SEC Filing - Parsons

View:

Download DOC

Download PDF

Download XLS

Download XBRL

psn-10q_20200630.htm

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, 2020

☐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

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 27, 2020, the registrant had 100,724,683 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 (Deficit)	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	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
	Signatures	43

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)

		June 30, 2020			December 31, 2019
Assets
Current assets:
	Cash and cash equivalents (including $31,221 and $51,171 Cash of consolidated joint ventures)	$	129,579		$	182,688
	Restricted cash and investments		7,041			12,686
	Accounts receivable, net (including $257,967 and $166,355 Accounts receivable of consolidated joint ventures, net)		717,358			671,492
	Contract assets (including $27,010 and $26,458 Contract assets of consolidated joint ventures)		645,556			575,089
	Prepaid expenses and other current assets (including $8,524 and $11,182 Prepaid expenses and other current assets of consolidated joint ventures)		89,662			84,454
	Total current assets		1,589,196			1,526,409

	Property and equipment, net (including $2,672 and $2,945 Property and equipment of consolidated joint ventures, net)		124,764			122,751
	Right of use assets, operating leases		225,054			233,415
	Goodwill		1,045,344			1,047,425
	Investments in and advances to unconsolidated joint ventures		64,905			68,620
	Intangible assets, net		214,936			259,858
	Deferred tax assets		129,737			130,401
	Other noncurrent assets		57,246			61,489
	Total assets	$	3,451,182		$	3,450,368

Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
	Accounts payable (including $91,969 and $85,869 Accounts payable of consolidated joint ventures)	$	209,858		$	216,613
	Accrued expenses and other current liabilities (including $112,014 and $74,857 Accrued expenses and other current liabilities of consolidated joint ventures)		642,357			639,863
	Contract liabilities (including $41,945 and $32,638 Contract liabilities of consolidated joint ventures)		219,037			230,681
	Short-term lease liabilities, operating leases		47,648			49,994
	Income taxes payable		12,053			7,231
	Total current liabilities		1,130,953			1,144,382
	Long-term employee incentives		22,122			56,928
	Long-term debt		249,448			249,353
	Long-term lease liabilities, operating leases		201,472			203,624
	Deferred tax liabilities		9,117			9,621
	Other long-term liabilities		131,818			125,704
	Total liabilities		1,744,930			1,789,612
Contingencies (Note 12)
Shareholders' equity (deficit):
	Common stock, $1 par value; authorized 1,000,000,000 shares; 146,495,690 and 146,440,701 shares issued; 23,929,462 and 21,772,888 public shares outstanding; 76,795,221 and 78,896,806 ESOP shares outstanding		146,496			146,441
	Treasury stock, 45,771,008 shares at cost		(934,240	)		(934,240	)
	Additional paid-in capital		2,658,036			2,649,975
	Accumulated deficit		(182,753	)		(218,025	)
	Accumulated other comprehensive loss		(19,991	)		(14,261	)
	Total Parsons Corporation shareholders' equity		1,667,548			1,629,890
	Noncontrolling interests		38,704			30,866
	Total shareholders' equity		1,706,252			1,660,756
	Total liabilities, redeemable common stock and shareholders' equity	$	3,451,182		$	3,450,368

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

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, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue	$	979,459		$	989,742		$	1,950,452		$	1,894,147
Direct cost of contracts		749,324			784,723			1,518,956			1,498,960
Equity in earnings of unconsolidated joint ventures		3,769			11,634			9,883			22,031
Indirect, general and administrative expenses		187,640			225,359			371,414			402,878
Operating income (loss)		46,264			(8,706	)		69,965			14,340
Interest income		196			225			424			702
Interest expense		(4,159	)		(6,376	)		(8,181	)		(14,668	)
Other income (expense), net		715			1,506			263			1,547
Total other expense		(3,248	)		(4,645	)		(7,494	)		(12,419	)
Income (loss) before income tax expense		43,016			(13,351	)		62,471			1,921
Income tax (expense) benefit		(11,891	)		53,496			(16,975	)		51,610
Net income including noncontrolling interests		31,125			40,145			45,496			53,531
Net (income) loss attributable to noncontrolling interests		(7,826	)		114			(9,224	)		(3,531	)
Net income attributable to Parsons Corporation	$	23,299		$	40,259		$	36,272		$	50,000
Earnings per share:
Basic	$	0.23		$	0.44		$	0.36		$	0.59
Diluted	$	0.23		$	0.44		$	0.36		$	0.59

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

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	For the Three Months Ended					For the Six Months Ended
	June 30, 2020			June 30, 2019		June 30, 2020			June 30, 2019
Net income including noncontrolling interests	$	31,125		$	40,145	$	45,496		$	53,531
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		3,104			2,240		(5,696	)		4,787
Pension adjustments, net of tax		23			17		(38	)		26
Comprehensive income including noncontrolling interests, net of tax		34,252			42,402		39,762			58,344
Comprehensive (income) loss attributable to noncontrolling interests, net of tax		(7,830	)		114		(9,220	)		(3,531	)
Comprehensive income attributable to Parsons Corporation, net of tax	$	26,422		$	42,516	$	30,542		$	54,813

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

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

		For the Six Months Ended
		June 30, 2020			June 30, 2019
Cash flows from operating activities:
	Net income including noncontrolling interests	$	45,496		$	53,531
	Adjustments to reconcile net income to net cash used in operating activities
	Depreciation and amortization		64,490			61,665
	Amortization of debt issue costs		369			629
	Gain on disposal of property and equipment		(43	)		(24	)
	Provision for doubtful accounts		38			(866	)
	Deferred taxes		325			(64,924	)
	Foreign currency transaction gains and losses		1,185			(352	)
	Equity in earnings of unconsolidated joint ventures		(9,883	)		(22,031	)
	Return on investments in unconsolidated joint ventures		15,893			15,023
	Stock-based compensation		6,432			-
	Contributions of treasury stock		29,468			24,529
	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:
	Accounts receivable		(49,618	)		(97,450	)
	Contract assets		(70,739	)		(50,842	)
	Prepaid expenses and current assets		(999	)		(4,967	)
	Accounts payable		(6,228	)		(4,517	)
	Accrued expenses and other current liabilities		(21,983	)		17,763
	Contract liabilities		(11,047	)		11,464
	Income taxes		4,048			(7,223	)
	Other long-term liabilities		(28,648	)		20,097
	Net cash used in operating activities		(31,444	)		(48,495	)
Cash flows from investing activities:
	Capital expenditures		(22,938	)		(25,953	)
	Proceeds from sale of property and equipment		943			1,873
	Payments for acquisitions, net of cash acquired		-			(287,482	)
	Investments in unconsolidated joint ventures		(3,844	)		(5,049	)
	Return of investments in unconsolidated joint ventures		17			4,403
	Net cash used in investing activities		(25,822	)		(312,208	)
Cash flows from financing activities:
	Proceeds from borrowings		180,600			350,000
	Repayments of borrowings		(180,600	)		(530,000	)
	Payments for debt costs and credit agreement		-			(286	)
	Contributions by noncontrolling interests		223			8,147
	Distributions to noncontrolling interests		(1,605	)		(20,787	)
	Purchase of treasury stock		-			(819	)
	Taxes paid on vested stock		(1,149	)		-
	Proceeds from issuance of common stock		1,684			537,331
	Dividend paid		-			(52,093	)
	Net cash (used in) provided by financing activities		(847	)		291,493
	Effect of exchange rate changes		(641	)		(602	)
	Net decrease in cash, cash equivalents, and restricted cash		(58,754	)		(69,812	)
	Cash, cash equivalents and restricted cash:
	Beginning of year		195,374			281,195
	End of period	$	136,620		$	211,383

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

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Three Months Ended June 30, 2020 and June 30, 2019

(In thousands)

(Unaudited)

										Retained			Accumulated			Total
	Redeemable							Additional		Earnings			Other			Parsons
	Common		Common		Treasury			Paid-in		(Accumulated			Comprehensive			Equity		Noncontrolling
	Stock		Stock		Stock			Capital		Deficit)			Income (Loss)			(Deficit)		Interests			Total
Balance at March 31, 2020	$	-	$	146,441	$	(934,240	)	$	2,652,227	$	(206,052	)	$	(23,114	)	$	1,635,262	$	32,117		$	1,667,379
Comprehensive income
Net income		-		-		-			-		23,299			-			23,299		7,826			31,125
Foreign currency translation gain, net		-		-		-			-		-			3,100			3,100		4			3,104
Pension adjustments, net		-		-		-			-		-			23			23		-			23
Contributions		-		-		-			-		-			-			-		2			2
Distributions		-		-		-			-		-			-			-		(1,245	)		(1,245	)
Issuance of equity securities, net of retirements		-