10-Q 1 psn-10q_20190630.htm 10-Q psn-10q_20190630.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, 2019

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

 

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  

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

As of August 1, 2019, the registrant had 99,434,877 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

 

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

44

Item 4.

Controls and Procedures

 

44

PART II.

OTHER INFORMATION

 

46

Item 1.

Legal Proceedings

 

46

Item 1A.

Risk Factors

 

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

46

Item 3.

Defaults Upon Senior Securities

 

46

Item 4.

Mine Safety Disclosures

 

46

Item 5.

Other Information

 

46

Item 6.

Exhibits

 

46

Signatures

 

47

 

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)

 

 

 

 

December 31, 2018

 

 

June 30, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (including $73,794 and $40,866 Cash of consolidated joint ventures)

 

$

280,221

 

 

$

202,854

 

 

Restricted cash and investments

 

 

974

 

 

 

8,529

 

 

Accounts receivable, net (including $180,325 and $211,091 Accounts receivable of consolidated joint ventures, net)

 

 

623,286

 

 

 

734,389

 

 

Contract assets (including $21,270 and $25,779 Contract assets of consolidated joint ventures)

 

 

515,319

 

 

 

576,280

 

 

Prepaid expenses and other current assets (including $11,837 and $13,165 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

69,007

 

 

 

73,910

 

 

Total current assets

 

 

1,488,807

 

 

 

1,595,962

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $2,561 and $2,998 Property and equipment of consolidated joint ventures, net)

 

 

91,849

 

 

 

100,934

 

 

Right of use assets, operating leases

 

 

-

 

 

 

212,386

 

 

Goodwill

 

 

736,938

 

 

 

922,403

 

 

Investments in and advances to unconsolidated joint ventures

 

 

63,560

 

 

 

73,481

 

 

Intangible assets, net

 

 

179,519

 

 

 

229,639

 

 

Deferred tax assets

 

 

5,680

 

 

 

70,152

 

 

Other noncurrent assets

 

 

46,225

 

 

 

50,495

 

 

Total assets

 

$

2,612,578

 

 

$

3,255,452

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable (including $87,914 and $103,938 Accounts payable of consolidated joint ventures)

 

$

226,345

 

 

$

227,672

 

 

Accrued expenses and other current liabilities (including $73,209 and $65,210 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

559,700

 

 

 

602,425

 

 

Contract liabilities (including $38,706 and $48,507 Contract liabilities of consolidated joint ventures)

 

 

208,576

 

 

 

222,167

 

 

Short-term lease liabilities, operating leases

 

 

-

 

 

 

51,696

 

 

Income taxes payable

 

 

11,540

 

 

 

5,816

 

 

Total current liabilities

 

 

1,006,161

 

 

 

1,109,776

 

 

Long-term employee incentives

 

 

41,913

 

 

 

54,825

 

 

Deferred gain resulting from sale-leaseback transactions

 

 

46,004

 

 

 

-

 

 

Long-term debt

 

 

429,164

 

 

 

249,258

 

 

Long-term lease liabilities, operating leases

 

 

-

 

 

 

178,589

 

 

Deferred tax liabilities

 

 

6,240

 

 

 

6,190

 

 

Other long-term liabilities

 

 

127,863

 

 

 

118,851

 

 

Total liabilities

 

 

1,657,345

 

 

 

1,717,489

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

Redeemable common stock held by Employee Stock Ownership Plan (ESOP), $1 par value; 78,172,809 and 78,138,602 shares outstanding, recorded at redemption value

 

 

1,876,309

 

 

 

2,880,189

 

Shareholders' equity (deficit):

 

 

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 125,097,684 and 146,393,959 shares issued; 0 and 21,296,275 shares outstanding

 

 

-

 

 

 

21,296

 

 

Treasury stock, 46,918,140 and 46,959,082 shares at cost

 

 

(957,025

)

 

 

(957,844

)

 

Retained earnings (accumulated deficit)

 

 

12,445

 

 

 

(424,886

)

 

Accumulated other comprehensive loss

 

 

(22,957

)

 

 

(18,144

)

 

Total Parsons Corporation shareholders' equity (deficit)

 

 

(967,537

)

 

 

(1,379,578

)

 

Noncontrolling interests

 

 

46,461

 

 

 

37,352

 

 

Total shareholders' equity (deficit)

 

 

(921,076

)

 

 

(1,342,226

)

 

Total liabilities, redeemable common stock and shareholders' equity (deficit)

 

$

2,612,578

 

 

$

3,255,452

 

 

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 29, 2018

 

 

June 30, 2019

 

 

 

June 29, 2018

 

 

June 30, 2019

 

Revenues

 

$

900,732

 

 

$

989,742

 

 

 

$

1,655,411

 

 

$

1,894,147

 

Direct costs of contracts

 

 

668,211

 

 

 

784,723

 

 

 

 

1,271,183

 

 

 

1,498,960

 

Equity in earnings of unconsolidated joint ventures

 

 

1,839

 

 

 

11,634

 

 

 

 

12,870

 

 

 

22,031

 

Indirect, general and administrative expenses

 

 

147,448

 

 

 

225,359

 

 

 

 

271,295

 

 

 

402,878

 

Operating income (loss)

 

 

86,912

 

 

 

(8,706

)

 

 

 

125,803

 

 

 

14,340

 

Interest income

 

 

1,266

 

 

 

225

 

 

 

 

2,007

 

 

 

702

 

Interest expense

 

 

(4,536

)

 

 

(6,376

)

 

 

 

(8,535

)

 

 

(14,668

)

Other income (expense), net

 

 

(1,493

)

 

 

1,506

 

 

 

 

(341

)

 

 

1,547

 

Gain associated with claim on long-term contract

 

 

76,908

 

 

 

-

 

 

 

 

74,578

 

 

 

-

 

Total other income (expense)

 

 

72,145

 

 

 

(4,645

)

 

 

 

67,709

 

 

 

(12,419

)

Income (loss) before income tax provision

 

 

159,057

 

 

 

(13,351

)

 

 

 

193,512

 

 

 

1,921

 

Income tax benefit (provision)

 

 

(9,019

)

 

 

53,496

 

 

 

 

(14,372

)

 

 

51,610

 

Net income including noncontrolling interests

 

 

150,038

 

 

 

40,145

 

 

 

 

179,140

 

 

 

53,531

 

Net (income) loss attributable to noncontrolling interests

 

 

(1,657

)

 

 

114

 

 

 

 

(5,472

)

 

 

(3,531

)

Net income attributable to Parsons Corporation

 

$

148,381

 

 

$

40,259

 

 

 

$

173,668

 

 

$

50,000

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic and diluted

 

$

1.83

 

 

$

0.44

 

 

 

$

2.13

 

 

$

0.59

 

 

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 29, 2018

 

 

June 30, 2019

 

 

June 29, 2018

 

 

June 30, 2019

 

Net income including noncontrolling interests

 

$

150,038

 

 

$

40,145

 

 

$

179,140

 

 

$

53,531

 

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

(2,598

)

 

 

2,240

 

 

 

(5,382

)

 

 

4,787

 

Pension adjustments, net of tax

 

 

(18

)

 

 

17

 

 

 

(37

)

 

 

26

 

Comprehensive income including noncontrolling interests, net of tax

 

 

147,422

 

 

 

42,402

 

 

 

173,721

 

 

 

58,344

 

Comprehensive (income) loss attributable to noncontrolling interests, net of tax

 

 

(1,657

)

 

 

114

 

 

 

(5,472

)

 

 

(3,531

)

Comprehensive income attributable to Parsons Corporation,

   net of tax

 

$

145,765

 

 

$

42,516

 

 

$

168,249

 

 

$

54,813

 

 

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 29, 2018

 

 

June 30, 2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

179,140

 

 

$

53,531

 

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

23,057

 

 

 

61,665

 

 

Amortization of deferred gain

 

 

(3,642

)

 

 

-

 

 

Amortization of debt issue costs

 

 

300

 

 

 

629

 

 

Gain associated with claim on long-term contract

 

 

(129,674

)

 

 

-

 

 

(Gain) loss on disposal of property and equipment

 

 

53

 

 

 

(24

)

 

Provision for doubtful accounts

 

 

6,464

 

 

 

(866

)

 

Deferred taxes

 

 

584

 

 

 

(64,924

)

 

Foreign currency transaction gains and losses

 

 

1,633

 

 

 

(352

)

 

Equity in earnings of unconsolidated joint ventures

 

 

(12,870

)

 

 

(22,031

)

 

Return on investments in unconsolidated joint ventures

 

 

12,726

 

 

 

15,023

 

 

Contributions of treasury stock

 

 

22,713

 

 

 

24,529

 

 

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

   joint ventures:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

418,169

 

 

 

(97,450

)

 

Contract assets

 

 

(502,095

)

 

 

(50,842

)

 

Prepaid expenses and current assets

 

 

(26,458

)

 

 

(4,967

)

 

Accounts payable

 

 

2,470

 

 

 

(4,517

)

 

Accrued expenses and other current liabilities

 

 

(12,592

)

 

 

17,763

 

 

Billings in excess of costs

 

 

(151,642

)

 

 

-

 

 

Contract liabilities

 

 

164,727

 

 

 

11,464

 

 

Provision for contract losses

 

 

(13,992

)

 

 

-

 

 

Income taxes

 

 

2,978

 

 

 

(7,223

)

 

Other long-term liabilities

 

 

9,508

 

 

 

20,097

 

 

Net cash used in operating activities

 

 

(8,443

)

 

 

(48,495

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,565

)

 

 

(25,953

)

 

Proceeds from sale of property and equipment

 

 

112

 

 

 

1,873

 

 

Payments for acquisitions, net of cash acquired

 

 

(481,163

)

 

 

(287,482

)

 

Investments in unconsolidated joint ventures

 

 

(4,211

)

 

 

(5,049

)

 

Return of investments in unconsolidated joint ventures

 

 

-

 

 

 

4,403

 

 

Net cash used in investing activities

 

 

(495,827

)

 

 

(312,208

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

260,000

 

 

 

350,000

 

 

Repayments of borrowings

 

 

-

 

 

 

(530,000

)

 

Payments for debt costs and credit agreement

 

 

-

 

 

 

(286

)

 

Contributions by (distributions to) noncontrolling interests, net

 

 

10,892

 

 

 

(12,640

)

 

Purchase of treasury stock

 

 

(32,996

)

 

 

(819

)

 

IPO proceeds, net

 

 

-

 

 

 

537,331

 

 

Dividend paid

 

 

-

 

 

 

(52,093

)

 

Net cash provided by financing activities

 

 

237,896

 

 

 

291,493

 

 

Effect of exchange rate changes

 

 

(624

)

 

 

(602

)

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(266,998

)

 

 

(69,812

)

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

446,144

 

 

 

281,195

 

 

End of period

 

$

179,146

 

 

$

211,383

 

 

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

4


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Three Months Ended June 30, 2019 and June 29, 2018

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

(Accumulated

 

 

Comprehensive

 

 

Parsons

 

 

Noncontrolling

 

 

 

 

 

 

 

Stock

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

Total

 

Balance at March 31, 2019

 

$

1,875,332

 

 

 

$

-

 

 

$

(957,838

)

 

$

-

 

 

$

75,771

 

 

$

(20,401

)

 

$

(902,468

)

 

$

31,828

 

 

$

(870,640

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40,259

 

 

 

-

 

 

 

40,259

 

 

 

(114

)

 

 

40,145

 

Foreign currency translation gain, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,240

 

 

 

2,240

 

 

 

-

 

 

 

2,240

 

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17

 

 

 

17

 

 

 

-

 

 

 

17

 

Purchase of treasury stock

 

 

(6

)

 

 

 

-

 

 

 

(6

)

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Distributions, net of contributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,638

 

 

 

5,638

 

Dividend paid

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52,093

)

 

 

-

 

 

 

(52,093

)

 

 

-

 

 

 

(52,093

)

Conversion of S-Corp to C-Corp

 

 

25,877

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,877

)

 

 

 

 

 

 

(25,877

)

 

 

-

 

 

 

(25,877

)

IPO proceeds, net

 

 

-

 

 

 

 

21,296

 

 

 

-

 

 

 

516,034

 

 

 

-

 

 

 

-

 

 

 

537,330

 

 

 

-

 

 

 

537,330

 

Accretion of redeemable common stock

 

 

978,986

 

 

 

 

-

 

 

 

-

 

 

 

(516,034

)

 

 

(462,952

)

 

 

-

 

 

 

(978,986

)

 

 

-

 

 

 

(978,986

)

Balance at June 30, 2019

 

$

2,880,189

 

 

 

$

21,296

 

 

$

(957,844

)

 

$

-

 

 

$

(424,886

)

 

$

(18,144

)

 

$

(1,379,578

)

 

$

37,352

 

 

$

(1,342,226

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 30, 2018

 

$

1,854,938

 

 

 

$

-

 

 

$

(876,738

)

 

$

-

 

 

$

(165,116

)

 

$

(17,803

)

 

$

(1,059,657

)

 

$

37,906

 

 

$

(1,021,751

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

148,381

 

 

 

-

 

 

 

148,381

 

 

 

1,657

 

 

 

150,038

 

Foreign currency translation (loss), net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,576

)

 

 

(2,576

)

 

 

(22

)

 

 

(2,598

)

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18

)

 

 

(18

)

 

 

-

 

 

 

(18

)

Purchase of treasury stock

 

 

(32,629

)

 

 

 

-

 

 

 

(32,629

)

 

 

-

 

 

 

32,629

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Contributions, net of distributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,394

 

 

 

4,394

 

Balance at June 29, 2018

 

$

1,822,309

 

 

 

$

-

 

 

$

(909,368

)

 

$

-

 

 

$

15,894

 

 

$

(20,397

)

 

$

(913,871

)

 

$

43,935

 

 

$

(869,936

)

 

 

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

5


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Six Months Ended June 30, 2019 and June 29, 2018

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

(Accumulated

 

 

Comprehensive

 

 

Parsons

 

 

Noncontrolling

 

 

 

 

 

 

 

Stock

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

Total

 

Balance at December 31, 2018

 

$

1,876,309

 

 

 

$

-

 

 

$

(957,025

)

 

$

-

 

 

$

12,445

 

 

$

(22,957

)

 

$

(967,537

)

 

$

46,461

 

 

$

(921,076

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

50,000