What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 247 added, 125 removed, 594 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share information)

March 31, 2022

June 30, 2022

December 31, 2021

46 unchanged sentences

For the Three Months Ended

March 31, 2022

March 31, 2021

For the Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Direct cost of contracts

17 unchanged sentences

For the Three Months Ended

March 31, 2022

March 31, 2021

For the Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net income including noncontrolling interests

9 unchanged sentences

(In thousands) (Unaudited)

For the Three Months Ended

March 31, 2022

March 31, 2021

For the Six Months Ended

June 30, 2022

June 30, 2021

Cash flows from operating activities:

20 unchanged sentences

Other long-term liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

7 unchanged sentences

Cash flows from financing activities:

Proceeds from borrowings under credit agreement

Repayments of borrowings under credit agreement

Payments for debt costs and credit agreement

Payments for acquired warrants

Contributions by noncontrolling interests

2 unchanged sentences

Taxes paid on vested stock

Net cash used in financing activities

Proceeds from issuance of common stock

Net cash provided by (used in) financing activities

Effect of exchange rate changes

6 unchanged sentences

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended March 31, 2022 and March 31, 2021

For the Three Months Ended June 30, 2022 and June 30, 2021

(In thousands)

2 unchanged sentences

Income (Loss)

Balance at December 31, 2021

Balance at March 31, 2022

Comprehensive income

6 unchanged sentences

Stock-based compensation

Balance at June 30, 2022

Balance at March 31, 2021

Balance at December 31, 2020

Comprehensive income

1 unchanged sentence

Pension adjustments, net

Adoption of ASU 2020-06

Contributions

2 unchanged sentences

Stock-based compensation

Balance at March 31, 2021

Balance at June 30, 2021

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, 2022 and June 30, 2021

(In thousands)

Comprehensive

Noncontrolling

Income (Loss)

Balance at December 31, 2021

Comprehensive income

Foreign currency translation gain, net

Pension adjustments, net

Contributions

Distributions

Issuance of equity securities, net of retirement

Repurchases of common stock

Stock-based compensation

Balance at June 30, 2022

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

Parsons Corporation and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

17 unchanged sentences

useful lives of property and equipment and intangible assets;

calculation of allowance for doubtful accounts;

valuation of deferred income tax assets and uncertain tax positions, among others.

24 unchanged sentences

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

Xator Corporation

On May 31, 2022, the Company acquired a 100 % ownership interest in Xator Corporation (“Xator”), a privately-owned company, for $ 388.3 million in cash.

The Company borrowed $ 300 million under the Credit Agreement, as described in “Note 10 – Debt and Credit Facilities”, to partially fund the acquisition.

Xator expands Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber solutions, biometrics, and global threat assessment and operations.

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

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Property and equipment

Right of use assets, operating leases

Investments in and advances to unconsolidated joint ventures

Intangible assets

Other noncurrent assets

Accounts payable

Accrued expenses and other current liabilities

Contract liabilities

Short-term lease liabilities, operating leases

Long-term lease liabilities, operating leases

Other long-term liabilities

Net assets acquired

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

Customer relationships

Developed technologies

Non-compete agreements

Amortization expense of $ 1.6 million related to these intangible assets was recorded for the three and six months ended June 30, 2022.

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 in its entirety is deductible for tax purposes.

The amount of revenue generated by Xator and included within consolidated revenues is $ 20.8 million for the three and six months ended June 30, 2022.

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 Xator acquisition had been consummated as of the beginning of fiscal year 2021 (in thousands) is as follows:

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

BlackHorse Solutions, Inc.

22 unchanged sentences

Non-compete agreements

Amortization expense of $ 3.6 million related to these intangible assets was recorded for the three months ended March 31, 2022.

Amortization expense of $ 3.5 million and $ 7.1 million related to these intangible assets was recorded for the three and six months ended June 30, 2022, 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 $ 10.6 million is deductible for tax purposes.

The amount of revenue generated by BlackHorse and included within consolidated revenues is $ 18.4 million for the three months ended March 31, 2022.

The amount of revenue generated by BlackHorse and included within consolidated revenues is $ 25.2 million and $ 43.6 million for the three and six months ended June 30, 2022, 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.

2 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Pro forma Revenue

9 unchanged sentences

Goodwill in its entirety is deductible for tax purposes.

The amount of revenue generated by Echo Ridge and included within consolidated revenues for the three months ended March 31, 2022 is $ 1.6 million.

The amount of revenue generated by Echo Ridge and included within consolidated revenues for the three and six months ended June 30, 2022 is $ 1.6 million and $ 3.2 million, respectively.

Contracts with Customers

4 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

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 March 31, 2022 and December 31, 2021 were as follows (in thousands):

March 31, 2022

Contract Assets and Contract Liabilities

Contract assets and contract liabilities balances at June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022

December 31, 2021

2 unchanged sentences

Net contract assets (liabilities) (1)

Total contract retentions included in net contract assets (liabilities) were $ 80.5 million as of March 31, 2022, of which $ 38.2 million are not expected to be paid in the next 12 months.

Total contract retentions included in net contract assets (liabilities) were $ 77.6 million as of June 30, 2022, of which $ 43.8 million are not expected to be paid in the next 12 months.

Total contract retentions included in net contract assets (liabilities) were $ 91.7 million as of December 31, 2021.

Contract assets at March 31, 2022 and December 31, 2021 include $ 102.8 million and $ 98.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three months ended March 31, 2022 and March 31, 2021, 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, 2022 and March 31, 2021, the Company recognized revenue of $ 63.9 million and $ 69.1 million, respectively, that was included in the corresponding contract liability balances at December 31, 2021 and December 31, 2020, respectively.

Contract assets at June 30, 2022 and December 31, 2021 include $ 104.9 million and $ 98.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three and six months ended June 30, 2022 and June 30, 2021, 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, 2022 and June 30, 2021, the Company recognized revenue of $ 18.6 million and $ 23.5 million, respectively, and $ 81.7 million and $ 92.6 million during the sixth months ended June 30, 2022 and June 30, 2021, respectively, that was included in the corresponding contract liability balances at December 31, 2021 and December 31, 2020, respectively.

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

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

Acquired contract liabilities

There was no significant impairment of contract assets recognized during the three months ended March 31, 2022 and March 31, 2021.

There were no 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, 2022 and March 31, 2021.

There was no significant impairment of contract assets recognized during the six months ended June 30, 2022 and June 30, 2021.

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, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Revenue impact, net

Accounts Receivable, net

Accounts receivable, net consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

Accounts receivable, net consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

Total accounts receivable, gross

5 unchanged sentences

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of March 31, 2022 represent a measure of the total dollar value of work to be performed on contracts awarded and in-progress.

The Company had $ 5.5 billion in RUPO as of March 31, 2022.

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of June 30, 2022 represent a measure of the total dollar value of work to be performed on contracts awarded and in-progress.

The Company had $ 5.8 billion in RUPO as of June 30, 2022.

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, 2022 over the following periods (in thousands):

The Company expects to satisfy its RUPO as of June 30, 2022 over the following periods (in thousands):

Period RUPO Will Be Satisfied

5 unchanged sentences

Our leases have remaining lease terms of one year to 8 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 after the third year .

The components of lease costs for the three months ended March 31, 2022 and March 31, 2021 are as follows (in thousands):

The components of lease costs for the three and six months ended June 30, 2022 and June 30, 2021 are as follows (in thousands):

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Operating lease cost

4 unchanged sentences

Total lease cost

Supplemental cash flow information related to leases for the three months ended March 31, 2022 and March 31, 2021 is as follows (in thousands):

Three Months Ended

March 31, 2022

March 31, 2021

Supplemental cash flow information related to leases for the three months ended June 30, 2022 and June 30, 2021 is as follows (in thousands):

Six Months Ended

June 30, 2022

June 30, 2021

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, 2022 and December 31, 2021 are as follows (in thousands):

March 31, 2022

Supplemental balance sheet and other information related to leases as of June 30, 2022 and December 31, 2021 are as follows (in thousands):

June 30, 2022

December 31, 2021

13 unchanged sentences

Finance leases

As of March 31, 2022, 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, 2022 is as follows (in thousands):

As of June 30, 2022, 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, 2022 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, 2021 to March 31, 2022 (in thousands):

The following table summarizes the changes in the carrying value of goodwill by reporting segment from December 31, 2021 to June 30, 2022 (in thousands):

December 31, 2021

Foreign Exchange

March 31, 2022

June 30, 2022

Federal Solutions

Critical Infrastructure

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, 2022 and concluded there has no t been an impairment.

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, 2022 and, therefore, 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, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

Total intangible assets

The aggregate amortization expense of intangible assets for the three months ended March 31, 2022 and March 31, 2021 was $ 20.1 million and $ 24.5 million, respectively.

The aggregate amortization expense of intangible assets for the three months ended June 30, 2022 and June 30, 2021 was $ 19.7 million and $ 24.5 million, respectively, and $ 39.8 million and $ 49.0 million for the six months ended June 30, 2022 and June 30, 2021, 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, 2022

June 30, 2022

Property and Equipment, Net

Property and equipment consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

Property and equipment consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

December 31, 2021

6 unchanged sentences

Property and equipment, net

Depreciation expense for the three months ended March 31, 2022 and March 31, 2021 was $ 9.7 million and $ 9.6 million, respectively.

Depreciation expense for the three months ended June 30, 2022 and June 30, 2021 was $ 9.9 million and $ 9.5 million, respectively, and $ 19.6 million and $ 19.2 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Debt and Credit Facilities

Debt consisted of the following (in thousands):

March 31, 2022

June 30, 2022

December 31, 2021

Revolving credit facility

Convertible senior notes

6 unchanged sentences

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.

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 March 31, 2022 and December 31, 2021 were 1.70 % and 1.36 %, respectively.

The rates on June 3 0 , 2022 and December 31, 2021 were 3.22 % and 1.36 %, respectively.

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

Letters of credit commitments outstanding under this agreement aggregated to $ 44.5 million and $ 44.3 million at March 31, 2022 and December 31, 2021, respectively, which reduced borrowing limits available to the Company.

Interest expense related to the Credit Agreement was $ 0.1 million and $ 0.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

There were no loan amounts outstanding under the Credit Agreement on March 31, 2022.

Letters of credit commitments outstanding under this agreement aggregated to $ 44.5 million and $ 44.3 million at June 3 0 , 2022 and December 31, 2021 , respectively, which reduced borrowing limits available to the Company.

Interest expense related to the C redit A greement was $ 0.8 million and $ 0 .3 million for the three months ended June 30 , 2022 and June 30 , 2021 , respectively and was $ 0.9 million and $ 0.5 million for six months ended June 30, 2022 and June 30, 2021, respectively .

The Company borrowed $ 300.0 million to partially fund the acquisition of Xator on May 31 , 2022.

There w as $ 200.0 million outstanding under the Credit Agreement on June 30 , 2022 .

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 the three months ended March 31, 2022 and March 31, 2021 was $ 2.6 million and $ 3.2 million, respectively.

Interest expense related to the Senior Notes for the three months ended June 30, 2022 and June 30, 2021 was $ 2.6 million and $ 3.2 million, respectively, and was $ 5.2 million and $ 6.3 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

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

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

The Company made interest payments of $ 5.1 million and $ 6.2 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Interest payable of $ 2.2 million and $ 4.7 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively, related to the Senior Notes.

Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company estimated that the fair value (Level 2) of its Senior Notes at March 31, 2022 approximates $ 208.4 million.

The Company made interest payments of $ 5.1 million for both the three and six months ended June 30, 2022, and $ 6.2 million for both the three and six months ended June 30, 2021.

Interest payable of $ 4.7 million and $ 4.7 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets at June 30, 2022 and December 31, 2021, respectively, related to the Senior Notes.

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

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, 2022 and December 31, 2021.

The Company was in compliance with these covenants at June 30, 2022 and December 31, 2021.

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 $ 220.6 million and $ 223.0 million at March 31, 2022 and December 31, 2021, respectively.

Letters of credit commitments outstanding under these bank lines aggregated $ 229.6 million and $ 223.0 million at June 30, 2022 and December 31, 2021, respectively.

Convertible Senior Notes

In August 2020, the Company issued an aggregate $ 400.0 million of 0.25 % Convertible Senior Notes due 2025, including the exercise of a $ 50.0 million initial purchasers’ option.

The Company received proceeds from the issuance and sale of the Convertible Senior Notes of $ 389.7 million, net of $ 10.3 million of transaction fees and other third-party offering expenses.

The Company received proceeds from the issuance and sale of the Convertible Senior Notes of $ 389.7 million, net of $ 10.3 million of transaction fees and other third-party offering

The Convertible Senior Notes accrue interest at a rate of 0.25 % per annum, payable semi-annually on February 15 and August 15 of each year beginning on February 15, 2021 , and will mature on August 15, 2025 , unless earlier repurchased, redeemed or converted.

15 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 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.

The carrying amount allocated to the equity component, which is recognized as a debt discount, represents the difference between the proceeds from the issuance of the notes and the fair value of the liability component of the notes.

Based on this debt to equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner.

non-convertible debt borrowing rate .

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

The carrying amount allocated to the equity component, which is recognized as a debt discount, represent ed the difference between the proceeds from the issuance of the notes and the fair value of the liability component of the notes.

Based on this debt to equity ratio, debt issuance costs we re then allocated to the liability and equity components in a similar manner.

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 %.

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

The difference between the principal amount of the Convertible Senior Notes and the liability component, inclusive of issuance costs, represent ed the debt discount, which the Company amortize d 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, t he Company recognized interest expense of $ 4.4 million.

As of December 31, 202 0 , the net carrying value of the Notes was $ 340.6 million.

2 unchanged sentences

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.

The Company recognized interest expense of $ 0.7 million and $ 0.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the carrying value of the Notes was $ 400.0 million.

The Company recognized interest expense of $ 0.7 million and $ 0.7 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $ 1.5 million and $ 1.5 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

As of June 30, 2022 and December 31, 2021, the carrying value of the Notes was $ 400.0 million.

Convertible Note Hedge and Warrant Transactions

14 unchanged sentences

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.

The Company’s effective tax rate was 25.4 % and 27.7 % for the three months ended March 31, 2022 and 2021, respectively.

The change in the effective tax rate was due primarily to a decrease of withholding tax and a change in the jurisdictional mix of earnings.

The Company’s effective tax rate was 20.1 % and 24.2 % for the three months ended June 30, 2022 and 2021, respectively.

The change in the effective tax rate was due primarily to a decrease in withholding tax, a change in the jurisdictional mix of earnings, and a settlement of an uncertain tax position.

The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was 23.0 % and 26.1 %, respectively.

The change in effective tax rate was due primarily to a decrease in withholding tax, a change in jurisdictional mix of earnings, and a settlement of an uncertain tax position.

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

Federal income tax rate of 21.0 % for the three months ended March 31, 2022 primarily relates to state income taxes and an increased expense for uncertain tax positions, partially offset by benefits related to untaxed income attributable to noncontrolling interests and federal research tax credits.

As of March 31, 2022, the Company’s deferred tax assets were subject to a valuation allowance of $ 28.0 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, 2022 primarily relates to state income taxes, partially offset by benefits related to untaxed income attributable to noncontrolling interests, earnings in lower tax jurisdictions, and federal research tax credits.

As of June 30, 2022, the Company’s deferred tax assets were subject to a valuation allowance of $ 27.7 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:

1 unchanged sentence

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, 2022 and December 31, 2021, the liability for income taxes associated with uncertain tax positions was $ 22.5 million and $ 21.2 million, respectively.

It is reasonably possible that the Company may realize a decrease in our uncertain tax positions of approximately $ 0.5 million during the next 12 months as a result of concluding various tax audits and closing tax years.

As of June 30, 2022 and December 31, 2021, the liability for income taxes associated with unrecognized tax benefits was $ 22.6 million and $ 21.2 million, respectively.

It is reasonably possible that the Company may realize a decrease in our unrecognized tax benefits of approximately $ 0.3 million during the next 12 months as a result of concluding 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.

6 unchanged sentences

A liability is recorded when it is both probable that a loss has been incurred and the amount of loss or range of loss can be reasonably estimated.

When using a range of loss estimate, the Company records the liability using the low end of the range.

When using a range of loss estimate, the Company records the liability using the low end of the range unless some amount within the range of loss appears at that time to be a better estimate than any other amount in the range.

The Company records a corresponding receivable for costs covered under its insurance policies.

22 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, 2022 and December 31, 2021, total shares of the Company’s common stock outstanding were 103,730,134 and 103,659,731 , respectively, of which 68,787,554 and 70,328,237 , respectively, were held by the ESOP.

As of June 30, 2022 and December 31, 2021, total shares of the Company’s common stock outstanding were 103,560,969 and 103,659,731 , respectively, of which 65,097,822 and 70,328,237 , 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 $ 13.1 million and $ 13.2 million for the three months ended March 31, 2022 and March 31, 2021 , respectivel y .

Total ESOP contribution expense was $ 13.5 million and $ 13.4 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $ 26.5 million for the six months ended June 30, 2022 and June 30, 2021.

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

Th e fiscal 20 2 2 ESOP contribution has not yet been made.

The amount is currently includ ed in accrued liabilities.

The fiscal 2022 ESOP contribution has not yet been made.

The amount is currently included in accrued liabilities.

Investments in and Advances to Joint Ventures

8 unchanged sentences

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 $ 73.2 million at March 31, 2022 and December 31, 2021.

Letters of credit outstanding described in “Note 10 – Debt and Credit Facilities” that relate to project ventures are $ 83.0 million and $ 73.2 million at June 30, 2022 and December 31, 2021, 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):

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

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, 2022

June 30, 2022

December 31, 2021

7 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Equity in earnings of unconsolidated joint ventures

The Company received net distributions from its unconsolidated joint ventures for the three months ended March 31, 2022 and March 31, 2021 of $ 2.8 million and $ 5.4 million, respectively.

The Company received net distributions from its unconsolidated joint ventures for the three months ended June 30, 2022 and June 30, 2021 of $ 5.4 million and $ 1.5 million, respectively, and $ 8.2 million and $ 6.8 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Related Party Transactions

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 March 31, 2022 and March 31, 2021 were $ 47.3 million and $ 53.7 million, respectively.

For the three months ended March 31, 2022 and March 31, 2021, the Company incurred $ 33.7 million and $ 41.4 million, respectively, of reimbursable costs.

Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended June 30, 2022 and June 30, 2021 were $ 51.8 million and $ 50.9 million, respectively, and $ 99.1 million and $ 104.6 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

For the three months ended June 30, 2022 and June 30, 2021, the Company incurred $ 37.2 million and $ 38.2 million, respectively, and for the six months ended June 30, 2022 and June 30, 2021 incurred $ 71.0 million and $ 79.6 million, respectively, of reimbursable costs.

The revenue and reimbursable cost prior period amounts have been updated to reflect all joint ventures for the comparable period.

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

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

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, 2022 and December 31, 2021, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and other liabilities.

At June 30, 2022 and December 31, 2021, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, debt and other liabilities.

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

13 unchanged sentences

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, 2022 and March 31, 2021.

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

8 unchanged sentences

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, 2022 and March 31, 2021 were 13,117 and 145 , respectively.

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the three months ended June 30, 2022 and June 30, 2021 were 11,502 and 9,271 , respectively, and for the six months ended June 30, 2022 and June 30, 2021 were 8,019 and 1,644 , respectively.

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

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Basic weighted average number of shares outstanding

4 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net income attributable to Parsons Corporation

2 unchanged sentences

Share Repurchases

In August 2021, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to $ 100.0 million of shares of Commons stock.

In August 2021, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to $ 100.0 million of shares of Common stock.

Repurchases under this stock repurchase program commenced on August 12, 2021 .

2 unchanged sentences

Three Months Ended

March 31, 2022

Six Months Ended

June 30, 2022

Total shares repurchased

1 unchanged sentence

Average price paid per share

As of March 31, 2022, the Company has $ 72.8 million remaining under the stock repurchase program.

As of June 30, 2022, the Company has $ 62.8 million remaining under the stock repurchase program.

Segment Information

11 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Federal Solutions revenue

6 unchanged sentences

Three Months Ended

Six Months Ended

Adjusted EBITDA attributable to Parsons Corporation

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Federal Solutions

17 unchanged sentences

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

North America

2 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Total Property and Equipment, Net

North America includes revenue in the United States for the three months ended March 31, 2022 and March 31, 2021 of $ 718.0 million and $ 652.2 million, respectively.

North America property and equipment, net includes $ 89.0 million and $ 95.0 million of property and equipment, net in the United States at March 31, 2022 and December 31, 2021, respectively.

North America includes revenue in the United States for the three months ended June 30, 2022 and June 30, 2021 of $ 767.8 million and $ 656.2 million, respectively, and for the six months ended June 30, 2022 and June 30, 2021 of $ 1.5 billion and $ 1.3 billion, respectively.

North America property and equipment, net includes $ 88.0 million and $ 95.0 million of property and equipment, net in the United States at June 30, 2022 and December 31, 2021, respectively.

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

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Defense and Intelligence

7 unchanged sentences

Effective January 1, 2022, the Company made changes to its Critical Infrastructure business units by transferring a portion of legacy Mobility Solutions to the Connected Communities business unit.

Effective June 1, 2022, the Company made changes to its Federal Solutions business units by transferring a portion of legacy Defense and Intelligence business unit to the Engineered Systems business unit.

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

Subsequent Events

On April 20, 2022, the Board of Directors authorized the Fifth Amendment to the Parsons Corporation Employee Stock Ownership Plan 2019 Amendment and Restatement (the Plan) providing for lump sum distributions to participants.

The ESOP Advisory Committee executed the Fifth Amendment to the Plan on April 28, 2022.

Participants were previously required to take distributions in up to three annual installments if their balance exceeded certain thresholds as disclosed in the Company’s 10-K for the year ended December 31, 2021.

Annual diversification elections and five-year vested termination distributions are not impacted by this amendment and will still occur annually and over installments as outlined in the Plan.

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