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Segments Information | 6 Months Ended
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Jun. 30, 2019
Segment Reporting [Abstract] |
Segments Information |
20. | Segments Information
The Company operates in two reportable segments: Federal Solutions and Critical Infrastructure. The Federal Solutions segment is a high-end services provider to the U.S. government, delivering timely, cost-effective solutions for mission-critical projects. The segment provides advanced technologies, including cybersecurity, missile defense systems, and subsurface munitions detection, as well as military facility modernization, logistics support, chemical weapon remediation and engineering services. The Critical Infrastructure segment provides integrated design and engineering services for complex physical and digital infrastructure around the globe. The Critical Infrastructure segment is a technology innovator focused on next generation infrastructure. Industry leading capabilities in design 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”), currently 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 CODM evaluates segment operating performance using segment Revenue and segment Adjusted EBITDA attributable to Parsons Corporation. The following table summarizes business segment revenue for the periods presented (in thousands):
|  | Three Months Ended |  |  |  | Six Months Ended |
|  | June 29, 2018 |  |  | June 30, 2019 |  |  |  | June 29, 2018 |  |  | June 30, 2019 |
Federal Solutions revenue |  | $ | 341,065 |  |  | $ | 478,497 |  |  |  | $ | 632,400 |  |  | $ | 901,309 |
Critical Infrastructure revenue |  |  | 559,667 |  |  |  | 511,245 |  |  |  |  | 1,023,011 |  |  |  | 992,838 |
Total revenue |  | $ | 900,732 |  |  | $ | 989,742 |  |  |  | $ | 1,655,411 |  |  | $ | 1,894,147 |
The Company defines Adjusted EBITDA attributable to Parsons Corporation as Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests. The Company defines Adjusted EBITDA as net income (loss) attributable to Parsons Corporation, adjusted to include net income (loss) attributable to noncontrolling interests and to exclude interest expense (net of interest income), provision for income taxes, depreciation and amortization and certain other items that are not considered in the evaluation of ongoing operating performance. These other items include net income (loss) attributable to noncontrolling interests, asset impairment charges, income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our prior restructuring. The following table reconciles business segment Adjusted EBITDA attributable to Parsons Corporation to Net Income attributable to Parsons Corporation for the periods presented (in thousands):
|  | Three Months Ended |  |  |  | Six Months Ended |
Adjusted EBITDA attributable to Parsons Corporation |  | June 29, 2018 |  |  | June 30, 2019 |  |  |  | June 29, 2018 |  |  | June 30, 2019 |
Federal Solutions |  | $ | 33,948 |  |  | $ | 35,700 |  |  |  | $ | 55,496 |  |  | $ | 76,299 |
Critical Infrastructure |  |  | 16,928 |  |  |  | 40,525 |  |  |  |  | 42,290 |  |  |  | 68,201 |
Adjusted EBITDA attributable to Parsons Corporation |  |  | 50,876 |  |  |  | 76,225 |  |  |  |  | 97,786 |  |  |  | 144,500 |
Adjusted EBITDA attributable to noncontrolling interests |  |  | 1,759 |  |  |  | (20 | ) |  |  |  | 5,679 |  |  |  | 3,729 |
Depreciation and amortization |  |  | (14,048 | ) |  |  | (31,074 | ) |  |  |  | (23,057 | ) |  |  | (61,665 | )
Interest expense, net |  |  | (3,270 | ) |  |  | (6,151 | ) |  |  |  | (6,528 | ) |  |  | (13,966 | )
Income tax (expense) benefit |  |  | (9,019 | ) |  |  | 53,496 |  |  |  |  | (14,372 | ) |  |  | 51,610 |
Litigation-related gains(a) |  |  | 132,004 |  |  |  | - |  |  |  |  | 129,674 |  |  |  | - |
Amortization of deferred gain resulting from sale-leaseback transactions(b) |  |  | 1,829 |  |  |  | - |  |  |  |  | 3,642 |  |  |  | - |
Equity based compensation(c) |  |  | (5,049 | ) |  |  | (43,311 | ) |  |  |  | (8,149 | ) |  |  | (47,161 | )
Transaction-related costs(d) |  |  | (4,930 | ) |  |  | (7,715 | ) |  |  |  | (5,055 | ) |  |  | (17,070 | )
Restructuring(e) |  |  | - |  |  |  | (353 | ) |  |  |  | - |  |  |  | (2,571 | )
HCM software implementation costs(f) |  |  | (337 | ) |  |  | (586 | ) |  |  |  | (337 | ) |  |  | (3,498 | )
Other(g) |  |  | 223 |  |  |  | (366 | ) |  |  |  | (143 | ) |  |  | (377 | )
Net income including noncontrolling interests |  |  | 150,038 |  |  |  | 40,145 |  |  |  |  | 179,140 |  |  |  | 53,531 |
Net income attributable to noncontrolling interests |  |  | 1,657 |  |  |  | (114 | ) |  |  |  | 5,472 |  |  |  | 3,531 |
Net income attributable to Parsons Corporation |  | $ | 148,381 |  |  | $ | 40,259 |  |  |  | $ | 173,668 |  |  | $ | 50,000 |
(a) | Reversal of an accrued liability, with $55.1 million recorded to revenue and $74.6 million recorded to other income (“gain associated with claim on long-term contract”) in results of operations, associated with a lawsuit against a joint venture in which the Company is the managing partner. Please see “Note 14 – Commitments and Contingencies” in the Company’s Form S-1/A filed on April 29, 2019, for a description of this matter, which was resolved in favor of the Company on June 13, 2018.
(b) | Reflects recognized deferred gains related to sales-leaseback transactions described in “Note 11 – Sale-Leasebacks.”
(c) | Reflects equity compensation costs related to cash-settled awards. Please see a further discussion of these awards in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the quarter ended June 30, 2019.
(d) | Reflects costs incurred in connection with acquisitions, the IPO, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
(e) | Reflects costs associated with corporate restructuring initiatives.
(f) | Reflects implementation costs incurred in connection with a new human resources and payroll application.
(g) | Includes a combination of gain/loss related to sale of fixed assets and other individually insignificant items that are non-recurring in nature.
Asset information by segment is not a key measure of performance used by the CODM. The following tables presents revenues and property and equipment, net by geographic area (in thousands):
|  | Three Months Ended |  |  |  | Six Months Ended |
|  | June 29, 2018 |  |  | June 30, 2019 |  |  |  | June 29, 2018 |  |  | June 30, 2019 |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 738,935 |  |  | $ | 819,255 |  |  |  | $ | 1,326,242 |  |  | $ | 1,550,285 |
Middle East |  |  | 158,294 |  |  |  | 167,624 |  |  |  |  | 320,700 |  |  |  | 335,576 |
Rest of World |  |  | 3,503 |  |  |  | 2,863 |  |  |  |  | 8,469 |  |  |  | 8,286 |
Total Revenue |  | $ | 900,732 |  |  | $ | 989,742 |  |  |  | $ | 1,655,411 |  |  | $ | 1,894,147 |
The geographic location of revenue is determined by the location of the customer. The prior reporting of revenue by geographic location has been conformed to the current presentation.
|  | December 31, 2018 |  |  | June 30, 2019 |
Property and Equipment, Net |  |  |  |  |  |  |  |
North America |  | $ | 86,847 |  |  | $ | 95,279 |
Middle East |  |  | 5,002 |  |  |  | 5,655 |
Total Property and Equipment, Net |  | $ | 91,849 |  |  | $ | 100,934 |
North America includes revenue in the United States for the three months ended June 29, 2018 and June 30, 2019 of $671.5 million and $744.3 million, respectively, and for the six months ended June 29, 2018 and June 30, 2019 $1.2 billion and $1.4 billion, respectively. North America property and equipment, net includes $79.9 million and $90.4 million of property and equipment, net in the United States at December 31, 2018 and June 30, 2019, respectively. The following table presents revenues by business lines (in thousands):
|  | Three Months Ended |  |  |  | Six Months Ended |
|  | June 29, 2018 |  |  | June 30, 2019 |  |  |  | June 29, 2018 |  |  | June 30, 2019 |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cyber & Intelligence |  | $ | 64,576 |  |  | $ | 81,171 |  |  |  | $ | 108,943 |  |  | $ | 157,281 |
Defense |  |  | 90,519 |  |  |  | 146,453 |  |  |  |  | 164,059 |  |  |  | 281,443 |
Mission Solutions |  |  | 83,973 |  |  |  | 81,888 |  |  |  |  | 158,122 |  |  |  | 149,978 |
Engineered Systems |  |  | 101,997 |  |  |  | 122,887 |  |  |  |  | 201,276 |  |  |  | 237,553 |
Geospatial |  |  | - |  |  |  | 46,098 |  |  |  |  | - |  |  |  | 75,054 |
Federal Solutions revenues |  |  | 341,065 |  |  |  | 478,497 |  |  |  |  | 632,400 |  |  |  | 901,309 |
Connect Communities |  |  | 165,002 |  |  |  | 150,622 |  |  |  |  | 325,915 |  |  |  | 307,498 |
Mobility Solutions |  |  | 338,594 |  |  |  | 281,466 |  |  |  |  | 594,273 |  |  |  | 550,580 |
Industrial |  |  | 56,071 |  |  |  | 79,157 |  |  |  |  | 102,823 |  |  |  | 134,760 |
Critical Infrastructure revenues |  |  | 559,667 |  |  |  | 511,245 |  |  |  |  | 1,023,011 |  |  |  | 992,838 |
Total Revenue |  | $ | 900,732 |  |  | $ | 989,742 |  |  |  | $ | 1,655,411 |  |  | $ | 1,894,147 |
Revenue for the three and six months ended June 29, 2018 included $55.1 million related to the settlement of a claim that was resolved in favor of the Company in the Mobility Solutions business line of our Critical Infrastructure segment. Please see “Note 15 – Commitments and Contingencies” in the Company’s Form S-1/A filed on April 29, 2019, for a description of this matter. Excluding the claim settlement, revenue for the three and six months ended June 29, 2018 for the Critical Infrastructure segment was $504.6 million and $967.9 million, respectively and for the Mobility Solutions revenue business line revenue was $283.5 million and $539.2 million, respectively.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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