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

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

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.

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,~~July 27, 2020, the registrant had ~~99,262,334~~100,724,683 shares of common stock, $1.00 par value per share, outstanding.

		December 31, 2018			September 30, 2019				June 30, 2020			December 31, 2019
Assets	Assets							Assets
Current assets:	Current assets:							Current assets:
	Cash and cash equivalents (including $73,794 and $55,054 Cash of consolidated joint ventures)	$	280,221		$	133,870		Cash and cash equivalents (including $31,221 and $51,171 Cash of consolidated joint ventures)	$	129,579		$	182,688
	Restricted cash and investments		974			12,592		Restricted cash and investments		7,041			12,686
	Accounts receivable, net (including $180,325 and $164,460 Accounts receivable of consolidated joint ventures, net)		623,286			673,674		Accounts receivable, net (including $257,967 and $166,355 Accounts receivable of consolidated joint ventures, net)		717,358			671,492
	Contract assets (including $21,270 and $26,542 Contract assets of consolidated joint ventures)		515,319			583,670		Contract assets (including $27,010 and $26,458 Contract assets of consolidated joint ventures)		645,556			575,089
	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		Prepaid expenses and other current assets (including $8,524 and $11,182 Prepaid expenses and other current assets of consolidated joint ventures)		89,662			84,454
	Total current assets		1,488,807			1,474,261		Total current assets		1,589,196			1,526,409

	Property and equipment, net (including $2,561 and $3,171 Property and equipment of consolidated joint ventures, net)		91,849			109,238		Property and equipment, net (including $2,672 and $2,945 Property and equipment of consolidated joint ventures, net)		124,764			122,751
	Right of use assets, operating leases		-			219,207		Right of use assets, operating leases		225,054			233,415
	Goodwill		736,938			1,050,077		Goodwill		1,045,344			1,047,425
	Investments in and advances to unconsolidated joint ventures		63,560			66,584		Investments in and advances to unconsolidated joint ventures		64,905			68,620
	Intangible assets, net		179,519			281,157		Intangible assets, net		214,936			259,858
	Deferred tax assets		5,680			111,610		Deferred tax assets		129,737			130,401
	Other noncurrent assets		46,225			50,510		Other noncurrent assets		57,246			61,489
	Total assets	$	2,612,578		$	3,362,644		Total assets	$	3,451,182		$	3,450,368

Liabilities and Shareholders' Equity (Deficit)	Liabilities and Shareholders' Equity (Deficit)							Liabilities and Shareholders' Equity (Deficit)
Current liabilities:	Current liabilities:							Current liabilities:
	Accounts payable (including $87,914 and $90,692 Accounts payable of consolidated joint ventures)	$	226,345		$	226,563		Accounts payable (including $91,969 and $85,869 Accounts payable of consolidated joint ventures)	$	209,858		$	216,613
	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		Accrued expenses and other current liabilities (including $112,014 and $74,857 Accrued expenses and other current liabilities of consolidated joint ventures)		642,357			639,863
	Contract liabilities (including $38,706 and $43,324 Contract liabilities of consolidated joint ventures)		208,576			231,032		Contract liabilities (including $41,945 and $32,638 Contract liabilities of consolidated joint ventures)		219,037			230,681
	Short-term lease liabilities, operating leases		-			49,074		Short-term lease liabilities, operating leases		47,648			49,994
	Income taxes payable		11,540			9,940		Income taxes payable		12,053			7,231
	Total current liabilities		1,006,161			1,156,259		Total current liabilities		1,130,953			1,144,382
	Long-term employee incentives		41,913			45,749		Long-term employee incentives		22,122			56,928
	Deferred gain resulting from sale-leaseback transactions		46,004			-		Long-term debt		249,448			249,353
	Long-term debt		429,164			249,306		Long-term lease liabilities, operating leases		201,472			203,624
	Long-term lease liabilities, operating leases		-			188,571		Deferred tax liabilities		9,117			9,621
	Deferred tax liabilities		6,240			7,337		Other long-term liabilities		131,818			125,704
	Other long-term liabilities		127,863			120,971		Total liabilities		1,744,930			1,789,612
	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
Contingencies (Note 12)								Contingencies (Note 12)
Shareholders' equity (deficit):	Shareholders' equity (deficit):							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		Common stock, $1 par value; authorized 1,000,000,000 shares; 146,495,690 and 146,440,701 shares issued; 23,929,462 and 21,772,888 public shares outstanding; 76,795,221 and 78,896,806 ESOP shares outstanding		146,496			146,441
	Treasury stock, 46,918,140 and 46,959,082 shares at cost		(957,025	)		(957,844	)	Treasury stock, 45,771,008 shares at cost		(934,240	)		(934,240	)
	Additional paid-in capital		-			8,772		Additional paid-in capital		2,658,036			2,649,975
	Retained earnings (accumulated deficit)		12,445			(64,896	)	Accumulated deficit		(182,753	)		(218,025	)
	Accumulated other comprehensive loss		(22,957	)		(17,982	)	Accumulated other comprehensive loss		(19,991	)		(14,261	)
	Total Parsons Corporation shareholders' equity (deficit)		(967,537	)		(1,010,654	)	Total Parsons Corporation shareholders' equity		1,667,548			1,629,890
	Noncontrolling interests		46,461			28,094		Noncontrolling interests		38,704			30,866
	Total shareholders' equity (deficit)		(921,076	)		(982,560	)	Total shareholders' equity		1,706,252			1,660,756
	Total liabilities, redeemable common stock and shareholders' equity (deficit)	$	2,612,578		$	3,362,644		Total liabilities, redeemable common stock and shareholders' equity	$	3,451,182		$	3,450,368

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

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

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue	$	979,459		$	989,742		$	1,950,452		$	1,894,147
Direct cost of contracts		749,324			784,723			1,518,956			1,498,960
Equity in earnings of unconsolidated joint ventures		3,769			11,634			9,883			22,031
Indirect, general and administrative expenses		187,640			225,359			371,414			402,878
Operating income (loss)		46,264			(8,706	)		69,965			14,340
Interest income		196			225			424			702
Interest expense		(4,159	)		(6,376	)		(8,181	)		(14,668	)
Other income (expense), net		715			1,506			263			1,547
Total other expense		(3,248	)		(4,645	)		(7,494	)		(12,419	)
Income (loss) before income tax expense		43,016			(13,351	)		62,471			1,921
Income tax (expense) benefit		(11,891	)		53,496			(16,975	)		51,610
Net income including noncontrolling interests		31,125			40,145			45,496			53,531
Net (income) loss attributable to noncontrolling interests		(7,826	)		114			(9,224	)		(3,531	)
Net income attributable to Parsons Corporation	$	23,299		$	40,259		$	36,272		$	50,000
Earnings per share:
Basic	$	0.23		$	0.44		$	0.36		$	0.59
Diluted	$	0.23		$	0.44		$	0.36		$	0.59

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended					For the Six Months Ended
	September 28, 2018			September 30, 2019			September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019		June 30, 2020			June 30, 2019
Net income including noncontrolling interests	$	46,066		$	61,293		$	225,206		$	114,824		$	31,125		$	40,145	$	45,496		$	53,531
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		2,303			171			(3,079	)		4,958			3,104			2,240		(5,696	)		4,787
Pension adjustments, net of tax		10			(9	)		(27	)		17			23			17		(38	)		26
Comprehensive income including noncontrolling interests, net of tax		48,379			61,455			222,100			119,799			34,252			42,402		39,762			58,344
Comprehensive income attributable to noncontrolling interests, net of tax		(4,822	)		(4,481	)		(10,270	)		(8,012	)
Comprehensive (income) loss attributable to noncontrolling interests, net of tax														(7,830	)		114		(9,220	)		(3,531	)
Comprehensive income attributable to Parsons Corporation, net of tax	$	43,557		$	56,974		$	211,830		$	111,787		$	26,422		$	42,516	$	30,542		$	54,813

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

		For the Nine Months Ended							For the Six Months Ended
		September 28, 2018			September 30, 2019				June 30, 2020			June 30, 2019
Cash flows from operating activities:	Cash flows from operating activities:							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		Net income including noncontrolling interests	$	45,496		$	53,531
	Gain associated with claim on long-term contract		(129,674	)		-		Adjustments to reconcile net income to net cash used in operating activities
	Loss on disposal of property and equipment		59			1,045		Depreciation and amortization		64,490			61,665
	Provision for doubtful accounts		9,094			(964	)	Amortization of debt issue costs		369			629
	Deferred taxes		1,281			(105,161	)	Gain on disposal of property and equipment		(43	)		(24	)
	Foreign currency transaction gains and losses		2,007			1,689		Provision for doubtful accounts		38			(866	)
	Equity in earnings of unconsolidated joint ventures		(25,577	)		(29,305	)	Deferred taxes		325			(64,924	)
	Return on investments in unconsolidated joint ventures		31,728			32,848		Foreign currency transaction gains and losses		1,185			(352	)
	Stock-based compensation		-			9,224		Equity in earnings of unconsolidated joint ventures		(9,883	)		(22,031	)
	Contributions of treasury stock		34,070			36,779		Return on investments in unconsolidated joint ventures		15,893			15,023
	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:							Stock-based compensation		6,432			-
	Accounts receivable		384,216			(31,726	)	Contributions of treasury stock		29,468			24,529
	Contract assets		(527,768	)		(59,161	)	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:
	Prepaid expenses and current assets		(13,028	)		2,980		Accounts receivable		(49,618	)		(97,450	)
	Accounts payable		38,424			(6,946	)	Contract assets		(70,739	)		(50,842	)
	Accrued expenses and other current liabilities		9,558			40,186		Prepaid expenses and current assets		(999	)		(4,967	)
	Billings in excess of costs		(151,892	)		-		Accounts payable		(6,228	)		(4,517	)
	Contract liabilities		168,579			20,703		Accrued expenses and other current liabilities		(21,983	)		17,763
	Provision for contract losses		(13,992	)		-		Contract liabilities		(11,047	)		11,464
	Income taxes		3,250			(3,019	)	Income taxes		4,048			(7,223	)
	Other long-term liabilities		12,517			13,138		Other long-term liabilities		(28,648	)		20,097
	Net cash provided by operating activities		99,822			130,628		Net cash used in operating activities		(31,444	)		(48,495	)
Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
	Capital expenditures		(19,436	)		(44,030	)	Capital expenditures		(22,938	)		(25,953	)
	Proceeds from sale of property and equipment		112			2,824		Proceeds from sale of property and equipment		943			1,873
	Payments for acquisitions, net of cash acquired		(481,163	)		(495,690	)	Payments for acquisitions, net of cash acquired		-			(287,482	)
	Investments in unconsolidated joint ventures		(4,276	)		(11,446	)	Investments in unconsolidated joint ventures		(3,844	)		(5,049	)
	Return of investments in unconsolidated joint ventures		1,126			6,632		Return of investments in unconsolidated joint ventures		17			4,403
	Net cash used in investing activities		(503,637	)		(541,710	)	Net cash used in investing activities		(25,822	)		(312,208	)
Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
	Proceeds from borrowings		260,000			530,000		Proceeds from borrowings		180,600			350,000
	Repayments of borrowings		(20,000	)		(710,000	)	Repayments of borrowings		(180,600	)		(530,000	)
	Payments for debt costs and credit agreement		(468	)		(286	)	Payments for debt costs and credit agreement		-			(286	)
	Contributions by noncontrolling interests		13,768			8,999		Contributions by noncontrolling interests		223			8,147
	Distributions to noncontrolling interests		(6,858	)		(35,378	)	Distributions to noncontrolling interests		(1,605	)		(20,787	)
	Purchase of treasury stock		(73,308	)		(819	)	Purchase of treasury stock		-			(819	)
	IPO proceeds, net		-			536,879		Taxes paid on vested stock		(1,149	)		-
	Dividend paid		-			(52,093	)	Proceeds from issuance of common stock		1,684			537,331
	Net cash provided by financing activities		173,134			277,302		Dividend paid		-			(52,093	)
	Effect of exchange rate changes		(1,233	)		(953	)	Net cash (used in) provided by financing activities		(847	)		291,493
	Net decrease in cash, cash equivalents, and restricted cash		(231,914	)		(134,733	)	Effect of exchange rate changes		(641	)		(602	)
	Cash, cash equivalents and restricted cash:							Net decrease in cash, cash equivalents, and restricted cash		(58,754	)		(69,812	)
	Beginning of year		446,144			281,195		Cash, cash equivalents and restricted cash:
	End of period	$	214,230		$	146,462		Beginning of year		195,374			281,195
								End of period	$	136,620		$	211,383

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

For the Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~September 28, 2018~~June 30, 2019

												Retained			Accumulated																							Retained			Accumulated			Total
	Redeemable								Additional			Earnings			Other			Total									Redeemable								Additional			Earnings			Other			Parsons
	Common			Common		Treasury			Paid-in			(Accumulated			Comprehensive			Parsons			Noncontrolling						Common			Common		Treasury			Paid-in			(Accumulated			Comprehensive			Equity			Noncontrolling
	Stock			Stock		Stock			Capital			Deficit)			Income (Loss)			Deficit			Interests			Total			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	)
Balance at March 31, 2020																											$	-		$	146,441	$	(934,240	)	$	2,652,227		$	(206,052	)	$	(23,114	)	$	1,635,262		$	32,117		$	1,667,379
Comprehensive income
Net income		-			-		-			-			56,812			-			56,812			4,481			61,293			-			-		-			-			23,299			-			23,299			7,826			31,125
Foreign currency translation gain, net		-			-		-			-			-			171			171			-			171			-			-		-			-			-			3,100			3,100			4			3,104
Pension adjustments, net		-			-		-			-			-			(9	)		(9	)		-			(9	)		-			-		-			-			-			23			23			-			23
Contributions		-			-		-			-			-			-			-			852			852			-			-		-			-			-			-			-			2			2
Distributions		-			-		-			-			-			-			-			(14,591	)		(14,591	)		-			-		-			-			-			-			-			(1,245	)		(1,245	)
Issuance of equity securities, net of retirements																												-			55		-			1,629			-			-			1,684			-			1,684
Stock-based compensation		-			-		-			9,224			-			-			9,224			-			9,224			-			-		-			4,180			-			-			4,180			-			4,180
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 30, 2020																											$	-		$	146,496	$	(934,240	)	$	2,658,036		$	(182,753	)	$	(19,991	)	$	1,667,548		$	38,704		$	1,706,252

Balance at June 29, 2018	$	1,822,309		$	-	$	(909,368	)	$	-		$	15,894		$	(20,397	)	$	(913,871	)	$	43,935		$	(869,936	)

Balance at March 31, 2019																											$	1,875,332		$	-	$	(957,838	)	$	-		$	75,771		$	(20,401	)	$	(902,468	)	$	31,828		$	(870,640	)
Comprehensive income
Net income		-			-		-			-			41,222			-			41,222			4,844			46,066			-			-		-			-			40,259			-			40,259			(114	)		40,145
Foreign currency translation gain, net		-			-		-			-			-			2,294			2,294			9			2,303			-			-		-			-			-			2,240			2,240			-			2,240
Pension adjustments, net		-			-		-			-			-			10			10			-			10			-			-		-			-			-			17			17			-			17
Purchase of treasury stock		(40,312	)		-		(40,312	)		-			40,312			-			-			-			-			(6	)		-		(6	)		-			6			-			-			-			-
Contributions		-			-		-			-			-			-			-			115			115
Distributions		-			-		-			-			-			-			-			(4,096	)		(4,096	)		-			-		-			-			-			-			-			5,638			5,638
Balance at September 28, 2018	$	1,781,997		$	-	$	(949,680	)	$	-		$	97,428		$	(18,093	)	$	(870,345	)	$	44,807		$	(825,538	)
Dividend paid																												-			-		-			-			(52,093	)		-			(52,093	)		-			(52,093	)
Conversion of S-Corp to C-Corp																												25,877			-		-			-			(25,877	)		-			(25,877	)		-			(25,877	)
IPO proceeds, net																												-			21,296		-			516,034			-			-			537,330			-			537,330
ESOP shares at redemption value																												978,986			-		-			(516,034	)		(462,952	)		-			(978,986	)		-			(978,986	)
Balance at June 30, 2019																											$	2,880,189		$	21,296	$	(957,844	)	$	-		$	(424,886	)	$	(18,144	)	$	(1,379,578	)	$	37,352		$	(1,342,226	)

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

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~September 28, 2018~~June 30, 2019

												Retained			Accumulated																							Retained			Accumulated
	Redeemable								Additional			Earnings			Other			Total									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, 2019																											$	-		$	146,441	$	(934,240	)	$	2,649,975		$	(218,025	)	$	(14,261	)	$	1,629,890		$	30,866		$	1,660,756
Comprehensive income
Net income																												-			-		-			-			36,272			-			36,272			9,224			45,496
Foreign currency translation (loss), net																												-			-		-			-			-			(5,692	)		(5,692	)		(4	)		(5,696	)
Pension adjustments, net																												-			-		-			-			-			(38	)		(38	)		-			(38	)
Adoption of ASU 2016-13																												-			-		-			-			(1,000	)					(1,000	)					(1,000	)
Contributions																												-			-		-			-			-			-			-			223			223
Distributions																												-			-		-			-			-			-			-			(1,605	)		(1,605	)
Issuance of equity securities, net of retirement																															55					1,629									1,684						1,684
Stock-based compensation																												-			-		-			6,432			-			-			6,432			-			6,432
Balance at June 30, 2020																											$	-		$	146,496	$	(934,240	)	$	2,658,036		$	(182,753	)	$	(19,991	)	$	1,667,548		$	38,704		$	1,706,252
	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	)	$	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			-			-		-			-			50,000			-			50,000			3,531			53,531
Foreign currency translation gain, net		-			-		-			-			-			4,958			4,958			-			4,958			-			-		-			-			-			4,787			4,787			-			4,787
Pension adjustments, net		-			-		-			-			-			17			17			-			17			-			-		-			-			-			26			26			-			26
ASC 842 transition adjustment		-			-		-			-			52,608			-			52,608			-			52,608
ASC 842 Transition Adjustment																												-			-		-			-			52,608			-			52,608			-			52,608
Purchase of treasury stock		(819	)		-		(819	)		-			819			-			-			-			-			(819	)		-		(819	)		-			819			-			-			-			-
Contributions		-			-		-			-			-			-			-			8,999			8,999			-			-		-			-			-			-			-			8,147			8,147
Distributions		-			-		-			-			-			-			-			(35,378	)		(35,378	)		-			-		-			-			-			-			-			(20,787	)		(20,787	)
Dividend paid		-			-		-			-			(52,093	)		-			(52,093	)		-			(52,093	)		-			-		-			-			(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	)		25,877			-		-			-			(25,877	)		-			(25,877	)		-			(25,877	)
IPO proceeds, net		-			21,296		-			515,582			-			-			536,878			-			536,878			-			21,296		-			516,034			-			-			537,330			-			537,330
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	)
ESOP shares at redemption value																												978,822			-		-			(516,034	)		(462,788	)		-			(978,822	)		-			(978,822	)
Balance at June 30, 2019																											$	2,880,189		$	21,296	$	(957,844	)	$	-		$	(424,886	)	$	(18,144	)	$	(1,379,578	)	$	37,352		$	(1,342,226	)

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

Parsons Corporation, a Delaware corporation, and its subsidiaries (collectively, the “Company”) is a leading provider of technology-driven solutions in the defense, intelligence and critical infrastructure markets. We provide ~~sophisticated design, engineering~~software and hardware products, technical services and ~~smart~~integrated solutions to support our customers’ missions. We have developed significant expertise and ~~agile software~~differentiated capabilities in key areas of cybersecurity, intelligence, missile defense, C5ISR, space, geospatial, and connected communities. By combining our talented team of professionals and advanced technology, we help solve complex technical challenges to ~~the United States federal government~~enable a safer, smarter 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.more interconnected world.

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~~net 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.

On April 15, 2019, the board of directors of the Company declared a common stock dividend in a ratio of ~~two~~2 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.

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 Annual Report on Form ~~S-1/A filed on April 29,~~10-K for the year ended December 31, 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~~include the accounts of ~~our wholly-owned~~Parsons Corporation and its subsidiaries and affiliates with it controls. Interests in joint ventures ofthat are controlled by the Company, or for which ~~we are~~the Company is otherwise deemed to be the primary ~~beneficiary. The equity method of accounting is applied for the~~beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts a significant influence, the Company applies the equity method of accounting. (see “Note 1514 –Investments in and Advances to Joint Ventures" for further discussion). Intercompany accounts and transactions are eliminated in consolidation.

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.

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.

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.

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and “Note ~~2 –~~ 2—Summary of Significant Accounting ~~Policies” of Notes~~Polices” in the notes to ~~Consolidated Financial Statements~~our consolidated financial statements included in the Company’s Form ~~S-1/A filed April 29,~~10-K for the year ended December 31, 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.

~~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.

~~In connection with the Company’s IPO on May 8, 2019, all~~ Employee Stock ~~Ownership~~Purchase 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~~second quarter 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 sharesfiscal 2020, initial purchases of the Company’s common Stock were made under the Parsons Employee Stock Purchase Program (“ESPP”). Under the ESPP, eligible employees who elect to participate are granted the right to purchase shares of the common stock ~~once vesting and eligibility requirements have been met.~~ of Parsons at a discount that is limited to 5% of the per-share market value on the day shares are sold to employees. Purchases of common stock under the ESPP are included in “proceeds from issuance of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.

In the first quarter of ~~2019,~~2020, the Company adopted ~~Topic 842. See “Note 6 – Leases” for further discussion~~Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments.” The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current practice with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. The adoption ~~and the~~of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

In ~~the first quarter of~~December 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,~~No. 2019-12, Income Taxes (Topic 740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment.~~ Income Taxes (“ASU ~~2017-04 simplifies~~2019-12”). ASU 2019-12 was issued as a means to reduce the ~~test~~complexity of accounting for ~~goodwill impairment by removing~~income taxes for those entities that fall within the ~~second step~~scope 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.standard. The guidance is to be applied using a prospective method, excluding amendments related to franchise taxes, which should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2019-12 is effective for ~~interim and annual reporting periods~~fiscal years beginning after December 15, ~~2019 and should be applied prospectively~~2020, with early adoption permitted. The Company ~~early adopted the new~~does not expect this standard ~~as of the beginning of fiscal 2018 and its adoption did not~~to have a material impact on ~~the~~its consolidated financial statements.

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):~~

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

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 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:

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.

On January 7, 2019, the Company acquired a 100% ownership interest in OGSystems, a ~~privately owned~~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~~Credit Agreement and $150 million on a short-term loan, as described in “Note ~~11 –~~ 10—Debt and Credit Facilities,” to partially fund the acquisition. In connection with this acquisition, the Company recognized ~~$0.6 million and $5.5~~$5.4 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the ~~three and nine months~~year ended ~~September 30,~~December 31, 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.

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			Amount
Cash and cash equivalents	$	5,772		$	5,772
Accounts receivable		9,904			9,904
Contract assets		9,747			9,747
Prepaid expenses and other current assets		4,307			4,307
Property and equipment		4,085			4,085
Right of use assets, operating leases		8,826			8,826
Goodwill		183,540			183,540
Intangible assets		92,300			92,300
Other noncurrent assets		10			10
Accounts payable		(5,450	)		(5,450	)
Accrued expenses and other current liabilities		(7,147	)		(7,147	)
Contract liabilities		(1,300	)		(1,300	)
Short-term lease liabilities, operating leases		(805	)		(805	)
Income tax payable		(1,469	)		(1,178	)
Deferred tax liabilities		(904	)		(1,195	)
Long-term lease liabilities, operating leases		(8,021	)		(8,021	)
Other long-term liabilities		(1,015	)		(1,015	)
Net assets acquired	$	292,380		$	292,380

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

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

Amortization expense of $5.9 million and ~~$17.8~~$5.9 million related to these intangible assets was recorded for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and June 30, 2019, respectively, and $11.9 million and $11.9 million for the six months ended June 30, 2020 and June 30, 2019, respectively. The entire value of goodwill of $183.5 million was assigned to the ~~Parsons~~ Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill of ~~$16.0~~$16 million is deductible for tax purposes.

The amount of revenue generated by OGSystems ~~since the acquisition~~ and included within consolidated revenues is $37.7 million and $46.1 million for the three months June 30, 2020 and ~~nine~~June 30, 2019, respectively, and $70.8 million and $75.1 million for the six months ended ~~September~~June 30, ~~2019 is $33.7 million~~2020 and ~~$108.7 million,~~June 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 information ~~on an~~of unaudited pro forma operating results assuming the OGSystems acquisition had been consummated as of the beginning of fiscal year 2018 (December ~~31,~~30, 2017) (in thousands) is as follows:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Pro forma revenue	$	1,007,793	$	1,023,277	$	2,715,572	$	2,919,379	$	979,459	$	989,742	$	1,950,452	$	1,896,102
Pro forma net income including noncontrolling interests	$	39,224	$	61,293	$	196,905	$	118,896	$	32,165	$	40,976	$	47,628	$	58,433

On July 31, 2019 the Company acquired a 100% ownership interest in QRC Technologies (“QRC”), a ~~privately owned~~privately-owned company, for $214.1 million in cash. QRC provides design and development of open-architecture radio-frequency products. The ~~company~~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~~$4.9 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the ~~three and nine months~~fiscal year ended ~~September 30,~~December 31, 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, and adds critical intellectual property that complements and expands ~~our~~the Company’s 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			Amount
Cash and cash equivalents	$	5,925		$	5,925
Accounts receivable		5,587			5,587
Prepaid expenses and other current assets		5,467			5,727
Property and equipment		1,205			1,205
Right of use assets, operating leases		5,228			5,228
Goodwill		128,387			125,091
Intangible assets		72,900			76,200
Accounts payable		(1,567	)		(1,567	)
Accrued expenses and other current liabilities		(3,771	)		(4,025	)
Short-term lease liabilities, operating leases		(545	)		(545	)
Long-term lease liabilities, operating leases		(4,683	)		(4,683	)
Net assets acquired	$	214,133		$	214,143

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

	Gross Carrying Amount		Amortization Period	Gross Carrying Amount		Amortization Period
			(in years)			(in years)
Customer relationships	$	47,600	12	$	49,800	12
Developed technologies					21,800	3 to 5
In-process research and development					1,800	3 to 5
Non-compete agreements					1,200	4
Trade name					800	2
Backlog		700	1		800	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~~$3.6 million and $7.2 million related to these intangible assets was recorded for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. The entire value of goodwill of ~~$128.4~~$125.1 million was assigned to the ~~Parsons~~ Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill in ~~it’s~~its 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~~six months ended ~~September~~June 30, ~~2019~~2020 is ~~$5.6 million.~~$8.1 million and $12.5 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.

Supplemental information on an unaudited pro forma ~~operating results~~basis, assuming the QRC Technologies acquisition had been consummated as of the beginning of fiscal year 2018 (December ~~31,~~30, 2017) (in thousands) is as follows:

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				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Fixed-Price	$	300,225	$	288,316	$	833,224	$	850,658	$	311,368	$	304,647	$	619,676	$	562,342
Time-and-Materials		254,435		285,586		732,555		810,656		259,381		269,364		511,820		525,070
Cost-Plus		421,497		449,375		1,065,789		1,256,110		408,710		415,731		818,956		806,735
Total	$	976,157	$	1,023,277	$	2,631,568	$	2,917,424	$	979,459	$	989,742	$	1,950,452	$	1,894,147

See “Note 1918 – Segments Information” for the Company’s revenues by business lines.

Contract assets and contract liabilities balances at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 were as follows (in thousands):

	December 31, 2018		September 30, 2019		$ change		% change			June 30, 2020		December 31, 2019		$ change			% change
Contract assets	$	515,319	$	583,670	$	68,351		13.3	%	$	645,556	$	575,089	$	70,467			12.3	%
Contract liabilities		208,576		231,032		22,456		10.8	%		219,037		230,681		(11,644	)		-5.0	%
Net contract assets (liabilities) (1)	$	306,743	$	352,638	$	45,895		15.0	%	$	426,519	$	344,408	$	82,111			23.8	%

During the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019, the Company recognized revenue of ~~$0.8~~$28.4 million and ~~$2.1~~$27.3 million, respectively, and ~~$100.4~~$122.7 million and ~~$115.1~~$113.0 million during the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019, respectively that was included in the corresponding contract liability balance at December ~~30, 2017~~31, 2019 and December 31, 2018, respectively. ~~The~~Certain changes in contract assets and contract liabilities ~~were~~consisted of the ~~result of normal business activity and not significantly impacted by other factors, except as follows:~~following:

	December 31, 2018		September 30, 2019		June 30, 2020		December 31, 2019
Acquired contract assets	$	35,229	$	9,747	$	-	$	9,747
Acquired contract liabilities		3,529		1,300		-		1,300
Change in the estimate of variable consideration		-		14,506		-		12,166
Reversal of provision for contract losses (1)	$	133,180	$	-

There was no0 significant impairment of contract assets recognized during the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019.

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 an increase in revenue of ~~$9.1~~$9.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, and no0 amounts for the three and ~~nine~~six months ended ~~September 28, 2018.~~ June 30, 2019.

Accounts receivable, net consisted of the following as of June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 (in thousands):

	December 31, 2018			September 30, 2019			June 30, 2020			December 31, 2019
Billed	$	538,808		$	516,099		$	487,654		$	475,528
Unbilled		135,180			200,477			235,245			201,461
Total accounts receivable, gross		673,988			716,576			722,899			676,989
Allowance for doubtful accounts		(50,702	)		(42,902	)		(5,541	)		(5,497	)
Total accounts receivable, net	$	623,286		$	673,674		$	717,358		$	671,492

Billed accounts receivable represents amounts billed to clients that have not been collected. Unbilled accounts receivable represents amounts where the Company has a present contractual right to bill but an invoice has not been issued to the customer at the period-end date.

In connection with the adoption of ASU 2016-13, we have modified the historical presentation of gross receivables and the allowance for doubtful accounts to reflect only expected credit losses in the allowance in conformity with the current period presentation.

The allowance for doubtful accounts was determined based on consideration of trends in actual and forecasted credit quality of clients, including delinquency and payment history, type of client, such as a government agency or commercial sector client, and general economic conditions and particular industry conditions that may affect a client’s ability to pay. COVID-19 Impacts: We have not seen and do not expect there to be a risk of non-payment from either our government agency or commercial customers. We have experienced payment delays due to administrative limitations from both types of customers.

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of ~~September~~June 30, ~~2019~~2020 represent a measure of the total dollar value of work to be performed on contracts awarded and ~~in progress.~~in-progress. The Company had ~~$5.1~~$5.0 billion in RUPO as of ~~September~~June 30, ~~2019.~~2020.

RUPO will increase with awards of new contracts and decrease as the Company performs work and recognizes revenue on existing contracts. Projects are included within RUPO at such time the project is awarded and agreement on contract terms has been reached. The difference between RUPO and backlog relates to unexercised option years that are included within backlog and the value of Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts included in backlog for which delivery orders have not been issued.

RUPO is comprised of: (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 ~~September~~June 30, ~~2019~~2020 over the following periods (in thousands):

Period RUPO Will Be Satisfied	Within One Year		Within One to Two Years		Thereafter		Within One Year		Within One to Two Years		Thereafter
Federal Solutions	$	1,198,634	$	436,620	$	208,734	$	1,298,368	$	541,804	$	259,113
Critical Infrastructure		1,636,525		960,469		643,170		1,539,418		629,956		743,576
Total	$	2,835,159	$	1,397,089	$	851,904	$	2,837,786	$	1,171,760	$	1,002,689

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, which is a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets obtained in exchange for lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company elected to adopt the standard, and available practical expedients, effective January 1, 2019. These practical expedients allowed the Company to keep the lease classification assessed under the previous lease accounting standard (ASC 840) without reassessment under the new standard, and allowed all separate lease components, including non-lease components, to be accounted for as a single lease component for all existing leases prior to adoption of the new standard. Furthermore, the Company made an accounting policy election to not recognize a lease liability and ROU asset for leases with lease terms of twelve months or less.

The Company adopted this new standard under the modified retrospective transition approach without adjusting comparative periods in the financial statements, as allowed under Topic 842, and implemented internal controls and key system functionality to enable the preparation of financial information on adoption.

The standard had a material impact on the Company’s consolidated balance sheets but did not have an impact on the consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while accounting for finance leases remained substantially unchanged.

As a result of the adoption, the Company recorded a cumulative-effect adjustment to retained earnings of $52.6 million net of deferred tax asset adjustment of $0.7 million, representing the unamortized portion of a deferred gain previously recorded as a sale-leaseback transaction associated with the sale of an office building in 2011. The Company concluded the transaction resulted in the transfer of control of the office building to the buyer-lessor at market terms and would have qualified as a sale under Topic 842 with gain recognition in the period the sale was recognized.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets and current and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in other noncurrent assets, accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

The Company has operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment. Our leases have remaining lease terms of one year to 10 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 up to the seventh year. ~~As of September 30, 2019, assets recorded under finance leases were $1.8 million and accumulated depreciation associated with finance leases was $0.5 million.~~

The components of lease costs for the three and ~~nine~~six months ended ~~September~~June 30, 2020 and June 30, 2019 are as follows (in thousands):

	Three Months Ended			Nine Months Ended			Three Months Ended						Six Months Ended
	September 30, 2019			September 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Operating lease cost	$	17,969		$	53,835		$	15,755		$	17,581		$	33,026		$	35,866
Short-term lease cost		5,429			10,925			4,301			3,492			7,952			5,496
Amortization of right-of-use assets		120			455			251			110			505			335
Interest on lease liabilities		15			46			22			15			46			31
Sublease income		(712	)		(2,727	)		(932	)		(1,085	)		(1,812	)		(2,015	)
Total lease cost	$	22,821		$	62,534		$	19,397		$	20,113		$	39,717		$	39,713

Supplemental cash flow information related to leases for the ~~nine~~six months ended ~~September~~June 30, 2020 and June 30, 2019 is as follows (in thousands):

	Nine Months Ended		Six Months Ended
	September 30, 2019		June 30, 2020		June 30, 2019
Operating cash flows for operating leases	$	52,056	$	30,676	$	35,012
Operating cash flows for financing activities		570		46		412
Financing cash flows from finance leases				553		-
Right-of-use assets obtained in exchange for new operating lease liabilities		274,212		17,034		254,084
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,818	$	-	$	1,818

Supplemental balance sheet and other information related to leases as of ~~September~~June 30, 2020 and December 31, 2019 isare as follows (in thousands):

	September 30, 2019			June 30, 2020			December 31, 2019
Operating Leases:
Right-of-use assets	$	219,207		$	225,054		$	233,415
Lease liabilities:
Current	$	49,074		$	47,648		$	49,994
Long-term		188,571			201,472			203,624
Total operating lease liabilities	$	237,645		$	249,120		$	253,618
Finance Leases:
Other noncurrent assets	$	1,362		$	1,876		$	2,377
Lease liabilities:
Accrued expenses and other current liabilities	$	558		$	1,031		$	1,075
Other long-term liabilities		736		$	695		$	1,202
Total finance lease liabilities	$	1,294

Weighted Average Remaining Lease Term:
Operating leases	6 years			5 years			6 years
Finance leases	3 years			2 years			3 years
Weighted Average Discount Rate:
Operating leases		4.3	%		3.8	%		4.0	%
Finance leases		4.4	%		4.5	%		4.5	%

As of ~~September~~June 30, ~~2019,~~2020, the Company has additional operating leases, primarily for office spaces, that have not yet commenced of ~~$37.0~~$2.2 million. These operating leases will commence in ~~2019~~2020 with lease terms of ~~2 years to 11~~six years.

A maturity analysis of the future undiscounted cash flows associated with the Company’s operating and finance lease liabilities as of ~~September~~June 30, ~~2019~~2020 is as follows (in thousands):

	Operating Leases			Finance Leases			Operating Leases			Finance Leases
2019	$	15,409		$	160
2020		54,561			574
2020 (remaining)							$	25,732		$	560
2021		50,333			421			59,006			879
2022		44,160			187			53,031			334
2023		36,996			25			46,075			56
2024								36,213			-
Thereafter		64,423			-			55,006			-
Total lease payments		265,882			1,367			275,063			1,829
Less: imputed interest		(28,237	)		(73	)		(25,943	)		(102	)
Total present value of lease liabilities	$	237,645		$	1,294		$	249,120		$	1,727

As of December 31, 2018, $276.7 million of minimum rental commitments on operating leases was payable as follows: $67.9 million in 2019, $51.0 million in 2020, $42.5 million in 2021, $35.9 million in 2022, $29.4 million in 2023, and $50.0 million thereafter. Rental expense for the three and nine months ended September 28, 2018 was $21.7 million and $59.7 million, respectively.

The following table summarizes the changes in the carrying value of goodwill by reporting segment at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 (in thousands):

	December 31, 2018		Acquisitions		Foreign Exchange		September 30, 2019		December 31, 2019		Foreign Exchange			June 30, 2020
Federal Solutions	$	666,841	$	311,860	$	-	$	978,701	$	975,405	$	-		$	975,405
Critical Infrastructure		70,097		-		1,279		71,376		72,020		(2,081	)		69,939
Total	$	736,938	$	311,860	$	1,279	$	1,050,077	$	1,047,425	$	(2,081	)	$	1,045,344

The ultimate impact from the COVID-19 pandemic is difficult to predict. While many uncertainties exist, we currently anticipate no material change in our financial condition or results of operations. Although the Company does not anticipate a material change to our financial condition or results of operations, 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, 2020 and concluded there has 0t been an impairment.

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):

	December 31, 2018							September 30, 2019							Weighted Average		June 30, 2020							December 31, 2019							Weighted Average
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Amortization Period (in years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Amortization Period (in years)
Backlog	$	80,754	$	(58,295	)	$	22,459	$	109,155	$	(80,321	)	$	28,834		3	$	109,255	$	(95,338	)	$	13,917	$	109,255	$	(87,510	)	$	21,745		3
Customer relationships		121,629		(38,974	)		82,655		226,329		(60,266	)		166,063		7		228,529		(89,079	)		139,450		228,529		(67,809	)		160,720		7
Leases		670		(561	)		109		670		(576	)		94		5		670		(590	)		80		670		(580	)		90		5
Developed technology		87,839		(15,174	)		72,665		111,739		(32,545	)		79,194		4		110,939		(54,850	)		56,089		110,939		(40,749	)		70,190		4
Trade name		3,600		(2,100	)		1,500		8,200		(5,092	)		3,108		1		8,200		(6,817	)		1,383		8,200		(5,667	)		2,533		1
Non-compete agreements		-		-			-		3,600		(650	)		2,950		3		3,600		(1,475	)		2,125		3,600		(925	)		2,675		3
In process research and development																		1,800		-			1,800		1,800		-			1,800	n/a
Other intangibles		275		(145	)		130		1,076		(162	)		914		10		275		(183	)		92		275		(170	)		105		10
Total intangible assets	$	294,767	$	(115,249	)	$	179,518	$	460,769	$	(179,612	)	$	281,157			$	463,268	$	(248,332	)	$	214,936	$	463,268	$	(203,410	)	$	259,858

The aggregate amortization expense of intangible assets for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$14.8~~$22.1 million and ~~$22.1~~$21.4 million, respectively and for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2020 and ~~September~~June 30, 2019 was ~~$22.7~~$44.8 million and ~~$64.5~~$42.3 million, respectively.

Estimated amortization expense for the remainder of the current fiscal year and in each of the next ~~five~~four years and beyond is as follows (in thousands):

	September 30, 2019		June 30, 2020
2019 (remaining)	$	23,049
2020		83,511
2020 (remaining)			$	41,696
2021		78,778		81,552
2022		34,517		36,095
2023		22,599		23,549
2024				9,098
Thereafter		38,703		21,146
Total	$	281,157	$	213,136

Property and equipment consisted of the following at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 (in thousands):

	December 31, 2018			September 30, 2019			Useful lives (years)	June 30, 2020			December 31, 2019			Useful lives (years)
Buildings and leasehold improvements	$	54,348		$	71,698		1-15	$	91,688		$	81,065		1-15
Furniture and equipment		81,705			85,322		3-10		91,336			91,720		3-10
Computer systems and equipment		148,255			168,241		3-10		170,484			164,161		3-10
Construction equipment		12,074			11,753		5-7		9,547			11,765		5-7
									363,055			348,711
Accumulated depreciation		(204,533	)		(227,776	)			(238,291	)		(225,960	)
Property and equipment, net	$	91,849		$	109,238			$	124,764		$	122,751

Depreciation expense for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$8.8~~$9.8 million and ~~$8.9~~$9.7 million, respectively, and ~~$24.0~~$19.4 million and ~~$28.2~~$19.4 million, respectively, for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019.

During fiscal 2011, the Company consummated two sale-leaseback transactions associated with the sale of two office buildings from which the Company recognized a total gain in the consolidated statements of income (loss) of $106.7 million and a total deferred gain of $107.8 million. The current and long-term portion of the deferred gain had been recorded in “Accrued expenses and other current liabilities” and “Deferred gain resulting from sale-leaseback transactions” on the consolidated balance sheet at December 31, 2018, respectively, and was being recognized ratably over the minimum lease terms to which they relate, as an offset to rental expense in “Indirect, general and administrative expenses” in the consolidated statements of income. Amortization of the deferred gain was $1.8 million for the three months ended September 28, 2018 and $5.4 million for the nine months ended September 28, 2018. The deferred gain balance of $53.3 million as of December 31, 2018 was recognized as an adjustment to beginning retained earnings net of a deferred tax asset adjustment of $0.7 million during January 2019 in connection with the adoption of the new leasing standard. See “Note 6 – Leases”.

Long-Term:	December 31, 2018			September 30, 2019			June 30, 2020			December 31, 2019
Revolving credit facility	$	180,000		$	-
Senior notes		250,000			250,000			250,000			250,000
Debt issuance costs		(836	)		(694	)		(552	)		(647	)
Total long-term	$	429,164		$	249,306		$	249,448		$	249,353

In November 2017, the Company entered into an amended and restated Credit Agreement. The Company incurred $2.0 million of costs in connection with this amendment. Under the agreement, the Company’s revolving credit facility was increased from $500 million to $550 million and the term of the agreement was extended through November ~~2022.~~2022. The borrowings under the Credit Agreement bear interest, at the Company’s option, at either the Base Rate (as defined in the Credit Agreement), plus an applicable margin, or LIBOR plus an applicable margin. The applicable margin for Base Rate loans is a range of 0.125% to 1.00% and the applicable margin for LIBOR loans is a range of 1.125% to 2.00%, both based on the leverage ratio of the Company at the end of each fiscal quarter. The rates at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 were ~~4.253%~~1.42% and ~~3.350%~~3.02%, respectively. Borrowings under this Credit Agreement are guaranteed by certain of the Company’s operating subsidiaries. Letters of credit commitments outstanding under this agreement aggregated to ~~$49.8~~$44.9 million and ~~$45.2~~$43.7 million at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019, respectively, which reduced borrowing limits available to the Company. Interest expense related to the ~~credit agreement~~Credit Agreement was ~~$1.1~~$0.3 million and ~~$6.4~~$0.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, and for the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2019 was ~~$2.5~~$1.6 million and ~~$3.5~~$5.0 million, respectively.There were 0 loan amounts outstanding under the Credit Agreement at June 30, 2020.

On July 1, 2014, the Company finalized a private placement whereby the Company raised an aggregate amount of $250.0 million in debt ~~repayable~~ as follows (in thousands):

Tranche	Debt Amount		Maturity Date	Interest Rates			Debt Amount		Maturity Date	Interest Rates
Senior Note, Series A	$	50,000	July 15, 2021		4.44	%	$	50,000	July 15, 2021		4.44	%
Senior Note, Series B		100,000	July 15, 2024		4.98	%		100,000	July 15, 2024		4.98	%
Senior Note, Series C		60,000	July 15, 2026		5.13	%		60,000	July 15, 2026		5.13	%
Senior Note, Series D	$	40,000	July 15, 2029		5.38	%		40,000	July 15, 2029		5.38	%

The Company incurred $1.1 million of debt issuance costs in connection with the private placement. On August 10, 2018, the Company finalized an amended and restated intercreditor agreement related to this private placement to more closely align certain covenants and definitions with the terms under the 2017 amended and restated Credit Agreement and incurred $0.5 million of additional issuance costs. 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 both the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was $3.1 million and ~~$9.3~~$6.2 million,respectively. The amortization of debt issuance costs and interest expense are recorded in “Interest expense” on the consolidated statements of income. The Company made interest payments related to the Senior Notes for both the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 of ~~$6.2~~$0 million and ~~$12.4~~$6.2 million,respectively. Interest payable of ~~$5.7~~$5.6 million and ~~$2.6~~$5.7 million is recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019, respectively, related to the Senior Notes.

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, 2020 and December 31, ~~2018 and September 30,~~ 2019.

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 ~~$223.0~~$186.6 million and ~~$220.6~~$197.3 million at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019, respectively.

Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company estimated the fair value ~~(level~~(Level 2) of its senior notes at ~~September~~June 30, ~~2019~~2020 approximates ~~$269.3~~$272.2 million.See “Note 1716 – Fair Value of Financial Instruments” for the definition of ~~level~~Level 2 of the fair value hierarchy.

In January 2019, the Company borrowed $150.0 million under our Term Loan Agreement to partially finance the OGSystems acquisition. On May 10, 2019, the Company used proceeds from its May 8, 2019 IPO to repay the $150.0 million outstanding balance under the Term Loan and this loan is now closed. Interest expense related to the ~~term loan~~Term Loan was $0$1.0 million and $2.3 million for the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively.

Amortization of debt issuance costs for all the Company’s debt and credit facilities for the three months ended September 28, 2018 and September 30, 2019 was $0.2 million and $0.2 million, respectively and $0.5 million and $0.8 million for the nine months ended September 28, 2018 and September 30, 2019, respectively.There were 0 amounts outstanding in fiscal 2020.

~~Historically,~~On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits Net Operating Loss (“NOL“) carryovers to offset 100% of taxable income for tax years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding tax years to generate a refund of previously paid income taxes. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The CARES Act also accelerates the refund of alternative minimum tax (“AMT”) credits that were previously accumulated. The Company does not expect that the modifications on the limitation of business interest or AMT credits would have any impact to the Company. Under the NOL carryback provision, the Company expects to carry back some of its NOLs relating to certain amounts associated with acquisitions which may be subject to certain shareholders’ claims.

On July 9, 2020, the U.S. Treasury Department issued final tax regulations related to the foreign-derived intangible income and global intangible low-taxed income (GILTI) provisions. Also, on July 20, 2020 the U.S. Treasury Department released final tax regulations permitting a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign tax. The Company is currently assessing the impact of the new legislation to its consolidated financial statements but does not expect a material change of its income tax expense due to the new regulations.

Prior to the Company’s IPO, the Company had elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code for federal tax purposes. As a result, income had not been subject to U.S. federal income taxes or state income taxes in those states where the “S” Corporation status is recognized. Therefore, previously, no provision or liability for federal or state income tax had been provided in the consolidated financial statements except for those states where the “S” Corporation status was not recognized, or where states imposed a tax on “S” Corporations. The provision for income tax in the historical periods prior to the IPO consists of these state taxes and taxes from certain foreign ~~taxes~~jurisdictions where the Company is subject to tax.

In connection with the Company’s IPO on May 8, 2019, the “S” Corporation status was terminated, and the Company is now treated as a “C” Corporation under the Code. The termination of the “S” Corporation election has had a material impact on the Company’s results of operations, financial condition, and cash flows as reflected in the June 30, ~~and September 30, 2019~~2020 consolidated financial statements. The effective ~~income~~ tax rate has increased, and net income has decreased as compared to the Company’s “S” Corporation tax years, since the Company is now subject to both U.S. federal and state corporate income taxes on its earnings.

~~For US corporate~~The Company’s effective tax rate was 27.64% and 400.68% for the three months ended June 30, 2020 and 2019, respectively. The change in the effective tax rate was due primarily to nonrecurring tax items included in the second quarter 2019 income taxes associated with a $56 million tax ~~purposes,~~benefit from the ~~Company will apportion its 2019 taxable income ratably between~~remeasurement of deferred taxes associated with the Company’s change in “S” Corporation ~~and~~to “C” Corporation ~~periods, as allowed by law. This allocation of income will effectively result in a blended income~~status. The Company’s effective tax rate for the six months ended June 30, 2020 and 2019 ~~year, as only the C corporation earnings will be subject to both U.S. federal~~was 27.17% and state corporate income tax while the “S” Corporation earnings will be subject to tax in those states that tax “S” Corporations or do not recognize “S” Corporation status. The Company has estimated our 2019 effective tax benefit rate to be (69.69)(2,686.95)%. The ~~most significant item contributing~~change in the effective tax rate was due primarily to the nonrecurring tax items included in 2019 for the remeasurement of deferred taxes associated with the change in tax status. The difference between the effective tax rate and the statutory U.S. Federal income tax rate of 21.0% for the quarter ended ~~September 30, 2019 is the tax impact of updating the revaluation of deferred tax assets and liabilities, resulting from the conversion from an “S” to a “C” Corporation.~~

The termination for the “S” Corporation status has been treated as a change in tax status under Accounting Standards Codification 740, “Income Taxes”. These rules require that the deferred tax effects of a change in tax status be recorded to income from continuing operations on the date the “S” Corporation status terminates. During the quarter ended June 30, 2019 the Company recorded a discrete deferred tax benefit of $56 million for the estimated effect of the change in tax status, relating to the recognition of net deferred tax assets for temporary differences in existence on the date of conversion to a “C” Corporation. During the quarter ended September 30, 2019, the Company has updated the estimate to $85 million, representing an increase in expected benefit of $29 million. The update2020 primarily relates to a change in the forecasted temporary differences as of the conversion, changes in deferred tax assets resulting from 2018 tax return-to-provision adjustments, and changes in tax accounting methods that were made with the 2018 tax return during the third quarter. This amount is subject to additional revision based upon actual results for the current year.~~The $29 million increase was recorded as a discrete tax benefit in the three months ended September 30, 2019.~~

~~The US government enacted comprehensive tax legislation on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act ("TCJA"). The TCJA significantly revised the U.S. corporate~~state income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The TCJA also repealed the deduction for domestic production activities, limited the deductibility of certain executive compensation, and implemented a modified territorial tax system with the introduction of the Global Intangible Low-Taxed Income (“GILTI”) tax rules. The TCJA also imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. As a Subchapter “S” corporation the TCJA had a limited effect on the Company’s 2018 effective tax rate. The Company calculated that as a “C” corporation in 2019, the provisions of TCJA, except for the statutory rate, will not have a material impact on the income tax provision. Under GAAP, the Company is allowed to make an accounting policy election of either: (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost ” method); or (ii) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred” method). For taxable income inclusions due to the GILTI tax rules, the Company has elected the period cost method and has included the impact in the estimated annual effective tax rate as of September 30, 2019.taxes.

As of ~~September~~June 30, ~~2019,~~2020, the Company’s deferred tax assets included a valuation allowance of ~~$18.1~~$17.2 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~~more-likely-than-not to be realized. The factors used to assess the likelihood of realization ~~were~~include: the past performance of the related entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets. 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, 2020 and December ~~31,2018 and September 30,~~31, 2019, the liability for income taxes associated with uncertain tax positions was ~~$9.9~~$14.6 million and ~~$14.6~~$15.5 million, respectively. ~~Management believes it~~It is ~~unlikely~~reasonably possible that the ~~liability~~Company may realize a decrease in our uncertain tax positions of approximately $1.7 million during the next twelve months as a result of concluding various tax audits and closing tax years. Although the Company believes its reserves for ~~unrecognized~~its tax ~~benefits related to existing matters would increase or decrease within~~positions are reasonable, the final outcome of tax audits could be materially different, both favorably and unfavorably. It is reasonably possible that certain audits may conclude in the next 12 months ~~by a material amount. The Company is routinely subject to~~and that the unrecognized tax ~~audit in several jurisdictions. Although adjustments could result from these audits,~~benefits the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. However, it is not ~~aware~~currently possible to estimate the amount, if any, of ~~any issue that would materially change the liability for uncertain tax positions.~~ such change.

The Company is subject to certain lawsuits, claims and assessments that arise in the ordinary course of business. Additionally, the Company has been named as a defendant in lawsuits alleging personal injuries as a result of contact with asbestos products at various project sites. Management believes that any significant costs relating to these claims will be reimbursed by applicable insurance and, although there can be no assurance that these matters will be resolved favorably, management believes that the ultimate resolution of any of these claims will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. A liability is recorded when it is both probable that a loss has been incurred and the amount of loss or range of loss can be reasonably estimated. When using a range of loss estimate, the Company records the liability using the low end of the range. The Company records a corresponding receivable for costs covered under its insurance policies. Management judgment is required to determine the outcome and the estimated amount of a loss related to such matters. Management believes that there are no0 claims or assessments outstanding which would materially affect the consolidated results of operations or the Company’s financial position.

On or about March 1, 2017, the Peninsula Corridor Joint Powers Board, or the JPB, filed a lawsuit against Parsons Transportation Group, Inc., or PTG, in the Superior Court of California, County of San Mateo, in connection with a positive train control project on which PTG was engaged prior to termination of its contract by the JPB. PTG had previously filed a lawsuit against the JPB for breach of contract and wrongful termination. The JPB seeks damages in excess of $100.0 million, which the Company is currently disputing. In addition to filing a complaint for breach of contract and wrongful termination, the Company has denied the allegations raised by the JPB and, accordingly, filed affirmative defenses. The Company is currently defending against the JPB’s claims and the parties are still engaged in discovery. The Company also has a professional liability insurance policy to the extent the JPB proves any errors or omissions occurred. At this time, ~~we are~~the Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any. The Company has also filed a third-party claim against a subcontractor for indemnification in connection with this matter.

In September 2015, a former Parsons employee filed an action in the United States District Court for the Northern District of Alabama against us as a qui tam relator on behalf of the United States (the “Relator”) alleging violation of the False Claims Act. The United States government did not intervene in this matter as it is allowed to do so under the statute. The Company filed a motion to dismiss the lawsuit on the grounds that the Relator did not meet the applicable statute of limitations. The District Court granted the motion to dismiss. The Relator’s attorney appealed the decision to the United States Court of Appeals of the Eleventh Circuit, which ultimately ruled in favor of the Relator, and the Company petitioned the United States Supreme Court to review the decision. The Supreme Court reviewed the decision and accepted the

position of the Relator. The case was thus remanded to the United States District Court for the Northern District of Alabama. The defendants, including Parsons, will file appropriate pleadings opposing the allegations. At this time, wethe Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any.

On or about October 4, 2019, LBH Engineers, LLC (“LBH”) filed a lawsuit against Parsons, PTG, and various other parties in the US District Court of for the Northern District of Georgia, in connection with an alleged infringement of LBH’s patent. LBH seeks damages and costs incurred by LBH, a post-judgment royalty, treble damages if the infringement is found to be willful, among other damages, which the Company and the other defendants are currently disputing. At this time, the Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any.

Federal government contracts are subject to audits, which are performed for the most part by the Defense Contract Audit Agency (“DCAA”). Audits by the DCAA and other agencies consist of reviews of our overhead rates, operating systems and cost proposals to ensure that we account for such costs in accordance with the Cost Accounting Standards (“CAS”). If the DCAA determines we have not accounted for such costs in accordance with the CAS, the DCAA may disallow these costs. The disallowance of such costs may result in a reduction of revenue and additional liability for the Company. Historically, the Company has not experienced any material disallowed costs as a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. All audits of costs incurred on work performed through 2010 have been closed, and years thereafter remain open.

Although there can be no assurance that these matters will be resolved favorably, management believes that their ultimate resolution will not have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows.

The Company’s principal retirement benefit plan is the Parsons Employee Stock Ownership Plan (“ESOP”), a stock bonus plan, established in 1975 to cover eligible employees of the Company and certain affiliated companies. Contributions of treasury stock to the ESOP are made annually in amounts determined by the Company’s board of directors and are held in trust for the sole benefit of the participants. Shares allocated to a participant’s account are fully vested after ~~six~~three years of credited service, or in the event(s) of reaching age 65, death or disability while an active

employee of the Company. ~~All~~As of June 30, 2020 and December 31, 2019, total shares of the Company’s common stock ~~was acquired~~were 100,724,683 and 100,669,694, respectively, of which 76,795,221and 78,896,806, respectively, were held by the ESOP.

A participant’s interest in their ESOP ~~in conjunction with a reorganization in 1984, which was financed by the Company.~~

~~Upon~~account is redeemable upon certain events, including retirement, death, termination due to permanent disability, a severe financial hardship ~~conflict~~following termination of employment, certain conflicts of interest following termination of employment, or the exercise of diversification ~~rights,~~rights. Distributions from the ESOP of participants’ interests are made in ~~their ESOP accounts are redeemable at~~ the ~~current price per~~Company’s common stock based on quoted prices of a share of the ~~stock.~~

~~There is a lock-up agreement~~Company’s common stock on the NYSE. A participant will be able to sell such shares of common stock in ~~place through November 3, 2019 affecting~~ the ~~ability~~market, subject to any requirements of the ESOP Trustee to trade shares of the Company’s stock. During the lock-up period, the Trustee will redeem eligible participants’ interests in their ESOP accounts for cash, funded by the May 10, 2019 IPO Dividend described below. If that cash is exhausted before the end of the lock-up period, participants will put their shares to the Company which will redeem them for cash. Upon the expiration of the lock-up period, all shares held by the ESOP will be redeemable by participants in shares of the Company’s stock once vesting and eligibility requirements have been met. The Company presents all shares held by the ESOP as temporary equity on the consolidated balance sheets at their redemption value. The Company elected the policy to adjust the temporary equity balance to the maximum redemption amount at each balance sheet date for units that are not currently redeemable. Accordingly, at each balance sheet date, the Company will adjust the temporary equity balance to its maximum redemption amount with a corresponding offset to retained earnings.federal securities laws.

Total ESOP contribution expense was ~~$11.4~~$14.6 million and $12.3 million for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019, respectively, and ~~$34.1~~$29.5 million and ~~$36.8~~$24.5 million for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019, respectively. The expense is recorded in “Direct costs of contracts” and “Indirect, general and administrative expense” in the consolidated statements of income. The fiscal ~~2019~~2020 ESOP contribution has not yet been made. The amount is currently included in accrued liabilities.

At December 31, 2018 and September 30, 2019, 78,172,809 shares and 78,138,602 shares of the Company’s stock were held by the ESOP which the Company recorded at their aggregate redemption value of $1.9 billion and $2.6 billion, respectively. On April 3, 2019, the board of directors of the Company declared a cash dividend to the Company’s sole existing shareholder at that time, the ESOP, in the amount of $2.00 per share, or $52.1 million in the aggregate (the “IPO Dividend”). The IPO Dividend was paid on May 10, 2019. On April 15, 2019, the board of directors of the Company declared a common stock dividend in a ratio of ~~two~~2 shares of common stock for every one share of common stock then held by the Company’s shareholder (the “Stock Dividend”). The record date of 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. ~~During the year ended December 31, 2018, the Company did not declare any dividends. Please see the Company’s Form S-1/A, filed April 29, 2019, for a further discussion of the Company’s ESOP.~~

As part of an acquisition in 2014, the Company acquired a defined contribution pension plan, a defined benefit pension plan, and supplemental retirement plan. For the defined contribution pension plan, the Company contributes a base amount plus an additional amount based upon a predetermined formula. At December 31, 2018 and September 30, 2019, the defined benefit pension plan was in a net asset position of $1.7 million and $1.7 million, respectively, which is recorded in “Other noncurrent assets” on the consolidated balance sheets.

The Company participates in joint ventures to bid, negotiate and complete specific projects. The Company is required to consolidate these joint ventures if it holds the majority voting interest or if the Company meets the criteria under the consolidation model, as described below.

The Company performs an analysis to determine whether its variable interests give the Company a controlling financial interest in a Variable Interest Entity (“VIE”) for which the Company is the primary beneficiary and should, therefore, be consolidated. Such analysis requires the Company to assess whether it has the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company analyzed all of its joint ventures and classified them into two groups: (1) joint ventures that must be consolidated because they are either not VIEs and the Company holds the majority voting interest, or because they are VIEs and the Company is the primary beneficiary; and (2) joint ventures that do not need to be consolidated because they

are either not VIEs and the Company holds a minority voting interest, or because they are VIEs and the Company is not the primary beneficiary.

Many of the Company’s joint venture agreements provide for capital calls to fund operations, as necessary; however, such funding is infrequent and is not anticipated to be material.

Letters of credit outstanding described in “Note 1110 – Debt and Credit Facilities” that relate to project ventures are ~~$76.8~~$65.7 millionand ~~$72.4~~$55.0 million at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019, 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. None of the Company’s current joint ventures that meet the characteristics of a VIE are individually significant to the consolidated financial statements.

The following represents financial information for consolidated joint ventures included in the consolidated financial statements (in thousands):

	December 31, 2018		September 30, 2019		June 30, 2020		December 31, 2019
Current assets	$	287,227	$	254,204	$	324,721	$	255,167
Noncurrent assets		2,689		2,836		1,947		2,860
Total assets		289,916		257,040		326,668		258,027
Current liabilities		199,833		198,079		246,019		193,583
Total liabilities		199,833		198,079		246,019		193,583
Total joint venture equity	$	90,083	$	58,961	$	80,649	$	64,444

	Three Months Ended				Nine Months Ended				Three Months Ended					Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Revenue	$	126,480	$	117,611	$	413,548	$	341,719	$	117,889	$	109,004		$	218,167	$	224,108
Costs		116,468		108,839		262,146		322,826		101,935		106,781			199,085		213,987
Net income	$	10,012	$	8,772	$	151,402	$	18,893	$	15,954	$	2,223		$	19,082	$	10,121
Net income attributable to noncontrolling interests	$	4,844	$	4,481	$	10,316	$	8,012
Net income (loss) attributable to noncontrolling interests									$	7,826	$	(114	)	$	9,224	$	3,531

The assets of the consolidated joint ventures are restricted for use only by the particular joint venture and are not available for the Company’s general operations.

The Company accounts for its unconsolidated joint ventures using the equity method of accounting. Under this method, the Company recognizes its proportionate share of the net earnings of these joint ventures as “Equity in earnings (loss) of unconsolidated joint ventures” in the consolidated statements of income. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

The following represents the financial information of the Company’s unconsolidated joint ventures as presented in their unaudited financial statements (in thousands):

	December 31, 2018		September 30, 2019		June 30, 2020		December 31, 2019
Current assets	$	707,457	$	778,876	$	775,365	$	801,335
Noncurrent assets		876,385		956,367		541,528		564,160
Total assets		1,583,842		1,735,243		1,316,893		1,365,495
Current liabilities		560,306		625,949		720,964		655,495
Noncurrent liabilities		813,269		895,514		486,464		507,131
Total liabilities		1,373,575		1,521,463		1,207,428		1,162,626
Total joint venture equity		210,267		213,780		109,465		202,869
Investments in and advances to unconsolidated joint ventures	$	63,560	$	66,584	$	64,905	$	68,620

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue	$	482,634	$	474,600	$	1,234,946	$	1,225,284	$	238,188	$	521,218	$	691,447	$	750,684
Costs		462,042		452,001		1,186,184		1,166,008		223,686		497,227		650,691		714,007
Net income	$	20,592	$	22,599	$	48,762	$	59,276	$	14,502	$	23,991	$	40,756	$	36,677
Equity in earnings of unconsolidated joint ventures	$	12,707	$	7,274	$	25,577	$	29,305	$	3,769	$	11,634	$	9,883	$	22,031

The Company received net distributions from ~~(made contributions to)~~ its unconsolidated joint ventures for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 of ~~$20.1~~$5.6 million and ~~$13.7~~$6.3 million, respectively, and ~~$28.6 million and $28.0 million~~ for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 of $12.1 millionand $14.4 million, respectively.

The Company often provides services to unconsolidated joint ventures and revenues include amounts related to recovering overhead costs for these services. Revenues related to services the Company provided to unconsolidated joint ventures for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 were ~~$36.6~~$42.4 million and ~~$28.8~~$50.7 million, , respectively, and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 were ~~$112.2~~$82.8 million and ~~$113.1~~$84.3 million respectively. For the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019, the Company incurred ~~$28.2~~$34.6 million and ~~$20.5~~$39.0 million, respectively, and for the ~~nine~~six months ended ~~September 28, 2019~~June 30, 2020 and ~~September~~June 30, 2019, ~~$85.2~~$66.1 million and ~~$86.3~~$66.2 million, respectively, of reimbursable costs. Amounts included in the consolidated balance sheets related to services the Company provided to unconsolidated joint ventures isare as follows (in thousands):

	December 31, 2018		September 30, 2019		June 30, 2020		December 31, 2019
Accounts receivable	$	38,742	$	44,637	$	40,199	$	37,425
Contract assets		2,648		2,734		3,309		6,955
Contract liabilities	$	10,861	$	5,517		4,435		4,509

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, 2020 and December 31, ~~2018 and September 30,~~ 2019, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and other liabilities. The fair values of these financial instruments approximate their carrying values due to their short-term maturities.

Investments measured at fair value are based on one or more of the following three valuation techniques:

In addition, the guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

~~The following table sets forth assets associated with~~Refer to Notes to Consolidated Financial Statements included in the ~~pension plan in “Note 14 – Retirement and Other Benefit Plans” that are accounted~~Company’s Form 10-K for the year ended December 31, 2019 for a more complete discussion of the various items within the consolidated financial statements measured at fair value ~~by Level within~~and the methods used to determine fair ~~value hierarchy.~~

As described in “Note 14 – Retirement and Other Benefit Plans,” the Company acquired a defined contribution pension plan, a defined benefit pension plan, and supplemental retirement plans. At December 31, 2018 and September 30, 2019, the Company measured the mutual funds held within the defined benefit pension plan at fair value using unadjusted quoted prices in active markets that are accessible for identical assets. The Company measured the fixed income securities using market bid and ask prices. The inputs that are significant to valuation of fixed income securities are generally observable and therefore have been classified as Level 2.

The following table sets forth redeemable common stock associated with the ESOP in as described in “Note 14 – Retirement and Other Benefit Plans” that is accounted for at fair value by Level within the fair value hierarchy.

As described in “Note 14 – Retirement and Other Benefit Plans,” the Company is obligated to redeem eligible participants’ interests in their ESOP accounts for cash upon an employee’s election. All shares held by the ESOP are eventually redeemable in the future for cash at the option of the holder once vesting and eligibility requirements have been met. The Company presents all shares held by the ESOP as temporary equity on the consolidated balance sheets at their redemption value. At December 31, 2018 and September 30, 2019, 78,172,809 shares and 78,138,602 shares, respectively, of the Company’s stock were held by the ESOP which the Company recorded at their aggregate redemption values of $1.9 billion and $2.6 billion, respectively. The December 31, 2018 redemption values is based on a share price established by the ESOP trustee, taking into account, among other things, the advice of a third-party valuation consultant for the ESOP trustee as well as the ESOP trustee’s knowledge of the Company. The share price valuation was determined using a combination of income and market-based methods that utilized unobservable Level 3 inputs, including significant assumptions such as forecasted revenue and operating margins, working capital requirements, and weighted average cost of capital. The September 30, 2019 redemption value is based on the Company’s closing share price in an active market and therefore has been classified as Level 1.

~~The following tables present a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3) (in thousands):~~

~~Basic~~The following table reconciles the denominator used to compute basic earnings per ~~common~~ share (“EPS”) to the denominator used to compute diluted EPS for the three and six months ended June 30, 2020 and June 30, 2019. Basic EPS is computed using the weighted average number of shares outstanding during the period and income available to shareholders.

Diluted ~~earnings per share (“EPS”)~~EPS is computed similar to basic EPS, except the weighted average number of shares outstanding is increased to include the dilutive effects of ~~outstanding stock options~~equity-based awards. For the three and ~~other stock-based awards.~~ six months ended June 30, 2020, there were 4,939 shares and 4,066 shares, respectively, excluded from the number of shares used in calculating diluted EPS as their inclusion would be antidilutive. There were no0 dilutive securities outstanding for the three and ~~nine~~six months ended ~~September 28, 2018 and September~~June 30, 2019.

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

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Basic weighted average number of shares outstanding		79,185,527		99,434,877		80,702,032		89,977,493		100,694,938		92,336,119		100,682,315		85,248,801
Dilutive common share equivalents		-		-		-		-		290,649		-		266,369		-
Diluted weighted average number of shares outstanding		79,185,527		99,434,877		80,702,032		89,977,493		100,985,587		92,336,119		100,948,684		85,248,801

The Company operates in ~~two~~2 reportable segments: Federal Solutions and Critical Infrastructure.

The Federal Solutions segment provides advanced technical solutions to the U.S. government, delivering timely, cost-effective hardware, software and services for mission-critical projects. The segment provides advanced technologies,

supporting national security missions in cybersecurity, missile defense, and military facility modernization, logistics support, hazardous material remediation and engineering services.

The Critical Infrastructure segment provides integrated engineering and management services for complex physical and digital infrastructure around the globe. The Critical Infrastructure segment is a technology innovator focused on next generation digital systems and complex structures. 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”), 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				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Federal Solutions revenue	$	443,725	$	486,175	$	1,076,125	$	1,387,484	$	482,210	$	478,497	$	959,781	$	901,309
Critical Infrastructure revenue		532,432		537,102		1,555,443		1,529,940		497,249		511,245		990,671		992,838
Total revenue	$	976,157	$	1,023,277	$	2,631,568	$	2,917,424	$	979,459	$	989,742	$	1,950,452	$	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						Nine Months Ended						Three Months Ended						Six Months Ended
Adjusted EBITDA attributable to Parsons Corporation	September 28, 2018			September 30, 2019			September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Federal Solutions	$	45,556		$	50,359		$	101,052		$	126,658		$	47,700		$	35,700		$	79,317		$	76,299
Critical Infrastructure		38,006			33,976			80,296			102,177			35,519			40,525			62,876			68,201
Adjusted EBITDA attributable to Parsons Corporation		83,562			84,335			181,348			228,835			83,219			76,225			142,193			144,500
Adjusted EBITDA attributable to noncontrolling interests		5,002			4,655			10,681			8,384			7,942			(20	)		9,464			3,729
Depreciation and amortization		(23,599	)		(31,027	)		(46,656	)		(92,692	)		(32,081	)		(31,074	)		(64,490	)		(61,665	)
Interest expense, net		(5,589	)		(4,482	)		(12,117	)		(18,448	)		(3,963	)		(6,151	)		(7,757	)		(13,966	)
Income tax (expense) benefit		(4,154	)		15,453			(18,526	)		67,063			(11,891	)		53,496			(16,975	)		51,610
Litigation-related gains(a)		-			-			129,674			-
Amortization of deferred gain resulting from sale-leaseback transactions(b)		1,798			-			5,440			-
Equity-based compensation		(5,049	)		1,657			(13,198	)		(45,504	)
Transaction-related costs(c)		(2,456	)		(9,891	)		(7,511	)		(26,961	)
Restructuring(d)		-			(309	)		-			(2,880	)
Other(e)		(3,449	)		902			(3,929	)		(2,973	)
Equity-based compensation expense														(12,854	)		(43,311	)		(5,133	)		(47,161	)
Transaction-related costs (a)														2,485			(7,715	)		(9,526	)		(17,070	)
Restructuring expense (b)														(1,143	)		(353	)		(1,110	)		(2,571	)
Other (c)														(589	)		(952	)		(1,170	)		(3,875	)
Net income including noncontrolling interests		46,066			61,293			225,206			114,824			31,125			40,145			45,496			53,531
Net income attributable to noncontrolling interests		4,844			4,481			10,316			8,012			7,826			(114	)		9,224			3,531
Net income attributable to Parsons Corporation	$	41,222		$	56,812		$	214,890		$	106,812		$	23,299		$	40,259		$	36,272		$	50,000

Asset information by segment is not a key measure of performance used by the CODM.

The following tables ~~presents~~present revenues and property and equipment, net by geographic area (in thousands):

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue
North America	$	805,320	$	849,839	$	2,131,562	$	2,400,124	$	800,044	$	819,255	$	1,597,990	$	1,550,285
Middle East		164,677		169,028		485,377		504,604		174,689		167,624		343,548		335,576
Rest of World		6,160		4,410		14,629		12,696		4,726		2,863		8,914		8,286
Total Revenue	$	976,157	$	1,023,277	$	2,631,568	$	2,917,424	$	979,459	$	989,742	$	1,950,452	$	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		September 30, 2019		June 30, 2020		December 31, 2019
Property and Equipment, Net
North America	$	86,847	$	103,690	$	119,985	$	117,606
Middle East		5,002		5,548		4,779		5,145
Total Property and Equipment, Net	$	91,849	$	109,238	$	124,764	$	122,751

North America includes revenue in the United States for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 of ~~$747.7~~$737.4 million and ~~$774.2~~$744.3 million, respectively, and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 ~~$2.0~~$1.5 billion and ~~$2.2~~$1.4 billion, respectively.North America property and equipment, net includes ~~$79.9~~$112.6 million and ~~$97.3~~$109.9 million of property and equipment, net in the United States at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019, respectively.

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue
Space & Geospatial Solutions									$	57,967	$	65,768	$	109,255	$	111,525
Cyber & Intelligence	$	68,895	$	90,429	$	177,838	$	247,710		102,993		80,489		201,875		153,038
Defense		133,259		144,160		297,318		425,603
Mission Solutions		122,780		87,936		280,902		237,914
Engineered Systems		118,791		129,989		320,067		367,542		166,483		167,276		339,315		312,894
Geospatial		-		33,661		-		108,715
Missile Defense & C5ISR										154,767		164,964		309,336		323,852
Federal Solutions revenues		443,725		486,175		1,076,125		1,387,484		482,210		478,497		959,781		901,309
Mobility Solutions										398,890		401,842		790,411		775,822
Connected Communities		165,529		151,779		491,444		459,277		98,359		109,403		200,260		217,016
Mobility Solutions		300,523		286,199		894,796		836,779
Industrial		66,380		99,124		169,203		233,884
Critical Infrastructure revenues		532,432		537,102		1,555,443		1,529,940		497,249		511,245		990,671		992,838
Total Revenue	$	976,157	$	1,023,277	$	2,631,568	$	2,917,424	$	979,459	$	989,742	$	1,950,452	$	1,894,147

~~Revenue for~~Effective January 1, 2020, the ~~three and nine months ended September 28, 2018 included $55.1 million related~~Company made changes to its business lines as described below. The prior year information in the table above has been reclassified to conform to the ~~settlement of~~business line changes.

As a ~~claim that was resolved in favor~~result of the ~~Company in~~acquisitions of Polaris Alpha, OGSystems and QRC, we realigned the ~~Mobility~~five business lines within our Federal Solutions segment into four business lines. We consolidated all space and geospatial programs from the former Geospatial Solutions, Defense and Cyber & Intelligence markets into a new Space & Geospatial Solutions business line ofto increase focus on the critical, evolving space market. This new business line better aligns capabilities and customers to drive growth and performance execution through improved agile, end-to-end solutions and dedicated customer focus.

Further, we re-named our Defense business line to Missile Defense & C5ISR. We moved our Missions Solutions business line into our Missile Defense & C5ISR, Engineered Systems and Cyber & Intelligence business lines, for better

customer and capability alignment. These changes were the next logical step in our acquisition integration process, to optimize performance delivery and growth.

We re-aligned our Critical Infrastructure ~~segment. Please see “Note 14 –~~ ~~Commitments and Contingencies”~~ ~~in the Company’s Form S-1/A filed on April 29, 2019, for~~segment from three markets to two markets. Industrial is now a ~~description~~part of ~~this matter. Excluding the claim settlement, revenue for the nine months ended September 28, 2018 for the Critical Infrastructure segment was $1.5 billion, respectively and for the~~ Mobility Solutions ~~revenue~~and we moved all Middle East business ~~line revenue was~~into Mobility Solutions as well. We believe this will drive improved synergies among like-markets and ~~$839.7 million, respectively.~~increased collaboration in areas such as program and engineering management, civil and structural and water/wastewater treatment. We also moved Aviation to Connected Communities and consolidated the civil portion of rail and transit with the systems portion of rail and transit into a consolidated sub-market within Connected Communities to focus on growth in these critical market segments. In each, we are pursuing systems, software and hardware product advanced technology opportunities.

On October 14, 2019, the Board of Directors of the Company approved the repurchase by the Company of shares of its Common Stock pursuant to the Company’s ESOP. The ESOP provides that, if, prior to the expiration of the lock-up period in connection with the Company’s initial public offering, the trust administering the ESOP has insufficient cash to fund all requested distributions, then, with respect to any distribution election received after the date the ESOP trustee determines it will no longer have sufficient cash to fund all requested distributions during the lock-up period, and provides at least 10 business days' written notice to the Company of such determination, the Company shall automatically, and without further action by the Company or the ESOP trustee, repurchase such number of shares of the Company's Common Stock held by the trust as is subject to any such election. The Company repurchased approximately 157,100 shares of its Common Stock for approximately $5.4 million. Pursuant to expiration of the lock-up period, the ESOP will commence regular distributions of shares to brokerage accounts of retired participants who have met the requirements for distribution.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis is intended to help investors understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion together with our consolidated financial statements and related notes thereto included elsewhere in this Form 10-Q and in conjunction with the Company’s Form ~~S-1/A filed April 29,~~10-K for the year ended December 31, 2019.

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in the Company’s Form ~~S-1/A filed April 29,~~10-K for the year ended December 31, 2019. We undertake no obligation to revise publicly any forward-looking statements. Actual results may differ materially from those contained in any forward-looking statements.

In response to the COVID-19 pandemic, the Company has taken certain actions to continue to execute under our contracts with customers and allow our people to work safely. A substantial majority of our work-force transitioned to work-from-home status during the latter part of the quarter ended March 31, 2020, and these practices remain in effect as of the date of this filing. To date, we have experienced no material disruption in our work as a consequence of these changes in our work practices.

~~Parsons Corporation~~The Company has experienced an impact in the volume of work in both the Federal Solutions and Critical Infrastructure segments where customers have restricted access to certain project sites. We have not seen any substantive cancellations of previously awarded contracts. In the Federal Solutions segment, we have had some existing contracts extended. We continue to see several potential contract awards pushed out to a future date.

The Company is receiving limited benefits associated with the CARES Act related to its work on certain US national security projects; however, the curtailment of work under these projects and the CARES Act benefits are not likely to have a material impact on our financial condition or results of operations.

The Company has provided additional disclosure around liquidity and capital resources which can be found in the “Liquidity and Capital Resources” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q.

The Company anticipates substantially all of the Company’s subcontractors and material suppliers will be able to fulfill their contractual obligations and we do not expect a material impact from non-performance.

The ultimate impact from the COVID-19 pandemic is difficult to predict. While many uncertainties exist, we currently anticipate no material change in our financial condition or results of operations.

PARSONS CORPORATION Enabling a ~~Safer, Smarter~~safer, smarter, and ~~More Interconnected World Segments Federal Solutions Technology~~more interconnected world. Engineered solutions for complex physical and digital infrastructure challenges SEGMENTS KEY FACTS AND FIGURES Technology-driven solutions for defense and intelligence customers FINANCIAL SNAPSHOT $4B Total Revenue Trailing 12-Months (Q2 2020) $4B Contract Awards Trailing 12-Months (Q2 2020) 75+ Years Of History Federal Solutions 49% Critical Infrastructure ~~Engineering and management services for complex physical and digital infrastructure customers Financial Snapshot $2.9B Revenue for nine months ended 9/30/19~~51% Federal Solutions 58% Critical Infrastructure ~~52%~~42% Federal Solutions ~~48% $3.3B Contract Awards for nine months ended 9/30/19~~ Critical Infrastructure ~~38% Federal Solutions 62% Key Facts and Figures 75 Year History~~ ~16K Employees 5%6% Revenue Growth ~~(Q3 2019) 1.2x TTM Book-to-Bill $8.3B~~Trailing 12-Months (Q2 2020) 1.0X Book-To-Bill Ratio Trailing 12-Months (Q2 2020) $7.7B Backlog ~~as of 9/~~As Of 6/30/~~2019 Parsons 1~~

Parsons Corporation Enabling a Safer, Smarter and More Interconnected World Segments Federal Solutions Technology solutions for defense and intelligence customers Critical Infrastructure Engineering and management services for complex physical and digital infrastructure customers Financial Snapshot $2.9B Revenue for nine months ended 9/30/19 Critical Infrastructure 52% Federal Solutions 48% $3.3B Contract Awards for nine months ended 9/30/19 Critical Infrastructure 38% Federal Solutions 62% Key Facts and Figures 75 Year History~16K Employees 5% Revenue Growth (Q3 2019) 1.2x TTM Book-to-Bill $8.3B Backlog as of 9/30/20192020 PARSONS CORPORATION.

We are a leading disruptive technology provider ~~of technology-driven solutions~~ in the global defense, intelligence and critical infrastructure markets. We provide ~~solutions comprised of technical engineering services,~~ software and hardware products, technical services and integrated solutions to ~~address~~support our customers’ ~~challenges.~~missions. We have developed significant expertise and differentiated capabilities in key areas of cybersecurity, intelligence, missile defense, ~~military training~~C5ISR, space, geospatial, and ~~development,~~ connected ~~communities, physical infrastructure and mobility solutions.~~communities. By combining our talented team of professionals and advanced technology, we help solve complex technical challenges to enable a safer, smarter and more interconnected world.

We operate in two reporting segments, Federal Solutions and Critical Infrastructure. Our Federal Solutions business provides advanced technical solutions to the U.S. government. Our Critical Infrastructure business provides integrated engineering and management services for complex physical and digital infrastructure to state and local governments and large companies.

Our employees provide services pursuant to contracts that we are awarded by the customer and specific task orders relating to such contracts. These contracts are often multi-year, which provides us backlog and visibility on our revenues for future periods. Many of our contracts and task orders are subject to renewal and rebidding at the end of their term, and some are subject to the exercise of contract options and issuance of ~~delivery or~~ task orders by the applicable government entity. In addition to focusing on increasing our revenues through increased contract awards and backlog, we focus our financial performance on margin expansion and cash flow.

We manage and assess the performance of our business by evaluating a variety of metrics. The following table sets forth selected key metrics (in thousands, except Book-to-Bill):

	September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019
Awards (year to date)	$	3,218,816	$	3,334,434	$	1,971,186	$	2,199,210
Backlog (1)	$	7,963,225	$	8,250,514	$	7,718,690	$	8,500,954
Book-to-Bill (year to date)		1.2		1.1		1.0		1.2

Awards generally represent the amount of revenue expected to be earned in the future from funded and unfunded contract awards received during the period. Contract awards include both new and re-compete contracts and task orders. Given that new contract awards generate growth, we closely track our new awards each year.

The following table summarizes the year ~~to date~~to-date value of new awards for the periods presented below (in thousands):

	Three months ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Federal Solutions	$	671,615	$	845,559	$	1,624,573	$	2,076,928	$	433,140	$	422,829	$	1,048,830	$	1,231,369
Critical Infrastructure		552,034		289,665		1,594,243		1,257,506		571,951		555,313		922,356		967,841
Total Awards	$	1,223,649	$	1,135,224	$	3,218,816	$	3,334,434	$	1,005,091	$	978,142	$	1,971,186	$	2,199,210

The change in new awards from year to year in our Federal Solutions segment is primarily due to significant awards in our legacy business and from business acquisitions. The change in new awards from year to year in our Critical Infrastructure segment is primarily due to ordinary course ~~fluctuations.~~fluctuations in our business. The volume of contract awards can fluctuate in any given period due to win rate and the timing and size of the awards issued by our customers. The change in new awards in our Federal Solutions segment for the six months ended June 30, 2020 when compared to the corresponding period last year was impacted by two significant contracts awarded in the first quarter of 2019. The awards in Critical Infrastructure for the three and six months ended June 30, 2020, were impacted by potential awards being pushed out to a future date.

Backlog includes (i) unissued ~~delivery~~task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.

The following table summarizes the value of our backlog at the respective dates presented below: (in thousands):

	September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019
Federal Solutions:
Funded	$	998,863	$	1,214,919	$	1,308,663	$	1,003,167
Unfunded		3,838,046		3,946,784		3,654,203		4,031,137
Total Federal Solutions		4,836,909		5,161,703		4,962,866		5,034,304
Critical Infrastructure:
Funded		3,126,316		3,050,525		2,719,037		3,428,364
Unfunded		-		38,286
Unfunded (1)						36,787		38,286
Total Critical Infrastructure		3,126,316		3,088,811		2,755,824		3,466,650
Total Backlog ~~(1)~~(2)	$	7,963,225	$	8,250,514	$	7,718,690	$	8,500,954

Our backlog includes orders under contracts that in some cases extend for several years. For example, the U.S. Congress generally appropriates funds for our U.S. federal government customers on a yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to complete. As a result, our federal contracts typically are only partially funded at any point during their ~~term and all~~term. All or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

We expect to recognize $2.8 billion of our funded backlog at ~~September~~June 30, ~~2019~~2020 as revenues in the following twelve months. However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts. In the case of a termination for convenience, we would not receive anticipated future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed. See “Risk Factors—~~Risks~~Risk Relating to Our Business—We may not realize the full value of our backlog, which may result in lower than expected revenue” in the Company’s Form ~~S-1/A filed on April 29,~~10-K for the year ended December 31, 2019.

The changes in backlog in ~~our~~both the Federal Solutions ~~segment is~~and Critical Infrastructure segments were primarily from ~~business acquisitions which contributed $0.3 billion. The change in backlog in our Critical Infrastructure segment was primarily due to~~ ordinary course fluctuations in our ~~business. Our backlog will fluctuate in any given period based on~~business and the ~~volume of awards issued in comparison~~impacts related to the ~~revenue generated from our existing contracts.~~Company’s awards discussed above.

Book-to-bill is the ratio of total awards to total revenue recorded in the same period. Our management believes our book-to-bill ratio is a useful indicator of our potential future revenue growth in that it measures the rate at which we are generating new awards compared to the Company’s current revenue. To drive future revenue growth, our goal is for the level of awards in a given period to exceed the revenue booked. A book-to-bill ratio greater than 1.0 indicates that awards generated in a given period exceeded the revenue recognized in the same period, while a book-to-bill ratio of less than 1.0 indicates that awards generated in such period were less than the revenue recognized in such period. The following table sets forth the book-to-bill ratio for the periods presented below:

	Three months ended				Nine Months Ended				Three months ended				Six Months Ended
	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Federal Solutions		1.5		1.7		1.5		1.5		0.9		0.9		1.1		1.4
Critical Infrastructure		1.0		0.5		1.0		0.8		1.2		1.1		0.9		1.0
Overall		1.3		1.1		1.2		1.1		1.0		1.0		1.0		1.2

We believe that the financial performance of our business and our future success are dependent upon many factors, including those highlighted in this section. Our operating performance will depend upon many variables, including the success of our growth strategies and the timing and size of investments and expenditures that we choose to undertake, as well as market growth and other factors that are not within our control.

Changes in the relative mix of government spending and areas of spending growth, with shifts in priorities on homeland security, intelligence, defense-related programs, infrastructure and urbanization, and continued increased spending on technology and innovation, including cybersecurity, artificial intelligence, connected communities and physical infrastructure, could impact our business and results of operations. Cost-cutting and efficiency initiatives, current and future budget restrictions, spending cuts and other efforts to reduce government spending could cause our government customers to reduce or delay funding or invest appropriated funds on a less consistent basis or not at all, and demand for our solutions or services could diminish. Furthermore, any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to customer locations or facilities as a result of such disruptions.

There is uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to address budgetary constraints, caps on the discretionary budget for defense and non-defense departments and agencies, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and agencies that are, and those that are not, subject to the caps. Additionally, budget deficits and the growing U.S. national debt increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide. A reduction in the amount of, or delays, or cancellations of funding for, services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations.

Increased audit, review, investigation and general scrutiny by government agencies of performance under government contracts and compliance with the terms of those contracts and applicable laws could affect our operating results. Negative publicity and increased scrutiny of government contractors in general, including us, relating to government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information, as well as the increasingly complex requirements of the U.S. Department of Defense and the U.S. intelligence community, including those related to cybersecurity, could impact our ability to perform in the markets we serve.

The industries we operate in consist of a large number of enterprises ranging from small, niche-oriented companies to multi-billion dollar corporations that serve many government and commercial customers. We compete on the basis of our technical expertise, technological innovation, our ability to deliver cost-effective multi-faceted services in a timely manner, our reputation and relationships with our customers, qualified and/or security-clearance personnel, and pricing. We believe that we are uniquely positioned to take advantage of the markets in which we operate because of our proven track record, long-term customer relationships, technology innovation, scalable and agile business offerings and world class talent. Our ability to effectively deliver on project engagements and successfully assist our customers affects our ability to win new contracts and drives our financial performance.

On May 31, 2018, the Company acquired Polaris Alpha for $489.1 million. Polaris Alpha is an advanced, technology-focused provider of innovative mission solutions for national security, intelligence and other U.S. federal customers. The acquisition was funded by cash on-hand and borrowings under our Revolving Credit Facility. The financial results of Polaris Alpha have been included in our consolidated results of operations from May 31, 2018 onward.

On January 7, 2019, the Company acquired OGSystems for $292.4 million. OGSystems provides geospatial intelligence, big data analytics and threat mitigation for defense and intelligence customers. The acquisition was funded by cash on-hand and borrowings under our Term Loan and Revolving Credit Facility. The financial results of OGSystems have been included in our consolidated results of operations from January 7, 2019 onward.

On July 31, 2019, the Company acquired QRC Technologies for $214.1 million. QRC Technologies provides design and development of open-architecture radio-frequency products. The acquisition was funded by cash on-hand and borrowings under our Revolving Credit Facility. The financial results of QRC Technologies have been included in our consolidated results of operations from July 31, 2019 onward.

Our results may be affected by variances as a result of seasonality we experience across our businesses. This pattern is typically driven by the U.S. federal government fiscal year-end, September 30. While not certain, it is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions in the weeks before the end of the U.S. federal government fiscal year in order to avoid the loss of unexpended fiscal year funds. In addition, we have also historically experienced higher bid and proposal costs in the months leading up to the U.S. federal government fiscal year-end as we pursue new contract opportunities expected to be awarded early in the following U.S. federal government fiscal year as a result of funding appropriated for that U.S. federal government fiscal year. Furthermore, many U.S. state governments with fiscal years ending on June 30 tend to accelerate spending during their first quarter, when new funding becomes available. We may continue to experience this seasonality in future periods, and our results of operations may be affected by it.

Historically, the Company had elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code for federal tax purposes. As a result, the Company’s income had not been subject to U.S. federal income taxes or state income taxes in those states where the “S” Corporation status was recognized. No provision or liability for federal or

state income tax had been provided in the Company’s consolidated financial statements, prior to the IPO on May 8, 2019, except for those states where the “S” Corporation status was not recognized ~~and for the 1.5% California franchise~~or where states imposed a tax ~~to which the Company was also subject as a California~~on “S” ~~Corporation.~~Corporations. The provision for income tax in the historical periods prior to the ~~initial public offering (“IPO”)~~IPO consists of these ~~taxes.~~state taxes and from certain foreign jurisdictions where the Company is subject to tax.

In connection with the IPO, ~~on May 8, 2019,~~ the Company’s “S” Corporation status terminated, and the Company ~~will be~~is now treated as a “C” Corporation under Subchapter C of the Internal Revenue Code. The revocation of the Company’s “S” Corporation election had a material impact on the Company’s results of operations, financial condition and cash flows. ~~Going forward the~~The effective ~~income~~ tax rate ~~will increase~~has increased, and net income ~~will decrease~~has decreased as compared to the Company’s “S” Corporation tax years, since the Company ~~will be~~is now subject to both U.S. federal and state corporate income taxes on ~~our~~its earnings.

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.

Our revenue consists of both services provided by our employees and pass-through fees from subcontractors and other direct costs. Our Federal Solutions segment derives revenue primarily from the U.S. federal government and our Critical Infrastructure segment derives revenue primarily from government and commercial customers.

We recognize revenue for work performed under cost-plus, time-and-materials and fixed-price contracts as follows:

Under cost-plus contracts, we are reimbursed for allowable or otherwise defined costs incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, safety and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. Revenue for cost-plus contracts is generally recognized using the cost-to-cost measure of progress method. Accounting for the sales and profits on performance obligations for which progress is measured using the cost-to-cost method involves the preparation of estimates of: (1) transaction price and (2) total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work.

Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual time spent on a project. In addition, clients reimburse actual out-of-pocket costs for other direct costs and expenses that are incurred in connection with the performance under the contract. ~~Revenue on time-and-materials contracts is recognized as services are performed and are contractually billable.~~

Under fixed-price ~~or FFP~~ contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work. ~~Revenue on FFP contracts is generally recognized using the cost-to-cost measure of progress method.~~

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and “Note 2—Summary of Significant Accounting Polices” in the notes to our consolidated financial statements included in the Company’s Form ~~S-1/A filed on April 29,~~10-K for the year ended December 31, 2019 for a ~~further~~ description of our policies on revenue recognition.

The table below presents the percentage of total revenue for each type of contract.

	Three Months Ended		Nine Months Ended		Three Months Ended		Six Months Ended
	September 28, 2018	September 30, 2019	September 28, 2018	September 30, 2019	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
Fixed-price	30.8%	28.2%	31.7%	29.2%	31.8%	30.8%	31.8%	29.7%
Time-and-materials	26.1%	27.9%	27.8%	27.8%	26.5%	27.2%	26.2%	27.7%
Cost-plus	43.2%	43.9%	40.5%	43.1%	41.7%	42.0%	42.0%	42.6%

The amount of risk and potential reward varies under each type of contract. Under cost-plus contracts, there is limited financial risk, because we are reimbursed for all allowable costs up to a ceiling. However, profit margins on this type of contract tend to be lower than on time-and-materials and fixed-price contracts. Under time-and-materials contracts, we are reimbursed for the hours worked using the predetermined hourly rates for each labor category. In addition, we are typically reimbursed for other direct contract costs and expenses at cost. We assume financial risk on time-and-materials contracts because our labor costs may exceed the negotiated billing rates. Profit margins on well-managed time-and-materials contracts tend to be higher than profit margins on cost-plus contracts as long as we are able to staff those contracts with people who have an appropriate skill set. Under fixed-price contracts, we are required to deliver the objectives under the contract for a pre-determined price. Compared to time-and-materials and cost-plus contracts, fixed-price contracts generally offer higher profit margin opportunities because we receive the full benefit of any cost savings, but they also generally involve greater financial risk because we bear the risk of any cost overruns. In the aggregate, the contract type mix in our revenue for any given period will affect that period’s profitability. Over time, we have experienced a relatively stable contract mix.

Our recognition of profit on long-term contracts requires the use of assumptions related to transaction price and total cost of completion. Estimates are continually evaluated as work progresses and are revised when necessary. When a change in ~~estimate~~estimated cost or transaction price is determined to have an impact on contract profit, we record a positive or negative adjustment to ~~revenue and/or direct cost of contracts.~~revenue.

We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in ~~the Company’s~~our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests). For the joint ventures we do not control, we recognize equity in earnings (loss) of unconsolidated joint ventures. Our revenues included amounts related to services we provided to our unconsolidated joint ventures for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 of ~~$36.6~~$42.4 million and ~~$28.8~~$50.7 million, respectively, and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 ~~$112.2~~of $82.8 million and ~~$113.1~~$84.3 million, respectively.

Operating costs and expenses primarily include direct costs of contracts and indirect, general and administrative expenses. Costs associated with compensation-related expenses for our people and facilities, which includes ESOP contribution expenses, are the most significant component of our operating expenses. Total ESOP contribution expense for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$11.4~~$14.6 million and $12.3 million, respectively, and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$34.1~~$29.5 million and ~~$36.8~~$24.5 million, respectively and is recorded in “Direct cost of contracts” and “Indirect, general and administrative expenses.” We expect operating expenses to increase due to our anticipated growth and the incremental costs associated with being a public company. In particular, under our existing compensation plans, we will adjust our compensation expense on a quarterly basis for any change in our share price from the end of the prior quarter. However, on a forward-looking basis, we generally expect these costs to decline as a percentage of our total revenue as we realize the benefits of scale.

Direct costs of contracts consist of direct labor and associated fringe benefits, indirect overhead, subcontractor ~~costs,~~and materials (“pass-through costs”), travel expenses and other expenses incurred to perform on contracts.

Indirect, general and administrative expenses (“IG&A”) include salaries and wages and fringe benefits of our employees not performing work directly for customers, facility costs and other costs related to these indirect functions.

Other income and expenses primarily consist of interest income, interest expense, other income, net and interest and other expense associated with claims on long-term contracts.

Interest income primarily consists of interest earned on U.S. government money market funds.

Interest expense consists of interest expense incurred under our Senior Notes and Credit Agreement.

Other income, net primarily consists of gain or loss on sale of assets, sublease income and transaction gain or loss related to movements in foreign currency exchange rates.

The following table sets forth Adjusted EBITDA, Net Income Margin, and Adjusted EBITDA Margin for the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019.

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(U.S. dollars in thousands)	September 28, 2018			September 30, 2019			September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Adjusted EBITDA (1)	$	88,564		$	88,990		$	192,029		$	237,219		$	91,161		$	76,205		$	151,657		$	148,229
Net Income Margin (2)		4.7	%		6.0	%		8.6	%		3.9	%		3.2	%		4.1	%		2.3	%		2.8	%
Adjusted EBITDA Margin (3)		9.1	%		8.7	%		7.3	%		8.1	%		9.3	%		7.7	%		7.8	%		7.8	%

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 28, 2018			September 30, 2019			September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020		June 30, 2019
Net income attributable to Parsons Corporation	$	41,222		$	56,812		$	214,890		$	106,812		$	23,299		$	40,259		$	36,272	$	50,000
Interest expense, net		5,589			4,482			12,117			18,448			3,963			6,151			7,757		13,966
Income tax provision (benefit)		4,154			(15,453	)		18,526			(67,063	)
Income tax expense (benefit)														11,891			(53,496	)		16,975		(51,610	)
Depreciation and amortization		23,599			31,027			46,656			92,692			32,081			31,074			64,490		61,665
Net income attributable to noncontrolling interests		4,844			4,481			10,316			8,012			7,826			(114	)		9,224		3,531
Litigation-related gains(a)		-			-			(129,674	)		-
Amortization of deferred gain resulting from sale-leaseback transactions(b)		(1,798	)		-			(5,440	)		-
Equity-based compensation		5,049			(1,657	)		13,198			45,504			12,854			43,311			5,133		47,161
Transaction-related costs(c)		2,456			9,891			7,511			26,961
Restructuring(d)		-			309			-			2,880
Other(e)		3,449			(902	)		3,929			2,973
Transaction-related costs (a)														(2,485	)		7,715			9,526		17,070
Restructuring (b)														1,143			353			1,110		2,571
Other (c)														589			952			1,170		3,875
Adjusted EBITDA	$	88,564		$	88,990		$	192,029		$	237,219		$	91,161		$	76,205		$	151,657	$	148,229

Adjusted EBITDA is a supplemental measure of our operating performance used by management and our board of directors to assess our financial performance both on a segment and on a consolidated basis. We discuss Adjusted EBITDA because our management uses this measure for business planning purposes, including to manage the business against internal projected results of operations and measure the performance of the business generally. Adjusted EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

Adjusted EBITDA is not a GAAP measure of our financial performance or liquidity and should not be considered as an alternative to net income ~~(loss)~~ as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. We define 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 we do not consider in our evaluation of ongoing operating performance. These other items include, among other things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on litigation matters, amortization of deferred gain resulting from sale-leaseback transactions, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our corporate restructuring initiatives. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by relying on our GAAP results in addition to using Adjusted EBITDA supplementally. Our measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.

The following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling interests (in thousands):

	Three Months Ended				Variance						Nine Months Ended				Variance						Three Months Ended					Variance						Six Months Ended				Variance
	September 28, 2018		September 30, 2019		Dollar			Percent			September 28, 2018		September 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019			Dollar			Percent			June 30, 2020		June 30, 2019		Dollar			Percent
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation	$	45,556	$	50,359	$	4,803			10.5	%	$	101,052	$	126,658	$	25,606			25.3	%	$	47,700	$	35,700		$	12,000			33.6	%	$	79,317	$	76,299	$	3,018			4.0	%
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation		38,006		33,976		(4,030	)		-10.6	%		80,296		102,177		21,881			27.3	%		35,519		40,525			(5,006	)		-12.4	%		62,876		68,201		(5,325	)		-7.8	%
Adjusted EBITDA attributable to noncontrolling interests		5,002		4,655		(347	)		-6.9	%		10,681		8,384		(2,297	)		-21.5	%		7,942		(20	)		7,962		N/A				9,464		3,729		5,735			153.8	%
Total Adjusted EBITDA	$	88,564	$	88,990	$	426			0.5	%	$	192,029	$	237,219	$	45,190			23.5	%	$	91,161	$	76,205		$	14,956			19.6	%	$	151,657	$	148,229	$	3,428			2.3	%

The following table sets forth our results of operations for the three and ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 as a percentage of revenue.

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 28, 2018			September 30, 2019			September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenues		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
Direct costs of contracts		80.2	%		78.0	%		78.1	%		78.8	%		76.5	%		79.3	%		77.9	%		79.1	%
Equity in earnings of unconsolidated joint ventures		1.3	%		0.7	%		1.0	%		1.0	%		0.4	%		1.2	%		0.5	%		1.2	%
Indirect, general and administrative expenses		15.4	%		17.4	%		16.0	%		19.9	%		19.2	%		22.8	%		19.0	%		21.3	%
Operating income		5.6	%		5.2	%		6.9	%		2.3	%
Operating income (loss)														4.7	%		-0.9	%		3.6	%		0.8	%
Interest income		0.0	%		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Interest expense		-0.6	%		-0.5	%		-0.6	%		-0.7	%		-0.4	%		-0.6	%		-0.4	%		-0.8	%
Other income, net		0.1	%		-0.3	%		0.0	%		-0.1	%		0.1	%		0.2	%		0.0	%		0.1	%
(Interest and other expense) gain associated with claim on long-term contract		0.0	%		0.0	%		2.8	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Total other income (expense)		-0.5	%		-0.7	%		2.4	%		-0.7	%		-0.3	%		-0.5	%		-0.4	%		-0.7	%
Income before income tax provision		5.1	%		4.5	%		9.3	%		1.6	%
Income (loss) before income tax expense														4.4	%		-1.3	%		3.2	%		0.1	%
Income tax benefit (provision)		-0.4	%		1.5	%		-0.7	%		2.3	%		-1.2	%		5.4	%		-0.9	%		2.7	%
Net income including noncontrolling interests		4.7	%		6.0	%		8.6	%		3.9	%		3.2	%		4.1	%		2.3	%		2.8	%
Net income attributable to noncontrolling interests		-0.5	%		-0.4	%		-0.4	%		-0.3	%		-0.8	%		0.0	%		-0.5	%		-0.2	%
Net income attributable to Parsons Corporation		4.2	%		5.6	%		8.2	%		3.7	%		2.4	%		4.1	%		1.9	%		2.6	%

	Three Months Ended				Variance					Nine Months Ended				Variance					Three Months Ended				Variance						Six Months Ended				Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		Dollar		Percent			September 28, 2018		September 30, 2019		Dollar		Percent			June 30, 2020		June 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019		Dollar		Percent
Revenue	$	976,157	$	1,023,277	$	47,120		4.8	%	$	2,631,568	$	2,917,424	$	285,856		10.9	%	$	979,459	$	989,742	$	(10,283	)		-1.0	%	$	1,950,452	$	1,894,147	$	56,305		3.0	%

~~enue In millions $3,000 $2,900 $2,800 $2,700 $2,600 $2,500 $2,400 $2,300 $2,200 $2,100 $2,000 $2,576 $64 $277 $2,917 YTD 2018 - Excluding Claim Settlement Organic Acquisitions YTD 2019 $ In millions~~

Revenue ~~increased $47.1~~decreased $10.3 million for the three months ended ~~September~~June 30, ~~2019~~2020 when compared to the corresponding period last year, primarily due to a decrease in revenue in our Critical Infrastructure segment of $14.0 million offset by an increase in our Federal Solutions segment of $3.7 million. Revenue increased $56.3 million for the six months ended June 30, 2020 when compared to the corresponding period last year, primarily due to an increase in revenue in our Federal Solutions segment of ~~$42.5~~$58.5 million ~~and an increase~~offset by a decrease in our Critical Infrastructure segment of ~~$4.7~~$2.2 million. See “Segment Results” below for a further discussion.

~~Revenue for the nine months ended September 28, 2018 included $55.1 million related to the settlement~~

Direct cost of ~~a claim that was resolved in favor of the Company on June 13, 2018, in our Critical Infrastructure segment. 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. Excluding the claim settlement, revenue increased $341.0~~contracts decreased $35.4 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019~~2020 when compared to the corresponding period last year, primarily due to ~~an increase~~a decrease of $26.8 million in ~~revenue~~our Critical Infrastructure segment and a decrease of $8.6 million in our Federal Solutions segment. The decrease in our Critical Infrastructure segment was primarily due to programs with high levels of pass-through costs reaching substantial completion. The decrease in our Federal Solutions segment ~~of $311.4 million and an increase~~was primarily due to a decrease in ~~our Critical Infrastructure segment of $29.6 million See “—Segment Results” below for further discussion.~~

~~Direct costs of contracts~~business volume driven by a reduction in pass-through costs.

Direct cost of contracts increased $20.0 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 when compared to the corresponding period last year, primarily due to an increase of ~~$18.5~~$41.0 million in our Federal Solutions segment offset by a decrease of ~~$3.0~~$21.0 million in our Critical Infrastructure segment. The increase in our Federal Solutions segment was ~~due~~ primarily ~~to business acquisitions, which added $27.4 million, and was primarily offset by a decrease in~~from increased pass-through ~~sub-contractor and material~~ costs. The decrease in our Critical Infrastructure segment was primarily due to ~~a decrease in~~programs with high levels of pass-through sub-contractor and material costs. Direct cost of contracts increased for the nine months ended September 30, 2019 when compared to the corresponding period last year, primarily due to an increase of $221.8 million in our Federal Solutions segment and from an increase of $21.5 million in our Critical Infrastructure segment. The increase in our Federal Solutions segment was due primarily to business acquisitions, which added $207.8 million. The increase in our Critical Infrastructure segment was primarily due to an increase in business volume under existing contracts. costs reaching substantial completion.

	Three Months Ended				Variance						Nine Months Ended				Variance					Three Months Ended				Variance						Six Months Ended				Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		Dollar			Percent			September 28, 2018		September 30, 2019		Dollar		Percent			June 30, 2020		June 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019		Dollar			Percent
Equity in earnings of unconsolidated joint ventures	$	12,707	$	7,274	$	(5,433	)		-42.8	%	$	25,577	$	29,305	$	3,728		14.6	%	$	3,769	$	11,634	$	(7,865	)		-67.6	%	$	9,883	$	22,031	$	(12,148	)		-55.1	%

Equity in earnings of unconsolidated joint ventures decreased $7.9 million and $12.1 million for the three and six months ended ~~September~~June 30, 2019 when compared to the corresponding period last year. The decrease is primarily related to the substantial completion of a significant joint venture. For the nine months ended September 30, 2019, equity in earnings of unconsolidated joint ventures increased2020, respectively, when compared to the corresponding periods last ~~year. The increase was~~year primarily ~~due~~related to ~~increased activity under a number of the Company’s existing~~reduced margins in certain joint ventures ~~offset by the substantial completion of~~as well as a reduction in activity on a significant joint venture ~~during the quarter.~~

	Three Months Ended				Variance					Nine Months Ended				Variance					Three Months Ended				Variance						Six Months Ended				Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		Dollar		Percent			September 28, 2018		September 30, 2019		Dollar		Percent			June 30, 2020		June 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019		Dollar			Percent
Indirect, general and administrative expenses	$	150,733	$	178,550	$	27,817		18.5	%	$	422,028	$	581,428	$	159,400		37.8	%	$	187,640	$	225,359	$	(37,719	)		-16.7	%	$	371,414	$	402,878	$	(31,464	)		-7.8	%

Indirect, general and administrative expenses (“IG&A”) for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 ~~includes, $5.0~~include $12.9 million and ~~$(1.7)~~$43.3 million, respectively, and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 ~~$13.2~~include $5.1 million and ~~$45.5~~$47.2 million, respectively, of compensation cost related to equity-based awards.

Equity awards ~~that~~issued prior to the Company’s IPO settle in ~~cash. These awards~~cash and are remeasured to an updated fair value at each reporting period until the award is settled. Compensation cost is trued-up at each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.

~~The significant increase in compensation cost related to these cash settled equity-based awards for the nine months ended September 30, 2019 is due~~ Prior to the ~~significant difference in~~IPO on May 8, 2019, the fair value of a share of the Company’s common stock ~~under Parsons~~was established by the ESOP ~~valuation at March~~trustee. See “Note 19 – Fair Value of Financial Instruments” in the Company’s Form 10-K for the year ended December 31, 2019 ~~compared to the fair value~~for a further discussion of how a share of the Company’s common stock inwas valued prior to the ~~public market at September 30, 2019. Please see “Note 17 – Fair Value~~IPO. Subsequent to the IPO, the share price of ~~Financial Instruments” for a description of how the ESOP share value is determined. Please see “Note 1 – Description of Operations” for more detail regarding~~ the Company’s ~~IPO. The plans in which these awards were granted have been frozen and~~common stock is based on quoted prices on the ~~Company does not currently intend to grant any further cash settled equity-based awards.~~New York Stock Exchange.

Excluding the compensation costs discussed above, IG&A for the three months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$145.7~~$174.8 million and ~~$180.2~~$182.0 million, respectively and for the ~~nine~~six months ended ~~September 28, 2018~~June 30, 2020 and ~~September~~June 30, 2019 was ~~$408.8~~$366.3 million and ~~$535.9~~$355.7 million, ~~respectively.~~respectively

The ~~increase~~decrease in IG&A of ~~$34.5~~$7.2 million, exclusive of equity compensation cost, for the three months ended ~~September~~June 30, ~~2019~~2020 when compared to the corresponding period last year was primarily due to ~~our Federal Solutions segment, most of~~a $8.6 million reduction in transaction-related, restructuring and other non-recurring costs, $4.3 million due to a tax law change, and $4.3 million from various overhead adjustments which ~~is related to~~occurred in second quarter 2019, but did not recur in the second quarter 2020. These decreases were offset by additional expenses of ~~$6.9~~$8.5 million ~~from~~associated with business acquisitions ~~$7.6~~and $1.5 million ~~from the amortization of intangible assets~~ related to ~~our acquisitions,~~strategic growth initiatives and $5.9 million in acquisition-related expenses, the remaining increase of $11.6 million is related to additional bid and proposal costs and a greater allocation of corporate IG&A in line with the growing share of overall business. In our Critical Infrastructure segment, IG&A increased by $2.5 million.public company operating costs.

The increase in IG&A of ~~$127.1~~$10.6 million, exclusive of equity compensation cost, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 when compared to the corresponding period last year was primarily due to ~~our Federal Solutions segment, most of which is related to~~ additional expenses of ~~$41.6~~$16.7 million ~~from~~associated with business acquisitions, ~~$42.3~~$3.7 million ~~from the amortization of intangible assets~~due to a tax law change, and $5.0 million related to ~~our acquisitions~~strategic growth initiatives and ~~$11.1~~public company operating costs. These increases were partially offset by a $14.8 million reduction in ~~acquisition-related expenses, the remaining increase of $29.5 million is related to additional bid~~transaction-related, restructuring and ~~proposal costs and a greater allocation of corporate IG&A in line with the growing share of overall business. In our Critical Infrastructure segment, IG&A increased by $2.6 million.~~other non-recurring costs.

	Three Months Ended						Variance						Nine Months Ended						Variance						Three Months Ended						Variance						Six Months Ended						Variance
(U.S. dollars in thousands)	September 28, 2018			September 30, 2019			Dollar			Percent			September 28, 2018			September 30, 2019			Dollar			Percent			June 30, 2020			June 30, 2019			Dollar			Percent			June 30, 2020			June 30, 2019			Dollar			Percent
Interest income	$	351		$	427		$	76			21.7	%	$	2,358		$	1,129		$	(1,229	)		-52.1	%	$	196		$	225		$	(29	)		-12.9	%	$	424		$	702		$	(278	)		-39.6	%
Interest expense		(5,940	)		(4,909	)		1,031			-17.4	%		(14,475	)		(19,577	)		(5,102	)		35.2	%		(4,159	)		(6,376	)		2,217			-34.8	%		(8,181	)		(14,668	)		6,487			-44.2	%
Other income (expense), net		696			(3,127	)		(3,823	)		-549.3	%		355			(1,580	)		(1,935	)		-545.1	%		715			1,506			(791	)		-52.5	%		263			1,547			(1,284	)		-83.0	%
Gain associated with claim on long-term contract		-			-			-			-			74,578			-			(74,578	)		-100.0	%
Total other income (expense)	$	(4,893	)	$	(7,609	)	$	(2,716	)		55.5	%	$	62,816		$	(20,028	)	$	(82,844	)		-131.9	%	$	(3,248	)	$	(4,645	)	$	1,397			-30.1	%	$	(7,494	)	$	(12,419	)	$	4,925			-39.7	%

Interest income is related to interest earned on cash balances held. Interest expense is primarily due to debt related to our business acquisitions. ~~During the nine months ended September 30, 2019, the Company’s term loan of $150 million was paid off and the amount of debt outstanding under the Company’s revolving credit facility was reduced.~~ The amounts in other income (expense), net are primarily related to transaction gains and losses on foreign currency transactions and sublease income.

The amount presented in gain associated with claim on long-term contract for the nine months ended September 28, 2018 relates to 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.~~

	Three Months Ended					Variance						Nine Months Ended					Variance						Three Months Ended					Variance					Six Months Ended					Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019			Dollar			Percent			September 28, 2018		September 30, 2019			Dollar			Percent			June 30, 2020		June 30, 2019			Dollar		Percent			June 30, 2020		June 30, 2019			Dollar		Percent
Income tax expense (benefit)	$	4,154	$	(15,453	)	$	(19,607	)		-472.0	%	$	18,526	$	(67,063	)	$	(85,589	)		-462.0	%
Income tax expense																							$	11,891	$	(53,496	)	$	65,387		-122.2	%	$	16,975	$	(51,610	)	$	68,585		-132.9	%

Income tax benefit was recorded for the three and nine months ended September 30, 2019, compared to expense for the corresponding periods last year primarily due to revaluation of our deferred tax assets and liabilities as a result of our conversion from “S” Corporation to a “C” Corporation.

As described in “Note 1211 – Income Taxes,” in the notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, in connection with the Company’s IPO on May 8, 2019, the Company converted from an “S” Corporation to a “C” Corporation. On a pro forma basis, if the Company had been taxed as a “C” Corporation for the three months and six months ended ~~September 28, 2018 and September~~June 30, 2019, the pro forma effective ~~income~~ tax

rate would have been ~~29.25%~~8.36% and ~~35.14%~~190.71%, respectively, and the pro forma income tax would have been $14.7 million and $16.1 million, respectively. For the nine months ended September 28, 2018 and September 30, 2019, the pro forma effective income tax rate would have been 28.46% and 41.40%, respectively, and the Company’s pro forma income tax expense would have been ~~$69.4~~$(1.1) million and ~~$19.8~~$3.7 million, respectively. The Company’s effective tax rate was 27.64% and 27.17% and income tax expense was $11.9 million and $17.0 million for the three months and six months ended June 30, 2020, respectively. The most significant ~~item~~items contributing to the change in the effective tax rate ~~relates~~relate to a nonrecurring item included in the second quarter 2019 associated with equity compensation and a change in jurisdictional earnings. The difference between the statutory U.S. federal income tax rate of 21.0% and the effective tax rate for the quarter ended ~~September 28, 2018~~June 30, 2020 primarily ~~relates~~relates to ~~foreign earnings which are subject to foreign~~state income ~~taxes at rates that exceed the U.S. income tax rate.~~taxes.

The termination of the “S” Corporation status was treated as a change in tax status for Accounting Standards Codification 740, Income Taxes. These rules require that the deferred tax effects of a change in tax status to be recorded to income from continuing operations on the date the “S” Corporation status terminates. ~~During~~At the quarter ended June 30, 2019, the Company had recorded ~~a deferred tax benefit of~~ $56 million for the estimated effect of the change in tax status, relating to the recognition of net deferred tax assets for temporary differences in existence on the date of conversion to a “C” Corporation. During the quarter ended September 30, 2019, the Company updated the estimate to $85 million, representing an increase in expected benefit of $29 million. The update primarily relates to a change in the forecasted temporary differences as of the conversion, changes in deferred tax assets resulting from 2018 tax return-to-provision adjustments, and changes in tax accounting methods that were made with the 2018 tax return during the third quarter. This estimated amount is subject to additional revision ~~based~~ upon ~~actual results for~~filing of the ~~current year.~~2019 tax returns.

We evaluate segment operating performance using segment revenue and segment Adjusted EBITDA attributable to Parsons Corporation. Adjusted EBITDA attributable to Parsons Corporation is Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests. Presented above, inthis Management’s Discussion and Analysis of Financial Condition and Results of Operations, is a discussion of our definition of Adjusted EBITDA, how we use this metric, why we present this metric and the material limitations on the usefulness of this metric. See “Note ~~19—~~18—Segments Information” in the notes to the consolidated financial statements in this Form 10-Q for further discussion regarding our segment Adjusted EBITDA attributable to Parsons Corporation.

The following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling interests:

	Three Months Ended				Nine Months Ended				Three Months Ended					Six Months Ended
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		September 28, 2018		September 30, 2019		June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation	$	45,556	$	50,359	$	101,052	$	126,658	$	47,700	$	35,700		$	79,317	$	76,299
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation		38,006		33,976		80,296		102,177		35,519		40,525			62,876		68,201
Adjusted EBITDA attributable to noncontrolling interests		5,002		4,655		10,681		8,384		7,942		(20	)		9,464		3,729
Total Adjusted EBITDA	$	88,564	$	88,990	$	192,029	$	237,219	$	91,161	$	76,205		$	151,657	$	148,229

	Three Months Ended				Variance					Nine Months Ended				Variance					Three Months Ended				Variance					Six Months Ended				Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		Dollar		Percent			September 28, 2018		September 30, 2019		Dollar		Percent			June 30, 2020		June 30, 2019		Dollar		Percent			June 30, 2020		June 30, 2019		Dollar		Percent
Revenue	$	443,725	$	486,175	$	42,450		9.6	%	$	1,076,125	$	1,387,484	$	311,359		28.9	%	$	482,210	$	478,497	$	3,713		0.8	%	$	959,781	$	901,309	$	58,472		6.5	%
Adjusted EBITDA attributable to Parsons Corporation	$	45,556	$	50,359	$	4,803		10.5	%	$	101,052	$	126,658	$	25,606		25.3	%	$	47,700	$	35,700	$	12,000		33.6	%	$	79,317	$	76,299	$	3,018		4.0	%

The increase in Federal Solutions revenue for the three and six months ended ~~September~~June 30, ~~2019~~2020 compared to the corresponding ~~period~~periods last year was primarily due to ~~incremental~~an increase in business volume from new and existing contracts and an increase in incentive fees. These increases were partially offset by a delay in revenue from ~~business acquisitions, which added $39.3 million. Revenue for the third quarter~~certain programs where work is delayed as a result of 2018 was impact by approximately $20 million of unusually high volume on two contracts and revenue for the third quarter of 2019 included a significant incentive fee recognition. Federal Solutions organic revenue grew $3.2 million for the three months ended September 30, 2019 compared to the corresponding period last year.COVID-19.

The increase in Federal Solutions revenue for the nine months ended September 30, 2019 compared to the corresponding period last year was primarily due to business acquisitions, which added $277.1 million. Federal Solutions organic revenue grew $34.3 million, which included significant incentive fee recognition.

djusted EBITDA In millions $ In millions $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 $101 $20 $69 -$23 -$42 $2 $27 YTD 2018 Project Margin – Organic Project Margin – Acquisitions IG&A –
Organic IG&A – Acquisitions Other YTD 2019

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the three months ended ~~September~~June 30, ~~2019~~2020 compared to the corresponding period last year was primarily due to ~~business acquisitions, and~~ generally higher profit margins driven by ~~significant incentive fee recognition. These increases were primarily offset by~~ an increase in ~~IG&A, driven by an increase in bid and proposal costs~~incentive fee recognition and a ~~greater allocation of corporate IG&A~~decrease in ~~line~~volume on contracts with ~~the segment’s growing share of overall business.~~ pass-through costs.

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the corresponding period last year was primarily due to ~~business acquisitions and~~ generally higher profit margins driven by ~~significant~~an increase in incentive ~~fee recognition. These increases were primarily offset by~~fees and an increase in business volume from new awards and business acquisitions. Offsetting the increase in Adjusted EBITDA attributable to Parsons Corporation was an increase in volume on contracts with pass-through costs and an increase in IG&A ~~as described above.~~from business acquisitions and corporate allocated costs. IG&A, in the first quarter of 2019, included various positive overhead adjustments that did not recur in the first quarter of 2020.

	Three Months Ended				Variance						Nine Months Ended				Variance						Three Months Ended				Variance						Six Months Ended				Variance
(U.S. dollars in thousands)	September 28, 2018		September 30, 2019		Dollar			Percent			September 28, 2018		September 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019		Dollar			Percent			June 30, 2020		June 30, 2019		Dollar			Percent
Revenue	$	532,432	$	537,102	$	4,670			0.9	%	$	1,555,443	$	1,529,940	$	(25,503	)		-1.6	%	$	497,249	$	511,245	$	(13,996	)		-2.7	%	$	990,671	$	992,838	$	(2,167	)		-0.2	%
Adjusted EBITDA attributable to Parsons Corporation	$	38,006	$	33,976	$	(4,030	)		-10.6	%	$	80,296	$	102,177	$	21,881			27.3	%	$	35,519	$	40,525	$	(5,006	)		-12.4	%	$	62,876	$	68,201	$	(5,325	)		-7.8	%

~~Revenue~~The decrease in Critical Infrastructure revenue for the three and six months ended ~~September~~June 30, 2019 compared to the corresponding period last year increased $4.7 million. As discussed above, revenue for the nine months ended September 28, 2018 included $55.1 million related to the settlement of a claim that was resolved in favor of the Company. Excluding the claim settlement, revenue for the nine months ended September 30, 20192020 compared to the corresponding periods last year ~~increased $29.6 million. This~~was primarily due to a delay in revenue from certain programs where work is delayed as a result of COVID-19, partially offset by an increase in ~~revenue was primarily related to revenue growth on~~business volume under new and existing contracts.

The decrease in ~~Critical Infrastructure~~ Adjusted EBITDA attributable to Parsons Corporation in Critical Infrastructure for the three months ended ~~September~~June 30, ~~2019 compared to the corresponding period last year~~2020 was primarily ~~due~~related to a decrease in equity in earnings of unconsolidated joint ventures partially offset by improved project margins.

The decrease in Adjusted EBITDA attributable to Parsons Corporation in Critical Infrastructure for the ~~substantial completion~~six months ended June 30, 2020 was primarily related to a decrease in equity in earnings of ~~a significant~~unconsolidated joint ~~venture~~ventures and an increase in IG&A. These decreases were partially offset by ~~an increase in~~improved project ~~margins from higher margin new awards.~~

The increase in Adjusted EBITDA attributable to Parsons for the nine months ended September 30, 2019 compared to the corresponding period last year was primarily due to an increase in equity in earnings of unconsolidated joint ventures, a decrease in IG&A and an increase in business volume.margins.

Historically, we have financed our operations and capital expenditures and satisfied redemptions of ESOP interests through a combination of internally generated cash from operations, our Senior Notes and from borrowings under our Revolving Credit Facility.

Generally, cash provided by operating activities has been adequate to fund our operations. Due to fluctuations in our cash flows and growth in our operations, it may be necessary from time to time in the future to borrow under our Credit Agreement to meet cash demands. Our management regularly monitors certain liquidity measures to monitor performance. We calculate our available liquidity as a sum of cash and cash equivalents from our consolidated balance sheet plus the amount available and unutilized on our Credit Agreement.

There are likely to be certain impacts in our ability to collect accounts receivable as a result of the economic impacts from the COVID-19 pandemic. Accounts receivable reflect amounts due from both commercial and government customers. Our commercial customers are comprised principally of large, well-known and well-established companies. Our government customers are comprised principally of national, state and local agencies in the U.S. and Middle East. We have not seen and do not expect there to be a risk of non-payment from either our government agency or commercial customers. We have experienced payment delays due to administrative limitations from both types of customers.

As of June 30, 2020, we believe we have adequate liquidity and capital resources to fund our operations, support our debt service and support our ongoing acquisition strategy for at least the next twelve months based on the liquidity from cash provided by our operating activities, cash and cash equivalents ~~on hand~~on-hand and our borrowing capacity under our Revolving Credit ~~Facility.~~Facility, which totals $505.1 million as of June 30, 2020. We do not currently anticipate that the COVID-19 pandemic related economic impacts will impair the Company’s ability to continue to maintain compliance with its debt covenants or access available borrowing capacity from our banks.

Cash received from customers, either from the payment of invoices for work performed or for advances in excess of revenue recognized, is our primary source of cash. We generally do not begin work on contracts until funding is appropriated by the customers. Billing timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is cost-plus, time-and-materials, or ~~fixed-price contracts.~~fixed-price. We generally bill and collect cash more frequently under cost-plus and time-and-materials contracts, as we are authorized to bill as the costs are incurred or work is performed. In contrast, we may be limited to bill certain fixed-price contracts only when specified milestones, including deliveries, are achieved. A number of our contracts may provide for performance-based payments, which allow us to bill and collect cash prior to completing the work.

Accounts receivable is the principal component of our working capital and is generally driven by revenue growth. Accounts receivable reflects amounts billed to our clients as of each balance sheet date and receivable amounts that are currently due but unbilled. The total amount of our accounts receivable can vary significantly over time, but is generally sensitive to revenue levels. Net days sales outstanding, which we refer to as net DSO, is calculated by dividing (i) (accounts receivable plus contract assets) less (contract liabilities plus accounts payable) by (ii) average revenue per day (calculated by dividing trailing twelve months revenue by the number of days in that period). ~~In the last few years we have focused~~We focus on collecting outstanding receivables to reduce Net DSO and working capital. Net DSO was 6769 days at ~~September 28, 2018~~June 30, 2020 and 5865 days at ~~September~~June 30, 2019. In addition to the COVID-19 impacts discussed above, the increase in DSO was also impacted by certain administrative activities by a customer in the Federal Solutions segment which have delayed the payment of invoices.

Our working capital (current assets less current liabilities) was ~~$482.6~~$458.2 million at June 30, 2020 and $382.0 million at December 31, ~~2018 and $318.0 million at September 30,~~ 2019.

Our cash, cash equivalents and restricted cash decreased by ~~$134.7~~$58.8 million to ~~$146.5~~$136.6 million at ~~September~~June 30, ~~2019~~2020 from ~~$281.2~~$195.4 million at December 31, ~~2018.~~2019.

The following table summarizes our sources and uses of cash over the periods presented (in thousands):

	Nine Months Ended						Six Months Ended
	September 28, 2018			September 30, 2019			June 30, 2020			June 30, 2019
Net cash provided by operating activities	$	99,822		$	130,628
Net cash used in operating activities							$	(31,444	)	$	(48,495	)
Net cash used in investing activities		(503,637	)		(541,710	)		(25,822	)		(312,208	)
Net cash provided by financing activities		173,134			277,302			(847	)		291,493
Effect of exchange rate changes		(1,233	)		(953	)		(641	)		(602	)
Net decrease in cash and cash equivalents	$	(231,914	)	$	(134,733	)	$	(58,754	)	$	(69,812	)

Net cash ~~provided by~~used in operating activities consists primarily of net income (loss) adjusted for noncash items, such as: equity in earnings (loss) of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, and provisions for doubtful ~~accounts, amortization of deferred gains, and impairment charges.~~accounts. The timing between the conversion of our billed and unbilled receivables into cash from our customers and disbursements to our employees and vendors is the primary driver of changes in our working capital. Our operating cash flows are primarily affected by our ability to invoice and collect from our clients in a timely manner, our ability to manage our vendor payments and the overall profitability of our contracts.

Net cash ~~provided by~~used in operating activities ~~increased $30.8~~decreased $17.1 million to ~~$130.6~~$31.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$99.8~~$48.5 million of cash ~~provided by~~used in operating activities for the ~~nine~~six months ended ~~September 28, 2018.~~June 30, 2019. The ~~increase~~change in net cash ~~provided by~~used in operating activities is primarily from a ~~$65.7~~$86.6 million increase ~~in cash flows from our working capital accounts offset by a $35.5 million decrease~~ in net income after adjusting for non-cash ~~items. Net DSOs improved from 67 days to 58 days~~items offset by a change of $48.7 million in other long-term liabilities, primarily driven by the payment of long-term employee incentives offset by the deferral of social security payroll taxes as described below and a $20.8 million increase in cash outflows from our working capital accounts (primarily from accrued expenses and contract liabilities offset by accounts receivable, net of contract assets and deferred income tax payments as described below).

Under the ~~Company’s revenue~~CARES Act, the Company had deferred $18.5 million in U.S. federal and certain state estimated 2020 income tax payments that were otherwise due during the quarter ended June 30, 2020 and were due and paid by July 15, 2020. The CARES Act also provides for the deferral of employer’s share of social security payroll taxes due from ~~business acquisitions along with net receivables decreasing.~~the date of enactment through the end of 2020. The Company has deferred $14.5 million of social security taxes otherwise due from April 10, 2020 through the quarter ended June 30, 2020 and will continue to defer employer social security taxes otherwise due for the remaining of the calendar year 2020; one-half of which are due December 31, 2021 and the second-half which are due December 31, 2022.

Net cash used in investing activities consists primarily of cash flows associated with capital expenditures and business acquisitions.

Net cash used in investing activities decreased ~~$38.1~~$286.4 million to ~~$541.7~~$25.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, when compared to ~~$503.6~~$312.2 million for the ~~nine~~six months ended ~~September 28, 2018. Cash used in investing activities~~June 30, 2019, primarily due to the use of $287.5 million, net of cash acquired, for ~~the nine months ended September 28, 2018 primarily related to~~ the acquisition of ~~Polaris Alpha and for~~OGSystems on January 7, 2019. The Company had no business acquisitions activity during the ~~nine~~six months ended ~~September~~June 30, ~~2019 primarily related to the acquisitions of OGSystems and QRC Technologies.~~2020.

Net cash provided by financing activities is primarily associated with proceeds from debt, the repayment thereof, and distributions to noncontrolling ~~interests and payments to the ESOP in connection with the redemption of ESOP participants’~~ interests. ~~We spent $73.3 million and~~

The Company used $0.8 million in net cash from financing activities for the ~~nine~~six months ended ~~September 28, 2018 and September 30, 2019, respectively,~~June 2020 compared to $291.5 million in connection with the redemption of ESOP participants’ interests. With a public market for the Company’s common stock, cash is no longer required for ESOP redemptions following the 180-day lock-up period which ended November 3, 2019.

~~Net~~net cash provided by financing activities ~~increased $104.2 million to $277.3 million~~ for the ~~nine~~six months ended ~~September~~June 30, 2019, ~~when compared to $173.1 million for the nine months ended September 28, 2018, primarily due to $536.9 million of~~a decrease in net ~~proceeds from the IPO and a reduction of $72.5 million in the purchases of treasury stock. These changes in~~ cash ~~flows~~ provided by financing activities ~~were~~of $292.3 million. The change in cash flows from financing activities is primarily due to $537.3 million of IPO proceeds offset in part by net repayments of borrowings of $180 million and a ~~net change in repayments under the Company’s revolving credit agreement of $420.0 million,~~dividend payment ~~of the IPO dividend~~

of $52.1 million ~~and an increase of $28.5 million in distributions~~during the six months ended June 30, 2019 compared to ~~noncontrolling interests.~~no amounts related to these financing activities for the six months ended June 30, 2020.

We also have in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees. Letters of credit commitments outstanding under these bank lines aggregated ~~$220.6~~$186.6 million as of ~~September~~June 30, ~~2019,~~2020, including ~~$45.2~~$44.9 million of letters of credit outstanding under the Credit Agreement. Total letters of credit outstanding at June 30, 2020 are $231.4 million.

See the information set forth in “Note 3—Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the notes to our consolidated financial statements.

As of ~~September~~June 30, ~~2019,~~2020, we have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and ~~Qualitati~~veQualitative Disclosures About Market Risk.

We are exposed to interest rate risks related to the Company’s Revolving Credit Facility. As of ~~September~~June 30, ~~2019, we had~~2020, there were no amounts outstanding under the Revolving Credit Facility. Borrowings under the Credit Facility bear interest, at the Company’s option, at either the Base Rate (as defined in the Credit Agreement), plus an applicable margin, or LIBOR plus an applicable margin. The applicable margin for Base Rate loans is a range of 0.125% to 1.00% and the applicable margin for LIBOR loans is a range of 1.125% to 2.00%, both based on the leverage ratio of the Company at the end of each fiscal quarter. The rates at June 30, 2020 and December 31, ~~2018 and September 30,~~ 2019 were ~~4.253%~~1.42% and ~~3.350%~~3.02%, respectively.

We are exposed to foreign currency exchange rate risk resulting from our operations outside of the U.S. We limit exposure to foreign currency fluctuations in most of our contracts through provisions that require client payments in currencies corresponding to the currency in which costs are incurred. As a result of this natural hedge, we generally do not need to hedge foreign currency cash flows for contract work performed.

Our management carried out, as of ~~September~~June 30, ~~2019 ,~~2020, with the participation of our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2019~~2020 , our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the ~~third~~second quarter of ~~2019,~~2020, there were no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The information required by this Item 1 is included in “Note 1312 – ~~Commitments and~~ Contingencies” included in the Notes to Consolidated Financial Statements appearing under Part I, Item 1 of this ~~Quarterly Report on~~ Form 10-Q which is incorporated herein by reference.

There have been no material changes from our Risk Factors disclosed in the Company’s Form ~~S-1/A filed~~10-K for the year ended December 31, 2019 other than as set forth below. See also our updates for the COVID-19 pandemic included in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q.

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 recent outbreak of COVID-19 which has spread from China to many other countries including the United States. In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak has 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. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

Although we have continued our operations consistent with federal guidelines and state and local orders, the outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities may have a material adverse effect on ~~April 29, 2019.~~our operations, employees and customers, including business shutdowns or disruptions. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting 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 COVID-19 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 our Form 10-K for the year ended December 31, 2019, such as those relating to government spending and priorities.

Carey Smith was appointed to the role of President of Parsons Corporation, in addition to her current duties as Chief Operating Officer effective November 11, 2019. In this position, she is responsible for Parsons operational business lines and supporting our customer’s missions. Charles L. Harrington will continue in his role as Chairman and Chief Executive Officer of Parsons Corporation.

~~Parsons also announced the departure of Adam Taylor as Chief Transformation Officer effective November 11, 2019.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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)

		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	3126
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4640
Item 4.	Controls and Procedures	4640
PART II.	OTHER INFORMATION	4741
Item 1.	Legal Proceedings	4741
Item 1A.	Risk Factors	4741
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4741
Item 3.	Defaults Upon Senior Securities	4741
Item 4.	Mine Safety Disclosures	4741
Item 5.	Other Information	4741
Item 6.	Exhibits	4842
	Signatures	4943

	Level 1		Level 2		Level 3		Total
Mutual funds	$	2,539	$	-	$	-	$	2,539
Fixed income		-		10,168		-		10,168
Cash and cash equivalents		361		-		-		361
	$	2,900	$	10,168	$	-	$	13,068

Large accelerated filer	☐☒	Accelerated filer	☐
Non-accelerated filer	☒☐	Smaller reporting company	☐
Emerging growth company	☐

	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

Balance at December 31, 2018	$	1,876,309
Transfer to Level 1		(1,876,309	)
Balance at September 30, 2019	$	-

Exhibit Number		Description

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~101		~~XBRL Instance Document~~The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

~~101.SCH~~104		Cover Page Interactive Data File (formatted as inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~with applicable taxonomy extension information contained in Exhibits 101).

	Company Name

Date: ~~November 12, 2019~~August 5, 2020	By:	/s/ George L. Ball
		George L. Ball
		Chief Financial Officer
		(Principal Financial Officer)