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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 September 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/18c795479e78301e86959434d2c35158-img90722407_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.)

 

 

14291 Park Meadow Drive, Suite 100

Chantilly, Virginia

20151

(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 October 19, 2023, the registrant had 104,888,937 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

 

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

Controls and Procedures

 

43

PART II.

OTHER INFORMATION

 

44

Item 1.

Legal Proceedings

 

44

Item 1A.

Risk Factors

 

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 3.

Defaults Upon Senior Securities

 

44

Item 4.

Mine Safety Disclosures

 

44

Item 5.

Other Information

 

45

Item 6.

Exhibits

 

45

 

Signatures

 

46

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents (including $100,478 and $53,193 Cash of consolidated joint ventures)

 

$

205,406

 

 

$

262,539

 

 

Accounts receivable, net (including $293,023 and $217,419 Accounts receivable of consolidated joint ventures, net)

 

 

906,741

 

 

 

717,345

 

 

Contract assets (including $12,622 and $11,313 Contract assets of consolidated joint ventures)

 

 

756,630

 

 

 

634,033

 

 

Prepaid expenses and other current assets (including $12,731 and $7,913 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

146,764

 

 

 

105,866

 

 

Total current assets

 

 

2,015,541

 

 

 

1,719,783

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $3,902 and $2,543 Property and equipment of consolidated joint ventures, net)

 

 

99,344

 

 

 

96,050

 

 

Right of use assets, operating leases (including $7,011 and $6,315 Right of use assets, operating leases of consolidated joint ventures)

 

 

158,400

 

 

 

155,090

 

 

Goodwill

 

 

1,797,330

 

 

 

1,661,850

 

 

Investments in and advances to unconsolidated joint ventures

 

 

164,858

 

 

 

107,425

 

 

Intangible assets, net

 

 

282,098

 

 

 

254,127

 

 

Deferred tax assets

 

 

148,512

 

 

 

137,709

 

 

Other noncurrent assets

 

 

66,905

 

 

 

66,108

 

 

Total assets

 

$

4,732,988

 

 

$

4,198,142

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable (including $54,668 and $49,078 Accounts payable of consolidated joint ventures)

 

$

266,345

 

 

$

201,428

 

 

Accrued expenses and other current liabilities (including $147,808 and $102,417 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

771,912

 

 

 

630,193

 

 

Contract liabilities (including $72,168 and $40,654 Contract liabilities of consolidated joint ventures)

 

 

277,249

 

 

 

213,064

 

 

Short-term lease liabilities, operating leases (including $3,507 and $2,552 Short-term lease liabilities, operating leases of consolidated joint ventures)

 

 

56,930

 

 

 

59,144

 

 

Income taxes payable

 

 

21,657

 

 

 

4,290

 

 

Total current liabilities

 

 

1,394,093

 

 

 

1,108,119

 

 

 

 

 

 

 

 

 

 

Long-term employee incentives

 

 

19,199

 

 

 

17,375

 

 

Long-term debt

 

 

820,366

 

 

 

743,605

 

 

Long-term lease liabilities, operating leases (including $3,504 and $3,763 Long-term lease liabilities, operating leases of consolidated joint ventures)

 

 

119,281

 

 

 

111,417

 

 

Deferred tax liabilities

 

 

20,448

 

 

 

12,471

 

 

Other long-term liabilities

 

 

111,501

 

 

 

109,220

 

 

Total liabilities

 

 

2,484,888

 

 

 

2,102,207

 

Contingencies (Note 12)

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,317,493 and 146,132,016 shares issued; 45,136,147 and 40,960,845 public shares outstanding; 59,752,326 and 63,742,151 ESOP shares outstanding

 

 

146,318

 

 

 

146,132

 

 

Treasury stock, 41,429,020 shares at cost

 

 

(844,936

)

 

 

(844,936

)

Additional paid-in capital

 

 

2,729,206

 

 

 

2,717,134

 

Retained earnings

 

 

158,945

 

 

 

43,089

 

Accumulated other comprehensive loss

 

 

(16,797

)

 

 

(17,849

)

Total Parsons Corporation shareholders' equity

 

 

2,172,736

 

 

 

2,043,570

 

Noncontrolling interests

 

 

75,364

 

 

 

52,365

 

Total shareholders' equity

 

 

2,248,100

 

 

 

2,095,935

 

 

Total liabilities and shareholders' equity

 

$

4,732,988

 

 

$

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 Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Revenue

 

$

1,418,571

 

 

$

1,134,370

 

 

$

3,948,523

 

 

$

3,092,160

 

Direct cost of contracts

 

 

1,124,305

 

 

 

872,423

 

 

 

3,109,713

 

 

 

2,388,095

 

Equity in (losses) earnings of unconsolidated joint ventures

 

 

10,262

 

 

 

(974

)

 

 

4,497

 

 

 

10,237

 

Selling, general and administrative expenses

 

 

221,188

 

 

 

196,960

 

 

 

632,393

 

 

 

581,969

 

Operating income

 

 

83,340

 

 

 

64,013

 

 

 

210,914

 

 

 

132,333

 

Interest income

 

 

492

 

 

 

382

 

 

 

1,591

 

 

 

618

 

Interest expense

 

 

(8,612

)

 

 

(6,323

)

 

 

(22,369

)

 

 

(14,786

)

Other income (expense), net

 

 

(191

)

 

 

(685

)

 

 

1,666

 

 

 

(304

)

Total other income (expense)

 

 

(8,311

)

 

 

(6,626

)

 

 

(19,112

)

 

 

(14,472

)

Income before income tax expense

 

 

75,029

 

 

 

57,387

 

 

 

191,802

 

 

 

117,861

 

Income tax expense

 

 

(15,218

)

 

 

(13,792

)

 

 

(41,944

)

 

 

(27,643

)

Net income including noncontrolling interests

 

 

59,811

 

 

 

43,595

 

 

 

149,858

 

 

 

90,218

 

Net income attributable to noncontrolling interests

 

 

(12,364

)

 

 

(14,024

)

 

 

(33,617

)

 

 

(21,685

)

Net income attributable to Parsons Corporation

 

$

47,447

 

 

$

29,571

 

 

$

116,241

 

 

$

68,533

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.45

 

 

$

0.29

 

 

$

1.11

 

 

$

0.66

 

Diluted

 

$

0.42

 

 

$

0.27

 

 

$

1.03

 

 

$

0.62

 

 

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 Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Net income including noncontrolling interests

 

$

59,811

 

 

$

43,595

 

 

$

149,858

 

 

$

90,218

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

(1,929

)

 

 

(7,134

)

 

 

1,046

 

 

 

(9,643

)

Pension adjustments, net of tax

 

 

(11

)

 

 

(68

)

 

 

6

 

 

 

(93

)

Comprehensive income including noncontrolling interests, net of tax

 

 

57,871

 

 

 

36,393

 

 

 

150,910

 

 

 

80,482

 

Comprehensive income attributable to noncontrolling interests, net of tax

 

 

(12,361

)

 

 

(14,014

)

 

 

(33,617

)

 

 

(21,673

)

Comprehensive income attributable to Parsons Corporation, net of tax

 

$

45,510

 

 

$

22,379

 

 

$

117,293

 

 

$

58,809

 

 

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 Nine Months Ended

 

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

149,858

 

 

$

90,218

 

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

87,202

 

 

$

90,668

 

 

Amortization of debt issue costs

 

 

2,124

 

 

$

1,959

 

 

Loss (gain) on disposal of property and equipment

 

 

(27

)

 

$

(261

)

 

Provision for doubtful accounts

 

 

91

 

 

$

(3

)

 

Deferred taxes

 

 

(8,205

)

 

$

(6,334

)

 

Foreign currency transaction gains and losses

 

 

1,479

 

 

$

3,502

 

 

Equity in losses (earnings) of unconsolidated joint ventures

 

 

(4,497

)

 

$

(10,237

)

 

Return on investments in unconsolidated joint ventures

 

 

30,328

 

 

$

25,626

 

 

Stock-based compensation

 

 

23,872

 

 

$

14,991

 

 

Contributions of treasury stock

 

 

44,072

 

 

$

41,980

 

 

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

 

 

 

 

 

 

 

Accounts receivable

 

 

(168,964

)

 

$

(90,913

)

 

Contract assets

 

 

(120,414

)

 

$

(62,861

)

 

Prepaid expenses and other assets

 

 

(40,470

)

 

$

8,772

 

 

Accounts payable

 

 

48,294

 

 

$

(918

)

 

Accrued expenses and other current liabilities

 

 

93,263

 

 

$

20,220

 

 

Contract liabilities

 

 

61,503

 

 

$

26,665

 

 

Income taxes

 

 

17,395

 

 

$

1,160

 

 

Other long-term liabilities

 

 

662

 

 

$

(5,866

)

 

Net cash provided by operating activities

 

 

217,566

 

 

 

148,368

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(30,877

)

 

$

(19,784

)

 

Proceeds from sale of property and equipment

 

 

274

 

 

$

573

 

 

Payments for acquisitions, net of cash acquired

 

 

(215,497

)

 

$

(379,272

)

 

Investments in unconsolidated joint ventures

 

 

(81,598

)

 

$

(13,637

)

 

Return of investments in unconsolidated joint ventures

 

 

72

 

 

$

9,443

 

 

Proceeds from sales of investments in unconsolidated joint ventures

 

 

381

 

 

$

-

 

 

Net cash used in investing activities

 

 

(327,245

)

 

 

(402,677

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

511,500

 

 

$

680,900

 

 

Repayments of borrowings

 

 

(436,500

)

 

$

(579,700

)

 

Payments for debt costs and credit agreement

 

 

-

 

 

$

(870

)

 

Payments for acquired warrants

 

 

-

 

 

$

(11,243

)

Contributions by noncontrolling interests

 

 

1,537

 

 

$

8,299

 

Distributions to noncontrolling interests

 

 

(12,156

)

 

$

(14,290

)

Repurchases of common stock

 

 

(8,000

)

 

$

(19,500

)

Taxes paid on vested stock

 

 

(6,941

)

 

$

(6,135

)

Proceeds from issuance of common stock

 

 

2,940

 

 

$

2,724

 

Net cash provided by financing activities

 

 

52,380

 

 

 

60,185

 

Effect of exchange rate changes

 

 

166

 

 

$

(2,220

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(57,133

)

 

 

(196,344

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Beginning of year

 

 

262,539

 

 

$

343,883

 

 

End of period

 

$

205,406

 

 

$

147,539

 

 

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 September 30, 2023 and September 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 June 30, 2023

 

$

146,312

 

 

$

(844,936

)

 

$

2,721,402

 

 

$

111,513

 

 

$

(14,860

)

 

$

2,119,431

 

 

$

71,334

 

 

$

2,190,765

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

47,447

 

 

 

-

 

 

 

47,447

 

 

 

12,364

 

 

 

59,811

 

Foreign currency translation
   gain, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,926

)

 

 

(1,926

)

 

 

(3

)

 

 

(1,929

)

Pension adjustments, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11

)

 

 

(11

)

 

 

-

 

 

 

(11

)

Contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,337

 

 

 

1,337

 

Distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,669

)

 

 

(9,669

)

Issuance of equity securities,
   net of retirements

 

 

6

 

 

 

-

 

 

 

(90

)

 

 

(15

)

 

 

-

 

 

 

(99

)

 

 

-

 

 

 

(99

)

Repurchases of common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

7,894

 

 

 

-

 

 

 

-

 

 

 

7,894

 

 

 

-

 

 

 

7,894

 

Balance at September 30, 2023

 

$

146,318

 

 

$

(844,936

)

 

$

2,729,206

 

 

$

158,945

 

 

$

(16,797

)

 

$

2,172,736

 

 

$

75,364

 

 

$

2,248,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

$

146,174

 

 

$

(867,391

)

 

$

2,676,063

 

 

$

(14,565

)

 

$

(12,100

)

 

$

1,928,181

 

 

$

36,486

 

 

$

1,964,667

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-