SEC Filing - Parsons

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psn-10q_20220331.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 March 31, 2022

☐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 April 27, 2022, the registrant had 103,730,134 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	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
	Signatures	38

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)

		March 31, 2022			December 31, 2021
Assets
Current assets:
	Cash and cash equivalents (including $28,477 and $78,514 Cash of consolidated joint ventures)	$	285,622		$	342,608
	Restricted cash and investments		1,140			1,275
	Accounts receivable, net (including $166,410 and $190,643 Accounts receivable of consolidated joint ventures, net)		646,117			598,311
	Contract assets (including $8,647 and $23,498 Contract assets of consolidated joint ventures)		600,109			579,216
	Prepaid expenses and other current assets (including $10,694 and $18,783 Prepaid expenses and other current assets of consolidated joint ventures)		107,978			110,941
	Total current assets		1,640,966			1,632,351

	Property and equipment, net (including $1,707 and $1,721 Property and equipment of consolidated joint ventures, net)		97,922			104,196
	Right of use assets, operating leases		171,907			182,672
	Goodwill		1,412,834			1,412,690
	Investments in and advances to unconsolidated joint ventures		114,234			110,688
	Intangible assets, net		188,731			207,821
	Deferred tax assets		137,015			134,393
	Other noncurrent assets		45,232			46,129
	Total assets	$	3,808,841		$	3,830,940

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable (including $57,700 and $78,558 Accounts payable of consolidated joint ventures)	$	157,080		$	196,286
	Accrued expenses and other current liabilities (including $78,453 and $82,746 Accrued expenses and other current liabilities of consolidated joint ventures)		609,095			599,089
	Contract liabilities (including $14,637 and $14,333 Contract liabilities of consolidated joint ventures)		172,932			171,671
	Short-term lease liabilities, operating leases		57,197			55,902
	Income taxes payable		12,551			7,836
	Total current liabilities		1,008,855			1,030,784

	Long-term employee incentives		15,000			15,997
	Long-term debt		592,450			591,922
	Long-term lease liabilities, operating leases		135,276			148,893
	Deferred tax liabilities		11,793			11,400
	Other long-term liabilities		94,842			94,832
	Total liabilities		1,858,216			1,893,828
Contingencies (Note 12)
Shareholders' equity:
	Common stock, $1 par value; authorized 1,000,000,000 shares; 146,347,283 and 146,276,880 shares issued; 34,942,580 and 33,331,494 public shares outstanding; 68,787,554 and 70,328,237 ESOP shares outstanding		146,348			146,277
	Treasury stock, 42,617,149 shares at cost		(867,391	)		(867,391	)
	Additional paid-in capital		2,678,761			2,684,979
	Accumulated deficit		(32,858	)		(53,529	)
	Accumulated other comprehensive loss		(6,673	)		(9,568	)
	Total Parsons Corporation shareholders' equity		1,918,187			1,900,768
	Noncontrolling interests		32,438			36,344
	Total shareholders' equity		1,950,625			1,937,112
	Total liabilities and shareholders' equity	$	3,808,841		$	3,830,940

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
	March 31, 2022			March 31, 2021
Revenue	$	949,069		$	874,697
Direct cost of contracts		733,900			669,082
Equity in earnings of unconsolidated joint ventures		5,598			7,530
Selling, general and administrative expenses		185,077			187,522
Operating income		35,690			25,623
Interest income		65			98
Interest expense		(3,938	)		(4,541	)
Other income (expense), net		145			(1,791	)
Total other income (expense)		(3,728	)		(6,234	)
Income before income tax expense		31,962			19,389
Income tax expense		(8,119	)		(5,375	)
Net income including noncontrolling interests		23,843			14,014
Net income attributable to noncontrolling interests		(3,176	)		(4,975	)
Net income attributable to Parsons Corporation	$	20,667		$	9,039
Earnings per share:
Basic	$	0.20		$	0.09
Diluted	$	0.19		$	0.09

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
	March 31, 2022			March 31, 2021
Net income including noncontrolling interests	$	23,843		$	14,014
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of tax		2,874			4,914
Pension adjustments, net of tax		22			19
Comprehensive income including noncontrolling interests, net of tax		26,739			18,947
Comprehensive income attributable to noncontrolling interests, net of tax		(3,177	)		(4,980	)
Comprehensive income attributable to Parsons Corporation, net of tax	$	23,562		$	13,967

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 Three Months Ended
		March 31, 2022			March 31, 2021
Cash flows from operating activities:
	Net income including noncontrolling interests	$	23,843		$	14,014
	Adjustments to reconcile net income to net cash used in operating activities
	Depreciation and amortization		30,509			34,673
	Amortization of debt issue costs		649			665
	(Gain) loss on disposal of property and equipment		(39	)		267
	Provision for doubtful accounts		(3	)		-
	Deferred taxes		(2,566	)		403
	Foreign currency transaction gains and losses		882			2,220
	Equity in earnings of unconsolidated joint ventures		(5,598	)		(7,530	)
	Return on investments in unconsolidated joint ventures		11,874			13,180
	Stock-based compensation		3,898			7,206
	Contributions of treasury stock		13,054			13,153
	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:
	Accounts receivable		(46,690	)		2,597
	Contract assets		(21,212	)		(31,711	)
	Prepaid expenses and other assets		4,496			(5,386	)
	Accounts payable		(39,342	)		(6,658	)
	Accrued expenses and other current liabilities		(4,134	)		(68,928	)
	Contract liabilities		945			(16,086	)
	Income taxes		4,706			1,268
	Other long-term liabilities		(986	)		(19,312	)
	Net cash used in operating activities		(25,714	)		(65,965	)
Cash flows from investing activities:
	Capital expenditures		(4,473	)		(4,449	)
	Proceeds from sale of property and equipment		112			164
	Payments for acquisitions, net of cash acquired		-			1,064
	Investments in unconsolidated joint ventures		(9,713	)		(22,240	)
	Return of investments in unconsolidated joint ventures		644			116
	Proceeds from sales of investments in unconsolidated joint ventures		-			14,300
	Net cash used in investing activities		(13,430	)		(11,045	)
Cash flows from financing activities:
	Contributions by noncontrolling interests		1,226			7
	Distributions to noncontrolling interests		(8,309	)		(8,989	)
	Repurchases of common stock		(5,548	)		-
	Taxes paid on vested stock		(5,771	)		(2,242	)
	Net cash used in financing activities		(18,402	)		(11,224	)
	Effect of exchange rate changes		425			430
	Net decrease in cash, cash equivalents, and restricted cash		(57,121	)		(87,804	)
	Cash, cash equivalents and restricted cash:
	Beginning of year		343,883			487,215
	End of period	$	286,762		$	399,411

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

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended March 31, 2022 and March 31, 2021

(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 December 31, 2021	$	146,277		$	(867,391	)	$	2,684,979		$	(53,529	)	$	(9,568	)	$	1,900,768		$	36,344		$	1,937,112
Comprehensive income
Net income		-			-			-			20,667			-			20,667			3,176			23,843
Foreign currency translation loss, net		-			-			-			-			2,873			2,873			1			2,874
Pension adjustments, net		-			-			-			-			22			22			-			22
Contributions		-			-			-			-			-			-			1,226			1,226
Distributions		-			-			-			-			-			-			(8,309	)		(8,309	)
Issuance of equity securities, net of retirements		222			-			(4,719	)		4			-			(4,493	)		-			(4,493	)
Repurchases of common stock		(151	)		-			(5,397	)		-			-			(5,548	)		-			(5,548	)
Stock-based compensation		-			-			3,898			-			-			3,898			-			3,898
Balance at March 31, 2022	$	146,348		$	(867,391	)	$	2,678,761		$	(32,858	)	$	(6,673	)	$	1,918,187		$	32,438		$	1,950,625


Balance at December 31, 2020	$	146,609		$	(899,328	)	$	2,700,925		$	(120,569	)	$	(13,865	)	$	1,813,772		$	47,645		$	1,861,417
Comprehensive income
Net income		-			-			-			9,039			-			9,039			4,975			14,014
Foreign currency translation gain, net		-			-			-			-			4,909			4,909			5			4,914
Pension adjustments, net		-			-			-			-			19			19			-			19
Adoption of ASU 2020-06								(40,002	)		2,782						(37,220	)					(37,220	)
Contributions		-			-			-			-			-			-			7			7
Distributions		-