What changed in this filing

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Item 1A. Risk Factors

2023-02-17 compared with 2022-02-23 · 42 added, 56 removed, 646 unchanged (13% of the section changed)

6 unchanged sentences

Risk Relating to Our Business

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

Government spending and priorities could change in a manner that adversely affects our future revenue and limits our growth prospects.

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Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property rights could result in significant costs and substantially harm our business, financial condition and operation results.

We have operations in the Middle East and neighboring regions, and these regions may experience turmoil that may impact our current projects, future business and financial stability.

We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may experience turmoil, political upheaval and similar crises that may impact our current projects, future business and financial stability.

We may not realize the full value of our backlog, which may result in lower-than-expected revenue.

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

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

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

While many of these restrictions have been removed or reduced, the spread of new variants or viruses may result in the imposition of additional restrictions.

In addition, governments and central banks in several parts of the world have enacted, or may enact in the future, fiscal and monetary stimulus measures to counteract the impacts of any such emergency.

The extent to which any emergency may impact our business will depend on future developments, which are highly uncertain and unpredictable, and the resultant financial impact cannot be estimated reasonably at this time but may materially adversely affect our ability to collect accounts receivables and our business, results of operations, financial condition and cash flows.

Further, the economic impact of such events may cause extreme volatility in financial and other capital markets which may continue to adversely impact our stock price and our ability to access capital markets.

Health emergencies may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K for the year ended December 31, 2022, such as those relating to government spending and priorities.

Risk Related to Our Common Stock

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You may not have the same protections afforded to stockholders of companies that are subject to such requirements.

Risks Related to the COVID-19 Pandemic

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

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

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

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

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

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

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

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets which has and may continue to adversely impact our stock price and our ability to access capital markets.

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

Further, in September 2021, President Joseph R.

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

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

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

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

Risks Related to Government Contracts

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

In March 2018, for example, President Trump signed proclamations to impose tariffs on steel and aluminum imports per the U.S.

Trade Expansion Act of 1962 increasing the price for steel and aluminum in the United States which could impact client spending.

Government spending for our Critical Infrastructure services may also depend on factors related to government demand, such as the condition of the existing infrastructure and buildings and the need for new or expanded infrastructure and buildings.

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In particular, it represents substantially all of the revenue of our Federal Solutions segment.

Approximately 52% of our consolidated revenues in 2021, 49% in 2020 and 48% in 2019, and approximately 17% of accounts receivable as of December 31, 2021 and 19% as of December 31, 2020 were derived from contracts with the U.S.

Approximately 17% of accounts receivable as of December 31, 2022 and December 31, 2021 were derived from contracts with the U.S.

federal government and its agencies.

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

Our existing and potential clients are similarly focused on increasing the

productivity of their contractual arrangements.

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

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

Moreover, government agencies may face restrictions or

pressure regarding the type and amount of services that they may obtain from private contractors.

Legislation, regulations and initiatives dealing with procurement reform, mitigation of potential OCIs, deterrence of fraud, and environmental responsibility or sustainability could have an adverse effect on us.

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

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

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

condition and results of operation s .

For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenditures in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes.

While the most significant impact of this provision is to cash tax liability for 2022, the tax year in which the provision took effect, the impact will decline annually over the five-year amortization period to an immaterial amount beginning in year six.

Risks Related to Acquisitions and Joint Ventures

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We depend on our teaming arrangements and relationships with other contractors and subcontractors.

If we are not able to maintain these relationships, of if these parties fail to satisfy

their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected.

If we are not able to maintain these relationships, of if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected.

We rely on teaming relationships with other prime contractors and subcontractors in order to submit bids for large procurements or other opportunities where we believe the combination of services, products, and solutions provided by us and our teammates will help us to win and perform the contract.

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Work for non-government and commercial clients involving the protection of information systems or that store clients’ information could also be harmed due to associated security breaches.

Damage to our reputation or limitations on our eligibility for additional work or any liability resulting from a security breach in one of the systems we develop, install, maintain, or otherwise support could have a material adverse effect on our business, financial condition and results of operations.

Damage to our reputation or limitations on our eligibility for additional work or any liability

resulting from a security breach in one of the systems we develop, install, maintain, or otherwise support could have a material adverse effect on our business, financial condition and results of operations.

Services we provide and technologies we develop are designed to detect and monitor threats to our clients, the failure of which may lead to reputational harm or liability against us by our clients or third parties and may subject our staff to potential threats, risk of loss or harm.

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

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

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

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

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

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

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If any of our third-party insurers fail, suddenly cancel our coverage or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase, and the management of our business operations would be disrupted.

In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits.

In addition, there can be

no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits.

Adverse judgments or settlements in legal disputes could result in materially adverse monetary damages or injunctive relief and damage our reputation.

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For example, our performance under U.S.

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

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

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

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

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Some of our services and operations involve the handling or disposal of hazardous substances or dangerous materials, including explosive, chemical, biological, radiological or nuclear materials.

These activities generally subject us to extensive foreign, federal, state and local environmental protection and health and safety laws and regulations, which, among other things, require us to incur costs to comply with these regulations and could impose liability on us for handling or disposing of hazardous substances or dangerous materials.

These activities generally subject us to extensive foreign, federal, state and local environmental protection and health and safety laws and regulations,

which, among other things, require us to incur costs to comply with these regulations and could impose liability on us for handling or disposing of hazardous substances or dangerous materials.

Numerous governmental authorities, such as the U.S.

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

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

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

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

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

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Trade secrets are generally difficult to protect.

Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information and/or the infringement of our patents and copyrights.

Although our employees are subject to confidentiality obligations, this protection may be inadequate to

deter or prevent misappropriation of our confidential information and/or the infringement of our patents and copyrights.

Further, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.

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imposition of governmental controls and changes in laws, regulations or policies;

political and economic instability, such as in the Middle East;

political and economic instability and turmoil internationally, including countries in the Middle East;

civil unrest, acts of terrorism, force majeure, war, or other armed conflict;

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currency exchange rate fluctuations, devaluations and other conversion restrictions;

health and safety concerns, including those related to the COVID-19 pandemic and other potential epidemics.

health and safety concerns, including those related to the COVID-19 pandemic, variants and other potential epidemics.

Any of these factors could have a material adverse effect on our business, financial condition or results of operations.

We have operations in the Middle East and neighboring regions, and these regions may experience turmoil that may impact our current projects, future business and financial stability.

We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may experience turmoil, political upheaval or similar crises that may impact our current projects, future business and financial stability.

We currently have operations in the Middle East, including in Oman, Qatar, Saudi Arabia and the United Arab Emirates.

These countries experience frequent political turmoil such as the tensions among Qatar and several of its neighbors, including Saudi Arabia and the United Arab Emirates.

Further, we may undertake work in other countries that may experience turmoil, political upheaval, or other similar crises.

This uncertainty may affect our ability to continue our projects in these regions due to lack of resources, local support, and safety for our workers.

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In addition, there can be no assurance that our backlog will result in actual revenue in any particular period.

This is because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, including congressional appropriations, many of which are beyond our control.

This is because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, including congressional appropriations, many of which are

beyond our control.

In particular, delays in the completion of the U.S.

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

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

are able to achieve revenue growth.

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

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

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

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

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

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

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

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In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses.

We have entered into twenty-four union labor or collective bargaining agreements as of December 31, 2021.

We have entered into twenty-three union labor or collective bargaining agreements as of December 31, 2022.

The outcome of any future negotiations relating to union representation or collective bargaining agreements for these or other employees in the future may not be favorable to us.

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

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

our operating performance.

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

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

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While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares.

In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock.

In addition, in the past, when the

market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock.

If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit.

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Of these shares, 63,742,151 shares are owned by the ESOP, 40,960,845 shares are publicly owned, and 41,429,020 shares are Treasury stock.

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

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

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

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

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As previously noted in the section of Part 1, Item 1 entitled “Employee Stock Ownership Plan”, in December 2020, the board of directors approved an amendment to the Employee Stock Ownership Plan to provide more flexible diversification rights for participants, and in January 2021, the board of directors approved the modification of the thresholds for distributions to participants in the ESOP effective March 1, 2021.

In April 2022, the board of directors approved an amendment providing for lump sum distributions to participants and removing the annual installments.

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.

ESOP distributions are made in the form of shares of our common stock (other than distributions in respect of fractional shares, which will be made in cash).

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If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors