)(cid:396)(cid:349)(cid:448)(cid:286)(cid:396)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:282)(cid:286)(cid:373)(cid:258)(cid:374)(cid:282)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:396)(cid:286)(cid:258)(cid:272)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:393)(cid:396)(cid:381)(cid:258)(cid:272)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:349)(cid:272)(cid:286)(cid:400)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:400)(cid:410)(cid:396)(cid:381)(cid:374)(cid:336)(cid:3)
(cid:258)(cid:374)(cid:282)(cid:3)(cid:449)(cid:286)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:272)(cid:381)(cid:374)(cid:296)(cid:349)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:349)(cid:374)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:393)(cid:381)(cid:449)(cid:286)(cid:396)(cid:3)(cid:381)(cid:296)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:373)(cid:381)(cid:282)(cid:286)(cid:367)(cid:856)(cid:3)(cid:3)
(cid:3)
(cid:47)(cid:3)(cid:258)(cid:373)(cid:3)(cid:336)(cid:396)(cid:258)(cid:410)(cid:286)(cid:296)(cid:437)(cid:367)(cid:3)(cid:410)(cid:381)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:410)(cid:286)(cid:258)(cid:373)(cid:3)(cid:410)(cid:346)(cid:258)(cid:410)(cid:3)(cid:346)(cid:258)(cid:400)(cid:3)(cid:381)(cid:448)(cid:286)(cid:396)(cid:272)(cid:381)(cid:373)(cid:286)(cid:3)(cid:400)(cid:286)(cid:286)(cid:373)(cid:349)(cid:374)(cid:336)(cid:367)(cid:455)(cid:3)(cid:349)(cid:374)(cid:400)(cid:437)(cid:396)(cid:373)(cid:381)(cid:437)(cid:374)(cid:410)(cid:258)(cid:271)(cid:367)(cid:286)(cid:3)(cid:381)(cid:271)(cid:400)(cid:410)(cid:258)(cid:272)(cid:367)(cid:286)(cid:400)(cid:3)(cid:410)(cid:346)(cid:349)(cid:400)(cid:3)(cid:455)(cid:286)(cid:258)(cid:396)(cid:3)(cid:410)(cid:381)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:286)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)
(cid:272)(cid:367)(cid:349)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:258)(cid:400)(cid:3)(cid:381)(cid:374)(cid:367)(cid:455)(cid:3)(cid:28)(cid:454)(cid:393)(cid:381)(cid:374)(cid:286)(cid:374)(cid:410)(cid:3)(cid:272)(cid:258)(cid:374)(cid:856)(cid:3)(cid:100)(cid:346)(cid:258)(cid:374)(cid:364)(cid:400)(cid:3)(cid:410)(cid:381)(cid:3)(cid:410)(cid:346)(cid:286)(cid:349)(cid:396)(cid:3)(cid:346)(cid:258)(cid:396)(cid:282)(cid:3)(cid:449)(cid:381)(cid:396)(cid:364)(cid:853)(cid:3)(cid:282)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:853)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:396)(cid:286)(cid:400)(cid:349)(cid:367)(cid:349)(cid:286)(cid:374)(cid:272)(cid:455)(cid:853)(cid:3)(cid:449)(cid:286)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:449)(cid:286)(cid:367)(cid:367)(cid:3)
(cid:393)(cid:381)(cid:400)(cid:349)(cid:410)(cid:349)(cid:381)(cid:374)(cid:286)(cid:282)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:367)(cid:381)(cid:374)(cid:336)(cid:882)(cid:410)(cid:286)(cid:396)(cid:373)(cid:3)(cid:336)(cid:396)(cid:381)(cid:449)(cid:410)(cid:346)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:449)(cid:349)(cid:367)(cid:367)(cid:3)(cid:272)(cid:381)(cid:374)(cid:410)(cid:349)(cid:374)(cid:437)(cid:286)(cid:3)(cid:410)(cid:381)(cid:3)(cid:282)(cid:286)(cid:367)(cid:349)(cid:448)(cid:286)(cid:396)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:258)(cid:367)(cid:367)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:400)(cid:410)(cid:258)(cid:364)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:856)(cid:3)
(cid:3)
(cid:116)(cid:349)(cid:410)(cid:346)(cid:3)(cid:116)(cid:258)(cid:396)(cid:373)(cid:3)(cid:90)(cid:286)(cid:336)(cid:258)(cid:396)(cid:282)(cid:400)(cid:853)(cid:3)(cid:3)
(cid:3)
(cid:18)(cid:258)(cid:410)(cid:346)(cid:286)(cid:396)(cid:349)(cid:374)(cid:286)(cid:3)(cid:18)(cid:381)(cid:396)(cid:396)(cid:349)(cid:336)(cid:258)(cid:374)(cid:853)(cid:3)(cid:87)(cid:346)(cid:856)(cid:24)(cid:856)(cid:3)
(cid:18)(cid:346)(cid:349)(cid:286)(cid:296)(cid:3)(cid:28)(cid:454)(cid:286)(cid:272)(cid:437)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:75)(cid:296)(cid:296)(cid:349)(cid:272)(cid:286)(cid:396)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:87)(cid:396)(cid:286)(cid:400)(cid:349)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal
year ended January 1, 2021.
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
(State or other jurisdiction of incorporation or organization)
149 Commonwealth Drive, Menlo Park, California
(Address of principal executive offices)
77-0218904
(I.R.S. Employer Identification No.)
94025
(Zip Code)
(650) 326-9400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.001 per share
Trading Symbol
EXPO
Name of Each Exchange on Which Registered
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant based on the closing sales price of the common stock as
reported on the NASDAQ Global Select Market on July 2, 2020, the last business day of the registrant’s most recently completed second quarter,
was $3,091,690,681. Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the
registrant’s knowledge, owned 10% or more of registrant’s outstanding common stock as of July 3, 2020 have been excluded in that such persons
may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s common stock outstanding as of February 19, 2021 was 51,803,884.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement for the registrant’s 2021 Annual Meeting of Stockholders to be held on June 3, 2021 are
incorporated by reference into Part III of this Annual Report on Form 10-K.
EXPONENT, INC.
FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED JANUARY 1, 2021
TABLE OF CONTENTS
PART I
Item 1.
Business ..............................................................................................................................................
Item 1A. Risk Factors.........................................................................................................................................
Item 1B. Unresolved Staff Comments ...............................................................................................................
Properties ............................................................................................................................................
Item 2.
Legal Proceedings ...............................................................................................................................
Item 3.
Mine Safety Disclosures .....................................................................................................................
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities .................................................................................................................................
Selected Financial Data.......................................................................................................................
Item 6.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.............
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.............................................................
Financial Statements and Supplementary Data...................................................................................
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............
Item 9.
Item 9A. Controls and Procedures .....................................................................................................................
Item 9B. Other Information ...............................................................................................................................
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Directors, Executive Officers and Corporate Governance..................................................................
Executive Compensation.....................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters ................................................................................................................................................
Certain Relationships and Related Transactions, and Director Independence ...................................
Principal Accounting Fees and Services.............................................................................................
Exhibits, Financial Statement Schedules ............................................................................................
Exhibit Index ..........................................................................................................................................................
Signatures ...............................................................................................................................................................
Page
4
15
21
21
21
21
22
23
24
36
37
37
37
37
38
38
38
38
38
39
70
73
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains, and incorporates by reference, certain “forward-looking” statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that are based on the
beliefs of the Company’s management, as well as assumptions made by and information currently available to the
Company’s management. Such forward-looking statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. When used in this document and in the documents incorporated herein by
reference, the words “intend,” “anticipate,” “believe,” “estimate,” “could,” “may,” “plan,” “expect” and similar
expressions, as they relate to the Company or its management, identify such forward-looking statements. Such
statements reflect the current views of the Company or its management with respect to future events and are subject
to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ
materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or
contribute to such material differences include the COVID-19 pandemic (including factors relating to measures
implemented by governmental authorities or by us to promote the safety of our employees, vendors and clients; other
direct and indirect impacts on our business and the businesses of our clients, vendors and other partners; impacts
which may, among other things, adversely affect our clients’ ability to utilize our services at the levels they have
previously; disruptions of access to our facilities or those of our clients or third parties; and increased and potentially
significant economic uncertainty and volatility, including credit and collectibility risks and potential disruptions of
capital and credit markets), the possibility that the demand for our services may decline as a result of changes in
general and industry specific economic conditions, the timing of engagements for our services, the effects of
competitive services and pricing, the absence of backlog related to our business, our ability to attract and retain key
employees, the effect of tort reform and government regulation on our business and liabilities resulting from claims
made against us. Additional risks and uncertainties are discussed under the heading “Risk Factors” and elsewhere in
this Annual Report on Form 10-K.
The inclusion of such forward-looking information should not be regarded as a representation by the Company or any
other person that the future events, plans, or expectations contemplated by the Company will be achieved. Due to such
uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak
only as of the date hereof. The Company does not intend to release publicly any updates or revisions to any such
forward-looking statements.
3
PART I
Item 1. Business
GENERAL
Exponent, Inc., together with its subsidiaries, (“Exponent”, the “Company”, “we”, “us” and “our”) is a science and
engineering consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists,
engineers, business and regulatory consultants brings together more than 90 different technical disciplines to solve
complicated issues facing industry and government today. Our services include analysis of product development,
product recall, regulatory compliance, and the discovery of potential problems related to products, people, property
and impending litigation.
The history of Exponent, Inc. goes back to 1967, with the founding of the partnership Failure Analysis Associates,
which was incorporated the following year in California and reincorporated in Delaware as Failure Analysis
Associates, Inc. in 1988. The Failure Group, Inc. was organized in 1989 as a holding company for Failure Analysis
Associates, Inc. and changed its name to Exponent, Inc. in 1998.
CLIENTS
General
Exponent serves clients in chemical, construction, consumer products, energy, food, beverage and nutrition,
government, life sciences, insurance, manufacturing, technology, industrial equipment, transportation and other
sectors of the economy. Many of our engagements are initiated directly by large corporations or by lawyers or
insurance companies whose clients anticipate, or are engaged in, litigation related to their products, equipment,
processes or services. The scope of our services in failure prevention and technology evaluation has grown as the
technological complexity of products has increased over the years. During 2020, we provided services representing
approximately 24%, 16%, 14% and 13% of revenues to clients in the consumer products industry, energy and utilities
industries, transportation industry and chemical industry, respectively.
Pricing and Terms of Engagements
We provide our services on either a fixed-price basis or on a time and material basis, charging in the latter case hourly
rates for each staff member involved in a project, based on his or her skills and experience. Our standard rates for
professionals range from $180 to $825 per hour. Our engagement agreements typically provide for monthly billing,
require payment of our invoices within 30 days of receipt and permit clients to terminate engagements at any time.
Clients normally agree to indemnify us and our personnel against liabilities arising out of the use or application of the
results of our work or recommendations.
SERVICES
Exponent provides high quality engineering and scientific consulting services to clients around the world. Our service
offerings are provided on a project-by-project basis. Many projects require support from multiple practices. We
currently operate the following 17 practices in two reportable operating segments, (i) Engineering and Other Scientific
and (ii) Environmental and Health:
ENGINEERING AND OTHER SCIENTIFIC
•
•
•
•
Biomechanics
Biomedical Engineering & Sciences
Buildings & Structures
Civil Engineering
4
•
Construction Consulting
• Data Sciences
•
Electrical Engineering & Computer Science
• Human Factors
• Materials & Corrosion Engineering
• Mechanical Engineering
•
•
Polymer Science & Materials Chemistry
Thermal Sciences
• Vehicle Engineering
ENVIRONMENTAL AND HEALTH
•
•
•
Chemical Regulation & Food Safety
Ecological & Biological Sciences
Environmental & Earth Sciences
• Health Sciences
ENGINEERING AND OTHER SCIENTIFIC
Biomechanics
Our Biomechanics Practice uses engineering and biomedical science to solve complex problems at the intersection of
biology and engineering. Our expertise is used to understand and evaluate the interaction between the human body as
a biological system and the physical environment to explore the cause, nature, and severity of injuries.
During the past year, our biomechanics staff performed analyses of human injuries which occurred while individuals
were utilizing a variety of products including recreational vehicles, sporting goods, trucks, trains, aircraft, industrial
equipment, and automobiles. They also looked at the implications of using protective devices (such as restraint
systems, airbags, and helmets) on reducing the potential for injury, and assessed injuries in the workplace, in the home,
and during recreational activities. Our consultants also evaluated product designs for performance, hazards, and injury
risks to assist clients with design modifications, address consumer feedback, and respond to regulators.
Biomedical Engineering and Sciences
Our Biomedical Engineering and Sciences Practice applies engineering principles to medical technologies, including
the evaluation of designs and performance of medical devices, pharmaceuticals, and biologics. Our engineers and
scientists assist clients with characterization of biomaterials, medical devices, and their interactions with
pharmaceuticals, cells, and tissues. To assist in regulatory clearance and approval, we perform preclinical testing, help
formulate related regulatory strategy, and conduct design verification and validation. We also assist with design and
manufacturing failure analyses, root cause assessment, recall management, and medical device explant analysis. In
addition, our staff performs analysis of clinical outcomes for medical devices and related procedures using
administrative claims databases. Our expertise is also utilized in product liability, intellectual property litigation,
technology acquisition and due diligence matters. During 2020 our staff engaged in the COVID-19 pandemic support
efforts related to personal protection equipment, testing and clinical diagnostics
5
Buildings & Structures
The basic function of a building is to provide structurally sound, durable, economically constructed and
environmentally controlled space to house and protect occupants and contents. If this basic function is not achieved,
it is because one or more aspect(s) of the building design or construction has failed. Our architects, structural engineers,
and material scientists have been investigating such failures for decades, and we use this experience to solve problems
with building systems and components, including finding the best repair options and mitigating the risk of future
failures.
During the past year, we have evaluated numerous problems with residential, commercial and industrial structures for
owners, designers, and builders at project sites around the world. Our evaluations often include property inspections,
laboratory or on-site testing, engineering analysis, and the development of repair recommendations. In addition, we
have worked with owners to assess and mitigate the risk of failure associated with hazards such as hurricanes,
earthquakes, tsunamis and aging infrastructure. We have assessed these risks to high-rise buildings, industrial
facilities, pipelines and nuclear power plant structures and provided testimony both in the U.S. and international courts
of law.
Civil Engineering
Our Civil Engineering Practice provides broad expertise that includes geotechnical engineering, geological
engineering, engineering geology, and geology to address a host of geo-failures, including landslides, foundation and
retaining wall failures, pipeline failures, dam and levee failures. The practice’s expertise also includes evaluation of
complex construction claims involving geotechnical design issues, wildland fire effects, and international construction
disputes. Over the past year, our consultants have been engaged in a number of investigations related to wildland fires,
landslide evaluations, construction vibration claims, construction claim and defect evaluations, and seismic design
evaluations. This practice provided services for property owners, contractors, design professionals, state agencies,
international government agencies, attorneys and insurance carriers.
Construction Consulting
Our Construction Consulting Practice provides expertise in the areas of project advisory, risk analysis, strategic
planning, dispute resolution, delay analysis and financial damages. During the past year, we expanded the practice by
leveraging key client relationships in several construction sectors including utilities, infrastructure and oil and gas.
Over the past year, the practice has been retained on numerous complex international arbitrations in Canada, Asia
Pacific, Europe and the Middle East. Our multi-disciplinary staff, which includes engineers, project managers,
schedulers, quantity surveyors, and financial specialists, provides these services to both the public and private sectors
for clients who represent a diverse mix of corporations, law firms and agencies. Our projects include many sectors of
the construction and engineering industry which include power plants, electric and gas utilities, petrochemical
facilities, transportation systems, tunnels, airports, and sporting arenas.
Data Sciences
The Data Sciences practice comprises our core capabilities in statistics, data analytics, and dedicated data collection.
Drawing on experience in a breadth of engineering, science, health, and environmental applications, we assist clients
life cycle.
with
their most complex data challenges at all stages of
the product or process
Our team of interdisciplinary scientists and engineers design sampling plans, surveys, and experiments to create,
manage, and analyze data sets of all sizes and varieties. User-focused visualizations support data-driven decision-
making and help clients measure risks and benefits to determine appropriate courses of action. Utilizing rigorous
statistical methods, our team can help assess and improve quality and reliability and mitigate risk. Our experience
helps clients build products that perform for a wide variety of users while preventing data bias, collecting personal
the risks associated with global data collection.
data with consideration for privacy, and managing
6
During the past year, our team worked on diverse projects for government, industry, and legal clients. We performed
assessments of manufacturing quality systems, evaluated the durability and reliability of smart cards for identity
management and credentialing, examined the in-service safety record of home appliances and medical devices and
developed sampling plans associated with product recall campaigns.
Electrical Engineering & Computer Science
Our Electrical Engineering and Computer Science Practice offers a broad range of expertise to address complex issues
for industrial, government and law firm clients. Our power engineers advise clients on challenges relating to reliability
of electrical systems, failures in power generation, transmission and distribution as well as on distributed
generation, renewables and energy storage. Our team of electronic engineers works on failure analysis, product
robustness and reliability for consumer and industrial electronics. Our information engineers and scientists work with
high-tech industries and computer-controlled applications to evaluate product safety and software reliability. The
information engineering and science expertise we offer encompasses a breadth of areas including information and
numerical sciences, algorithms and data structures, computer graphics, computer architecture, networking and
communications, as well as security and cryptography. We operate laboratories for testing heavy equipment and
electronics and we have a broad capability in analyzing computer software.
Over the past year, we performed a wide array of investigations ranging from assessing damage to electrical power
infrastructure from the effect of weather-related events to working with clients to develop sophisticated machine
learning algorithms applied to large quantities of unstructured data. We continue to work with consumer electronics
manufacturers and the transportation industry on the reliability and robustness of computer-controlled equipment for
user safety.
Human Factors
Our Human Factors Practice evaluates human performance and safety in product and system use. Our consultants
study how the limitations and capabilities of people, including memory, perception, attention, reaction time, judgment,
physical size and dexterity, affect the way they use a product, interact with an organization or environment, process
information or participate in an activity.
We review warnings and labeling issues related to consumer products, pharmaceuticals, motor vehicles, medical
devices and industrial products – supporting the development of safety information to accompany products and
assessing claims that the safety information provided was inadequate. We apply our expertise in human behavior,
warnings, and decision making in class actions suits, and in evaluating claims seeking to establish a class. In addition,
we assist manufacturers with compliance with regulatory guidelines related to products and work with them regarding
analysis of adverse event reports and consumer complaints in publicly available databases overseen by the Consumer
Product Safety Commission and the Food and Drug Administration.
We examine the role that attention plays in human perception, memory, and behavior, and how attention, inattention,
and distraction may affect safety in a wide range of settings and activities (e.g., operating vehicles and machinery,
walking, and using consumer products). We address the reliability of human memory and retrospective reporting in
the gathering of fact-based evidence. We utilize scientific investigations and research (e.g., human perception, reaction
time, and looking behavior) to assess driver behavior in both accident investigations and during the design of
automotive systems. Our Human Factors scientists have been actively engaged in research and project work with
Advanced Driver Assistive System (ADAS) and automated vehicle technology, in order to understand and advise our
clients on how these technologies may change the nature and dynamic of driving, and the role and performance of the
driver.
We provide user experience research, including focus groups, usability testing, and complex user studies with custom-
tailored designs, across a wide range of industries, including consumer electronics, medical devices, and vehicle
technologies. Our state-of-the-art Phoenix User Research Center, with 5,000 square feet of research space, has six lab
suites, including a dedicated focus group room, an ophthalmological lab, a motion capture lab, and wearable eye
tracking technology, plus connectivity to our vehicle test track. The scope of human factors engagements range from
consulting on our clients’ research to providing turnkey research solutions.
7
We perform incident investigations and root cause analyses of near-misses and accidents involving human error in
occupational and industrial settings. Our Human Factors scientists have advanced technical systems training and
experience required to understand how humans contribute to the initiation of, and emergency response to, explosions,
fires, chemical releases, and major equipment failures in the manufacturing, utility, oil and gas, and construction
industries, among others. We also capitalize on this knowledge to conduct human error risk and culture assessments
to help clients proactively control human performance gaps, improve occupational and process safety performance,
and create administrative controls and procedures. In addition to helping clients address the frequency and severity of
incidents related to human error, fatigue, and performance, these and other similar project activities can be leveraged
to improve efficiency, reliability, and maintainability of normal operations.
Materials & Corrosion Engineering
Our in-depth knowledge of materials science, corrosion, and metallurgical engineering combined with the breadth of
our collective experience across many industries and disciplines gives our Materials and Corrosion Engineering
Practice a unique ability to efficiently provide our clients with solutions to their complex materials-based problems.
We use our knowledge and experience to understand how and why materials, products, and processes may not perform
their intended function. Further, we use this knowledge to help our clients prevent future failures of new products as
well as aging infrastructure.
Over the past year, our Materials and Corrosion Engineering Practice helped clients solve critical materials-related
issues in the consumer electronics, medical device, battery systems, chemical processing, transportation, energy,
utilities, and aerospace fields, among others.
Mechanical Engineering
We provide clients with a thorough comprehension of current and alternate designs of mechanical systems to identify
vulnerabilities before failures occur, develop appropriate risk mitigation methods, and provide post-failure
investigations. Our consultants review the performance and reliability of industrial processes, manufactured products,
and engineered systems, and we determine the root cause of failures. We assist in legal and insurance matters, failure
investigations, product recall investigations, internal compliance programs, product development, workplace safety
evaluations, and intellectual property matters.
Our staff members develop and utilize detailed and validated computational models and laboratory experimental
methods to evaluate products, systems, and equipment. We perform field inspections, rely on industry standards, and
utilize operational data to inform our analyses. We have performed these activities in a broad range of industries
including transportation, energy, industrial equipment, building systems, medical devices, and consumer
products. During the past year, our mechanical engineers worked on a wide variety of projects including international
construction disputes, product recalls, and mechanical safety in product development.
Polymer Science & Materials Chemistry
Our Polymer Science and Materials Chemistry Practice consults with industrial, government, legal, insurance and
individual clients regarding polymers and textiles used in diverse applications as well as the chemistry, materials and
processing aspects of batteries, drug delivery systems, and other products that depend on highly controlled
manufacturing environments. We assist clients in understanding the short- and long-term performance of plastic,
rubber, adhesive, coating, composite, reactive chemical systems, and electrochemical energy storage systems when
challenged by physical, chemical, thermal and other operational stressors. Our work also includes customized
chemical, electrochemical and rheological testing and leverages expanding internal infrastructure for instrumented
analysis and advanced imaging capabilities.
Our consultants participate in product development programs, perform failure analyses and provide support to clients
involved in regulatory and legal proceedings and the protection of intellectual property. Clients value our technical
expertise related to chemistry, formulation, manufacturing and materials performance, our understanding of the history
and evolution of these materials, and our ability to assist them in identifying and incorporating emerging materials
and manufacturing technologies into their businesses. During the past year, significant program activities addressed
8
aspects of battery systems, consumer electronics, wearable devices, implantable medical devices, drug delivery
systems, medical diagnostics, building materials, water handling systems, synthetic turf, the plastics supply chain, fire
retardancy and flammability, technology scouting, materials science aspects of health risk, service life prediction,
sustainability, and intellectual property related to consumer, recreational, medical, pharmaceutical, food packaging
and other products, including trade secrets.
Thermal Sciences
Our Thermal Sciences Practice provides multi-disciplinary expertise to assist clients in chemical, fire protection, and
mechanical engineering. We have investigated and analyzed thousands of fires and explosions ranging from high loss
disasters at manufacturing facilities, energy facilities and oil and gas installations to small insurance claims.
Information gained from these analyses has helped us assist clients with preventive measures related to the design of
their facilities and products. We assist clients in minimizing the risk of fires and explosions, we provide regulatory
consulting for permitting new industrial facilities, and we assist manufacturers in addressing the risk of fires associated
with consumer products. Our engineers use fire modeling and other computational fluid dynamics modeling tools to
supplement our analytical, experimental, and field-based activities. Preventive services include process safety hazard
analysis for the chemical and oil and gas industries, fire protection engineering and dust explosion consulting.
In recent years, the Thermal Sciences Practice has developed tools to evaluate fire and explosion risks of lithium-ion
batteries. We have consulted with a variety of clients to evaluate and mitigate fire and explosion hazards of batteries
in applications including consumer products, vehicles and energy storage. We continue to be very active in wildland
fire investigation and risk assessment.
During the past year, our work in oil and gas exploration and production, liquefied natural gas and downstream oil
and gas sectors has continued. Our services in these areas include assessing new oil well control technologies,
assessing potential fire and explosion risks and consequences, investigating loss of containment incidents and
assessing the integrity of fixed assets.
Vehicle Engineering
We have performed thousands of investigations for the automotive, trucking, recreational vehicle, marine, aerospace,
and rail industries. Internal research programs and client projects have resulted in technological contributions that
have assisted manufacturers in the understanding of product performance and provided insight to government agencies
in establishing policy and regulations. Information gained from these analyses has also assisted clients in assessing
preventive measures related to the design of their products, as well as evaluating failures.
Our Test and Engineering Center located in Phoenix, Arizona, is used for our most complex testing and analysis. We
have gained a worldwide reputation for our ability to mobilize resources expeditiously and efficiently, integrate a
broad array of technical disciplines, and provide valuable insight that is objective and withstands rigorous scrutiny.
Many of our projects involve addressing the cause of accidents and our clients rely on us to determine what happened
in an accident and why it happened. In many cases, clients also want us to assess what could have been done to reduce
the severity of the accident or to mitigate occupant injuries to those involved. Current advances in emerging
transportation technologies and concepts allow our multi-disciplinary team of scientists, engineers, and analysts across
numerous practices to focus on the development and implementation of connected vehicles, automated vehicles,
connected/smart cities, and data analyses. Whether the objective is design analysis, component testing, failure
analysis, or accident reconstruction, our knowledge of vehicle systems and engineering principles coupled with our
experience from conducting full-scale tests aim to add insight and proficiency to every project.
ENVIRONMENTAL AND HEALTH SCIENCES
Chemical Regulation & Food Safety
Our Chemical Regulation and Food Safety Practice includes both technical and regulatory specialists who are
experienced in dealing with foods, food ingredients, cosmetics, dietary supplements, pesticide and biocides (including
conventional chemicals, biochemicals, microbials, antimicrobials/biocides, and products of biotechnology), and
9
industrial chemicals. We provide practical, scientific and regulatory support to meet global business objectives at
every stage of the product cycle, from research and development to retail and beyond.
During the past year, our Chemical Regulation and Food Safety staff have conducted a wide array of work. The
European and U.S. sides of the practice were jointly involved with ongoing support of COVID-19 related sanitizers
and disinfectants as well as multiple new pesticide active ingredients and end-use products. The European side of our
business was involved with many projects related to plant protection and biocidal product regulatory submissions,
from new active substances and those under review to product-specific dossiers for European member states. Due to
the pandemic numerous regulatory dossiers and risk assessments were prepared for emergency registration of biocidal
products (surface disinfectants and hand sanitizers) throughout Europe. In addition, we provided many specialist
assessments relating to human and environmental exposure and product efficacy as well as national and international
Maximum Residue Limit/import tolerance submissions covering countries such as South Korea, Taiwan and Hong
Kong. In Europe and the U.S., we continued to provide clients with regulatory compliance support for food contact
materials, food additives, novel foods, nutrition-related analyses, as well as undertaking safety assessments for food
and cosmetics products. We also provided proactive and reactive product safety and litigation support. For industrial
chemicals, we continued to provide full regulatory support for our clients who prepared and submitted registrations
and risk assessments. Our European and U.S. offices were active supporting our clients with their E.U. Registration,
Evaluation, Authorisation and Restriction of Chemicals (REACH) and U.S. Toxic Substances Control Act regulatory
requirements. Our U.S. offices continued to provide services related to new pesticide active ingredients and end-use
product development and registrations in the U.S., Canada, and Mexico, registration review by the U.S. Environmental
Protection Agency, new requirements related to the U.K. leaving the E.U., state registration support, import tolerances
in the U.S. and Canada, inert ingredient approvals, due diligence related to product and/or business sales, and data
compensation.
Ecological & Biological Sciences
Our ecological and biological scientists provide strategic support on issues related to natural resources damages
associated with chemicals and forest fires, international environmental disputes, ecosystem service assessments for
businesses, adverse weather events/climate change, ecological risk assessment, ecotoxicology, novel remediation
methods, restoration of wetlands and other natural resources, large development projects, resource utilization (such as
mineral mining, oil and gas, wood pulp, etc.), agriculture land-use impacts, genomic assessments, and the use of
chemicals and other products in commerce. The practice specializes in assessing the integrated effects of chemical,
biological, and physical stressors on aquatic and terrestrial ecosystems. Many of these assessments utilize a causal
analysis approach to systematically and transparently determine causation in complex and interrelated situations. The
practice is comprised of nationally recognized experts that cover disciplines related to the ecological implications and
risks associated with these projects.
Environmental & Earth Sciences
Our environmental scientists and engineers provide cost-effective, scientifically defensible and realistic assessments
and solutions to complex environmental issues. We offer technical, regulatory, and litigation support to industries that
include oil and gas, mining and minerals, chemicals, forest products, railroads, aerospace, development, and trade
associations, and to municipal and governmental clients. Our consultants specialize in the areas of environmental fate
and transport, environmental chemistry and forensics, remediation consulting, environmental engineering and waste
management, and natural resources damages assessment. Our expertise also includes hydrology and hydrogeology,
modeling and monitoring, water quality, water rights and water resources, extreme weather event and climate change
risk management, and evaluation of environmental and social risks.
Our work frequently involves complex and high visibility environmental problems and issues, often the focus of
environmental or toxic tort claims, where evaluation of contamination and historical reconstruction of events, releases,
and doses are central to problem resolution. We provide case-specific strategic and advisory consulting on risk
mitigation, planning, and environmental regulatory and policy issues, as well as high-level technical strategic
consulting to support critical business decisions and for complex matters where understanding the long-term
implications of early technical actions is critical to managing overall liability.
10
Health Sciences
Our health scientists, including epidemiologists, toxicologists, industrial hygienists, exposure scientists, air quality
scientists, biostatisticians, risk assessment scientists, and physicians, apply scientific and medical principles to
examine and address complex human-health-related risk issues in a variety of settings. Our consultants are recognized
nationally and internationally for our outstanding expertise and credentials, and our decades of experience in
government, academia, and industry sectors. Our work has included numerous community and environmental health
assessments, disease cluster investigations, air quality investigations and analyses, survey research, cohort and case-
control studies, exposure assessment and simulation studies, biologically-based modeling, meta-analyses, and state-
of-the-art literature reviews. We have addressed critical issues for clients on industrial chemicals, pesticides, mineral
fibers, drugs, medical devices, consumer products, nanotechnology, and other agents and products as they relate to
human health risk.
Our multidisciplinary team has extensive experience investigating a broad variety of health concerns such as claims
of adverse health effects from exposures to a wide range of physical agents (e.g., ionizing radiation, low- and radio-
frequency electromagnetic fields); chemical agents (e.g., volatile organic compounds, metals, dusts, air pollutants,
mineral fibers, fumes, nanoparticles, and pharmaceuticals); and biological agents (fungi/molds, bacteria, and other
micro-organisms). We can assess the potential health effects of occupational and environmental exposures; investigate
accidental releases of chemicals and evaluate fate and transport of chemical substances; characterize consumer and
workplace exposures through simulation and exposure reconstruction; provide air quality and meteorological
modeling, permitting, and licensing support services; develop measures of prevention and exposure control; and assist
clients with occupational safety and health evaluations and emergency preparedness and response. In the past year,
we have added key principal pharmacoepidemiologists, expanding our expertise in the pharmaceuticals arena, from
pre-approval through post-marketing. This expanding team brings innovation and novel approaches to complex issues
in drug safety, analyses of electronic medical or health records, and regulatory strategies related to drugs, devices, and
other medical products regulated by the U.S. Food and Drug Administration.
COMPETITION
The marketplace for our services is fragmented and we face different sources of competition in providing various
services. In addition, the services that we provide to some of our clients can be performed in-house by those clients.
Clients that have the capability to perform such services themselves will retain Exponent or other independent
consultants because of independence concerns.
In each of our practices, we believe that the principal competitive factors are: technical capability and breadth of
services, ability to deliver services on a timely basis, professional reputation and knowledge of litigation and
regulatory processes. Although we believe that we generally compete favorably in each of these areas, some of our
competitors may be able to provide services acceptable to our clients at lower prices.
We believe that the barriers to entry are low and that for many of our technical disciplines, competition is increasing.
In response to competitive forces in the marketplace, we continue to look for new markets for our various technical
disciplines.
HUMAN CAPITAL
Exponent's vision is to engage the brightest scientists and engineers to empower clients with solutions for a safe,
healthy, sustainable and technologically complex world. Attracting, exciting, developing, and rewarding exceptional
people with diverse backgrounds and expertise are central to our corporate mission. As a pre-eminent global
engineering and scientific consulting firm, we continuously create opportunity for hundreds of talented staff.
Exponent's culture actively supports the development of our professionals and their potential by creating a stimulating,
growth-oriented and inclusive environment. Our programs, tools, and processes support the development of (1)
science and engineering consultants, who balance exceptional technical prowess and objectivity with sound business
acumen; (2) corporate and support staff, who empower expansion into multiple markets; and (3) leaders who inspire
outstanding performance.
As of January 1, 2021, we employed 1,168 full-time, part time and hourly employees, including 930 engineering and
scientific staff, 63 technical support staff and 175 administrative and support staff. Our staff includes 857 employees
11
with advanced degrees, of which 642 employees have achieved the level of Ph.D., Sc.D., or M.D. As of January 1,
2021 approximately 88% of our employees are located in the United States and 12% are located in other global regions.
Technical full-time equivalent employees is a key metric that we use to analyze our revenues. During 2020 technical
full-time equivalent employees increased 1% to 912 as compared to 901 during the prior year due to our recruiting
and retention efforts. We attribute our ability to grow technical full-time equivalent employees to a number of factors,
including exciting and challenging assignments, strong leadership and management, the opportunity to learn new skills
and advance careers, along with competitive and equitable total rewards. To ensure a compelling total rewards
philosophy and practice, we have practices in place to deliver fair and equitable compensation for employees based
on their contribution and performance. We also offer a comprehensive set of benefits for employees and their families.
Exponent’s core values include being the best and getting it right; doing challenging, exciting, and important work in
an ethical and objective manner; recognizing and rewarding good work; working in teams and sharing a sense of
mission; insisting on honesty, integrity, trust and respect for the individual; and providing life-long professional
learning and renewal.
Our staff share their unique specialized scientific expertise on over 250 individual scientific and engineering
committees and advisory boards. Many of our staff serve in leadership roles or are actively working to develop
technical standards. Exponent’s professionals routinely contribute to the advancement of science through peer-
reviewed scientific literature, publishing a multitude of articles, book chapters, and books every year. Exponent staff
have published over 900 articles in scientific and engineering journals. More than 50 Exponent consultants currently
hold positions at academic institutions, where they serve as professors, research professors, adjunct and associate
faculty, lecturers, instructors, and advisors.
At Exponent, the health and safety of our employees is extremely important to us. To help mitigate occupational
hazards we maintain a safety management program that includes policies, procedures, training, and other contributions
to address the wide variety of project engagements. During the COVID-19 pandemic, our primary focus has been on
the safety and well-being of our employees and their families. Our global pandemic efforts include leveraging the
advice and recommendations of infectious disease experts to establish proper safety standards. As the pandemic
continues, the health and well-being of our workforce remains a top priority while we ensure productive remote work.
To enable a culture where diversity, equity, and inclusion are embedded we have articulated four pillars of action.
These include recruiting, people development, communication, and outreach.
Recruiting
We are working to identify and meet candidates from increasingly diverse backgrounds and to minimize bias in our
screening process. Through our university recruiting program we visit over 50 universities each year, and virtual
webinars allow us to engage graduate students at over 100 universities. Our outreach to students who are members of
affinity groups on campus supports diversification of our candidate pool. We are committed to broadening
relationships with historically black colleges and universities with graduate programs in our technical disciplines. Our
recruiting teams also identify diverse candidates from employee referrals, website applicants, and conferences. Our
leaders are continuously engaged with experienced consultants in other firms to stay alert to trends in the industry and
to recruit. We employ a behavioral and technical competency-based interviewing process to reduce bias in our
candidate screening.
People Development
We work to ensure that our people receive equitable opportunities and training and that our development pathways
are free from bias. Our employee resource group, which is focused on women and underrepresented minorities, teams
with our human resources department to conduct a quarterly seminar series on a broad set of topics ranging from
work-life balance to cross-cultural communications. We encourage our staff to participate in technical conferences,
professional societies, and standards committees. We support our technical staff as they share their scientific and
engineering insights related to safety, health, and the environment through Exponent website and social media content,
our webinar series, and external speaking opportunities. Our mentoring program provides training and leadership
opportunities to consultants early in their careers. Our sponsorship program pairs rising mid-level consultants with
senior leaders who serve as advocates and provide career opportunities. This pairing is a two-year commitment. We
12
encourage training for all employees and provide training opportunities at all levels on a variety of technical and soft
skills topics. Our leadership is exposed to best management practices that are vital to their development and the
development of their staff.
Communication
We encourage employee investment in the firm’s success by engaging with them through annual leadership meetings
and quarterly all-employee meetings. We also encourage our line management to invest in employees' physical,
cognitive, and emotional energy through their work. Employee engagement surveys are conducted annually to solicit,
collect, and disseminate feedback in our effort to continually improve our work environment. Exponent maintains an
online suggestion box for employees to express ideas for improving our work environment. Exponent also provides
new parent affinity groups and a shared online workspace for balancing work and parenting life.
Outreach
In June of 2020, Exponent matched employee contributions to charities involved in diversity, equity, and inclusion
initiatives with a $50,000 grant to the United Negro College Fund (UNCF). This grant will fund 16 scholarships for
African American students pursuing STEM majors at UNCF-member historically black colleges and universities. We
support the initiatives of our employees as they seek local service opportunities, and we are developing strategies for
deeper engagement in service through our participation in professional societies. Our Volunteer Connection intranet
site enables employees to share stories and pictures of outreach to their local communities and to encourage others to
participate.
ADDITIONAL INFORMATION
The address of our Internet website is www.exponent.com. We make available, free of charge through our website,
access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
other periodic and current Securities and Exchange Commission (SEC) reports, along with amendments to all of those
reports, as soon as reasonably practicable after we file or furnish the reports with the SEC. Copies of material filed or
furnished by us with the SEC may also be obtained by writing to us at our corporate headquarters, Exponent, Inc.,
Attention: Investor Relations, 149 Commonwealth Drive, Menlo Park, CA 94025, or by calling (650) 326-9400. The
content of our Internet website is not incorporated into and is not part of this Annual Report on Form 10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Exponent and their ages as of February 26, 2021 are as follows:
Name
Catherine Ford Corrigan, Ph.D. ................................
Robert I. Haddad, Ph.D.............................................
Brad A. James, Ph.D. ................................................
Harri K. Kytomaa, Ph.D............................................
Steven J. Murray, Ph.D. ............................................
John D. Pye, Ph.D. ....................................................
Richard Reiss, Sc.D. .................................................
Maureen T.F. Reitman, Sc.D. ...................................
Richard L. Schlenker, Jr............................................
Age
52
63
55
62
46
50
54
52
55
Sally B. Shepard........................................................
60
Position
President and Chief Executive Officer
Group Vice President
Group Vice President
Group Vice President
Group Vice President
Group Vice President
Group Vice President
Group Vice President
Executive Vice President, Chief Financial Officer and Corporate
Secretary
Chief Human Resources Officer
Executive officers of Exponent are appointed by the Board of Directors and serve at the discretion of the Board or
until the appointment of their successors. There is no family relationship between any of the directors and officers of
the Company.
13
Catherine Ford Corrigan, Ph.D., joined the Company in 1996. She was promoted to Principal in the Biomechanics
practice in 2002 and was appointed Group Vice President in May 2012. Dr. Corrigan was named President in July
2016. She was named Chief Executive Officer and elected to the Board of Directors in May 2018. Dr. Corrigan earned
her Ph.D. (1996) in Medical Engineering and Medical Physics and M.S. (1992) in Mechanical Engineering from the
Massachusetts Institute of Technology and her B.S. in Bioengineering from the University of Pennsylvania. Prior to
joining Exponent, Dr. Corrigan was a researcher in the Orthopaedic Biomechanics Laboratory at Beth Israel Hospital
and Harvard Medical School. On February 9, 2021, Dr. Corrigan was elected to the National Academy of Engineering.
Robert I. Haddad, Ph.D., joined the Company in May 2016 as a Corporate Vice President and Principal Scientist.
He was promoted to Group Vice President in October 2016. Prior to joining the Company, Dr. Haddad was Chief,
Assessment & Restoration Division, Office of Response & Restoration at the National Oceanic and Atmospheric
Administration from 2007 to 2016 where he was responsible for the strategic evaluation and tactical resolution of
environmental problems. From 2002 to 2007, Dr. Haddad was President and Principal Scientist at Applied
Geochemical Strategies, Inc. where he was responsible for providing litigation support and expertise in environmental
forensics, human health and ecological risk assessments, and natural resource damage assessments to regional,
national, and international clients. Dr. Haddad received his Ph.D. (1989) in Chemical Oceanography from the
University of North Carolina, Chapel Hill and B.S. (1979) in Geology from the University of California, Los Angeles.
Dr. Haddad has published in peer-reviewed technical publications and scientific journals, and has authored over 300
technical reports and confidential documents for a variety of projects.
Brad A. James, Ph.D., joined the Company in 1994. He was promoted to Principal Engineer in 2005 and was
appointed Corporate Vice President in 2014. Dr. James was appointed Group Vice President on January 4, 2020. Dr.
James received his Ph.D. (1994) in Metallurgical and Materials Engineering from the Colorado School of Mines and
his B.S. (1988) in Metallurgical Engineering from the University of Washington. He is a licensed professional engineer
in the states of California and Texas. Prior to joining Exponent, Dr. James was employed as a Research Engineer,
Materials Performance Division, at the Babcock and Wilcox R&D Center.
Harri K. Kytomaa, Ph.D., joined the Company in 1994. He was promoted to Principal Engineer in 1999 and was
appointed Corporate Vice President in 2006. Dr. Kytomaa was appointed Group Vice President in October 2016. Dr.
Kytomaa received his Ph.D. (1986) in Mechanical Engineering and M.S. (1981) in Mechanical Engineering from the
California Institute of Technology, and B.Sc. (1979) in Engineering Science from Durham University, England. He is
a Registered Professional Engineer in 9 states and a Certified Fire and Explosion Investigator in accordance with the
National Association of Fire Investigators National Certification Board. Prior to joining Exponent, Dr. Kytomaa was
Assistant Professor and Associate Professor of Mechanical Engineering at the Massachusetts Institute of Technology,
where he was head of the Fluid Mechanics Laboratory.
Steven J. Murray, Ph.D., joined the Company in 2001. He was promoted to Principal Engineer in 2008. Dr. Murray
was promoted to Corporate Vice President in May 2014 and Group Vice President in January 2015. Dr. Murray
received his Ph.D. (2000) in Materials Science and Engineering (Electronic Materials Panel) from the Massachusetts
Institute of Technology, B.S. (1996) in Materials Science and Mineral Engineering and B.S. (1996) in Mechanical
Engineering from the University of California, Berkeley. He is a Registered Professional Electrical Engineer in the
State of Oregon and Registered Professional Mechanical Engineer in the State of California.
John D. Pye, Ph.D., joined the Company in 1999. He was promoted to Principal Engineer in 2006 and was appointed
Corporate Vice President in 2009. Dr. Pye was appointed Group Vice President in January 2014. Dr. Pye received his
Ph.D. (1999) in Aerospace Engineering from Stanford University, M.S. (1993) in Aerospace Engineering from
Stanford University, and B.A.Sc. (1992) in Engineering Science from the University of Toronto, Canada. He is a
Registered Professional Mechanical Engineer in the State of California. Prior to joining Exponent, Dr. Pye held a
research position in the Aerospace Fluid Mechanics Lab at Stanford University where he was responsible for the
renovation and redesign of the Stanford Low-Speed wind tunnel as well as managing the Stanford experimental
facilities for the Stanford/NASA Ames Joint Institute for Aeronautics and Astronautics.
Richard Reiss, Sc.D., joined the Company in 2006 as a Principal Scientist. He was promoted to Group Vice President
in January 2015. Dr. Reiss earned his Sc.D. (1994) in Environmental Health from the Harvard University School of
Public Health, M.S. (1991) in Environmental Engineering from Northwestern University and B.S. (1989) in Chemical
Engineering from the University of California, Santa Barbara. Prior to joining Exponent he was a Vice President with
Sciences International. Dr. Reiss is a Fellow of the Society of Risk Analysis.
14
Maureen T.F. Reitman, Sc.D., joined the Company in 2002. She was promoted to Principal Engineer in 2006 and
was appointed Corporate Vice President in 2014. Dr. Reitman was appointed Group Vice President on January 4,
2020. Dr. Reitman received her Sc.D. (1993) in Materials Science and Engineering from the Massachusetts Institute
of Technology and her B.S. (1990) in Materials Science and Engineering from the Massachusetts Institute of
Technology. She is a registered Professional Mechanical Engineer in the state of Maryland. Prior to joining Exponent,
Dr. Reitman worked for the 3M Company in both research and management roles. Her activities at 3M included
technology identification, materials selection and qualification, product development, customer support, program
management, acquisition integration, intellectual property analysis, and patent litigation support.
Richard L. Schlenker, Jr., joined the Company in 1990. Mr. Schlenker is the Executive Vice President, Chief
Financial Officer and Corporate Secretary of the Company. He was appointed Executive Vice President in April 2010,
Chief Financial Officer in July 1999 and Secretary of the Company in November 1997. Mr. Schlenker was the Director
of Human Resources from 1998 until his appointment as Chief Financial Officer. He was the Manager of Corporate
Development from 1996 until 1998. From 1993 to 1996, Mr. Schlenker was a Business Manager, where he managed
the business activities for multiple consulting practices within the Company. Prior to 1993, he held several different
positions in finance and accounting within the Company. Mr. Schlenker holds a B.S. in Finance from the University
of Southern California.
Sally B. Shepard, rejoined the Company in 2014 as Vice President - Human Resources and was promoted to Chief
Human Resources Officer in 2017. From 2012 to 2014 she served as Vice President Human Resources at 41st
Parameter, which was acquired by Experian. From 2002 to 2009 she served as Vice President Human Resources at
CoWare, Inc., which was acquired by Synopsys. From 2000 to 2001 Ms. Shepard served as Vice President Human
Resources at Lutris Technologies. She also provided Human Resources consulting services for a variety of companies
between roles. From 1981 to 1999 Ms. Shepard held a variety of roles at Exponent including Managing Engineer,
Business Manager, Director of Human Resources and Information Technology, and Vice President of Corporate
Human Resources. Ms. Shepard holds a B.S. (1982) in Mechanical Engineering from Stanford University.
Item 1A. Risk Factors
Exponent operates in a rapidly changing environment that involves a number of uncertainties, some of which are
beyond our control and may have a material adverse effect on our financial condition and results of operations. These
uncertainties include, but are not limited to, those mentioned elsewhere in this report and those set forth below.
Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.
Risks Related to Our Clients and Demand for Our Services
The effects of the COVID-19 pandemic have materially affected our operations and those of our clients. The
duration and extent to which the COVID-19 pandemic will impact our future financial condition and results of
operations remains uncertain.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to
spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain
the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and
shutdowns. While we are unable to accurately predict the full impact that the COVID-19 pandemic will have on our
financial condition and results of operations due to numerous uncertainties, including the duration and severity of the
pandemic and containment measures, compliance with these measures has impacted, and will likely continue to
impact, our operations.
The vast majority of our employees have been working remotely since the implementation of government measures
to contain the virus. These remote working arrangements may result in inefficiencies, delays and additional costs and
risks. In addition, most of our clients are also working remotely, which may delay the initiation of new projects and
the execution of on-going work. Many of our litigation support projects paused due to courthouse closures and
associated legal delays. Travel restrictions have delayed work that requires inspection of a site or a product that cannot
be shipped. The pandemic has also negatively impacted our ability to conduct user studies.
The COVID-19 pandemic also raises the possibility of an extended global economic downturn and has caused
volatility in financial markets, which could affect demand for our services and impact our financial condition and
results of operations even after the pandemic is contained and the containment measures are lifted. For example, we
15
may be unable to collect receivables from those customers significantly impacted by the COVID-19 pandemic. We
believe that our existing balances of cash, cash equivalents, short-term investments and cash generated from operations
are sufficient to satisfy our working capital needs, capital expenditures, outstanding commitments, stock repurchases,
dividends and other liquidity requirements over at least the next 12 months. However, we continue to monitor the
impact of the COVID-19 pandemic on our cash flows and on the credit and financial markets.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be
accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness
of containment actions, and the impact of these and other factors on our employees and clients. There can be no
assurance, however, that the ultimate impact on our financial condition and results of operations will not be material.
We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to our business.
The unpredictable and reactive nature of our business can create uneven performance in any given quarter or
year.
Revenues are primarily derived from services provided in response to client requests or events that occur without
notice, and engagements, generally billed as services are performed, are terminable or subject to postponement or
delay at any time by clients. As a result, backlog at any particular time is small in relation to our quarterly or annual
revenues and is not a reliable indicator of revenues for any future periods. Revenues and operating margins for any
particular quarter are generally affected by staffing mix, resource requirements and timing and size of engagements.
Our financial results could suffer if our clients’ needs change more rapidly than we are able to secure the
appropriate mix of trained, skilled and experienced personnel.
As our clients’ needs change, new technologies develop, and legal and regulatory processes change, we may be unable
to timely hire or train personnel with the appropriate new set of skills and experience which could negatively impact
our growth and profitability.
The loss of a large client could adversely affect our business.
We currently derive a significant portion of our revenues from clients in the chemical, construction, consumer
products, energy, life sciences and transportation industries. The loss of any large client could have a material adverse
effect on our business, financial condition or results of operations.
Our clients may be unable to pay for our services.
If a client's financial difficulties become severe, the client may be unwilling or unable to pay our invoices in the
ordinary course of business, which could adversely affect collections of both our accounts receivable and unbilled
services. The COVID-19 pandemic raises the possibility of an extended global economic downturn, which may impact
the ability of our customers to pay for our services. On occasion, some of our clients have entered bankruptcy, which
has prevented us from collecting amounts owed to us. The bankruptcy of a client with substantial accounts receivable
could have a material adverse effect on our financial condition and results of operations.
Our business is dependent on our professional reputation.
The professional reputation of Exponent and its consultants is critical to our ability to successfully compete for new
client engagements and attract or retain professionals. Proven or unproven allegations against us may damage our
professional reputation. Any factors that damage our professional reputation could have a material adverse effect on
our business.
Our business can be adversely impacted by deregulation or reduced regulatory enforcement.
Public concern over health, safety and preservation of the environment has resulted in the enactment of a broad range
of environmental and/or other laws and regulations by local, state and federal lawmakers and agencies. These laws
and the implementation of new regulations affect nearly every industry, as well as the agencies of federal, state and
local governments charged with their enforcement. To the extent changes in such laws, regulations and enforcement
or other factors significantly reduce the exposures of manufacturers, owners, service providers and others to liability,
the demand for our services may be significantly reduced.
16
Tort reform can reduce demand for our services.
Several of our practices have a significant concentration in litigation support consulting services. To the extent tort
reform reduces the exposure of manufacturers, owners, service providers and others to liability, the demand for our
litigation support consulting services may be significantly reduced.
Potential conflicts of interest may preclude us from accepting some engagements.
We provide litigation support consulting and other services primarily in connection with significant disputes, or other
matters that are usually adversarial or that involve sensitive client information. The nature of our consulting services
has and will continue to preclude us from accepting engagements with other potential clients because of conflicts.
Accordingly, the nature of our business limits the number of both potential clients and potential engagements.
Inherent risks related to government contracts may adversely affect our business.
We work for various United States and foreign governmental entities and agencies. Government entities reserve the
right to audit our contracts and conduct inquiries and investigations of our business practices with respect to
government contracts. Findings from an audit may result in fees being refunded to the government or prospective
adjustment to previously agreed upon rates that will affect future margins. If a government client discovers improper
or illegal activities in the course of audits or investigations, we may become subject to various civil and criminal
penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension
of payments, fines and suspensions or debarment from doing business with other agencies of the government. The
inherent limitations of internal controls may not prevent or detect all improper or illegal activities, regardless of the
adequacy of such controls. Government contracts, and the proceedings surrounding them, are often subject to more
extensive scrutiny and publicity than other commercial contracts. Negative publicity related to our government
contracts, regardless of whether it is accurate, may further damage our business by affecting our ability to compete
for new contracts.
Governments may terminate, cancel, modify or curtail our contracts at any time prior to their completion.
Under our government contracts, the client generally has the right not to exercise options to extend or expand our
contracts and may otherwise terminate, cancel, modify or curtail our contracts at its convenience. Any decision by the
client not to exercise contract options or to terminate, cancel, modify or curtail our programs or contracts would
adversely affect our revenues, revenue growth and profitability.
Risks Related to Our Operations
Failure to attract and retain key employees may adversely affect our business.
Exponent’s business involves the delivery of professional services and is labor-intensive. Our success depends in large
part upon our ability to attract, retain and motivate highly qualified technical and managerial personnel. Qualified
personnel are in great demand and are likely to remain a limited resource for the foreseeable future. We cannot provide
any assurance that we can continue to attract sufficient numbers of highly qualified technical and managerial personnel
and retain existing employees. We have experienced and expect to continue to experience employee turnover. The
loss of key managerial employees, business generators or any significant number of employees could have a material
adverse impact on our business, including our ability to secure and complete engagements.
Our engagements may result in professional or other liability.
Our services typically involve difficult engineering and scientific assignments and carry risks of professional and other
liability. Many of our engagements involve matters that could have a severe impact on a client's business, cause a
client to lose significant amounts of money, or prevent a client from pursuing desirable business opportunities.
Accordingly, if a client is dissatisfied with our performance, the client could threaten or bring litigation in order to
recover damages or to contest its obligation to pay our fees. Litigation alleging that we performed negligently,
disclosed client confidential information, lost or damaged evidence, infringed on patents, were forced to withdraw
from a legal matter due to a conflict or otherwise breached our obligations to a client could expose us to significant
liabilities to our clients or other third parties or tarnish our reputation.
17
We are subject to unpredictable risks of litigation.
Although we seek to avoid litigation whenever possible, from time to time we are party to various lawsuits and claims.
Disputes may arise, for example, from employment issues, regulatory actions, business acquisitions and real estate
and other commercial transactions. There can be no assurances that any lawsuits or claims will be immaterial in the
future. Any material lawsuits or claims could adversely affect our business and reputation.
We are subject to security breaches that may disrupt our operations and/or lead to the inability to protect
confidential information.
We have experienced, and expect to continue to be subjected to, security breaches and threats, none of which have
been material to us to date. Despite the implementation of security and business continuity measures, our information
technology infrastructure and networks are vulnerable to electronic breaches of security. Such breaches could lead to
disruptions of our operations and potential unauthorized disclosure of confidential and/or personal information, which
could result in legal claims or proceedings. While we have taken reasonable steps to prevent and mitigate the damage
of a security breach by continuously improving our design and coordination of security controls across our business,
those steps may not be effective and there can be no assurance that any such steps can be effective against all possible
risks.
Failure to protect client and employee data may have an adverse effect on our business.
We manage, utilize, and store sensitive or confidential client or employee data, including personal data and protected
health information. As a result, we are subject to numerous laws and regulations designed to protect this information,
such as the U.S. federal and state laws governing the protection of health or other personally identifiable information,
including the Health Insurance Portability and Accountability Act, and international laws such as the European Union
General Data Protection Regulation. In addition, many states, U.S. federal governmental authorities and non-U.S.
jurisdictions have adopted, proposed, or are considering adopting or proposing, additional data security and/or data
privacy statutes or regulations such as the California Consumer Privacy Act. These laws and regulations are increasing
in complexity and number. If any person, including any of our employees, negligently disregards or intentionally
breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates
that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines, and/or criminal
prosecution. In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through
systems failure, employee negligence, fraud, or misappropriation, could damage our reputation and cause us to lose
clients and their related revenue in the future. Our remote working arrangements due to the COVID-19 pandemic may
increase the risks associated with protecting client and employee data.
Our international operations create special risks that could adversely affect our business.
In addition to our offices in the United States, we have physical offices in the United Kingdom, Switzerland, Hong
Kong, China, Singapore, Ireland, and Canada, and conduct business in several other countries. We expect to continue
to expand globally and our international revenues may account for an increasing portion of our revenues in the future.
Our international operations carry special financial, business and legal risks, including cultural and language
differences; employment laws and related factors that could result in lower utilization, higher staffing costs, and
cyclical fluctuations of utilization and revenues; currency fluctuations that adversely affect our financial position and
operating results; burdensome regulatory requirements and other barriers to conducting business; tariffs/trade disputes
and other trade barriers including the United Kingdom’s decision to leave the European Union; managing the risks
associated with engagements with foreign officials and governmental agencies, including the risks arising from the
United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010; managing the risks
associated with global privacy and data security laws and regulations including the General Data Protection Regulation
in Europe; greater difficulties in managing and staffing foreign operations; successful entry and execution in new
markets; restrictions on the repatriation of earnings; potentially adverse tax consequences; other impending legislation
that could add additional risks to the business; and the COVID-19 pandemic and resulting restrictions on business
activity, which vary significantly by region.
18
We could incur significant liabilities and suffer negative publicity if people or properties are harmed by the products
and systems we sell or the services we offer.
We, on occasion, design, develop, manufacture, sell, service and maintain various products and systems. In some
instances, we also train operators of such products and systems. Many of these products and systems utilize software
algorithms that are probabilistic in nature and subject to significant technical limitations. There are many factors, some
of which are beyond our control, which could result in the failure of our products or systems. The failure of our
products or systems could lead to injury, death, or extensive property damage and may lead to product liability,
professional liability, or other claims against us. Further, if our products or systems fail, or are perceived to have
failed, the negative publicity from such incident could have a material adverse effect on our business.
General Risks
Competition could reduce our pricing and adversely affect our business.
The markets for our services are highly competitive. In addition, there are relatively low barriers to entry into our
markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets.
Competitive pressure could reduce the market acceptance of our services and result in price reductions that could have
a material adverse effect on our business, financial condition or results of operations.
We hold substantial investments that could present liquidity risks.
Our cash equivalent and short-term investment portfolio as of January 1, 2021 consisted primarily of obligations of
the U.S. Treasury. We follow an established investment policy to monitor, manage and limit our exposure to interest
rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as
our maximum exposure to various asset classes.
Investments in some financial instruments may pose risks arising from liquidity and credit concerns. As of January 1,
2021, we had no impairment charge associated with our investment portfolio relating to such adverse financial market
conditions. Although we believe our current investment portfolio has a low risk of impairment, we cannot predict
future market conditions or market liquidity and can provide no assurance that our investment portfolio will remain
unimpaired.
Impairment of goodwill may require us to record a significant charge to earnings.
On our balance sheet as of January 1, 2021, we have $8,607,000 of goodwill subject to periodic evaluation for
impairment. Failure to achieve sufficient levels of cash flow at reporting units, the loss of key employees, changes to
the scope of operations of our business or a significant and sustained decline in our stock price could result in goodwill
impairment charges. During times of financial market volatility, significant judgment is required to determine the
underlying cause of the decline and whether stock price declines are short-term in nature or indicative of an event or
change in circumstances.
Impairment of long-lived assets or restructuring activities may require us to record a significant charge to earnings.
Our long-lived assets, including our office, laboratory and warehouse space in Menlo Park, California, our test and
engineering center in Phoenix, Arizona, and our office and laboratory facilities in Natick, Massachusetts, are subject
to periodic testing for impairment. Failure to achieve sufficient levels of cash flow at the asset group level could result
in impairment of our long-lived assets. In addition, we have operating lease commitments for office and laboratory
space. Changes in the business environment could lead to changes in the scope of operations of our business. These
changes, including the closure of one or more offices, could result in restructuring and/or asset impairment charges.
The COVID-19 pandemic raises the possibility of an extended global economic downturn, which increases the risk of
long-lived asset impairment charges.
19
Changes in, or interpretations of, accounting principles could have a significant impact on our financial position
and results of operations.
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies
formed to interpret and create appropriate accounting principles. A change in these principles can have a significant
effect on our reported results and may even retroactively affect previously reported transactions. Additionally, the
adoption of new or revised accounting principles may require that we make significant changes to our systems,
processes and controls.
Our business can be adversely affected by downturns in the overall economy.
The markets that we serve are cyclical and subject to general economic conditions. The direction and relative strength
of the global economy continues to be uncertain. If economic growth in the United States, where we primarily operate,
slows, our clients may consolidate or go out of business and thus demand for our services could be reduced
significantly.
Our quarterly results may vary.
Variations in our revenues and operating results occur from time to time, as a result of a number of factors, such as
the significance of client engagements commenced and completed during a quarter, the timing of engagements, the
number of working days in a quarter, employee hiring and utilization rates, and integration of companies acquired.
Because a high percentage of our expenses, particularly personnel and facilities related expenses, are relatively fixed
in advance of any particular quarter, a variation in the timing of the initiation or the completion of our client
assignments can cause significant variations in operating results from quarter to quarter.
The market price of our common stock may be volatile.
Many factors could cause the market price of our common stock to rise and fall. These include the risk factors listed
above and below; changes in estimates of our performance or recommendations by securities analysts; future sales of
shares of common stock in the public market; market conditions in the industry and economy as a whole; acquisitions
or strategic alliances involving us or our competitors; restatement of financial results; and changes in accounting
principles or methods. In addition, the stock market often experiences significant price fluctuations. These fluctuations
are often unrelated to the operating performance of particular companies. These broad market fluctuations may
adversely affect the market price of our common stock. When the market price of a company's stock drops
significantly, shareholders often institute securities class action litigation against that company. Any litigation against
us could cause us to incur substantial costs, divert the time and attention of our management and other resources, or
otherwise harm our business.
There can be no assurance that we will continue to declare cash dividends or repurchase our shares at all or in
any particular amounts.
Our Board of Directors has declared quarterly dividends since March 2013. Our intent to continue to pay quarterly
dividends and to repurchase our shares is subject to capital availability and, in the case of dividends, periodic
determinations by our Board of Directors that cash dividends are in the best interest of our stockholders and are in
compliance with all laws and agreements applicable to the declaration and payment of cash dividends by us. Future
dividends and share repurchases may also be affected by, among other factors: our views on potential future capital
requirements for investments, including acquisitions; legal risks; stock repurchase programs; changes in federal and
state income tax laws or corporate laws; contractual restrictions; and changes to our business model. Our dividend
payments and share repurchases may change from time to time, and we cannot provide assurance that we will continue
to declare dividends or repurchase shares at all or in any particular amounts. A reduction or suspension in our dividend
payments or share repurchase activity could have a negative effect on our stock price.
20
Catastrophic events may disrupt our business.
We rely on our network infrastructure and certain third-party hosted services to support our operations. A disruption
or failure of these systems in the event of a major earthquake, fire, flood, tsunami or other weather event, power loss,
telecommunications failure, software or hardware malfunctions, pandemics, cyber-attack, war, terrorist attack or other
catastrophic event that our disaster recovery plans do not adequately address, could have a material adverse effect on
our business, financial condition or results of operations.
Climate change may disrupt our business.
The areas where we conduct business are vulnerable to the effects of climate change. For example, in California,
wildfire danger increases the probability of planned power outages which may impact our employees’ abilities to
commute to work and to stay connected. Climate-related events, including the increasing frequency of extreme
weather events and their impact on critical infrastructure, have the potential to disrupt our business.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our Silicon Valley office facilities consist of a 153,738 square foot building, with office and laboratory space located
on a 6.3-acre tract of land we own in Menlo Park, California and an adjacent 27,000 square feet of warehouse storage
space on a 1.1-acre tract of land that we also own.
Our Test and Engineering Center (TEC) occupies 147 acres in Phoenix, Arizona. We lease this land from the state of
Arizona under a 30-year lease agreement that expires in January 2028 and have options to renew for two fifteen-year
periods. We constructed a 21,613 square foot indoor test facility as well as a 44,053 square foot engineering and test
preparation building at the TEC.
Our office facilities in Natick, Massachusetts, consist of a 60,480 square foot building, with office and laboratory
space located on a 2.9 acre tract of land that we own and an adjacent building that consists of 9,100 square feet of
office space located on a 0.81 acre tract of land that we also own.
In addition, we lease office and laboratory space in 20 other locations in 13 states and the District of Columbia, as
well as in China, Hong Kong, Singapore, Switzerland and the United Kingdom. Leases for these offices and laboratory
facilities have terms generally ranging between one and ten years.
Item 3. Legal Proceedings
Exponent is not engaged in any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
21
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Exponent’s common stock is traded on the NASDAQ Global Select Market, under the symbol “EXPO.”
As of February 19, 2021, there were 170 holders of record of our common stock. Because many of the shares of our
common stock are held by brokers and other institutions on behalf of stockholders, we believe that there are
considerably more beneficial holders of our common stock than record holders.
The following table provides information on the Company’s share repurchases (of Company common stock) for the
quarter ended January 1, 2021 (in thousands, except price per share):
Total
Number
of Shares
Purchased
Average
Price
Paid Per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under
the Plan or Program
75,455
75,455
75,455
— $
— $
— $
—
October 3 to October 30...........
October 31 to November 27.....
November 28 to January 1 .......
Total .........................................
— $
— $
— $
— $
—
—
—
—
Repurchases of the Company’s common stock were affected pursuant to a repurchase program authorized by the
Company’s Board of Directors. On January 31, 2019, the Company’s Board of Directors announced $75,000,000 for
the repurchase of the Company’s common stock. On May 29, 2020, the Company’s Board of Directors announced an
additional $45,000,000 for the repurchase of the Company’s common stock. These repurchase programs have no
expiration dates.
COMPANY STOCK PRICE PERFORMANCE GRAPH
This graph compares the Company’s cumulative total stockholder return calculated on a dividend-reinvested basis
from 2016 through 2020 with those of the Standard & Poor’s (“S&P”) 500 Index and the S&P SmallCap 600 Index.
The Company does not have a comparable peer group and thus has selected the S&P Small Cap 600 Index. The graph
assumes that $100 was invested on the last day of 2015. Note that the historic price performance is not necessarily
indicative of future price performance.
TOTAL SHAREHOLDER RETURNS
400
300
200
100
s
r
a
l
l
o
D
0
2015
2016
2017
2018
2019
2020
Years Ending
Exponent, Inc.
S&P 500 Index
S&P SmallCap 600 Index
22
Item 6. Selected Financial Data
The following selected consolidated financial data are derived from our consolidated financial statements. This data
should be read in conjunction with the consolidated financial statements and notes thereto, and with Part II - “Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(In thousands, except per share data)
Consolidated Statements of Income Data:
2020
2019
Fiscal Years
2018
2017
2016
Revenues before reimbursements.............................. $ 378,412 $ 391,390 $ 354,639 $ 329,664 $ 299,197
Revenues ................................................................... $ 399,900 $ 417,199 $ 379,523 $ 347,799 $ 315,076
Operating income ...................................................... $ 83,249 $ 85,111 $ 91,456 $ 72,051 $ 61,911
Net income ................................................................ $ 82,552 $ 82,460 $ 72,254 $ 41,305 $ 47,480
Net income per share:
Basic..................................................................... $
Diluted ................................................................. $
1.58 $
1.55 $
1.56 $
1.53 $
1.37 $
1.33 $
0.78 $
0.77 $
0.90
0.87
Cash dividends declared per share ............................ $
0.76 $
0.64 $
0.52 $
0.42 $
0.36
Consolidated Balance Sheet Data:
Cash and cash equivalents......................................... $ 197,525 $ 176,436 $ 127,059 $ 124,794 $ 114,967
Short-term investments ............................................. $ 45,001 $ 55,165 $ 81,495 $ 71,604 $ 58,755
Working capital ......................................................... $ 249,524 $ 240,084 $ 228,308 $ 222,402 $ 193,808
Total assets ................................................................ $ 580,096 $ 563,411 $ 468,936 $ 439,589 $ 403,744
Long-term liabilities .................................................. $ 101,290 $ 89,200 $ 56,723 $ 57,394 $ 50,162
Total stockholders’ equity ......................................... $ 361,498 $ 350,251 $ 313,909 $ 289,088 $ 273,346
23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's
interdisciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90
technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm
leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their
technologically complex products and processes, ensure the safety and health of their users, and address the challenges
of sustainability.
CRITICAL ACCOUNTING ESTIMATES
In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a
significant impact on our revenue, operating income and net income, as well as on the value of certain assets and
liabilities on our consolidated balance sheet. We base our assumptions, judgments and estimates on historical
experience and various other factors that we believe to be reasonable under the circumstances. On a regular basis we
evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that the assumptions,
judgments and estimates involved in accounting for revenue recognition and estimating the allowance for contract
losses and doubtful accounts have a potential impact on our consolidated financial statements, so we consider these to
be our critical accounting policies. We discuss below the assumptions, judgments and estimates associated with these
policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not
differed materially from actual results. For further information on our critical accounting policies, see “Note 1:
Summary of Significant Accounting Policies” of our Notes to Consolidated Financial Statements.
Revenue recognition. We derive our revenues primarily from professional fees earned on consulting engagements,
fees earned for the use of our equipment and facilities, as well as reimbursements for outside direct expenses associated
with the services that are billed to our clients.
Substantially all of our engagements are service contracts performed under time and material or fixed-price billing
arrangements. For time and material and fixed-price service projects, revenue is generally recognized as the services
are performed. For substantially all of our fixed-price service engagements, we recognize revenue based on the
relationship of incurred labor hours at standard rates to our estimate of the total labor hours at standard rates we expect
to incur over the term of the contract. Our estimate of total labor hours we expect to incur over the term of the contract
is based on the nature of the project and our past experience on similar projects. We believe this methodology achieves
a reliable measure of the revenue from the consulting services we provide to our customers under fixed-price contracts.
Management judgments and estimates must be made and used in connection with the revenues recognized in any
accounting period. These judgments and estimates include an assessment of the estimate as to the total effort required
to complete fixed-price projects.
Estimating the allowance for contract losses and doubtful accounts. We make estimates of our ability to collect
accounts receivable and our unbilled but recognized work-in-process. In circumstances where we are aware of a
specific customer’s inability to meet its financial obligations to us or for disputes with customers that affect our ability
to fully collect our accounts receivable and unbilled work-in-process, we record a specific allowance to reduce the net
recognized receivable to the amount we reasonably believe will be collected. For all other customers we recognize
allowances for contract losses and doubtful accounts taking into consideration factors such as historical write-offs,
customer concentration, customer creditworthiness, current economic conditions, and aging of amounts due.
24
The following table sets forth, for the periods indicated, the percentage of revenues of certain items in our consolidated
statements of income and the percentage increase (decrease) in the dollar amount of such items year to year:
Percentage of Revenues for
Fiscal Years
2020
2019
2018
Period to
Period Change
2020 v
2019
2019 v
2018
Revenues ...................................................................... 100.0% 100.0% 100.0%
(4.1)%
9.9%
Operating expenses:
Compensation and related expenses.......................
Other operating expenses .......................................
Reimbursable expenses ..........................................
General and administrative expenses .....................
Operating income.........................................................
62.5
8.1
5.4
3.2
79.2
20.8
60.5
8.0
6.2
4.9
79.6
20.4
56.7
8.1
6.6
4.6
76.0
24.0
(0.9)
(4.0)
(16.7)
(37.2)
(4.6)
(2.2)
17.3
9.7
3.7
17.0
15.3
(6.9)
Other income, net.........................................................
3.4
4.6
0.5
(28.3)
925.2
Income before income taxes ........................................
24.2
25.0
24.5
(7.0)
Provision for income taxes...........................................
3.6
5.2
5.5
(33.8)
11.7
3.2
Net income ...................................................................
20.6%
19.8%
19.0%
0.1%
14.1%
EXECUTIVE SUMMARY
Revenues for 2020 decreased 4% and revenues before reimbursements decreased 3% as compared to the prior year.
The decrease in revenues before reimbursements was due to a decrease in billable hours partially offset by an increase
in billing rates. Business restrictions associated with the COVID-19 pandemic caused project delays across multiple
areas of our business. Our litigation support work slowed with many projects paused due to court-related delays and
closures. The business restrictions associated with the COVID-19 pandemic also delayed our human participant
studies. The decrease in revenues before reimbursements was also due to fiscal 2020 having one less week of activity
as compared to fiscal 2019. We continued to see strength in integrity management advisory services for the utilities
sector as our clients focused on power reliability, in particular due to fire safety concerns in the western United States.
We also experienced growth in our chemical regulation and food safety practice as our scientists evaluated the effects
of chemicals and new products on human health and the environment.
Society is raising the bar for safety, health, sustainability and reliability, and clients are increasingly seeking our
interdisciplinary proactive solutions. We have been engaged by industry and government to help in the response to
the coronavirus. We continue to advise clients with respect to disinfectant products and procedures, COVID-19 testing,
contract tracing, and occupational health and safety. During the fourth quarter of 2020 we deployed wearable
technology platforms for COVID-19 risk monitoring and mitigation for the U.S. Army and Navy.
Net income was $82,552,000 during 2020 as compared to $82,460,000 during 2019. Diluted earnings per share
increased to $1.55 for 2020 as compared to $1.53 for 2019. Net income and diluted earnings per share for 2020
benefited from a decrease in our effective tax rate due to an increase in the excess tax benefit associated with stock-
based awards. The excess tax benefit associated with stock-based awards increased to $12,258,000 during 2020 as
compared to $8,067,000 during 2019.
We remain focused on selectively adding top talent and developing the skills necessary to expand upon our market
position, providing clients with in-depth scientific research and analysis to determine what happened and how to
prevent failures or exposures in the future. We also remain focused on capitalizing on emerging growth areas,
managing other operating expenses, generating cash from operations, maintaining a strong balance sheet and
undertaking activities such as share repurchases and dividends to enhance shareholder value.
25
COVID-19 Update
We responded quickly and carefully to address the unprecedented challenges created by the pandemic. We have
successfully adapted and will continue to evolve our business development, recruiting and operational approaches,
yielding benefits both during and after this crisis. We have accelerated our sharing of in-depth scientific and regulatory
knowledge through webinars and thought leadership pieces, which has fostered new client relationships and projects.
We have shifted all recruiting activities online, allowing us to reach a more geographically expansive set of candidates.
The health and safety of our team remain top priorities, and therefore we have leveraged our internal expertise to
establish protocols that allow us to safely continue laboratory activities and resume human participant studies. Our
business continuity plan and robust infrastructure have empowered productive remote work, and employees continue
to work from home unless they are performing laboratory testing or inspections. Our leadership team has responded
with enhanced internal communications to encourage increased connectivity across the firm.
We are pleased that the Company has been able to address the majority of our clients’ needs with a mostly remote
workforce. The relaxation of business restrictions in June allowed us to resume laboratory testing, inspections, and
human participant studies for clients in non-essential industries. Field inspections of sites and products have increased
due to lifting of travel restrictions but are still occurring at a reduced level since many businesses are not fully
operational.
We continue to receive new retentions for litigation support, and work is ongoing for many existing matters. At the
same time, trial dates continue to be delayed, removing imminent deadlines and causing some clients – in particular
the automotive industry – to pause work. Courts have been experimenting with virtual bench trials as well as social
distancing for in-person trials, so we expect trials will gradually increase.
We are pleased to be sharing our scientific and regulatory knowledge on health and safety issues related to the novel
coronavirus through webinars and thought leadership pieces. We continue to advise clients with respect to disinfectant
products and procedures, COVID-19 testing, contract tracing, and occupational health and safety.
OVERVIEW OF THE YEAR ENDED JANUARY 1, 2021
Our revenues consist of professional fees earned on consulting engagements, fees for use of our equipment and
facilities, and reimbursements for outside direct expenses associated with the services performed that are billed to our
clients.
We operate on a 52-53 week fiscal year with each year ending on the Friday closest to December 31st. The fiscal year
ended January 1, 2021 included 52 weeks of activity. The fiscal year ended January 3, 2020 included 53 weeks of
activity. The fiscal year ended December 28, 2018 included 52 weeks of activity. Fiscal 2021 is a 52 week fiscal year
that will end on Friday, December 31, 2021.
During 2020, billable hours decreased 7% to 1,273,000 as compared to 1,376,000 during 2019. Our utilization
decreased to 67% for 2020 as compared to 72% for 2019. Technical full-time equivalent employees increased 1% to
912 for 2020 as compared to 901 for 2019. We continue to selectively hire key talent to expand our capabilities.
FISCAL YEARS ENDED JANUARY 1, 2021, AND JANUARY 3, 2020
Revenues
(In thousands except percentages)
Fiscal Years
Engineering and Other Scientific ..................................................... $
Percentage of total revenues.............................................................
Environmental and Health................................................................
Percentage of total revenues.............................................................
Total revenues............................................................................. $
2020
319,346
$
79.9%
80,554
20.1%
$
399,900
26
Percent
Change
2019
339,796
81.4%
77,403
18.6%
417,199
(6.0)%
4.1%
(4.1)%
The decrease in revenues for our Engineering and Other Scientific segment was due to a decrease in billable hours
partially offset by an increase in billing rates. During 2020, billable hours for this segment decreased by 10% to
976,000 as compared to 1,084,000 during 2019. Utilization for this segment decreased to 67% for 2020 as compared
to 73% for 2019. Business restrictions associated with the COVID-19 pandemic caused project delays across multiple
practices within this segment. The most substantial impact was on our litigation support work with many projects
paused due to court-related delays. The business restrictions associated with the COVID-19 pandemic also delayed
our human participant studies. The decrease in billable hours was also due to fiscal 2020 having one less week of
activity than fiscal 2019. We continued to see strength in integrity management advisory services for the utilities sector
as our clients focus on power reliability, in particular due to fire safety concerns in the western United States. Technical
full-time equivalent employees in this segment increased 1% to 704 during 2020 as compared to 699 for 2019.
Clients continued to seek out our expertise for proactive and reactive engagements across a broad range of industries
and use cases. Our multidisciplinary battery team leveraged its experience in consumer electronics to advance energy
storage for electric vehicles and medical devices. Our integrity management advisory services for the utilities industry
remained strong as clients and regulators focused on power reliability and safety. Our biomedical team advised clients
as they navigated evolving regulatory frameworks around the world.
The increase in revenues from our Environmental and Health segment was due to an increase in billable hours and an
increase in billing rates partially offset by fiscal 2020 having one less week of activity than fiscal 2019. During 2020,
billable hours for this segment increased by 2% to 297,000 as compared to 292,000 during 2019. The increase in
billable hours was due to growth in our chemical regulation & food safety practice where we expanded our proactive
services. The increase in billable hours was partially offset by fiscal 2020 having one less week of activity than fiscal
2019. This segment also experienced delays in litigation related projects due to business restrictions associated with
the COVID-19 pandemic. Utilization for this segment increased to 69% during 2020 as compared to 68% during 2019.
Technical full-time equivalents increased 3% to 208 during 2020 as compared to 202 for 2019 due to our recruiting
and retention efforts.
Revenues are primarily derived from services provided in response to client requests or events that occur without
notice and engagements are generally terminable or subject to postponement or delay at any time by our clients. As a
result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable
indicator of revenues for any future periods.
Percent
Change
(0.9)%
2019
252,197
60.5%
Compensation and Related Expenses
(In thousands except percentages)
Fiscal Years
Compensation and related expenses................................................. $
Percentage of total revenues.............................................................
2020
250,041
$
62.5%
27
The decrease in compensation and related expenses during 2020 was due to a change in the value of assets associated
with our deferred compensation plan and a decrease in bonus expense, partially offset by an increase in payroll
expense. During 2020, deferred compensation expense decreased $4,806,000 with a corresponding decrease to other
income, net, as compared to the prior year due to the change in value of assets associated with our deferred
compensation plan. This decrease consisted of an increase in the value of the plan assets of $8,028,000 during 2020
as compared to an increase in the value of the plan assets of $12,834,000 during 2019. During 2020, bonus expense
decreased by $3,710,000 due to a corresponding decrease in the bonus pool, which is 33% of income before income
taxes, interest income, bonus expense, and stock-based compensation. Payroll expense increased $6,187,000 during
2020 due to the increase in technical full-time equivalent employees and the impact of our annual salary increase,
partially offset by fiscal 2020 having one less week of activity than fiscal 2019. We expect our compensation expense,
excluding the change in value of deferred compensation plan assets, to increase as we selectively add new talent and
adjust compensation to market conditions.
Other Operating Expenses
(In thousands except percentages)
Fiscal Years
2020
2019
Percent
Change
Other operating Expenses................................................................. $
Percentage of total revenues.............................................................
32,234
$
8.1%
33,562
8.0%
(4.0)%
Other operating expenses include facilities-related costs, technical materials, computer-related expenses and
depreciation and amortization of property, equipment and leasehold improvements. The decrease in other operating
expenses was primarily due to a decrease in occupancy expense of $978,000 and a decrease in technical materials of
$487,000. The decrease in occupancy expenses and technical materials were primarily due to COVID-19 pandemic-
related business restrictions and fiscal 2020 having one less week of activity than fiscal 2019. We expect other
operating expense to grow as we selectively add new talent and make additional investments in our corporate
infrastructure.
Reimbursable Expenses
(In thousands except percentages)
Fiscal Years
2020
2019
Percent
Change
Reimbursable expenses .................................................................... $
Percentage of total revenues.............................................................
21,488
$
5.4%
25,809
6.2%
(16.7)%
The amount of reimbursable expenses will vary from year to year depending on the nature of our projects. The decrease
during 2020 was primarily due to COVID-19 pandemic-related business and travel restrictions.
General and Administrative Expenses
(In thousands except percentages)
Fiscal Years
2020
2019
Percent
Change
General and administrative expenses ............................................... $
Percentage of total revenues.............................................................
12,888
$
3.2%
20,520
4.9%
(37.2)%
28
The decrease in general and administrative expenses during 2020 was primarily due to decreases in travel and meals
of $5,969,000 and a decrease in personnel expenses of $1,348,000. The decrease was also due to fiscal 2020 having
one less week of activity than fiscal 2019. The decrease in travel and meals and personnel expenses were primarily
due to COVID-19 pandemic-related business and travel restrictions. We expect general and administrative expenses
to increase as we selectively add new talent, expand our business development efforts, and pursue staff development
initiatives.
Operating Income
(In thousands except percentages)
Engineering and other scientific ....................................................... $
Environmental and health .................................................................
Total segment operating income.......................................................
Corporate operating expense ............................................................
Total operating income ............................................................... $
Fiscal Years
2020
100,616 $
26,728
127,344
(44,095)
83,249 $
2019
110,822
26,589
137,411
(52,300)
85,111
Percent
Change
(9.2)%
0.5%
(7.3)%
(15.7)%
(2.2)%
The decrease in operating income for our Engineering and Other Scientific segment during 2020 as compared to 2019
was due to a decrease in revenues. The decrease in revenues was due to a decrease in billable hours, partially offset
by an increase in billing rates. Business restrictions associated with the COVID-19 pandemic caused project delays
across multiple practices within this segment. The most substantial impact was on our litigation support work with
many projects paused due to court-related delays. The business restrictions associated with the COVID-19 pandemic
also delayed our human participant studies. The decrease in billable hours was also due to fiscal 2020 having one less
week of activity than fiscal 2019. We continued to see strength in the integrity management advisory services for the
utilities sector. The impact of the decrease in revenues to operating income for this segment was partially offset by a
decrease in operating expenses primarily due to the business and travel restrictions associated with the COVID-19
pandemic.
The slight increase in operating income for our Environmental and Health segment during 2020 as compared to 2019
was due to an increase in revenues. The increase in revenues was due to an increase in billable hours and an increase
in billing rates, partially offset by fiscal 2020 having one less week of activity than fiscal 2019. The increase in billable
hours was due to growth in our chemical regulation & food safety practice where we expanded our proactive services.
Certain operating expenses are excluded from the Company’s measure of segment operating income. These expenses
include the costs associated with our human resources, finance, information technology, and business development
groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred
compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the
change in our allowance for contract losses and doubtful accounts.
The decrease in corporate operating expenses during 2020 as compared to 2019 was primarily due to a decrease in
deferred compensation expense. During 2020, deferred compensation expense decreased $4,806,000, with a
corresponding decrease to other income, net, as compared to the prior year, due to the change in value of assets
associated with our deferred compensation plan. This decrease consisted of an increase in the value of plan assets of
$8,028,000 during 2020 as compared to an increase in the value of plan assets of $12,834,000 during 2019. The
decrease in corporate operating expenses was also due to a decrease in travel and meals and personnel expenses
primarily due to COVID-19 pandemic-related business and travel restrictions. The decrease was also due to fiscal
2020 having one less week of activity than fiscal 2019.
Other Income
(In thousands except percentages)
Fiscal Years
2020
2019
Percent
Change
Other income .................................................................................... $
Percentage of total revenues.............................................................
13,687
$
3.4%
19,079
4.6%
(28.3)%
29
Other income consists primarily of interest income earned on available cash, cash equivalents and short-term
investments, changes in the value of assets associated with our deferred compensation plan and rental income from
leasing excess space in our Silicon Valley facility. The decrease in other income was primarily due to the change in
value of assets associated with our deferred compensation plan and a decrease in interest income of $2,207,000,
partially offset by an increase in the realized gain on foreign exchange of $1,432,000 and an increase in rental income
of $210,000. During 2020, other income decreased $4,806,000 with a corresponding decrease to deferred
compensation expense as compared to 2019, due to the change in value of assets associated with our deferred
compensation plan. This change consisted of an increase in the value of the plan assets of $8,028,000 during 2020 as
compared to an increase in the value of the plan assets of $12,834,000 during 2019. The decrease in interest income
was due to lower interest rates for our cash equivalents and short-term investments. The increase in the realized gain
on foreign exchange was due to an increase in the value of monetary assets denominated in non-functional currencies
during 2020 and the recognition of a foreign currency exchange loss of $601,000 during 2019 associated with the
divestiture of our German subsidiary.
Income Taxes
(In thousands except percentages)
Fiscal Years
Income taxes..................................................................................... $
Percentage of total revenues.............................................................
Effective tax rate ..............................................................................
14,384
$
3.6%
14.8%
2020
2019
21,730
Percent
Change
(33.8)%
5.2%
20.9%
The decrease in our effective tax rate was due to an increase in the excess tax benefit associated with stock-based
awards and a 2019 tax charge associated with the divestiture of our German subsidiary. The excess tax benefit
associated with stock-based awards increased to $12,258,000 during 2020 as compared to $8,067,000 during 2019.
During 2019 we recognized a tax charge of $956,000 associated with the divestiture of our German subsidiary.
FISCAL YEARS ENDED JANUARY 3, 2020, AND DECEMBER 28, 2018
Revenues
(In thousands except percentages)
Fiscal Years
Engineering and Other Scientific ..................................................... $
Percentage of total revenues.............................................................
Environmental and Health................................................................
Percentage of total revenues.............................................................
Total revenues............................................................................. $
2019
339,796
$
81.4%
77,403
18.6%
$
417,199
2018
306,265
80.7%
73,258
19.3%
379,523
10.9%
5.7%
9.9%
Percent
Change
The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours
and an increase in billing rates. During 2019, billable hours for this segment increased by 9.3% to 1,084,000 as
compared to 992,000 during 2018. This segment had strong growth in its biomedical engineering, buildings &
structures, construction consulting, human factors, materials & corrosion engineering, thermal sciences, and polymer
science & materials chemistry practices. We continued to see strong demand from multinational companies for our
scientific expertise and advice regarding their products. Safety concerns regarding energy storage systems drove
increased demand for risk assessments in the consumer products, transportation, utility and medical device industries.
The increase in billable hours was also due to fiscal 2019 having one additional week of activity than fiscal 2018.
Utilization decreased to 73% for 2019 as compared to 75% for 2018. The decrease in utilization was due to the
completion of a large human factors’ assessment in the third quarter of 2018. Technical full-time equivalents increased
9.2% to 699 for 2019 as compared to 640 for 2018 due to our recruiting and retention efforts.
30
The increase in revenues from our Environmental and Health segment was due to an increase in billable hours and an
increase in billing rates. During 2019, billable hours for this segment increased by 3.5% to 292,000 as compared to
282,000 during 2018. The increase in billable hours was due to growth in our chemical regulation and food safety
practice where we expanded our proactive services. The increase in billable hours was also due to fiscal 2019 having
one additional week of activity than fiscal 2018. Utilization was 68% for both 2019 and 2018. Technical full-time
equivalents increased 1.5% to 202 during 2019 as compared to 199 for 2018 due to our recruiting and retention efforts.
Revenues are primarily derived from services provided in response to client requests or events that occur without
notice and engagements are generally terminable or subject to postponement or delay at any time by our clients. As a
result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable
indicator of revenues for any future periods.
Compensation and Related Expenses
(In thousands except percentages)
Fiscal Years
Compensation and related expenses................................................. $
Percentage of total revenues.............................................................
2019
252,197
$
60.5%
2018
215,052
56.7%
Percent
Change
17.3%
The increase in compensation and related expenses during 2019 was due to an increase in payroll expense, an increase
in bonus expense, an increase in fringe benefits, and a change in the value of assets associated with our deferred
compensation plan. During 2019, payroll and fringe benefits increased $13,629,000 and $1,735,000, respectively, due
to the increase in technical full-time equivalent employees, the impact of our annual salary increase, and fiscal 2019
having one additional week of activity than fiscal 2018. During 2019, bonus expense increased by $4,576,000 due to
a corresponding increase in income before income taxes, before bonus expense, and before stock-based compensation.
During 2019, deferred compensation expense increased $16,734,000 with a corresponding increase to other income,
net, as compared with the prior year due to the change in value of assets associated with our deferred compensation
plan. This increase consisted of an increase in the value of the plan assets of $12,834,000 during 2019 as compared to
a decrease in the value of the plan assets of $3,900,000 during 2018.
Other Operating Expenses
(In thousands except percentages)
Fiscal Years
2019
2018
Percent
Change
Other operating Expenses................................................................. $
Percentage of total revenues.............................................................
33,562
$
8.0%
30,599
8.1%
9.7%
Other operating expenses include facilities-related costs, technical materials, computer-related expenses and
depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating
expenses was primarily due to an increase in occupancy expense of $1,028,000, an increase in information technology
expenses of $768,000, an increase in depreciation and amortization of $514,000, and an increase in technical materials
of $317,000. These increases were due to our increase in technical full-time equivalent employees, investments in our
corporate infrastructure and fiscal 2019 having one additional week of activity than fiscal 2018.
Reimbursable Expenses
(In thousands except percentages)
Fiscal Years
2019
2018
Percent
Change
Reimbursable expenses .................................................................... $
Percentage of total revenues.............................................................
25,809
$
6.2%
24,884
6.6%
3.7%
31
The amount of reimbursable expenses will vary from year to year depending on the nature of our projects.
General and Administrative Expenses
(In thousands except percentages)
Fiscal Years
2019
2018
Percent
Change
General and administrative expenses ............................................... $
Percentage of total revenues.............................................................
20,520
$
4.9%
17,532
4.6%
17.0%
The increase in general and administrative expenses during 2019 was primarily due to an increase in travel and meals
of $1,724,000, an increase in marketing and promotion of $334,000, an increase in bad debt of $259,000 and several
other individually insignificant increases. The increase in travel and meals was due to a firm-wide managers meeting
held during 2019, an increase in technical full-time equivalent employees, an increase in business development and
professional development activities and fiscal 2019 having one additional week of activity than fiscal 2018. The
increase in marketing and promotion was due to an increase in business development activities.
Operating Income
(In thousands except percentages)
Engineering and other scientific ....................................................... $
Environmental and health .................................................................
Total segment operating income .......................................................
Corporate operating expense.............................................................
Total operating income................................................................ $
Fiscal Years
2019
110,822 $
26,589
137,411
(52,300)
85,111 $
2018
100,307
23,824
124,131
(32,675)
91,456
Percent
Change
10.5%
11.6%
10.7%
60.1%
-6.9%
The increase in operating income for our Engineering and Other Scientific segment during 2019 as compared to 2018
was due to an increase in revenues. The increase in revenues was due to an increase in billable hours and an increase
in billing rates. We continued to see strong demand for our services related to product recalls, including assignments
from the consumer products and automotive industries. Proactive services continued to expand as companies sought
our interdisciplinary advice throughout the product life cycle, consistent with the increased importance placed on
understanding how users interact with complex technologies.
The increase in operating income for our Environmental and Health segment during 2019 as compared to 2018 was
due to an increase in revenues. The increase in revenues was due to an increase in billable hours and an increase in
billing rates. The increase in billable hours was due to the expansion of our chemical regulation & food safety proactive
services.
Certain operating expenses are excluded from the Company's measure of segment operating income. These expenses
include the costs associated with our human resources, finance, information technology, and business development
groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred
compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the
change in our allowance for contract losses and doubtful accounts.
The increase in corporate operating expenses during 2019 as compared to 2018 was primarily due to an increase in
deferred compensation expense. During 2019, deferred compensation expense increased $16,734,000, with a
corresponding increase to other income, net, as compared to the prior year, due to the change in value of assets
associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of
$12,834,000 during 2019 as compared to a decrease in the value of plan assets of $3,900,000 during 2018. The increase
in corporate operating expenses was also due to an increase in travel and meals due to a firm-wide managers meeting
held during 2019, an increase in stock-based compensation associated with restricted stock unit grants, and increases
in expenses for our human resources, finance, information technology, and business development groups due to
increases in technical full-time equivalent employees, investments in our corporate infrastructure and fiscal 2019
having one additional week of activity than fiscal 2018.
32
Other Income
(In thousands except percentages)
Engineering and other scientific ....................................................... $
Environmental and health .................................................................
Fiscal Years
2019
110,822 $
26,589
2018
100,307
23,824
Percent
Change
10.5%
11.6%
Other income consists primarily of interest income earned on available cash, cash equivalents and short-term
investments, changes in the value of assets associated with our deferred compensation plan and rental income from
leasing excess space in our Silicon Valley facility. The increase in other income was primarily due to the change in
value of assets associated with our deferred compensation plan and an increase in interest income, partially offset by
an increase in loss on foreign exchange. During 2019, other income increased $16,734,000 with a corresponding
increase to deferred compensation expense as compared to 2018. This change consisted of an increase in the value of
the plan assets of $12,834,000 during 2019 as compared to a decrease in the value of the plan assets of $3,900,000
during 2018. The increase in interest income of $1,161,000 was due to higher average balances and higher interest
rates for our cash equivalents and short-term investments. During 2019, we recognized a foreign currency exchange
loss of $601,000 associated with the planned divestiture of our German subsidiary.
Income Taxes
(In thousands except percentages)
Fiscal Years
Income taxes..................................................................................... $
Percentage of total revenues.............................................................
Effective tax rate ..............................................................................
21,730
$
5.2%
20.9%
2019
2018
21,063
Percent
Change
3.2%
5.5%
22.6%
The decrease in our effective tax rate was due to an increase in the excess tax benefit associated with stock-based
awards partially offset by a tax charge associated with the planned divestiture of our German subsidiary. The excess
tax benefit associated with stock-based awards increased to $8,067,000 during 2019 as compared to $4,154,000 during
2018. During 2019, we recognized a tax charge of $956,000 associated with the planned divestiture of our German
subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
(In thousands)
Net cash provided by (used in):
Operating activities ........................................................................... $
Investing activities ............................................................................ $
Financing activities ........................................................................... $
2020
Fiscal Years
2019
2018
103,312 $
5,024 $
(88,355) $
108,059 $
4,269 $
(63,414) $
91,188
(25,820)
(62,500)
We financed our business in 2020 through available cash and cash flows from operating activities. We invest our
excess cash in cash equivalents and short-term investments. As of January 1, 2021, our cash, cash equivalents and
short-term investments were $242,526,000 as compared to $231,601,000 at January 3, 2020. We believe our existing
balances of cash, cash equivalents and short-term investments will be sufficient to satisfy our working capital needs,
capital expenditures, outstanding commitments, stock repurchases, dividends and other liquidity requirements over at
least the next 12 months.
Generally, our net cash provided by operating activities is used to fund our day-to-day operating activities. First quarter
operating cash requirements are generally higher due to payment of our annual bonuses accrued during the prior year.
Our largest source of operating cash flows is cash collections from our clients. Our primary uses of cash from operating
activities are for employee-related expenditures, leased facilities, taxes, and general operating expenses.
Net cash provided by operating activities was $103.3 million for 2020 as compared to $108.1 million and $91.2 million
in 2019 and 2018, respectively.
33
During 2020, 2019 and 2018, net cash provided by/used in investing activities was primarily related to the purchase
and maturity of short-term investments and capital expenditures. During 2019 we substantially completed construction
of our office and laboratory facilities in Natick, Massachusetts. Total capital expenditures associated with this facility
were $15.2 million during 2019. During 2018, we purchased 2.9 acres of land in Natick, Massachusetts, and started
construction of our office and laboratory facilities. The total purchase price for the land was $5.2 million and our total
capital expenditures during 2018 associated with the construction were $5.3 million.
The increase in net cash used in financing activities during 2020 as compared to 2019 was due to an increase in our
quarterly dividend payment and an increase in repurchases of our common stock. The increase in net cash used in
financing activities during 2019 as compared to 2018 was due to an increase in our quarterly dividend payment
partially offset by a decrease in repurchases of our common stock.
We expect to continue our investing activities, including capital expenditures. Furthermore, cash reserves may be used
to repurchase common stock under our stock repurchase programs, pay dividends, procure facilities and equipment or
strategically acquire professional service firms that are complementary to our business.
The following schedule summarizes our principal contractual commitments as of January 1, 2021 (in thousands):
Fiscal
year
2021 .............................................................................................................................................
2022 .............................................................................................................................................
2023 .............................................................................................................................................
2024 .............................................................................................................................................
2025 .............................................................................................................................................
Thereafter ....................................................................................................................................
$
Operating
lease
commitments
6,555
5,340
3,672
2,252
1,491
2,973
22,283
The above table does not reflect unrecognized tax benefits of $1,873,000, the timing of which is uncertain. Refer to
“Note 7: Income Taxes” of the Notes to Consolidated Financial Statements for additional discussion on unrecognized
tax benefits.
We maintain nonqualified deferred compensation plans for the benefit of a select group of highly compensated
employees. Vested amounts due under the plans of $83,961,000 were recorded as a long-term liability on our
consolidated balance sheet at January 1, 2021. Vested amounts due under the plans of $5,016,000 were recorded as a
current liability on our consolidated balance sheet at January 1, 2021. Company assets that are earmarked to pay
benefits under the plans are held in a rabbi trust and are subject to the claims of our creditors. As of January 1, 2021,
invested amounts under the plans of $83,731,000 were recorded as a long-term asset on our consolidated balance
sheet. As of January 1, 2021, invested amounts under the plans of $5,016,000 were recorded as a current asset on our
consolidated balance sheet.
As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain
events or occurrences while the officer or director is, or was serving, at our request in such capacity. The
indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The
maximum potential amount of future payments we could be required to make under these indemnification agreements
is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to
recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements
in excess of applicable insurance coverage is minimal.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not engage in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.
34
Non-GAAP Financial Measures
Regulation G, conditions for use of Non-Generally Accepted Accounting Principles (“Non-GAAP”) financial
measures, and other SEC regulations define and prescribe the conditions for use of certain Non-GAAP financial
information. Generally, a Non-GAAP financial measure is a numerical measure of a company's performance, financial
position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance with GAAP. We closely monitor two financial
measures, EBITDA and EBITDAS, which meet the definition of Non-GAAP financial measures. We define EBITDA
as net income before income taxes, interest income, depreciation and amortization. We define EBITDAS as EBITDA
before stock-based compensation. We regard EBITDA and EBITDAS as useful measures of operating performance
and cash flow to complement operating income, net income and other GAAP financial performance measures.
Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present
and future operating results. These measures are used to evaluate our financial results, develop budgets and determine
employee compensation. These measures, however, should be considered in addition to, and not as a substitute or
superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with
GAAP. A reconciliation of the Non-GAAP measures to the nearest comparable GAAP measure is set forth below.
The following table shows EBITDA as a percentage of revenues before reimbursements for 2020, 2019 and 2018:
(in thousands, except percentages)
Revenues before reimbursements..................................................... $
EBITDA ........................................................................................... $
EBITDA as a % of revenues before reimbursements ......................
2020
378,412
102,102
$
$
27.0%
Fiscal Years
2019
391,390
107,084
$
$
27.4%
2018
354,639
96,858
27.3%
The decrease in EBITDA as a percentage of revenues before reimbursements for 2020 as compared to 2019 was due
to a 3% decrease in revenues before reimbursements, partially offset by a 37% decrease in general and administrative
expenses primarily due to the business and travel restrictions associated with the COVID-19 pandemic.
The slight increase in EBITDA as a percentage of revenues before reimbursements for 2019 as compared to 2018 was
due to 10% growth in revenues before reimbursements, partially offset by a 17% increase in general and administrative
expenses primarily due to a firm-wide managers’ meeting during 2020.
The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income,
for 2020, 2019 and 2018:
(in thousands)
Net Income ........................................................................................ $
Add back (subtract):
2020
Fiscal Years
2019
2018
82,552 $
82,460 $
72,254
Income taxes ................................................................................
Interest income ............................................................................
Depreciation and amortization.....................................................
EBITDA .................................................................................
Stock-based compensation ..........................................................
EBITDAS............................................................................... $
14,384
(1,705)
6,871
102,102
17,278
119,380 $
21,730
(3,912)
6,806
107,084
17,466
124,550 $
21,063
(2,751)
6,292
96,858
16,993
113,851
35
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Exponent is exposed to interest rate risk associated with our balances of cash, cash equivalents and short-term
investments. We manage our interest rate risk by maintaining an investment portfolio primarily consisting of debt
instruments with high credit quality and relatively short average effective maturities in accordance with the Company’s
investment policy. The maximum effective maturity of any issue in our portfolio of cash equivalents and short-term
investments is 3 years and the maximum average effective maturity of the portfolio cannot exceed 12 months.
If interest rates were to instantaneously increase or decrease by 100 basis points, the change in the fair value of our
portfolio of cash equivalents and short-term investments would not have a material impact on our financial statements.
We do not use derivative financial instruments in our investment portfolio. Notwithstanding our efforts to manage
interest rate risk, there can be no assurances that we will be adequately protected against the risks associated with
interest rate fluctuations.
We have foreign currency risk related to our revenues and expenses denominated in currencies other than the U.S.
dollar, primarily the British Pound, the Chinese Yuan, and the Hong Kong Dollar. Accordingly, changes in exchange
rates may negatively affect the revenues and net income of our foreign subsidiaries as expressed in U.S. dollars.
At January 1, 2021, we had net assets of approximately $16.9 million with a functional currency of the British Pound,
net assets of approximately $5.9 million with a functional currency of the Chinese Yuan, and net assets of
approximately $5.5 million with a functional currency of the Hong Kong Dollar associated with our operations in the
United Kingdom, China, and Hong Kong respectively.
We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities
denominated in currencies that are not the functional currency. We have experienced and will continue to experience
fluctuations in our net income as a result of gains (losses) on these foreign currency transactions and the re-
measurement of monetary assets and liabilities. At January 1, 2021, we had net assets denominated in the non-
functional currency of approximately $6.5 million.
We do not use foreign exchange contracts to hedge any foreign currency exposures. To date, the impacts of foreign
currency exchange rate changes on our consolidated revenues and consolidated net income have not been material.
However, our continued international expansion increases our exposure to exchange rate fluctuations and as a result
such fluctuations could have a significant impact on our future results of operations.
36
Item 8. Financial Statements and Supplementary Data
See Item 15 of this Annual Report on Form 10-K for required financial statements and supplementary data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
KPMG LLP, an independent registered public accounting firm, has audited the internal control over financial reporting
of Exponent, Inc., as stated in their report which is included in Part IV, Item 15 of this Annual Report on Form 10-K.
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is
defined under Rule 13(a)-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form
10-K.
(b) Management’s Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to
provide reasonable assurance, but not absolute assurance, regarding the reliability of financial reporting and the
preparation of financial statements in accordance with U.S. generally accepted accounting principles. There are
inherent limitations to the effectiveness of any system of internal control over financial reporting. These limitations
include the possibility of human error, the circumvention or overriding of the system and reasonable resource
constraints. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Under the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under
the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal
control over financial reporting was effective at the reasonable assurance level as of January 1, 2021.
(c) Changes in Internal Control Over Financial Reporting.
There have not been any changes in the Company’s internal control over financial reporting, as such term is defined
in Rule 13a-15(f) under the Exchange Act, during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None.
37
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K. We intend to file a
definitive Proxy Statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Annual Report on Form 10-K, and certain information included therein is incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for
its 2021 Annual Meeting of Stockholders (the "Proxy Statement"). See Part 1, Item 1 of this Annual Report on Form
10-K for information regarding the executive officers of the Company.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the Proxy Statement. See also the table on the
Company’s share repurchases in Part II, Item 5 above.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the Proxy Statement.
38
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K.
1. Financial Statements
The following consolidated financial statements of Exponent, Inc. and subsidiaries and the Report of
Independent Registered Public Accounting Firm are included herewith:
Page
Report of Independent Registered Public Accounting Firm ..................................................................
40
Consolidated Statements of Income for the years ended January 1, 2021, January 3, 2020
and December 28, 2018 ..........................................................................................................................
Consolidated Statements of Comprehensive Income for the years ended January 1, 2021,
January 3, 2020 and December 28, 2018................................................................................................
Consolidated Balance Sheets as of January 1, 2021 and January 3, 2020 .............................................
Consolidated Statements of Stockholders’ Equity for the years ended January 1, 2021,
January 3, 2020 and December 28, 2018................................................................................................
Consolidated Statements of Cash Flows for the years ended January 1, 2021, January 3, 2020
and December 28, 2018 ..........................................................................................................................
Notes to Consolidated Financial Statements ..........................................................................................
42
43
44
45
46
47
2. Financial Statement Schedules
The following financial statement schedule of Exponent, Inc. for the years ended January 1, 2021, January
3, 2020 and December 28, 2018 is filed as part of this Report and should be read in conjunction with the
consolidated financial statements of Exponent, Inc. and subsidiaries:
Schedule II - Valuation and Qualifying Accounts..................................................................................
69
Schedules other than those listed above have been omitted since they are either not required, not applicable,
or the information is otherwise included elsewhere in the report.
Page
3. Exhibits
(a) Exhibit Index ................................................................................................................................
70
Page
39
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Exponent, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Exponent, Inc. and subsidiaries (the Company) as
of January 1, 2021 and January 3, 2020, the related consolidated statements of income, comprehensive income,
stockholders’ equity, and cash flows for each of the years in the three-year period ended January 1, 2021, and the
related notes and financial statement schedule II (collectively, the consolidated financial statements). We also have
audited the Company’s internal control over financial reporting as of January 1, 2021, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of January 1, 2021 and January 3, 2020, and the results of its operations and its
cash flows for each of the years in the three-year period ended January 1, 2021, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of January 1, 2021 based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting
for leases as of December 29, 2018 due to the adoption of FASB Accounting Standards Codification Topic 842,
Leases.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
40
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Collectibility of accounts receivable
As discussed in Notes 1 and 6 to the consolidated financial statements, the Company’s allowance for
contract losses and doubtful accounts was $4.0 million as of January 1, 2021. The Company’s accounts
receivable, net was $111.6 million as of January 1, 2021 which represents 19% of total assets and 28% of
revenue for the year ended January 1, 2021. As discussed in Note 1, the Company maintains allowances to
estimate their ability to collect financial obligations from customers. The Company records a specific
allowance in circumstances where the Company is aware of a dispute with a specific customer or a specific
customer’s inability to meet its financial obligations.
We identified the assessment of the collectibility of accounts receivable as a critical audit matter.
Specifically, the specific allowance is an estimate which involves assessing the likelihood of collection of a
customer’s accounts receivable by considering various factors such as nature of the dispute,
communications from the customer, historical collections, and number of days accounts receivables have
been outstanding. Subjective auditor judgment was involved in evaluating the relevance and reliability of
the evidence obtained in evaluating these factors.
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the critical audit
matter. This included controls related to the Company’s assessment of the specific allowance. We
investigated significant fluctuations in the specific allowance as compared to gross accounts receivable and
the prior year specific allowance. For a selection of customer invoices and projects, we inquired of
Company personnel to evaluate the rationale for establishing a specific allowance for certain customers and
assessed the Company’s estimate of the specific customer allowance by evaluating the underlying
contractual documents, historical collection trends, communications with customers, number of days
accounts receivable have been outstanding, and other additional factors. We also evaluated subsequent
collections occurring after the balance sheet date for the selected customer invoices and projects and
considered the impact of potential subsequent events on the estimate of the specific customer allowance.
/s/ KPMG, LLP
We have served as the Company’s auditor since 1987.
San Francisco, California
February 26, 2021
41
Exponent, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
Revenues:
2020
Fiscal Years
2019
2018
Revenues before reimbursements ................................................ $
Reimbursements ..........................................................................
Revenues ................................................................................
378,412 $
21,488
399,900
391,390 $
25,809
417,199
354,639
24,884
379,523
Operating expenses:
Compensation and related expenses ............................................
Other operating expenses.............................................................
Reimbursable expenses................................................................
General and administrative expenses ..........................................
Total operating expenses........................................................
Operating income ...................................................................
250,041
32,234
21,488
12,888
316,651
83,249
252,197
33,562
25,809
20,520
332,088
85,111
Other income:
Interest income ............................................................................
Miscellaneous income (loss), net.................................................
Income before income taxes...................................................
1,705
11,982
96,936
3,912
15,167
104,190
Provision for income taxes................................................................
Net income ............................................................................. $
14,384
82,552 $
21,730
82,460 $
215,052
30,599
24,884
17,532
288,067
91,456
2,751
(890)
93,317
21,063
72,254
Net income per share:
Basic ............................................................................................ $
Diluted ......................................................................................... $
1.58 $
1.55 $
1.56 $
1.53 $
1.37
1.33
Shares used in per share computations:
Basic ............................................................................................
Diluted .........................................................................................
52,388
53,323
52,691
53,884
52,906
54,168
Cash dividends declared per common share ..................................... $
0.76 $
0.64 $
0.52
See accompanying notes to the Consolidated Financial Statements.
42
Exponent, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
Net income.............................................................................................. $
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax of $0, $0,
and $0, respectively........................................................................
Reclassification adjustment for currency translation
adjustments on planned disposal of a subsidiary,
net of tax of $0, included in miscellaneous income,
net on the consolidated statement of income .................................
Unrealized gain/(loss) arising during the period on
investments, net of tax of $79, $(114), and $(63), respectively.....
Comprehensive income .......................................................................... $
See accompanying notes to the Consolidated Financial Statements.
2020
Fiscal Years
2019
2018
82,552 $
82,460 $
72,254
65
145
(1,015)
—
601
—
(237)
82,380 $
347
83,553 $
191
71,430
43
Exponent, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par value)
Assets
Current assets:
January 1,
2021
January 3,
2020
Cash and cash equivalents............................................................................. $
Short-term investments .................................................................................
Accounts receivable, net of allowance for contract losses and doubtful
accounts of $3,995 and $4,295, respectively .............................................
Prepaid expenses and other current assets.....................................................
Total current assets.............................................................................
Property, equipment and leasehold improvements, net ......................................
Operating lease right-of-use asset.......................................................................
Goodwill .............................................................................................................
Deferred income taxes ........................................................................................
Deferred compensation plan assets.....................................................................
Other assets.........................................................................................................
Total assets ......................................................................................... $
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities ...................................................... $
Accrued payroll and employee benefits ........................................................
Deferred revenues .........................................................................................
Operating lease liability ................................................................................
Total current liabilities .......................................................................
Other liabilities ...................................................................................................
Deferred compensation plan liabilities ...............................................................
Operating lease liability......................................................................................
Total liabilities.................................................................................... $
197,525 $
45,001
111,565
12,741
366,832
59,823
19,322
8,607
40,539
83,731
1,242
580,096 $
16,327 $
83,194
11,800
5,987
117,308
2,986
83,961
14,343
218,598 $
176,436
55,165
120,138
12,305
364,044
61,587
23,003
8,607
36,821
68,400
949
563,411
18,583
86,723
12,710
5,944
123,960
2,669
68,373
18,158
213,160
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value; 2,000 shares authorized; no shares
outstanding .................................................................................................
Common stock, $0.001 par value; 120,000 shares authorized; 65,707
shares issued...............................................................................................
Additional paid-in capital..............................................................................
Accumulated other comprehensive income/(loss)
Investment securities, available for sale ..................................................
Foreign currency translation adjustments ................................................
Retained earnings ..........................................................................................
Treasury stock, at cost: 13,903 and 13,951 shares held, respectively...........
Total stockholders’ equity..................................................................
Total liabilities and stockholders’ equity ........................................... $
—
—
66
265,328
66
244,935
65
(1,997)
(1,932)
421,809
(323,773)
361,498
580,096 $
302
(2,062)
(1,760)
384,668
(277,658)
350,251
563,411
See accompanying notes to the Consolidated Financial Statements.
44
Exponent, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Common Stock
Shares Amount capital
—
—
—
—
—
—
—
—
—
(In thousands)
Balance at December 29, 2017 ...... 65,707 $
Employee stock purchase plan.......
—
Amortization of unrecognized
stock-based compensation ..........
Purchase of treasury shares............
Foreign currency translation
adjustments .................................
Grant of restricted stock units to
settle accrued bonus ....................
Settlement of restricted stock
units.............................................
Unrealized gain on investments.....
Dividends and dividend equivalent
—
rights ...........................................
Net income.....................................
—
Balance at December 28, 2018 ...... 65,707 $
—
Employee stock purchase plan.......
Exercise of stock options ...............
—
Amortization of unrecognized
stock-based compensation ..........
Purchase of treasury shares............
Foreign currency translation
adjustments .................................
Reclassification adjustment for
currency translation adjustments
on planned disposal of a
subsidiary ....................................
Grant of restricted stock units to
settle accrued bonus ....................
Settlement of restricted stock
units.............................................
Unrealized gain on investments.....
Dividends and dividend equivalent
—
rights ...........................................
Net income.....................................
—
Balance at January 3, 2020 ............ 65,707 $
—
Employee stock purchase plan.......
Exercise of stock options ...............
—
Amortization of unrecognized
stock-based compensation ..........
Purchase of treasury shares............
Foreign currency translation
adjustments .................................
Grant of restricted stock units to
settle accrued bonus ....................
Settlement of restricted stock
units.............................................
Unrealized loss on investments......
Dividends and dividend equivalent
—
rights ...........................................
—
Net income.....................................
Balance at January 1, 2021 ............ 65,707 $
—
—
—
—
—
—
—
—
—
—
Accumulated
other
Additional
paid-in comprehensive Retained
Treasury Stock
income (loss) earnings Shares Amount Total
66 $ 210,230 $
1,161
—
(2,029) $303,990 14,169 $(223,169) $289,088
1,474
313
(32)
—
—
—
—
8,550
—
—
—
—
—
—
562
—
8,550
(27,915) (27,915)
—
—
(1,015)
—
—
—
(1,015)
—
7,643
—
—
—
—
7,643
—
—
(1,107)
—
—
191
(5,892)
—
(491)
—
(1,840)
—
(8,839)
191
806
—
—
—
66 $ 227,283 $
1,384
—
(141)
—
—
—
— (28,328)
— 72,254
— (27,522)
— 72,254
(2,853) $342,024 14,208 $(252,611) $313,909
1,668
1,561
284
1,702
(27)
(166)
—
—
—
—
—
—
8,710
—
—
—
—
—
—
342
—
8,710
(21,957) (21,957)
—
—
145
—
—
—
145
—
—
601
—
—
—
601
—
7,947
—
—
—
—
7,947
—
—
(961)
—
—
347
(5,146)
—
(406)
—
(5,076) (11,183)
347
—
713
—
—
—
66 $ 244,935 $
1,536
—
1,996
—
—
—
— (34,670)
— 82,460
— (33,957)
— 82,460
(1,760) $384,668 13,951 $(277,658) $350,251
1,791
4,940
255
2,944
(24)
(284)
—
—
—
—
—
—
9,165
—
—
—
—
—
—
636
—
9,165
(40,049) (40,049)
—
—
65
—
—
—
65
—
8,645
—
—
—
—
8,645
—
—
(1,460)
—
—
(237)
(4,538)
—
(376)
—
(9,265) (15,263)
(237)
—
511
—
—
—
66 $ 265,328 $
— (40,873)
— 82,552
— (40,362)
— 82,552
(1,932) $421,809 13,903 $(323,773) $361,498
—
—
See accompanying notes to the Consolidated Financial Statements.
45
Exponent, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income................................................................................... $
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property, equipment and
leasehold improvements......................................................
Amortization of premiums and accretion of discounts on
short-term investments ........................................................
Deferred rent expense ............................................................
Provision for contract losses and doubtful accounts ..............
Stock-based compensation .....................................................
Deferred income tax provision...............................................
Changes in operating assets and liabilities:
Accounts receivable..........................................................
Prepaid expenses and other current assets ........................
Change in operating leases ...............................................
Accounts payable and accrued liabilities..........................
Accrued payroll and employee benefits ...........................
Deferred revenues.............................................................
Net cash provided by operating activities ...................
2020
Fiscal Years
2019
2018
82,552 $
82,460 $
72,254
6,871
6,806
6,292
(163)
—
1,849
17,278
(3,639)
6,724
(9,075)
(91)
(2,646)
4,562
(910)
103,312
(516)
—
2,224
17,466
(2,845)
(16,548)
(3,343)
205
6,715
11,891
3,544
108,059
Cash flows from investing activities:
Capital expenditures ....................................................................
Purchase of short-term investments.............................................
Maturity of short-term investments .............................................
Net cash provided by/(used in) investing activities ....
(4,987)
(39,989)
50,000
5,024
(23,038)
(38,693)
66,000
4,269
Cash flows from financing activities:
Payroll taxes for restricted stock units.........................................
Repurchase of common stock......................................................
Exercise of stock-based payment awards ....................................
Dividends and dividend equivalent rights ...................................
Net cash used in financing activities ...........................
(15,263)
(40,049)
6,732
(39,775)
(88,355)
(11,183)
(21,957)
3,229
(33,503)
(63,414)
(114)
175
1,848
16,993
(3,715)
2,438
(11,047)
—
(4,620)
9,820
864
91,188
(16,298)
(52,522)
43,000
(25,820)
(8,839)
(27,915)
1,474
(27,220)
(62,500)
Effect of foreign currency exchange rates on cash and cash
equivalents .....................................................................................
Net increase in cash and cash equivalents.........................................
Cash and cash equivalents at beginning of year................................
Cash and cash equivalents at end of year.......................................... $
1,108
21,089
176,436
197,525 $
463
49,377
127,059
176,436 $
(603)
2,265
124,794
127,059
See accompanying notes to the Consolidated Financial Statements.
46
Exponent, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
Exponent, Inc. together with its subsidiaries (collectively referred to as the “Company”) is a science and engineering
consulting firm that provides solutions to complex problems. The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
The Company operates on a 52-53 week fiscal year with each year ending on the Friday closest to December 31st.
Fiscal period 2020 included 52 weeks of activity and ended on January 1, 2021. Fiscal period 2019 included 53 weeks
of activity and ended on January 3, 2020. Fiscal period 2018 included 52 weeks of activity and ended on December
28, 2018. Fiscal period 2021 is 52 weeks and will end on December 31, 2021.
Stock Split
On May 31, 2018, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation
to (i) increase the number of authorized shares of common stock to 120,000,000 and (ii) effect a two-for-one stock
split. As a result of the stock split, each shareholder of record at the close of business on May 31, 2018, received one
additional share of common stock for each share of common stock owned by such stockholder. Restricted stock unit
awards and stock option awards have also been adjusted to reflect the two-for-one stock split. For periods prior to the
stock split, all share and per share data in the Company’s consolidated financial statements and related notes have
been retroactively adjusted to reflect the stock split.
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. Estimates are used for, but not limited to, revenue recognition,
allowance for contract losses and doubtful accounts, stock-based compensation, income taxes, goodwill, the useful
life of property, equipment and leasehold improvements, and operating lease liabilities. Actual results could differ
from those estimates.
Foreign Currency Translation
The Company translates the assets and liabilities of foreign subsidiaries, whose functional currency is the local
currency, at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average
rates of exchange prevailing during the year. The adjustment resulting from translating the financial statements of
such foreign subsidiaries is included in accumulated other comprehensive income/(loss), which is reflected as a
separate component of stockholders’ equity.
Cash Equivalents
Cash equivalents consist of highly liquid investments such as money market mutual funds, commercial paper and debt
securities with original remaining maturities of three months or less from the date of purchase.
Short-term Investments
Short-term investments consist of debt securities classified as available-for-sale and are carried at their fair value as
of the balance sheet date. Short-term investments generally mature between three months and three years from the
purchase date. Investments with maturities beyond one year are classified as short-term based on their highly liquid
nature and because such marketable securities represent investments readily available for current operations.
47
The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains or losses are determined on the specific identification
method and are reflected in other income. Net unrealized gains and losses are recorded directly in accumulated other
comprehensive income/(loss) except for unrealized losses that are deemed to be other-than-temporary, which are
reflected in net income.
Investments are reviewed on a regular basis to evaluate whether or not any security has experienced an other-than
temporary decline in fair value. When assessing investments for other-than-temporary declines in fair value, the
Company considers the significance of the decline in value as a percentage of the original cost, how long the market
value of the investment has been less than its original cost, any news that has been released specific to the investee,
and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before
recovery of the investment’s cost basis.
Allowances for Contract Losses and Doubtful Accounts
The Company maintains allowances for estimated losses resulting from the inability of customers to meet their
financial obligations or for disputes that affect the Company’s ability to fully collect amounts due. In circumstances
where the Company is aware of a specific customer’s inability to meet its financial obligations or aware of a dispute
with a specific customer, a specific allowance is recorded to reduce the net recognized receivable to the amount the
Company reasonably believes will be collected. For all other customers the Company recognizes allowances for
doubtful accounts based upon historical write-offs, customer concentration, customer creditworthiness, current
economic conditions, aging of amounts due and changes in customer payment terms.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are recognized using the straight-line method. Buildings are depreciated over their
estimated useful lives ranging from thirty to forty years. Equipment is depreciated over its estimated useful life, which
generally ranges from two to seven years. Leasehold improvements are amortized over the shorter of their estimated
useful lives, generally seven years, or the term of the related lease.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets. The Company has not recognized impairment losses
on any long-lived assets in 2020, 2019 or 2018.
Goodwill
The Company assesses the impairment of goodwill annually and whenever events or changes in circumstances indicate
that the carrying amount may be impaired. The Company’s annual goodwill impairment review is completed during
the fourth quarter of each year. The Company evaluates goodwill for each reporting unit for impairment by assessing
qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The
Company considers events and circumstances, including but not limited to, macroeconomic conditions, industry and
market considerations, cost factors, overall financial performance, changes in management or key personnel, changes
in strategy, changes in customers, a change in the composition or carrying amount of a reporting unit’s net assets and
changes in the price of its common stock. If, after assessing the totality of events or circumstances, the Company
determines that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then
the quantitative goodwill impairment test is not performed.
48
The Company completed its annual assessment for all reporting units with goodwill for 2020 and determined, after
assessing the totality of the qualitative factors, that it is more likely than not that the fair value of each reporting unit
is greater than its respective carrying amount. Accordingly, there was no indication of impairment of goodwill for any
of the Company’s reporting units and the quantitative goodwill impairment test was not performed. The Company did
not recognize any goodwill impairment losses in 2020, 2019 or 2018.
Deferred Revenues
Deferred revenues represent amounts billed to clients in advance of services provided.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the expected tax consequences of temporary differences between the tax basis and the financial reporting basis of
assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws in effect
when the differences are expected to reverse. The effect on deferred tax assets and liabilities from changes in tax rates
is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred
tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. An uncertain
tax position is recognized if it is determined that it is more likely than not to be sustained upon examination. The tax
position is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon
ultimate settlement. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits
as income tax expense. Accrued interest and penalties are insignificant at January 1, 2021 and January 3, 2020.
Fair Value of Financial Instruments
Financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, other assets
and accounts payable. Cash, cash equivalents and short-term investments are recorded at fair value. The carrying
amount of the Company’s accounts receivable, other assets and accounts payable approximates their fair values due
to their short maturities.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as
expense on a straight-line basis over the requisite service period of the entire award. The Company accounts for
forfeitures of stock-based awards when they occur.
Net Income Per Share
Basic per share amounts are computed using the weighted-average number of common shares outstanding during the
period. Dilutive per share amounts are computed using the weighted-average number of common shares outstanding
and potentially dilutive securities, using the treasury stock method if their effect would be dilutive.
The following schedule reconciles the denominators of the Company’s calculation for basic and diluted net income
per share:
(In thousands)
Shares used in basic per share computation......................................
Effect of dilutive common stock options outstanding ......................
Effect of unvested restricted stock units outstanding........................
Shares used in diluted per share computation ...................................
2020
Fiscal Years
2019
52,388
333
602
53,323
52,691
458
735
53,884
2018
52,906
403
859
54,168
Common stock options to purchase 35,604 shares were excluded from the diluted per share calculation for 2020 due
to their anti-dilutive effect. There were no equity awards excluded from the diluted per share calculation for 2019 and
2018.
49
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) established Topic 326, Measurement of Credit
Losses on Financial Instruments, by issuing Accounting Standard Update (“ASU”) No. 2016-13, Financial
Instruments – Credit Losses, which replaces the incurred loss methodology with an expected loss methodology that is
referred to as the current expected credit loss (“CECL”) methodology. The measurement of the expected credit losses
under the CECL methodology is applicable to financial assets measured at amortized cost where there is a contractual
right to receive cash, including, accounts receivables, loan receivables and held-to-maturity debt securities. The
Company adopted ASU No. 2016-13 in the first quarter of 2020 and the impact of the adoption was not material to
the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”) established Topic 842, Leases, by issuing
Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize leases on-balance sheet and
disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01,
Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to
Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model
(“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a
term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern
and classification of expense recognition in the income statement. Under the standard, disclosures are required to meet
the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows
arising from leases.
The Company adopted the ASU as of the beginning of its first quarter of 2019. A modified retrospective transition
approach is required, requiring the application of the new standard to all leases existing at the date of initial application.
An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period
presented in the financial statements as its date of initial application. The Company adopted the new standard on
December 29, 2018, using the effective date as the date of initial application. Consequently, financial information was
not updated and the disclosures required under the new standard were not provided for dates and periods before
December 29, 2018.
The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package
of practical expedients’, which permits it not to reassess under the new standard prior conclusions about lease
identification, lease classification and initial direct costs. The Company elected the practical expedient to include both
lease and non-lease components as a single component and account for it as a lease for all asset classes. The Company
also elected to apply the short-term lease exception for all leases. Under the short-term lease exception, the Company
will not recognize ROU assets or lease liabilities for leases that, at the acquisition date, have a remaining lease term
of 12 months or less.
The ASU had a material impact to the Company’s consolidated balance sheet, but did not have an impact on its
consolidated statement of income. The most significant impact was the recognition of ROU assets and lease liabilities
for its operating leases.
Recently Accounting Pronouncements Not Yet Effective
There are no new accounting pronouncements that have significance, or potential significance, to the Company’s
consolidated financial statements.
Note 2: Revenue Recognition
Substantially all of the Company’s engagements are performed under time and materials or fixed-price arrangements.
For time and materials contracts, the Company utilizes the practical expedient under Accounting Standards
Codification 606 – Revenue from Contracts with Customers, which states, if an entity has a right to consideration from
a customer in an amount that corresponds directly with the value of the entity’s performance completed to date (for
example, a service contract in which an entity bills a fixed amount for each hour of service provided), the entity may
recognize revenue in the amount to which the entity has a right to invoice.
50
The following table discloses the percent of the Company’s revenue generated from time and materials contracts:
Engineering & other scientific ..................................................
Environmental and health..........................................................
Total time and materials revenues .......................................
2020
61%
19%
80%
Fiscal Years
2019
66%
18%
84%
2018
64%
18%
82%
For fixed-price contracts the Company recognizes revenue over time because of the continuous transfer of control to
the customer. The customer typically controls the work in process as evidenced either by contractual termination
clauses or by the Company’s rights to payment for work performed to date to deliver services that do not have an
alternative use to the Company. Revenue for fixed-price contracts is recognized based on the relationship of incurred
labor hours at standard rates to the Company’s estimate of the total labor hours at standard rates it expects to incur
over the term of the contract. The Company believes this methodology achieves a reliable measure of the revenue
from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting
services the Company provides.
The following table discloses the percent of the Company’s revenue generated from fixed price contracts:
Engineering & other scientific ..................................................
Environmental and health..........................................................
Total fixed price revenues....................................................
2020
19%
1%
20%
Fiscal Years
2019
15%
1%
16%
2018
17%
1%
18%
Deferred revenues represent amounts billed to clients in advance of services provided. During 2020, $8,815,000 of
revenues were recognized that were included in the deferred revenue balance at January 3, 2020. During 2019,
$5,754,000 of revenue were recognized that were included in the deferred revenue balance at December 28, 2018.
During 2018, $6,067,000 of revenues were recognized that were included in the deferred revenue balance at December
29, 2017.
Reimbursements, including those related to travel and other out-of-pocket expenses, and other similar third-party costs
such as the cost of materials and certain subcontracts, are included in revenues, and an equivalent amount of
reimbursable expenses are included in operating expenses. Any mark-up on reimbursable expenses is included in
revenues before reimbursements. The Company reports revenues net of subcontractor fees for certain subcontracts
where the Company has determined that it is acting as an agent because its performance obligation is to arrange for
the provision of goods or services by another party. The total amount of subcontractor fees not included in revenues
because the Company was acting as an agent were $9,408,000, $14,409,000 and $23,174,000 during 2020, 2019 and
2018, respectively.
51
Note 3: Cash, cash equivalents and short-term investments
Cash, cash equivalents and short-term investments consisted of the following as of January 1, 2021:
(In thousands)
Classified as current assets:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair
Value
Cash .............................................................................................. $ 146,083 $
— $
— $ 146,083
Cash equivalents:
Money market securities .........................................................
Total cash equivalents.............................................................
51,442
51,442
Total cash and cash equivalents ........................................ 197,525
Short-term investments:
U.S. Treasury securities ..........................................................
Total short-term investments.............................................
44,993
44,993
Total cash, cash equivalents and short-term investments .................. $ 242,518 $
—
—
—
8
8
8 $
—
51,442
51,442
—
— 197,525
45,001
—
—
45,001
— $ 242,526
Cash, cash equivalents and short-term investments consisted of the following as of January 3, 2020:
(In thousands)
Classified as current assets:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair
Value
Cash .............................................................................................. $ 135,225 $
— $
— $ 135,225
Cash equivalents:
Money market securities .........................................................
Total cash equivalents .......................................................
41,211
41,211
Total cash and cash equivalents.............................................. 176,436
—
—
—
41,211
—
—
41,211
— 176,436
Short-term investments:
U.S. Treasury securities ..........................................................
Total short-term investments.............................................
54,841
54,841
Total cash, cash equivalents and short-term investments .................. $ 231,277 $
324
324
324 $
55,165
—
—
55,165
— $ 231,601
52
Note 4: Fair Value Measurements
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 2020, 2019 and 2018. 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 January 1, 2021 (in thousands):
Fair Value Measurements at Reporting Date Using
Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Money market securities (1)............................................... $
51,442 $
51,442 $
— $
Fixed income available for sale securities (2) ...................
45,001
—
45,001
Fixed income trading securities held in
deferred compensation plan (3) ......................................
26,274
26,274
—
Equity trading securities held in deferred compensation
plan (3)............................................................................
62,473
62,473
—
Total ................................................................................. $ 185,190 $
140,189 $
45,001 $
Liabilities
Deferred compensation plan (4).........................................
88,977
88,977
Total ................................................................................. $
88,977 $
88,977 $
—
— $
—
—
—
—
—
—
—
(1)
(2)
(3)
(4)
Included in cash and cash equivalents on the Company’s consolidated balance sheet.
Included in short-term investments on the Company’s consolidated balance sheet.
Included in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s
consolidated balance sheet.
Included in accounts payable and accrued liabilities and deferred compensation plan liabilities on the Company’s
consolidated balance sheet.
53
The fair value of these certain financial assets and liabilities was determined using the following inputs at January 3,
2020 (in thousands):
Fair Value Measurements at Reporting Date Using
Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Money market securities (1) .............................................. $
41,211 $
41,211 $
— $
Fixed income available for sale securities (2) ...................
55,165
—
55,165
Fixed income trading securities held in
deferred compensation plan (3) ......................................
22,010
22,010
—
Equity trading securities held in deferred compensation
plan (3)............................................................................
53,924
53,924
—
Total............................................................................ $ 172,310 $
117,145 $
55,165 $
Liabilities
Deferred compensation plan (4) ........................................
76,357
76,357
Total............................................................................ $
76,357 $
76,357 $
—
— $
—
—
—
—
—
—
—
(1)
(2)
(3)
(4)
Included in cash and cash equivalents on the Company’s consolidated balance sheet.
Included in short-term investments on the Company’s consolidated balance sheet.
Included in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s
consolidated balance sheet.
Included in accounts payable and accrued liabilities and deferred compensation plan liabilities on the Company’s
consolidated balance sheet.
Fixed income available-for-sale securities as of January 1, 2021 and January 3, 2020 represent primarily obligations
of the United States Treasury. Fixed income and equity trading securities represent mutual funds held in the
Company’s deferred compensation plan. See Note 11 for additional information about the Company’s deferred
compensation plan.
At January 1, 2021 all short-term fixed income securities classified as short-term investments were due to mature
within one year.
At January 1, 2021 and January 3, 2020, 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
January 1, 2021 but require disclosure of their fair values: accounts receivable, other assets and accounts payable. The
estimated fair value of such instruments at January 1, 2021 approximates their carrying value as reported on the
consolidated balance sheet.
There were no other-than-temporary impairments or credit losses related to available-for-sale securities during 2020,
2019 and 2018.
54
Note 5: Property, Equipment and Leasehold Improvements
(In thousands)
Property:
Land............................................................................................................... $
Buildings .......................................................................................................
Construction in progress ...............................................................................
Equipment:
Machinery and equipment.............................................................................
Office furniture and equipment .....................................................................
Leasehold improvements ....................................................................................
Less accumulated depreciation and amortization ...............................................
Property, equipment and leasehold improvements, net ...................................... $
Fiscal Years
2020
2019
18,339 $
62,324
650
48,728
10,500
13,201
153,742
93,919
59,823 $
18,339
60,437
1,133
47,628
10,504
13,653
151,694
90,107
61,587
Depreciation and amortization for 2020, 2019 and 2018 was $6,871,000, $6,806,000 and $6,292,000, respectively.
Note 6: Other Significant Balance Sheet Components
Account receivable, net
(In thousands)
Billed accounts receivable .................................................................................. $
Unbilled accounts receivable..............................................................................
Allowance for contract losses and doubtful accounts.........................................
Total accounts receivable, net ....................................................................... $
Accounts payable and accrued liabilities
(In thousands)
Accounts payable................................................................................................ $
Accrued liabilities...............................................................................................
Total accounts payable and other accrued liabilities..................................... $
Accrued payroll and employee benefits
(In thousands)
Accrued bonuses payable ................................................................................... $
Accrued 401(k) contributions .............................................................................
Accrued vacation ................................................................................................
Deferred compensation plan ...............................................................................
Other accrued payroll and employee benefits ....................................................
Total accrued payroll and employee benefits................................................ $
Fiscal Years
2020
2019
80,298 $
35,262
(3,995)
111,565 $
85,579
38,854
(4,295)
120,138
Fiscal Years
2020
2019
3,279 $
13,048
16,327 $
4,644
13,939
18,583
Fiscal Years
2020
2019
51,126 $
9,127
13,174
5,016
4,751
83,194 $
54,471
8,878
10,896
7,984
4,494
86,723
Other accrued payroll and employee benefits consist primarily of accrued wages, payroll taxes and disability insurance
programs. A portion of accrued bonuses payable will be settled by issuing fully vested restricted stock units. See Note
9 and Note 16 for additional information.
55
Note 7: Income Taxes
Income before income taxes includes income from foreign operations of $10,092,000, $8,017,000 and $8,005,000 for
2020, 2019 and 2018, respectively.
Total income tax expense for 2020, 2019 and 2018 consisted of the following:
(In thousands)
Current
Federal ......................................................................................... $
Foreign.........................................................................................
State .............................................................................................
Deferred
Federal .........................................................................................
State .............................................................................................
Total ....................................................................................... $
2020
Fiscal Years
2019
2018
11,553 $
1,873
4,597
18,023
(2,766)
(873)
(3,639)
14,384 $
16,498 $
1,523
6,554
24,575
(1,727)
(1,118)
(2,845)
21,730 $
16,487
1,624
6,667
24,778
(2,604)
(1,111)
(3,715)
21,063
56
The Company’s effective tax rate differs from the statutory federal tax rate of 21% as shown in the following schedule:
(In thousands)
Tax at federal statutory rate.............................................................. $
State taxes, net of federal benefit .....................................................
Divestiture of foreign subsidiary......................................................
Nondeductible officer compensation ...............................................
Non-deductible expenses..................................................................
Non-deductible stock-based compensation ......................................
Excess tax benefit from equity incentive plans ................................
Difference between statutory rate and foreign effective tax rate .....
Other.................................................................................................
Tax expense ................................................................................ $
2020
Fiscal Years
2019
2018
$
20,357
2,942
46
907
118
(14)
(9,725)
(486)
239
14,384
$
$
21,880
4,129
956
759
345
2
(6,394)
(341)
394
21,730
$
19,597
4,391
—
—
335
20
(3,310)
(217)
247
21,063
Effective tax rate ..............................................................................
14.8%
20.9%
22.6%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities at January 1, 2021 and January 3, 2020 are presented in the following schedule:
(In thousands)
Deferred tax assets:
Fiscal Years
2020
2019
Accrued liabilities and allowances................................................................ $
Deferred compensation plan..........................................................................
Operating leases ............................................................................................
Total deferred tax assets ..................................................................................... $
Deferred tax liabilities:
State taxes...................................................................................................... $
Deductible goodwill ......................................................................................
Operating leases ............................................................................................
Property, equipment and leasehold improvements .......................................
Unrealized gain of deferred compensation plan assets .................................
Divestiture of foreign subsidiary...................................................................
Other..............................................................................................................
Total deferred tax liabilities................................................................................
Net deferred tax assets ........................................................................................ $
16,841 $
31,619
5,758
54,218 $
(1,969) $
(2,091)
(5,758)
(81)
(3,545)
—
(235)
(13,679)
40,539 $
15,658
28,463
6,867
50,988
(1,624)
(2,104)
(6,867)
(84)
(2,339)
(956)
(193)
(14,167)
36,821
Management believes it is more likely than not that the results of future operations will generate sufficient taxable
income to realize the net deferred tax assets.
The Company is entitled to a deduction for federal and state tax purposes with respect to employees’ stock award
activity. The net deduction in taxes otherwise payable arising from that deduction has been recorded as an income tax
benefit. For 2020, 2019 and 2018, the net deduction in tax payable arising from employees’ stock award activity was
$12,258,000, $8,067,000 and $4,154,000, respectively.
57
The Company and its subsidiaries file income tax returns in the United States federal jurisdiction, California and
various other state and foreign jurisdictions. The Company is no longer subject to United States federal income tax
examination for years prior to 2017. The Company is no longer subject to California franchise tax examinations for
years prior to 2016. The California Franchise Tax Board is currently examining the Company’s 2017 and 2018 returns.
With few exceptions, the Company is no longer subject to state and local or non-United States income tax examination
by tax authorities for years prior to 2016.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at December 28, 2018 .................................................................................................... $
Additions based on tax positions related to the current year.......................................................
Reductions due to lapse of statute of limitations.........................................................................
Balance at January 3, 2020.......................................................................................................... $
Additions based on tax positions related to the current year.......................................................
Reductions due to lapse of statute of limitations.........................................................................
Balance at January 1, 2021.......................................................................................................... $
1,748,000
515,000
(340,000)
1,923,000
275,000
(325,000)
1,873,000
Unrecognized tax benefits are included in other liabilities in the accompanying balance sheet. To the extent these
unrecognized tax benefits are ultimately recognized, they will impact the effective tax rate by $1,514,000 in a future
period. There are no uncertain tax positions whose resolution in the next 12 months is expected to materially affect
operating results.
58
Note 8: Stockholders’ Equity
Preferred Stock
The Company has authorized 2,000,000 shares of undesignated preferred stock with a par value of $0.001 per share.
None of the preferred shares were issued and outstanding at January 1, 2021 and January 3, 2020.
Dividends
The Company declared and paid cash dividends per share of common stock during the periods presented as follows:
First Quarter .......................................................................................... $
Second Quarter ...................................................................................... $
Third Quarter......................................................................................... $
Fourth Quarter ....................................................................................... $
First Quarter .......................................................................................... $
Second Quarter ...................................................................................... $
Third Quarter......................................................................................... $
Fourth Quarter ....................................................................................... $
Fiscal Years
2020
Dividends
Per Share
Amount
(in thousands)
9,913
9,801
9,808
9,839
39,361
0.190 $
0.190
0.190
0.190
$
Fiscal Years
2019
Dividends
Per Share
Amount
(in thousands)
0.160 $
0.160
0.160
0.160
$
8,240
8,306
8,323
8,280
33,149
Treasury Stock
Net losses related to the re-issuance of treasury stock to settle restricted stock unit and stock option awards of
$4,538,000, $5,146,000 and $5,892,000 were recorded as a reduction to retained earnings during 2020, 2019 and 2018,
respectively.
Repurchase of Common Stock
The Company repurchased 636,000 shares of its common stock for $40,049,000 during 2020. The Company
repurchased 342,000 shares of its common stock for $21,957,000 during 2019. The Company repurchased 562,000
shares of its common stock for $27,915,000 during 2018. On May 29, 2020, the Board of Directors authorized
$45,000,000 for the repurchase of the Company’s common stock. On January 31, 2019 the Board of Directors
authorized $75,000,000 for the repurchase of the Company’s common stock. These repurchase programs have no
expiration dates. As of January 1, 2021, the Company had remaining authorization under its stock repurchase plan of
$75,455,000 to repurchase shares of common stock.
Note 9: Stock-Based Compensation
On May 29, 2008, the Company’s stockholders approved the 2008 Equity Incentive Plan and the 2008 Employee
Stock Purchase Plan (“ESPP”). The 2008 Equity Incentive Plan and ESPP were previously adopted by the Company’s
Board of Directors on April 8, 2008, subject to stockholder approval.
59
The 2008 Equity Incentive Plan allows for the award of stock options, stock awards (including stock units, stock grants
and stock appreciation rights or other similar equity awards) and cash awards to officers, employees, consultants and
non-employee members of the Board of Directors. The total number of shares reserved for issuance under the 2008
Equity Incentive Plan was 11,856,300 shares of common stock, subject to adjustment resulting from a stock split or
the payment of a stock dividend or any other increase or decrease in the number of issued shares of the Company’s
stock effected without receipt of consideration by the Company. As of January 1, 2021, 1,817,364 shares were
available for grant under the 2008 Equity Incentive Plan.
The ESPP allows for officers and employees to purchase common stock through payroll deductions of up to 15% of
a participant’s eligible compensation. Shares of common stock are purchased under the ESPP at 95% of the fair market
value of the Company’s common stock on each purchase date. Subject to adjustment resulting from a stock split or
the payment of a stock dividend or any other increase or decrease in the number of issued shares of the Company’s
stock effected without receipt of consideration by the Company, the total number of shares reserved for issuance under
the ESPP was 1,200,000 shares of common stock. As of January 1, 2021, 362,171 shares were available for grant.
Weighted average purchase prices for shares sold under the ESPP plan in 2020, 2019 and 2018 were $73.22, $60.32
and $45.26, respectively.
Restricted Stock Units
The Company grants restricted stock units to employees and outside directors. These 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 received a fully vested restricted stock unit award is granted a matching number of
unvested restricted stock unit awards. These unvested restricted stock unit awards 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 59 ½ years or older, all unvested restricted stock unit awards will continue to vest provided
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.
All restricted stock units granted have dividend equivalent rights (“DER”), which entitle holders of restricted stock
units to the same dividend value per share as holders of common stock. DER are subject to the same vesting and other
terms and conditions as the corresponding unvested restricted stock units. DER are accumulated and paid when the
underlying shares vest and are forfeited if the underlying shares are forfeited.
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. For 2020, 2019 and 2018,
the Company recorded stock-based compensation expense associated with accrued bonus awards of $8,112,000,
$8,756,000 and $8,443,000 respectively.
The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards
of $8,472,000, $8,127,000 and $7,653,000 during 2020, 2019 and 2018, respectively. The total fair value of restricted
stock unit awards vested during 2020, 2019, and 2018 was $31.3 million, $25.6 million and $23.2 million, respectively.
The weighted-average grant date fair values of restricted stock unit awards granted during 2020, 2019 and 2018 were
$68.21, $57.08 and $40.61, respectively.
60
The number of unvested restricted stock unit awards outstanding as of January 1, 2021 is as follows (1):
Number
of awards
outstanding
Weighted-
average
grant date
fair value
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic value
(in thousands) (2)
Balance as of January 3, 2020.........................
Awards granted..........................................
Awards vested ...........................................
Awards forfeited........................................
886,295 $
273,348
(425,983)
(8,866)
35.16
68.21
38.31
42.65
Exercisable at January 1, 2021........................
724,794 $
45.68
1.4 $
65,253
(1) Does not include employee stock purchase plans or stock option plans.
(2) The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ
Global Select Market, the market value as of January 1, 2021 was $90.03.
Stock Options
The Company currently grants stock options under the 2008 Equity Incentive Plan. Options are granted for terms of
ten years and generally vest ratably over a four-year period from the grant date. The Company grants options at
exercise prices equal to the fair value of the Company’s common stock on the date of grant. All stock options have
dividend equivalent rights, which entitle holders of stock options to the same dividend value per share as holders of
common stock. DER are subject to the same vesting terms as the corresponding stock options. DER are accumulated
and paid in cash when the underlying stock options vest and are forfeited if the underlying stock options do not vest.
During 2020, 2019 and 2018, the Company recorded stock-based compensation expense of $694,000, $583,000 and
$897,000, respectively, associated with stock options.
Option activity is as follows (1):
Number
of shares
outstanding
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic value
(in thousands)
Balance as of January 3, 2020.........................
Options granted .........................................
Options forfeited and expired....................
Options exercised ......................................
662,149 $
40,000
—
(283,755)
26.23
79.43
—
17.41
Balance at January 1, 2021 .............................
418,394 $
37.29
6.56 $
22,066
Exercisable at January 1, 2021........................
263,894 $
29.24
5.89 $
16,042
(1) Does not include restricted stock or employee stock purchase plans.
The total intrinsic value of options exercised during 2020, 2019 and 2018 was $18,211,000, $9,651,000 and $0,
respectively. The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between the Company’s closing stock price on the last trading day of the fiscal year ended January 1, 2021, and the
exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders
had all option holders exercised their options on January 1, 2021. This amount changes based on the fair-value of the
Company’s stock.
61
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 payment 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 dividend yield assumption considers the expectation of continued declaration of dividends,
offset by option holders’ dividend equivalent rights. All stock-based payment awards are recognized on a straight-line
basis over the requisite service periods of the awards.
The assumptions used to value option grants for 2020, 2019 and 2018 are as follows:
Stock Option Plan
Fiscal Years
2019
2018
2020
Expected term (in years)...................................................................
Risk-free interest rate........................................................................
Volatility...........................................................................................
Dividend yield ..................................................................................
5.8
1.48%
23%
0%
5.7
2.52%
23%
0%
5.9
2.74%
23%
0%
The weighted-average grant date fair value of options granted during 2020, 2019 and 2018 were $19.73, $15.16 and
$10.59, respectively.
The amount of stock-based compensation expense and the related income tax benefit recognized in the Company’s
consolidated statements of income for 2020, 2019 and 2018 is as follows:
(In thousands)
Compensation and related expenses:
2020
Fiscal Years
2019
2018
Restricted stock units................................................................... $
Stock option grants ......................................................................
Sub-total .................................................................................
15,946 $
694
16,640
16,320 $
583
16,903
15,561
897
16,458
General and administrative expenses:
Restricted stock units...................................................................
Sub-total .................................................................................
Total stock-based compensation expense ......................................... $
638
638
17,278 $
563
563
17,466 $
535
535
16,993
Income tax benefit............................................................................. $
12,258 $
8,067 $
4,467
As of January 1, 2021, there was $10,485,000 of unrecognized compensation cost, expected to be recognized over a
weighted average period of 2.5 years, related to unvested restricted stock unit awards and $1,202,000 of unrecognized
compensation cost, expected to be recognized over a weighted average period of 2.5 years, related to unvested stock
options.
62
Note 10: Retirement Plans
The Company provides a defined contribution retirement plan for its employees whereby the Company contributes to
each eligible employee’s account 7% of the employee’s eligible base salary plus overtime. The employee does not
need to make a contribution to the plan to be eligible for the Company’s 7% contribution. To be eligible under the
plan, an employee must be at least 21 years of age and be either a full-time or part-time salaried employee. The 7%
Company contribution will vest 20% per year for the first 5 years of employment and then immediately thereafter.
The Company’s expenses related to this plan were $9,752,000, $9,073,000, and $8,419,000 in 2020, 2019, and 2018,
respectively.
Note 11: Deferred Compensation Plans
The Company maintains nonqualified deferred compensation plans for the benefit of a select group of highly
compensated employees. Under these plans, participants may elect to defer up to 100% of their compensation.
Company assets that are earmarked to pay benefits under the plans are held in a rabbi trust and are subject to the claims
of the Company’s creditors. As of January 1, 2021, and January 3, 2020, the invested amounts under the plans totaled
$88,747,000 and $75,934,000, respectively. These assets are classified as trading securities and are recorded at fair
market value with changes recorded as adjustments to other income.
As of January 1, 2021, and January 3, 2020, vested amounts due under the plans totaled $88,977,000 and $76,357,000,
respectively. Changes in the liability are recorded as adjustments to compensation expense. During 2020, 2019 and
2018, the Company recognized compensation expense/(gain) of $8,028,000, $12,834,000 and $(3,900,000),
respectively, as a result of changes in the market value of the trust assets with the same amount being recorded as
other income.
Note 12: Leases
The Company determines if an arrangement is a lease at the inception of the arrangement. Operating leases are
included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long-term operating
lease liabilities in the Company’s consolidated balance sheet. The Company does not have any finance leases as of
January 1, 2021.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent
the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities
are recognized at commencement date based on the present value of lease payments over the lease term. As the
Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, based on the
information available at commencement date, in determining the present value of lease payments. The operating lease
ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms include
options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease
expense for lease payments is recognized on a straight-line basis over the lease term. The amortization of operating
lease ROU assets and the change in operating lease liabilities is disclosed as a single line item in the consolidated
statement of cash flows.
The Company leases office, laboratory, and storage space in 13 states and the District of Columbia, as well as in
China, Hong Kong, Singapore, Switzerland and the United Kingdom. Leases for these office, laboratory, and storage
facilities have terms generally ranging between one and ten years. Some of these leases include options to extend or
terminate the lease, none of which are currently included in the lease term as the Company has determined that exercise
of these options is not reasonably certain.
The Company has a Test and Engineering Center on 147 acres of land in Phoenix, Arizona. The Company leases this
land from the state of Arizona under a 30-year lease agreement that expires in January of 2028 and has options to
renew for two fifteen-year periods. As of January 1, 2021, the Company has determined that exercise of the renewal
options is not reasonably certain and thus the extension is not included in the lease term.
The Company’s equipment leases are included in the ROU asset and liability balances but are not material.
63
The components of lease expense included in other operating expenses on the consolidated statement of income were
as follows:
(In thousands)
Operating lease cost...................................................................................................... $
Variable lease cost ........................................................................................................
Short-term lease cost.....................................................................................................
2020
2019
6,973 $
1,158
573
7,395
1,479
405
Fiscal Year Fiscal Year
Supplemental cash flow information related to operating leases was as follows:
(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities...... $
2020
2019
6,968 $
7,522
Fiscal Year Fiscal Year
Supplemental balance sheet information related to operating leases was as follows:
Weighted Average Remaining Lease Term ..................................................................
Weighted Average Discount Rate.................................................................................
2020
4.5 years
2019
5.2 years
4.2%
4.4%
Fiscal Year Fiscal Year
Maturities of operating lease liabilities as of January 1, 2021:
(In thousands)
2021 ....................................................................................................................................................
2022 ....................................................................................................................................................
2023 ....................................................................................................................................................
2024 ....................................................................................................................................................
2025 ....................................................................................................................................................
2026 ....................................................................................................................................................
2027 ....................................................................................................................................................
Total lease payments ..................................................................................................................... $
Less imputed interest.....................................................................................................................
Total lease liability .................................................................................................................. $
Operating
Leases
6,555
5,340
3,672
2,252
1,491
1,507
1,466
22,283
(1,953)
20,330
Note 13: Commitments & Contingencies
The Company is a party to various legal actions from time to time and may be contingently liable in connection with
claims and contracts arising in the normal course of business, the outcome of which the Company believes, after
consultation with legal counsel, will not have a material adverse effect on its financial condition, results of operations
or liquidity. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from
current expected results. All legal costs associated with litigation are expensed as incurred.
64
Note 14: Miscellaneous Income, Net
Miscellaneous income, net, consisted of the following:
(In thousands)
Rental income ................................................................................... $
Gain (loss) on deferred compensation investments ..........................
Gain (loss) on foreign exchange .......................................................
Other..................................................................................................
Total............................................................................................. $
2020
Fiscal Years
2019
2018
3,351 $
8,028
592
11
11,982 $
3,141 $
12,834
(840)
32
15,167 $
2,823
(3,900)
167
20
(890)
Note 15: Industry and Client Credit Risk
The Company serves clients in various segments of the economy. During 2020, the Company provided services
representing approximately 24%, 16%, 14% and 13% to clients in the consumer products industry, energy and utilities
industries, the transportation industry and the chemical industry, respectively.
No single client comprised more than 10% of the Company’s revenues during 2020 or 2019. One client comprised
12% of the Company’s revenues during 2018. No other single client comprised more than 10% of the Company’s
revenues during 2018. No single client comprised more than 10% of the Company’s accounts receivable at January 1,
2021 and January 3, 2020.
Note 16: Supplemental Cash Flow Information
The following is supplemental disclosure of cash flow information:
(In thousands)
Cash paid during the year:
2020
Fiscal Years
2019
2018
Income taxes ................................................................................ $
20,118 $
21,364 $
28,636
Non-cash investing and financing activities:
Unrealized gain (loss) on investments.........................................
Vested stock unit awards granted to settle accrued bonus...........
Accrual for capital expenditures..................................................
Right-of-use asset obtained in exchange for operating
lease obligation .........................................................................
(237)
8,645
602
347
7,947
482
191
7,643
1,231
2,436
29,480
-
Note 17: Segment Reporting
The Company has two reportable operating segments based on two primary areas of service. The Engineering and
Other Scientific segment is a broad service group providing technical consulting in different practices primarily in
engineering. The Environmental and Health segment provides services in the area of environmental, epidemiology
and health risk analysis. This 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 is presented for selected data from the statements of income and statements of cash flows for
2020, 2019 and 2018. Segment information for selected data from the balance sheets is presented for the fiscal years
ended January 1, 2021 and January 3, 2020. The Company’s CEO, the chief operating decision maker, does not review
total assets in her evaluation of segment performance and capital allocation.
65
Revenues
(In thousands)
Engineering and Other Scientific ...................................................... $
Environmental and Health ................................................................
Total revenues.............................................................................. $
2020
Fiscal Years
2019
319,346 $
80,554
399,900 $
339,796 $
77,403
417,199 $
2018
306,265
73,258
379,523
Operating Income
(In thousands)
Engineering and Other Scientific ...................................................... $
Environmental and Health ................................................................
2020
Fiscal Years
2019
2018
100,616 $
26,728
110,822 $
26,589
100,307
23,824
Total segment operating income .......................................................
127,344
137,411
124,131
Corporate operating expense.............................................................
Total operating income ................................................................ $
(44,095)
83,249 $
(52,300)
85,111 $
(32,675)
91,456
Certain operating expenses are excluded from the Company's measure of segment operating income. These expenses
include the costs associated with the Company’s human resources, finance, information technology, and business
development groups; the deferred compensation expense/benefit due to the change in value of assets associated with
the Company’s deferred compensation plan; stock-based compensation associated with restricted stock unit and stock
option awards; and the change in the Company’s allowance for contract losses and doubtful accounts.
Capital Expenditures
(In thousands)
Engineering and Other Scientific ...................................................... $
Environmental and Health ................................................................
2020
Fiscal Years
2019
2018
2,237 $
102
4,675 $
104
4,528
199
Total segment capital expenditures...................................................
2,339
4,779
4,727
Corporate capital expenditures..........................................................
Total capital expenditures............................................................ $
2,768
5,107 $
17,511
22,290 $
12,654
17,381
Certain capital expenditures associated with the Company's corporate cost centers and the related depreciation are
excluded from the Company's segment information. The high level of corporate capital expenditures during 2018 and
2019 was due to the land purchase and construction costs associated with the Company’s office and laboratory
facilities in Natick, Massachusetts.
Depreciation and Amortization
(In thousands)
Engineering and Other Scientific ...................................................... $
Environmental and Health ................................................................
2020
Fiscal Years
2019
2018
4,239 $
196
4,827 $
206
4,435
171
Total segment depreciation and amortization ...................................
4,435
5,033
4,606
Corporate depreciation and amortization ..........................................
Total depreciation and amortization ............................................ $
2,436
6,871 $
1,773
6,806 $
1,686
6,292
66
Information regarding the Company’s operations in different geographical areas:
Property, Equipment and Leasehold Improvements, net
(In thousands)
United States....................................................................................................... $
Foreign Countries ...............................................................................................
Total .............................................................................................................. $
Fiscal Years
2020
2019
58,900 $
923
59,823 $
60,074
1,513
61,587
Revenues (1)
(In thousands)
United States ..................................................................................... $
Foreign Countries..............................................................................
2020
Fiscal Years
2019
2018
353,565 $
46,335
351,856 $
65,343
334,422
45,101
Total............................................................................................. $
399,900 $
417,199 $
379,523
(1) Geographic revenues are allocated based on the location of the client.
Below is a breakdown of goodwill, reported by segment as of January 1, 2021 and January 3, 2020:
(In thousands)
Goodwill ........................................................................................... $
Environmental
and Health
Engineering
and Other
Scientific
Total
8,099 $
508 $
8,607
There were no changes in the carrying amount of goodwill for 2020, 2019 and 2018. There were no goodwill
impairments or gains or losses on disposals for any portion of the Company’s reporting units during 2020, 2019 and
2018.
Note 18: Subsequent Event
On February 4, 2021, the Company announced that its Board of Directors had declared a quarterly cash dividend of
$0.20 per share to be paid on March 26, 2021 to all common stockholders of record as of March 12, 2021.
67
Comparative Quarterly Financial Data (unaudited)
Summarized quarterly financial data is as follows:
(In thousands, except per share data)
Revenues before reimbursements ....................... $
Revenues .............................................................
Operating income................................................
Income before income taxes ...............................
2020 Quarter Ended
April 3,
2020
July 3,
2020
October 2,
2020
January 1,
2021
99,720 $
105,953
35,988
24,055
87,863 $
92,045
9,120
21,414
93,499 $
98,663
20,407
24,638
97,330
103,239
17,734
26,829
Net income .......................................................... $
26,282 $
16,346 $
18,084 $
21,840
Net income per share
Basic .............................................................. $
Diluted ........................................................... $
0.50 $
0.49 $
0.31 $
0.31 $
0.35 $
0.34 $
0.42
0.41
Shares used in per share computations
Basic ..............................................................
Diluted ...........................................................
52,575
53,657
52,259
53,139
52,316
53,209
52,402
53,260
(In thousands, except per share data)
Revenues before reimbursements ........................ $
Revenues ..............................................................
Operating income.................................................
Income before income taxes ................................
March 29,
2019
2019 Quarter Ended
June 28,
2019
September 27,
2019
93,401 $
99,031
15,754
23,322
100,263 $
106,506
24,823
28,851
95,506 $
101,548
23,184
25,211
January 3,
2020
102,220
110,114
21,350
26,806
Net income ........................................................... $
22,712 $
20,994 $
19,633 $
19,121
Net income per share
Basic ............................................................... $
Diluted ............................................................ $
0.43 $
0.42 $
0.40 $
0.39 $
0.37 $
0.36 $
0.36
0.36
Shares used in per share computations
Basic ...............................................................
Diluted ............................................................
52,536
53,814
52,745
53,872
52,802
54,002
52,681
53,817
68
Schedule II
Valuation and Qualifying Accounts
Additions
Deletions (1)
Accounts
Written-
off Net of
Recoveries
Balance
at End
of Year
(In thousands)
Year Ended January 1, 2021
Balance at
Beginning
of Year
Provision
Charged to
Expense
Provision
Charged to
Revenues
Allowance for bad debt ................................. $
Allowance for contract losses ....................... $
945 $
3,350 $
443 $
— $
— $
1,406 $
(509) $
(1,640) $
879
3,116
Year Ended January 3, 2020
Allowance for bad debt ................................. $
Allowance for contract losses ....................... $
847 $
3,219 $
484 $
— $
— $
1,740 $
(386) $
(1,609) $
945
3,350
Year Ended December 28, 2018
Allowance for bad debt ................................. $
Allowance for contract losses ....................... $
917 $
2,609 $
293 $
— $
— $
1,940 $
(363) $
(1,330) $
847
3,219
(1) Balance includes currency translation adjustments.
Recoveries of accounts receivable previously written off were $27,000, $32,000 and $28,000 for 2020, 2019 and 2018,
respectively.
Schedules other than above have been omitted since they are either not required, not applicable, or the information is
otherwise included in the Report.
69
EXHIBIT INDEX
The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual
Report on Form 10-K. Unless otherwise indicated all filings are under SEC File Number 000-18655:
3.1(i)
Restated Certificate of Incorporation of the Company (incorporated by reference from the Company’s
Registration Statement on Form S-1 as filed on June 25, 1990, registration number 33-35562). (P)
3.1(ii)
Certificate of Amendment of Restated Certificate of Incorporation of the Company (incorporated by
reference from the Company’s Current Report on Form 8-K filed on May 24, 2006).
3.1(iii) Certificate of Amendment of Restated Certificate of Incorporation of the Company (incorporated by
reference from the Company’s Current Report on Form 8-K filed on May 28, 2015).
3.1(iv) Certificate of Amendment of Restated Certificate of Incorporation of the Company (incorporated by
reference from the Company’s Current Report on Form 8-K filed on May 31, 2018).
3.2(i)
Amended and Restated Bylaws of the Company, as amended and restated May 29, 2014 (incorporated
by reference from the Company’s Current Report on Form 8-K as filed on May 30, 2014).
4.1
*4.2
*10.6
*10.10
*10.11
10.15
*10.17
*10.19
10.20
*10.24
*10.25
*10.26
Specimen copy of Common Stock Certificate of the Company (incorporated by reference from the
Company’s Registration Statement on Forms S-1 as filed on June 25, 1990, registration number 33-
35562). (P)
Description of the Registrant’s Securities (incorporated by reference from the Company’s Annual
Report on From 10-K for fiscal year ended January 1, 2021).
Exponent, Inc. 1998 Non-Statutory Stock Option Plan dated October 24, 1998 (incorporated by
reference from the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999).
Exponent, Inc. 1999 Stock Option Plan (incorporated by reference from the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 1999).
Exponent, Inc. 1999 Restricted Stock Plan (incorporated by reference from the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 1999).
Commercial Lease No. 03-53542 between the Company and the Arizona State Land Department,
effective January 17, 1998 (incorporated by reference from the Company’s Annual Report on Form 10-
K for the fiscal year ended January 3, 2003).
Exponent Nonqualified Deferred Compensation Plan (incorporated by reference from the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
Form of Indemnification Agreement entered into or proposed to be entered into between the Company
and its officers and directors (incorporated by reference from the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 2006).
Services Agreement between the Company and Exponent Engineering P.C. (incorporated by reference
from the Company’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2006).
Amendment No. 1 to Exponent, Inc. 1998 Non-Statutory Stock Option Plan dated January 29, 2007
(incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended
December 29, 2006).
Amendment No. 1 to Exponent, Inc. 1999 Stock Option Plan dated January 29, 2007 (incorporated by
reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 29,
2006).
Amendment No. 1 to Exponent, Inc. 1999 Restricted Stock Plan dated January 29, 2007 (incorporated
by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 29,
2006).
70
*10.28
*10.31
*10.32
*10.33
*10.34
*10.35
*10.36
2008 Employee Stock Purchase Plan (incorporated by reference from the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 2009).
Form of Restricted Stock Unit Employee Bonus Grant Agreement under the 2008 Equity Incentive Plan
(incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended
January 1, 2009).
Form of Restricted Stock Unit Employee Matching Grant Agreement under the 2008 Equity Incentive
Plan (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year
ended January 1, 2009).
Form of Restricted Stock Unit Director Grant Agreement under the 2008 Equity Incentive Plan
(incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended
January 1, 2009).
Amended and Restated Restricted Stock Unit Bonus Grant Agreement under the 1999 Restricted Stock
Plan (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year
ended January 1, 2009).
Amended and Restated Restricted Stock Unit Matching Grant Agreement under the 1999 Restricted
Stock Plan (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2009).
Amended and Restated Restricted Stock Unit Director Grant Agreement under the 1999 Restricted
Stock Plan (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2009).
*10.37
Exponent, Inc. Amended and Restated 2008 Equity Incentive Plan (filed as Appendix A to the
Company’s Schedule 14A filed on April 19, 2012).
*10.38
Exponent, Inc. 401(k) Savings Plan, as amended and restated effective January 1, 2014.
*10.39
First Amendment to the Exponent, Inc. 401(k) Savings Plan (as amended and restated January 1, 2014).
*10.40
*10.41
*10.43
*10.45
*10.46
*10.47
*10.48
21.1
23.1
31.1
Second Amendment to the Exponent, Inc. 401(k) Savings Plan (as amended and restated January 1,
2014).
Form of Stock Option Agreement under the 2008 Equity Incentive Plan (incorporated by reference from
the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2011).
Amendment to Form of Stock Option Agreement under the 2008 Equity Incentive Plan (incorporated by
reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 28,
2012).
Form of Indemnification Agreement entered into or proposed to be entered into between the Company
and its officers and directors (incorporated by reference from the Company’s Current Report on Form 8-
K as filed on May 30, 2014).
Executive Compensation Clawback Policy (incorporated by reference from the Company’s Quarterly
Report on Form 10-Q for the fiscal period ended September 30, 2016).
Exponent, Inc. Amended and Restated 2008 Equity Incentive Plan (filed as Appendix A to the
Company’s Schedule 14A on April 18, 2017).
Exponent, Inc. Amended and Restated 2008 Employee Stock Purchase Plan (filed as Appendix B to the
Company’s Schedule 14A on April 18, 2017).
List of subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer pursuant to Rule 13a – 14(a) of the Securities Exchange Act of
1934.
71
31.2
32.1
32.2
Certification of Chief Financial Officer pursuant to Rule 13a – 14(a) of the Securities Exchange Act of
1934.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Schema Document.
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document.
101.LAB Inline XBRL Taxonomy Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Definition Linkbase Document.
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
*
Indicates management compensatory plan, contract or arrangement
72
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 26, 2021
EXPONENT, INC.
(Registrant)
By:
/s/ Richard L. Schlenker, Jr.
Richard L. Schlenker, Jr., Executive Vice President,
Chief Financial Officer and Corporate Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Catherine Ford Corrigan
Catherine Ford Corrigan, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Richard L. Schlenker, Jr.
Richard L. Schlenker, Jr.
Executive Vice President, Chief Financial Officer and
Corporate Secretary (Principal Financial and Accounting
Officer)
February 26, 2021
February 26, 2021
/s/ Paul R. Johnston
Paul R. Johnston, Ph.D.
/s/ George Brown
George Brown
/s/ Carol Lindstrom
Carol Lindstrom
/s/ Karen A. Richardson
Karen A. Richardson
/s/ John B. Shoven
John B. Shoven, Ph.D.
/s/ Debra L. Zumwalt
Debra L. Zumwalt
Chairman of the Board of Directors
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
Director
Director
Director
Director
Director
73
[THIS PAGE INTENTIONALLY LEFT BLANK]