What changed in this filing

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Item 1. Financial Statements

2021-12-06 compared with 2021-09-03 · 135 added, 126 removed, 451 unchanged (37% of the section changed)

2 unchanged sentences

CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions, except per share amounts)

19 unchanged sentences

CONDENSED AND CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

19 unchanged sentences

Intangible assets, net 1,166 1,138

Property, plant, and equipment (net of accumulated depreciation of $ 173 million and $ 158 million at July 30, 2021 and January 29, 2021, respectively)

Property, plant, and equipment (net of accumulated depreciation of $ 181 million and $ 158 million at October 29, 2021 and January 29, 2021, respectively)

Operating lease right of use assets 223 236

11 unchanged sentences

Commitments and contingencies (Note 11)

Common stock, $ 0.0001 par value, 1 billion shares authorized, 58 million shares issued and outstanding as of July 30, 2021 and January 29, 2021

Common stock, $ 0.0001 par value, 1 billion shares authorized, 57 million shares and 58 million shares issued and outstanding as of October 29, 2021 and January 29, 2021, respectively

Additional paid-in capital 896 1,004

15 unchanged sentences

(in millions)

Balance at April 30, 2021 58 $ 965 $ 687 $ ( 75 ) $ 10 $ 1,587

Balance at July 30, 2021 58 $ 945 $ 747 $ ( 74 ) $ 10 $ 1,628

Net income — — 71 — — 71

6 unchanged sentences

Distributions to non-controlling interest — — — — — —

Balance at July 30, 2021 58 $ 945 $ 747 $ ( 74 ) $ 10 $ 1,628

Balance at October 29, 2021 57 $ 896 $ 796 $ ( 57 ) $ 10 $ 1,645

Balance at January 29, 2021 58 $ 1,004 $ 627 $ ( 89 ) $ 10 $ 1,552

7 unchanged sentences

Distributions to non-controlling interest — — — — ( 1 ) ( 1 )

Balance at October 29, 2021 57 $ 896 $ 796 $ ( 57 ) $ 10 $ 1,645

Balance at July 31, 2020 58 $ 996 $ 550 $ ( 109 ) $ 13 $ 1,450

Balance at May 1, 2020 58 $ 983 $ 520 $ ( 108 ) $ 13 $ 1,408

Net income — — 60 — — 60

Issuances of stock — 4 — — — 4

Other comprehensive loss, net of tax — — — ( 1 ) — ( 1 )

Other comprehensive income, net of tax — — — 11 — 11

Cash dividends of $ 0.37 per share

3 unchanged sentences

Distributions to non-controlling interest — — — — ( 2 ) ( 2 )

Balance at July 31, 2020 58 $ 996 $ 550 $ ( 109 ) $ 13 $ 1,450

Balance at October 30, 2020 58 $ 1,010 $ 587 $ ( 98 ) $ 11 $ 1,510

Balance at January 31, 2020 58 $ 983 $ 506 $ ( 72 ) $ 10 $ 1,427

7 unchanged sentences

Distributions to non-controlling interest — — — — ( 2 ) ( 2 )

Balance at July 31, 2020 58 $ 996 $ 550 $ ( 109 ) $ 13 $ 1,450

Balance at October 30, 2020 58 $ 1,010 $ 587 $ ( 98 ) $ 11 $ 1,510

See accompanying notes to condensed and consolidated financial statements.

1 unchanged sentence

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

2021 July 31,

Nine Months Ended

2021 October 30,

(in millions)

35 unchanged sentences

Net cash (used in) provided by financing activities ( 176 ) 526

Net (decrease) increase in cash, cash equivalents and restricted cash ( 48 ) 13

Net decrease in cash, cash equivalents and restricted cash ( 33 ) ( 1 )

Cash, cash equivalents and restricted cash at beginning of period 190 202

6 unchanged sentences

The Company provides engineering and integration services for large, complex projects and offers a broad range of services with a targeted emphasis on higher-end, differentiated technology services.

The Company is organized as a matrix comprised of two customer facing operating sectors supported by a strategy, growth and innovation organization.

The Company is organized as a matrix comprised of two customer facing operating sectors supported by an enterprise solutions and operations organization.

Each of the Company’s two customer facing operating sectors is focused on providing the Company’s comprehensive technical and enterprise IT service offerings to one or more agencies of the U.S.

14 unchanged sentences

The Company holds a 50.1 % majority interest in Forfeiture Support Associates J.V.

The results of operations of FSA are included in the Company's condensed and consolidated statements of income and comprehensive income.

The results of operations of FSA are included in the Company's condensed and consolidated statements of income and comprehensive income and statements of cash flows.

The non-controlling interest reported on the condensed and consolidated balance sheets represents the portion of FSA's equity that is attributable to the non-controlling interest.

19 unchanged sentences

Investments in marketable securities consist of equity securities which are recorded at fair value using observable inputs such as quoted prices in active markets (Level 1).

As of July 30, 2021 and January 29, 2021, the fair value of our investments total $ 30 million and $ 27 million, respectively, and are included in other assets on the condensed and consolidated balance sheets.

As of October 29, 2021 and January 29, 2021, the fair value of our investments totaled $ 31 million and $ 27 million, respectively, and are included in other assets on the condensed and consolidated balance sheets.

The Company's investments are primarily held in a custodial account, which includes investments to fund our deferred compensation plan liabilities.

16 unchanged sentences

The amounts recognized in acquisition and integration costs on the condensed and consolidated statements of income are as follows:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

3 unchanged sentences

Total acquisition and integration costs $ 12 $ 3 $ 36 $ 47

(1) Acquisition expenses recognized for the three and six months ended July 30, 2021 are related to the acquisitions of Halfaker and Koverse.

Acquisition expenses recognized for the six months ended July 31, 2020 are related to the acquisition of Unisys Federal.

(2) Includes $ 3 million and $ 10 million of impairment of right of use lease assets for the three and six months ended July 30, 2021 and $ 4 million of restructuring costs for the six months ended July 31, 2020.

(3) Integration expenses for the three and six months ended July 31, 2020 include an $ 11 million loss associated with the divestiture of non-strategic international operations.

(1) Acquisition expenses for the nine months ended October 29, 2021 were related to the acquisitions of Halfaker and Koverse.

Acquisition expenses for the nine months ended October 30, 2020 were related to the acquisition of Unisys Federal.

(2) Integration expenses for the nine months ended October 29, 2021 include a $ 10 million impairment of right of use lease assets.

Integration expenses for the nine months ended October 30, 2020 include an $ 11 million loss on divestiture of non-strategic international operations.

Integration expenses for the three and nine months ended October 30, 2020 also include restructuring costs of $ 2 million and $ 6 million, respectively.

Restructuring

During the three and nine months ended October 30, 2020, the Company incurred $ 4 million of severance and other employee costs associated with an internal reorganization.

These costs are presented within selling, general and administrative expenses in the condensed and consolidated statements of income.

Accounting Standards Updates

Accounting Standards Updates effective after July 30, 2021 are not expected to have a material effect on the Company’s financial statements.

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured at the acquisition date in accordance with Topic 606 as if the acquirer had originated the contracts.

ASU 2021-08 becomes effective for the Company in the first quarter of fiscal 2024 and is required to be adopted on a prospective basis with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard on its financial statements.

Other Accounting Standards Updates effective after October 29, 2021 are not expected to have a material effect on the Company’s financial statements.

Note 2— Earnings Per Share and Dividends:

2 unchanged sentences

A reconciliation of the weighted-average number of shares outstanding used to compute basic and diluted EPS was:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

5 unchanged sentences

58.0 58.7 58.4 58.6

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

The following stock-based awards were excluded from the weighted-average number of shares outstanding used to compute diluted EPS:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

Antidilutive stock options excluded — 0.4 — 0.4

The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended July 30, 2021.

Subsequent to the end of the quarter, on September 1, 2021, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on October 29, 2021 to stockholders of record on October 15, 2021.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended October 29, 2021.

Subsequent to the end of the quarter, on December 1, 2021, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on January 28, 2022 to stockholders of record on January 14, 2022.

Note 3— Revenues:

10 unchanged sentences

Aggregate net changes in estimates on contracts accounted for using the cost-to-cost method of accounting were recognized in operating income as follows:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions, except per share amounts)

Net favorable adjustments $ 6 $ — $ 9 $ 3

Net favorable adjustments, after tax 5 — 7 2

Net favorable (unfavorable) adjustments $ — $ ( 4 ) $ 9 $ ( 1 )

Net favorable (unfavorable) adjustments, after tax — ( 3 ) 7 ( 1 )

Diluted EPS impact $ — $ ( 0.05 ) $ 0.12 $ ( 0.01 )

Revenues were $ 15 million and $ 20 million higher for the three and six months ended July 30, 2021, respectively, and $ 2 million and $ 6 million higher for the three and six months ended July 31, 2020, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Revenues were $ 1 million and $ 21 million higher for the three and nine months ended October 29, 2021, respectively, and $ 1 million lower and $ 5 million higher for the three and nine months ended October 30, 2020, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Disaggregation of Revenues

3 unchanged sentences

subcontractor to the federal government.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenues by customer were as follows:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

3 unchanged sentences

Total $ 1,898 $ 1,818 $ 5,612 $ 5,339

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenues by contract-type were as follows:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

5 unchanged sentences

subcontractor were as follows:

Three Months Ended Six Months Ended

2021 July 31,

2020 July 30,

2021 July 31,

Three Months Ended Nine Months Ended

2021 October 30,

2020 October 29,

2021 October 30,

(in millions)

3 unchanged sentences

Total $ 1,898 $ 1,818 $ 5,612 $ 5,339

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

Contract balances for the periods presented were as follows:

Balance Sheet line item July 30,

Balance Sheet line item October 29,

2021 January 29,

6 unchanged sentences

Contract liabilities - non-current Other long-term liabilities $ 11 $ 17

(1) Net of allowance of $ 4 million and $ 3 million as of July 30, 2021 and January 29, 2021.

During the three and six months ended July 30, 2021, the Company recognized revenues of $ 14 million and $ 64 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 29, 2021.

During the three and six months ended July 31, 2020, the Company recognized revenues of $ 5 million and $ 22 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 31, 2020.

(1) Net of allowance of $ 3 million as of October 29, 2021 and January 29, 2021.

During the three and nine months ended October 29, 2021, the Company recognized revenues of $ 8 million and $ 72 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 29, 2021.

During the three and nine months ended October 30, 2020, the Company recognized revenues of $ 5 million and $ 27 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 31, 2020.

Remaining Performance Obligations

As of July 30, 2021, the Company had $ 4.9 billion of remaining performance obligations.

Remaining performance obligations represent the expected value yet to be recognized on exercised contracts.

As of October 29, 2021, the Company had $ 6.0 billion of remaining performance obligations.

Remaining performance obligations represent the expected value, both funded and unfunded, yet to be recognized on exercised contracts.

Remaining performance obligations exclude unexercised option periods and unissued task orders under indefinite delivery, indefinite quantity (IDIQ) contracts.

1 unchanged sentence

The Company expects to recognize revenue on approximately 80 % of the remaining performance obligations over the next 12 months and approximately 90 % over the next 24 months, with the remaining recognized thereafter.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Lessor revenue

3 unchanged sentences

Operating lease income is reported as revenue on the condensed and consolidated statements of income.

Operating lease income was $ 2 million and $ 11 million for the three and six months ended July 30, 2021, respectively, and $ 11 million and $ 17 million for the three and six months ended July 31, 2020, respectively.

Operating lease income was $ 3 million and $ 14 million for the three and nine months ended October 29, 2021, respectively, and $ 11 million and $ 28 million for the three and nine months ended October 30, 2020, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Note 4— Acquisitions:

3 unchanged sentences

The allocation of the preliminary purchase price resulted in goodwill of $ 98 million and intangible assets of $ 112 million, all of which is deductible for income tax purposes.

The Company has not yet obtained all of the information required to complete the purchase price allocation related to this acquisition.

During the third quarter of fiscal 2022, the Company increased goodwill by $ 6 million which consisted of a $ 3 million increase in the preliminary purchase price for final working capital adjustments and $ 3 million in fair value adjustments for other assets acquired.

The goodwill is primarily associated with future customer relationships and an acquired assembled work force.

The intangible assets consist of backlog of $ 17 million and customer relationships of $ 95 million that will be amortized over a period of one and nine years , respectively.

During the current quarter, the Company recognized integration expenses of $ 3 million related to the payment of certain transaction bonuses.

The intangible assets consist of customer relationships of $ 95 million and backlog of $ 17 million that will be amortized over a period of nine years and one year , respectively.

The Company has not yet finalized the purchase accounting for the acquisition as it is still in the process of finalizing the valuation for certain assets acquired.

The Company will make additional cash payments of $ 21 million in March 2022 associated with certain change in control provisions that will be recognized as post-combination expense.

5 unchanged sentences

The intangible assets, which primarily consist of developed technology, are being amortized over a weighted average period of seven years .

The Company will recognize an additional $ 13 million in post-combination compensation expense over the next two years associated with employee retention agreements.

The Company is recognizing an additional $ 13 million in post-combination compensation expense over the next two years associated with employee retention agreements.

Unisys Federal Acquisition

4 unchanged sentences

The Company used the net proceeds from its offering of Senior Notes and borrowings under the Term Loan B2 Facility, proceeds from the sale of receivables under its MARPA Facility, and cash on its balance sheet to finance the acquisition and pay related fees and expenses.

During the second quarter of fiscal 2022, the Company accelerated the amortization for certain off-market customer contracts as a result of a change in the expected contractual terms and resulted in additional amortization of $ 8 million during the quarter.

During the second quarter of fiscal 2022, the Company accelerated the amortization for certain off-market customer contracts as a result of a change in the expected contractual terms which resulted in additional amortization of $ 9 million and $ 17 million for the three and nine months ended October 29, 2021.

Amortization for the next four years is expected to be as follows:

$ 16 million in the remainder of 2022, $ 9 million in 2023, $ 8 million in 2024, and $ 2 million in 2025.

The amount of Unisys Federal's revenue included in the condensed and consolidated statements of income for the three and six months ended July 31, 2020, was $ 175 million and $ 279 million, respectively, and the amount of net income attributable to common stockholders included in the condensed and consolidated statements of income for the three and six months ended July 31, 2020, was $ 8 million and $ 19 million, respectively.

$ 3 million for the remainder of 2022, $ 9 million in 2023, $ 8 million in 2024, and $ 2 million in 2025.

The amount of Unisys Federal's revenue included in the condensed and consolidated statements of income for the three and nine months ended October 30, 2020, was $ 200 million and $ 479 million, respectively, and the amount of net income attributable to common stockholders included in the condensed and consolidated statements of income for the three and nine months ended October 30, 2020, was $ 21 million and $ 40 million, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma financial information presents the combined results of operations for Unisys Federal and the Company for the three and six months ended July 31, 2020:

Three Months Ended Six Months Ended

July 31, 2020 July 31, 2020

The following unaudited pro forma financial information presents the combined results of operations for Unisys Federal and the Company for the three and nine months ended October 30, 2020:

Three Months Ended Nine Months Ended

October 30, 2020 October 30, 2020

(in millions)

8 unchanged sentences

Note 5— Goodwill and Intangible Assets:

Goodwill had a carrying value of $ 2,899 million and $ 2,787 million as of July 30, 2021 and January 29, 2021, respectively.

Goodwill increased by $ 112 million during the six months ended July 30, 2021, primarily due to the acquisitions of Halfaker ($ 92 million) and Koverse ($ 21 million) as discussed in Note 4.

Goodwill had a carrying value of $ 2,905 million and $ 2,787 million as of October 29, 2021 and January 29, 2021, respectively.

Goodwill increased by $ 118 million during the nine months ended October 29, 2021, primarily due to the acquisitions of Halfaker ($ 98 million) and Koverse ($ 21 million) as discussed in Note 4.

There were no impairments of goodwill during the periods presented.

1 unchanged sentence

Intangible assets, all of which were finite-lived, consisted of the following:

July 30, 2021 January 29, 2021

October 29, 2021 January 29, 2021

Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value

5 unchanged sentences

Total intangible assets $ 1,495 $ ( 329 ) $ 1,166 $ 1,427 $ ( 289 ) $ 1,138

Amortization expense related to intangible assets was $ 29 million and $ 61 million for the three and six months ended July 30, 2021, respectively, and $ 42 million and $ 68 million for the three and six months ended July 31, 2020, respectively.

Amortization expense related to intangible assets was $ 33 million and $ 94 million for the three and nine months ended October 29, 2021, respectively, and $ 40 million and $ 108 million for the three and nine months ended October 30, 2020, respectively.

There were no intangible asset impairment losses during the periods presented.

As of July 30, 2021, the estimated future annual amortization expense related to intangible assets is as follows:

As of October 29, 2021, the estimated future annual amortization expense related to intangible assets is as follows:

Fiscal Year Ending (in millions)

6 unchanged sentences

Note 6— Income Taxes:

The Company's effective income tax rate was 23.6 % and 23.0 % for the three and six months ended July 30, 2021, respectively, and 24.9 % and 22.0 % for the three and six months ended July 31, 2020, respectively.

The Company’s effective tax rate was lower for the three months ended July 30, 2021 compared to the prior year period primarily due to tax benefits recorded from an employee retention credit study.

The Company's effective tax rate was higher for the six months ended July 30, 2021 compared to the prior year period due to lower excess tax benefits from employee share-based compensation and the prior period included the benefits from a reversal of foreign tax reserves.

Tax rates for the three and six months ended July 30, 2021 were lower than the combined federal and state statutory rates due principally to excess tax benefits related to employee share-based compensation, research and development tax credits, employee retention credits, and other permanent book tax differences.

As of July 30, 2021, the Company's total liability for unrecognized tax benefits was $ 68 million, which is classified as other long-term liabilities on the condensed and consolidated balance sheets, and if recognized, would positively impact the effective tax rate.

The Company's effective income tax rate was 19.4 % and 22.0 % for the three and nine months ended October 29, 2021, respectively, and 22.4 % and 22.2 % for the three and nine months ended October 30, 2020, respectively.

The Company’s effective tax rate was lower for the three and nine months ended October 29, 2021 compared to the prior year periods primarily due to the completion of prior year tax return planning efforts recorded during the three months ended October 29, 2021.

Tax rates for the three and nine months ended October 29, 2021 were lower than the combined federal and state statutory rates principally due to excess tax benefits related to employee stock-based compensation, research and development tax credits, a Foreign Derived Intangible Income deduction, and other permanent book tax differences.

As of October 29, 2021, the Company's total liability for unrecognized tax benefits was $ 71 million, which is classified as other long-term liabilities on the condensed and consolidated balance sheets, and if recognized, would positively impact the effective tax rate.

While the Company believes it has adequate accruals for uncertainty in income taxes, the tax authorities, on review of the Company’s tax filings, may determine that the Company owes taxes in excess of recorded accruals, or the recorded accruals may be in excess of the final settlement amounts agreed to by the tax authorities.

Although the timing of such reviews is not certain, over the next 12 months the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at July 30, 2021.

Although the timing of such reviews is not certain, over the next 12 months the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at October 29, 2021.

Note 7— Debt Obligations:

The Company’s long-term debt as of the dates presented was as follows:

July 30, 2021 January 29, 2021

October 29, 2021 January 29, 2021

rate Effective

15 unchanged sentences

$ 2,456 $ ( 23 ) $ 2,433 $ 2,474 $ ( 27 ) $ 2,447

As of July 30, 2021, the Company has a $ 2.6 billion credit facility (the Credit Facility) consisting of a $ 400 million secured Revolving Credit Facility due October 2023, an $ 805 million secured Term Loan A Facility due October 2023, a $ 100 million secured Term Loan A2 Facility due October 2023, a $ 1,021 million secured Term Loan B Facility due October 2025, and a $ 272 million secured Term Loan B2 Facility due March 2027 (together, the Term Loan Facilities).

There is no balance outstanding on the Revolving Credit Facility as of July 30, 2021.

As of July 30, 2021, the Company was in compliance with the covenants under its Credit Facility.

On March 1, 2021, the Company executed the Third Amendment to the Third Amended and Restated Credit Agreement, which reduces the applicable margin for the Term Loan B2 Facility due March 2027 for LIBOR loans from 2.25 % to 1.875 % and for base rate loans from 1.25 % to 0.875 %.

As of October 29, 2021, the Company has a $ 2.6 billion credit facility (the Credit Facility) consisting of a $ 785 million secured Term Loan A Facility due October 2023, a $ 100 million secured Term Loan A2 Facility due October 2023, a $ 1,018 million secured Term Loan B Facility due October 2025, a $ 272 million secured Term Loan B2 Facility due March 2027 (together, the Term Loan Facilities), and a $ 400 million secured Revolving Credit Facility due October 2023.

There is no balance outstanding on the Revolving Credit Facility as of October 29, 2021.

As of October 29, 2021, the Company was in compliance with the covenants under its Credit Facility.

On March 1, 2021, the Company executed the Third Amendment to the Third Amended and Restated Credit Agreement, which reduced the applicable margin for the Term Loan B2 Facility due March 2027 for LIBOR loans from 2.25 % to 1.875 % and for base rate loans from 1.25 % to 0.875 %.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

8 unchanged sentences

The Term Loan A2 Facility due October 2023 is subject to the same covenants and events of default as the Company’s existing term loans under the Credit Facility.

As of July 30, 2021 and January 29, 2021, the carrying value of the Company’s outstanding debt obligations approximated its fair value.

As of October 29, 2021 and January 29, 2021, the carrying value of the Company’s outstanding debt obligations approximated its fair value.

The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s Term Loan Facilities and Senior Notes.

1 unchanged sentence

The Company’s derivative instruments designated as cash flow hedges consist of:

Liability Fair Value (1) at

Notional Amount at July 30, 2021 Pay Fixed

Fair Value of Liability (1) at

Notional Amount at October 29, 2021 Pay Fixed

Rate Settlement and

Termination July 30,

Termination October 29,

2021 January 29, 2021

12 unchanged sentences

See Note 9 for the unrealized change in fair values on cash flow hedges recognized in other comprehensive income (loss) and the amounts reclassified from accumulated other comprehensive loss into earnings for the current and comparative periods presented.

The Company estimates that it will reclassify $ 34 million of unrealized losses from accumulated other comprehensive loss into earnings in the twelve months following July 30, 2021.

The Company estimates that it will reclassify $ 32 million of unrealized losses from accumulated other comprehensive loss into earnings in the twelve months following October 29, 2021.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

9 unchanged sentences

(in millions)

Three months ended July 30, 2021

Balance at April 30, 2021 $ ( 72 ) $ ( 3 ) $ ( 75 )

Other comprehensive loss before reclassifications ( 6 ) — ( 6 )

Three months ended October 29, 2021

Balance at July 30, 2021 $ ( 71 ) $ ( 3 ) $ ( 74 )

Other comprehensive income before reclassifications 13 — 13

Amounts reclassified from accumulated other comprehensive loss

1 unchanged sentence

Net other comprehensive income 17 — 17

Balance at October 29, 2021 $ ( 54 ) $ ( 3 ) $ ( 57 )

Three months ended October 30, 2020

Balance at July 31, 2020 $ ( 104 ) $ ( 5 ) $ ( 109 )

Three months ended July 31, 2020

Balance at May 1, 2020 $ ( 103 ) $ ( 5 ) $ ( 108 )

Other comprehensive loss before reclassifications ( 10 ) — ( 10 )

Other comprehensive income before reclassifications 7 — 7

Amounts reclassified from accumulated other comprehensive loss

Income tax impact ( 4 ) — ( 4 )

Net other comprehensive loss ( 1 ) — ( 1 )

Balance at July 31, 2020 $ ( 104 ) $ ( 5 ) $ ( 109 )

Six months ended July 30, 2021

Net other comprehensive income 11 — 11

Balance at October 30, 2020 $ ( 93 ) $ ( 5 ) $ ( 98 )

Nine months ended October 29, 2021

Balance at January 29, 2021 $ ( 86 ) $ ( 3 ) $ ( 89 )

3 unchanged sentences

Net other comprehensive income 32 — 32

Balance at July 30, 2021 $ ( 71 ) $ ( 3 ) $ ( 74 )

Six months ended July 31, 2020

Balance at October 29, 2021 $ ( 54 ) $ ( 3 ) $ ( 57 )

Nine months ended October 30, 2020

Balance at January 31, 2020 $ ( 67 ) $ ( 5 ) $ ( 72 )

3 unchanged sentences

Net other comprehensive loss ( 26 ) — ( 26 )

Balance at July 31, 2020 $ ( 104 ) $ ( 5 ) $ ( 109 )

Balance at October 30, 2020 $ ( 93 ) $ ( 5 ) $ ( 98 )

(1) The amount reclassified from accumulated other comprehensive loss is included in interest expense.

4 unchanged sentences

(the Purchaser) for the sale of up to a maximum amount of $ 300 million of certain designated eligible receivables with the U.S.

During the six months ended July 30, 2021 and July 31, 2020, the Company incurred purchase discount fees of $ 1 million, which are presented in Other (income) expense, net on the condensed and consolidated statements of income.

During the nine months ended October 29, 2021 and October 30, 2020, the Company incurred purchase discount fees of $ 2 million, which are presented in Other (income) expense, net on the condensed and consolidated statements of income.

MARPA Facility activity consisted of the following:

Six Months Ended

2021 July 31,

Nine Months Ended

2021 October 30,

(in millions)

6 unchanged sentences

Remaining sold receivables $ 169 $ 175

(1) For the six months ended July 30, 2021 and July 31, 2020, the Company recorded a net increase to cash flows from operating activities of $ 15 million and $ 200 million, respectively, from sold receivables.

(2) Represents primarily the cash collected on behalf of but not yet remitted to the Purchaser as of July 30, 2021 and July 31, 2020.

(1) For the nine months ended October 29, 2021 and October 30, 2020, the Company recorded a net increase to cash flows from operating activities of $ 15 million and $ 200 million, respectively, from sold receivables.

(2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of October 29, 2021 and October 30, 2020.

This balance is included in accounts payable and accrued liabilities on the condensed and consolidated balance sheets.

6 unchanged sentences

Beginning in fiscal 2018, the Company entered into contracts with various vendors for long-lead time materials that would be necessary to complete the low-rate initial production (LRIP) phase of the program, including portions of the LRIP phase that had not yet been awarded.

As a result of the program termination, the Company recognized an inventory provision for long-lead items during fiscal 2019.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Government Investigations, Audits and Reviews

4 unchanged sentences

Due to the Company’s reliance on government contracts, adverse findings could also have a material impact on the Company’s business, including its financial position, results of operations and cash flows.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

The indirect cost audits by the DCAA of the Company’s business remain open for certain prior years and the current year.

2 unchanged sentences

The Company has recorded reserves for estimated net amounts to be refunded to customers for potential adjustments for indirect cost audits and compliance with Cost Accounting Standards.

As of July 30, 2021, the Company has recorded a total liability of $ 17 million which is presented in accounts payable and accrued liabilities on the condensed and consolidated balance sheets.

As of October 29, 2021, the Company has recorded a total liability of $ 18 million which is presented in accounts payable and accrued liabilities on the condensed and consolidated balance sheets.

Letters of Credit and Surety Bonds

The Company has outstanding obligations relating to letters of credit of $ 10 million as of July 30, 2021, principally related to guarantees on insurance policies.

The Company has outstanding obligations relating to letters of credit of $ 10 million as of October 29, 2021, principally related to guarantees on insurance policies.

The Company also has outstanding obligations relating to surety bonds in the amount of $ 19 million, principally related to performance and payment bonds on the Company’s contracts.

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements