What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 228 added, 140 removed, 579 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share information)

March 31, 2021

June 30, 2021

December 31, 2020

47 unchanged sentences

For the Three Months Ended

March 31, 2021

March 31, 2020

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Direct cost of contracts

17 unchanged sentences

For the Three Months Ended

March 31, 2021

March 31, 2020

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net income including noncontrolling interests

4 unchanged sentences

Comprehensive income attributable to noncontrolling interests, net of tax

Comprehensive income attributable to Parsons Corporation,

Comprehensive income attributable to Parsons Corporation, net of tax

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

2 unchanged sentences

(In thousands)

For the Three Months Ended

March 31, 2021

March 31, 2020

For the Six Months Ended

June 30, 2021

June 30, 2020

Cash flows from operating activities:

Net income including noncontrolling interests

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

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Depreciation and amortization

1 unchanged sentence

Loss (gain) on disposal of property and equipment

Provision for doubtful accounts

Deferred taxes

13 unchanged sentences

Other long-term liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

9 unchanged sentences

Repayments of borrowings under credit agreement

Payments for debt costs and credit agreement

Contributions by noncontrolling interests

1 unchanged sentence

Taxes paid on vested stock

Net cash (used in) provided by financing activities

Proceeds from issuance of common stock

Net cash used in financing activities

Effect of exchange rate changes

6 unchanged sentences

Consolidated Statements of Shareholders’ Equity

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

For the Three Months Ended June 30, 2021 and June 30, 2020

(In thousands)

2 unchanged sentences

Income (Loss)

Balance at December 31, 2020

Balance at March 31, 2021

Comprehensive income

1 unchanged sentence

Pension adjustments, net

Adoption of ASU 2020-06

Contributions

2 unchanged sentences

Stock-based compensation

Balance at June 30, 2021

Balance at March 31, 2020

Comprehensive income

Foreign currency translation gain, net

Pension adjustments, net

Contributions

Distributions

Issuance of equity securities, net of retirements

Stock-based compensation

Balance at June 30, 2020

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

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

For the Six Months Ended June 30, 2021 and June 30, 2020

(In thousands)

Comprehensive

Noncontrolling

Income (Loss)

Balance at December 31, 2020

Comprehensive income

Foreign currency translation (loss), net

Pension adjustments, net

Adoption of ASU 2020-06

Contributions

Distributions

Issuance of equity securities, net of retirement

Stock-based compensation

Balance at June 30, 2021

Balance at December 31, 2019

Comprehensive income

Foreign currency translation gain, net

3 unchanged sentences

Distributions

Issuance of equity securities, net of retirement

Stock-based compensation

Balance at March 31, 2020

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

Balance at June 30, 2020

Parsons Corporation and Subsidiaries

50 unchanged sentences

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.

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 six months ended June 30, 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.

18 unchanged sentences

Non-compete agreements

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

Amortization expense of $ 4.0 million and $ 8.1 million related to these intangible assets was recorded for the three and six months ended June 30, 2021, respectively.

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 Braxton and included within consolidated revenues is $ 31.0 million for the three months ended March 31, 2021.

The amount of revenue generated by Braxton and included within consolidated revenues is $ 29.3 million and $ 60.3 million for the three and six months ended June 30, 2021, 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.

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

Supplemental Pro Forma Information (Unaudited)

1 unchanged sentence

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Pro forma Revenue

Pro forma Net Income

Pro forma Net Income including noncontrolling interests

Contracts with Customers

4 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Time-and-Materials

1 unchanged sentence

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

Contract assets and contract liabilities balances at June 30, 2021 and December 31, 2020 were as follows (in thousands):

June 30, 2021

December 31, 2020

2 unchanged sentences

Net contract assets (liabilities) (1)

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 $ 94.7 million as of June 30, 2021, of which $ 50.8 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 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.

Contract assets at June 30, 2021 and December 31, 2020 include $ 103.4 million and $ 116.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three and six months ended June 30, 2021 and June 30, 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 June 30, 2021 and June 30, 2020, the Company recognized revenue of $ 23.5 million and $ 28.4 million, respectively, and $ 92.6 million and $ 122.7 million during the six months ended June 30, 2021 and June 30, 2020, 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:

March 31, 2021

June 30, 2021

December 31, 2020

1 unchanged sentence

Acquired contract liabilities

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.

There was no significant impairment of contract assets recognized during the three and six months ended June 30, 2021 and June 30, 2020.

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

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Revenue impact, net

Accounts Receivable, net

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

Accounts receivable, net consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

Total accounts receivable, gross

4 unchanged sentences

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.

COVID-19 Impacts:

We have not seen and do not expect there to be a risk of non-payment from either our government agency or commercial customers.

We have experienced payment delays due to administrative limitations from both types of customers.

We have not seen and do not expect there to be a risk of non-payment from either our government agency or commercial customers related to COVID-19 impacts;

however, we have experienced payment delays due to administrative limitations from both types of customers.

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

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.

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of June 30, 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 June 30, 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 March 31, 2021 over the following periods (in thousands):

The Company expects to satisfy its RUPO as of June 30, 2021 over the following periods (in thousands):

Period RUPO Will Be Satisfied

4 unchanged sentences

The Company has operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment.

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 months ended March 31, 2021 and March 31, 2020 are as follows (in thousands):

The components of lease costs for the three and six months ended June 30, 2021 and June 30, 2020 are as follows (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Operating lease cost

4 unchanged sentences

Total lease cost

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

Supplemental cash flow information related to leases for the six months ended June 30, 2021 and June 30, 2020 is as follows (in thousands):

Six Months Ended

June 30, 2021

June 30, 2020

Operating cash flows for operating leases

3 unchanged sentences

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

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

Supplemental balance sheet and other information related to leases as of June 30, 2021 and December 31, 2020 are as follows (in thousands):

June 30, 2021

December 31, 2020

13 unchanged sentences

Finance leases

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):

As of June 30, 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 June 30, 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 from December 31, 2020 to March 31, 2021 (in thousands):

The following table summarizes the changes in the carrying value of goodwill by reporting segment from December 31, 2020 to June 30, 2021 (in thousands):

December 31, 2020

Foreign Exchange

March 31, 2021

June 30, 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 March 31, 2021 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 June 30, 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):

March 31, 2021

June 30, 2021

December 31, 2020

5 unchanged sentences

Total intangible assets

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.

The aggregate amortization expense of intangible assets for the three months ended June 30, 2021 and June 30, 2020 was $ 24.5 million and $ 22.1 million, respectively, and $ 49.0 million and $ 44.8 million for the six months ended June 30, 2021 and June 30, 2020, 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):

March 31, 2021

June 30, 2021

Property and Equipment, Net

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

March 31, 2021

Property and equipment consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

December 31, 2020

6 unchanged sentences

Property and equipment, net

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

Depreciation expense for the three months ended June 30, 2021 and June 30, 2020 was $ 9.5 million and $ 9.8 million, respectively, and $ 19.2 million and $ 19.4 million, respectively, for the six months ended June 30, 2021 and June 30, 2020.

Debt and Credit Facilities

Debt consisted of the following (in thousands):

March 31, 2021

June 30, 2021

December 31, 2020

5 unchanged sentences

Revolving Credit Facility

In November 2017 , the Company entered into an amended and restated Credit Agreement.

The Company incurred $ 2.0 million of costs in connection with this amendment.

Under the agreement, the Company’s revolving credit facility was increased from $ 500 million to $ 550 million and the term of the agreement was extended through November 2022 .

The borrowings under the Credit Agreement bear interest, at the Company’s option, at either the Base Rate (as defined in the Credit Agreement), plus an applicable margin, or LIBOR plus an applicable margin.

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 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 .

In June 2021 , the Company entered into a $ 650 million unsecured revolving credit facility (the “Credit Agreement”).

The Company incurred $ 2.0 million of costs in connection with this Credit Agreement.

The 2021 Credit Agreement replaced an existing Fifth Amended and Restated Credit Agreement dated as of November 15, 2017.

Under the new agreement, the Company’s revolving credit facility was increased from $ 550 million to $ 650 million.

The credit facility has a five-year maturity, which may be extended up to two times for periods determined by the Company and the applicable extending lenders, and permits the Company to borrow in U.S.

dollars, certain specified foreign currencies, and each

other currency that may be approved in accordance with the 2021 Facility.

The borrowings under the Credit Agreement bear interest at either a eurocurrency rate plus a margin between 1.0 % and 1.625 % or a base rate (as defined in the Credit Agreement) plus a margin of between 0 % and 0.625 %.

The rates on June 30 , 20 2 1 and December 31, 2020 were 1.34 % 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 $ 45.0 million and $ 44.9 million at June 3 0 , 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 $ 0.3 million and $ 0 .3 million for the three months ended June 30, 2021 and June 30, 2020, respectively, and was $ 0.5 million and $ 0.7 million for six months ended June 30, 202 1 and June 30, 2020 , respectively .

There were no loan amounts outstanding under the Credit Agreement on June 3 0 , 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 months ended March 31, 2021 and March 31, 2020 was $ 3.2 million .

Interest expense related to the Senior Notes for both the three and six months ended June 30, 2021 and June 30, 2020 was $ 3.1 million and $ 6.2 million , respectively.

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 Company made interest payments of $ 6.2 million for both the three and six months ended June 30, 2021 and June 30, 2020, respectively.

Interest payable of $ 5.5 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets on both June 30, 2021 and December 31, 2020, respectively, related to the Senior Notes.

The Company paid the $ 50 million Series A tranche of the Senior Note as scheduled in July 2021.

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 March 31, 2021 and December 31, 2020.

The Company was in compliance with these covenants at June 30, 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 $ 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.

Letters of credit commitments outstanding under these bank lines aggregated $ 219.2 million and $ 193.1 million at June 30, 2021 and December 31, 2020, respectively.

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

4 unchanged sentences

The Convertible Senior Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes;

equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated;

right of payment to any of the Company’s unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of the Company’s secured indebtedness, to the extent of the value of the assets securing such indebtedness;

1 unchanged sentence

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:

8 unchanged sentences

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.

Under existing GAAP at the time of issuance during 2020, convertible debt instruments that may be settled in cash on conversion were 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.

2 unchanged sentences

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 amortized to interest expense over the term of the Convertible Senior Notes using an effective interest rate of 3.25 %.

effective interest rate of 3.25 %.

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

2 unchanged sentences

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.

The Company also adjusted the carrying amount of the convertible senior notes to what it would have been if the Company had applied ASU 2020-06 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 three and six months ended June 30, 2021, the Company recognized interest expense of $ 0.7 million and $ 1.5 million, respectively.

As of June 30, 2021, the carrying value of the Notes was $ 400.0 million.

Convertible Note Hedge and Warrant Transactions

18 unchanged sentences

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 Company’s effective tax rate was 24.2 % and 27.6 % for the three months ended June 30, 2021 and 2020, respectively.

The change in the effective tax rate was due primarily to an increase in untaxed income attributable to noncontrolling interests and a change in jurisdictional earnings.

The Company’s effective tax rate for the six months ended June 30, 2021 and June 30, 2020 was 26.1 % and 27.2 %.

The change in effective tax rate was due primarily to an increase in untaxed income attributed to noncontrolling interests and a change in jurisdictional earnings and partially offset by an increase of foreign tax losses which will not provide any tax benefit 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 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.

Federal income tax rate of 21.0 % for the three and six months ended June 30, 2021 primarily relates to state income taxes and a recorded valuation allowance on foreign tax credits, partially offset by benefits related to untaxed income attributable to noncontrolling interests and federal research tax credits.

As of June 30, 2021, the Company’s deferred tax assets were subject to a valuation allowance of $ 31.3 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 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.

As of June 30, 2021 and December 31, 2020, the liability for income taxes associated with uncertain tax positions was $ 18.0 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 various tax audits and closing tax years.

Although the Company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be materially different, both favorably and unfavorably.

23 unchanged sentences

The Relator’s attorney appealed the decision to the United States Court of Appeals of the Eleventh Circuit, which ultimately ruled in favor of the Relator, and the Company petitioned the United States Supreme Court to review the decision.

The Supreme Court reviewed the decision and accepted the position of the Relator.

The Supreme Court reviewed the decision and accepted the position of the R elator.

The case was thus remanded to the United States District Court for the Northern District of Alabama.

1 unchanged sentence

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 .

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, 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.

Federal government contracts are subject to audits, which are performed for the most part by the Defense Contract Audit Agency (“DCAA”).

10 unchanged sentences

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 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.

As of June 30, 2021 and December 31, 2020, total shares of the Company’s common stock outstanding were 102,502,780 and 102,360,662 , respectively, of which 72,288,913 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.

1 unchanged sentence

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 $ 13.2 million and $ 14.9 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

Total ESOP contribution expense was $ 13.4 million and $ 14.6 million for the three months ended June 30, 2021 and June 30, 2020, respectively, and $ 26.5 million and $ 29.5 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

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

7 unchanged sentences

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.

1 unchanged sentence

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 $ 67.4 million and $ 59.3 million at March 31, 2021 and December 31, 2020, respectively.

Letters of credit outstanding described in “Note 10 – Debt and Credit Facilities” that relate to project ventures are $ 67.5 million and $ 59.3 million at June 30, 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.

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

March 31, 2021

June 30, 2021

December 31, 2020

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Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net income attributable to noncontrolling interests

5 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

7 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Equity in earnings of unconsolidated joint ventures

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.

The Company received net distributions from and sale proceeds for its unconsolidated joint ventures for the three months ended June 30, 2021 and June 30, 2020 of $ 1.5 million and $ 5.6 million, respectively, and $ 6.8 million and $ 12.1 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

For the three and six months ended June 30, 2021, the Company recorded write-downs of $ 1.6 million and $ 5.1 million, respectively, on an unconsolidated joint venture in the Critical Infrastructure segment as a result of changes in estimates made by the managing partner.

The write-downs decreased operating and net income by $ 1.6 million and $ 1.2 million, respectively for the three months ended June 2021.

Operating and net income were decreased by $ 5.1 million and $ 3.8 million, respectively, for the six months ended June 30, 2021.

The write-downs decreased diluted earnings per share by $ 0.01 and $ 0.03 for the three and six months ended June 30, 2021.

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 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.

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

Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended June 30, 2021 and June 30, 2020 were $ 40.5 million and $ 42.4 million, respectively, and for the six months ended June 30, 2021 and June 30, 2020 were $ 82.4 million and $ 82.8 million, respectively.

For the three months ended June 30, 2021 and June 30, 2020, the Company incurred $ 30.6 million and $ 34.6 million, respectively, and for the six months ended June 30, 2021 and June 30, 2020, $ 61.9 million and $ 66.1 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):

March 31, 2021

June 30, 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 March 31, 2021 and December 31, 2020, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and other liabilities.

At June 30, 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 months ended March 31, 2021 and March 31, 2020.

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

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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 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.

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the three months ended June 30, 2021 and June 30, 2020 were 9,271 and 4,939 , respectively, and for the six months ended June 30, 2021 and June 30, 2020 were 1,644 and 4,066 , respectively.

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

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Basic weighted average number of shares outstanding

4 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net income attributable to Parsons Corporation

10 unchanged sentences

Industry leading capabilities in engineering and project management allow the Company to deliver significant value to customers by employing cutting-edge technologies, improving timelines and reducing costs.

The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”), currently its Chairman and Chief Executive Officer, evaluates the performance of each segment and manages the operations of the Company for purposes of allocating resources among the segments.

The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”), its Chairman and Chief Executive Officer, evaluates the performance of each segment and manages the operations of the Company for purposes of allocating resources among the segments.

The CODM evaluates segment operating performance using segment Revenue and segment Adjusted EBITDA attributable to Parsons Corporation.

1 unchanged sentence

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Federal Solutions revenue

2 unchanged sentences

The Company defines Adjusted EBITDA attributable to Parsons Corporation as Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests.

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.

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, equity-based compensation, 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

Six Months Ended

Adjusted EBITDA attributable to Parsons Corporation

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Federal Solutions

5 unchanged sentences

Income tax expense

Equity-based compensation income (expense)

Equity-based compensation expense

Transaction-related costs (a)

9 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

North America

2 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

2 unchanged sentences

Total Property and Equipment, Net

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.

North America includes revenue in the United States for the three months ended June 30, 2021 and June 30, 2020 of $ 656.2 million and $ 737.4 million, respectively and for the six months ended June 30, 2021 and June 30, 2020 of $ 1.3 billion and $ 1.5 billion, respectively.

North America property and equipment, net includes $ 100.5 million and $ 109.6 million of property and equipment, net in the United States at June 30, 2021 and December 31, 2020, respectively.

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

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Cyber & Intelligence

8 unchanged sentences

Subsequent Events

On July 6, 2021, the Company completed its acquisition of BlackHorse Solutions, Inc.

BlackHorse Solutions, Inc.

expands Parsons’ capabilities and products in next-generation military, intelligence, and space operations, specifically in cyber electronic warfare, and information dominance.

The purchase price of $ 203.0 million was paid in cash.

We are in the process of finalizing the accounting for this transaction and expect to complete our preliminary allocation of the purchase price to the assets acquired and liabilities assumed by the end of the third quarter of 2021.

On July 30, 2021, the Company completed its acquisition of Echo Ridge LLC.

Echo Ridge adds position, navigation, and timing devices;

modeling, simulation, test, and measurement tools;

and deployable software defined radio products and signal processing services to Parsons’ space portfolio.

The purchase price of approximately $ 9.0 million was paid in cash.

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