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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, 2022

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 27, 2022, the registrant had 103,561,917 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

 

41

Item 4.

Controls and Procedures

 

41

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

 

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, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (including $25,060 and $78,514 Cash of consolidated joint ventures)

 

$

125,982

 

 

$

342,608

 

 

Restricted cash and investments

 

 

890

 

 

 

1,275

 

 

Accounts receivable, net (including $183,768 and $190,643 Accounts receivable of consolidated joint ventures, net)

 

 

733,487

 

 

 

598,311

 

 

Contract assets (including $9,867 and $23,498 Contract assets of consolidated joint ventures)

 

 

603,359

 

 

 

579,216

 

 

Prepaid expenses and other current assets (including $13,357 and $18,783 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

119,908

 

 

 

110,941

 

 

Total current assets

 

 

1,583,626

 

 

 

1,632,351

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $1,504 and $1,721 Property and equipment of consolidated joint ventures, net)

 

 

98,491

 

 

 

104,196

 

 

Right of use assets, operating leases

 

 

167,577

 

 

 

182,672

 

 

Goodwill

 

 

1,671,668

 

 

 

1,412,690

 

 

Investments in and advances to unconsolidated joint ventures

 

 

115,478

 

 

 

110,688

 

 

Intangible assets, net

 

 

285,115

 

 

 

207,821

 

 

Deferred tax assets

 

 

134,591

 

 

 

134,393

 

 

Other noncurrent assets

 

 

53,259

 

 

 

46,129

 

 

Total assets

 

$

4,109,805

 

 

$

3,830,940

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable (including $62,848 and $78,558 Accounts payable of consolidated joint ventures)

 

$

194,696

 

 

$

196,286

 

 

Accrued expenses and other current liabilities (including $82,994 and $82,746 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

647,040

 

 

 

599,089

 

 

Contract liabilities (including $14,293 and $14,333 Contract liabilities of consolidated joint ventures)

 

 

186,295

 

 

 

171,671

 

 

Short-term lease liabilities, operating leases

 

 

59,814

 

 

 

55,902

 

 

Income taxes payable

 

 

10,941

 

 

 

7,836

 

 

Total current liabilities

 

 

1,098,786

 

 

 

1,030,784

 

 

 

 

 

 

 

 

 

 

 

 

Long-term employee incentives

 

 

16,177

 

 

 

15,997

 

 

Long-term debt

 

 

792,982

 

 

 

591,922

 

 

Long-term lease liabilities, operating leases

 

 

127,487

 

 

 

148,893

 

 

Deferred tax liabilities

 

 

9,587

 

 

 

11,400

 

 

Other long-term liabilities

 

 

100,119

 

 

 

94,832

 

 

Total liabilities

 

 

2,145,138

 

 

 

1,893,828

 

Contingencies (Note 12)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,178,118 and 146,276,880 shares issued; 38,463,147 and 33,331,494 public shares outstanding; 65,097,822 and 70,328,237 ESOP shares outstanding

 

 

146,174

 

 

 

146,277

 

 

Treasury stock, 42,617,149 shares at cost

 

 

(867,391

)

 

 

(867,391

)

 

Additional paid-in capital

 

 

2,676,063

 

 

 

2,684,979

 

 

Accumulated deficit

 

 

(14,565

)

 

 

(53,529

)

 

Accumulated other comprehensive loss

 

 

(12,100

)

 

 

(9,568

)

 

Total Parsons Corporation shareholders' equity

 

 

1,928,181

 

 

 

1,900,768

 

 

Noncontrolling interests

 

 

36,486

 

 

 

36,344

 

 

Total shareholders' equity

 

 

1,964,667

 

 

 

1,937,112

 

 

Total liabilities and shareholders' equity

 

$

4,109,805

 

 

$

3,830,940

 

 

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, 2022

 

 

June 30, 2021

 

 

June 30, 2022

 

 

June 30, 2021

 

Revenue

 

$

1,008,721

 

 

$

879,356

 

 

$

1,957,790

 

 

$

1,754,053

 

Direct cost of contracts

 

 

781,772

 

 

 

680,328

 

 

 

1,515,672

 

 

 

1,349,410

 

Equity in earnings of unconsolidated joint ventures

 

 

5,613

 

 

 

9,428

 

 

 

11,211

 

 

 

16,958

 

Selling, general and administrative expenses

 

 

199,932

 

 

 

188,238

 

 

 

385,009

 

 

 

375,760

 

Operating income

 

 

32,630

 

 

 

20,218

 

 

 

68,320

 

 

 

45,841

 

Interest income

 

 

171

 

 

 

152

 

 

 

236

 

 

 

250

 

Interest expense

 

 

(4,525

)

 

 

(4,910

)

 

 

(8,463

)

 

 

(9,451

)

Other income (expense), net

 

 

236

 

 

 

405

 

 

 

381

 

 

 

(1,386

)

Total other income (expense)

 

 

(4,118

)

 

 

(4,353

)

 

 

(7,846

)

 

 

(10,587

)

Income before income tax expense

 

 

28,512

 

 

 

15,865

 

 

 

60,474

 

 

 

35,254

 

Income tax expense

 

 

(5,732

)

 

 

(3,838

)

 

 

(13,851

)

 

 

(9,213

)

Net income including noncontrolling interests

 

 

22,780

 

 

 

12,027

 

 

 

46,623

 

 

 

26,041

 

Net income attributable to noncontrolling interests

 

 

(4,485

)

 

 

(5,325

)

 

 

(7,661

)

 

 

(10,300

)

Net income attributable to Parsons Corporation

 

$

18,295

 

 

$

6,702

 

 

$

38,962

 

 

$

15,741

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

0.07

 

 

$

0.38

 

 

$

0.15

 

Diluted

 

$

0.17

 

 

$

0.06

 

 

$

0.35

 

 

$

0.15

 

 

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, 2022

 

 

June 30, 2021

 

 

June 30, 2022

 

 

June 30, 2021

 

Net income including noncontrolling interests

 

$

22,780

 

 

$

12,027

 

 

$

46,623

 

 

$

26,041

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

(5,383

)

 

 

3,012

 

 

 

(2,509

)

 

 

7,926

 

Pension adjustments, net of tax

 

 

(47

)

 

 

19

 

 

 

(25

)

 

 

38

 

Comprehensive income including noncontrolling interests, net of tax

 

 

17,350

 

 

 

15,058

 

 

 

44,089

 

 

 

34,005

 

Comprehensive income attributable to noncontrolling interests, net of tax

 

 

(4,482

)

 

 

(5,324

)

 

 

(7,659

)

 

 

(10,304

)

Comprehensive income attributable to Parsons Corporation, net of tax

 

$

12,868

 

 

$

9,734

 

 

$

36,430

 

 

$

23,701

 

 

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, 2022

 

 

June 30, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

46,623

 

 

$

26,041

 

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

61,090

 

 

 

69,308

 

 

Amortization of debt issue costs

 

 

1,302

 

 

 

1,530

 

 

(Gain) loss on disposal of property and equipment

 

 

(96

)

 

 

297

 

 

Provision for doubtful accounts

 

 

(3

)

 

 

-

 

 

Deferred taxes

 

 

(2,149

)

 

 

(4,217

)

 

Foreign currency transaction gains and losses

 

 

1,461

 

 

 

2,395

 

 

Equity in earnings of unconsolidated joint ventures

 

 

(11,211

)

 

 

(16,958

)

 

Return on investments in unconsolidated joint ventures

 

 

19,434

 

 

 

18,132

 

 

Stock-based compensation

 

 

8,358

 

 

 

11,361

 

 

Contributions of treasury stock

 

 

26,544

 

 

 

26,518

 

 

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

   joint ventures:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(109,681

)

 

 

58,146

 

 

Contract assets

 

 

(17,866

)

 

 

8,360

 

 

Prepaid expenses and other assets

 

 

(3,521

)

 

 

(11,153

)

 

Accounts payable

 

 

(8,079

)

 

 

(34,372

)

 

Accrued expenses and other current liabilities

 

 

(7,314

)

 

 

(97,541

)

 

Contract liabilities

 

 

13,360

 

 

 

(5,957

)

 

Income taxes

 

 

3,107

 

 

 

(2,402

)

 

Other long-term liabilities

 

 

3,977

 

 

 

(11,025

)

 

Net cash provided by operating activities

 

 

25,336

 

 

 

38,463

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(13,588

)

 

 

(9,171

)

 

Proceeds from sale of property and equipment

 

 

251

 

 

 

384

 

 

Payments for acquisitions, net of cash acquired

 

 

(379,272

)

 

 

256

 

 

Investments in unconsolidated joint ventures

 

 

(11,228

)

 

 

(26,373

)

 

Return of investments in unconsolidated joint ventures

 

 

-

 

 

 

727

 

 

Proceeds from sales of investments in unconsolidated joint ventures

 

 

-

 

 

 

14,335

 

 

Net cash used in investing activities

 

 

(403,837

)

 

 

(19,842

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under credit agreement

 

 

347,100

 

 

 

-

 

 

Repayments of borrowings under credit agreement

 

 

(147,100

)

 

 

-

 

 

Payments for debt costs and credit agreement

 

 

-

 

 

 

(1,826

)

 

Payments for acquired warrants

 

 

(11,243

)

 

 

-

 

 

Contributions by noncontrolling interests

 

 

2,827

 

 

 

872

 

 

Distributions to noncontrolling interests

 

 

(10,344

)

 

 

(21,836

)

 

Repurchases of common stock

 

 

(15,548

)

 

 

-

 

 

Taxes paid on vested stock

 

 

(5,963

)

 

 

(2,242

)

 

Proceeds from issuance of common stock

 

 

2,724

 

 

 

2,773

 

 

Net cash provided by (used in) financing activities

 

 

162,453

 

 

 

(22,259

)

 

Effect of exchange rate changes

 

 

(963

)

 

 

1,011

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(217,011

)

 

 

(2,627

)

 

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

343,883

 

 

 

487,215

 

 

End of period

 

$

126,872

 

 

$

484,588

 

 

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, 2022 and June 30, 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 March 31, 2022

 

$

146,348

 

 

$

(867,391

)

 

$

2,678,761

 

 

$

(32,858

)

 

$

(6,673

)

 

$

1,918,187

 

 

$

32,438

 

 

$

1,950,625

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,295

 

 

 

-

 

 

 

18,295

 

 

 

4,485

 

 

 

22,780

 

Foreign currency translation loss, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,380

)

 

 

(5,380

)

 

 

(3

)

 

 

(5,383

)

Pension adjustments, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(47

)

 

 

(47

)

 

 

-

 

 

 

(47

)

Contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,601

 

 

 

1,601

 

Distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,035

)

 

 

(2,035

)

Issuance of equity securities, net of retirements

 

 

102

 

 

 

-

 

 

 

2,566

 

 

 

(2

)

 

 

-

 

 

 

2,666

 

 

 

-

 

 

 

2,666

 

Repurchases of common stock

 

 

(276

)

 

 

-

 

 

 

(9,724

)

 

 

-

 

 

 

-

 

 

 

(10,000

)

 

 

-

 

 

 

(10,000

)

Stock-based compensation

 

 

-

 

 

 

-