What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-03 · 211 added, 177 removed, 664 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except share information)

June 30, 2022

September 30, 2022

December 31, 2021

35 unchanged sentences

Additional paid-in capital

Accumulated deficit

Retained earnings (accumulated deficit)

Accumulated other comprehensive loss

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

For the Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Direct cost of contracts

17 unchanged sentences

For the Three Months Ended

For the Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

For the Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Net income including noncontrolling interests

9 unchanged sentences

(In thousands) (Unaudited)

For the Six Months Ended

June 30, 2022

June 30, 2021

For the Nine Months Ended

September 30, 2022

September 30, 2021

Cash flows from operating activities:

48 unchanged sentences

Consolidated Statements of Shareholders’ Equity

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

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

(In thousands)

2 unchanged sentences

Income (Loss)

Balance at March 31, 2022

Balance at June 30, 2022

Comprehensive income

6 unchanged sentences

Stock-based compensation

Balance at September 30, 2022

Balance at June 30, 2021

Balance at March 31, 2021

Comprehensive income

4 unchanged sentences

Issuance of equity securities, net of retirements

Repurchases of common stock

Stock-based compensation

Balance at June 30, 2021

Balance at September 30, 2021

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

1 unchanged sentence

Consolidated Statements of Shareholders’ Equity

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

For the Nine Months Ended September 30, 2022 and September 30, 2021

(In thousands)

11 unchanged sentences

Stock-based compensation

Balance at June 30, 2022

Balance at September 30, 2022

Balance at December 31, 2020

6 unchanged sentences

Issuance of equity securities, net of retirement

Repurchases of common stock

Stock-based compensation

Balance at June 30, 2021

Balance at September 30, 2021

Parsons Corporation and Subsidiaries

69 unchanged sentences

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.

Amortization expense of $ 4.9 million and $ 6.6 million related to these intangible assets was recorded for the three and nine months ended September 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 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 amount of revenue generated by Xator and included within consolidated revenues is $ 70.4 million and $ 91.2 million for the three and nine months ended September 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.

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

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Pro forma Revenue

24 unchanged sentences

Non-compete agreements

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.

Amortization expense of $ 3.5 million and $ 10.6 million related to these intangible assets was recorded for the three and nine months ended September 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 $ 25.2 million and $ 43.6 million for the three and six months ended June 30, 2022, respectively.

The amount of revenue generated by BlackHorse and included within consolidated revenues is $ 22.6 million and $ 66.3 million for the three and nine months ended September 30, 2022, respectively and $ 16.7 million for the three and nine months ended September 30, 2021.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 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 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

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Time-and-Materials

1 unchanged sentence

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

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

September 30, 2022

December 31, 2021

2 unchanged sentences

Net contract assets (liabilities) (1)

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 $ 74.2 million as of September 30, 2022, of which $ 40.5 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 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.

Contract assets at September 30, 2022 and December 31, 2021 include $ 102.2 million and $ 98.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the three and nine months ended September 30, 2022 and September 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 September 30, 2022 and September 30, 2021, the Company recognized revenue of $ 10.1 million and $ 3.0 million, respectively, and $ 91.8 million and $ 95.5 million during the nine months ended September 30, 2022 and September 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:

June 30, 2022

September 30, 2022

December 31, 2021

1 unchanged sentence

Acquired contract liabilities

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

There was no significant impairment of contract assets recognized during the nine months ended September 30, 2022 and September 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

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Revenue impact, net

Accounts Receivable, net

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

Accounts receivable, net consisted of the following as of September 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 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.

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of September 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 September 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 June 30, 2022 over the following periods (in thousands):

The Company expects to satisfy its RUPO as of September 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 and six months ended June 30, 2022 and June 30, 2021 are as follows (in thousands):

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

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Operating lease cost

4 unchanged sentences

Total lease cost

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

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

Nine Months Ended

September 30, 2022

September 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 June 30, 2022 and December 31, 2021 are as follows (in thousands):

June 30, 2022

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

September 30, 2022

December 31, 2021

13 unchanged sentences

Finance leases

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):

As of September 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 September 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 June 30, 2022 (in thousands):

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

December 31, 2021

Foreign Exchange

June 30, 2022

September 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 June 30, 2022 and, therefore, 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 September 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):

June 30, 2022

September 30, 2022

December 31, 2021

5 unchanged sentences

Total intangible assets

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.

The aggregate amortization expense of intangible assets for the three months ended September 30, 2022 and September 30, 2021 was $ 19.1 million and $ 27.0 million, respectively, and $ 58.9 million and $ 76.1 million for the nine months ended September 30, 2022 and September 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):

June 30, 2022

September 30, 2022

Property and Equipment, Net

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

June 30, 2022

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

September 30, 2022

December 31, 2021

6 unchanged sentences

Property and equipment, net

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.

Depreciation expense for the three months ended September 30, 2022 and September 30, 2021 was $ 9.7 million and $ 9.6 million, respectively, and $ 29.3 million and $ 28.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Debt and Credit Facilities

Debt consisted of the following (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

7 unchanged sentences

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.

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 3 0 , 2022 and December 31, 2021 were 3.22 % and 1.36 %, respectively.

The borrowings under the Credit Agreement bear interest at either a n adjusted Term SOFR benchmark 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 September 3 0 , 2022 and December 31, 2021 were 4.46 % 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 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 .

Letters of credit commitments outstanding under this agreement aggregated to $ 44.5 million and $ 44.3 million at September 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 $ 2.5 million and $ 0.1 million for the three months ended September 30 , 2022 and September 30 , 2021 , respectively and was $ 3.4 million and $ 0.6 million for nine months ended September 30, 2022 and September 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 .

There w as $ 101.2 million outstanding under the Credit Agreement on September 30 , 2022 .

Delayed Draw Term Loan

In September 2022 , the Company entered into a $ 350 million unsecured delayed draw term loan with an increase option of up to $ 150 million (the “2022 Delayed Draw Term Loan”).

The 2022 Delayed Draw Term Loan may be borrowed in a single draw during the period from and including the Closing Date to the earlier to occur of (a) the date of termination of the 2022 Delayed Draw Term Loan by the Company pursuant to the terms of the 2022 Delayed Draw Term Loan Agreement and (b) six (6) months following the Closing Date.

Proceeds of the 2022 Delayed Draw Term Loan Agreement may be used (a) to pay off in full, or partially payoff, the Company’s existing Senior Notes, (b) to prepay revolving loans outstanding under the Revolving Credit Agreement (as defined below), or (c) for working capital, capital expenditures and other lawful corporate purposes.

No amounts were funded under the 2022 Delayed Draw Term Loan Agreement on the Closing Date.

The Company incurred $ 0.9 million of debt issuance costs in connection with the delayed draw term loan as of September 30, 2022.

There were no amounts outstanding under the 2022 Delayed Draw Term Loan as of September 30, 2022.

The 2022 Delayed Draw Term Loan has a three-year maturity and permits the Company to borrow in U.S.

The 2022 Delayed Draw Term Loan does not require any amortization payments by the Company.

Depending on the Company’s consolidated leverage ratio (or debt rating after such time as the Company has such rating), borrowings under the 2022 Delayed Draw Term Loan Agreement will bear interest at either an adjusted Term SOFR benchmark rate plus a margin between 0.875 % and 1.500 % or a base rate plus a margin of between 0 % and 0.500 % and will initially bear interest at the middle of this range.

The Company will pay a ticking fee on unused term loan commitments at a rate of 0.175 % commencing with the date that is ninety (90) days after the Closing Date.

Amounts outstanding under the 2022 Delayed Draw Term Loan Agreement may be prepaid at the option of the Company without premium or penalty, subject to customary breakage fees in connection with the prepayment of benchmark rate loans.

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 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.

Interest expense related to the Senior Notes for the three months ended September 30, 2022 and September 30, 2021 was $ 2.6 million and $ 2.7 million, respectively, and was $ 7.8 million and $ 8.9 million for the nine months ended September 30, 2022 and September 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 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.

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 June 30, 2022 approximates $ 211.3 million.

The Company made interest payments of $ 5.1 million for the thre e months ended September 30, 2022 and $ 10.2 million for the ni n e months ended September 30, 2022 , and $ 6.2 million for the three months ended September 30, 2021 and $ 12.4 million for the nine months ended September 30, 2021 .

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 September 3 0 , 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 June 30, 2022 and December 31, 2021.

The Company was in compliance with these covenants at September 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 $ 229.6 million and $ 223.0 million at June 30, 2022 and December 31, 2021, respectively.

Letters of credit commitments outstanding under these bank lines aggregated $ 239.8 million and $ 223.0 million at September 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

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 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.

7 unchanged sentences

during any calendar quarter commencing after the calendar quarter ending on December 31, 2021, if the last reported sale price of the Company’s common stock for at least 20 trading days, whether or not consecutive, during a period of 30 consecutive trading days ending on, and including the last trading day of the immediately preceding calendar quarter, is greater than or equal to 130 % of the conversion price on each applicable trading day;

during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $ 1,000 principal amount of Convertible Senior Notes for such trading day was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

trading day was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

if the Company calls such Convertible Senior Notes for redemption;

5 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 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.

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

The carrying amount allocated to the equity component, which is recognized as a debt discount, represented 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 were 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, 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.

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

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

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

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 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.

The Company recognized interest expense of $ 0.7 million and $ 0.7 million for the three months ended September 30, 2022 and September 30, 2021, respectively, and $ 2.2 million and $ 2.2 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

As of September 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 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.

On August 9, President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act into law, which includes an advanced manufacturing investment tax credit, among other provisions.

On August 16, President Biden signed the Inflation Reduction Act (the IRA) into law, which includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions.

Based on the Company’s review, these new laws do not result in a material change to the Company’s income tax provision for 2022.

The Company’s effective tax rate was 24.0 % and 25.5 % for the three months ended September 30, 2022 and 2021, respectively.

The change in the effective tax rate was due primarily to a decrease in withholding tax, a change in jurisdictional mix of earnings and a nonrecurring write down of a foreign tax receivable included in 2021, partially offset by a release of a valuation allowance included in 2021.

The Company’s effective tax rate for the nine months ended September 30, 2022 and 2021 was 23.5 % and 25.8 %, respectively.

The change in effective tax rate was due primarily to a decrease in withholding tax, a change in jurisdictional mix of earnings, a settlement of an uncertain tax position and a nonrecurring write down of a foreign tax receivable included in 2021, partially offset by a release of a valuation allowance included in 2021.

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

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.

Federal income tax rate of 21.0 % for the three and nine months ended September 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 September 30, 2022, the Company’s deferred tax assets were subject to a valuation allowance of $ 28.5 million primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital losses that

the Company has determined are not more-likely-than-not to be realized.

The factors used to assess the likelihood of realization include:

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 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.

As of September 30, 2022 and December 31, 2021, the liability for income taxes associated with unrecognized tax benefits was $ 22.7 million and $ 21.2 million, respectively.

It is reasonably possible that the Company may realize a decrease in our unrecognized tax benefits of approximately $ 4.0 million during the next 12 months as a result of concluding various tax audits and closing tax years.

32 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 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.

As of September 30, 2022 and December 31, 2021, total shares of the Company’s common stock outstanding were 103,470,622 and 103,659,731 , respectively, of which 64,144,230 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 $ 13.5 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.

Total ESOP contribution expense was $ 15.4 million and $ 14.8 million for the three months ended September 30, 2022 and September 30, 2021, respectively, and $ 42.0 million and $ 41.3 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

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

11 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 $ 83.0 million and $ 73.2 million at June 30, 2022 and December 31, 2021, respectively.

Letters of credit outstanding described in “Note 10 – Debt and Credit Facilities” that relate to project ventures are $ 99.2 million and $ 73.2 million at September 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):

June 30, 2022

September 30, 2022

December 31, 2021

5 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 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):

June 30, 2022

September 30, 2022

December 31, 2021

7 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Equity in earnings of unconsolidated joint ventures

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.

The Company received net distributions from its unconsolidated joint ventures for the three months ended September 30, 2022 and September 30, 2021 of $ 13.2 million and $ 7.3 million, respectively.

The Company received net distributions from its unconsolidated joint ventures for the nine months ended September 30, 2022 of $ 21.4 million and had net contributions to its unconsolidated joint ventures for the nine months ended September 30, 2021 of $ 0.5 million.

For the three and nine months ended September 30, 2022, the Company recorded write-downs of $ 6.4 million and $ 9.4 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 $ 6.4 million and $ 4.8 million, respectively for the three months ended September 2022.

Operating and net income were decreased by $ 9.4 million and $ 7.0 million, respectively, for the nine months ended September 30, 2022.

The write-downs decreased diluted earnings per share by $ 0.04 and $ 0.06 for the three and nine months ended September 30, 2022.

For the three and nine months ended September 30, 2021, the Company recorded write-downs of $ 5.5 million and $ 10.6 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 $ 5.5 million and $ 4.1 million, respectively for the three months ended September 2021.

Operating and net income were decreased by $ 10.6 million and $ 7.9 million, respectively, for the nine months ended September 30, 2021.

The write-downs decreased diluted earnings per share by $ 0.04 and $ 0.07 for the three and nine months ended September 30, 2021.

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 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.

Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended September 30, 2022 and September 30, 2021 were $ 59.9 million and $ 48.3 million, respectively, and $ 159.0 million and $ 152.9 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

For the three months ended September 30, 2022 and September 30, 2021, the Company incurred $ 41.7 million and $ 37.3 million, respectively, and for the nine months ended September 30, 2022 and September 30, 2021 incurred $ 112.7 million and $ 116.9 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):

June 30, 2022

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

At September 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 and six months ended June 30, 2022 and June 30, 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 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.

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the three months ended September 30, 2022 and September 30, 2021 were 2,449 and 4,656 , respectively, and for the nine months ended September 30, 2022 and September 30, 2021 were 11,564 and 6,838 , respectively.

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

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Basic weighted average number of shares outstanding

4 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Net income attributable to Parsons Corporation

7 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Total shares repurchased

1 unchanged sentence

Average price paid per share

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

As of September 30, 2022, the Company has $ 58.8 million remaining under the stock repurchase program.

Segment Information

7 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”), 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 Chairwoman 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

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Federal Solutions revenue

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Adjusted EBITDA attributable to Parsons Corporation

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Federal Solutions

17 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

North America

2 unchanged sentences

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

June 30, 2022

September 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 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.

North America includes revenue in the United States for the three months ended September 30, 2022 and September 30, 2021 of $ 851.5 million and $ 730.7 million, respectively, and for the nine months ended September 30, 2022 and September 30, 2021 of $ 2.3 billion and $ 2.0 billion, respectively.

North America property and equipment, net includes $ 84.0 million and $ 95.0 million of property and equipment, net in the United States at September 30, 2022 and December 31, 2021, respectively.

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

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Defense and Intelligence

10 unchanged sentences

Subsequent Events

On October 26, 2022, the Company prepaid its outstanding private placement debt of $ 200.0 million described in Note 10 – Debt and Credit Facilities with borrowings under the revolving credit facility.

In connection with the prepayment, the Company incurred $ 2.1 million of additional interest expense associated with a make-whole amount and unamortized debt issuance costs.

On October 28, 2022, the Company borrowed $ 350.0 million on the 2022 Delayed Draw Term Loan described in Note 10 – Debt and Credit Facilities and used the proceeds to pay down the borrowings under the revolving credit facility.

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