Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~October 27, 2017,~~May 1, 2020, the latest practicable date, the registrant had ~~25,810,749~~51,545,910 shares of common stock ~~$0.001 par value per share,~~ outstanding.

	September 29,			December 30,
	2017			2016			April 3, 2020			January 3, 2020
Assets
Current assets:
Cash and cash equivalents	$	89,809		$	114,967		$	105,594		$	176,436
Short-term investments		75,782			58,755			46,449			55,165
Accounts receivable, net of allowance for contract losses and doubtful accounts of $3,847 and $3,417 at September 29, 2017 and December 30, 2016, respectively		124,803			87,409
Prepaid expenses and other assets		10,692			12,913
Accounts receivable, net of allowance for contract losses and doubtful accounts of $6,192 and $4,295 at April 3, 2020 and January 3, 2020, respectively								127,212			120,138
Prepaid expenses and other current assets								14,141			12,305
Total current assets		301,086			274,044			293,396			364,044

Property, equipment and leasehold improvements, net		35,180			36,710			60,840			61,587
Operating lease right-of-use assets								21,500			23,003
Goodwill		8,607			8,607			8,607			8,607
Deferred income taxes		42,574			42,166			35,151			36,821
Deferred compensation plan assets		46,678			41,153			63,353			68,400
Other assets		1,515			1,064			816			949
Total assets	$	435,640		$	403,744		$	483,663		$	563,411

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	13,813		$	10,073		$	14,038		$	18,583
Accrued payroll and employee benefits		59,696			62,539			45,729			86,723
Deferred revenues		7,776			7,624			11,684			12,710
Operating lease liabilities								5,648			5,944
Total current liabilities		81,285			80,236			77,099			123,960

Other liabilities		2,161			2,005			2,797			2,669
Deferred compensation		50,778			46,503
Deferred rent		1,340			1,654
Deferred compensation plan liabilities								64,026			68,373
Operating lease liabilities								16,244			18,158
Total liabilities		135,564			130,398			160,166			213,160

Stockholders’ equity:
Common stock, $0.001 par value; 80,000 shares authorized; 32,853 shares issued at September 29, 2017 and December 30, 2016		33			33
Common stock, $0.001 par value; 120,000 shares authorized; 65,707 shares issued at April 3, 2020 and January 3, 2020								66			66
Additional paid-in capital		208,583			194,632			257,389			244,935
Accumulated other comprehensive income (loss)
Investment securities, available-for-sale		(129	)		(146	)		470			302
Foreign currency translation adjustments		(1,934	)		(2,980	)		(3,735	)		(2,062	)
		(2,063	)		(3,126	)		(3,265	)		(1,760	)
Retained earnings		313,277			291,243			395,646			384,668
Treasury stock, at cost; 7,043 and 7,256 shares held at September 29, 2017 and December 30, 2016, respectively		(219,754	)		(209,436	)
Treasury stock, at cost; 14,161 and 13,951 shares held at April 3, 2020 and January 3, 2020, respectively								(326,339	)		(277,658	)
Total stockholders’ equity		300,076			273,346			323,497			350,251
Total liabilities and stockholders’ equity	$	435,640		$	403,744		$	483,663		$	563,411

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

	Three Months Ended
	April 3, 2020			March 29, 2019
Revenues:
Revenues before reimbursements	$	99,720		$	93,401
Reimbursements		6,233			5,630
Revenues		105,953			99,031
Operating expenses:
Compensation and related expenses		49,985			65,093
Other operating expenses		8,216			8,008
Reimbursable expenses		6,233			5,630
General and administrative expenses		5,531			4,546
Total operating expenses		69,965			83,277
Operating income		35,988			15,754
Other income, net:
Interest income, net		875			1,055
Miscellaneous income (loss), net		(12,808	)		6,513
Total other income (loss), net		(11,933	)		7,568
Income before income taxes		24,055			23,322
Income taxes		(2,227	)		610
Net income	$	26,282		$	22,712
Net income per share:
Basic	$	0.50		$	0.43
Diluted	$	0.49		$	0.42
Shares used in per share computations:
Basic		52,575			52,536
Diluted		53,657			53,814
Cash dividends declared per common share	$	0.19		$	0.16

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements

	Three Months Ended April 3, 2020
	Common Stock				Additional paid-in			Accumulated other comprehensive			Retained			Treasury Stock
	Shares		Amount		capital			income (loss)			earnings			Shares			Amount			Total
Balance at January 3, 2020		65,707	$	66	$	244,935		$	(1,760	)	$	384,668			13,951		$	(277,658	)	$	350,251
Employee stock purchase plan		-		-		400			-			-			(7	)		73			473
Exercise of stock options						64									(60	)		608			672
Amortization of unrecognized stock-based compensation		-		-		4,095			-			-			-			-			4,095
Purchase of treasury shares															636			(40,049	)		(40,049	)
Foreign currency translation adjustments		-		-		-			(1,673	)		-			-			-			(1,673	)
Grant of restricted stock units to settle accrued bonus		-		-		8,645			-			-			-			-			8,645
Settlement of restricted stock units		-		-		(1,261	)		-			(4,538	)		(359	)		(9,313	)		(15,112	)
Unrealized gain on investments		-		-		-			168			-			-			-			168
Dividends and dividend equivalent rights		-		-		511			-			(10,766	)		-			-			(10,255	)
Net income		-		-		-			-			26,282			-			-			26,282
Balance at April 3, 2020		65,707	$	66	$	257,389		$	(3,265	)	$	395,646			14,161		$	(326,339	)	$	323,497


	Three Months Ended March 29, 2019
	Common Stock				Additional paid-in			Accumulated other comprehensive			Retained			Treasury Stock
(In thousands)	Shares		Amount		capital			income (loss)			earnings			Shares			Amount			Total
Balance at December 28, 2018		65,707	$	66	$	227,283		$	(2,853	)	$	342,024			14,208		$	(252,611	)	$	313,909
Employee stock purchase plan		-		-		302			-			-			(7	)		70			372
Amortization of unrecognized stock-based compensation		-		-		3,663			-			-			-			-			3,663
Foreign currency translation adjustments		-		-		-			117			-			-			-			117
Grant of restricted stock units to settle accrued bonus		-		-		7,947			-			-			-			-			7,947
Settlement of restricted stock units		-		-		(860	)		-			(5,146	)		(395	)		(5,188	)		(11,194	)
Unrealized gain on investments		-		-		-			154			-			-			-			154
Dividends and dividend equivalent rights		-		-		581			-			(9,084	)		-			-			(8,503	)
Net income		-		-		-			-			22,712			-			-			22,712
Balance at March 29, 2019		65,707	$	66	$	238,916		$	(2,582	)	$	350,506			13,806		$	(257,729	)	$	329,177

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

~~For the Three and Nine Months Ended September 29, 2017 and September 30, 2016~~

~~The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements~~

~~For the Three and Nine Months Ended September 29, 2017 and September 30, 2016~~

~~The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements~~

For the ~~Nine~~Three Months Ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016~~2019

	Nine Months Ended						Three Months Ended
	September 29, 2017			September 30, 2016			April 3, 2020			March 29, 2019
Cash flows from operating activities:
Net income	$	45,010		$	37,092		$	26,282		$	22,712
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property, equipment and leasehold improvements		4,762			4,509			1,786			1,590
Amortization of premiums and accretion of discounts on short-term investments		-			7			(60	)		(132	)
Deferred rent		(314	)		(330	)
Provision for contract losses and doubtful accounts		1,657			1,688			2,383			788
Stock-based compensation		12,728			10,659			6,138			5,731
Deferred income tax provision		(421	)		(1,284	)		1,614			161
Changes in operating assets and liabilities:
Accounts receivable		(39,051	)		(7,403	)		(9,457	)		(13,838	)
Prepaid expenses and other assets		1,049			(342	)
Prepaid expenses and other current assets								(12,561	)		(10,431	)
Change in operating leases								(707	)		(425	)
Accounts payable and accrued liabilities		3,950			(1,059	)		(4,110	)		(333	)
Accrued payroll and employee benefits		(2,558	)		(4,091	)		(24,117	)		(16,477	)
Deferred revenues		152			(2,212	)		(1,026	)		(1,599	)
Net cash provided by operating activities		26,964			37,234

Net cash used in operating activities								(13,835	)		(12,253	)
Cash flows from investing activities:
Capital expenditures		(3,354	)		(13,063	)		(1,293	)		(5,670	)
Purchase of short-term investments		(20,997	)		(36,000	)		-			(23,848	)
Maturity of short-term investments		4,000			29,950			9,000			13,000
Net cash used in investing activities		(20,351	)		(19,113	)

Net cash provided by (used in) investing activities								7,707			(16,518	)
Cash flows from financing activities:
Payroll taxes for restricted stock units		(9,520	)		(7,685	)		(15,112	)		(11,194	)
Repurchase of common stock		(8,431	)		(24,456	)		(40,049	)		-
Exercise of share-based payment awards		1,733			1,499
Exercise of stock-based payment awards								1,145			372
Dividends and dividend equivalents rights		(16,419	)		(14,174	)		(10,308	)		(8,593	)
Net cash used in financing activities		(32,637	)		(44,816	)		(64,324	)		(19,415	)

Effect of foreign currency exchange rates on cash and cash equivalents		866			(631	)		(390	)		207

Net decrease in cash and cash equivalents		(25,158	)		(27,326	)		(70,842	)		(47,979	)
Cash and cash equivalents at beginning of period		114,967			125,751			176,436			127,059
Cash and cash equivalents at end of period	$	89,809		$	98,425		$	105,594		$	79,080

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Exponent, Inc. (referred to as the “Company” or “Exponent”) is an engineering and scientific consulting firm that provides solutions to complex problems. The Company operates on a 52-53 week fiscal year ending on the Friday closest to the last day of December.

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission. Accordingly, they do not contain all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments which are necessary for the fair presentation of the condensed consolidated financial statements have been included and all such adjustments are of a normal and recurring nature. The operating results for the three ~~and nine~~ months ended ~~September 29, 2017~~April 3, 2020 are not necessarily representative of the results of future quarterly or annual periods. The following information should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~December 30, 2016,~~January 3, 2020, which was filed with the U.S. Securities and Exchange Commission on February ~~24, 2017.~~

The unaudited condensed consolidated financial statements include the accounts of Exponent, Inc. and its subsidiaries, which are all wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

~~Dividend.~~ ~~The Company declared and paid cash dividends per common share during the periods presented as follows:~~

On October 18, 2017, the Company’s Board of Directors announced a cash dividend of $0.21 per share of the Company’s common stock, payable December 22, 2017, to stockholders of record as of December 1, 2017. The Company expects to continue paying quarterly dividends in the future, subject to declaration by the Company’s Board of Directors.

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. ~~Significant items~~Items subject to such estimates and assumptions include accounting for revenue recognition and estimating the allowance for contract losses and doubtful accounts. Actual results could differ from those estimates. The Company’s estimate of its allowance for contract losses and doubtful accounts takes into consideration the macroeconomic effect of global events such as the COVID-19 pandemic which may impact the ability of its customers to pay.

~~Recent~~Recently Adopted Accounting ~~Pronouncements Not Yet Effective~~~~. On May 28, 2014,~~Pronouncements. In June 2016, the Financial Accounting Standards Board (“FASB”) ~~issued~~established Topic 326, Measurement of Credit Losses on Financial Instruments, by issuing Accounting Standard Update (“ASU”) No. ~~2014-09,~~~~Revenue from Contracts~~2016-13, Financial Instruments – Credit Losses, which replaces the incurred loss methodology with ~~Customers~~~~, which requires~~ an ~~entity~~expected loss methodology that is referred to ~~recognize~~as the ~~amount~~current expected credit loss (“CECL”) methodology. The measurement of ~~revenue~~the expected credit losses under the CECL methodology is applicable to ~~which it expects~~financial assets measured at amortized cost where there is a contractual right to ~~be entitled for the transfer of promised goods or services to customers.~~receive cash, including, accounts receivables, loan receivables and held-to-maturity debt securities. The Company adopted ASU ~~will replace most existing revenue recognition guidance~~No. 2016-13 in ~~U.S. generally accepted accounting principles (“GAAP”) when it becomes effective. The new standard is effective for the Company on~~ the first ~~day~~quarter of ~~fiscal 2018 (December 30, 2017). The two permitted transition methods under~~2020 and the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application.

~~The~~ impact of ~~adopting~~ the ~~new standard is~~adoption was not ~~expected~~material to ~~be material because the analysis of~~ the Company’s ~~contracts under the new revenue recognition standard supports the recognition of revenue over time, which is consistent with the Company’s current revenue recognition model.~~condensed consolidated financial statements.

Substantially all of the Company’s engagements are performed under time and ~~material~~materials or fixed-price arrangements. For time and materials contracts, the Company ~~anticipates utilizing~~utilizes the practical expedient under ~~the ASU~~Accounting Standards Codification 606 – Revenue from Contracts with Customers, which states that 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 orof service provided), then the entity may recognize revenue in the amount to which the entity has a right to invoice. ~~Application~~

The following table discloses the percent of the ~~practical expedient to~~Company’s revenue generated from time and ~~material contracts is consistent with the Company’s current revenue recognition policy.~~materials contracts:

For ~~fixed price~~fixed-price contracts, the Company ~~will recognize~~recognizes revenue over time ~~under the ASU~~ 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. ~~Input methods are an acceptable method of measuring progress towards completing under the ASU. This~~Revenue for fixed-price contracts is ~~consistent with the Company’s current policy of measuring progress towards completion~~recognized based on the relationship of incurred labor hours at standard rates to ~~its~~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.~~

The Company anticipates adopting the standard using the modified retrospective method. The Company is currently evaluating the required disclosures under the new standard and developing appropriate changes to its process, systems and controls.

~~On February 25, 2016, the FASB issued ASU No. 2016-02,~~~~Leases~~, which requires lessees to recognize most leases on their balance sheet. The new standard will be effective for the Company on the first day of fiscal 2019 (December 29, 2018). Early adoption is permitted. The standard requires use of the modified retrospective transition method, with elective relief, which requires application of the guidance for all periods presented. The Company is evaluating the effect that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. The standard will require the Company to record a right of use asset and a lease liability that will materially gross up its balance sheet.contracts:

Deferred revenues represent amounts billed to clients in advance of services provided. During the first quarter of 2020, $4,791,000 of revenues were recognized that were included in the deferred revenue balance at January 3, 2020. During the first quarter of 2019, $3,411,000 of revenues were recognized that were included in the deferred revenue balance at December 28, 2018.

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 $3,781,000 during the first quarter of 2020. The total amount of subcontractor fees not included in revenues because the Company was acting as an agent were $4,242,000 during the first quarter of 2019.

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 were no transfers between fair value measurement levels during the three ~~and nine~~ months ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016.~~2019. Any transfers between fair value measurement levels would be recorded on the actual date of the event or change in circumstances that caused the transfer. The fair value of these certain financial assets and liabilities was determined using the following inputs at ~~September 29, 2017:~~April 3, 2020 (in thousands):

	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market securities ⁽¹⁾	$	4,758	$	4,758	$	-	$	-
Fixed income available-for-sale securities ⁽²⁾		46,449		-		46,449		-
Fixed income trading securities held in deferred compensation plan ⁽³⁾		29,905		29,905		-		-
Equity trading securities held in deferred compensation plan ⁽³⁾		38,937		38,937		-		-
Total	$	120,049	$	73,600	$	46,449	$	-
Liabilities
Deferred compensation plan ⁽⁴⁾		69,865		69,865		-		-
Total	$	69,865	$	69,865	$	-	$	-

The fair value of these certain financial assets and liabilities was determined using the following inputs at ~~December 30, 2016:~~January 3, 2020 (in thousands):

	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market securities⁽¹⁾	$	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	$	-	$	-

Fixed income available-for-sale securities as of ~~September 29, 2017~~April 3, 2020 and ~~December 30, 2016~~January 3, 2020 represent obligations of the United States ~~agencies.~~Treasury. Fixed income and equity trading securities represent mutual funds held in the Company’s deferred compensation plan. See Note 67 for additional information about the Company’s deferred compensation plan.

Cash, cash equivalents and short-term investments consisted of the following as of ~~September 29, 2017:~~April 3, 2020 (in thousands):

Cash, cash equivalents and short-term investments consisted of the following as of ~~December 30, 2016:~~January 3, 2020 (in thousands):

~~- 11 -~~

	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Classified as current assets:
Cash	$	135,225	$	-	$	-	$	135,225
Cash equivalents:
Money market securities		41,211		-		-		41,211
Total cash equivalents		41,211		-		-		41,211
Total cash and cash equivalents		176,436		-		-		176,436
Short-term investments:
U.S. Treasury and agency securities		54,841		324		-		55,165
Total short-term investments		54,841		324		-		55,165
Total cash, cash equivalents and short-term investments	$	231,277	$	324	$	-	$	231,601

~~The following table summarizes~~At April 3, 2020 the ~~cost and estimated fair value~~stated effective maturities of all short-term fixed income securities classified as short-term investments ~~based on stated effective maturities as of September 29, 2017:~~were due within one year.

At ~~September 29, 2017~~April 3, 2020 and ~~December 30, 2016,~~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 unaudited condensed consolidated balance sheet at ~~September 29, 2017~~April 3, 2020 and ~~December 30, 2016,~~January 3, 2020 but require disclosure of their fair values: accounts receivable, other assets and accounts payable. The estimated fair value of such instruments at ~~September 29, 2017~~April 3, 2020 and ~~December 30, 2016~~January 3, 2020 approximates their carrying value as reported on the Company’s unaudited condensed consolidated balance sheet.

There were no other-than-temporary impairments or credit losses related to available-for-sale securities during the three ~~and nine~~ months ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016.~~2019.

Basic per share amounts are computed using the weighted-average number of common shares outstanding during the period. Diluted per share amounts are calculated using the weighted-average number of common shares outstanding during the period and, when dilutive, the weighted-average number of potential common shares from the issuance of common stock to satisfy outstanding restricted stock units and the exercise of outstanding options to purchase common stock using the treasury stock method.

The following schedule reconciles the shares used to calculate basic and diluted net income per share:

Common stock options to purchase 22,418 shares were ~~no options~~ excluded from the diluted per share ~~calculations~~calculation for the three ~~and nine~~ months ended ~~September~~April 3, 2020 due to their anti-dilutive effect.Common stock options to purchase 24,176 shares were excluded from the diluted per share calculation for the three months ended March 29, ~~2017 and September 30, 2016.~~2019 due to their anti-dilutive effect.

Restricted stock unit grants are designed to attract and retain employees, and to better align employee interests with those of the Company’s stockholders. For a select group of employees, up to 40% of their annual bonus is settled with fully vested restricted stock unit awards. Under these fully vested restricted stock unit awards, the holder of each award has the right to receive one share of the Company’s common stock for each fully vested restricted stock unit four years from the date of grant. Each individual who receives a fully vested restricted stock unit award is also granted a matching number of unvested restricted stock unit awards. Unvested restricted stock unit awards are also granted for select new hires and promotions. These unvested restricted stock unit awards generally cliff vest four years from the date of grant, at which time the holder of each award will have the right to receive one share of the Company’s common stock for each restricted stock unit award provided the holder of each award has met certain employment conditions. In the case of retirement at 59½ years or older, all unvested restricted stock unit awards will continue to vest, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company.

The value of these restricted stock unit awards is determined based on the market price of the Company’s common stock on the date of grant. The value of fully vested restricted stock unit awards issued is recorded as a reduction to accrued bonuses. The portion of bonus expense that the Company expects to settle with fully vested restricted stock unit awards is recorded as stock-based compensation during the period the bonus is earned. The Company recorded stock-based compensation expense associated with accrued bonus awards of ~~$2,155,000~~$2,043,000 and ~~$1,548,000~~$2,068,000 during the three months ended ~~September~~April 3, 2020 and March 29, 2017 and September 30, 2016, respectively. For the nine months ended September 29, 2017 and September 30, 2016, the Company recorded stock-based compensation expense associated with accrued bonus awards of $6,284,000 and $4,716,000,2019, respectively. The value of the unvested restricted stock unit awards granted is recognized on a straight-line basis over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59½. If the award recipient is 59½ years or older on the date of grant, the value of the entire award is expensed upon grant. The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of $3,927,000 and $3,530,000 during the three months ended April 3, 2020 and March 29, 2019, respectively.

Stock options are granted for terms of ten years and generally vest 25% per year over a four-year period from the grant date. Unvested stock option awards will continue to vest in the case of retirement at 59½ years or older, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company. The value of the unvested stock option awards granted is recognized on a straight-line basis over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59½. If the award recipient is 59½ years or older on the date of grant, the value of the entire award is expensed upon grant. The Company recorded stock-based compensation expense associated with ~~the unvested restricted~~ stock ~~unit awards~~option grants of ~~$1,294,000~~$168,000 and ~~$1,115,000~~$133,000 during the three months ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016,~~2019, respectively. The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of $5,788,000 and $5,447,000 during the nine months ended September 29, 2017 and September 30, 2016, respectively.

Stock options are granted for terms of ten years and generally vest 25% per year over a four-year period from the grant date. Unvested stock option awards will continue to vest in the case of retirement at 59½ years or older, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company. The Company grants options at exercise prices equal to the fair value of the Company’s common stock on the date of grant. The Company recorded stock-based compensation expense associated with stock option grants of $92,000 and $67,000 during the three months ended September 29, 2017 and September 30, 2016, respectively. The Company recorded stock-based compensation expense associated with stock option grants of $656,000 and $496,000 during the nine months ended September 29, 2017 and September 30, 2016, respectively.

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 option 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, forfeiture, 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 of the options. The dividend yield assumption considers the expectation of continued declaration of dividends, offset by option holders’ dividend equivalent rights.

The Company accounts for forfeitures of stock-based awards when they occur. All stock-based payment awards are recognized on a straight-line basis over the requisite service periods of the awards.

On October ~~21, 2015,~~19, 2016, the Company’s Board of Directors authorized $35,000,000 for the repurchase of shares of the Company’s common stock. On ~~October 19, 2016,~~January 31, 2019, the Company’s Board of Directors authorized an additional ~~$35,000,000~~$75,000,000 for the repurchase of shares of the Company’s common stock.

The Company repurchased ~~139,182~~636,000 shares of its common stock for ~~$8,431,000~~$40,049,000 during the ~~nine~~three months ended ~~September 29, 2017.~~April 3, 2020. The Company ~~repurchased 491,312~~did 0t repurchase any shares of its common stock ~~for $24,456,000~~ during the ~~nine~~three months ended ~~September 30, 2016.~~March 29, 2019. As of ~~September 29, 2017~~April 3, 2020, the Company had remaining authorization under its stock repurchase plans of ~~$48,876,000 to repurchase shares of common stock.~~$30,455,000.

Net losses related to the re-issuance of treasury stock to settle restricted stock unit and stock option awards of $5,667,000 and $5,791,000 were recorded as a reduction to retained earnings during the nine months ended September 29, 2017 and September 30, 2016, respectively. There were no net losses related to the re-issuance of treasury stock during the three months ended September 29, 2017 and September 30, 2016.

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 ~~September 29, 2017~~April 3, 2020, and ~~December 30, 2016,~~January 3, 2020, the invested amounts under the plans totaled ~~$50,779,000~~$68,842,000 and ~~$48,267,000,~~$75,934,000 respectively and are recorded in ~~pre-paid~~prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet. These assets are classified as trading securities and are recorded at fair value with changes recorded as adjustments to miscellaneous income (loss), net.

As of ~~September 29, 2017~~April 3, 2020, and ~~December 30, 2016,~~January 3, 2020, vested amounts due under the plans totaled ~~$56,479,000~~$69,865,000 and ~~$53,617,000,~~$76,357,000 respectively and are recorded within accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheet. Changes in the liability are recorded as adjustments to compensation expense. During the three months ended ~~September 29, 2017 and September 30, 2016,~~April 3, 2020, the Company recognized a reduction to compensation expense of ~~$1,699,000 and $1,458,000, respectively,~~$(14,622,000). During the three months ended March 29, 2019 the Company recognized additional compensation expense of $5,869,000 as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income (loss), net. During the nine months ended September 29, 2017 and September 30, 2016, the Company recognized compensation expense of $4,617,000 and $2,823,000, respectively, as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income, net.

At ~~September 29, 2017~~April 3, 2020 and ~~December 30, 2016,~~January 3, 2020, accounts receivable, net, was comprised of the following:

The Company maintains allowances for estimated losses over the remaining contractual life of its receivables 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 future expectations.

A reconciliation of the beginning and ending amount of the allowance for contract losses and doubtful accounts is as follows (in thousands):

The provision for contract losses and doubtful accounts for the first quarter of 2020 includes approximately $1,500,000 as a result of the economic uncertainty associated with the COVID-19 pandemic. Recoveries of accounts receivable previously written-off were not material during the first quarter of 2020.

On January 29, 2019, PG&E Corp. (“PG&E”) filed for bankruptcy under chapter 11 of the U.S. bankruptcy code. As of April 3, 2020, the Company’s total pre-bankruptcy outstanding accounts receivable from PG&E was $3,000,000. The Company currently expects to collect substantially all of the pre-bankruptcy accounts receivable from PG&E. However, due to the risks and uncertainties inherent in the bankruptcy process, the amount ultimately collected could differ from the Company’s current expectation. The Company continues to do work for PG&E post-bankruptcy filing and expects to be paid for this work in the ordinary course of business. Under the United States Bankruptcy code, PG&E is required to pay all post-bankruptcy expenses in the normal course of business. If they do not do so, the Company is eligible to have the post-bankruptcy obligation categorized as an administrative expense entitled to priority over most pre-bankruptcy creditors.

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~~areas 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.

Our Chief Executive Officer, the chief operating decision maker, reviews revenues and operating income for each of our reportable segments but does not review total assets in evaluating segment performance and capital allocation.

Segment information for the three ~~and nine~~ months ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016~~2019 follows:

One client comprised 17% of the Company’s revenues during the three months ended September 29, 2017. The same client comprised 14% of the Company’s revenues during the nine months ended September 29, 2017. No otherNaN single client comprised more than 10% of the Company’s revenues during the three ~~and nine~~ months ended ~~September~~April 3, 2020 and March 29, 2017. No single client comprised more than 10% of the Company’s revenues during the three and nine months ended September 30, 2016. The same client comprised 29% of the Company’s accounts receivable at September 29, 2017. No other2019. NaN single client comprised more than 10% of the Company’s accounts receivable at ~~September 29, 2017. No single client comprised more than 10%~~April 3, 2020 and January 3, 2020.

The Company determines if an arrangement is a lease at the inception of the arrangement. Operating leases are included in operating lease ROU assets, current operating lease liabilities, and long-term operating lease liabilities in the Company’s ~~accounts receivable~~condensed consolidated balance sheet. The Company does not have any finance leases as of April 3, 2020.

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 ~~December 30, 2016.~~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 may 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 condensed 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 Germany, 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 2 fifteen-year periods. As of April 3, 2020, 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.

The Company leases excess space in its Silicon Valley and Natick facilities. Rental income of $991,000 and $741,000 was included in other income for the three months ended April 3, 2020 and March 29, 2019, respectively.

The components of lease expense included in other operating expenses on the condensed consolidated statement of income were as follows:

Supplemental balance sheet information related to operating leases was as follows:

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.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included herein and with our audited consolidated financial statements and notes thereto for the fiscal year ended ~~December 30, 2016,~~January 3, 2020, which are contained in our fiscal ~~2016~~2019 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February ~~24, 2017~~28, 2020 (our ~~“2016~~“2019 Annual Report”).

This Quarterly Report on Form 10-Q contains 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, the words “intend,” “anticipate,” “believe,” “estimate,” “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 collectability 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 in ~~our 2016 Annual~~this Quarterly Report under the heading “Risk Factors” and elsewhere in ~~the~~this report. 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 warned 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.

Exponent, Inc., is an engineering and scientific consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists, engineers and business consultants brings together more than 90 different technical disciplines to solve complicated issues facing industry and business 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.

~~In preparing our unaudited condensed consolidated financial statements, we make assumptions, judgments and estimates that can~~There have abeen no 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. Actual results could differ materially from these estimates under different assumptions or conditions. 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 the accounting for revenue recognition and estimating the allowance for contract losses and doubtful accounts have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting ~~policies. Historically, our assumptions, judgments and~~ estimates ~~relative~~during the three months ended April 3, 2020, as compared to ~~our~~the critical accounting ~~policies have not differed materially from actual results. Policies covering revenue recognition~~estimates disclosed in Management’s Discussion and ~~estimating the allowance for contract losses~~Analysis of Financial Condition and ~~doubtful accounts are described~~Results of Operations included in our ~~2016~~2019 Annual ~~Report under “Critical Accounting Estimates” and Note 1 (Summary of Significant Accounting Policies) of the Notes to Consolidated Financial Statements.~~Report.

Revenues for the ~~third~~first quarter ~~of 2017~~2020 increased ~~13%~~7% to ~~$87,555,000~~$105,953,000 as compared to ~~$77,612,000~~$99,031,000 during the same period last year. Revenues before reimbursements for the ~~third~~first quarter of ~~2017~~2020 increased ~~11%~~7% to ~~$82,359,000~~$99,720,000 as compared to ~~$74,160,000~~$93,401,000 during the same period last year. ~~We experienced strong demand for~~Business restrictions related to the COVID-19 impacted our ~~consulting services from a diverse set~~Asian operations starting in late January, and certain areas of ~~clients for both proactive~~our European and ~~reactive projects. We continue to see demand for our proactive services~~United States operations in the ~~areas~~second half of ~~design and regulatory consulting, specifically related to consumer electronics, and our reactive services in international construction disputes, consumer product recalls and product liability claims.~~

During the ~~third~~first quarter of ~~2017~~2020, we had strong growth in our biomechanics, biomedical engineering, chemical regulation &and food safety, ~~construction consulting, electrical engineering & computer science, human factors,~~ mechanical engineering, and ~~polymer science & materials chemistry~~vehicle engineering practices. ~~During the quarter we continued to work on a large human factors assessment~~Multinational companies across industries engaged our interdisciplinary teams of world-class consultants for ~~a client in the consumer products industry. The level of activity for this project increased during the quarter, driving increases in both revenue~~scientific expertise and profitability. This project represented approximately 8% of our revenues before reimbursements in the third quarter of 2017 and approximately 6% of our revenues before reimbursements for the first nine months of 2017. During the quarter we also continued our international construction disputes work with current mining, gas terminal and power plant projects. We also experienced growth from lithium-ion battery consulting for clients in the consumer products, transportation, medical device, and utility industries. Our interdisciplinary team of chemists, electrical engineers, material scientists and mechanical engineers has guided clients with respect to the performance, reliability, and safety of new products, as well as with respect to recalls and litigation matters involving existing products with lithium-ion batteries.

Net income increased ~~30%~~16% to ~~$14,643,000~~$26,282,000 during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~$11,289,000~~$22,712,000 during the same period last year. Diluted earnings per share increased to ~~$0.54~~$0.49 per share as compared to $0.42 in the same period last year. WeThe increases in net income and diluted earnings per share were ~~able~~primarily due to ~~improve profitability~~the 7% increase in revenues before reimbursements and ~~margins by effectively managing headcount over the past year to align~~a decrease in our ~~resources with demand and benefited from a large human factors assessment for a client~~effective tax rate. The decrease in the ~~consumer products industry, which resulted~~effective tax rate was due to an increase in ~~improved utilization~~the excess tax benefit associated with stock-based awards. The excess tax benefit associated with stock-based awards increased to $8,772,000 during the first quarter of 2020 as compared to $5,670,000 during the same period last year.

We are addressing the challenges associated with the COVID-19 pandemic with the same seriousness, intellectual rigor, and ~~increased leverage~~fact-based analysis that we have employed for over 50 years. We are focused on three things: ensuring the health and safety of our ~~cost structure.~~people, demonstrating leadership by continuing to solve our clients’ most pressing problems, and delivering value to shareholders. Our employees have been working from home since the initiation of shelter in place orders, with the exception of laboratory and inspection activities for essential businesses. Our business development process has evolved to adapt to a remote working environment and new engagements continue to be initiated by inbound client communication based on our reputation and long-standing relationships.

We continue to see strong demand for utility integrity management services, as clients focus on power reliability while their customers are asked to stay at home. Preparation for fire season is an additional market driver in this sector. Our chemical regulation and food safety services represent an ongoing area of strength, as clients must continue to comply with complex regulations as they distribute products around the world.

We have seen slowing of a portion of our litigation support projects due to courthouse closures and associated legal delays. However, courts are beginning to utilize technology to hold virtual hearings and trials. Travel restrictions are delaying work that requires inspection of a site or a product that cannot be shipped, but as restrictions begin to ease, Exponent’s broad geographic footprint will be a competitive advantage as it puts our consultants within driving distance of many locations. The pandemic has also temporarily paused our user studies, but we are actively adapting the study designs and implementing processes and technologies so that we can restart them as quickly as possible, while ensuring the health and safety of our participants and employees.

Our scientific experts are more committed than ever to delivering actionable thought leadership, especially where it can help to manage and mitigate risk associated with the COVID-19 pandemic. Our interdisciplinary teams are addressing questions about occupational health and safety, development and regulation of new medical devices, disinfectants and personal protective equipment, global supply chain optimization, insurance claims and litigation.

Exponent’s fundamentals are sound and our market drivers are strong, despite uncertainties surrounding how and over what timeframe each region will relax business restrictions and physical distancing requirements. Clients continue to retain Exponent for our scientific expertise and sound advice, but the rate of new project engagements has slowed. With our talented workforce intact, we are well-positioned to execute on paused work and the anticipated acceleration of new work as business restrictions are eased. The COVID-19 pandemic has caused revenues for the first three weeks of the second quarter to decline approximately 15% to 20% as compared to the same period last year. As business restrictions continue, there could be further reduction to our revenues in the short term.

We remain focused on selectively adding top talent and developing the skills necessary to expand our market position and 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.

During the ~~third~~first quarter of ~~2017,~~2020 billable hours increased ~~12%~~6% to ~~310,000~~348,000 as compared to ~~278,000~~329,000 during the same period last year. Our utilization ~~increased~~decreased to ~~76%~~71% during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~70%~~72% during the same period last year. Technical full-time equivalent employees increased 3%6% to ~~787~~938 during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~761~~883 during the same period last year. We continue to selectively hire key talent to expand our capabilities.

Three Months Ended ~~September 29, 2017~~April 3, 2020 compared to Three Months Ended ~~September 30, 2016~~March 29, 2019

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable ~~hours.~~hours and an increase in billing rates. During the ~~third~~first quarter of ~~2017,~~2020, billable hours for this segment increased by ~~13%~~5% to ~~242,000~~271,000 as compared to ~~214,000~~258,000 during the same period last year. Utilization for this segment ~~increased~~decreased to ~~78%~~71% during the ~~third~~first quarter of ~~2017~~2020 as compared to 73% during the same period last year. The increase in billable hours ~~and utilization~~ was due to strong growth in our biomechanics, biomedical engineering, mechanical engineering, and vehicle engineering practices. Multinational companies across industries engaged Exponent’s interdisciplinary teams of world-class consultants for scientific expertise and risk assessments. During the first quarter of 2020, this segment benefited from ~~our proactive design consulting services, specifically~~a large project for an electric utility client evaluating the integrity of their infrastructure and helping to mitigate safety risks related to ~~ongoing projects with clients~~wildfires. The decrease in utilization was due to business restrictions related to COVID-19 that impacted our Asian operations in late January and certain areas of our European and United States operations during the consumer products industry. During the quarter we continued work on a large human factors assessment for a client in the consumer products industry. In addition to the ongoing large human factors assessment project, we realized increased demand for similar services from other clients. We have developed a unique offeringsecond half of highly qualified scientists and facilities to advise clients as they navigate the increasing complexity of interactions between their products and users. We also experienced growth from lithium-ion battery consulting for clients in the consumer products, transportation, medical device, and utility industries. Our interdisciplinary team of chemists, electrical engineers, material scientists and mechanical engineers has guided clients with respect to the performance, reliability, and safety of new products, as well as with respect to recalls and litigation matters involving existing products with lithium-ion batteries.March. Technical full-time equivalent employees in this segment increased 5%8% to ~~594~~731 during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~566~~679 for the same period last year due to our continuing recruiting and retention efforts.

The increase in revenues for our Environmental and Health segment was due to an increase in billable ~~hours.~~hours and an increase in billing rates. During the ~~third~~first quarter of ~~2017,~~2020, billable hours for this segment increased by 6%9% to ~~68,000~~77,000 as compared to ~~64,000~~71,000 during the same period last year. Utilization in this segment increased to ~~68%~~72% during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~63%~~67% during the same period last year. The increase in billable hours and utilization was due to growth in our chemical regulation and food safety practice, where ~~we continued to assist clients with global regulatory issues. This segment’s contribution to~~our scientists evaluated the ~~large ongoing~~effects of chemicals and new products on human ~~factors assessment also contributed to~~health and the ~~increase in billable hours and utilization. These increases were partially offset by depressed demand from the oil and gas and industrial chemical industries.~~environment. Technical full-time equivalent employees in this segment ~~decreased by~~increased 1% to ~~193~~207 during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~195~~204 during the same period last year. ~~The decrease in technical full-time equivalent employees was due to our efforts to align resources with anticipated demand.~~

The ~~increase~~decrease in compensation and related expenses during the ~~third~~first quarter of ~~2017~~2020 was due to a change in the value of assets associated with our deferred compensation plan partially offset by an increase in ~~bonus~~payroll expense and an increase in ~~payroll expense. Bonus~~fringe benefits. During the first quarter of 2020, deferred compensation expense decreased by $20,491,000 with a corresponding decrease to other income, net, as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. This decrease consisted of a decrease in the value of plan assets of $14,622,000 during the first quarter of 2020 as compared to an increase in the value of plan assets of $5,869,000 during the same period last year. Payroll expense increased by ~~$2,392,000~~$3,452,000 during the ~~third~~first quarter of ~~2017 due to a corresponding increase to income before income taxes, before bonus expense, and before stock-based compensation. Payroll expense increased $854,000~~2020 due to the increase in technical full-time equivalent ~~employees.~~employees and the impact of our annual salary adjustments. Fringe benefits increased by $1,323,000 during the first quarter of 2020 due to the increase in technical full-time equivalent employees and the impact of our annual salary adjustments. 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 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 during the ~~third~~first quarter of ~~2017~~2020 was primarily due to an increase in ~~occupancy~~depreciation and amortization expense of ~~$265,000 and~~$196,000, an increase in ~~computer~~occupancy expenses of $119,000, and several other individually insignificant increases partially offset by a decrease in technical materials of $189,000. The increases in depreciation and amortization expense ~~of $137,000 associated with~~and occupancy expense were due to our increase in technical full-time equivalent employees and investments in our corporate infrastructure. The decrease in technical materials was due to the impact of COVID-19 related restrictions on our operations. We expect other operating expenses to grow as we selectively add new talent and make investments in our corporate infrastructure.

~~The increase in reimbursable expenses was primarily due to an increase in travel related costs associated with our large human factors assessment project.~~ Reimbursable Expenses

The amount of reimbursable expenses will vary from quarter to quarter depending on the nature of our projects.

The increase in general and administrative expenses during the ~~third~~first quarter of ~~2017~~2020 was primarily due to an increase in bad debt expense of ~~$91,000, an increase~~$1,365,000 partially offset by a decrease in travel and meals of ~~$90,000, and an~~$440,000. The increase in ~~legal expenses~~bad debt was due to additional reserves we booked to our allowance for doubtful accounts as a result of ~~$87,000.~~the economic uncertainty associated with the COVID-19 pandemic. The decrease in travel and meals was due to the travel restrictions put in place due to the COVID-19 pandemic. We expect general and administrative expenses to increase as we selectively add new talent and expand our business development ~~initiatives,~~ and ~~pursue~~ staff development initiatives.

Other income, net, consists primarily of changes in the value of assets associated with our deferred compensation plan, interest income earned on available cash, cash equivalents and short-term investments, and rental income from leasing space in our Silicon Valley facility. The ~~increase~~decrease in other income, net, was primarily due to ~~an increase in interest income of $193,000 and~~ a change in the value of assets associated with our deferred compensation ~~plan. The~~plan partially offset by an increase in ~~interest income was due to higher interest rates for our cash equivalents and short-term investments.~~the realized gain on foreign exchange of $910,000. During the ~~third~~first quarter of ~~2017,~~2020, other income, net, ~~increased $241,000~~decreased by $20,491,000 with a corresponding ~~increase~~decrease to deferred compensation expense, as compared to the same period last year, due to a change in the value of assets associated with our deferred compensation plan. This ~~increase~~decrease consisted of ~~an increase~~a decrease in the value of the plan assets of ~~$1,699,000~~$14,622,000 during the ~~third~~first quarter of ~~2017~~2020 as compared to an increase in the value of the plan assets of ~~$1,458,000~~$5,869,000 during the same period last year. 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.

The ~~increase in income tax expense was due to a corresponding increase in pre-tax income. The~~ decrease in ~~our~~the effective tax rate was due to an increase in the excess tax benefit associated with ~~share-based awards and a decrease in our unrecognized tax benefit.~~stock-based awards. The excess tax benefit associated with ~~share-based~~stock-based awards increased to ~~$464,000~~$8,772,000 during the ~~third~~first quarter of ~~2017~~2020 as compared to ~~$39,000~~$5,670,000 during the same period last year. ~~During~~Excluding the ~~third~~impact of the excess tax benefit, the effective tax rate would have been 27.2% during the first quarter of ~~2017 we released $437,000 of our unrecognized tax benefit due to the completion of two tax audits.~~

~~Nine Months Ended September 29, 2017 compared to Nine Months Ended September 30, 2016~~

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours. During the first nine months of 2017, billable hours for this segment increased by 9% to 709,0002020 as compared to 649,000 during the same period last year. Utilization for this segment increased to 78% during the first nine months of 2017 as compared to 74% during the same period last year. The increase in billable hours and utilization was due to strong growth from our proactive design and regulatory consulting services, specifically related to ongoing projects with clients in the consumer products industry. During the first nine months of 2017 we performed a large human factors assessment for a client in the consumer products industry. We continued to expand our broad base of international construction dispute work with ongoing mining, gas terminal and power plant projects leveraging our integrated team of experts to deliver solutions to complex capital projects. Technical full-time equivalent employees in this segment increased 4% to 584 during the first nine months of 2017 as compared to 563 for the same period last year due to our continuing recruiting and retention efforts.

The increase in revenues for our Environmental and Health segment was due to an increase in billable hours. During the first nine months of 2017, billable hours for this segment increased by 4% to 207,000 as compared to 199,000 during the same period last year. Utilization in this segment increased to 69% during the first nine months of 2017 as compared to 63% during the same period last year. The increase in billable hours and utilization was due to growth in our chemical regulation and food safety practice where we continued to assist clients with global regulatory issues. This segment’s contribution to the large ongoing human factors assessment also contributed to the increase in billable hours and utilization. These increases were partially offset by depressed demand from the oil and gas and industrial chemical industries. Technical full-time equivalent employees in this segment decreased by 5% to 192 during the first nine months of 2017 as compared to 203 during the same period last year. The increase in utilization and the decrease in technical full-time equivalent employees were due to our efforts to align resources with anticipated demand.

The increase in compensation and related expenses during the first nine months of 2017 was due to an increase in bonus expense, an increase in payroll expense and fringe benefits, an increase in stock-based compensation, and a change in the value of assets associated with our deferred compensation plan. Bonus expense increased by $5,467,000 during the first nine months of 2017 due to a corresponding increase to income before income taxes, before bonus expense, and before stock-based compensation. Payroll expense increased $2,453,000 and fringe benefits increased $291,000 due to the increase in technical full-time equivalent employees and our annual salary increases. Stock-based compensation increased by $460,000 due primarily to an increase in the amortization of restricted stock unit grants. During the first nine months of 2017, deferred compensation expense increased $1,794,000 with a corresponding increase to other income, net, as compared to the same period last year due to a change in value of assets associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of $4,617,000 during the first nine months of 2017 as compared to an increase in the value of plan assets of $2,823,00026.9% during the same period last year.

The increase in reimbursable expenses was primarily due to an increase in travel related costs associated with our large human factors assessment project. The amount of reimbursable expenses will vary from quarter to quarter depending on the nature of our projects.

The increase in general and administrative expenses during the first nine months of 2017 was primarily due to an increase in travel and meals of $1,010,000, an increase in legal expenses of $246,000, and an increase in marketing and promotion of $141,000. The increase in travel and meals was due to a firm-wide managers’ meeting which occurs every other year. The increase in marketing and promotion was due to several initiatives associated with the firm’s 50^th ~~anniversary.~~

The increase in income tax expense was due to a corresponding increase in pre-tax income. The decrease in our effective tax rate was due to an increase in the excess tax benefit associated with share-based awards and a decrease in our unrecognized tax benefit. The excess tax benefit associated with share-based awards increased to $6,518,000 during the first nine months of 2017 as compared to $4,827,000 during the same period last year. During the first nine months of 2017 we released $437,000 of our unrecognized tax benefit due to the completion of two tax audits.

We financed our business during the first nine months of 2017 through available cash. We invest our excess cash in cash equivalents and short-term investments. As of September 29, 2017, our cash, cash equivalents and short-term investments were $165.6 million compared to $173.7 million at December 30, 2016. We believe our existing balances of cash, cash equivalents, short-term investments and cash generated from operations 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 twelve months. However, we continue to monitor the impact of the COVID-19 pandemic on our cash flows and on the credit and financial markets.

We financed our business during the first three months of 2020 through available cash. We invest our excess cash in cash equivalents and short-term investments. As of April 3, 2020, our cash, cash equivalents and short-term investments were $152,043,000 as compared to $231,601,000 at January 3, 2020.

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 in the first quarter of our annual bonuses accrued during the prior year. Our largest source of operating cash flows is collections from our clients. Our primary uses of cash from operating activities are for employee related expenditures, leased facilities, taxes, and general operating expenses including marketing and travel.

The ~~decrease~~increase in net cash provided by ~~operating~~investing activities during the first ~~nine~~three months of ~~2017~~2020, as compared to the same period last year, was ~~primarily~~ due to ~~an increase~~a decrease in ~~accounts receivable.~~the purchase of short-term investments, net of maturities, and a decrease in capital expenditures. The decrease in capital expenditures was due to the completion of construction of our office and laboratory facilities in Natick, Massachusetts during 2019.

The increase in net cash used in ~~investing~~financing activities during the first ~~nine~~three months of ~~2017,~~2020, as compared to the same period last year, was due to an increase in ~~the purchase of short-term investments, net of maturities partially offset by a decrease in capital expenditures.~~

~~The decrease in net cash used in financing activities during the first nine months of 2017, as compared to the same period last year, was due to a decrease in~~ repurchases of our common stock, ~~partially offset by~~ an increase in payroll taxes for restricted stock units and an increase in dividend payments.

We expect to continue our investing activities, including capital expenditures. Furthermore, cash reserves may be used to repurchase shares of common stock under our stock repurchase programs, pay dividends, or strategically acquire professional service firms that are complementary to our business.

For a summary of our commitments to make future payments under contractual obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in our ~~2016~~2019 Annual Report.

During April 2017, we entered into two agreements to purchase a total of 2.9 acres of land in Natick, Massachusetts on which we intend to build office and laboratory facilities. The total purchase price is $5,200,000. The purchase agreements are contingent on several items including feasibility studies, environmental assessments, and government approvals. If we determine that the property is unsuitable for the planned project, we can terminate the agreements to purchase the land at our sole discretion.

There have been no ~~other~~ material changes in our contractual obligations since ~~December 30, 2016.~~

We maintain a nonqualified deferred compensation plan for the benefit of a select group of highly compensated employees. Vested amounts due under the plan of ~~$50,778,000~~$64,026,000 were recorded as a long-term liability on our unaudited condensed consolidated balance sheet at ~~September 29, 2017.~~April 3, 2020. Vested amounts due under the plan of $5,839,000 were recorded as a current liability on our unaudited condensed consolidated balance sheet at April 3, 2020. Company assets that are earmarked to pay benefits under the plan are held in a rabbi trust and are subject to the claims of our creditors. As of ~~September 29, 2017,~~April 3, 2020, invested amounts under the plan of ~~$46,678,000~~$63,353,000 were recorded as a long-term asset on our unaudited condensed consolidated balance sheet.

As of April 3, 2020, invested amounts under the plan of $5,489,000 were recorded as a current asset on our unaudited condensed 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.

Regulation G, Conditions for Use of Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures, and other ~~SEC~~U.S. Securities and Exchange Commission (“SEC”) rules and regulations define and prescribe the conditions for use of 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, net interest income, depreciation and amortization. We define EBITDAS as EBITDA before stock-based compensation. The Company regards EBITDA and EBITDAS as useful measures of operating performance 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 for 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 (determined as shown in the reconciliation table below) as a percentage of revenues before reimbursements for the three ~~and nine~~ months ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016:~~2019:

The ~~increase~~decrease in EBITDA as a percentage of revenues before reimbursements during the ~~third~~first quarter of ~~2017~~2020 as compared to the same period last year was primarily due to anthe increase in ~~utilization. Utilization~~general and administrative expenses associated with the additional reserves we booked to our allowance for ~~the third quarter of 2017 was 76% as compared to 70% during the same period last year.~~

~~The increase in EBITDA~~doubtful accounts as a ~~percentage~~result of ~~revenues before reimbursements during~~ the ~~first nine months of 2017 as compared to~~economic uncertainty associated with the ~~same period last year was primarily due to an increase in utilization. Utilization for the first nine months of 2017 was 76% as compared to 71% during the same period last year.~~COVID-19 pandemic

The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income, for the three ~~and nine~~ months ended ~~September 29, 2017 and September 30, 2016:~~April 3, 2020:

We are 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 our investment policy. The maximum effective maturity of any issue in our portfolio 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 market 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 portfolio. There have not been any material changes during the period covered by this Quarterly Report on Form 10-Q to our interest rate risk exposures, or how these exposures are managed. 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 Euro, the Chinese Yuan, and the ~~Chinese Yuan.~~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 ~~September 29, 2017,~~April 3, 2020, we had net assets of approximately ~~$10.0~~$6.9 million with a functional currency of the British Pound, net assets of approximately ~~$4.1~~$1.5 million with a functional currency of the Euro, ~~and~~ net assets of approximately ~~$4.0~~$5.5 million with a functional currency of the Chinese Yuan, and net assets of approximately $3.8 million with a functional currency of the Hong Kong Dollar associated with our operations in the United Kingdom, Germany, China, and ~~China,~~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 remeasurement of monetary assets and liabilities. At ~~September 29, 2017,~~April 3, 2020, we had net assets denominated in the non-functional currency of approximately ~~$2.6~~$0.7 million. ~~As such, a ten percent change in the value of the local currency would result in a $260,000 foreign currency gain or loss in our results of operations.~~

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.~~significant. However, our continued international growth increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of ~~September 29, 2017,~~April 3, 2020, the Company’s disclosure controls and procedures were effective.

We ~~intend to~~ review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis, to improve our controls and procedures over time and to correct any deficiencies that we may discover in the future. Our goal is to ensure that our senior management has timely access to all material financial and non-financial information concerning our business. While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to significantly modify our disclosure controls and procedures.

(b)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~three month~~three-month period ended ~~September 29, 2017~~April 3, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic.

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PART II - OTHER INFORMATION

~~Item 1.~~

Item 1. Legal Proceedings

Exponent is not engaged in any material legal proceedings.

~~Item 1A.~~

~~Risk Factors~~

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.

~~There~~The effects of the COVID-19 pandemic have materially affected our operations and those of our clients. The duration and extent to which this 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 COVID-19 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 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. We have seen slowing of a portion of our litigation support projects due to courthouse closures and associated legal delays. Travel restrictions are delaying work that requires inspection of a site or a product that cannot be shipped. The pandemic has also temporarily paused our 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 may be unable to collect receivables from those customers significantly impacted by COVID-19. We believe that our existing balances of cash, cash equivalents, short-term investments and cash generated from operations to be sufficient to satisfy our working capital needs, capital expenditures, outstanding commitments, stock repurchases, dividends and other liquidity requirements over at least the next twelve 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. 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 fiscal 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.

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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.

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.

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.

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.

On January 29, 2019, PG&E Corp. (“PG&E”) filed for bankruptcy under chapter 11 of the U.S. bankruptcy code. As of April 3, 2020, our total pre-bankruptcy outstanding accounts receivable from PG&E was $3.0 million. We currently expect to collect substantially all of the pre-bankruptcy accounts receivable from PG&E. However, due to the risks and uncertainties inherent in the bankruptcy process, the amount ultimately collected could differ from our current expectation. We continue to do work for PG&E post-bankruptcy filing and expect to be paid for this work in the ordinary course of business. Under the United States Bankruptcy code, PG&E is required to pay all post-bankruptcy expenses in the normal course of business. If they do not do so, we are eligible to have the post-bankruptcy obligation categorized as an administrative expense entitled to priority over most pre-bankruptcy creditors.

We hold substantial investments that could present liquidity risks.

Our cash equivalent and short-term investment portfolio as of April 3, 2020, 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.

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Investments in some financial instruments may pose risks arising from liquidity and credit concerns. As of April 3, 2020, 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.

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.

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.

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.

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.

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.

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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 measures, our operating systems 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. 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.

Impairment of goodwill may require us to record a significant charge to earnings.

On our balance sheet, 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. The COVID-19 pandemic raises the possibility of an extended global economic downturn which increase the risk of 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 right-of-use assets 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 increase the risk of long-lived asset impairment charges

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, Germany, 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

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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 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; and other impending legislation that could add additional risks to the business.

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.

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.

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 activity in the United States, where

- 33 -

we primarily operate, continues to decline, 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 ~~as previously discussed under the heading “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 ~~Company’s 2016 Annual Report.~~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.

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, or epidemics where we have operations, 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 have a long-term impact on 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.

- 34 -

~~Item 2.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on the Company’s repurchases of the Company’s common stock for the three months ended ~~September 29, 2017~~April 3, 2020 (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 Programs Approximate Dollar
Value of Shares That
May Yet Be
Purchased Under the
Programs⁽¹⁾

July 1 to July 28 - $ - - $ 50,303
July 29 to August 25 - - - $ 50,303
August 26 to September 29 22 66.06 22 $ 48,876
Total 22 $ 66.06 22 $ 48,876

	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs ⁽¹⁾
January 4 to January 31		-	$	-		-	$	70,504
February 1 to February 28		-		-		-		70,504
February 29 to April 3		636		62.97		636		30,455
Total		636	$	62.97		636	$	30,455

⁽¹⁾

On October ~~21, 2015,~~19, 2016, the Company’s Board of Directors ~~authorized~~approved $35,000,000 for the repurchase of the Company’s common stock. On ~~October 19, 2016,~~January 31, 2019, the Company’s Board of Directors ~~authorized an additional $35,000,000~~approved $75,000,000 for the repurchase of the Company’s common stock. These ~~plans~~repurchase programs have no expiration date.

~~- 27 -~~

~~Item 3.~~

Item 3. Defaults Upon Senior Securities

Not applicable.

~~Item 4.~~

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 5.~~

Item 5. Other Information

Not applicable.

- 35 -

Item 6. Exhibits

(a)

~~Item 6.~~

~~Exhibits~~

Exhibit Index

31.1

~~(a)~~

~~Exhibit Index~~

	~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934.

31.2	~~31.2~~	Certification of Chief Financial Officer pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934.

32.1	~~32.1~~	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2	~~32.2~~	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS	~~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	~~101.SCH~~	Inline XBRL Taxonomy Extension Schema Document

101.CAL	~~101.CAL~~	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

~~- 28 -~~

~~SIGNATURES~~- 36 -

SIGNATURES

Pursuant to the requirements 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.

		EXPONENT, INC.
		(Registrant)

Date: ~~November 3, 2017~~May 8, 2020
		/s/ ~~Paul R. Johnston~~Catherine Ford Corrigan
	~~Paul R. Johnston,~~	Catherine Ford Corrigan, Ph.D., Chief Executive Officer

		/s/ Richard L. Schlenker
		Richard L. Schlenker, Chief Financial Officer

~~- 29 -~~

- 37 -

~~DELAWARE~~ delaware		77-0218904
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

~~149 COMMONWEALTH DRIVE, MENLO PARK, CALIFORNIA~~	~~94025~~

149 COMMONWEALTH DRIVE, MENLO PARK,California		94025
(Address of principal executive office)		(Zip Code)

Large accelerated filerx	☒		Accelerated filer¨	☐	Non-accelerated filer¨	☐	Smaller reporting company¨	☐
		~~(Do not check if a smaller~~ ~~reporting company)~~

Emerging growth company¨	☐

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		EXPO		Nasdaq Global Select Market

	Three Months Ended				Nine Months Ended
	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016

Revenues:
Revenues before reimbursements	$	82,359	$	74,160	$	246,946	$	226,444
Reimbursements		5,196		3,452		12,571		11,619

Revenues		87,555		77,612		259,517		238,063

Operating expenses:
Compensation and related expenses		51,493		47,797		157,447		146,854
Other operating expenses		7,500		7,020		21,966		21,221
Reimbursable expenses		5,196		3,452		12,571		11,619
General and administrative expenses		4,061		3,748		13,277		11,407

Total operating expenses		68,250		62,017		205,261		191,101

Operating income		19,305		15,595		54,256		46,962

Other income, net:
Interest income, net		372		179		872		489
Miscellaneous income, net		2,353		2,146		6,660		4,880
Total other income, net		2,725		2,325		7,532		5,369

Income before income taxes		22,030		17,920		61,788		52,331

Income taxes		7,387		6,631		16,778		15,239

Net income	$	14,643	$	11,289	$	45,010	$	37,092

Net income per share:
Basic	$	0.56	$	0.43	$	1.71	$	1.40
Diluted	$	0.54	$	0.42	$	1.67	$	1.36

Shares used in per share computations:
Basic		26,370		26,545		26,362		26,563
Diluted		26,963		27,185		26,976		27,234

Cash dividends declared per common share	$	0.21	$	0.18	$	0.63	$	0.54

				Page

PART I – FINANCIAL INFORMATION				3

Item 1.		Financial Statements (unaudited):		3

		Condensed Consolidated Balance Sheets ~~September 29, 2017~~as of April 3, 2020 and ~~December 30, 2016~~January 3, 2020		3

		Condensed Consolidated Statements of Income for the Three ~~and Nine~~ Months Ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016~~2019		4

		Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016~~2019		5

		Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended April 3, 2020 and March 29, 2019		6

		Condensed Consolidated Statements of Cash Flows ~~Nine~~for the Three Months Ended ~~September~~April 3, 2020 and March 29, ~~2017 and September 30, 2016~~2019	6	7

		Notes to Unaudited Condensed Consolidated Financial Statements	7	8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	20

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	26	27

Item 4.		Controls and Procedures	27	28

PART II – OTHER INFORMATION				29

Item 1.		Legal Proceedings	27	29

Item 1A.		Risk Factors	27	29

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	27	35

Item 3.		Defaults Upon Senior Securities	28	35

Item 4.		Mine Safety Disclosures	28	35

Item 5.		Other Information	28	35

Item 6.	~~Exhibits~~	28Exhibits		36

~~Signatures~~		29Signatures		37

	Fiscal Year 2017
	Dividends		Amount
	Per Share		(in thousands)
First Quarter	$	0.21	$	5,374
Second Quarter		0.21		5,424
Third Quarter		0.21		5,424
Total	$	0.63	$	16,222

	Fiscal Year 2016
	Dividends		Amount
	Per Share		(in thousands)
First Quarter	$	0.18	$	4,628
Second Quarter		0.18		4,675
Third Quarter		0.18		4,659
Fourth Quarter		0.18		4,607
Total	$	0.72	$	18,569

	September 29,			December 30,			April 3,			January 3,
(In thousands)	2017			2016			2020			2020

Billed accounts receivable	$	90,263		$	60,510		$	92,953		$	85,579
Unbilled accounts receivable		38,387			30,316			40,451			38,854
Allowance for contract losses and doubtful accounts		(3,847	)		(3,417	)		(6,192	)		(4,295	)
Total accounts receivable, net	$	124,803		$	87,409		$	127,212		$	120,138

Balance at January 3, 2020	$	4,295
Provision for contract losses and doubtful accounts		2,383
Write-offs		(486	)
Balance at April 3, 2020	$	6,192

	April 3, 2020	March 29, 2019
Weighted Average Remaining Lease Term	5.0 years	5.6 years
Weighted Average Discount Rate	4.4%	4.5%

(In thousands)	Operating Leases
2020	$	4,503
2021		5,993
2022		4,773
2023		3,187
2024		2,176
2025		1,491
2026		1,507
2027		1,466
Total lease payments	$	25,096
Less imputed interest		(3,204	)
Total lease liability	$	21,892

	Three Months Ended
(in thousands, except percentages)	April 3, 2020			March 29, 2019			Percent Change
Other operating expenses	$	8,216		$	8,008			2.6	%
Percentage of total revenues		7.8	%		8.1	%

Other Income, Net
	Three Months Ended
(in thousands, except percentages)	September 29, 2017			September 30, 2016			Percent Change

Other income, net	$	2,725		$	2,325			17.2	%
Percentage of total revenues		3.1	%		3.0	%