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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-07782

 

https://cdn.kscope.io/2385a53d095f1adaa4b3ca118a975f7e-img90719524_0.jpg 

Parsons Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

95-3232481

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

5875 Trinity Parkway #300

Centreville, Virginia

20120

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (703) 988-8500

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1 par value

 

PSN

 

New York Stock Exchange

 

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 19, 2023, the registrant had 104,885,334 shares of common stock, $1.00 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

 

1

Item 1.

Financial Statements (Unaudited)

 

1

Consolidated Balance Sheets

 

1

Consolidated Statements of Income

 

2

Consolidated Statements of Comprehensive Income

 

3

Consolidated Statements of Cash Flows

 

4

 

Consolidated Statements of Shareholders’ Equity

 

5

Notes to Unaudited Consolidated Financial Statements

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4.

Controls and Procedures

 

40

PART II.

OTHER INFORMATION

 

42

Item 1.

Legal Proceedings

 

42

Item 1A.

Risk Factors

 

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

42

Item 3.

Defaults Upon Senior Securities

 

42

Item 4.

Mine Safety Disclosures

 

42

Item 5.

Other Information

 

43

Item 6.

Exhibits

 

43

 

Signatures

 

44

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents (including $83,101 and $53,193 Cash of consolidated joint ventures)

 

$

178,589

 

 

$

262,539

 

 

Accounts receivable, net (including $266,312 and $217,419 Accounts receivable of consolidated joint ventures, net)

 

 

949,493

 

 

 

717,345

 

 

Contract assets (including $9,983 and $11,313 Contract assets of consolidated joint ventures)

 

 

712,413

 

 

 

634,033

 

 

Prepaid expenses and other current assets (including $15,546 and $7,913 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

139,713

 

 

 

105,866

 

 

Total current assets

 

 

1,980,208

 

 

 

1,719,783

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $3,345 and $2,543 Property and equipment of consolidated joint ventures, net)

 

 

95,266

 

 

 

96,050

 

 

Right of use assets, operating leases (including $6,596 and $6,315 Right of use assets, operating leases of consolidated joint ventures)

 

 

166,797

 

 

 

155,090

 

 

Goodwill

 

 

1,692,725

 

 

 

1,661,850

 

 

Investments in and advances to unconsolidated joint ventures

 

 

118,861

 

 

 

107,425

 

 

Intangible assets, net

 

 

240,300

 

 

 

254,127

 

 

Deferred tax assets

 

 

144,782

 

 

 

137,709

 

 

Other noncurrent assets

 

 

68,568

 

 

 

66,108

 

 

Total assets

 

$

4,507,507

 

 

$

4,198,142

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable (including $49,508 and $49,078 Accounts payable of consolidated joint ventures)

 

$

237,229

 

 

$

201,428

 

 

Accrued expenses and other current liabilities (including $144,256 and $102,417 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

693,662

 

 

 

630,193

 

 

Contract liabilities (including $45,552 and $40,654 Contract liabilities of consolidated joint ventures)

 

 

292,404

 

 

 

213,064

 

 

Short-term lease liabilities, operating leases (including $3,197 and $2,552 Short-term lease liabilities, operating leases of consolidated joint ventures)

 

 

57,085

 

 

 

59,144

 

 

Income taxes payable

 

 

14,521

 

 

 

4,290

 

 

Total current liabilities

 

 

1,294,901

 

 

 

1,108,119

 

 

 

 

 

 

 

 

 

 

Long-term employee incentives

 

 

18,142

 

 

 

17,375

 

 

Long-term debt

 

 

744,777

 

 

 

743,605

 

 

Long-term lease liabilities, operating leases (including $3,399 and $3,763 Long-term lease liabilities, operating leases of consolidated joint ventures)

 

 

128,634

 

 

 

111,417

 

 

Deferred tax liabilities

 

 

20,024

 

 

 

12,471

 

 

Other long-term liabilities

 

 

110,263

 

 

 

109,220

 

 

Total liabilities

 

 

2,316,741

 

 

 

2,102,207

 

Contingencies (Note 12)

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,311,866 and 146,132,016 shares issued; 43,665,289 and 40,960,845 public shares outstanding; 61,217,557 and 63,742,151 ESOP shares outstanding

 

 

146,312

 

 

 

146,132

 

 

Treasury stock, 41,429,020 shares at cost

 

 

(844,936

)

 

 

(844,936

)

Additional paid-in capital

 

 

2,721,402

 

 

 

2,717,134

 

Retained earnings

 

 

111,513

 

 

 

43,089

 

Accumulated other comprehensive loss

 

 

(14,860

)

 

 

(17,849

)

Total Parsons Corporation shareholders' equity

 

 

2,119,431

 

 

 

2,043,570

 

Noncontrolling interests

 

 

71,335

 

 

 

52,365

 

Total shareholders' equity

 

 

2,190,766

 

 

 

2,095,935

 

 

Total liabilities and shareholders' equity

 

$

4,507,507

 

 

$

4,198,142

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


 

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share information)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30, 2023

 

 

June 30, 2022

 

 

June 30, 2023

 

 

June 30, 2022

 

Revenue

 

$

1,356,486

 

 

$

1,008,721

 

 

$

2,529,952

 

 

$

1,957,790

 

Direct cost of contracts

 

 

1,068,220

 

 

 

781,772

 

 

 

1,985,408

 

 

 

1,515,672

 

Equity in (losses) earnings of unconsolidated joint ventures

 

 

75

 

 

 

5,613

 

 

 

(5,765

)

 

 

11,211

 

Selling, general and administrative expenses

 

 

211,897

 

 

 

199,932

 

 

 

411,205

 

 

 

385,009

 

Operating income

 

 

76,444

 

 

 

32,630

 

 

 

127,574

 

 

 

68,320

 

Interest income

 

 

306

 

 

 

171

 

 

 

1,099

 

 

 

236

 

Interest expense

 

 

(7,299

)

 

 

(4,525

)

 

 

(13,757

)

 

 

(8,463

)

Other income (expense), net

 

 

543

 

 

 

236

 

 

 

1,857

 

 

 

381

 

Total other income (expense)

 

 

(6,450

)

 

 

(4,118

)

 

 

(10,801

)

 

 

(7,846

)

Income before income tax expense

 

 

69,994

 

 

 

28,512

 

 

 

116,773

 

 

 

60,474

 

Income tax expense

 

 

(15,223

)

 

 

(5,732

)

 

 

(26,726

)

 

 

(13,851

)

Net income including noncontrolling interests

 

 

54,771

 

 

 

22,780

 

 

 

90,047

 

 

 

46,623

 

Net income attributable to noncontrolling interests

 

 

(11,530

)

 

 

(4,485

)

 

 

(21,253

)

 

 

(7,661

)

Net income attributable to Parsons Corporation

 

$

43,241

 

 

$

18,295

 

 

$

68,794

 

 

$

38,962

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

0.18

 

 

$

0.66

 

 

$

0.38

 

Diluted

 

$

0.38

 

 

$

0.17

 

 

$

0.61

 

 

$

0.35

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2


 

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30, 2023

 

 

June 30, 2022

 

 

June 30, 2023

 

 

June 30, 2022

 

Net income including noncontrolling interests

 

$

54,771

 

 

$

22,780

 

 

$

90,047

 

 

$

46,623

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

3,152

 

 

 

(5,383

)

 

 

2,975

 

 

 

(2,509

)

Pension adjustments, net of tax

 

 

16

 

 

 

(47

)

 

 

17

 

 

 

(25

)

Comprehensive income including noncontrolling interests, net of tax

 

 

57,939

 

 

 

17,350

 

 

 

93,039

 

 

 

44,089

 

Comprehensive income attributable to noncontrolling interests, net of tax

 

 

(11,533

)

 

 

(4,482

)

 

 

(21,256

)

 

 

(7,659

)

Comprehensive income attributable to Parsons Corporation, net of tax

 

$

46,406

 

 

$

12,868

 

 

$

71,783

 

 

$

36,430

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

 

 

For the Six Months Ended

 

 

 

 

June 30, 2023

 

 

June 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

90,047

 

 

$

46,623

 

 

Adjustments to reconcile net income to net cash used in operating activities

 

 

 

 

 

 

 

Depreciation and amortization

 

 

57,048

 

 

 

61,090

 

 

Amortization of debt issue costs

 

 

1,414

 

 

 

1,302

 

 

Loss (gain) on disposal of property and equipment

 

 

43

 

 

 

(96

)

 

Provision for doubtful accounts

 

 

91

 

 

 

(3

)

 

Deferred taxes

 

 

(5,220

)

 

 

(2,149

)

 

Foreign currency transaction gains and losses

 

 

230

 

 

 

1,461

 

 

Equity in losses (earnings) of unconsolidated joint ventures

 

 

5,765

 

 

 

(11,211

)

 

Return on investments in unconsolidated joint ventures

 

 

9,313

 

 

 

19,434

 

 

Stock-based compensation

 

 

15,978

 

 

 

8,358

 

 

Contributions of treasury stock

 

 

29,167

 

 

 

26,544

 

 

Changes in assets and liabilities, net of acquisitions and newly consolidated
   joint ventures:

 

 

 

 

 

 

 

Accounts receivable

 

 

(227,756

)

 

 

(109,681

)

 

Contract assets

 

 

(78,254

)

 

 

(17,866

)

 

Prepaid expenses and other assets

 

 

(40,899

)

 

 

(3,521

)

 

Accounts payable

 

 

35,043

 

 

 

(8,079

)

 

Accrued expenses and other current liabilities

 

 

33,336

 

 

 

(7,314

)

 

Contract liabilities

 

 

76,522

 

 

 

13,360

 

 

Income taxes

 

 

10,309

 

 

 

3,107

 

 

Other long-term liabilities

 

 

1,809

 

 

 

3,977

 

 

Net cash provided by operating activities

 

 

13,986

 

 

 

25,336

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(17,956

)

 

 

(13,588

)

 

Proceeds from sale of property and equipment

 

 

65

 

 

 

251

 

 

Payments for acquisitions, net of cash acquired

 

 

(42,273

)

 

 

(379,272

)

 

Investments in unconsolidated joint ventures

 

 

(24,507

)

 

 

(11,228

)

 

Return of investments in unconsolidated joint ventures

 

 

72

 

 

 

-

 

 

Proceeds from sales of investments in unconsolidated joint ventures

 

 

381

 

 

 

-

 

 

Net cash used in investing activities

 

 

(84,218

)

 

 

(403,837

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

187,400

 

 

 

347,100

 

 

Repayments of borrowings

 

 

(187,400

)

 

 

(147,100

)

 

Payments for acquired warrants

 

 

-

 

 

 

(11,243

)

Contributions by noncontrolling interests

 

 

200

 

 

 

2,827

 

Distributions to noncontrolling interests

 

 

(2,487

)

 

 

(10,344

)

Repurchases of common stock

 

 

(8,000

)

 

 

(15,548

)

Taxes paid on vested stock

 

 

(6,838

)

 

 

(5,963

)

Proceeds from issuance of common stock

 

 

2,940

 

 

 

2,724

 

Net cash (used in) provided by financing activities

 

 

(14,185

)

 

 

162,453

 

Effect of exchange rate changes

 

 

467

 

 

 

(963

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(83,950

)

 

 

(217,011

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Beginning of year

 

 

262,539

 

 

 

343,883

 

 

End of period

 

$

178,589

 

 

$

126,872

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended June 30, 2023 and June 30, 2022

(In thousands)

(Unaudited)

 

 

 

Common
Stock

 

 

Treasury
Stock

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings
(Accumulated
Deficit)

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Parsons
Equity

 

 

Noncontrolling
Interests

 

 

Total

 

Balance at March 31, 2023

 

$

146,244

 

 

$

(844,936

)

 

$

2,712,167

 

 

$

68,429

 

 

$

(18,025

)

 

$

2,063,879

 

 

$

61,651

 

 

$

2,125,530

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43,241

 

 

 

-

 

 

 

43,241

 

 

 

11,530

 

 

 

54,771

 

Foreign currency translation
   gain, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,149

 

 

 

3,149

 

 

 

3

 

 

 

3,152

 

Pension adjustments, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16

 

 

 

16

 

 

 

-

 

 

 

16

 

Distributions

 

 

-

 

 

 

-