Acquisitions

3 Months Ended

Mar. 31, 2023

Xator Corporation

On May 31, 2022, the Company acquired a 100% ownership interest in Xator Corporation (“Xator”), a privately-owned company, for $388.3 million in cash. The Company borrowed $300 million under the Credit Agreement, as described in “Note 11 – Debt and Credit Facilities”, to partially fund the acquisition. Xator expands Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber solutions, biometrics, and global threat assessment and operations. In connection with this acquisition, the Company recognized $7.7 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2022, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the preliminary purchase price allocation as of the date of acquisition (in thousands):


	Amount
Cash and cash equivalents	$	8,935
Accounts receivable		7,393
Contract assets		25,397
Prepaid expenses and other current assets		3,615
Property and equipment		1,699
Right of use assets, operating leases		7,517
Goodwill		253,190
Investments in and advances to unconsolidated joint ventures		698
Intangible assets		123,500
Other noncurrent assets		9,156
Accounts payable		(6,626	)
Accrued expenses and other current liabilities		(31,119	)
Contract liabilities		(2,080	)
Short-term lease liabilities, operating leases		(2,371	)
Long-term lease liabilities, operating leases		(5,146	)
Other long-term liabilities		(9,156	)
Net assets acquired	$	384,602

Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):


	Gross Carrying Amount		Amortization Period
			(in years)
Customer relationships	$	37,000	15
Backlog		81,000	6
Trade Name		4,000	1
Developed technologies		1,000	3
Non-compete agreements		500	3

Amortization expense of $5.1 million related to these intangible assets was recorded for the three months ended March 31, 2023. The entire value of goodwill was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill in its entirety is deductible for tax purposes.

The amount of revenue generated by Xator and included within consolidated revenues is $112.4 million for the three months ended March 31, 2023. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

The Company is still in the process of finalizing its valuation of net working capital acquired.

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the Xator acquisition had been consummated as of the beginning of fiscal year 2021 (in thousands) is as follows:


	Three Months Ended
	March 31, 2023		March 31, 2022
Pro forma Revenue	$	1,173,466	$	1,016,072
Pro forma Net Income including noncontrolling interests		37,574		27,298