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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 March 31, 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 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

 

 

 

 

i


 

 

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.

1


 

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.

2


 

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.

3


 

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.

4


 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,989

)

 

 

(8,989

)

Issuance of equity securities, net of retirements

 

 

45

 

 

 

-

 

 

 

(999

)

 

 

28

 

 

 

-

 

 

 

(926

)

 

 

-

 

 

 

(926

)

Stock-based compensation

 

 

-