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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission File Number 0-18655

EXPONENT, INC.

(Exact name of registrant as specified in its charter)

149 Commonwealth Drive, Menlo Park, California 94025

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (650) 326-9400

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sale price of the Common Stock as reported on the NASDAQ National Market on July 3, 2003, the last business day of the registrant’s most recently completed second quarter, was $100,167,134.

The number of shares of the issuer’s Common Stock outstanding as of March 5, 2004 was 7,355,259.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for the Registrant’s 2004 Annual Meeting of Stockholders to be held on June 2, 2004, are incorporated by reference into Part III of this Form 10-K.

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EXPONENT, INC.

FORM 10-K ANNUAL REPORT

FISCAL YEAR ENDED JANUARY 2, 2004

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains, and incorporates by reference, certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended thereto under) that are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. When used in this document and in the documents incorporated herein by reference, the words “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 possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions, the effects of competitive services and pricing, and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in this Report under the heading “Factors That May Affect Future Operating Results and Market Price of Stock” and elsewhere. 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

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contemplated by the Company will be achieved. The Company undertakes no obligation to release publicly any updates or revisions to any such forward-looking statements.

PART I

GENERAL

The beginning of Exponent, Inc. goes back to 1967 with the founding of the partnership Failure Analysis Associates which was incorporated the following year and then reincorporated in Delaware as Failure Analysis Associates, Inc. in 1988. The Failure Group, Inc. was organized in 1989 as a holding company for Failure Analysis Associates, Inc. and changed its name to Exponent, Inc. in 1998. Exponent, Inc. (“Exponent”, and together with its subsidiaries, the “Company”), is a science and engineering consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists, physicians, engineers and business consultants brings together more than 70 different technical disciplines to solve complicated issues facing industry and business today. Our professional staff can perform in-depth scientific research and analysis, or very rapid-response evaluations to provide our clients with the critical information they need.

CLIENTS

General

Exponent serves clients in automotive, aviation, chemical, construction, energy, government, health, insurance, manufacturing, technology and other sectors of the economy. Many of our engagements are initiated by lawyers or insurance companies, whose clients anticipate, or are engaged in, litigation over an alleged failure of their products, equipment or services. We have seen our services in failure prevention and technology evaluation grow as the technological complexity of products has increased over the years.

Pricing and Terms of Engagements

We provide our services on either a fixed-price basis or on a “time and expenses” basis, charging hourly rates for each staff member involved in a project, based on his or her skills and experience. Our standard rates for professionals range from $80 to $750 per hour. Our engagement agreements typically provide for monthly billing, require payment of our invoices within 30 days of receipt and permit clients to terminate an engagement at any time. Clients normally agree to indemnify our work and our personnel against liabilities arising out of the use or application of the results of our work or recommendations.

SERVICES

In 2003, Exponent worked on key public health, environmental and product safety issues. We assisted clients’ efforts to design more robust and safer products as well as supported the U.S. Army’s efforts in Afghanistan and Iraq. We are pleased that over the past year Exponent’s consultants have been engaged to provide solutions to many emerging and challenging technical issues.

Exponent’s service offerings are provided through a practice-focused format. Many projects require support from multiple practice areas. We currently operate 15 practice areas.

Biomechanics

Exponent’s Biomechanics staff uses engineering and biomedical science to explore the cause, nature and severity of injuries. The type and distribution of injuries, combined with our extensive experience in human injury tolerance, allows us to determine forces and motions that must have occurred to produce the injuries. Through close interaction with our Accident Reconstruction and Human Factors service areas, our consultants analyze the human’s overall role in an accident, including likelihood, causation and severity. We are also actively involved in assessing potential injury or medical risk to individuals that utilize medical devices such as cardiac stents and orthopedic

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implants. In 2003, we worked with a medical device manufacturer to provide advanced research on current products and technology evaluation for future applications.

Civil Engineering

Exponent has over 30 years experience investigating all types of structural, hydrological, geotechnical, geological, geomechanical, construction and building problems, from major catastrophes to simple performance failures. The scientific investigation of these events provides our clients with a thorough assessment of damage, as well as expert analysis of causation to be used for purposes of retrofit, repair, claims adjustment or litigation. Furthermore, we use our experience to help clients before failures occur, to determine the vulnerability of their facilities to damage and to develop appropriate mitigation measures.

We continue to assist in the evaluation of construction design defects, water intrusion and mold issues. In 2003, we added a number of staff in our construction consulting area and have been extremely active in assessing construction delay claims such as those on the “Big Dig” in Massachusetts. In addition we assist clients with the investigation and resolution of damage claims and litigation arising from earthquakes, landslides and other natural disasters including the December 2003 Paso Robles quake in Central California.

Data/Risk Analysis

Exponent’s expertise in risk analysis helps quantify how machines, vehicles, consumer products and components behave in the “real world”—the direct measurement of risk. We advise our clients on whether design changes may increase or decrease risk, or whether overall safety justifies a particular design. Using one of the largest collections of accident and incident data in the world, our Data/Risk Analysis group reviews “real-world” performance of consumer products, transportation and other human activity. In 2003, our staff provided statistical analysis for a number of consumer product and transportation-related litigations.

EcoSciences

Exponent’s ecological scientists provide proven, cost-effective, and scientifically defensible solutions to complex environmental issues. This multidisciplinary team includes terrestrial and aquatic ecologists, toxicologists, fishery scientists and resource management specialists. Our services include ecological risk assessment, natural resource damage assessment, toxicological reviews and analysis, water quality management, and design/monitoring of ecological restoration programs.

Exponent’s staff has worked on more than 30 natural resource damage cases nationwide. Through this work, we have gained valuable insights into the natural resource damage assessment process and a thorough understanding of the trustees’ perspectives. Our experience includes a wide variety of habitats (freshwater, estuarine, marine, and terrestrial) and substances of concern (PCBs, dioxins, PAH, metals and petroleum hydrocarbons).

Electrical Engineering

In the age of electronics, Exponent continues to be a highly sought-after resource for understanding current and potential risks involving electrical and electronic components. Our team of electrical engineers performs a wide array of investigations ranging from electric power systems to semiconductor devices. We operate laboratories for testing both heavy equipment and light electronic equipment. Computers and specialized software are used to analyze electric power systems, circuits and other equipment configurations. For a large electric utility client, we have conducted power flow studies, tested for network transfer capability, transmission congestion, voltage support and reactive requirements and made recommendations for improvement to the system. In the electronics and semiconductor area, our consultants work with manufacturers and suppliers to assure product

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quality. In 2003, we were involved with investigating certain headline making electrocutions in the Ohio Valley.

Environmental Science

Exponent’s environmental scientists and engineers provide proven, cost-effective, scientifically defensible and realistic assessments and solutions to complex environmental issues. We offer technical, regulatory and litigation support to industries that include mining and minerals, petrochemicals, forest products, shipbuilding, railroads, aerospace and defense and trade associations. Our consultants also address hydrological issues related to new housing and office complex developments around the country.

Food & Chemicals

Our Food and Chemical practice includes experienced staff of both technical and regulatory specialists who are experienced in dealing with foods, and with pesticide and non-pesticide products including conventional chemicals, biochemicals, microbials, and products of biotechnology. We provide practical, creative scientific and regulatory support to meet global business objectives at every stage of the product cycle, from R&D to retail. In 2003, we assisted several clients with worldwide regulatory support and recall efforts and continued to build our European Union presence. In addition we assessed risks to determine the advisability and extent of food and supplement product recalls due to chemical or microbiological contaminants and evaluated potential exposures associated with foods, dietary supplements and consumer products.

Health and Epidemiology

Our health practice combines the expertise and experience of M.D.s and Ph.D.s to provide a comprehensive perspective on human health issues such as occupational and environmental health, pharmaceuticals, medical devices and the quality of health care. The practice utilizes consultants expertise in occupational epidemiology to examine possible work related diseases and injuries related to products such as asbestos, silica and dioxin. In 2003, we added a number of former corporate medical directors in our Chicago location to add a strong Health practice to a growing Midwest market.

Human Factors

Our Human Factors practice analyzes human cognition and behavior to guide product design decisions to provide better safety and usability. Working in conjunction with other Exponent practices, our scientists look at ways to improve product design, as well as review safety information and training to help change human behavior and reduce accidents.

Human Health Risk Assessment

Exponent’s team of toxicologists study and analyze industry and regulatory issues relating to products and processes and their effect on humans and their environment. We provide solutions for potential environmental liabilities and effectively communicate those results with industry, regulatory personnel and the public. In 2003, we continued our extensive studies of the effect of asbestos from automotive brakes and continue to respond to the increase in mold and indoor air quality claims being raised throughout the country utilizing a multi-disciplinary team of health risk, health and civil engineering professionals to meet the needs of our clients.

Industrial Structures

Our Industrial Structures practice, based in Düsseldorf, Germany specializes in design and assessment of industrial concrete structures subject to extreme conditions. The office is one of the leading German engineering firms in the areas of tower-like structures, water retaining structures and refactories. Exponent’s Dusseldorf office has provided design reviews and assessments on more than 800 structures around the world. Our staff has participated in the creation of several engineering standards.

Mechanical Engineering and Materials Science

Our mechanical engineers and materials scientists have both an academic and “real-world” understanding of their field, including reliability and hazard evaluation, design assessment, fluid and thermal analysis and materials life prediction. We routinely work with manufacturers to assess risks to their products during their design and manufacturing phases of product development. In addition we help manufacturers respond to allegations of defective design by the federal regulatory agencies such as the Consumer Product Safety Commission.

Technology Development

Drawing on our multidisciplinary engineering, testing and failure analysis and prevention expertise, our Technology Development practice specializes in harnessing commercial technologies to develop effective military equipment and systems.

In 2003, Exponent sent a team of consultants full-time to Afghanistan and Iraq to support the Army’s Rapid Equipping Force. Our Technology Development practice is assisting with the development of an advanced robotic controller. This is a highly configurable, modular approach to robotic systems leveraging open standards and interfaces. The systems developed under this effort include a handheld controller, mapping, voice communications, marking, security, data communications, weapon payloads, sensor payloads, new robots and autonomous/semi-autonomous operation. We also continue our effort with the Defense Manpower Agency to perform reliability characterization and testing on Smart Cards used throughout the Department of Defense.

Thermal Sciences

Exponent has investigated and analyzed thousands of fires and explosions ranging from high loss disasters at manufacturing facilities to small insurance claims. Information gained from these analyses has helped us when assisting clients in assessing preventative measures related to the design of their products. In 2003, our Thermal practice was tasked to investigate several major industrial explosions, a number of

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headline producing residential and commercial fires as well as a number of aircraft accidents.

Vehicle Analysis

Our Vehicle Analysis practice provides design analysis, vehicle crash testing, component testing and accident reconstruction services to clients when they are developing new automotive products, facing unexpected performance issues, or are seeking information on how an accident occurred. At our 147-acre Test and Engineering Center in Phoenix, we develop unique test protocols using proprietary tests developed by our consulting staff.

COMPETITION

The marketplace for our services is fragmented and we face different sources of competition in providing various services. In addition, the services that we provide to some of our clients can be performed in-house by those clients. However, because of liability and independence concerns, clients that have the capability to perform such services themselves often retain Exponent or other independent consultants.

In each of the foregoing areas, we believe that the principal competitive factors are: technical capability and breadth of services, ability to deliver services on a timely basis, professional reputation and knowledge of the litigation process. Although we believe that we generally compete favorably in each of these areas, some of our competitors may be able to provide services acceptable to our clients at lower prices.

We believe that the barriers to entry in particular areas of engineering expertise are low and that for many of our technical disciplines, competition is increasing. In response to competitive forces in the marketplace, we continue to explore new markets for our various technical disciplines.

EMPLOYEES

As of January 2, 2004, we employed 738 full-time and part-time employees, including 470 engineering and scientific staff, 114 technical support staff and 154 administrative and support staff. Our highly skilled staff includes 377 employees with advanced degrees, of which 216 employees have achieved the level of Ph.D. or M.D.

ADDITIONAL INFORMATION

The address of our Internet website is www.exponent.com. We make available, free of charge through our website, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other periodic SEC reports, along with amendments to all of those reports, as soon as reasonably practicable after we file the reports with the SEC.

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EXECUTIVE OFFICERS

The executive officers of Exponent and their ages as of March 17, 2004 are as follows:

Executive officers of Exponent are appointed by the Board of Directors and serve at the discretion of the Board or until the appointment of their successors. There is no family relationship between any of the directors and officers of the Company.

Roger L. McCarthy, Ph.D., joined the Company in August 1978. Currently, Dr. McCarthy is Chairman of the Board of Directors and has been a Director of the Company since 1980. From June 1996 to October 1998, he served as Chief Technical Officer of the Company. He was Chief Executive Officer of the Company from 1982 to June 1996. He also served as President of the Company from 1986 to March 1993. Dr. McCarthy received his Ph.D. (1977), Mech.E. (1975) and S.M. (1973) from Massachusetts Institute of Technology and his B.S.E. (1972) in Mechanical Engineering and A.B. (1972) in Philosophy from the University of Michigan. Dr. McCarthy is a Registered Professional Engineer in the states of California, Georgia and Arizona and a member of the National Academy of Engineering.

Michael R. Gaulke joined the Company in September 1992, as Executive Vice President and Chief Financial Officer. He was named President in March 1993 and he was appointed as a member of the Board of Directors of the Company in January 1994. He assumed his current role of President and Chief Executive Officer in June 1996. From November 1988 to September 1992, Mr. Gaulke served as Executive Vice President and Chief Financial Officer at Raynet Corporation, a subsidiary of Raychem Corporation. Prior to joining Raynet, Mr. Gaulke was Executive Vice President and Chief Financial Officer of Spectra Physics, Inc., where he was employed from 1979 to 1988. From 1972 to 1979, Mr. Gaulke served as a consultant with McKinsey & Company. Mr. Gaulke is a member of the Board of Directors of Cymer, Inc. and LECG Corporation and serves on the Board of Trustees of the Palo Alto Medical Foundation. Mr. Gaulke received a M.B.A. (1972) in Marketing and Operations from the Stanford University Graduate School of Business and a B.S. (1968) in Electrical Engineering from Oregon State University.

Subbaiah V. Malladi, Ph.D., joined the Company in 1982 as a Senior Engineer, becoming a Senior Vice President in January 1988 and a Corporate Vice President in September 1993. In October 1998, Dr. Malladi was appointed Chief Technical Officer of the Company. Dr. Malladi also served as a Director of the Company from March 1991 through September 1993. He was re-appointed as a Director in April 1996 and has remained on the Board since that date. He received a Ph.D. (1980) in Mechanical Engineering from the California Institute of Technology, M.Tech (1972) in Mechanical Engineering from the Indian Institute of Technology, B.E. (1970) in Mechanical Engineering from SRI Venkateswara University, India and B.S. (1966) in Physics, Chemistry and Mathematics from Osmania

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University, India. Dr. Malladi is a Registered Professional Mechanical Engineer in the State of California.

Larry W. Anderson, Ph.D., joined the Company in 1986. He was promoted to Principal Engineer in 1993 and Group Vice President in 1996. Dr. Anderson received his Ph.D. (1966), M.S. (1964) and B.S. (1961) in Mechanical Engineering from the University of Washington. He is a Registered Professional Mechanical Engineer in the State of California.

Robert D. Caligiuri, Ph.D., joined the Company in 1987. He was promoted to Principal Engineer in 1990 and Group Vice President in 1999. Dr. Caligiuri received his Ph.D. (1977) and M.S. (1974) in Materials Science and Engineering from Stanford University and B.S. (1973) in Mechanical Engineering from the University of California, Davis. Prior to joining the Company he was a Program Manager and Materials Scientist for SRI International. He is a Registered Professional Metallurgical Engineer in the State of California and a Licensed Professional Engineer in the State of Utah.

Paul R. Johnston, Ph.D., joined the Company in 1981, was promoted to Vice President in 1997 and appointed Chief Operating Officer in July 2003. He received his Ph.D. (1981) in Civil Engineering and M.S. (1977) in Structural Engineering from Stanford University, and his B.A.I. (1976) in Civil Engineering and B.A. (1976) in Mathematics from Trinity College, University of Dublin, Ireland. Dr. Johnston is a Registered Professional Engineer in the State of California and a Chartered Engineer in Ireland.

John E. Moalli, Sc.D., joined the Company in 1992. He was promoted to Principal Engineer in 1997 and Group Vice President in 2002. Dr. Moalli received his Sc.D. (1992) in Polymers from the Massachusetts Institute of Technology and B.S. (1987) in Civil Engineering from Northeastern University. He is a member of the Society for the Plastics Industry; Society for Plastics Engineers and a member of the Editorial Advisory Board of Medical Plastics and Biomaterials.

Richard L. Schlenker, Jr. joined the Company in October 1990. Mr. Schlenker is the Chief Financial Officer and Corporate Secretary of the Company. He was appointed Chief Financial Officer in July 1999 and was appointed Secretary of the Company in November 1997. Mr. Schlenker was the Director of Corporate Development from 1998 until his appointment as CFO. He was the Manager of Corporate Development from 1996 until 1998. From 1993 to 1996, Mr. Schlenker was a Business Manager, where he managed the business activities for multiple consulting practices within the Company. Prior to 1993 he held several different positions in finance and accounting within the Company. Mr. Schlenker holds a B.S. in Finance from the University of Southern California.

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Our Silicon Valley office facilities consist of a 153,738 square foot building, with office and laboratory space located on a 6.3-acre tract of land we own in Menlo Park, California and an adjacent 27,000 square feet of leased warehouse storage space.

Our Test and Engineering Center (“TEC”) occupies 147 acres in Maricopa County, Arizona. We lease this land from the state of Arizona under a 30-year lease agreement that expires in January 2028 and have an option to renew for two fifteen-year periods. We constructed an indoor test facility as well as an engineering and test preparation building at the TEC.

In addition, we lease office, warehouse and laboratory space in 21 other locations in 15 states and the District of Columbia, as well as in Germany and the United Kingdom. Leases for these offices, warehouse and laboratory facilities have terms generally ranging between one to ten years. Aggregate lease expense in fiscal 2003 for all leased properties was approximately $4,745,000.

Exponent is not engaged in any material legal proceedings.

No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2003.

PART II

Exponent’s common stock is traded on the NASDAQ National Market under the symbol “EXPO”. The following table sets forth for the fiscal periods indicated the high and low closing sales prices for our common stock.

As of March 5, 2004, there were 351 holders of record of our common stock. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we believe that there are considerably more beneficial holders of our common stock than record holders.

We have never paid cash dividends on our common stock. See Item 7 of Part II “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

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The following selected consolidated financial data are derived from our consolidated financial statements. This data should be read in conjunction with the consolidated financial statements and notes thereto, and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements

The statements in this report that are not statements of historical fact are “forward-looking statements” and are based on current expectations and actual results may differ materially. These forward-looking statements involve numerous risks and uncertainties that could cause actual results to differ materially, including but not limited to, the possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions and the effects of competitive services and pricing; one or more current or future claims made against us may result in substantial liabilities; and such other risks and uncertainties as are described in reports and other documents we file from time to time with the Securities and Exchange Commission.

Overview

Exponent, Inc. is a science and engineering consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists, physicians, engineers and business consultants brings together more than 70 different technical disciplines to solve complicated issues facing industry and government today. Our services include analysis of product development or product recall, regulatory compliance, discovery of potential problems related to products, people or property and impending litigation, as well as the development of highly technical new products.

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CRITICAL ACCOUNTING ESTIMATES

In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheet. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. 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, estimating the allowance for doubtful accounts, accounting for income taxes and valuing goodwill have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. We discuss below the critical accounting estimates associated with these policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Revenue recognition. We derive our revenues primarily from professional fees earned on consulting engagements and fees earned for the use of our equipment and facilities, as well as reimbursements for outside direct expenses associated with the services that are billed to our clients.

Substantially all of our engagements are performed under time and material or fixed-price billing arrangements. On time and material and fixed-price projects, revenue is generally recognized as the services are performed. For our fixed-price engagements we recognize revenue based on the relationship of incurred labor hours at standard rates to our estimate of the total labor hours at standard rates we expect to incur over the term of the contract. We believe this methodology achieves a reliable measure of the revenue from the consulting services we provide to our customers under fixed-price contracts.

Significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period. These judgments and estimates include an assessment of collectibility and, for fixed-price engagements, an estimate as to the total effort required to complete the project. If we made different judgments or utilized different estimates, the amount and timing of our revenue for any period could be materially different.

All consulting contracts are subject to review by management, which requires a positive assessment of the collectibility of contract amounts. If, during the course of the contract, we determine that collection of revenue is not reasonably assured, we do not recognize the revenue until its collection becomes reasonably assured, which is generally upon receipt of cash. We assess collectibility based on a number of factors, including past transaction history with the client and project manager, as well as the credit-worthiness of the client. Losses on fixed-price contracts are recognized during the period in which the loss first becomes evident. Contract losses are determined to be the amount by which the estimated total costs of the contract exceeds the total fixed price of the contract.

Estimating the allowance for doubtful accounts. We must make estimates of our ability to collect accounts receivable and our unbilled work-in-process. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific allowance to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers we recognize allowances for doubtful accounts based upon historical bad debts, customer concentration, customer credit-worthiness, current economic conditions and changes in customer payment terms. As of January 2, 2004, our accounts receivable balance was $35.8 million, net of an allowance for doubtful accounts of $1.2 million.

Accounting for income taxes. In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions where we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent that we believe that recovery is not likely, we must establish a valuation allowance.

Significant judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance against our deferred tax assets, such as current tax laws, our

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interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. In the event that actual results differ from these estimates or the estimates are adjusted in future periods, then we may need to establish a valuation allowance, which could materially impact our financial position and results of operations. Based on our current financial projections and operating plan for fiscal 2004, we currently believe that we will be able to utilize our deferred tax assets.

Valuing goodwill. We assess the impairment of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Factors that we consider when evaluating for possible impairment include the following:

When evaluating our goodwill for impairment, based upon the existence of one or more of the above factors, we determine the existence of an impairment by assessing the fair value of the applicable reporting unit, including goodwill, using expected future cash flows to be generated by the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then an impairment loss is recognized.

We completed our annual impairment review during 2003 and determined that we had no impairment of our goodwill and therefore did not record an impairment charge. As of January 2, 2004, goodwill totaled $8.6 million.

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CONSOLIDATED RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, the percentage of revenues of certain items in our consolidated statements of income and the percentage increase (decrease) in the dollar amount of such items year to year:

FISCAL YEARS ENDED JANUARY 2, 2004, JANUARY 3, 2003 AND DECEMBER 28, 2001

Revenues

Our revenues consist of professional fees earned on consulting engagements, fees for use of our equipment and facilities, as well as reimbursements for outside direct expenses associated with the services performed that are billed to our clients. We operate on a 52-53 week fiscal year with each year ending on the Friday closest to December 31^st. The fiscal years ended January 2, 2004 and December 28, 2001 included 52 weeks of activity. The fiscal year ended January 3, 2003 included 53 weeks of activity.

Our fiscal 2003 revenues were $139.7 million, an increase of $13.6 million or 10.8% over the prior year. This increase in revenue was the result of an increase in total billable hours and higher billing rates, partially offset by fiscal 2003 having one less week of activity than fiscal 2002. During fiscal 2003, total billable hours increased by 4.3% to 652,000 as compared to 625,000 during fiscal 2002. This increase in billable hours was driven by an increase in technical full time equivalents to 474 as compared to 450 during fiscal 2002 partially offset by a decrease in utilization to 66% during fiscal 2003 as compared to 67% during fiscal 2002.

The increase in revenue was the result of growth in both of our business segments. Our other scientific and engineering segment contributed $10.2 million to our overall revenue growth. During fiscal 2003 billable hours for this segment increased by 5.0% to 465,000 as compared to 443,000 during fiscal 2002. This increase in billable hours was driven by an increase in technical full time equivalents to 331 as compared to 315 during fiscal 2002 and an increase in utilization to 68% during fiscal 2003 as compared to 67% during fiscal 2002.

Our environmental and health segment contributed $3.4 million to the overall revenue growth. During fiscal 2003, billable hours for this segment increased by 2.7% to 187,000 as compared to 182,000 during fiscal 2002. This increase in billable hours was driven by an increase in technical full time equivalents to 143 as compared to 134 during fiscal 2002 offset by a decrease in utilization to 63% during fiscal 2003 as compared to 65% during fiscal 2002. Revenues are primarily derived from services provided in response to client requests or events that

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occur without notice and engagements are generally terminable or subject to postponement or delay at any time by our clients. As a result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable indicator of revenues for any future periods.

Our fiscal 2002 revenues were $126.1 million, an increase of $11.6 million or 10.1% over fiscal 2001. Fiscal 2002 was a 53-week year in which we earned approximately $1.2 million in revenues before reimbursements during the extra week. During fiscal 2002, total billable hours increased by 0.6% to 625,000 as compared to 621,000 during fiscal 2001. This increase in billable hours was driven by an increase in technical full time equivalents to 450 as compared to 432 during fiscal 2001 partially offset by a decrease in utilization to 67% during fiscal 2002 as compared to 69% during fiscal 2001. Our revenue increase over fiscal 2001 was the result of growth in both of our business segments. Our environmental and health segment contributed $6.3 million of the increase and our other scientific and engineering segment contributed $5.3 million.

Growth in our other scientific and engineering segment was the result of higher billing rates partially offset by a decrease in billable hours. During fiscal 2002, billable hours for this segment decreased by 1.6% to 443,000 as compared to 450,000 during fiscal 2001. The decrease in billable hours was driven by a decrease in utilization to 67% during fiscal 2002 as compared to 69% during fiscal 2001.

Growth in our environmental and health segment was primarily the result of increased billing rates and the acquisition of Novigen Sciences, Inc. (“Novigen”) on May 20, 2002. During fiscal 2002, billable hours for this segment increased by 6.4% to 182,000 as compared to 171,000 during fiscal 2001. The increase in billable hours was driven by an increase in technical full time equivalents to 134 during fiscal 2002 as compared to 115 during fiscal 2001 partially offset by a decrease in utilization to 65% during fiscal 2002 as compared to 70% during fiscal 2001. The Novigen acquisition contributed $3.1 million to this segment’s revenue growth.

Compensation and Related Expenses

During fiscal 2003, total compensation and related expenses were $82.3 million, an increase of $6.6 million or 8.7% over the prior year. The increase was primarily due to the effect of annual salary increases, an increase in headcount, and an increase in bonus expense partially offset by fiscal 2003 having one less week of activity than fiscal 2002. Technical full time equivalents increased 5.3% during fiscal 2003 as compared to the prior year. Bonus expense increased by $1.1 million or 14.9%, as a result of our increased profitability. As a percentage of revenue, compensation and related expenses decreased to 58.9% as compared to 60.1% in fiscal 2002. We anticipate an increase in compensation and related expenses due to the effect of our annual salary increase at the beginning of April 2004. We expect this salary increase to be approximately 5%.

During fiscal 2002, total compensation and related expenses were $75.7 million, an increase of $7.5 million or 11.0% over fiscal 2001. The increase was primarily due to the effect of annual salary increases, the Novigen acquisition, increased bonus expense, and fiscal 2002 having one more week of activity than fiscal 2001. The Novigen acquisition increased our staff by 34 full-time employees and compensation expense by $2.2 million or 3.0%. Bonus expense increased by $1.7 million or 28.5%, as a result of our increased profitability. These increases were partially offset by a staff reduction, primarily in the vehicle analysis and technology development practices, by 15 full-time employees in the first quarter of fiscal 2002. As a percentage of revenue, compensation and related expenses increased to 60.1% in fiscal 2002 as compared to 59.6% in fiscal 2001.

Other Operating Expenses

During fiscal 2003, other operating expenses were $17.9 million, an increase of $396,000 or 2.3% over the prior year. The increase was primarily due to an increase in occupancy expense of $525,000. The increase in occupancy expense was due to the acquisition of three Novigen offices, the relocation of three existing offices and new lease agreements in several other locations during fiscal 2002. We realized the impact of this additional office space for all of fiscal 2003 as compared to a portion of fiscal 2002. As a percentage of revenues, other operating expenses decreased to 12.8% in fiscal 2003 from 13.9% in fiscal 2002.

During fiscal 2002, other operating expenses were $17.5 million, an increase of $301,000 or 1.8% over fiscal 2001, as a result of increased rent expense of $682,000, partially offset by reduced depreciation of $257,000 and other occupancy expenses of $151,000. Rent increased as a result of three newly acquired Novigen offices, the relocation of three existing

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offices and new lease agreements in several other locations. Depreciation decreased due to personal computer and software assets becoming fully depreciated and fewer assets capitalized as a result of lower unit acquisition costs. Other occupancy costs decreased due primarily to lower repair and maintenance costs in fiscal 2002 compared to fiscal 2001. As a percentage of revenues, other operating expenses decreased to 13.9% in fiscal 2002 from 15.1% in fiscal 2001.

Reimbursable Expenses

During fiscal 2003, reimbursable expenses were $13.7 million, an increase of $3.0 million or 27.7% over the prior year due primarily to increases in outside direct expenses related to projects in our technology development practice. As a percentage of revenues, reimbursable expenses increased to 9.8% from 8.5% in fiscal 2002.

During fiscal 2002, reimbursable expenses were $10.8 million, an increase of $793,000 or 8.0% over fiscal 2001 due primarily to increases in outside direct expenses for vehicle procurements related to services performed on projects primarily in our vehicle analysis practice. As a percentage of revenues, reimbursable expenses decreased to 8.5% from 8.7% in fiscal 2001.

General and Administrative Expenses

During fiscal 2003, general and administrative expenses were $8.8 million, an increase of $785,000 or 9.7% over the prior year due primarily to an increase in tax and license fees of $267,000, an increase in travel and meals of $311,000 and an increase in bad debt expense of $143,000. The increase in tax and license fees was primarily due to a non-recurring credit of $310,000 recorded during fiscal 2002 related to the favorable completion of a sales tax audit, which we had previously recorded as an expense. The increase in travel and meals was due to increased proposal activity and the increase in bad debt expenses was due to an increase in write-offs. As a percentage of revenues, general and administrative expenses were 6.4% in fiscal 2003 and 2002.

During fiscal 2002, general and administrative expenses were $8.1 million, a decrease of $1.3 million or 13.6% compared to fiscal 2001 due to decreases in goodwill amortization of $843,000, taxes and licenses of $222,000, outside consulting of $157,000 and employee relocation expenses of $138,000. These decreases were partially offset by an increase in marketing expense of $142,000. With the adoption of Statement of Accounting Standards (“SFAS”) No. 142, at the beginning of fiscal 2002, we ceased amortizing goodwill. The decrease in tax and licenses expense resulted from a favorable settlement of a sales tax assessment, which we had previously recorded as an expense. Our outside consulting expenses decreased primarily due to the reduced effort on the Land Warrior program compared to fiscal 2001. As a percentage of revenues, general and administrative expenses decreased to 6.4% in fiscal 2002 from 8.1% in fiscal 2001.

Other Income and Expense

Other income and expense, net, consists primarily of investment income earned on available cash, cash equivalents and short-term investments and rental income from leasing excess space in our Silicon Valley facility.

During fiscal 2003, other income and expense, net, was $794,000, an increase of $190,000 or 31.5% as compared to fiscal 2002. The increase was primarily due to an increase in miscellaneous income of $174,000 and an increase in interest income of $16,000. The increase in miscellaneous income was due to the acquisition of two new tenants to lease space in our Silicon Valley facility during fiscal 2002 for which we realized a full year of rental income during 2003. The increase in interest income was due to higher average balances of our cash, cash equivalents, and short-term investments during fiscal 2003. We anticipate an increase in interest income during 2004 due to expected higher average balances of our cash, cash equivalents and short-term investments.

During fiscal 2002, other income and expense, net, was $604,000, a decrease of $246,000 or 28.9% as compared to fiscal 2001. The decrease was primarily due to a reduction in rental income of $390,000 from our Silicon Valley facility, partially offset by other miscellaneous income.

Income Taxes

During fiscal 2003, our provision for income taxes was $7.5 million compared to $6.7 million in the prior year. As a percentage of income, our tax provision was 42.6% during fiscal 2003 compared to 45.9% in the prior year. The decrease in our effective tax rate was primarily due to the write-off of an expiring capital loss carry-forward of $349,000 during fiscal 2002. Our increase in tax-exempt interest income during fiscal 2003 also contributed to the decrease in our effective tax rate. We anticipate that our effective tax rate will be 41.0% in fiscal 2004.

During fiscal 2002, our provision for income taxes was $6.7 million compared to $4.5 million in fiscal

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2001. As a percentage of income, our tax provision was 45.9% during fiscal 2002 compared to 42.4% in fiscal 2001. The increase in our effective tax rate was primarily due to the write-off of an expiring capital loss carry-forward of $349,000 during fiscal 2002. In addition, as a result of our increasing income, a portion of our income was subject to a higher tax rate during fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

We financed our business in fiscal 2003 principally through available cash and cash flows from operating activities. We invest our excess cash in cash equivalents and short-term investments. At the end of fiscal 2003, we had $41.8 million in cash, cash equivalents and short-term investments compared to $22.5 million at the end of the prior year. We also maintain a revolving reducing mortgage note, secured by our headquarters building. As of January 2, 2004, our available borrowings under this mortgage note were $24.5 million and the outstanding balance was $0.

Net cash provided by operating activities was $21.7 million in fiscal 2003, compared to $16.3 million in fiscal 2002. The increase in cash provided by operating activities as compared to the prior year was largely due an increase in net income, improved collections, and an increase in accrued payroll and employee benefits. Accounts receivable related cash flow improved as a result of lower days sales outstanding, which were reduced to 82 days in fiscal 2003 compared to 98 days in the prior year. The increase in accrued payroll and employee benefits was due to an increase in accrued bonus, which is calculated based on pre-tax income. Net cash provided by operating activities was $16.3 million in fiscal 2002 compared to $5.0 million in fiscal 2001. The increase in cash provided by operating activities in fiscal 2002 relative to fiscal 2001 was largely due to increased net income, improved collections, and an increase in accrued payroll and employee benefits. Accounts receivable related cash flow improved as a result of lower days sales outstanding, which were reduced to 98 days in fiscal 2002 compared to 114 days in fiscal 2001. The increase in accrued payroll and employee benefits was due to an increase in accrued bonus, which is calculated based on pre-tax income.

During fiscal 2003, net cash used in investing activities was $24.7 million compared to $4.4 million in the prior year. The increase in cash used in investing activities was primarily due to purchases of short-term investments for $23.5 million during fiscal 2003. During fiscal 2002, we paid $2.1 million to acquire Novigen and did not purchase any short-term investments. During fiscal 2002, net cash used in investing activities was $4.4 million compared to $2.2 million in fiscal 2001. The increase in cash used in investing activities was primarily the result of $2.1 million paid for the acquisition of Novigen during fiscal 2002.

During fiscal 2003, net cash provided by financing activities was $17,000 compared to $2.7 million in the prior year. This decrease in net cash provided by financing activities was due to a decrease in proceeds from the issuance of common stock and an increase in common stock repurchases. During fiscal 2002, net cash provided by financing activities was $2.7 million compared to net cash used in financing activities of $1.4 million during fiscal 2001. The increase in net cash provided by financing activities was primarily due to an increase in proceeds from issuance of common stock. Proceeds from the issuance of common stock are primarily related to the exercise of employee stock options and the purchase of common stock under our employee stock purchase plan.

We expect to continue our investing activities, including purchases of short-term investments and capital expenditures. Furthermore, cash reserves may be used to repurchase common stock under our stock repurchase programs, strategically acquire professional services firms that are complementary to our business and pay dividends.

The following table represents the remaining authorization under our stock repurchase plans as of January 2, 2004 (in thousands):

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The following schedule summarizes our principal contractual commitments as of January 2, 2004 (in thousands):

Operating lease commitments are net of estimated sub-lease income.

We have a revolving reducing mortgage note with a total available borrowing amount of $22.9 million and an outstanding balance of $0 as of March 17, 2004. We believe that our existing revolving note, together with funds generated from operations, will provide adequate cash to fund our anticipated cash needs through at least the next twelve-month period.

In addition, we believe that the funds available under the revolving reducing mortgage note, together with funds generated from operations, will provide adequate cash to fund our anticipated long-term cash needs beyond the next twelve-month period; however, we intend to grow our business by pursuing potential acquisitions, which could increase the need for additional sources of funds over the long-term.

As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not engage in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS AND MARKET PRICE OF STOCK

Exponent operates in a rapidly changing environment that involves a number of uncertainties, some of which are beyond our control. These uncertainties include, but are not limited to, those mentioned elsewhere in this report and the following:

Absence of Backlog

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.

Attraction and Retention of Key Employees

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 to retain existing employees. The loss of a significant number of our employees could have a material adverse impact on our business, including our ability to secure and complete engagements.

Competition

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.

Customer Concentration

We currently derive and believe that we will continue to derive a significant portion of our revenues from clients, organizations and insurers related to the transportation industry. Transportation industry

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related engagements accounted for approximately 18% of our gross revenues for the fiscal year ended January 2, 2004. In addition, we performed engagements for the government sector, which accounted for approximately 17% of our gross revenues for the fiscal year ended January 2, 2004. The loss of any large client, organization or insurer related to either the transportation industry or government sector could have a material adverse effect on our business, financial condition or results of operations.

Economic Uncertainty

The markets that we serve are cyclical and subject to general economic conditions, particularly in light of the labor-intensive nature of our business and our relatively high compensation expenses. If the economy in which we operate, which is predominately in the U.S., were to experience a prolonged slowdown, demand for our services could be reduced considerably.

Regulation

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 implementing 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

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.

Variability of Quarterly Financial Results

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 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, are relatively fixed in advance of any particular quarter, a variation in the timing of the initiation or the completion of our client assignments, at or near the end of any quarter, can cause significant variations in operating results from quarter to quarter.

Exponent is exposed to interest rate risk associated with our balances of cash, cash equivalents and short-term investments. We manage our interest rate risk by maintaining an investment portfolio primarily consisting of debt instruments with high credit quality and relatively short average maturities in accordance with the Company’s investment policy. The maximum maturity of any issue in our portfolio of cash equivalents and short-term investments is 3 years and the maximum average maturity of the portfolio cannot exceed 18 months. Our exposure to market rate risk for changes in interest rates relates primarily to our short-term investments. We do not use derivative financial instruments in our short-term investment portfolio. The average maturity of our short-term investments at January 2, 2004 was 0.9 years. 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 are exposed to some foreign currency exchange rate risk associated with our foreign operations. Given the limited nature of these operations, we believe that any exposure would be minimal.

Exponent has a revolving reducing mortgage note (the “Mortgage Note”) secured by our Silicon Valley headquarters building. The Mortgage Note had an initial borrowing amount up to $30.0 million and is subject to automatic annual reductions in the amount available to be borrowed of between $1.3 million to $2.1 million approximately per year until January 31, 2008. As of January 2, 2004 we had $0 outstanding and available borrowings of $24.5 million. As of March 17, 2004 our available borrowings under this note decreased to $22.9 million due to the annual reductions in the amount available to be borrowed. The Mortgage Note is subject to two interest rate options of either prime less 1.5% or the fixed LIBOR plus 1.25% with a term of one month, two months, three months, six months, nine months, or twelve months.

Any borrowings under the Mortgage Note would expose us to some interest rate risk. Our general policy for selecting among interest rate options and related terms will be to minimize interest expense. However, given the risk of interest rate fluctuations, we cannot be certain that the lowest rate option will always be obtained, thereby consistently minimizing our interest expense. No sensitivity analysis was performed on our exposure to interest rate fluctuations, however, given the historical low volatility of both the prime and LIBOR interest rates, we believe that any exposure would be minimal.

See Item 15 of this Form 10-K for required financial statements and supplementary data.

None.

On January 2, 2004, an evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer, and the Chief Financial

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Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer, and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to their evaluation.

We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and 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.

There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

PART III

The information required by this item with respect to our directors, code of ethics and compliance with section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the sections of the Company’s definitive Proxy Statement for its 2004 Annual Meeting of Stockholders (the “Proxy Statement”) entitled “Proposal No. 1: Election of Directors,” “Code of Ethics” and “Compliance with Section 16(a) of the Exchange Act.” See Item 1 for information regarding the executive officers of the Company.

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Executive Officer Compensation”.

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Stock Ownership”.

None.

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Principal Accounting Fees and Services”.

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PART IV

The following consolidated financial statements of Exponent, Inc. and subsidiaries and the Independent Auditors’ Report are included herewith:

The following financial statement schedule of Exponent, Inc. for the years ended January 2, 2004, January 3, 2003 and December 28, 2001 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Exponent, Inc.

Schedules other than those listed above have been omitted since they are either not required, not applicable, or the information is otherwise included elsewhere in the report.

On October 20, 2003, Exponent filed a Current Report on Form 8-K furnishing under Item 12 of Form 8-K its press release, dated October 20, 2003, announcing third quarter results.

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Exponent, Inc. and Subsidiaries

Consolidated Statements of Income

The accompanying notes are an integral part of the Consolidated Financial Statements.

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Exponent, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

The accompanying notes are an integral part of the Consolidated Financial Statements.

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Exponent, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of the Consolidated Financial Statements.

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Exponent, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity