What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-04 · 186 added, 388 removed, 533 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except share information)

September 30, 2020

March 31, 2021

December 31, 2020

12 unchanged sentences

Other noncurrent assets

Liabilities and Shareholders' Equity (Deficit)

Liabilities and Shareholders' Equity

Current liabilities:

13 unchanged sentences

Contingencies (Note 12)

Shareholders' equity (deficit):

Shareholders' equity:

Common stock, $ 1 par value;

10 unchanged sentences

Total shareholders' equity

Total liabilities, redeemable common stock and shareholders' equity

Total liabilities and shareholders' equity

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

3 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Direct cost of contracts

Equity in earnings of unconsolidated joint ventures

Indirect, general and administrative expenses

Selling, general and administrative expenses

Operating income

4 unchanged sentences

Income before income tax expense

Income tax (expense) benefit

Income tax expense

Net income including noncontrolling interests

7 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Net income including noncontrolling interests

9 unchanged sentences

(In thousands)

For the Nine Months Ended

September 30, 2020

September 30, 2019

For the Three Months Ended

March 31, 2021

March 31, 2020

Cash flows from operating activities:

3 unchanged sentences

Amortization of debt issue costs

Amortization of convertible notes discount

Gain on disposal of property and equipment

Provision for doubtful accounts

Loss (gain) on disposal of property and equipment

Deferred taxes

8 unchanged sentences

Contract assets

Prepaid expenses and current assets

Prepaid expenses and other assets

Accounts payable

2 unchanged sentences

Other long-term liabilities

Net cash provided by operating activities

Net cash used in operating activities

Cash flows from investing activities:

4 unchanged sentences

Return of investments in unconsolidated joint ventures

Proceeds from sales of investments in unconsolidated joint ventures

Net cash used in investing activities

2 unchanged sentences

Repayments of borrowings under credit agreement

Payments for debt costs and credit agreement

Proceeds from issuance of convertible notes

Payments for purchase of bond hedges

Proceeds from issuance of warrants

Transaction costs paid in connection with convertible notes issuance

Contributions by noncontrolling interests

Distributions to noncontrolling interests

Purchase of treasury stock

Taxes paid on vested stock

Proceeds from issuance of common stock

Dividend paid

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents, and restricted cash

Cash, cash equivalents and restricted cash:

3 unchanged sentences

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Three Months Ended September 30, 2020 and September 30, 2019

(In thousands)

Comprehensive

Noncontrolling

Income (Loss)

Balance at June 30, 2020

Comprehensive income

Foreign currency translation gain, net

Pension adjustments, net

Contributions

Distributions

Issuance of equity securities, net of retirements

Equity component value of convertible note issuance

Purchase of convertible note hedge

Sale of common stock warrants

Stock-based compensation

Balance at September 30, 2020

Balance at June 30, 2019

Comprehensive income

Foreign currency translation gain, net

Pension adjustments, net

Contributions

Distributions

Stock-based compensation

IPO proceeds, net

ESOP shares at redemption value

Balance at September 30, 2019

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

PARSONS CORPORATION AND SUBSI DIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Nine Months Ended September 30, 2020 and September 30, 2019

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended March 31, 2021 and March 31, 2020

(In thousands)

4 unchanged sentences

Comprehensive income

Foreign currency translation (loss), net

Foreign currency translation gain, net

Pension adjustments, net

2 unchanged sentences

Distributions

Issuance of equity securities, net of retirement

Equity component value of convertible note issuance

Purchase of convertible note hedge

Sale of common stock warrants

Issuance of equity securities, net of retirements

Stock-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

Balance at December 31, 2019

2 unchanged sentences

Pension adjustments, net

ASC 842 Transition Adjustment

Purchase of treasury stock

Adoption of ASU 2016-13

Contributions

Distributions

Dividend paid

Stock-based compensation

Conversion of S-Corp to C-Corp

IPO proceeds, net

ESOP shares at redemption value

Balance at September 30, 2019

Balance at March 31, 2020

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

6 unchanged sentences

By combining our talented team of professionals and advanced technology, we help solve complex technical challenges to enable a safer, smarter and more interconnected world.

Initial Public Offering

On May 8, 2019, the Company consummated its initial public offering (“IPO”) whereby the Company sold 18,518,500 shares of common stock for $ 27.00 per share.

The underwriters exercised their option on May 14, 2019 to purchase an additional 2,777,775 shares at the net price of $ 25.515 which was the IPO share price of $27.00 less the underwriting discount of $ 1.485 per share.

The net proceeds of the IPO and the underwriters’ option were $ 536.9 million, after deducting underwriting discounts and other fees, and were used to fund an IPO dividend of $ 52.1 million, repay the outstanding balance of $ 150.0 million under our Term Loan, and repay outstanding indebtedness under our Revolving Credit Facility.

Stock Dividend

On April 15, 2019, the board of directors of the Company declared a common stock dividend in a ratio of two shares of common stock for every one share of common stock presently held by the Company’s stockholder (the “Stock Dividend”).

The record date of this common Stock Dividend was May 7, 2019, the day immediately prior to the consummation of the Company’s IPO on May 8, 2019, and the payment date of the Stock Dividend was May 8, 2019 .

Purchasers of the Company’s common stock in the Company’s public offering were not entitled to receive any portion of the Stock Dividend.

Basis of Presentation and Principles of Consolidation

5 unchanged sentences

Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary beneficiary, are consolidated.

For joint ventures in which the Company does not have a controlling interest, but exerts a significant influence, the Company applies the equity method of accounting.

(see “Note 14 – Investments in and Advances to Joint Ventures" for further discussion).

For joint ventures in which the Company does not have a controlling interest, but exerts a significant influence, the Company applies the equity method of accounting (see “Note 14 – Investments in and Advances to Joint Ventures" for further discussion).

Intercompany accounts and transactions are eliminated in consolidation.

13 unchanged sentences

Under the ESPP, eligible employees who elect to participate are granted the right to purchase shares of the common stock of Parsons at a discount that is limited to 5 % of the per-share market value on the day shares are sold to employees.

Purchases of common stock under the ESPP are included in “proceeds from issuance of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.

Purchases of common stock under the ESPP are included in

“proceeds from issuance of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.

New Accounting Pronouncements

In the first quarter of 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments.” The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current practice with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 was issued as a means to reduce the complexity of accounting for income taxes for those entities that fall within the scope of the standard.

The guidance is to be applied using a prospective method, excluding amendments related to franchise taxes, which should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company does not expect this standard to have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).

In the first quarter of 2021, the Company early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”.

The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract.

2 unchanged sentences

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company expects to early adopt this standard using the modified retrospective method.

The Company is evaluating the impact of the adoption on its consolidated financial statements, and expects it will result in a reduction in non-cash interest expense and a reclassification of the equity portion of the Convertible Senior Notes to liabilities on the consolidated balance sheet.

On January 7, 2019, the Company acquired a 100 % ownership interest in OGSystems, a privately-owned company, for $ 292.4 million paid in cash.

OGSystems provides geospatial intelligence, big data analytics and threat mitigation for defense and intelligence customers.

The Company borrowed $ 110 million under the Credit Agreement and $ 150 million on a short-term loan, as described in “Note 10— Debt and Credit Facilities ,” to partially fund the acquisition.

In connection with this acquisition, the Company recognized $ 5.4 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2019, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

OGSystems enhances the Company’s artificial intelligence and data analytics expertise with new technologies and solutions.

Customers of both companies will benefit from existing, complementary technologies and increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development.

The Company adopted ASU 2020-06 in the first quarter of 2021 using the modified retrospective method which resulted in a reduction in non-cash interest expense and reclassification of the equity portion of the Convertible Senior Notes to “Long-term debt” on the consolidated balance sheet.

In the first quarter of 2021, the Company adopted ASU No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”)”.

ASU 2019-12 was issued as a means to reduce the complexity of accounting for income taxes.

The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements.

In the first quarter of 2020, the Company adopted ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The amendments in ASU 2016-13 replaced the incurred loss impairment methodology in current practice with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements.

Braxton Science & Technology Group

On November 19, 2020, the Company acquired a 100 % ownership interest in Braxton Science & Technology Group (“Braxton”), a privately-owned company, for $ 308.8 million in cash.

Braxton operates at the forefront of satellite operations, ground system automation, flight dynamics, and spacecraft and antenna simulation for the U.S.

Department of Defense and Intelligence Community.

The acquisition was entirely funded by cash on hand in August 2020, as described in “Note 12—Debt and Credit Facilities”.

In connection with this acquisition, the Company recognized $ 0.6 million of acquisition-related “Selling, general and administrative expense” in the consolidated statements of income for the three months ended March 31, 2021, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

Braxton allows Parsons to capitalize on the quickly evolving space missions of its national security space customers and address rapid market growth driven by proliferated low earth orbit constellations, small satellite expansion, and space cyber resiliency.

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

6 unchanged sentences

Intangible assets

Other noncurrent assets

Accounts payable

2 unchanged sentences

Short-term lease liabilities, operating leases

Income tax payable

Deferred tax liabilities

Long-term lease liabilities, operating leases

Other long-term liabilities

Deferred tax liabilities

Net assets acquired

1 unchanged sentence

Customer relationships

Non-compete agreements

Developed technologies

Amortization expense of $ 5.9 million related to these intangible assets was recorded for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 17.8 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The entire value of goodwill of $ 183.5 million was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination.

Non-compete agreements

Amortization expense of $ 4.1 million related to these intangible assets was recorded for the three months ended March 31, 2021.

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 of $ 196.3 million is deductible for tax purposes.

The amount of revenue generated by OGSystems and included within consolidated revenues is $ 46.2 million and $ 33.7 million for the three months September 30, 2020 and September 30, 2019, respectively, and $ 117.0 million and

$ 108.7 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The amount of revenue generated by Braxton and included within consolidated revenues is $ 31.0 million for the three months ended March 31, 2021.

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 the net assets acquired.

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the OGSystems acquisition had been consummated as of the beginning of fiscal year 2018 (December 30, 2017) (in thousands) is as follows:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Pro forma revenue

Pro forma net income including noncontrolling interests

QRC Technologies

On July 31, 2019 the Company acquired a 100 % ownership interest in QRC Technologies (“QRC”), a privately-owned company, for $ 214.1 million in cash.

QRC provides design and development of open-architecture radio-frequency products.

The Company borrowed $ 140.0 million under the Revolving Credit Facility to partially fund the transaction.

In connection with this acquisition, the Company recognized $ 4.9 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the fiscal year ended December 31, 2019, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

QRC is an agile, disruptive product company that specializes in radio frequency spectrum survey, record and playback;

signals intelligence;

and electronic warfare missions.

QRC complements our existing portfolio, increases our presence in the high-growth markets of spectrum awareness and surveillance, and adds critical intellectual property that complements and expands the Company’s available capabilities for the Special Operations and Intelligence Communities.

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

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Right of use assets, operating leases

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Short-term lease liabilities, operating leases

Long-term lease liabilities, operating leases

Net assets acquired

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

Customer relationships

Developed technologies

In-process research and development

Non-compete agreements

Amortization expense of $ 3.5 million and $ 1.9 million related to these intangible assets was recorded for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 10.6 million and $ 1.9 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The entire value of goodwill of $ 125.1 million 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 QRC and included within consolidated revenues is $ 12.6 million and $ 5.6 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 25.2 million and $ 5.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

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.

Supplemental Pro Forma Information

Supplemental information on an unaudited pro forma basis, assuming the QRC Technologies acquisition had been consummated as of the beginning of fiscal year 2018 (December 30, 2017) (in thousands) is as follows:

Supplemental information of unaudited pro forma operating results assuming the Braxton acquisition had been consummated as of the beginning of fiscal year 2019 (in thousands) is as follows:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Pro forma Revenue

Pro forma net income including noncontrolling interests

Pro forma Net Income

Contracts with Customers

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Time-and-Materials

See “Note 18 – Segments Information” for the Company’s revenues by business lines.

Contract Assets a nd Contract Liabilities

Contract assets and contract liabilities balances at September 30, 2020 and December 31, 2019 were as follows (in thousands):

September 30, 2020

Contract Assets and Contract Liabilities

Contract assets and contract liabilities balances at March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021

December 31, 2020

2 unchanged sentences

Net contract assets (liabilities) (1)

Total contract retentions included in net contract assets (liabilities) were $ 89.8 million as of September 30, 2020, of which $ 42.0 million are not expected to be paid in the next 12 months.

Total contract retentions included in net contract assets (liabilities) were $ 92.3 million as of March 31, 2021, of which $ 41.0 million are not expected to be paid in the next 12 months.

Total contract retentions included in net contract assets (liabilities) were $ 93.8 million as of December 31, 2020.

Contract assets at September 30, 2020 and December 31, 2019 include $ 96.2 million and $ 73.0 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three and nine months ended September 30, 2020 and September 30, 2019, there were no material losses recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

During the three months ended September 30, 2020 and September 30, 2019, the Company recognized revenue of $ 9.5 million and $ 2.1 million, respectively, and $ 132.2 million and $ 115.1 million during the nine months ended September 30, 2020 and September 30, 2019, respectively that was included in the corresponding contract liability balances at December 31, 2019 and December 31, 2018, respectively.

Contract assets at March 31, 2021 and December 31, 2020 include $ 117.8 million and $ 116.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three months ended March 31, 2021 and March 31, 2020, there were no material losses recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

During the three months ended March 31, 2021 and March 31, 2020, the Company recognized revenue of $ 69.1 million and $ 94.3 million, respectively that was included in the corresponding contract liability balances at December 31, 2020 and December 31, 2019, respectively.

Certain changes in contract assets and contract liabilities consisted of the following:

September 30, 2020

March 31, 2021

December 31, 2020

1 unchanged sentence

Acquired contract liabilities

Change in the estimate of variable consideration

There was no significant impairment of contract assets recognized during the three and nine months ended September 30, 2020 and September 30, 2019.

Revisions in estimates, such as changes in estimated claims or incentives, related to performance obligations partially satisfied in previous periods that individually had an impact of $ 5 million or more on revenue resulted in the following changes in revenue:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Revenue impact, net

There was no significant impairment of contract assets recognized during the three months ended March 31, 2021 and March 31, 2020.

There were no amounts due to revisions in estimates, such as changes in estimated claims or incentives, related to performance obligations partially satisfied in previous periods that individually had an impact of $ 5 million or more on revenue during the three months ended March 31, 2021 and March 31, 2020.

Accounts Receivable, net

Accounts receivable, net consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

December 31, 2019

Accounts receivable, net consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

Total accounts receivable, gross

3 unchanged sentences

Unbilled accounts receivable represents amounts where the Company has a present contractual right to bill but an invoice has not been issued to the customer at the period-end date.

In connection with the adoption of ASU 2016-13, we have modified the historical presentation of gross receivables and the allowance for doubtful accounts to reflect only expected credit losses in the allowance in conformity with the current period presentation.

The allowance for doubtful accounts was determined based on consideration of trends in actual and forecasted credit quality of clients, including delinquency and payment history, type of client, such as a government agency or commercial sector client, and general economic conditions and particular industry conditions that may affect a client’s ability to pay.

3 unchanged sentences

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of September 30, 2020 represent a measure of the total dollar value of work to be performed on contracts awarded and in-progress.

The Company had $ 5.0 billion in RUPO as of September 30, 2020.

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of March 31, 2021 represent a measure of the total dollar value of work to be performed on contracts awarded and in-progress.

The Company had $ 5.1 billion in RUPO as of March 31, 2021.

RUPO will increase with awards of new contracts and decrease as the Company performs work and recognizes revenue on existing contracts.

3 unchanged sentences

(a) original transaction price, (b) change orders for which written confirmations from our customers have been received, (c) pending change orders for which the Company expects to receive confirmations in the ordinary course of business, and (d) claim amounts that the Company has made against customers for which it has determined that it has a legal basis under existing contractual arrangements and a significant reversal of revenue is not probable, less revenue recognized to-date.

The Company expects to satisfy its RUPO as of September 30, 2020 over the following periods (in thousands):

The Company expects to satisfy its RUPO as of March 31, 2021 over the following periods (in thousands):

Period RUPO Will Be Satisfied

5 unchanged sentences

Our leases have remaining lease terms of one year to 9 years, some of which may include options to extend the leases for up to five years , and some of which may include options to terminate the leases up to the third year .

The components of lease costs for the three and nine months ended September 30, 2020 and September 30, 2019 are as follows (in thousands):

The components of lease costs for the three months ended March 31, 2021 and March 31, 2020 are as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Operating lease cost

4 unchanged sentences

Total lease cost

Supplemental cash flow information related to leases for the nine months ended September 30, 2020 and September 30, 2019 is as follows (in thousands):

Nine Months Ended

September 30, 2020

September 30, 2019

Supplemental cash flow information related to leases for the three months ended March 31, 2021 and March 31, 2020 is as follows (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Operating cash flows for operating leases

Operating cash flows for financing activities

Operating cash flows for finance leases

Financing cash flows from finance leases

1 unchanged sentence

Right-of-use assets obtained in exchange for new finance lease liabilities

Supplemental balance sheet and other information related to leases as of September 30, 2020 and December 31, 2019 are as follows (in thousands):

September 30, 2020

Supplemental balance sheet and other information related to leases as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

March 31, 2021

December 31, 2020

13 unchanged sentences

Finance leases

As of September 30, 2020, the Company has no operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with the Company’s operating and finance lease liabilities as of September 30, 2020 is as follows (in thousands):

As of March 31, 2021, the Company has no operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with the Company’s operating and finance lease liabilities as of March 31, 2021 is as follows (in thousands):

Operating Leases

4 unchanged sentences

Total present value of lease liabilities

The following table summarizes the changes in the carrying value of goodwill by reporting segment at September 30, 2020 and December 31, 2019 (in thousands):

The following table summarizes the changes in the carrying value of goodwill by reporting segment from December 31, 2020 to March 31, 2021 (in thousands):

December 31, 2020

Foreign Exchange

September 30, 2020

March 31, 2021

Federal Solutions

2 unchanged sentences

While many uncertainties exist, we currently anticipate no material change in our financial condition or results of operations.

Although the Company does not anticipate a material change to our financial condition or results of operations, the Company performed a qualitative triggering analysis and determined there was no triggering event indicating a potential impairment to the carrying value of its goodwill at September 30, 2020 and concluded there has no t been an impairment.

Although the Company does not anticipate a material change to our financial condition or results of operations, the Company performed a qualitative triggering analysis and determined there was no triggering event indicating a potential impairment to the carrying value of its goodwill at March 31, 2021 and concluded there has no t been an impairment.

Intangible Assets

The gross amount and accumulated amortization of intangible assets with finite useful lives included in “Intangible assets, net” on the consolidated balance sheets are as follows (in thousands except for years):

September 30, 2020

March 31, 2021

December 31, 2020

5 unchanged sentences

Total intangible assets

The aggregate amortization expense of intangible assets for the three months ended September 30, 2020 and September 30, 2019 was $ 20.9 million and $ 22.1 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019 was $ 65.7 million and $ 64.5 million, respectively.

The aggregate amortization expense of intangible assets for the three months ended March 31, 2021 and March 31, 2020 was $ 24.5 million and $ 22.7 million, respectively.

Estimated amortization expense for the remainder of the current fiscal year and in each of the next four years and beyond is as follows (in thousands):

September 30, 2020

2020 (remaining)

March 31, 2021

Property and Equipment, Net

Property and equipment consisted of the following at September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

Property and equipment consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

December 31, 2020

3 unchanged sentences

Construction equipment

Construction in progress

Accumulated depreciation

Property and equipment, net

Depreciation expense for the three months ended September 30, 2020 and September 30, 2019 was $ 9.5 million and $ 8.9 million, respectively, and $ 28.9 million and $ 28.2 million, respectively, for the nine months ended September 30, 2020 and September 30, 2019.

Depreciation expense for both the three months ended March 31, 2021 and March 31, 2020 was $ 9.6 million.

Debt and Credit Facilities

Debt consisted of the following (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

10 unchanged sentences

The applicable margin for Base Rate loans is a range of 0.125 % to 1.00 % and the applicable margin for LIBOR loans is a range of 1.125 % to 2.00 %, both based on the leverage ratio of the Company at the end of each fiscal quarter.

The rates at September 30, 2020 and December 31, 2019 were 1.44 % and 3.02 %, respectively.

Borrowings under this Credit Agreement are guaranteed by certain Company operating subsidiaries.

Letters of credit commitments outstanding under this agreement aggregated to $ 44.9 million and $ 43.7 million at September 30, 2020 and December 31, 2019, respectively, which reduced borrowing limits available to the Company.

Interest expense related to the Credit Agreement was $ 0.2 million and $ 0.9 million for the three and nine months ended September 30, 2020, respectively, and for the three and nine months ended September 30, 2019 was $ 1.1 million and $ 6.4 million, respectively.

There were no loan amounts outstanding under the Credit Agreement at September 30, 2020.

In January 2019, the Company borrowed $ 150.0 million under our Term Loan Agreement to partially finance the OGSystems acquisition.

On May 10, 2019, the Company used proceeds from its May 8, 2019 IPO to repay the $ 150.0 million outstanding balance under the Term Loan and this loan is now closed.

Interest expense related to the Term Loan was $ 0 and $ 2.3 million for the three and nine months ended September 30, 2019, respectively.

There were no amounts outstanding in fiscal 2020.

The rates on March 31, 2021 and December 31, 2020 were 1.86 % and 1.87 %, respectively.

Borrowings under this Credit Agreement are guaranteed by certain

Company operating subsidiaries.

Letters of credit commitments outstanding under this agreement aggregated to $ 45.3 million and $ 44.9 million at March 31 , 20 2 1 and December 3 1 , 20 20 , respectively, which reduced borrowing limits available to the Company.

Interest expense related to the C redit A greement was $ 0.1 million and $ 0.3 million for the three months ended March 31, 2021 and March 31, 2020, respectively .

There were no loan amounts outstanding under the Credit Agreement on March 31 , 202 1 .

Private Placement

13 unchanged sentences

These costs are presented as a direct deduction from the debt on the face of the consolidated balance sheets.

Interest expense related to the Senior Notes for both the three and nine months ended September 30, 2020 and September 30, 2019 was $ 3.1 million and $ 9.3 million , respectively.

The amortization of debt issuance costs and interest expense are recorded in “Interest expense” on the consolidated statements of income.

The Company made interest payments of $ 6.2 million for both the three months ended September 30, 2020 and September 30, 2019.

The Company made interest payments related to the Senior Notes for both the nine months ended September 30, 2020 and September 30, 2019 of $ 12.4 million.

Interest payable of $ 2.4 million and $ 2.6 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets at September 30, 2020 and December 31, 2019, respectively, related to the Senior Notes.

Interest expense related to the Senior Notes for both the three months ended March 31, 2021 and March 31, 2020 was $ 3.2 million .

The amortization of debt issuance costs and interest expense is recorded in “Interest expense” on the consolidated statements of income.

The Company made interest payments of $ 6.2 million for both the three months ended March 31, 2021 and March 31, 2020, respectively.

Interest payable of $ 2.4 million and $ 2.6 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets on March 31, 2021 and December 31, 2020, respectively, related to the Senior Notes.

The Credit Agreement and private placement includes various covenants, including restrictions on indebtedness, liens, acquisitions, investments or dispositions, payment of dividends and maintenance of certain financial ratios and conditions.

The Company was in compliance with these covenants at September 30, 2020 and December 31, 2019.

The Company was in compliance with these covenants at March 31, 2021 and December 31, 2020.

The Company also has in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees.

Letters of credit commitments outstanding under these bank lines aggregated $ 198.0 million and $ 197.3 million at September 30, 2020 and December 31, 2019, respectively.

Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company estimated the fair value (Level 2) of its senior notes at September 30, 2020 approximates $ 277.6 million.

Letters of credit commitments outstanding under these bank lines aggregated $ 203.9 million and $ 193.1 million at March 31, 2021 and December 31, 2020, respectively.

Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company estimated the fair value (Level 2) of its Senior Notes at March 31, 2021 approximates $ 270.5 million.

See “Note 16 – Fair Value of Financial Instruments” for the definition of Level 2 of the fair value hierarchy.

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Each $ 1,000 of principal of the Notes will initially be convertible into 22.2913 shares of our common stock, which is equivalent to an initial conversion price of $ 44.86 per share, subject to adjustment upon the occurrence of specified events.

On or after March 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Senior Notes, holders may convert all or a portion of their Convertible Senior Notes, regardless of the conditions below.

On or after March 15, 2025 until the close of business on the second scheduled trading day immediately

preceding the maturity date of the Convertible Senior Notes, holders may convert all or a portion of their Convertible Senior Notes, regardless of the conditions below .

Prior to the close of business on the business day immediately preceding March 15, 2025, the Notes will be convertible at the option of the holders thereof only under the following circumstances:

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Upon conversion, the Company may settle the Convertible Senior Notes for cash, shares of the Company’s common stock, or a combination thereof, at the Company’s option.

If the Company satisfies its conversion obligation solely in cash or through payment and delivery of a combination of cash and shares of the Company’s common stock, the

amount of cash and shares of common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 50 - trading day observation period.

Under GAAP, convertible debt instruments that may be settled in cash on conversion are required to be separated into liability and equity components in a manner that reflects the issuer’s non-convertible debt borrowing rate.

If the Company satisfies its conversion obligation solely in cash or through payment and delivery of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 50-trading day observation period.

Under existing GAAP at the time of issuance during 2020, convertible debt instruments that may be settled in cash on conversion are required to be separated into liability and equity components in a manner that reflects the issuer’s non-convertible debt borrowing rate.

The carrying amount of the liability component is based on the fair value of a similar instrument that does not contain an equity conversion option.

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Accordingly, at issuance the Company allocated $ 336.1 million to the debt liability and $ 53.6 million to additional paid-in capital.

The difference between the principal amount of the Convertible Senior Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company amortizes to interest expense over the term of the Convertible Senior Notes using an effective interest rate of 3.25 %.

During the three and nine months ended September 20, 2020, the Company recognized interest expense of $ 1.5 million related to the amortization of debt discount and issuance costs.

As of September 30, 2020, the net carrying value of the Notes was $ 337.6 million.

A summary as of September 30, 2020 of the gross carrying amount, unamortized debt discount including debt issuance costs, and net carrying value of the liability component of the Convertible Senior Notes is as follows:

September 30, 2020

Debt discount

Carrying amount

Equity component

The difference between the principal amount of the Convertible Senior Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company amortized to interest expense over the term of the Convertible Senior Notes using an effective interest rate of 3.25 %.

During the year ended December 31, 2020, the Company recognized interest expense of $ 4.4 million.

As of December 31, 2020, the net carrying value of the Notes was $ 340.6 million.

In the first quarter of 2021, the Company early adopted ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Equity’s Own Equity (Subtopic 815-40).

The Company used the modified retrospective method which resulted in a reduction in non-cash interest expense and reclassification of equity component of the convertible senior notes of $ 55.0 million and equity component of the debt issuance costs of $ 1.4 million to liabilities on the consolidated balance sheet.

The Company also adjusted the carrying

amount of the convertible senior notes to what it would have been if the Company had applied the amendments from the inception of the Notes and recorded the offset of the carrying amount adjustment of $ 3.7 million in retained earnings on January 1, 2021.

During the year ended March 31, 2021, the Company recognized interest expense of $ 0.6 million.

As of March 31, 2021, the carrying value of the Notes was $ 400.0 million.

Convertible Note Hedge and Warrant Transactions

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The net cost of $ 41.2 million for the purchase of the bond hedges and sale of the warrants was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.

At issuance, the Company recorded a deferred tax liability of $ 16.2 million related to the Convertible Senior Notes debt discount and a deferred tax asset of $ 16.5 million related to the convertible note hedge transactions.

The deferred tax liability and deferred tax asset are included net in “Deferred tax assets” on the consolidated balance sheets

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits Net Operating Loss (“NOL“) carryovers to offset 100 % of taxable income for tax years beginning before 2021.

In addition, the CARES Act allows NOLs

incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding tax years to generate a refund of previously paid income taxes.

The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

The modifications to Section 163(j) increase the allowable business interest deduction from 30 % of adjusted taxable income to 50 % of adjusted taxable income.

The CARES Act also accelerates the refund of alternative minimum tax (“ AMT ”) credits that were previously accumulated.

The Company does not expect that the modifications on the limitation of business interest or AMT credits would have any impact to the Company.

Under the NOL carryback provision, the Company carried back some of its NOLs claiming a tax refund of $ 3.9 million relating to certain amounts associated with the acquisition of OGSystems which may be subject to certain shareholders’ claims.

On July 9, 2020, the U.S.

Treasury Department issued final tax regulations related to the foreign-derived intangible income and global intangible low-taxed income (“GILTI”) provisions.

Also, on July 20, 2020 the U.S.

Treasury Department released final tax regulations permitting a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign tax.

Additionally, on August 21, 2020, the U.S.

Treasury Department finalized anti-abuse regulations limiting deductions of foreign-source dividends.

Separately, on September 2, 2020, the U.S.

Treasury Department finalized regulations on the base erosion anti-abuse tax (“BEAT”) under IRC Section 59A.

Treasury Department also finalized a second set of regulations on the allowance for the additional first-year depreciation deduction under IRC Section 168(k) on September 16, 2020, as amended by the Tax Cuts and Jobs Act (“TCJA”), for qualified property acquired and placed in service after September 27, 2017.

Lastly, on September 29, 2020, the U.S.

Treasury Department issued final tax regulations addressing various aspects of the foreign tax credit regime.

The Company is currently assessing the impact of the new regulations to its consolidated financial statements but does not expect a material change of its income tax expense due to the new regulations.

Prior to the Company’s IPO, the Company had elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code for federal tax purposes.

As a result, income had not been subject to U.S.

federal income taxes or state income taxes in those states where the “S” Corporation status is recognized.

Therefore, previously, no provision or liability for federal or state income tax had been provided in the consolidated financial statements except for those states where the “S” Corporation status was not recognized, or where states imposed a tax on “S” Corporations.

The provision for income tax in the historical periods prior to the IPO consists of these state taxes and taxes from certain foreign jurisdictions where the Company is subject to tax.

In connection with the Company’s IPO on May 8, 2019, the “S” Corporation status was terminated, and the Company is now treated as a “C” Corporation under the Code.

The termination of the “S” Corporation election has had a material impact on the Company’s results of operations, financial condition, and cash flows as reflected in the September 30, 2020 consolidated financial statements.

The effective tax rate has increased, and net income has decreased as compared to the Company’s “S” Corporation tax years, since the Company is now subject to both U.S.

federal and state corporate income taxes on its earnings.

The Company’s effective tax rate was 25.61 % and ( 33.71 )% for the three months ended September 30, 2020 and 2019, respectively.

The change in the effective tax rate was due primarily to nonrecurring tax items included in the third quarter 2019 income taxes associated with an additional $ 29 million tax benefit from the remeasurement of deferred taxes associated with the Company’s change in “S” Corporation to “C” Corporation status.

The Company’s effective tax rate for the nine months ended September 30, 2020 and 2019 was 26.39 % and ( 140.42 )%.

The change in the effective tax rate was due primarily to the nonrecurring tax items included in 2019 for the remeasurement of deferred taxes associated with the change in tax status.

At issuance, the Company recorded a deferred tax liability of $ 16.2 million related to the Convertible Senior Notes debt discount and the capitalized debt issuance costs.

The Company also recorded a deferred tax asset of $ 16.5 million related to the convertible note hedge transactions and the tax basis of the capitalized debt issuance costs through additional paid-in capital.

The deferred tax liability and deferred tax asset were included net in “Deferred tax assets” on the consolidated balance sheets.

Upon adoption of ASU2020-06, the Company reversed the deferred tax liability of $ 13.9 million that the Company had recorded at issuance related to the Convertible Senior Note debt discount and recorded an additional deferred tax liability of $ 0.4 million related to the capitalized debt issuance costs.

In addition, the Company recorded a $ 0.9 million adjustment to the deferred tax asset through retained earnings related to the tax effect of book accretion recorded in 2020 and reversed upon adoption.

On January 5, 2021, the Treasury Department and Internal Revenue Service issued final regulations which provide guidance on applying the limitations on the deductibility of business interest expense under IRC Section 163(j).

On January 6, 2021, the government published final regulations under IRC Section 451.

The final regulations include guidance related to (1) timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting under IRC Section 451(b), and (2) advance payments for goods, services, and certain other items under IRC Section 451(c).

The Company is currently assessing the impact of the new regulations but does not expect any material impact to its consolidated financial statements.

The Company’s effective tax rate was 27.7 % and 26.1 % for the three months ended March 31, 2021 and 2020, respectively.

The change in the effective tax rate was due primarily to an increase of foreign tax losses which will not provide any tax benefit to the Company and a settlement of a state tax audit.

The difference between the effective tax rate and the statutory U.S.

Federal income tax rate of 21.0 % for the quarter ended September 30, 2020 primarily relates to state income taxes and a recorded valuation allowance on foreign tax credits, partially offset by benefits related to income attributable to noncontrolling interest and federal research tax credits.

As of September 30, 2020, the Company’s deferred tax assets included a valuation allowance of $ 17.5 million primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital losses that the Company has determined are not more-likely-than-not to be realized.

Federal income tax rate of 21.0 % for the quarter ended March 31, 2021 primarily relates to state income taxes and a recorded valuation allowance on foreign tax credits, partially offset by benefits related to income attributable to noncontrolling interest and federal research tax credits.

As of March 31, 2021, the Company’s deferred tax assets included a valuation allowance of $ 30.5 million primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital losses that the Company has determined are not more-likely-than-not to be realized.

The factors used to assess the likelihood of realization include:

the past performance of the entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets.

the past performance of the entities, forecasts of future taxable income, future reversals of existing taxable temporary

differences, and available tax planning strategies that could be implemented to realize the deferred tax assets.

The ability or failure to achieve the forecasted taxable income in these entities could affect the ultimate realization of deferred tax assets.

As of September 30, 2020 and December 31, 2019, the liability for income taxes associated with uncertain tax positions was $ 14.7 million and $ 15.5 million, respectively.

As of March 31, 2021 and December 31, 2020, the liability for income taxes associated with uncertain tax positions was $ 17.4 million and $ 16.4 million, respectively.

It is reasonably possible that the Company may realize a decrease in our uncertain tax positions of approximately $ 0.2 million during the next 12 months as a result of concluding various tax audits and closing tax years.

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On or about October 4, 2019, LBH Engineers, LLC (“LBH”) filed a lawsuit against Parsons, PTG, and various other parties in the US District Court of for the Northern District of Georgia, in connection with an alleged infringement of LBH’s patent.

LBH seeks damages and costs incurred by LBH, a post - judgment royalty, treble damages if the infringement is found to be willful, among other damages, which the Company and the other defendants are currently disputing.

LBH seeks damages and costs incurred by LBH, a post - judgment royalty, and treble damages if the infringement is found to be willful, among other damages, which the Company and the other defendants are currently disputing.

At this time, the Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any.

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Shares allocated to a participant’s account are fully vested after three years of credited service, or in the event(s) of reaching age 65, death or disability while an active employee of the Company.

As of September 30, 2020 and December 31, 2019, total shares of the Company’s common stock were 100,727,574 and 100,669,694 , respectively, of which 76,090,531 and 78,896,806 , respectively, were held by the ESOP.

As of March 31, 2021 and December 31, 2020, total shares of the Company’s common stock outstanding were 102,406,446 and 102,360,662 , respectively, of which 75,560,749 and 76,641,312 , respectively, were held by the ESOP.

A participant’s interest in their ESOP account is redeemable upon certain events, including retirement, death, termination due to permanent disability, a severe financial hardship following termination of employment, certain conflicts of interest following termination of employment, or the exercise of diversification rights.

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A participant will be able to sell such shares of common stock in the market, subject to any requirements of the federal securities laws.

Total ESOP contribution expense was $ 12.5 million and $ 12.3 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 42.0 million and $ 36.8 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

The expense is recorded in “Direct costs of contracts” and “Indirect, general and administrative expense” in the consolidated statements of income.

Total ESOP contribution expense was $ 13.2 million and $ 14.9 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

The expense is recorded in “Direct costs of contracts” and “Selling, general and administrative expense” in the consolidated statements of income.

The fiscal 2021 ESOP contribution has not yet been made.

The amount is currently included in accrued liabilities.

On April 3, 2019 , the board of directors of the Company declared a cash dividend to the Company’s sole existing shareholder at that time, the ESOP, in the amount of $ 2.00 per share, or $ 52.1 million in the aggregate (the “IPO Dividend”).

The IPO Dividend was paid on May 10, 2019 .

On April 15, 2019 , the board of directors of the Company declared a common stock dividend in a ratio of two shares of common stock for every one share of common stock then held by the Company’s shareholder (the “Stock Dividend”).

The record date of the Stock Dividend was May 7, 2019 , the day immediately prior to the consummation of the Company’s IPO on May 8, 2019, and the payment date of the Stock Dividend was May 8, 2019 .

Purchasers of the Company’s common stock in the Company’s public offering were not entitled to receive any portion of the Stock Dividend.

Investments in and Advances to Joint Ventures

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The Company analyzed all of its joint ventures and classified them into two groups:

(1) joint ventures that must be consolidated because they are either not VIEs and the Company holds the majority voting interest, or because they are VIEs and the Company is the primary beneficiary;

(1) joint ventures that must be consolidated because they are either not VIEs and the Company holds the majority voting interest, or because they are

VIEs and the Company is the primary beneficiary;

and (2) joint ventures that do not need to be consolidated because they are either not VIEs and the Company holds a minority voting interest, or because they are VIEs and the Company is not the primary beneficiary.

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however, such funding is infrequent and is not anticipated to be material.

Letters of credit outstanding described in “Note 10 – Debt and Credit Facilities” that relate to project ventures are $ 59.9 million and $ 55.0 million at September 30, 2020 and December 31, 2019, respectively.

Letters of credit outstanding described in “Note 10 – Debt and Credit Facilities” that relate to project ventures are $ 67.4 million and $ 59.3 million at March 31, 2021 and December 31, 2020, respectively.

In the table below, aggregated financial information relating to the Company’s joint ventures is provided because their nature, risk and reward characteristics are similar.

2 unchanged sentences

The following represents financial information for consolidated joint ventures included in the consolidated financial statements (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

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Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Net income attributable to noncontrolling interests

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Under this method, the Company recognizes its proportionate share of the net earnings of these joint ventures as “Equity in earnings (loss) of unconsolidated joint ventures” in the consolidated statements of income.

The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

The Company’s maximum exposure to loss as a result of its investments in unconsolidated joint ventures is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

The following represents the financial information of the Company’s unconsolidated joint ventures as presented in their unaudited financial statements (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

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Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Equity in earnings of unconsolidated joint ventures

The Company received net distributions from its unconsolidated joint ventures for the three months ended September 30, 2020 and September 30, 2019 of $ 11.2 million and $ 13.7 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019 of $ 23.2 million and $ 28.0 million, respectively.

The Company received net distributions from and sale proceeds for its unconsolidated joint ventures for the three months ended March 31, 2021 and March 31, 2020 of $ 5.4 million and $ 6.5 million, respectively.

Related Party Transactions

The Company often provides services to unconsolidated joint ventures and revenues include amounts related to recovering overhead costs for these services.

Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended September 30, 2020 and September 30, 2019 were $ 42.0 million and $ 28.8 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019 were $ 124.7 million and $ 113.1 million, respectively.

For the three months ended September 30, 2020 and September 30, 2019, the Company incurred $ 32.3 million and $ 20.5 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019, $ 98.3 million and $ 86.3 million, respectively, of reimbursable costs.

Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended March 31, 2021 and March 31, 2020 were $ 42.0 million and $ 40.4 million, respectively.

For the three months ended March 31, 2021 and March 31, 2020, the Company incurred $ 31.3 million and $ 31.5 million, respectively, of reimbursable costs.

Amounts included in the consolidated balance sheets related to services the Company provided to unconsolidated joint ventures are as follows (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

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The authoritative guidance on fair value measurement defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price”).

At September 30, 2020 and December 31, 2019, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and other liabilities.

At March 31, 2021 and December 31, 2020, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and other liabilities.

The fair values of these financial instruments approximate their carrying values due to their short-term maturities.

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Earnings Per Share

The following tables reconcile the denominator and numerator used to compute basic earnings per share (“EPS”) to the denominator and numerator used to compute diluted EPS for the three and nine months ended September 30, 2020 and September 30, 2019.

Basic EPS is computed using the weighted average number of shares outstanding during the period and income available to shareholders.

Diluted EPS is computed similar to basic EPS, except the income available to shareholders is adjusted to add back interest expense, after tax related to the Convertible Senior Note, and the weighted average number of shares outstanding is adjusted to reflect the dilutive effects of equity-based awards and shares underlying the Convertible Senior Note.

Convertible Senior Note dilution impact is calculated using the if-converted method which will be required upon adoption of ASU 2020-06.

As a result, the Company elected to adopt the if-converted method under the present accounting.

In connection with the offerings of our note, the Company entered into a convertible note hedge and warrants (see Note 10 Debt and Credit Facilities);

Diluted EPS is computed similar to basic EPS, except the income available to shareholders is adjusted to add back interest expense, after tax, related to the Convertible Senior Note, and the weighted average number of shares outstanding is adjusted to reflect the dilutive effects of stock-based awards and shares underlying the Convertible Senior Note.

Convertible Senior Note dilution impact is calculated using the if-converted method which was required upon adoption of ASU 2020-06.

As a result, the Company elected to adopt the if-converted method when the Convertible Senior Notes were issued during the third quarter of 2020.

In connection with the offerings of the Notes, the Company entered into a convertible note hedge and warrants (see Note 10 Debt and Credit Facilities);

however, the convertible note hedge is not considered when calculating dilutive shares given its impact is anti-dilutive.

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The warrants have a strike price above our average share price during the period and are out of the money and not included in the tables below.

Dilutive potential common shares include shares the Company could be obligated to issue from its Convertible Senior Notes and warrants (see Note 10 for further discussion) and equity-based awards.

Dilutive potential common shares include shares the Company could be obligated to issue from its Convertible Senior Notes and warrants (see Note 10 for further discussion) and stock-based awards.

Shares to be provided to the Company from its bond hedge purchased concurrently with the issuance of Convertible Senior Notes are anti-dilutive and are not included in its diluted shares.

Anti-dilutive equity-based awards excluded from the calculation of earnings per share for the three and nine months ended September 30, 2020 were 205 and 3,318 , respectively.

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the three months ended March 31, 2021 and March 31, 2020 were 145 and 27,596 , respectively.

The weighted average number of shares used to compute basic and diluted EPS were:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Basic weighted average number of shares outstanding

Equity-based awards

Stock-based awards

Convertible senior notes

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Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Net income attributable to Parsons Corporation

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Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Federal Solutions revenue

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The Company defines Adjusted EBITDA as net income (loss) attributable to Parsons Corporation, adjusted to include net income (loss) attributable to noncontrolling interests and to exclude interest expense (net of interest income), provision for income taxes, depreciation and amortization and certain other items that are not considered in the evaluation of ongoing operating performance.

These other items include net

income (loss) attributable to noncontrolling interests, asset impairment charges, income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our prior restructuring.

These other items include net income (loss) attributable to noncontrolling interests, asset impairment charges, income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our prior restructuring.

The following table reconciles business segment Adjusted EBITDA attributable to Parsons Corporation to Net Income attributable to Parsons Corporation for the periods presented (in thousands):

Three Months Ended

Nine Months Ended

Adjusted EBITDA attributable to Parsons Corporation

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Federal Solutions

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Interest expense, net

Income tax (expense) benefit

Income tax expense

Equity-based compensation income (expense)

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Net income attributable to Parsons Corporation

Reflects costs incurred in connection with acquisitions, the IPO, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.

Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.

Reflects costs associated with corporate restructuring initiatives.

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Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

North America

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The geographic location of revenue is determined by the location of the customer.

September 30, 2020

March 31, 2021

December 31, 2020

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Total Property and Equipment, Net

North America includes revenue in the United States for the three months ended September 30, 2020 and September 30, 2019 of $ 774.0 million and $ 774.2 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019 of $ 2.2 billion and $ 2.2 billion, respectively.

North America property and equipment, net

includes $ 109.6 million and $ 109.9 million of property and equipment, net in the United States at September 30, 2020 and December 31, 2019, respectively.

The following table presents revenues by business lines (in thousands):

North America includes revenue in the United States for the three months ended March 31, 2021 and March 31, 2020 of $ 652.2 million and $ 735.8 million, respectively.

North America property and equipment, net includes $ 104.8 million and $ 109.6 million of property and equipment, net in the United States at March 31, 2021 and December 31, 2020, respectively.

The following table presents revenues by business units (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Space & Geospatial Solutions

March 31, 2021

March 31, 2020

Cyber & Intelligence

Engineered Systems

Space & Geospatial Solutions

Missile Defense & C5ISR

Engineered Systems

Federal Solutions revenues

Mobility Solutions

Connected Communities

Mobility Solutions

Critical Infrastructure revenues

Total Revenue

Effective January 1, 2020, the Company made changes to its business lines as described below.

The prior year information in the table above has been reclassified to conform to the business line changes.

Federal Solutions Business Line Changes

As a result of the acquisitions of Polaris Alpha, OGSystems and QRC, we realigned the five business lines within our Federal Solutions segment into four business lines.

We consolidated all space and geospatial programs from the former Geospatial Solutions, Defense and Cyber & Intelligence markets into a new Space & Geospatial Solutions business line to increase focus on the critical, evolving space market.

This new business line better aligns capabilities and customers to drive growth and performance execution through improved agile, end-to-end solutions and dedicated customer focus.

Further, we re-named our Defense business line to Missile Defense & C5ISR.

We moved our Missions Solutions business line into our Missile Defense & C5ISR, Engineered Systems and Cyber & Intelligence business lines, for better customer and capability alignment.

These changes were the next logical step in our acquisition integration process, to optimize performance delivery and growth.

Critical Infrastructure Business Line Changes

We re-aligned our Critical Infrastructure segment from three markets to two markets.

Industrial is now a part of Mobility Solutions and we moved all Middle East business into Mobility Solutions as well.

We believe this will drive improved synergies among like-markets and increased collaboration in areas such as program and engineering management, civil and structural and water/wastewater treatment.

We also moved Aviation to Connected Communities and consolidated the civil portion of rail and transit with the systems portion of rail and transit into a consolidated sub-market within Connected Communities to focus on growth in these critical market segments.

In each, we are pursuing systems, software and hardware product advanced technology opportunities.

Subsequent Events

On October 29, 2020, the Company announced that it has entered into a definitive agreement to acquire Braxton Science & Technology Group, LLC (BSTG).

BSTG operates at the forefront of satellite operations, ground system automation, flighty dynamics, and spacecraft and antenna simulation for the U.S.

Department of Defense and Intelligence Community.

The purchase price is estimated to be $ 300 million and the Company anticipates using all cash to fund the transaction.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements