What changed in this filing

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Item 1A. Risk Factors

2022-03-28 compared with 2021-03-26 · 35 added, 29 removed, 283 unchanged (18% of the section changed)

5 unchanged sentences

We generated either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S.

government over 95% of our total revenues during each of the last three fiscal years from contracts with the U.S.

government 98% of our total revenues during each of the last three fiscal years from contracts with the U.S.

We expect to continue to derive substantially all of our revenues from work performed under U.S.

18 unchanged sentences

government operates under a continuing resolution, contract awards may be delayed, canceled, or funded at lower levels, which could adversely impact our operations, cash flows and financial results.

While the federal government is currently funded in full through the end of GFY 2021, there is a strong possibility that GFY 2022 will begin under a continuing resolution, which has occurred regularly in recent election year appropriations cycles.

While the federal government is currently funded in full through the end of GFY 2022, there is a strong possibility that GFY 2023 will begin under a continuing resolution lasting several weeks or months.

In addition, it is possible that an impasse on policy issues could threaten continuous government funding past September 30, 2022 or result in another federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows and financial results.

8 unchanged sentences

The competitive bidding process involves substantial costs and a number of risks, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded but for which we do not receive meaningful task orders.

For contracts awarded to us, we also face the risk of inaccurately estimating the resources and costs that will be required to fulfill any contract we win.

Following contract award, we may encounter significant expense, delay, contract modifications or even contract loss as a result of our competitors protesting the award of contracts to us in competitive bidding.

17 unchanged sentences

In each case, our failure to accurately estimate costs or the resources and technology needed to perform our contracts or to effectively manage and control our costs during the performance of work could result, and in some instances has resulted, in reduced profits or in losses.

More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control (such as performance failures of our subcontractors, natural disasters or other force majeure events including the outbreak of the coronavirus disease 2019 (COVID-19) during fiscal 2021) could make our contracts less profitable than expected or unprofitable.

More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control (such as performance failures of our subcontractors, rising inflation, natural disasters or other force majeure events including the outbreak of the coronavirus disease 2019 (COVID-19)) could make our contracts less profitable than expected or unprofitable.

We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected.

21 unchanged sentences

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

Federal and state laws, regulations and mandates that require significant progress to reduce the impact of climate change through carbon pollution-free electricity, net-zero emissions in vehicles, buildings, procurement and operations, and similar actions could diminish or weaken our ability to attain new contracts or garner renewals.

As a government services provider, we anticipate that requirements around supply chain management and specific procurement strategies to reduce contractor emissions and emissions in products used or acquired could impair the Company from effectively competing.

Further, requirements around the disclosure of greenhouse gas emissions, particularly Scope 3 emissions, emission reduction targets, climate risk, and other climate sustainability actions could potentially have a negative impact to our business and the ability to secure certain contracts or contract renewals.

The risk of more rapidly shifting or changing government policies could have an equally adverse effect on government contractors such as ourselves.

Moreover, shifts in the buying practices of U.S.

1 unchanged sentence

Any of these changes could impair our ability to obtain new contracts or contract renewals.

Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future revenues, profitability and prospects.

Any new contracting requirements or procurement methods, including those related to climate change, could be costly or administratively difficult for us to implement and could adversely affect our future revenues, profitability and prospects.

Our business is subject to reviews, audits and cost adjustments by the U.S.

government, which, if resolved unfavorably to us, could adversely affect our profitability, cash flows or growth prospects.

The Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA) and others routinely audit and review a contractor’s performance on government contracts, indirect cost rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards.

The DCAA, DCMA and others routinely audit and review a contractor’s performance on government contracts, indirect cost rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards.

They also review the adequacy of the contractor’s compliance with government standards for its business systems, which are defined as the contractor’s accounting, earned value management, estimating, materials management, property management and purchasing systems.

A finding of significant control deficiencies in a contractor’s business systems or a finding of noncompliance with U.S.

government Cost Accounting Standards (CAS) can result in decremented billing rates to U.S.

A finding of significant control deficiencies in a contractor’s business systems or a finding of noncompliance with CAS can result in decremented billing rates to U.S.

government customers until the control deficiencies are corrected and their remediation is accepted by the DCMA.

1 unchanged sentence

As a result, audits and reviews have become more rigorous and the standards to which we are held are being more strictly interpreted, which has increased the likelihood of an audit or review resulting in an adverse outcome.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds.

5 unchanged sentences

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

We have recorded contract revenues based on an estimate of costs that we believe will be approved on final

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We have recorded contract revenues based on an estimate of costs that we believe will be approved on final audit.

However, we do not know the outcome of any ongoing or future audits or whether future adjustments will exceed our reserves for potential adjustments.

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Our use of net operating loss carryforwards and other tax attributes to offset future taxable income may become limited in the event that we or the IRS determines that we have experienced an ownership change.

As of January 29, 2021, we have estimated $383 million of net operating loss (NOL) and tax basis in our acquired amortizable goodwill and other intangible assets of approximately $1.6 billion.

As of January 28, 2022, we have estimated $343 million of gross net operating loss (NOL) carryforwards and tax basis in our acquired amortizable goodwill and other intangible assets of approximately $1.6 billion.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes may be limited.

Such an ownership change occurred during the acquisition of Engility Holdings, Inc.

and as a result of these limitations, $3 million of tax credit carryforwards were eliminated in purchase accounting.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

49 unchanged sentences

These divestitures similarly require significant investment of time and resources and may disrupt our business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could adversely affect our financial results.

We will incur direct and indirect costs as a result of the merger with Engility and acquisition of Unisys Federal.

We will incur substantial expenses in connection with and as a result of the merger and acquisition and, over a period of time following the completion of the merger and acquisition, we expect to incur substantial expenses in connection with coordinating our businesses, operations, policies and procedures.

We will incur direct and indirect costs as a result of the acquisitions of Engility Holdings, Inc.

(Engility), Unisys Federal, Halfaker, and Koverse.

We will incur substantial expenses in connection with and as a result of the acquisitions and, over a period of time following the completion of the acquisitions, we expect to incur substantial expenses in connection with coordinating our businesses, operations, policies and procedures.

While we have assumed that a certain level of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of these expenses.

1 unchanged sentence

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We may not realize the growth opportunities that are anticipated from the acquisition of Unisys Federal as we may experience difficulties in integrating its business with ours.

The benefits that are expected to result from the acquisition will depend, in part, on our ability to realize anticipated growth opportunities as a result of the acquisition.

Our success in realizing these growth opportunities, and the timing of this realization, depends on the successful integration of Unisys Federal’s business.

There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition as sizable as the acquisition.

The process of integrating operations could cause an interruption of, or loss of momentum in, our and Unisys Federal’s business.

Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage our Company, service existing customers, attract new customers and develop new products or strategies.

If senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer.

There can be no assurance that we will successfully or cost-effectively integrate Unisys Federal’s business or at all.

The failure to do so could have a material adverse effect on our business, financial condition or results of operations.

Our business and financial results could be negatively affected by cyber or other security threats.

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In addition, the resulting volatility in the global capital markets could restrict our access to capital and/or increase our cost of capital.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

It is possible that the continued spread of COVID-19 may also further cause disruption in our supply chain;

8 unchanged sentences

Many of the systems and networks that we develop, install and maintain for our customers involve managing and protecting personal information and information relating to national security and other sensitive government functions.

While we have programs designed to comply with relevant privacy and security laws and restrictions, if a system or network that we develop, install or maintain were to fail or experience a security breach or service interruption, whether caused by us, third-party service providers, cybersecurity threats or other events, we may experience loss of revenue, remediation costs or face claims for damages or contract termination.

While we have programs designed to comply with relevant privacy and security laws and restrictions, if a

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

system or network that we develop, install or maintain were to fail or experience a security breach or service interruption, whether caused by us, third-party service providers, cybersecurity threats or other events, we may experience loss of revenue, remediation costs or face claims for damages or contract termination.

Any such event could cause serious harm to our reputation and prevent us from having access to or being eligible for further work on such systems and networks.

23 unchanged sentences

The expense of defending these claims may adversely affect our financial results.

We face risks related to climate change if associated increases in extreme weather events prohibit or adversely affect our employees’ ability to work.

Severe storms, increased precipitation and flooding, heat waves and other weather-related obstacles due to climate change could adversely affect our ability to execute our strategy and may disrupt our operations.

Any failure of our employees’ ability to work could potentially impair our capability to efficiently perform and meet our contractual obligations, timely address our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial position, results of operations, and/or cash flows.

While we have a distributed workforce with employees working remotely across the U.S., we do have employees who, because of client requirements or contractual obligations, must work at specified locations.

In these instances, if there was a severe weather event that impacted such a location we may not be able to meet the client’s requirements or our contractual obligations.

In the shorter term, a climate-related event could temporarily suspend our ability to do the required work in person, produce operational or other unforeseen challenges, and in the longer term, threaten our ability to perform contracts in a timely manner or meet other requirements of the contract, any of which could harm our business and its results.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Although SAIC has business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective or that such measures will not adversely affect our operations or long-term plans.

In addition, local conditions and regulations may delay the return of employees to business sites, which could impede our ability to meet the client’s requirements or our contractual obligations.

The ability of individual employees, based on how severely the climate-related event has impacted them, may also impede our ability to meet the client’s requirements or our contractual obligations.

Our customers, both government and civil, may shift priorities, requirements and business processes in response to climate change, which could affect our business and revenues.

Customers could change priorities and approaches due to their operations experiencing a direct climate-change impact, have future concerns about their long-term sustainability, face external legislative or regulatory pressure, or other external market factors such as investor, consumer or societal requests or demands that a customer may feel obliged to respond to.

Such changes and responses by our customers have the potential to adversely impact our future revenues, profitability and prospects.

We could incur significant liabilities and suffer negative publicity if our detection systems fail to operate as intended or our assessment reports prove to be inaccurate.

15 unchanged sentences

If we have any violations of, or incur liabilities pursuant to, these laws or regulations, our financial condition and operating results could be adversely affected.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We face risks associated with our international business.

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In addition, the funding of the Pension Plan may be subject to changes caused by legislative or regulatory actions.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We will make contributions to fund the Pension Plan when considered necessary or advantageous to do so.

13 unchanged sentences

Goodwill and intangible assets are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Examples of events or changes in circumstances indicating that the carrying value of goodwill may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, loss of key contracts, customer relationships, or personnel that affect current and future operating cash flows of the reporting unit.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

reporting unit.

Any future impairment of goodwill or other intangible assets would have a negative impact on our profitability and financial results.

9 unchanged sentences

No information is required in response to this item.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

What changed 10-K

Item 1A. Risk Factors