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PARSONS CORP - Quarter Report: 2019 September (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to

Commission File Number: 001-07782

 

Parsons Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

95-3232481

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

5875 Trinity Parkway #300

Centreville, Virginia

20120

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (703) 988-8500

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $1 par value

 

PSN

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 4, 2019, the registrant had 99,262,334 shares of common stock, $1.00 par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

1

Item 1.

Financial Statements (Unaudited)

 

1

 

Consolidated Balance Sheets

 

1

 

Consolidated Statements of Income

 

2

 

Consolidated Statements of Comprehensive Income

 

3

 

Consolidated Statements of Cash Flows

 

4

 

Consolidated Statements of Shareholders’ Equity (Deficit)

 

5

 

Notes to Unaudited Consolidated Financial Statements

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

46

Item 4.

Controls and Procedures

 

46

PART II.

OTHER INFORMATION

 

47

Item 1.

Legal Proceedings

 

47

Item 1A.

Risk Factors

 

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

Item 3.

Defaults Upon Senior Securities

 

47

Item 4.

Mine Safety Disclosures

 

47

Item 5.

Other Information

 

47

Item 6.

Exhibits

 

48

Signatures

 

49

 

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)

 

 

 

 

December 31, 2018

 

 

September 30, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (including $73,794 and $55,054 Cash of consolidated joint ventures)

 

$

280,221

 

 

$

133,870

 

 

Restricted cash and investments

 

 

974

 

 

 

12,592

 

 

Accounts receivable, net (including $180,325 and $164,460 Accounts receivable of consolidated joint ventures, net)

 

 

623,286

 

 

 

673,674

 

 

Contract assets (including $21,270 and $26,542 Contract assets of consolidated joint ventures)

 

 

515,319

 

 

 

583,670

 

 

Prepaid expenses and other current assets (including $11,837 and $8,149 Prepaid expenses and other current assets of consolidated joint ventures)

 

 

69,007

 

 

 

70,455

 

 

Total current assets

 

 

1,488,807

 

 

 

1,474,261

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net (including $2,561 and $3,171 Property and equipment of consolidated joint ventures, net)

 

 

91,849

 

 

 

109,238

 

 

Right of use assets, operating leases

 

 

-

 

 

 

219,207

 

 

Goodwill

 

 

736,938

 

 

 

1,050,077

 

 

Investments in and advances to unconsolidated joint ventures

 

 

63,560

 

 

 

66,584

 

 

Intangible assets, net

 

 

179,519

 

 

 

281,157

 

 

Deferred tax assets

 

 

5,680

 

 

 

111,610

 

 

Other noncurrent assets

 

 

46,225

 

 

 

50,510

 

 

Total assets

 

$

2,612,578

 

 

$

3,362,644

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable (including $87,914 and $90,692 Accounts payable of consolidated joint ventures)

 

$

226,345

 

 

$

226,563

 

 

Accrued expenses and other current liabilities (including $73,209 and $63,880 Accrued expenses and other current liabilities of consolidated joint ventures)

 

 

559,700

 

 

 

639,650

 

 

Contract liabilities (including $38,706 and $43,324 Contract liabilities of consolidated joint ventures)

 

 

208,576

 

 

 

231,032

 

 

Short-term lease liabilities, operating leases

 

 

-

 

 

 

49,074

 

 

Income taxes payable

 

 

11,540

 

 

 

9,940

 

 

Total current liabilities

 

 

1,006,161

 

 

 

1,156,259

 

 

Long-term employee incentives

 

 

41,913

 

 

 

45,749

 

 

Deferred gain resulting from sale-leaseback transactions

 

 

46,004

 

 

 

-

 

 

Long-term debt

 

 

429,164

 

 

 

249,306

 

 

Long-term lease liabilities, operating leases

 

 

-

 

 

 

188,571

 

 

Deferred tax liabilities

 

 

6,240

 

 

 

7,337

 

 

Other long-term liabilities

 

 

127,863

 

 

 

120,971

 

 

Total liabilities

 

 

1,657,345

 

 

 

1,768,193

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

Redeemable common stock held by Employee Stock Ownership Plan (ESOP), $1 par value; 78,172,809 and 78,138,602 shares outstanding, recorded at redemption value

 

 

1,876,309

 

 

 

2,577,011

 

Shareholders' equity (deficit):

 

 

 

 

 

 

 

 

 

Common stock, $1 par value; authorized 1,000,000,000 shares; 125,097,684 and 146,393,959 shares issued; 0 and 21,296,275 shares outstanding

 

 

-

 

 

 

21,296

 

 

Treasury stock, 46,918,140 and 46,959,082 shares at cost

 

 

(957,025

)

 

 

(957,844

)

 

Additional paid-in capital

 

 

-

 

 

 

8,772

 

 

Retained earnings (accumulated deficit)

 

 

12,445

 

 

 

(64,896

)

 

Accumulated other comprehensive loss

 

 

(22,957

)

 

 

(17,982

)

 

Total Parsons Corporation shareholders' equity (deficit)

 

 

(967,537

)

 

 

(1,010,654

)

 

Noncontrolling interests

 

 

46,461

 

 

 

28,094

 

 

Total shareholders' equity (deficit)

 

 

(921,076

)

 

 

(982,560

)

 

Total liabilities, redeemable common stock and shareholders' equity (deficit)

 

$

2,612,578

 

 

$

3,362,644

 

 

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

1


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share information)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

For the Nine Months Ended

 

 

 

September 28, 2018

 

 

September 30, 2019

 

 

 

September 28, 2018

 

 

September 30, 2019

 

Revenues

 

$

976,157

 

 

$

1,023,277

 

 

 

$

2,631,568

 

 

$

2,917,424

 

Direct costs of contracts

 

 

783,018

 

 

 

798,552

 

 

 

 

2,054,201

 

 

 

2,297,512

 

Equity in earnings of unconsolidated joint ventures

 

 

12,707

 

 

 

7,274

 

 

 

 

25,577

 

 

 

29,305

 

Indirect, general and administrative expenses

 

 

150,733

 

 

 

178,550

 

 

 

 

422,028

 

 

 

581,428

 

Operating income

 

 

55,113

 

 

 

53,449

 

 

 

 

180,916

 

 

 

67,789

 

Interest income

 

 

351

 

 

 

427

 

 

 

 

2,358

 

 

 

1,129

 

Interest expense

 

 

(5,940

)

 

 

(4,909

)

 

 

 

(14,475

)

 

 

(19,577

)

Other income (expense), net

 

 

696

 

 

 

(3,127

)

 

 

 

355

 

 

 

(1,580

)

Gain associated with claim on long-term contract

 

 

-

 

 

 

-

 

 

 

 

74,578

 

 

 

-

 

Total other income (expense)

 

 

(4,893

)

 

 

(7,609

)

 

 

 

62,816

 

 

 

(20,028

)

Income before income tax provision

 

 

50,220

 

 

 

45,840

 

 

 

 

243,732

 

 

 

47,761

 

Income tax benefit (provision)

 

 

(4,154

)

 

 

15,453

 

 

 

 

(18,526

)

 

 

67,063

 

Net income including noncontrolling interests

 

 

46,066

 

 

 

61,293

 

 

 

 

225,206

 

 

 

114,824

 

Net income attributable to noncontrolling interests

 

 

(4,844

)

 

 

(4,481

)

 

 

 

(10,316

)

 

 

(8,012

)

Net income attributable to Parsons Corporation

 

$

41,222

 

 

$

56,812

 

 

 

$

214,890

 

 

$

106,812

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic and diluted

 

$

0.52

 

 

$

0.57

 

 

 

$

2.66

 

 

$

1.19

 

 

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

2


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 28, 2018

 

 

September 30, 2019

 

 

September 28, 2018

 

 

September 30, 2019

 

Net income including noncontrolling interests

 

$

46,066

 

 

$

61,293

 

 

$

225,206

 

 

$

114,824

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

2,303

 

 

 

171

 

 

 

(3,079

)

 

 

4,958

 

Pension adjustments, net of tax

 

 

10

 

 

 

(9

)

 

 

(27

)

 

 

17

 

Comprehensive income including noncontrolling interests, net of tax

 

 

48,379

 

 

 

61,455

 

 

 

222,100

 

 

 

119,799

 

Comprehensive income attributable to noncontrolling interests, net of tax

 

 

(4,822

)

 

 

(4,481

)

 

 

(10,270

)

 

 

(8,012

)

Comprehensive income attributable to Parsons Corporation,

   net of tax

 

$

43,557

 

 

$

56,974

 

 

$

211,830

 

 

$

111,787

 

 

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

3


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

For the Nine Months Ended

 

 

 

 

September 28, 2018

 

 

September 30, 2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

225,206

 

 

$

114,824

 

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

46,656

 

 

 

92,692

 

 

Amortization of deferred gain

 

 

(5,440

)

 

 

-

 

 

Amortization of debt issue costs

 

 

548

 

 

 

802

 

 

Gain associated with claim on long-term contract

 

 

(129,674

)

 

 

-

 

 

Loss on disposal of property and equipment

 

 

59

 

 

 

1,045

 

 

Provision for doubtful accounts

 

 

9,094

 

 

 

(964

)

 

Deferred taxes

 

 

1,281

 

 

 

(105,161

)

 

Foreign currency transaction gains and losses

 

 

2,007

 

 

 

1,689

 

 

Equity in earnings of unconsolidated joint ventures

 

 

(25,577

)

 

 

(29,305

)

 

Return on investments in unconsolidated joint ventures

 

 

31,728

 

 

 

32,848

 

 

Stock-based compensation

 

 

-

 

 

 

9,224

 

 

Contributions of treasury stock

 

 

34,070

 

 

 

36,779

 

 

Changes in assets and liabilities, net of acquisitions and newly consolidated

   joint ventures:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

384,216

 

 

 

(31,726

)

 

Contract assets

 

 

(527,768

)

 

 

(59,161

)

 

Prepaid expenses and current assets

 

 

(13,028

)

 

 

2,980

 

 

Accounts payable

 

 

38,424

 

 

 

(6,946

)

 

Accrued expenses and other current liabilities

 

 

9,558

 

 

 

40,186

 

 

Billings in excess of costs

 

 

(151,892

)

 

 

-

 

 

Contract liabilities

 

 

168,579

 

 

 

20,703

 

 

Provision for contract losses

 

 

(13,992

)

 

 

-

 

 

Income taxes

 

 

3,250

 

 

 

(3,019

)

 

Other long-term liabilities

 

 

12,517

 

 

 

13,138

 

 

Net cash provided by operating activities

 

 

99,822

 

 

 

130,628

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(19,436

)

 

 

(44,030

)

 

Proceeds from sale of property and equipment

 

 

112

 

 

 

2,824

 

 

Payments for acquisitions, net of cash acquired

 

 

(481,163

)

 

 

(495,690

)

 

Investments in unconsolidated joint ventures

 

 

(4,276

)

 

 

(11,446

)

 

Return of investments in unconsolidated joint ventures

 

 

1,126

 

 

 

6,632

 

 

Net cash used in investing activities

 

 

(503,637

)

 

 

(541,710

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

260,000

 

 

 

530,000

 

 

Repayments of borrowings

 

 

(20,000

)

 

 

(710,000

)

 

Payments for debt costs and credit agreement

 

 

(468

)

 

 

(286

)

 

Contributions by noncontrolling interests

 

 

13,768

 

 

 

8,999

 

 

Distributions to noncontrolling interests

 

 

(6,858

)

 

 

(35,378

)

 

Purchase of treasury stock

 

 

(73,308

)

 

 

(819

)

 

IPO proceeds, net

 

 

-

 

 

 

536,879

 

 

Dividend paid

 

 

-

 

 

 

(52,093

)

 

Net cash provided by financing activities

 

 

173,134

 

 

 

277,302

 

 

Effect of exchange rate changes

 

 

(1,233

)

 

 

(953

)

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(231,914

)

 

 

(134,733

)

 

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

446,144

 

 

 

281,195

 

 

End of period

 

$

214,230

 

 

$

146,462

 

 

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

4


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Three Months Ended September 30, 2019 and September 28, 2018

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

(Accumulated

 

 

Comprehensive

 

 

Parsons

 

 

Noncontrolling

 

 

 

 

 

 

 

Stock

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

Total

 

Balance at June 30, 2019

 

$

2,880,189

 

 

 

$

21,296

 

 

$

(957,844

)

 

$

-

 

 

$

(424,886

)

 

$

(18,144

)

 

$

(1,379,578

)

 

$

37,352

 

 

$

(1,342,226

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

56,812

 

 

 

-

 

 

 

56,812

 

 

 

4,481

 

 

 

61,293

 

Foreign currency translation gain, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

171

 

 

 

171

 

 

 

-

 

 

 

171

 

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9

)

 

 

(9

)

 

 

-

 

 

 

(9

)

Contributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

852

 

 

 

852

 

Distributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,591

)

 

 

(14,591

)

Stock-based compensation

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

9,224

 

 

 

-

 

 

 

-

 

 

 

9,224

 

 

 

-

 

 

 

9,224

 

IPO proceeds, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

(452

)

 

 

-

 

 

 

-

 

 

 

(452

)

 

 

-

 

 

 

(452

)

Accretion of redeemable common stock

 

 

(303,178

)

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

303,178

 

 

 

-

 

 

 

303,178

 

 

 

-

 

 

 

303,178

 

Balance at September 30, 2019

 

$

2,577,011

 

 

 

$

21,296

 

 

$

(957,844

)

 

$

8,772

 

 

$

(64,896

)

 

$

(17,982

)

 

$

(1,010,654

)

 

$

28,094

 

 

$

(982,560

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 29, 2018

 

$

1,822,309

 

 

 

$

-

 

 

$

(909,368

)

 

$

-

 

 

$

15,894

 

 

$

(20,397

)

 

$

(913,871

)

 

$

43,935

 

 

$

(869,936

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

41,222

 

 

 

-

 

 

 

41,222

 

 

 

4,844

 

 

 

46,066

 

Foreign currency translation gain, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,294

 

 

 

2,294

 

 

 

9

 

 

 

2,303

 

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

 

 

10

 

 

 

-

 

 

 

10

 

Purchase of treasury stock

 

 

(40,312

)

 

 

 

-

 

 

 

(40,312

)

 

 

-

 

 

 

40,312

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Contributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

115

 

 

 

115

 

Distributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,096

)

 

 

(4,096

)

Balance at September 28, 2018

 

$

1,781,997

 

 

 

$

-

 

 

$

(949,680

)

 

$

-

 

 

$

97,428

 

 

$

(18,093

)

 

$

(870,345

)

 

$

44,807

 

 

$

(825,538

)

 

 

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

5


PARSONS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Nine Months Ended September 30, 2019 and September 28, 2018

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

(Accumulated

 

 

Comprehensive

 

 

Parsons

 

 

Noncontrolling

 

 

 

 

 

 

 

Stock

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

Total

 

Balance at December 31, 2018

 

$

1,876,309

 

 

 

$

-

 

 

$

(957,025

)

 

$

-

 

 

$

12,445

 

 

$

(22,957

)

 

$

(967,537

)

 

$

46,461

 

 

$

(921,076

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106,812

 

 

 

-

 

 

 

106,812

 

 

 

8,012

 

 

 

114,824

 

Foreign currency translation gain, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,958

 

 

 

4,958

 

 

 

-

 

 

 

4,958

 

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17

 

 

 

17

 

 

 

-

 

 

 

17

 

ASC 842 transition adjustment

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52,608

 

 

 

-

 

 

 

52,608

 

 

 

-

 

 

 

52,608

 

Purchase of treasury stock

 

 

(819

)

 

 

 

-

 

 

 

(819

)

 

 

-

 

 

 

819

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Contributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,999

 

 

 

8,999

 

Distributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(35,378

)

 

 

(35,378

)

Dividend paid

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52,093

)

 

 

-

 

 

 

(52,093

)

 

 

-

 

 

 

(52,093

)

Stock-based compensation

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

9,224

 

 

 

-

 

 

 

-

 

 

 

9,224

 

 

 

-

 

 

 

9,224

 

Conversion of S-Corp to C-Corp

 

 

25,877

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(25,877

)

 

 

-

 

 

 

(25,877

)

 

 

-

 

 

 

(25,877

)

IPO proceeds, net

 

 

-

 

 

 

 

21,296

 

 

 

-

 

 

 

515,582

 

 

 

-

 

 

 

-

 

 

 

536,878

 

 

 

-

 

 

 

536,878

 

Accretion of redeemable common stock

 

 

675,644

 

 

 

 

-

 

 

 

-

 

 

 

(516,034

)

 

 

(159,610

)

 

 

-

 

 

 

(675,644

)

 

 

-

 

 

 

(675,644

)

Balance at September 30, 2019

 

$

2,577,011

 

 

 

$

21,296

 

 

$

(957,844

)

 

$

8,772

 

 

$

(64,896

)

 

$

(17,982

)

 

$

(1,010,654

)

 

$

28,094

 

 

$

(982,560

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 29, 2017

 

$

1,855,305

 

 

 

$

-

 

 

$

(876,372

)

 

$

-

 

 

$

(186,035

)

 

$

(15,003

)

 

$

(1,077,410

)

 

$

27,494

 

 

$

(1,049,916

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

214,890

 

 

 

-

 

 

 

214,890

 

 

 

10,316

 

 

 

225,206

 

Foreign currency translation (loss), net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,063

)

 

 

(3,063

)

 

 

(16

)

 

 

(3,079

)

Pension adjustments, net

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27

)

 

 

(27

)

 

 

-

 

 

 

(27

)

Adoption of ASC 606

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,735

)

 

 

-

 

 

 

(4,735

)

 

 

103

 

 

 

(4,632

)

Purchase of treasury stock

 

 

(73,308

)

 

 

 

 

 

 

 

(73,308

)

 

 

-

 

 

 

73,308

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Contributions

 

 

-

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,768

 

 

 

13,768

 

Distributions

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,858

)

 

 

(6,858

)

Balance at September 28, 2018

 

$

1,781,997

 

 

 

$

-

 

 

$

(949,680

)

 

$

-

 

 

$

97,428

 

 

$

(18,093

)

 

$

(870,345

)

 

$

44,807

 

 

$

(825,538

)

 

 

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

 

 

 

6


 

Parsons Corporation and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

 

1.

Description of Operations

Organization

Parsons Corporation, a Delaware corporation, and its subsidiaries (collectively, the “Company”) provide sophisticated design, engineering and technical services, and smart and agile software to the United States federal government and Critical Infrastructure customers worldwide. The Company performs work in various foreign countries through local subsidiaries, joint ventures and foreign offices maintained to carry out specific projects.

Initial Public Offering

On May 8, 2019, the Company consummated its initial public offering (“IPO”) whereby the Company sold 18,518,500 shares of common stock for $27.00 per share.  The underwriters exercised their share option on May 14, 2019 to purchase an additional 2,777,775 shares at the share price of $25.515 which was the IPO share price of $27.00 less the underwriting discount of $1.485 per share.  The net proceeds of the IPO and the underwriters’ share option were $536.9 million, after deducting underwriting discounts and other fees, and were used to fund an IPO dividend of $52.1 million, repay the outstanding balance of $150.0 million under our Term Loan, and repay outstanding indebtedness under our Revolving Credit Facility.

Stock Dividend

On April 15, 2019, the board of directors of the Company declared a common stock dividend in a ratio of two shares of common stock for every one share of common stock presently held by the Company’s stockholder (the “Stock Dividend”). The record date of this common Stock Dividend, which the Company refers to as the Stock Dividend was May 7, 2019, the day immediately prior to the consummation of the Company’s IPO on May 8, 2019, and the payment date of the Stock Dividend was May 8, 2019. Purchasers of the Company’s common stock in the Company’s public offering were not entitled to receive any portion of the Stock Dividend.

2.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and pursuant to the interim period reporting requirements of Form 10-Q.  They do not include all of the information and footnotes required by GAAP for complete financial statements and, therefore, should be read in conjunction with our consolidated financial statements and the notes thereto included in the Company’s Form S-1/A filed on April 29, 2019.

In the opinion of management, the consolidated financial statements reflect all normal recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented.  The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year or for future years.  

This Quarterly Report on Form 10-Q includes the accounts of our wholly-owned subsidiaries, and joint ventures of which we are the primary beneficiary.  The equity method of accounting is applied for the joint ventures in which the Company does not have a controlling interest, but exerts a significant influence (see “Note 15 – Investments in and Advances to Joint Ventures" for further discussion).

In the first quarter of 2019 the Company adopted Accounting Standards Update (‘ASU”) 2016-02, “Leases” (“Topic 842”), using the modified retrospective method.  The new guidance was applied to leases that existed or were entered into on or after January 1, 2019.  The Company’s results for the reporting period beginning January 1, 2019 have been presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance.  See “Note 6 – Leases” for further discussion of the adoption and the impact on the Company’s financial statements.

7


 

Accumulated Deficit

The Company's accounting policy is to record dividends and accretion of redeemable stock as a reduction of retained earnings. In the absence of retained earnings, the Company will charge the dividends and/or accretion of redeemable stock to Additional Paid-in Capital until depleted and will then charge the remainder to accumulated deficit. As a result of the change in tax status from "S" Corporation to "C" Corporation in the second quarter of 2019, the Company reclassified historical retained earnings for the "S" Corporation from retained earnings to Additional Paid in Capital as of the date of conversion. Subsequent changes in accumulated deficit are related to increases or decreases in the maximum redemption value of redeemable common stock.

Fiscal Periods

In October 2018, our board of directors approved a change in our annual and quarterly fiscal period ends from the last Friday on or before the calendar year or quarterly month-end to the last day of the calendar year or quarterly month-end. Accordingly, the period end for the first, second, and third quarters of fiscal 2018 and fiscal 2019 are March 30, 2018, June 29, 2018, and September 28, 2018, respectively, and March 31, 2019, June 30, 2019, and September 30, 2019, respectively.  The number of days in the three- and nine-month periods ended September 28, 2018 and September 30, 2019 were 91 and 273, respectively, and 92 and 273, respectively.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. The Company’s most significant estimates and judgments involve revenue recognition with respect to the determination of the costs to complete contracts and transaction price; determination of self-insurance reserves; valuation of the Company’s fair value of common stock (for periods prior to the IPO); 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. Please see “Note 2 – Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements included in the Company’s Form S-1/A filed April 29, 2019, for a discussion of the significant estimates and assumptions affecting our consolidated financial statements.  Estimates of costs to complete contracts are continually evaluated as work progresses and are revised when necessary. When a change in estimate is determined to have an impact on contract profit, the Company records a positive or negative adjustment to the consolidated statement of income.  

Inventory

Included in Prepaid expenses and other current assets in the Company’s consolidated balances sheets is inventory.  Inventory consists of uninstalled materials received by the Company awaiting installation at our project sites and raw materials, work-in-process, and finished goods related to the manufacture of advance technology equipment.  Uninstalled materials inventory and the inventory related to advance technology equipment is carried on the Company’s consolidated balance sheets at the lower of cost (which approximates average cost) or net realizable value.

 

Redeemable Common Stock

In connection with the Company’s IPO on May 8, 2019, all Employee Stock Ownership Plan (“ESOP”) shares were contingently redeemable for cash during the 180-day lock-up period which ended on November 3, 2019.  During the 180-day lock-up period, the Company presented all shares held by the ESOP as temporary equity on the consolidated balance sheets as Redeemable common stock held by Employee Stock Ownership Plan (ESOP) at their redemption value.  The consolidated balance sheet, to be presented in the Company’s 2019 Annual Report on Form 10-K, at December 31, 2019 will reflect the reclassification of redeemable common stock held by the ESOP from temporary equity to permanent equity as the lock-up period expires in the fourth quarter.  At the conclusion of the lock-up period all shares held by the ESOP will be redeemable by participants in shares of the Company’s common stock once vesting and eligibility requirements have been met.  

 

8


 

3.

Recently Adopted Accounting Pronouncements

In the first quarter of 2019, the Company adopted Topic 842.  See “Note 6 – Leases” for further discussion of the adoption and the impact on the Company’s financial statements.

In the first quarter of 2019, the Company adopted ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” under which the Company did not elect to reclassify the income tax effects stranded in accumulated other comprehensive income to retained earnings as a result of the enactment of comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act.  As a result, there was no impact on the Company’s financial position, results of operations or cash flows.

On December 30, 2017, the Company adopted ASC 606, “Revenue from Contracts with Customers,” using the modified retrospective method, which provides for a cumulative effect adjustment to retained earnings beginning in fiscal 2018 for those uncompleted contracts impacted by the adoption of the new standard. The difference between the recognition criteria under ASC 606 and our previous recognition practices under ASC 605-35 was recognized through a cumulative adjustment of $4.7 million that was made to the opening balance of accumulated deficit as of December 30, 2017.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the test for goodwill impairment by removing the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied prospectively with early adoption permitted. The Company early adopted the new standard as of the beginning of fiscal 2018 and its adoption did not have a material impact on the consolidated financial statements.

4.

Acquisitions

Polaris Alpha

On May 31, 2018, the Company acquired a 100% ownership interest in Polaris Alpha, a privately owned, advanced technology-focused provider of innovative mission solutions for complex defense, intelligence, and security customers, as well as other U.S. federal government customers, for $489.1 million paid in cash. The Company borrowed $260 million under the credit agreement, as described in “Note 11 – Debt and Credit Facilities,” to partially fund the acquisition. In connection with this acquisition, the Company recognized $6.2 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the fiscal year ended December 31, 2018, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. Polaris Alpha enhances the Company’s artificial intelligence and data analytics expertise with new technologies and solutions. Customers of both companies will benefit from existing, complementary technologies and increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed (in thousands):

 

 

 

Amount

 

Cash and cash equivalents

 

$

7,914

 

Accounts receivable

 

 

29,688

 

Contract assets

 

 

35,229

 

Prepaid expenses and other current assets

 

 

9,295

 

Property and equipment

 

 

9,024

 

Goodwill

 

 

243,471

 

Intangible assets

 

 

199,520

 

Other noncurrent assets

 

 

2,203

 

Accounts payable

 

 

(13,942

)

Accrued expenses and other current liabilities

 

 

(26,419

)

Contract liabilities

 

 

(3,529

)

Deferred tax liabilities

 

 

(2,231

)

Other long-term liabilities

 

 

(1,146

)

Net assets acquired

 

$

489,077

 

 

9


 

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

 

 

 

Gross

Carrying

Amount

 

 

Amortization

Period

 

 

 

 

 

 

(in years)

Developed technology

 

$

84,900

 

 

4

Customer relationships

 

 

76,000

 

 

8

Backlog

 

 

34,900

 

 

2

Trade name

 

 

3,600

 

 

1

Leases

 

$

120

 

 

6

Amortization expense of $13.0 million and $13.2 million related to these intangible assets was recorded for the three months ended September 28, 2018 and September 30, 2019, respectively, and $17.3 million and $41.2 million for the nine months ended September 28, 2018 and September 30, 2019, respectively. The entire value of goodwill of $243.5 million was assigned to the Parsons Federal reporting unit and represents synergies expected to be realized from this business combination. Goodwill of $50.1 million is deductible for tax purposes.

The amount of revenue generated by Polaris Alpha and included within consolidated revenues is $94.8 million and $96.9 million for the three months ended September 28, 2018 and September 30, 2019, respectively, and $124.7 million and $293.0 million for the nine months ended September 28, 2018 and September 30, 2019, 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.

Supplemental Pro Forma Information

Supplemental information on an unaudited pro forma operating results assuming the Polaris Alpha acquisition had been consummated as of the beginning of fiscal year 2018 (December 31, 2017) (in thousands) is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 28, 2018

 

 

September 28, 2018

 

Pro forma revenue

 

$

976,157

 

 

$

2,784,864

 

Pro forma net income including noncontrolling interests

 

$

46,848

 

 

$

179,071

 

 

The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses and the additional pro forma interest expense related to the borrowings under the credit agreement as of the assumed acquisition date. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

OGSystems

On January 7, 2019, the Company acquired a 100% ownership interest in OGSystems, a privately owned company, for $292.4 million paid in cash. OGSystems provides geospatial intelligence, big data analytics and threat mitigation for defense and intelligence customers.  The Company borrowed $110 million under the credit agreement and $150 million on a short-term loan, as described in “Note 11 – Debt and Credit Facilities,” to partially fund the acquisition. In connection with this acquisition, the Company recognized $0.6 million and $5.5 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the three and nine months ended September 30, 2019, respectively, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. OGSystems enhances the Company’s artificial intelligence and data analytics expertise with new technologies and solutions. Customers of both companies will benefit from existing, complementary technologies and increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development.

10


 

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):

 

 

 

Amount

 

Cash and cash equivalents

 

$

5,772

 

Accounts receivable

 

 

9,904

 

Contract assets

 

 

9,747

 

Prepaid expenses and other current assets

 

 

4,307

 

Property and equipment

 

 

4,085

 

Right of use assets, operating leases

 

 

8,826

 

Goodwill

 

 

183,540

 

Intangible assets

 

 

92,300

 

Other noncurrent assets

 

 

10

 

Accounts payable

 

 

(5,450

)

Accrued expenses and other current liabilities

 

 

(7,147

)

Contract liabilities

 

 

(1,300

)

Short-term lease liabilities, operating leases

 

 

(805

)

Income tax payable

 

 

(1,469

)

Deferred tax liabilities

 

 

(904

)

Long-term lease liabilities, operating leases

 

 

(8,021

)

Other long-term liabilities

 

 

(1,015

)

Net assets acquired

 

$

292,380

 

 

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

 

 

 

Gross

Carrying

Amount

 

 

Amortization

Period

 

 

 

 

 

 

(in years)

Customer relationships

 

$

57,100

 

 

5

Backlog

 

 

27,700

 

 

3

Trade name

 

 

3,800

 

 

2

Non-compete agreements

 

 

2,400

 

 

3

Developed technologies

 

$

1,300

 

 

3

 

The Company is still in the process of finalizing its valuation of developed technology acquired.

Amortization expense of $5.9 million and $17.8 million related to these intangible assets was recorded for the three and nine months ended September 30, 2019, respectively. The entire value of goodwill of $183.5 million was assigned to the Parsons Federal reporting unit and represents synergies expected to be realized from this business combination. Goodwill of $16.0 million is deductible for tax purposes.

The amount of revenue generated by OGSystems since the acquisition and included within consolidated revenues for the three and nine months ended September 30, 2019 is $33.7 million and $108.7 million, 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.    

11


 

Supplemental Pro Forma Information

Supplemental information on an unaudited pro forma operating results assuming the OGSystems acquisition had been consummated as of the beginning of fiscal year 2018 (December 31, 2017) (in thousands) is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 28, 2018

 

 

September 30, 2019

 

 

September 28, 2018

 

 

September 30, 2019

 

Pro forma revenue

 

$

1,007,793

 

 

$

1,023,277

 

 

$

2,715,572

 

 

$

2,919,379

 

Pro forma net income including noncontrolling interests

 

$

39,224

 

 

$

61,293

 

 

$

196,905

 

 

$

118,896

 

 

The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses and the additional pro forma interest expense related to the borrowings under the credit agreement as of the assumed acquisition date. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

QRC Technologies

On July 31, 2019 the Company acquired a 100% ownership interest in QRC Technologies (“QRC”), a privately owned company, for $214.1 million in cash.  QRC provides design and development of open-architecture radio-frequency products.  The company borrowed $140.0 million under the Revolving Credit Facility to partially fund the transaction. In connection with this acquisition, the Company recognized $4.7 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the three and nine months ended September 30, 2019 including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. QRC is an agile, disruptive product company that specializes in radio frequency spectrum survey, record and playback; signals intelligence; and electronic warfare missions. QRC complements our existing portfolio, increases our presence in the high-growth markets of spectrum awareness and surveillance, adds critical intellectual property that complements and expands our available capabilities for the Special Operations and Intelligence Communities.

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):

 

 

 

Amount

 

Cash and cash equivalents

 

$

5,925

 

Accounts receivable

 

 

5,587

 

Prepaid expenses and other current assets

 

 

5,467

 

Property and equipment

 

 

1,205

 

Right of use assets, operating leases

 

 

5,228

 

Goodwill

 

 

128,387

 

Intangible assets

 

 

72,900

 

Accounts payable

 

 

(1,567

)

Accrued expenses and other current liabilities

 

 

(3,771

)

Short-term lease liabilities, operating leases

 

 

(545

)

Long-term lease liabilities, operating leases

 

 

(4,683

)

Net assets acquired

 

$

214,133

 

12


 

 

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

 

 

 

Gross

Carrying

Amount

 

 

Amortization

Period

 

 

 

 

 

 

(in years)

Customer relationships

 

$

47,600

 

 

12

Backlog

 

 

700

 

 

1

Trade name

 

 

800

 

 

2

Non-compete agreements

 

 

1,200

 

 

4

Developed technologies

 

$

22,600

 

 

3-5

 

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

Amortization expense of $1.9 million related to these intangible assets was recorded for the three and nine months ended September 30, 2019, respectively. The entire value of goodwill of $128.4 million was assigned to the Parsons Federal reporting unit and represents synergies expected to be realized from this business combination. Goodwill in it’s entirety is deductible for tax purposes.

The amount of revenue generated by QRC since the acquisition and included within consolidated revenues for both the three and nine months ended September 30, 2019 is $5.6 million. 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.

Supplemental Pro Forma Information

Supplemental information on an unaudited pro forma operating results assuming the QRC Technologies acquisition had been consummated as of the beginning of fiscal year 2018 (December 31, 2017) (in thousands) is as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 28, 2018

 

 

September 30, 2019

 

 

September 28, 2018

 

 

September 30, 2019

 

Pro forma revenue

 

$

987,343

 

 

$

1,026,831

 

 

$

2,657,105

 

 

$

2,938,973

 

Pro forma net income including noncontrolling interests

 

$

44,944

 

 

$

65,782

 

 

$

212,728

 

 

$

117,399

 

 

 

5.

Contracts with Customers

Disaggregation of Revenue

The Company’s contracts contain both fixed-price and cost reimbursable components. Contract types are based on the component that represents the majority of the contract. The following table presents revenue disaggregated by contract type (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 28, 2018

 

 

September 30, 2019

 

 

September 28, 2018

 

 

September 30, 2019

 

Fixed-Price

 

$

300,225

 

 

$

288,316

 

 

$

833,224

 

 

$

850,658

 

Time-and-Materials

 

 

254,435

 

 

 

285,586

 

 

 

732,555

 

 

 

810,656

 

Cost-Plus

 

 

421,497

 

 

 

449,375

 

 

 

1,065,789

 

 

 

1,256,110

 

Total

 

$

976,157

 

 

$

1,023,277

 

 

$

2,631,568

 

 

$

2,917,424

 

 

See “Note 19 – Segments Information” for the Company’s revenues by business lines.

13


 

Contract Assets and Contract Liabilities

Contract assets and contract liabilities balances at December 31, 2018 and September 30, 2019 were as follows (in thousands):

 

 

 

December 31, 2018

 

 

September 30, 2019

 

 

$ change

 

 

% change

 

Contract assets

 

$

515,319

 

 

$

583,670

 

 

$

68,351

 

 

 

13.3

%

Contract liabilities

 

 

208,576

 

 

 

231,032

 

 

 

22,456

 

 

 

10.8

%

Net contract assets (liabilities) (1)

 

$

306,743

 

 

$

352,638

 

 

$