What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-24 · 67 added, 50 removed, 635 unchanged (16% of the section changed)

23 unchanged sentences

Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any misconduct by our employees, subcontractors, agents or business partners could harm our business and reputation.

Our business is subject the impact of supply chain disruption and inflation risk upon the cost of providing materials and services to customers and upon the profitability for certain contracts.

Goodwill and intangible assets represent a significant amount of our total assets, and any impairment of these assets would negatively impact our results of operations.

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Failure to manage our field project sites and facilities safely could result in environmental disasters, employee deaths or injuries, reduced profitability, the loss of projects or clients and possible exposure to litigation.

The impact of extreme weather events, including floods, hurricanes, droughts, and wildfires, including as a result of climate change or supply shortages, could have an adverse impact on our business and operations.

Risk Related to Our Common Stock

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Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics, or other public health emergencies, such as the current global COVID-19 pandemic.

Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the current global COVID-19 pandemic.

The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.

addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic .

Although we have continued our operations consistent with federal guidelines and state and local orders, the outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities [has had and] may [continue to] have a material adverse effect on our operations, employees and customers, including business shutdowns or disruptions.

The pandemic resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.

While many of these restrictions have been removed or reduced, the spread of recent variants of COVID-19 has resulted in the imposition of additional restrictions.

In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic.

Although we continued our operations throughout 2021 consistent with federal guidelines and state and local orders, the continued outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities may continue to have a material adverse effect on our operations, employees, and customers, including business shutdowns or disruptions.

The COVID-19 pandemic is expected to reduce demand for our services and impact client spending in certain circumstances.

The extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effects.

Any resulting financial impact cannot be estimated reasonably at this time but may materially adversely affect our ability to collect accounts receivables and our business, results of operations, financial condition and cash flows.

The extent to which the COVID-19 pandemic will continue to impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of continued outbreaks, development of new variants and the effectiveness of actions taken globally to contain or mitigate the pandemic’s effects.

The resultant financial impact cannot be estimated reasonably at this time but may materially adversely affect our ability to collect accounts receivables and our business, results of operations, financial condition and cash flows.

Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression.

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To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K for the year ended December 31, 2021, such as those relating to government spending and priorities.

Further, in September 2021, President Joseph R.

Biden issued Executive Order 14042 requiring federal government contractors to ensure that their employees are vaccinated, subject to certain medical or religious exceptions.

The enforcement of Executive Order 14042 was preliminarily enjoined by an order of the United States District Court for the Southern District of Georgia.

Parsons Corporation is closely following the legal status of Executive Order 14042 and has implemented plans to ensure compliance based upon the final legal determinations.

There may be an impact to our business if we are required to implement plans to ensure compliance with Executive Order 14042, as certain employees may elect not to continue their employment rather than comply.

Risks Related to Government Contracts

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government in particular to decrease spending for management support service contracts;

government shutdowns due to, among other reasons, a failure by elected officials to fund the government, such as the shutdowns which occurred during government fiscal years 2019

and 2014 and, to a lesser extent, government fiscal year 2018, and other potential delays in the appropriations process;

government shutdowns due to, among other reasons, a failure by elected officials to fund the government, such as the shutdowns which occurred during government fiscal years 2019 and 2014 and, to a lesser extent, government fiscal year 2018, and other potential delays in the appropriations process;

government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures;

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Similarly, the impact of an economic downturn on state and local governments may make it more difficult for them to fund infrastructure projects.

If appropriations are not made in subsequent years on our government

contracts, then we will not realize all of our potential revenue and profit from that contract, and we may incur substantial labor costs without reimbursement.

If appropriations are not made in subsequent years on our government contracts, then we will not realize all of our potential revenue and profit from that contract, and we may incur substantial labor costs without reimbursement.

Government funding with respect to our Critical Infrastructure services fluctuates over time and new or changing government policies may affect our Critical Infrastructure business and operations.

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False Claims Act or the U.S.

Foreign Corrupt Practices Act, or

Foreign Corrupt Practices Act, or FCPA.

The suspension or debarment in any particular case may be limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire enterprise in severe circumstances.

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The government-related industries within which we do business continue to experience significant changes to business practices as a result of an increased focus on affordability, efficiencies and recovery of costs, among other items.

Our existing and potential clients are similarly focused on increasing the productivity of their contractual arrangements.

Our existing and potential clients are similarly focused on increasing the

productivity of their contractual arrangements.

Moreover, government agencies may face restrictions or pressure regarding the type and amount of services that they may obtain from private contractors.

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Such adjustments can be applied retroactively, which could result in significant customer refunds, and those refunds would negatively impact our revenue.

Receipt of adverse audit findings or the failure to obtain an “approved” determination on our various business systems could significantly and adversely affect our business by, among other things, restricting our ability to bid on new contracts and, for those proposals

under evaluation, diminishing our competitive position.

A determination of noncompliance could also result in penalties and sanctions against us, including withholding of payments, suspension of payments and increased government scrutiny.

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reduce orders under or otherwise modify contracts;

for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate and current;

for contracts subject to the Truthful Cost and Pricing Data Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate and current;

for some contracts, (1) demand a refund, make a forward price adjustment or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (2) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated;

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our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including employees with the right mix of skills and experience to support our projects;

our employees’ inability to obtain or retain necessary security clearances or required certifications;

our employees’ ability to obtain or retain necessary security clearances or required certifications;

changes to or delays or cancellations of projects, as a result of governmental budgetary processes or otherwise;

our ability to manage attrition;

the impact of inflation upon the cost of services and materials provided to customers;

our need to devote time and resources to training, business development, and other non-chargeable activities.

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If we fail in our new capabilities development efforts or our capabilities or services fail to achieve market acceptance more rapidly than our competitors, our ability to procure new contracts could be negatively impacted, which would negatively impact our results of operations and our financial condition.

In addition, our ability to grow our business by leveraging our operating model to efficiently and effectively deploy our people across our client base is largely dependent on our ability to maintain our collaborative culture.

In addition, our ability to grow our business by leveraging our operating model to deploy our people efficiently and effectively across our client base is largely dependent on our ability to maintain our collaborative culture.

To the extent that we are unable to maintain our culture for any reason, including our effort to focus on new growth areas or acquire new businesses with different corporate cultures, we may be unable to grow our business.

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To remain competitive, we must consistently provide superior service, technology and performance on a cost-effective basis to our customers and there is no assurance that we will do so.

Changing global tax laws could have a material impact on our effective income tax rate.

We are subject to income taxes in the U.S.

and numerous foreign jurisdictions.

Many tax jurisdictions, including the U.S., have called for comprehensive changes to fiscal and tax policies that could significantly impact how we are taxed on our domestic and foreign earnings.

Such changes, if enacted into law, could increase our effective tax rate and have a material adverse impact on our financial condition and results of operation.

Risks Related to Acquisitions and Joint Ventures

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In addition to any costs resulting from contract performance or required corrective action, these failures may result in increased costs or loss of revenue if they result in clients postponing subsequently scheduled work or canceling or failing to renew contracts.

In 2021, Parsons actively monitored external cyber threats, including potential risks associated with SolarWinds and Log4j vulnerabilities.

Parsons implements customized and continuous monitoring of its systems and actively engages with its suppliers to defend the enterprise environment against cyber threats.

The SolarWinds and Log4j threats did not compromise Parsons’ systems.

However, the existence of external threats remains and requires ongoing vigilance.

The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

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In some new business areas, we may not be able to obtain sufficient insurance and may decide not to accept or solicit business in these areas.

As a contractor supporting defense and national security clients, we are also subject to regulatory compliance requirements under the Defense Federal Acquisition Regulation Supplement and other federal regulations requiring that our networks and information technology systems comply with the security and privacy controls in National Institute of Standards and Technology Special Publications.

As a contractor supporting defense and national security clients, we are also subject to regulatory compliance requirements under the Federal Acquisition Regulations, the Defense Federal Acquisition Regulation Supplement and other federal regulations requiring that our networks and information technology systems comply with the security and privacy controls in National Institute of Standards and Technology Special Publications and similar documents.

To the extent that we do not comply with the applicable security and control requirements, whether imposed by regulation or contract, unauthorized access or disclosure of sensitive information could potentially result in a contract termination that has a material adverse effect on our business, financial condition and results of operations and reputational harm.

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For example, our performance under U.S.

government contracts and compliance with the terms of those contracts and applicable laws and regulations are subject to continuous audit, review, and investigation by the U.S.

government contracts and compliance with the terms of those contracts and applicable laws and

regulations are subject to continuous audit, review, and investigation by the U.S.

government which may include such investigative techniques as subpoenas or civil investigative demands.

1 unchanged sentence

Additionally, our insurance policies may not protect us against potential liability due to various exclusions in the policies and self-insured retention amounts.

Partially or completely uninsured claims, if

successful and of significant magnitude, could have a material adverse effect on our business, financial condition and results of operations.

Partially or completely uninsured claims, if successful and of significant magnitude, could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future.

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Furthermore, failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative or contractual sanctions, including fines, penalties or suspension or debarment from contracting with the U.S.

government, and could also result in investigations, the imposition of corrective action or remedial obligations, and the issuance of orders limiting or prohibiting some or all of our operations.

government, and could also result in investigations, the imposition of corrective action or remedial

obligations, and the issuance of orders limiting or prohibiting some or all of our operations.

In certain instances, citizen groups also have the ability to bring legal proceedings against us if we are not in compliance with environmental laws.

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If we are unable to finish these projects, it is likely that our finances will be impacted.

Furthermore, we may experience liability regarding our employees and their safety and security

in these locations.

Furthermore, we may experience liability regarding our employees and their safety and security in these locations.

We also may incur material costs to maintain the safety of our personnel.

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and, in some circumstances, strict compliance with anticorruption laws may conflict with local customs and practices.

Despite our training and compliance programs, we cannot assure that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents.

Despite our training and compliance programs, we cannot be certain that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents.

In addition, from time to time, government investigations of corruption in industries we operate in may affect us and our peers.

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and, in the case of backlog related to IDIQ contracts where task orders have not been issued, no further task orders may be issued.

In addition, headcount growth is the primary means by which we are able to achieve revenue growth.

In addition, headcount growth is the primary means by which we

are able to achieve revenue growth.

Any inability to hire additional appropriately qualified personnel or failure to timely and effectively deploy such additional personnel against funded backlog could negatively affect our ability to grow our revenue.

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changes in the use of government contracting vehicles, and the provisions therein used to procure our services;

adjustments to the scope of services under, or cancellation of contracts, by the applicable government at any time.

and adjustments to the scope of services under, or cancellation of contracts, by the applicable government at any time.

Furthermore, even if our backlog results in revenue, the contracts may not be profitable.

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The agreements governing our debt contain a number of restrictive covenants which may limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.

As of December 31, 2020, our total indebtedness was $590 million.

Our Credit Agreement and the agreements governing our Senior Notes contain a number of covenants that impose operating and other restrictions on us and our subsidiaries.

As of December 31, 2021, our total indebtedness was approximately $590 million.

Our Credit Agreement and the agreements governing our Senior Notes and Convertible Notes contain a number of covenants that impose operating and other restrictions on us and our subsidiaries.

Such restrictions affect or will affect, and in many respects limit or prohibit our ability and the ability of our subsidiaries to, among other things:

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These guarantors constitute substantially all of our domestic, wholly owned subsidiaries’ assets.

Prior to our initial public offering, we were 100% owned by the ESOP, which is a retirement plan that is intended to be qualified under the Code.

Prior to our initial public offering, we were 100% owned by the ESOP, which is a retirement plan that is intended to be qualified under the Internal Revenue Code.

If the ESOP failed to meet the requirements of a tax qualified retirement plan, we could be subject to substantial penalties.

The ESOP is a defined contribution retirement plan subject to the requirements of the Code and ERISA.

The ESOP has received a determination letter, dated January 31, 2012, from the Internal Revenue Service (IRS) that it meets the requirements of a tax qualified retirement plan in form and we endeavor to maintain and administer the ESOP in compliance with all requirements of the Code and ERISA.

The ESOP is a defined contribution retirement plan subject to the requirements of the Internal Revenue Code (Code) and the Employment Retirement Income Security Act (ERISA).

The ESOP received a determination letter, dated January 31, 2012, from the Internal Revenue Service (IRS) that it meets the requirements of a tax qualified retirement plan in form, and we endeavor to maintain and administer the ESOP in compliance with all requirements of the Code and ERISA.

However, the rules regarding tax qualified plans, and especially ESOPs, are complex and change frequently.

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Depending on the level of required clearance, security clearances can be difficult and time-consuming to obtain and personnel with security clearances are in great demand.

Particularly in highly specialized areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth in the current and future fiscal years.

Particularly in highly specialized areas, it has become more difficult to retain employees and meet all of our needs for

employees in a timely manner, which may affect our growth in the current and future fiscal years.

Although we intend to continue to devote significant resources to recruiting, training and retaining qualified employees, we may not be able to attract, effectively train and retain these employees.

Any failure to do so could impair our ability to efficiently perform our contractual obligations, timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial condition and results of operations.

We believe that our success also depends on the continued employment of a highly qualified and experienced senior management team and that team’s ability to retain existing business and generate

new business.

We believe that our success also depends on the continued employment of a highly qualified and experienced senior management team and that team’s ability to retain existing business and generate new business.

The loss of key personnel in critical functions could lead to lack of business continuity or disruptions in our business until we are able to hire and train replacement personnel.

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Risk Related to Our Common Stock

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.

In addition, beginning with our second annual report on Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act.

At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

The process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation is time-consuming, costly and complicated.

If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could become subject to investigations by our stock exchange, the SEC or other regulatory authorities, which could require additional financial and management resources.

If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply in a timely manner with the management certification requirements of Section 404 of the Sarbanes-Oxley Act as to the effectiveness of our internal control over financial reporting or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could become subject to investigations by our stock exchange, the SEC or other regulatory authorities, which could require additional financial and management resources.

If our stock price fluctuates, you could lose a significant part of your investment.

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Our operating results and share price may be volatile, and the market price of our common stock may drop.

Our quarterly operating results are likely to fluctuate in the future as a publicly traded company.

Our quarterly operating results have fluctuated and are likely to continue to fluctuate in the future.

In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations.

This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance.

This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of

our operating performance.

Our operating results and the trading price of our shares may fluctuate in response to various factors, including:

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Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

Sales of outstanding shares of our common stock into the market in the future could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of outstanding shares of our common stock into the market in the future by the ESOP could cause the market price of our common stock to drop significantly.

At December 31, 2021, we had 146,276,880 shares of our common stock issued and 103,659,731 outstanding.

Of these shares, 70,328,237 shares are owned by the ESOP, 33,331,494 shares are publicly owned, and 42,617,149 shares are Treasury stock.

We are party to a registration rights agreement with the ESOP Trustee, providing the ESOP with certain demand registration rights related to shares held by the ESOP in the event the ESOP Trustee determines in good faith, in exercising its fiduciary duties under ERISA, that the ESOP is required to sell its shares, which we believe is only likely to occur if our business, financial condition or results of operations have materially and adversely deteriorated.

We are party to a registration rights agreement with the ESOP Trustee, providing the ESOP with certain demand registration rights related to

shares held by the ESOP in the event the ESOP Trustee determines in good faith, in exercising its fiduciary duties under ERISA, that the ESOP is required to sell its shares, which we believe is only likely to occur if our business, financial condition or results of operations have materially and adversely deteriorated.

Qualifying ESOP participants have the right to receive distributions of shares of our common stock from the ESOP and can sell such shares in the market.

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For future fiscal years, the annual contribution to the ESOP shall be in amounts as determined by the board of directors.

Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our participants, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us.

Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our ESOP participants, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us.

Our common stock has one vote per share.

The ESOP beneficially owns approximately 75% of our outstanding common stock.

The ESOP beneficially owns approximately 68% of our outstanding common stock, 40% of which is owned by employees of Parsons Corporation.

Under the terms of the ESOP, each participant has the ability to direct the ESOP Trustee on the voting of the shares allocated to his or her account under the ESOP.

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Our business and strategic plans may consume resources faster than we anticipate.

In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of

In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both.

However, any decline in the market price of our common stock could impair our ability to raise capital.

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specify that special meetings of our stockholders can be called only by our board of directors, or a board committee authorized with the power to call such meetings;

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of our stockholders;

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

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establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholders’ meetings.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, or the DGCL.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law (DGCL).

These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a period of time.

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Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.

We have no current plans to declare dividends.

We do not currently pay a dividend and have no current plans to declare any cash dividends to holders of our common stock.

Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, any contractual restrictions, our indebtedness, restrictions imposed by applicable law and other factors our board of directors deems relevant.

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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-K

Item 1A. Risk Factors