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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, 2021

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

 

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 28, 2021, the registrant had 102,502,780 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

 

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

 

42

Item 6.

Exhibits

 

42

 

Signatures

 

43

 

 

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (including $57,563 and $75,220 Cash of consolidated joint ventures)

 

$

483,443

 

 

$

483,609

 

 

Restricted cash and investments

 

 

1,145

 

 

 

3,606

 

 

Accounts receivable, net (including $173,640 and $190,643 Accounts receivable of consolidated joint ventures, net)

 

 

637,980

 

 

 

698,578

 

 

Contract assets (including $25,192 and $23,498 Contract assets of consolidated joint ventures)

 

 

568,239

 

 

 

576,568

 

 

Prepaid expenses and other current assets (including $6,657 and $3,045 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

103,599

 

 

 

80,769

 

 

Total current assets

 

 

1,794,406

 

 

 

1,843,130

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $2,283 and $2,629 Property and equipment of consolidated joint ventures, net)

 

 

110,617

 

 

 

121,027

 

 

Right of use assets, operating leases

 

 

194,484

 

 

 

210,398

 

 

Goodwill

 

 

1,263,060

 

 

 

1,261,978

 

 

Investments in and advances to unconsolidated joint ventures

 

 

86,045

 

 

 

68,975

 

 

Intangible assets, net

 

 

197,985

 

 

 

245,958

 

 

Deferred tax assets

 

 

147,146

 

 

 

130,200

 

 

Other noncurrent assets

 

 

45,554

 

 

 

56,038

 

 

Total assets

 

$

3,839,297

 

 

$

3,937,704

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable (including $85,425 and $97,810 Accounts payable of consolidated joint ventures)

 

$

191,688

 

 

$

225,679

 

 

Accrued expenses and other current liabilities (including $70,015 and $68,801 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

582,610

 

 

 

650,753

 

 

Contract liabilities (including $35,260 and $33,922 Contract liabilities of consolidated joint ventures)

 

 

196,547

 

 

 

201,864

 

 

Short-term lease liabilities, operating leases

 

 

53,997

 

 

 

54,133

 

 

Income taxes payable

 

 

2,582

 

 

 

4,980

 

 

Short-term debt

 

 

50,000

 

 

 

50,000

 

 

Total current liabilities

 

 

1,077,424

 

 

 

1,187,409

 

 

Long-term employee incentives

 

 

23,222

 

 

 

21,828

 

 

Long-term debt

 

 

590,876

 

 

 

539,998

 

 

Long-term lease liabilities, operating leases

 

 

164,754

 

 

 

182,467

 

 

Deferred tax liabilities

 

 

12,690

 

 

 

12,285

 

 

Other long-term liabilities

 

 

119,881

 

 

 

132,300

 

 

Total liabilities

 

 

1,988,847

 

 

 

2,076,287

 

Contingencies (Note 12)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,751,406 and 146,609,288 shares issued; 30,213,867 and 25,719,350 public shares outstanding; 72,288,913 and 76,641,312 ESOP shares outstanding

 

 

146,752

 

 

 

146,609

 

 

Treasury stock, 44,248,626 shares at cost

 

 

(899,328

)

 

 

(899,328

)

 

Additional paid-in capital

 

 

2,673,965

 

 

 

2,700,925

 

 

Accumulated deficit

 

 

(102,019

)

 

 

(120,569

)

 

Accumulated other comprehensive loss

 

 

(5,905

)

 

 

(13,865

)

 

Total Parsons Corporation shareholders' equity

 

 

1,813,465

 

 

 

1,813,772

 

 

Noncontrolling interests

 

 

36,985

 

 

 

47,645

 

 

Total shareholders' equity

 

 

1,850,450

 

 

 

1,861,417

 

 

Total liabilities and shareholders' equity

 

$

3,839,297

 

 

$

3,937,704

 

 

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, 2021

 

 

June 30, 2020

 

 

June 30, 2021

 

 

June 30, 2020

 

Revenue

 

$

879,356

 

 

$

979,459

 

 

$

1,754,053

 

 

$

1,950,452

 

Direct cost of contracts

 

 

680,328

 

 

 

749,324

 

 

 

1,349,410

 

 

 

1,518,956

 

Equity in earnings of unconsolidated joint ventures

 

 

9,428

 

 

 

3,769

 

 

 

16,958

 

 

 

9,883

 

Selling, general and administrative expenses

 

 

188,238

 

 

 

187,640

 

 

 

375,760

 

 

 

371,414

 

Operating income

 

 

20,218

 

 

 

46,264

 

 

 

45,841

 

 

 

69,965

 

Interest income

 

 

152

 

 

 

196

 

 

 

250

 

 

 

424

 

Interest expense

 

 

(4,910

)

 

 

(4,159

)

 

 

(9,451

)

 

 

(8,181

)

Other income (expense), net

 

 

405

 

 

 

715

 

 

 

(1,386

)

 

 

263

 

Total other income (expense)

 

 

(4,353

)

 

 

(3,248

)

 

 

(10,587

)

 

 

(7,494

)

Income before income tax expense

 

 

15,865

 

 

 

43,016

 

 

 

35,254

 

 

 

62,471

 

Income tax expense

 

 

(3,838

)

 

 

(11,891

)

 

 

(9,213

)

 

 

(16,975

)

Net income including noncontrolling interests

 

 

12,027

 

 

 

31,125

 

 

 

26,041

 

 

 

45,496

 

Net income attributable to noncontrolling interests

 

 

(5,325

)

 

 

(7,826

)

 

 

(10,300

)

 

 

(9,224

)

Net income attributable to Parsons Corporation

 

$

6,702

 

 

$

23,299

 

 

$

15,741

 

 

$

36,272

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.23

 

 

$

0.15

 

 

$

0.36

 

Diluted

 

$

0.06

 

 

$

0.23

 

 

$

0.15

 

 

$

0.36

 

 

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, 2021

 

 

June 30, 2020

 

 

June 30, 2021

 

 

June 30, 2020

 

Net income including noncontrolling interests

 

$

12,027

 

 

$

31,125

 

 

$

26,041

 

 

$

45,496

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

3,012

 

 

 

3,104

 

 

 

7,926

 

 

 

(5,696

)

Pension adjustments, net of tax

 

 

19

 

 

 

23

 

 

 

38

 

 

 

(38

)

Comprehensive income including noncontrolling interests, net of tax

 

 

15,058

 

 

 

34,252

 

 

 

34,005

 

 

 

39,762

 

Comprehensive income attributable to noncontrolling interests, net of tax

 

 

(5,324

)

 

 

(7,830

)

 

 

(10,304

)

 

 

(9,220

)

Comprehensive income attributable to Parsons Corporation, net of tax

 

$

9,734

 

 

$

26,422

 

 

$

23,701

 

 

$

30,542

 

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, 2021

 

 

June 30, 2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

26,041

 

 

$

45,496

 

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

69,308

 

 

 

64,490

 

 

Amortization of debt issue costs

 

 

1,530

 

 

 

369

 

 

Loss (gain) on disposal of property and equipment

 

 

297

 

 

 

(43

)

 

Provision for doubtful accounts

 

 

-

 

 

 

38

 

 

Deferred taxes

 

 

(4,217

)

 

 

325

 

 

Foreign currency transaction gains and losses

 

 

2,395

 

 

 

1,185

 

 

Equity in earnings of unconsolidated joint ventures

 

 

(16,958

)

 

 

(9,883

)

 

Return on investments in unconsolidated joint ventures

 

 

18,132

 

 

 

15,893

 

 

Stock-based compensation

 

 

11,361

 

 

 

6,432

 

 

Contributions of treasury stock

 

 

26,518

 

 

 

29,468

 

 

Changes in assets and liabilities, net of acquisitions and newly consolidated

   joint ventures:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

58,146

 

 

 

(49,618

)

 

Contract assets

 

 

8,360

 

 

 

(70,739

)

 

Prepaid expenses and other assets

 

 

(11,153

)

 

 

(999

)

 

Accounts payable

 

 

(34,372

)

 

 

(6,228

)

 

Accrued expenses and other current liabilities

 

 

(97,541

)

 

 

(21,983

)

 

Contract liabilities

 

 

(5,957

)

 

 

(11,047

)

 

Income taxes

 

 

(2,402

)

 

 

4,048

 

 

Other long-term liabilities

 

 

(11,025

)

 

 

(28,648

)

 

Net cash provided by (used in) operating activities

 

 

38,463

 

 

 

(31,444

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(9,171

)

 

 

(22,938

)

 

Proceeds from sale of property and equipment

 

 

384

 

 

 

943

 

 

Payments for acquisitions, net of cash acquired

 

 

256

 

 

 

-

 

 

Investments in unconsolidated joint ventures

 

 

(26,373

)

 

 

(3,844

)

 

Return of investments in unconsolidated joint ventures

 

 

727

 

 

 

17

 

 

Proceeds from sales of investments in unconsolidated joint ventures

 

 

14,335

 

 

 

-

 

 

Net cash used in investing activities

 

 

(19,842

)

 

 

(25,822

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under credit agreement

 

 

-

 

 

 

180,600

 

 

Repayments of borrowings under credit agreement

 

 

-

 

 

 

(180,600

)

 

Payments for debt costs and credit agreement

 

 

(1,826

)

 

 

-

 

 

Contributions by noncontrolling interests

 

 

872

 

 

 

223

 

 

Distributions to noncontrolling interests

 

 

(21,836

)

 

 

(1,605

)

 

Taxes paid on vested stock

 

 

(2,242

)

 

 

(1,149

)

 

Proceeds from issuance of common stock

 

 

2,773

 

 

 

1,684

 

 

Net cash used in financing activities

 

 

(22,259

)

 

 

(847

)

 

Effect of exchange rate changes

 

 

1,011

 

 

 

(641

)

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(2,627

)

 

 

(58,754

)

 

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

487,215

 

 

 

195,374

 

 

End of period

 

$

484,588

 

 

$

136,620

 

 

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, 2021 and June 30, 2020

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

(Accumulated

 

 

Comprehensive

 

 

Parsons

 

 

Noncontrolling

 

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Total

 

Balance at March 31, 2021

 

$

146,654

 

 

$

(899,328

)

 

$

2,667,130

 

 

$

(108,720

)

 

$

(8,937

)

 

$

1,796,799

 

 

$

43,643

 

 

$

1,840,442

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,702

 

 

 

-

 

 

 

6,702

 

 

 

5,325

 

 

 

12,027

 

Foreign currency translation gain, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,013

 

 

 

3,013

 

 

 

(1

)

 

 

3,012

 

Pension adjustments, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19

 

 

 

19

 

 

 

-

 

 

 

19

 

Contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

865

 

 

 

865

 

Distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,847

)

 

 

(12,847

)

Issuance of equity securities, net of retirements

 

 

98

 

 

 

-

 

 

 

2,680

 

 

 

(1

)

 

 

-

 

 

 

2,777

 

 

 

-

 

 

 

2,777

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

4,155

 

 

 

-

 

 

 

-

 

 

 

4,155

 

 

 

-

 

 

 

4,155

 

Balance at June 30, 2021

 

$

146,752

 

 

$

(899,328

)

 

$

2,673,965

 

 

$

(102,019

)

 

$

(5,905

)

 

$

1,813,465

 

 

$

36,985

 

 

$

1,850,450