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Item 1A. Risk Factors

2023-04-03 compared with 2022-03-28 · 41 added, 28 removed, 290 unchanged (19% of the section changed)

123 unchanged sentences

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 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.

As of February 3, 2023, we have estimated $296 million of gross net operating loss carryforwards and tax basis in our acquired amortizable goodwill and other intangible assets of approximately $1.4 billion.

Net operating loss carryforwards and other tax attributes are subject to various annual limitations under Sections 382 and 383 of the Internal Revenue Code, which restricts a corporation’s ability to use such carryforwards and attributes following an ownership change.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.

Changes in U.S.

(federal or state) regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.

For example, beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes.

While the impact to income taxes payable is most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six.

The actual impact will depend on the amount of research and development costs incurred by the Company, whether Congress modifies, or repeals this provision and whether new guidance and interpretive rules are issued by the U.S.

Treasury, among other factors.

Legal disputes could require us to pay potentially large damage awards and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.

We are subject to a number of lawsuits and claims described under “Legal Proceedings” in Part I of this report.

We are subject to a number of lawsuits and claims described under “Legal Proceedings” in Part I, Item 3 of this report.

We are also subject to, and may become a party to, a variety of other litigation or claims and suits that arise from time to time in the ordinary course of our business.

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Any claims or litigation could be costly to defend, and even if we are successful or if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future.

Litigation and other claims, including those described under “Legal Proceedings” in Part I of this report, are subject to inherent uncertainties and management’s view of these matters may change in the future.

Litigation and other claims, including those described under “Legal Proceedings” in Part I, Item 3 of this report, are subject to inherent uncertainties and management’s view of these matters may change in the future.

Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any misconduct by our employees, subcontractors, agents or business partners could harm our business and reputation.

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Such misconduct could include fraud or other improper activities such as falsifying time or other records, failure to comply with our policies and procedures or violations of applicable laws and regulations.

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Business and Operational Risks

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Any failure to do so could impair our ability to efficiently perform our contractual obligations, timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our future results.

In addition, salaries and related costs are a

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significant portion of the cost of providing our services and, accordingly, our ability to efficiently utilize our workforce impacts our profitability.

In addition, salaries and related costs are a significant portion of the cost of providing our services and, accordingly, our ability to efficiently utilize our workforce impacts our profitability.

If our employees are under-utilized, our profitability could suffer.

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In addition, we may periodically divest businesses, including businesses that are no longer a part of our ongoing strategic plan.

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 acquisitions of Engility Holdings, Inc.

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

These divestitures similarly require significant investment of time and resources and may disrupt our

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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 acquisitions of 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.

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Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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In the event of unauthorized access to sensitive information for which we are responsible under customer contracts, our customers, their employees, or third parties may seek to hold us liable for any costs or other damages associated with the unauthorized access.

In addition, government agencies may bring legal actions against us for violation of or noncompliance with regulatory requirements relating to any unauthorized access to sensitive information.

In addition, government agencies may bring legal actions against us for violation of or noncompliance with regulatory requirements relating to any unauthorized access to sensitive information including failure to make adequate and timely disclosure to the public, regulators or law enforcement agencies.

Occurrence of any unauthorized access caused by these security threats could adversely affect our reputation, business operations including contract terminations, ability to win work on future contracts, and impact our financial results.

Any remediation costs, damages or other liabilities related to unauthorized access of sensitive information of ours or our customers caused by cyber or other security threats may not be fully insured or indemnified by other means or our insurers.

Occurrence of any unauthorized access caused by these security threats could adversely affect our reputation, business operations, and impact our financial results.

We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19.

If significant portions of our workforce are unable to work effectively due to illness, quarantines, government actions, facility closures or other reasons in connection with COVID-19, our operations will likely be impacted.

We may be unable to perform fully on our contracts and some of our costs may not be fully recoverable or adequately covered by insurance.

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

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

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

cause delay, or limit the ability of, the U.S.

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and cause other unpredictable events.

We continue to work with our stakeholders (including customers, employees, suppliers and local communities) to address the impacts of COVID-19.

We continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

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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.

We continue to monitor the ongoing situation relating to COVID-19, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

At this time, we cannot predict the overall impact of COVID-19, but it could have a material adverse effect on our business, financial position, results of operations and/or cash flows.

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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

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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 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.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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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.

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Furthermore, failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative or contractual sanctions, including fines, penalties or suspension or debarment from contracting with the U.S.

government or could cause us to incur costs to change, upgrade, remediate and/or close some of our operations or properties.

government or could cause us to incur costs to change, upgrade, remediate and/or close

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some of our operations or properties.

Although we do not have extensive real estate holdings, our ownership and operation of real property also subjects us to environmental protection laws, some of which hold current or previous owners or operators of businesses and real property liable for hazardous substance releases, even if they did not know of and were not responsible for the releases.

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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Pension funding and costs are dependent upon several economic assumptions, which if changed may cause our future earnings and cash flow to fluctuate significantly.

As a result of the acquisition of Engility, which closed on January 14, 2019, we assumed the obligations under Engility's defined benefit pension plan (the Pension Plan).

As a result of the acquisition of Engility Holdings, Inc.

(Engility) in fiscal 2019, we assumed the obligations under Engility's defined benefit pension plan (the Pension Plan).

The impact of the Pension Plan on our U.S.

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For additional information related to our pension funding and costs, see Note 9 to the consolidated financial statements contained within this report.

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Goodwill and intangible assets represent a significant amount of our total assets and any impairment of these assets would negatively impact our results of operations.

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

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reporting unit.

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

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

The majority of our cash is held in accounts at U.S.

banking institutions that we believe are of high quality.

Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation (FDIC) insurance limits.

If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations.

Any material loss that we may experience in the future could have a material adverse effect on our financial position and could materially impact our ability to pay our operational expenses or make other payments.

Banking institution failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us.

If our customers, suppliers, insurers, joint venture partners, sureties, or other parties with whom we do business with are affected by issues in the banking industry it may have an adverse impact on our operational and financial performance.

Forward-Looking Statement Risks

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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