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Item 9A. Controls and Procedures

2023-04-03 compared with 2022-03-28 · 490 added, 473 removed, 1108 unchanged (46% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), has evaluated 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 of January 28, 2022, and our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), has evaluated 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 of February 3, 2023, and our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

These disclosure controls and

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

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Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, completely, accurately and fairly reflect the transactions and dispositions of our assets;

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Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting as of January 28, 2022 based on the framework established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management has assessed in its evaluation the effectiveness of our internal control over financial reporting as of January 28, 2022 and has concluded that our internal control over financial reporting was effective.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting as of February 3, 2023 based on the framework established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management has assessed in its evaluation the effectiveness of our internal control over financial reporting as of February 3, 2023 and has concluded that our internal control over financial reporting was effective.

Ernst & Young LLP, an independent registered public accounting firm, audited our consolidated financial statements included in this report and our internal control over financial reporting, and the firm’s report on our internal control over financial reporting are set forth below this report.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

Science Applications International Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Science Applications International Corporation's internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Science Applications International Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 28, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 28, 2022 and January 29, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended January 28, 2022, and the related notes and our report dated March 28, 2022 expressed an unqualified opinion thereon.

We have audited Science Applications International Corporation's internal control over financial reporting as of February 3, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 3, 2023 and January 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended February 3, 2023, and the related notes and our report dated April 3, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Tysons, Virginia

March 28, 2022

April 3, 2023

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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Directors, Executive Officers and Corporate Governance

Our executive officers as of March 28, 2022, are listed below, along with their ages on that date, positions and offices held and business experience during at least the past five years.

Our executive officers as of April 3, 2023, are listed below, along with their ages on that date, positions and offices held and business experience during at least the past five years.

All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal.

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Enterprise Markets at CGI Group, Inc.

Mahon 60 General Counsel and Corporate Secretary since November 2015.

Mahon previously served as General Counsel, Chief Compliance Officer and Corporate Secretary at MTS Systems Corporation (MTS) from October 2011 to November 2015.

Prior to MTS, Mr.

Mahon was Assistant General Counsel for Alliant Techsystems Inc.

and is a retired Colonel from the U.S.

Army where he served in the U.S.

Judge Advocate’s General’s Corps, practicing law in a variety of roles on active duty and in the U.S.

Army Reserve.

Hageman 54 General Counsel and Corporate Secretary since July 2022.

Hageman previously served as Senior Vice President and Deputy General Counsel at SAIC until 2019 when she became the General Counsel and Corporate Secretary of Cubic Corporation.

Immediately prior to her return to SAIC, Ms.

Hageman served as Executive Vice President, General Counsel and Corporate Secretary for a public satellite company primarily supporting the defense and aerospace industries.

Hageman has also held other senior legal roles at CACI and at the U.S.

Department of Defense.

Prabu Natarajan 52 Chief Financial Officer (CFO) since January 2021.

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From 2004 to 2013, Mr.

Genter held various leadership and P&L roles at CGI, ultimately serving as Vice President of Consulting Services for Commercial Markets, and prior to joining CGI, held several finance and operations roles at American Management Systems.

Genter held various leadership roles at CGI, ultimately serving as Vice President of Consulting Services for Commercial Markets, and prior to joining CGI, held several finance and operations roles at American Management Systems.

LaRouche 57 President, National Security and Space Sector, since 2019.

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LaRouche led multiple large business units at Raytheon, where he served as Vice President for 11 years.

Earlier in his career, LaRouche served in leadership positions with Lockheed Martin and Hughes.

Earlier in his career, Mr.

LaRouche served in leadership positions with Lockheed Martin and Hughes.

For additional information required by Item 10 with respect to executive officers and directors, including audit committee and audit committee financial experts, procedures by which stockholders may recommend nominees to the Board of Directors, and compliance with Section 16(a) of the Securities Exchange Act of 1934, see the information set forth under the captions “Proposal 1—Election of Directors,” “Corporate Governance” and “Other Information” in the 2023 Definitive Proxy Statement, which information is incorporated by reference into this report.

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This code applies to all executive officers and employees and forms the foundation of our corporate policies and procedures designed to promote ethical behavior in all aspects of our business.

To obtain copies of the Code of Conduct, visit our website at www.saic.com and click on the link titled “Corporate Governance” and then “Code of Conduct.” We intend to post on our website any material changes to or waivers from our code of business ethics.

To obtain copies of the Code of Conduct, visit our website at www.saic.com and click on the links titled “Corporate Governance” then "Governance Documents" and then “Code of Conduct.” We intend to post on our website any material changes to or waivers from our code of business ethics.

The information on our website is not incorporated by reference into and is not a part of this report.

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For information required by Item 11 with respect to executive compensation, see the information set forth under the captions “Compensation Discussion and Analysis,” “Executive Compensation” and “Corporate Governance” in the 2023 Definitive Proxy Statement, which information is incorporated by reference into this report.

For information required by Item 11 with respect to compensation committee interlocks and insider participation, see the information set forth under the caption “Corporate Governance” in the 2022 Definitive Proxy Statement, which information is incorporated by reference into this report.

For information required by Item 11 with respect to compensation committee interlocks, insider participation, and the compensation committee report, see the information set forth under the captions “Corporate Governance” and "Compensation Discussion and Analysis" in the 2023 Definitive Proxy Statement, which information is incorporated by reference into this report.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

The following table provides the number of shares of our common stock to be issued, the weighted-average exercise price of the outstanding stock options and the number of shares remaining for future award grants as of January 28, 2022:

Equity Compensation Plan Information

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(2) Does not include shares to be issued for stock-based awards, other than stock options, which will not require any payment upon issuance of those shares.

(3) Includes 2,514,092 shares of our common stock available for issuance under the 2013 Employee Stock Purchase Plan (ESPP).

(3) Includes 2,335,409 shares of our common stock available for issuance under the 2013 Employee Stock Purchase Plan (ESPP), 1,741,168 shares under the 2013 Equity Incentive Plan (EIP), and 1,015,764 shares under the 2012 Long Term Performance Plan (LTPP).

The maximum number of shares initially available for issuance under the ESPP was 1 million.

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There was no increase to the amount authorized for issuance under the ESPP during fiscal 2018 - 2023.

In addition, this includes 2,027,513 shares of our common stock available for issuance under the 2013 Equity Incentive Plan (EIP).

The maximum number of shares initially available for issuance under the EIP was 5.7 million, which was increased by 2.8 million per the amended and restated 2013 Equity Incentive Plan, adopted June 4, 2014, amounting to a total authorized for issuance of 8.5 million.

Lastly, this includes 1,015,764 shares of our common stock available for issuance under the 2012 Long Term Performance Plan (LTPP), see Note 8 to the consolidated financial statements contained within this report.

The shares outstanding under the LTPP relate to assumed awards from the Engility Holdings, Inc.

acquisition, and as of the acquisition date, January 14, 2019, the maximum number of shares available for issuance under the LTPP was 1,198,010.

The shares outstanding under the LTPP relate to assumed awards from the Engility acquisition and, as of the acquisition date, the maximum number of shares available for issuance under the LTPP was 1,198,010.

We expect that the number of shares actually issued under the EIP and LTPP will be significantly less than the number of total awards outstanding under the respective plans because (a) a net option exercise results in a smaller portion of the number of award shares being issued when a participant uses award shares, rather than cash, to pay the exercise price, which historically most participants have elected to do, (b) most participants historically have elected to let the Company retain award shares to pay for taxes due on the exercise of options and all participants are required to use award shares to pay for taxes upon the vesting of restricted stock or restricted stock units, (c) some participants may terminate employment with the Company before the vesting of awards resulting in awards being forfeited and (d) some participants may not exercise stock options before the expiration date for a variety of reasons, including if the exercise price exceeds the then current market price of shares.

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For information required by Item 13 with respect to certain relationships and related transactions and the independence of directors and nominees, see the information set forth under the caption “Corporate Governance” in the 2023 Definitive Proxy Statement, which information is incorporated by reference into this report.

Principal Accounting Fees and Services

For information required by Item 14 with respect to principal accounting fees and services, see the information set forth under the caption “Audit Matters” in the 2022 Definitive Proxy Statement, which information is incorporated by reference into this report.

Principal Accountant Fees and Services

For information required by Item 14 with respect to principal accountant fees and services, see the information set forth under the caption “Audit Matters” in the 2023 Definitive Proxy Statement, which information is incorporated by reference into this report.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Exhibits, Financial Statement Schedules

Exhibits and Financial Statement Schedules

(a) Documents filed as part of the report:

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Financial statement schedules are omitted because they are not applicable or the required information is shown in our consolidated financial statements or the notes thereto.

See Exhibit Index at the end of this report.

Description of Exhibit

Distribution Agreement dated September 25, 2013, between the Company (formerly SAIC Gemini, Inc.) and Leidos Holdings, Inc.

(formerly SAIC, Inc.).

Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2013.

Agreement and Plan of Merger, dated September 9, 2018, by and among Science Applications International Corporation, Inc., a Delaware corporation, Engility, a Delaware corporation, and Raptors Merger Sub, Inc., a Delaware corporation.

(Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby agrees to supplementally furnish to the Securities and Exchange Commission upon request any omitted schedule or exhibit to the Agreement and Plan of Merger.) Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on September 10, 2018.

Asset Purchase Agreement, dated February 5, 2020, by and among Science Applications International Corporation, Inc., a Delaware corporation and Unisys Corporation, a Delaware corporation.

Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K as filed with the SEC on February 6, 2020.

Amended and Restated Certificate of Incorporation.

Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2013.

Amended and Restated Bylaws.

Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on March 29 , 2023 .

Description of Securities.

Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K as filed with the SEC on March 27, 2020.

Indenture, dated March 13, 2020, by and among Science Applications International Corporation, the guarantors party thereto and U.S.

Bank National Association, as trustee.

Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2020.

Fifth Amendment to the Third Amended and Restated Credit Agreement, dated June 30, 2022, by and among SAIC, Citibank N.A., as administrative agent and collateral agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on June 30, 2022.

Fourth Amendment to the Third Amended and Restated Credit Agreement, dated July 2, 2021, by and among SAIC, Citibank N.A., as administrative agent and collateral agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on July 7, 2021.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Description of Exhibit

Third Amended and Restated Credit Agreement by and among SAIC, Citibank, as administrative agent and collateral agent, and certain other agents and lenders party thereto, dated October 31, 2018.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 5, 2018.

First Amendment to the Third Amended and Restated Credit Agreement by and among SAIC, Citibank, as administrative agent and collateral agent, and certain other agents and lenders party thereto, dated February 19, 2020.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 24, 2020.

Second Amendment, dated March 13, 2020, to the Third Amended and Restated Credit Agreement, dated October 31, 2018 by and among Science Applications International Corporation, Citibank, N.A., as administrative agent and collateral agent, and certain other agents and lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2020.

Third Amendment to the Third Amended and Restated Credit Agreement, dated March 1, 2021, by and among SAIC, Citibank N.A., as administrative agent and collateral agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 5, 2021.

Second Amended and Restated Credit Agreement, dated May 4, 2015 by and among the Company, Citibank N.A.

as administrative agent and collateral agent, and Bank of America, N.A., as a syndication agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on May 4, 2015.

First Amendment to the Second Amended and Restated Credit Agreement, dated August 23, 2016 by and among the Company, Citibank N.A.

as administrative agent and collateral agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on August 25, 2016.

Second Amendment to the Second Amended and Restated Credit Agreement, dated February 7, 2018 by and among the Company, Citibank N.A.

as administrative agent and collateral agent, and certain other lenders and parties thereto.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 9, 2018.

Master Accounts Receivable Purchase Agreement, dated January 21, 2020, among Science Applications International Corporation, Engility Services, LLC, and MUFG Bank, Ltd.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 12, 2020.

Performance Undertaking, January 21, 2020, made by Science Applications International Corporation in favor of MUFG Bank, Ltd.

Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 12, 2020.

Amendment No.1 to Master Accounts Receivable Purchase Agreement, dated March 17, 2020, among Science Applications International Corporation, Engility Services, LLC, and MUFG Bank, Ltd.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on March 26, 2020.

Science Applications International Corporation Management Stock Compensation Plan, effective September 27, 2013.

Incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013.

Science Applications International Corporation Key Executive Stock Deferral Plan, effective September 27, 2013.

Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013.

Science Applications International Corporation 2013 Employee Stock Purchase Plan, effective October 1, 2013.

Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Description of Exhibit

Science Applications International Corporation 401(k) Excess Deferral Plan, effective September 27, 2013.

Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013.

Science Applications International Corporation Retirement Plan, effective September 27, 2013.

Incorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013.

Science Applications International Corporation Amended and Restated 2013 Equity Incentive Plan, effective June 4, 2014.

Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A as filed with the SEC on April 24, 2014.

Form of Restricted Stock Unit Award Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014.

Form of Nonstatutory Stock Option Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014.

Form of Performance Share Award Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014.

Form of Restricted Stock Unit Award Agreement of the Science Applications International Corporation 2013 Amended and Restated Equity Incentive Plan.

Incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 28, 2022.

Form of Performance Share Award Agreement of the Science Applications International Corporation 2013 Amended and Restated Equity Incentive Plan.

Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 28, 2022.

Deferred Compensation Plan, effective January 1, 2015.

Incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K as filed with the SEC on March 31, 2015.

SAIC Executive Severance, Change in Control and Retirement Policy, effective July 1, 2020.

Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on July 2, 2020.

Science Applications International Corporation Third Amended and Restated 2012 Long Term Performance Plan.

Incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019.

Master Transitional Contracting Agreement between the Company (formerly SAIC Gemini, Inc.) and Leidos Holdings, Inc.

(formerly SAIC, Inc.) dated September 25, 2013.

Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on December 13, 2013.

Form of Performance Unit Award Agreement of the Science Applications International Corporation 2012 Long Term Performance Plan.

Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019.

Form of Restricted Stock Unit Agreement of the Science Applications International Corporation 2012 Long Term Performance Plan.

Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Description of Exhibit

Subsidiaries of Registrant.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 Interactive Data File.

The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104 The cover page from this Annual Report on Form 10-K, formatted as Inline XBRL.

* Compensation Plans and Arrangements

Form 10-K Summary

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Chief Financial Officer

March 28, 2022

April 3, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

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/s/ Nazzic S.

Keene Principal Executive Officer and Director March 28, 2022

Keene Principal Executive Officer and Director April 3, 2023

/s/ Prabu Natarajan Principal Financial Officer and

Principal Accounting Officer

March 28, 2022

April 3, 2023

Prabu Natarajan

Morea Chair of the Board March 28, 2022

Morea Chair of the Board April 3, 2023

/s/ Robert A.

Bedingfield Director March 28, 2022

Goode Director March 28, 2022

Graham Director March 28, 2022

Hamre Director March 28, 2022

Bedingfield Director April 3, 2023

Goode Director April 3, 2023

Graham Director April 3, 2023

Hamre Director April 3, 2023

/s/ Carolyn B.

Handlon Director April 3, 2023

/s/ Yvette M.

Kanouff Director March 28, 2022

Kanouff Director April 3, 2023

/s/ Timothy J.

Mayopoulos Director March 28, 2022

Mayopoulos Director April 3, 2023

/s/ Katharina G.

McFarland Director March 28, 2022

McFarland Director April 3, 2023

/s/ Milford W.

McGuirt Director March 28, 2022

McGuirt Director April 3, 2023

Reagan Director April 3, 2023

/s/ Steven R.

Shane Director March 28, 2022

Shane Director April 3, 2023

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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Note 12—Derivative Instruments Designated as Cash Flow Hedges

Note 13—Changes in Accumulated Other Comprehensive Loss by Component

Note 13—Changes in Accumulated Other Comprehensive Income (Loss) by Component

Note 14 — Sale of Receivables

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Note 17—Legal Proceedings and Commitments and Contingencies

Note 18—Subsequent Events

Financial statement schedules are omitted because they are not applicable or the required information is shown in our consolidated financial statements or the notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

Science Applications International Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Science Applications International Corporation (the Company) as of January 28, 2022 and January 29, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended January 28, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 28, 2022 and January 29, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2022, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Science Applications International Corporation (the Company) as of February 3, 2023 and January 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended February 3, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 3, 2023 and January 28, 2022, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 28, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 3, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 3, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Unrecognized tax benefits

Unrecognized tax benefits that, if recognized, would affect the effective income tax rate

Description of the Matter As discussed in Notes 1 and 10 to the consolidated financial statements, the Company files income tax returns in the U.S.

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The Company recognizes liabilities for uncertainty in income taxes when it is more likely than not that a tax position will not be sustained on examination and settlement with various taxing authorities.

During the year ended January 28, 2022, the Company has recorded additional unrecognized tax benefits of $12 million, resulting in a total liability of $78 million.

Auditing these reserves was challenging due to the significant judgment in applying the tax law and inherent uncertainty involved in predicting the ultimate resolution of the matters with the taxing authority.

During the year ended February 3, 2023, the Company recorded unrecognized tax benefits of $90 million that, if recognized, would affect the effective income tax rate.

Auditing these reserves was challenging due to the significant judgment in applying the relevant tax laws and inherent uncertainty involved in predicting the ultimate resolution of such matters with the taxing authority.

Changes to the liability resulting from ongoing or future audits by the taxing authorities could have a material effect on the Company’s results of operations.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for income taxes, including unrecognized tax benefits, during the year.

For example, we tested management’s controls over the review of tax positions taken by the Company to determine whether they met the threshold for recognition within the consolidated financial statements, as well as determination of the measurement of the unrecognized tax liability.

To test the recognition of the Company’s unrecognized tax benefits and measurement of unrecognized tax benefits, we involved tax professionals with specialized skills and knowledge to assess the technical merits of the Company’s material tax positions.

For example, we tested management’s controls over the review of tax positions taken by the Company to determine whether the positions met the threshold for recognition within the consolidated financial statements, as well as determination of the measurement of the unrecognized tax liability.

To test the recognition of the Company’s unrecognized tax benefits that would, if reversed, affect the effective tax rate and measurement of these unrecognized tax benefits, we involved tax professionals with specialized skills and knowledge to assess the technical merits of the Company’s material tax positions.

We performed audit procedures that included, among others, evaluating communications with relevant taxing authorities, evaluating whether management appropriately considered new information that could significantly change the recognition, measurement, or disclosure of the unrecognized tax benefits, and testing the assumptions used by management in estimating the valuation of any associated liability.

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Tysons, Virginia

March 28, 2022

April 3, 2023

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

January 28, 2022 January 29, 2021 January 31, 2020

February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

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Commitments and contingencies (Note 17)

Common stock, $ 0.0001 par value, 1 billion shares authorized, 56 million shares and 58 million shares issued and outstanding as of January 28, 2022 and January 29, 2021, respectively

Common stock, $ 0.0001 par value, 1 billion shares authorized, 54 million shares and 56 million shares issued and outstanding as of February 3, 2023 and January 28, 2022, respectively

Additional paid-in capital 637 838

Retained earnings 1,035 818

Accumulated other comprehensive loss ( 37 ) ( 89 )

Accumulated other comprehensive income (loss) 22 ( 37 )

Total common stockholders' equity 1,694 1,619

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comprehensive

loss Non-controlling Interest Total

income (loss) Non-controlling Interest Total

(in millions)

Balance at February 1, 2019 60 $ 1,132 $ 367 $ ( 14 ) $ 14 $ 1,499

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

Net income — — 209 — 2 211

8 unchanged sentences

Issuances of stock 1 16 — — — 16

Other comprehensive loss, net of tax — — — ( 17 ) — ( 17 )

Other comprehensive income, net of tax — — — 52 — 52

Cash dividends of $1.48 per share — — ( 86 ) — — ( 86 )

10 unchanged sentences

Distributions to non-controlling interest — — — — ( 3 ) ( 3 )

Balance at January 28, 2022 56 $ 838 $ 818 $ ( 37 ) $ 10 $ 1,629

Balance at February 3, 2023 54 $ 637 $ 1,035 $ 22 $ 10 $ 1,704

See accompanying notes to consolidated financial statements.

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Net cash (used in) provided by financing activities ( 493 ) ( 301 ) 464

Net decrease in cash, cash equivalents and restricted cash ( 75 ) ( 12 ) ( 44 )

Net increase (decrease) in cash, cash equivalents and restricted cash 3 ( 75 ) ( 12 )

Cash, cash equivalents and restricted cash at beginning of period 115 190 202

5 unchanged sentences

Non-cash investing and financing activities:

Increase (decrease) in accrued plan share repurchases $ 2 $ 1 $ ( 1 )

(Decrease) increase in accrued property, plant, and equipment $ ( 2 ) $ ( 1 ) $ 3

(Decrease) increase in accrued plan share repurchases $ ( 2 ) $ 2 $ 1

Decrease in accrued property, plant, and equipment $ ( 1 ) $ ( 2 ) $ ( 1 )

See accompanying notes to consolidated financial statements.

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Science Applications International Corporation (collectively, with its consolidated subsidiaries, the “Company”) is a leading provider of technical, engineering and enterprise information technology (IT) services primarily to the U.S.

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 provides these services for large, complex projects with a targeted emphasis on higher-end, differentiated technology services and solutions that accelerate and transform secure and resilient digital environments through system development, modernization, integration, and sustainment to drive enterprise and mission outcomes.

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, engineering and enterprise IT service offerings to one or more agencies of the U.S federal government.

The Company's operating sectors are aggregated into one reportable segment for financial reporting purposes, see Note 16.

Each of the Company’s two customer facing operating sectors is focused on providing both (1) growth and technology accelerating solutions and (2) core IT service offerings to one or more agencies of the U.S.

federal government.

Growth and technology accelerating solutions include the delivery of secure cloud modernization, outcome based enterprise IT as-a-service, and the integration, production and modernization of defense systems.

Core IT services include systems engineering, the operation and maintenance of existing IT systems and networks, and logistics and supply chain solutions.

The Company's operating sectors are aggregated into one reportable segment for financial reporting purposes.

See Note 16 for additional information.

Acquisitions.

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All intercompany transactions and account balances within the Company have been eliminated.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.

Non-controlling Interest.

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

As of February 3, 2023, the Company held a 50.1 % majority interest in Forfeiture Support Associates J.V.

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

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The Company utilizes a 52/53 week fiscal year ending on the Friday closest to January 31, with fiscal quarters typically consisting of 13 weeks.

Fiscal 2022 began on January 30, 2021 and ended on January 28, 2022, fiscal 2021 began on February 1, 2020 and ended on January 29, 2021, and fiscal 2020 began on February 2, 2019 and ended on January 31, 2020.

Fiscal 2023 began on January 29, 2022 and ended on February 3, 2023, fiscal 2022 began on January 30, 2021 and ended on January 28, 2022, and fiscal 2021 began on February 1, 2020 and

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ended on January 29, 2021.

Fiscal 2023 consisted of 53 weeks with the extra week occurring in the fourth quarter, while fiscal 2022 and 2021 consisted of 52 weeks.

Revenue Recognition

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Contract modifications that do not add distinct goods or services are accounted for through cumulative catch-up adjustments.

Contract modifications that add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price are accounted for as separate contracts.

The Company recognizes revenue when, or as, we satisfy our performance obligations under a contract.

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The Company selects the appropriate measure of progress for revenue recognition based on the nature of the performance obligation, contract type and other pertinent contract terms.

Over time performance obligations may involve a series of recurring services, such as network operations and maintenance, operation and program support services, IT outsourcing services, and other IT arrangements where the Company is standing ready to provide support, when-and-if needed.

Performance obligations satisfied over time may involve a series of recurring services, such as network operations and maintenance, operation and program support services, IT outsourcing services, and other IT arrangements where the Company is standing ready to provide support, when-and-if needed.

Such performance obligations are satisfied over time because the customer simultaneously receives and consumes the benefits of our performance as services are provided.

Alternatively, over time performance obligations may involve the completion of a contract deliverable.

Alternatively, performance obligations satisfied over time may involve the completion of a contract deliverable.

Examples include systems integration, network engineering, network design, and engineering and build services.

Deliverable-based performance obligations are satisfied over time when the Company’s performance creates or enhances an asset that is controlled by the customer, or when the Company’s performance creates an asset that is customized to the customer’s specifications and the Company has a right to payment, including profit, for work performed to date.

For recurring services performance obligations, the Company measures progress using either a cost input measure (cost-to-cost), a time-elapsed output measure, or the as-invoiced practical expedient.

For series-services performance obligations, the Company measures progress using either a cost input measure (cost-to-cost), a time-elapsed output measure, or the as-invoiced practical expedient.

A cost input measure typically is applied to the Company’s cost-reimbursable contracts.

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The Company’s time-and-material and fixed price-level of effort contracts generally qualify for the as-invoiced practical expedient.

Revenue is recognized in the amount to which the Company has a contractual right to invoice.

For deliverable-based performance obligations satisfied over time, the Company recognizes revenue using a cost input measure of progress (cost-to-cost), regardless of contract type.

Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion, except for certain contracts for which the costs associated with significant materials or hardware procurements are excluded from the measure of progress and revenue is recognized on an adjusted cost-to-cost basis.

Revenue on these contracts is recognized in the amount to which the Company has a contractual right to invoice.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For deliverable-based performance obligations satisfied over time, the Company recognizes revenue using a cost input measure of progress (cost-to-cost), regardless of contract type.

Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion.

The Company may incur costs associated with significant materials or hardware procurements that are not proportionate to the Company’s progress in satisfying its performance obligations.

For these contracts, costs are excluded from the measure of progress, and revenue is recognized equal to the costs incurred.

For performance obligations in which the Company does not transfer control over time, we recognize revenue at the point-in-time when the customer obtains control of the related asset, usually at the time of shipment or upon delivery.

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The Company includes variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Many of the Company's contracts recognize revenue using a cost input measure (cost-to-cost), which requires estimates of total costs at completion.

Estimating costs at completion is complex due to the nature of the services being performed and the length of certain contracts.

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Management must make assumptions regarding the complexity of the work to be performed, the schedule and associated tasks, labor productivity and availability, increases in wages and prices of materials, execution by our subcontractors, overhead cost rates, and other variables.

For contracts using a cost input measure, when total expected contract costs exceed total estimated contract revenues, the Company recognizes the total estimated loss in the quarter identified.

Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss.

Contract costs incurred for U.S.

government contracts, including indirect costs, are subject to audit and adjustment by the Defense Contract Audit Agency (DCAA).

The Company provides for anticipated losses on contracts with the U.S.

government by recording an expense for the total expected loss during the period in which the losses are first determined.

For contracts with multiple performance obligations, the Company allocates transaction price to each performance obligation based on the relative standalone selling price of each distinct performance obligation within the contract.

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Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

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Contract assets include unbillable receivables and contract retentions, but exclude billed and billable receivables.

Billed and billable receivables are rights to consideration, which are

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

unconditional other than to the passage of time.

Billed and billable receivables are rights to consideration, which are unconditional other than to the passage of time.

Contract liabilities include customer advances, billings in excess of revenues and deferred revenue.

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Recording the provision for income taxes requires management to make significant judgments and estimates for matters for which the ultimate resolution may not become known until the final resolution of an examination by taxing authorities or the statute of limitations lapses.

Additionally, recording liabilities for uncertainty in income taxes involves significant judgment in evaluating the Company’s tax positions and developing the best estimate of the taxes ultimately expected to be paid.

Tax penalties and interest are included in income tax expense.

The Company records net deferred tax assets to the extent these assets will more likely than not be realized.

In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

If it is determined that the Company would be able to realize the deferred income tax assets in the future in excess of their net recorded amount or would no longer be able to realize the deferred income tax assets in the future as currently recorded, an adjustment would be made to the valuation allowance, which would decrease or increase the provision for income taxes.

Additionally, recording liabilities for uncertainty in income taxes

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

involves significant judgment in evaluating the Company’s tax positions and developing the best estimate of the taxes ultimately expected to be paid.

Tax penalties and interest are included in income tax expense.

The Company has also recognized liabilities for uncertainty in income taxes when it is more likely than not that a tax position will not be sustained on examination and settlement with various taxing authorities.

Liabilities for uncertainty in income taxes are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company records the largest amount of benefit that is more likely than not to be realized when the tax position is settled.

To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of reserves, our effective tax rate in a given financial period may be materially impacted.

Deferred tax assets and liabilities are netted by taxable jurisdiction and classified as noncurrent on the consolidated balance sheets.

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Cash and cash equivalents are comprised of cash in banks and highly liquid instruments, which primarily consist of bank deposits and investments in institutional money market funds.

The Company includes outstanding payments within cash and cash equivalents and accounts payable on the consolidated balance sheets and as of January 28, 2022 and January 29, 2021 these amounts were $ 54 million and $ 25 million, respectively.

The Company includes outstanding payments within cash and cash equivalents and accounts payable on the consolidated balance sheets and as of February 3, 2023 and January 28, 2022 these amounts were $ 49 million and $ 54 million, respectively.

The Company does not invest in high yield or high risk securities.

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Restricted cash consists of cash on deposit in rabbi trusts that are contractually restricted from use in operations, but are subject to future claims of creditors.

Restricted cash will be used primarily to fund future payment obligations related to deferred compensation plans and our voluntary disability insurance plan in California.

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets for the periods presented:

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

(in millions)

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government on the Company’s receipt of progress payments.

Progress payments received of $ 76 million and $ 28 million offset unbilled receivables as of January 28, 2022 and January 29, 2021, respectively.

Progress payments received of $ 42 million and $ 76 million offset unbilled receivables as of February 3, 2023 and January 28, 2022, respectively.

Contract retentions are billed when contract conditions have been met and may relate to uncompleted indirect cost negotiations with the U.S.

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Receivable balances are written-off in the period during which management determines they are uncollectable, and, at that time, such balances are removed from billed receivables and, if previously reserved, from the allowance.

Inventory is substantially comprised of finished goods inventory purchased for resale to customers, such as tires and lubricants, and is valued at the lower of cost or net realizable value, generally using the average method.

The Company evaluates current inventory against historical and planned usage to estimate the appropriate provision for obsolete inventory.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates current inventory against historical and planned usage to estimate the appropriate provision for obsolete inventory.

Business Combinations

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Acquisition (1)

$ ( 2 ) $ 3 $ 20

Integration (2)(3)

Total acquisition and integration costs $ 13 $ 56 $ 54

(1) Acquisition expenses in fiscal 2023 reflect adjustments to the fair value of the Koverse earnout liability.

Acquisition expenses recognized for fiscal 2022 were related to the acquisitions of Halfaker and Koverse.

Acquisition expenses recognized for fiscal 2021 and 2020 were related to the acquisition of Unisys Federal.

Acquisition expenses recognized for fiscal 2021 were related to the acquisition of Unisys Federal.

See Note 4 for additional information related to the acquisitions.

(2) Integration expenses for fiscal 2021 include an $ 11 million loss associated with the sale of certain non-strategic international operations.

(3) Integration expenses include $ 6 million and $ 16 million of restructuring costs for fiscal 2021 and 2020, respectively, and $ 17 million, $ 1 million and $ 5 million for the impairment of assets for fiscal 2022, 2021 and 2020, respectively.

See Note 5 for additional information related to restructuring costs and impairments.

(3) Integration expenses include $ 6 million of restructuring costs for fiscal 2021 and $ 17 million and $ 1 million for the impairment of assets for fiscal 2022 and 2021, respectively.

See Note 5 for additional information related to restructuring and impairment costs.

Restructuring Costs

The Company periodically initiates restructuring activities to support business strategies, realign resources, and enhance its operational efficiency.

Restructuring costs may include severance and other employee related termination costs, and costs associated with consolidating or closing facilities.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

One-time involuntary employee termination benefits are recognized as a liability and measured at fair value when the plan of termination has been communicated to employees and certain other criteria are met.

Ongoing employee termination benefit arrangements are recognized as a liability and measured at fair value when it is probable that amounts will be paid and such amounts are reasonably estimable.

Costs to consolidate or close facilities primarily include lease obligation charges for exited facilities, including the impact of accelerated lease expense for right of use assets and accelerated depreciation expense for leasehold improvements with reductions in their estimated useful lives due to exited facilities.

The Company occupies most of its facilities under operating leases.

Certain equipment is also leased under short-term or cancelable operating leases.

The Company recognizes a right of use (ROU) asset and a lease liability upon the commencement of its operating leases.

The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate on a secured basis.

The lease term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise those rights.

The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives.

The Company recognizes lease costs on a straight-line basis over the remaining lease term, except for variable lease payments that are expensed in the period in which the obligation for those payments is incurred.

For its facility leases, the Company combines and accounts for lease and non-lease components together as a single component.

The Company does not recognize lease liabilities and ROU assets for leases with original terms of 12 months or less.

ROU assets are evaluated for impairment as a long-lived asset.

The Company leases IT equipment and hardware to its customers.

All of the Company’s lessor arrangements are operating leases.

Operating lease income is recognized on a straight-line basis over the term of the lease and is reported as revenue on the consolidated statements of income.

Goodwill and Intangible Assets

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The fair value of the Company’s reporting units are determined using either a market approach, income approach, or a combination of both, which involves the use of estimates and assumptions, including projected future operating results and cash flows, the cost of capital, and financial measures derived from observable market data of comparable public companies.

If the fair value is less than the carrying value, the amount of impairment expense is equal to the difference between the reporting unit’s fair value and the reporting unit’s carrying value.

Intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives.

Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the asset group level.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost net of accumulated depreciation and amortization.

Purchases of property, plant, and equipment, as well as costs associated with major renewals and betterments, are capitalized.

Maintenance, repairs and minor renewals and betterments are expensed as incurred.

When assets are sold or

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

value is less than the carrying value, the amount of impairment expense is equal to the difference between the reporting unit’s fair value and the reporting unit’s carrying value.

Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

otherwise disposed of, the cost and related accumulated depreciation or amortization are removed and any resulting gain or loss is recognized.

See Note 7 for depreciation and amortization methods and estimated useful lives by major asset class.

Impairment of Long-lived Assets

The Company evaluates its long-lived assets for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount of the asset exceeds its estimated future undiscounted cash flows.

The Company evaluates its long-lived assets (including right of use lease assets) for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount of the asset exceeds its estimated future undiscounted cash flows (including sublease income) at the asset group level.

When the carrying amount of the asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized to reduce the asset’s carrying amount to its estimated fair value based on the present value of its estimated future cash flows.

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and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3).

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts of cash and cash equivalents, receivables, accounts payable and other amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value due to the short-term nature of these amounts.

The carrying value of the Company’s outstanding debt obligations approximates its fair value, which is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Non-financial assets acquired and liabilities assumed in a business combination were measured at fair value using income, market and cost valuation methodologies.

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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 January 28, 2022 and January 29, 2021, the fair value of our investments total $ 28 million and $ 27 million, respectively, and was included in other assets on the consolidated balance sheets.

As of February 3, 2023 and January 28, 2022, the fair value of our investments total $ 28 million, and was included in other assets on the consolidated balance sheets.

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

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Level 2, or market observable inputs (such as yield and credit curves), are used within the standard pricing models in order to determine fair value.

The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party or canceled.

The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party.

See Note 12 for further discussion on the Company’s derivative instruments designated as cash flow hedges.

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Accounting Standards Updates

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

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) , which requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services.

The new standard does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.

These amendments are effective for fiscal years beginning after December 15, 2022, except for the requirement to provide rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In October 2021, the FASB issued 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.

The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and must be applied prospectively.

Early adoption is permitted.

The Company adopted the requirements of ASU 2021-08 on a prospective basis effective the first day of fiscal 2023.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (LIBOR) or other reference rates expected to be discontinued due to reference rate reform.

The Company adopted this standard on a prospective basis in the fourth quarter of fiscal 2021, and the adoption did not have a material impact on the Company’s financial statements.

The Company’s credit facility, derivative instruments and Master Accounts Receivable Purchase Agreement (MARPA Facility) reference LIBOR-based rates.

Although the Company does not expect the transition from LIBOR to have a material impact on its financial statements, it will continue to monitor the impact until transition is completed.

Other Accounting Standards Updates effective after January 28, 2022 are not expected to have a material effect on the Company’s financial statements.

Note 2— Earnings Per Share, Share Repurchases and Dividends:

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Diluted EPS is computed similarly to basic EPS, except the weighted-average number of shares outstanding is increased to include the dilutive effect of outstanding stock options and other stock-based awards.

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

The following table provides a reconciliation of the weighted-average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

2023 January 28,

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Diluted weighted-average number of shares outstanding 55.8 58.1 58.7

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

2022 January 29,

2021 January 31,

(in millions)

Antidilutive stock options excluded — 0.3 0.3

Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for fiscal 2023, 2022, and 2021 were immaterial .

Share Repurchases

2 unchanged sentences

The Company has not made any material purchases of common stock other than in connection with established share repurchase plans.

On March 27, 2019, the number of shares of our common stock that may be repurchased under our existing repurchase plan was increased by approximately 4.6 million shares, bringing the total authorized shares to be repurchased under the plan to approximately 16.4 million shares.

As of January 28, 2022, the Company has repurchased approximately 14.4 million shares of common stock under the plan.

In June 2022, the number of shares of our common stock that may be repurchased under our existing repurchase plan was increased 8.0 million shares, bringing the total authorized shares to be repurchased under the plan to approximately 24.4 million shares.

As of February 3, 2023, the Company has repurchased approximately 17.0 million shares of its common stock under the plan.

The Company declared and paid quarterly dividends of $ 0.37 per share every quarter for the years presented.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the end of fiscal 2022, on March 23, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.37 per share of the Company’s common stock payable on April 29, 2022 to stockholders of record on April 14, 2022.

Note 3— Revenues:

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government including subcontracts with other contractors engaged in work for the U.S.

The Company disaggregates revenues by customer, contract-type and prime vs.

subcontractor to the federal government.

The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government.

Disaggregated revenues by customer were as follows:

January 28, 2022 January 29, 2021 January 31, 2020

February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

4 unchanged sentences

Disaggregated revenues by contract type were as follows:

January 28, 2022 January 29, 2021 January 31, 2020

February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

5 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenues by prime vs.

subcontractor were as follows:

January 28, 2022 January 29, 2021 January 31, 2020

Disaggregated revenues by prime versus subcontractor were as follows:

February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

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Contract balances for the periods presented were as follows:

Balance Sheet line item January 28,

Balance Sheet line item February 3,

2023 January 28,

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Contract liabilities - non-current Other long-term liabilities $ 4 $ 9

(1) Net of allowance of $ 4 million and $ 3 million as of January 28, 2022 and January 29, 2021, respectively.

(1) Net of allowance of $ 4 million as of February 3, 2023 and January 28, 2022.

The changes in the Company's contract assets and contract liabilities during the current period primarily result from timing differences between the Company's performance, invoicing and customer payments.

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Deferred costs for the periods presented were as follows:

Balance Sheet line item January 28,

Balance Sheet line item February 3,

2023 January 28,

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Fulfillment costs of $ 5 million and $ 6 million were amortized during fiscal 2023 and 2022, respectively.

Costs to obtain of $ 1 million were amortized during fiscal 2022 and were not material for fiscal 2021.

Costs to obtain of $ 1 million were amortized during fiscal 2023 and 2022.

Remaining Performance Obligations

As of January 28, 2022, the Company had $ 5.3 billion of remaining performance obligations.

As of February 3, 2023, the Company had approximately $ 5 billion of remaining performance obligations.

Remaining performance obligations exclude any variable consideration that is allocated entirely to unsatisfied performance obligations on our supply chain contracts.

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Note 4— Acquisitions:

On July 2, 2021, the Company completed the acquisition of Halfaker, a mission focused, pure-play health IT company for a preliminary purchase price of $ 228 million, net of $ 3 million cash acquired, subject to post-closing adjustments.

On July 2, 2021, the Company completed the acquisition of Halfaker, a mission focused, pure-play health IT company for a purchase price of $ 228 million, net of $ 3 million cash acquired.

The Company funded the transaction from increased borrowings (as discussed in Note 11) and cash on hand.

The allocation of the preliminary purchase price resulted in goodwill of $ 106 million and intangible assets of $ 112 million, both of which are deductible for income tax purposes.

During fiscal 2022, the Company increased goodwill by $ 14 million, which consisted of $ 11 million in estimated fair value adjustments to certain acquired assets, and a $ 3 million increase resulting from finalization of net working capital adjustments.

During the first quarter of fiscal 2023, the Company made fair value adjustments decreasing goodwill and increasing customer relationships intangible assets by $ 2 million.

The Company has completed the determination of fair values of the acquired assets and liabilities assumed.

The allocation of the purchase price resulted in goodwill of $ 104 million and intangible assets of $ 114 million, both of which are deductible for income tax purposes.

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

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.

As of January 28, 2022, the Company has not yet finalized the determination of fair values allocated to the acquired assets and liabilities, including but not limited to the valuation of acquired intangible assets.

The intangible assets consist of customer relationships of $ 97 million and backlog of $ 17 million and are being amortized over a period of nine years and one year , respectively.

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

On May 3, 2021, the Company acquired Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data, for a purchase price of $ 30 million, net of $ 2 million cash acquired.

The purchase price includes $ 3 million of contingent consideration, representing the acquisition date fair value recognized for up to $ 27 million gross of potential future earnout payments based on the achievement of certain revenue targets over the next four years.

The allocation of the purchase price has been finalized by the Company and resulted in goodwill of $ 21 million and intangible assets of $ 10 million, which are both not deductible for income tax purposes.

The purchase price included $ 3 million of contingent consideration, representing the acquisition date fair value recognized for up to $ 27 million gross of potential future earnout payments based on the achievement of certain revenue targets over the next four years.

The Company has completed the allocation of the purchase price which resulted in goodwill of $ 21 million and intangible assets of $ 10 million, both of which are not deductible for income tax purposes.

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

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

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

As of February 3, 2023, the Company has recognized $ 12 million of the $ 13 million of post-combination compensation expense associated with employee retention agreements.

Unisys Federal

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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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company completed the purchase accounting valuation for this transaction in fiscal 2021 and recorded final purchase accounting entries as follows:

(in millions)

Receivables $ 114

Prepaid expenses 15

Intangible assets 574

Property, plant, and equipment 4

Operating lease right of use assets 43

Other assets 7

Total assets acquired 1,411

Accounts payable 42

Accrued vacation 7

Other accrued liabilities 62

Operating lease liabilities 30

Other long-term liabilities 68

Total liabilities assumed 209

Net assets acquired $ 1,202

Amount of tax deductible goodwill $ 593

Goodwill resulting from the acquisition of Unisys Federal was primarily associated with intellectual capital, an acquired assembled work force, and future customer relationships.

The identifiable intangible assets and a portion of the goodwill acquired by the Company are amortizable for tax purposes.

The following table summarizes the fair value of intangible assets and the related weighted-average useful lives as of the acquisition date:

Amount Weighted-Average Amortization Period

(in millions) (in years)

Customer relationships $ 520 13

Developed technology 7 1

Total intangible assets $ 574 12

The backlog intangible asset is comprised solely of funded backlog as of the acquisition date.

The customer relationships intangible asset consists of unfunded backlog as of the acquisition date and estimated future renewals and recompetes.

The backlog and customer relationships intangible assets were valued using the excess earnings method (income approach) in which the value is derived from an estimation of the after-tax cash flows specifically attributable to the intangible asset being valued.

The analysis included assumptions for projections of revenues and expenses, tax rates, contributory asset charges, discount rates, and a tax amortization benefit.

The developed technology asset was valued using the relief from royalty method (income approach) in which the value is derived by estimation of the after-tax royalty savings attributable to owning the developed technology asset.

Assumptions in this analysis included projections of revenues, royalty rates representing costs avoided due to ownership of the developed technology asset, discount rates, a tax amortization benefit, and future obsolescence of the technology.

The Company recorded a $ 67 million provision for certain off-market customer contracts whose terms were unfavorable compared to the current market terms as of the acquisition date.

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The provision for off-market customer contracts is included in other long-term liabilities and is being amortized over the remaining contractual terms as an increase to revenue.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During 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 $ 15 million during fiscal 2022.

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

$ 9 million in fiscal 2023, $ 8 million in fiscal 2024 and $ 2 million in fiscal 2025.

During fiscal 2023 and 2022, the Company accelerated the amortization for certain off-market customer contracts as a result of changes in their expected contractual terms which resulted in additional amortization of $ 6 million and $ 15 million during fiscal 2023 and 2022, respectively.

As of February 3, 2023, the remaining unamortized balance of the provision for certain off-market customer contracts is $ 5 million and is expected to be amortized by the end of fiscal 2024.

The Company incurred $ 49 million in acquisition-related costs associated with the acquisition of Unisys Federal, including $ 27 million of debt issue costs (as discussed in Note 11).

The amount of Unisys Federal's revenue and net income attributable to common stockholders included in the consolidated statements of income for fiscal 2021 was $ 669 million and $ 62 million, respectively.

The following unaudited pro forma financial information presents the combined results of operations for Unisys Federal and the Company for the twelve months ended January 29, 2021 and January 31, 2020, respectively:

2021 January 31,

(in millions)

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma financial information presents the combined results of operations for Unisys Federal and the Company for the twelve months ended January 29, 2021:

Revenues $ 7,146

Net income attributable to common stockholders $ 258

The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of Unisys Federal as though it had occurred on February 2, 2019.

They include adjustments for intangible asset amortization;

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and certain costs allocated from the former parent.

The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on February 2, 2019, nor is it indicative of future operating results.

The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on the first day of fiscal 2020, nor is it indicative of future operating results.

Note 5— Restructuring and Impairment:

Restructuring and impairment costs recognized were as follows:

Statement of Income line item January 28, 2022 January 29, 2021 January 31, 2020

Statement of Income line item February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

2023 Restructuring:

Severance and other employee costs SG&A and Cost of revenues $ 6 $ — $ —

Other associated costs SG&A 14 — —

2022 Restructuring:

Other associated costs SG&A — 1 —

2021 Restructuring:

Severance and other employee costs SG&A — — 4

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Total restructuring costs and impairment $ 24 $ 19 $ 12

In fiscal 2023, the Company initiated restructuring activities (the "2023 Restructuring") associated with the optimization of business processes and incurred consulting costs, severance and other employee costs, and other costs related to the consolidation of certain facilities.

The Company expects to complete these restructuring activities in fiscal 2024.

During fiscal 2023, cash paid for consulting costs was $ 5 million.

The remaining liability for consulting costs ($ 2 million) and the severance and other employee costs will be paid in fiscal 2024.

In fiscal 2022, the Company initiated and completed restructuring activities (the “2022 Restructuring”) associated with the optimization and consolidation of certain facilities.

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Cash paid for other associated costs was $ 4 million and $ 7 million during fiscal 2021 and 2020, respectively.

The 2019 Restructuring was completed in fiscal 2021 and there was no remaining liability associated with this restructuring as of January 28, 2022 and January 29, 2021.

The 2019 Restructuring was completed in fiscal 2021 and there was no remaining liability associated with this restructuring as of February 3, 2023 and January 28, 2022.

During fiscal 2023, 2022 and 2021, the Company recognized impairment charges for certain assets associated with exited facilities of $ 4 million, $ 18 million and $ 2 million, respectively.

Note 6— Goodwill and Intangible Assets:

Goodwill had a carrying value of $ 2,913 million and $ 2,787 million as of January 28, 2022 and January 29, 2021, respectively.

Goodwill increased by $ 126 million during fiscal 2022, primarily due to the acquisitions of Halfaker ($ 106 million) and Koverse ($ 21 million) as discussed in Note 4.

Goodwill had a carrying value of $ 2,911 million and $ 2,913 million as of February 3, 2023 and January 28, 2022, respectively.

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:

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

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

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There were no impairments of intangible assets during the periods presented.

Intangible assets with a gross carrying value of $ 54 million became fully amortized during fiscal 2022 and are no longer reflected in the gross carrying value and accumulated amortization as of January 28, 2022.

Intangible assets with a gross carrying value of $ 19 million became fully amortized during fiscal 2023 and are no longer reflected in the gross carrying value and accumulated amortization as of February 3, 2023.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of January 28, 2022, the estimated future annual amortization expense related to intangible assets is as follows:

As of February 3, 2023, the estimated future annual amortization expense related to intangible assets is as follows:

Fiscal Year (in millions)

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Note 7— Property, Plant, and Equipment:

Property, plant, and equipment are carried at cost net of accumulated depreciation and amortization.

Purchases of property, plant, and equipment, as well as costs associated with major renewals and betterments, are capitalized.

Maintenance, repairs and minor renewals and betterments are expensed as incurred.

When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed and any resulting gain or loss is recognized.

Depreciation and amortization is recognized using the methods and estimated useful lives as follows:

Property, plant, and equipment, d epreciation and amortization methods, and estimated useful lives by major asset class were as follows:

Depreciation or

amortization method

Estimated useful lives (in years) January 28,

Estimated useful lives (in years) February 3,

2023 January 28,

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The terms of the stock-based awards granted to employees and directors are the same, except that those for directors cliff vest within one year of the grant date.

As of January 28, 2022, the Company has outstanding stock options, vested and vesting stock awards, and performance share awards under this plan.

As of February 3, 2023, the Company has outstanding stock options, vested and vesting stock awards, and performance share awards under this plan.

Stock options granted under the EIP generally become exercisable 33 %, 33 % and 33 % after one, two and three years, respectively, while vesting stock awards granted prior to fiscal 2020 generally vest 25 %, 25 %, 25 % and 25 % after one, two, three and four years, respectively.

1 unchanged sentence

The maximum contractual term for stock options granted under the EIP is ten years , but historically the Company has granted stock options with a seven-year contractual term.

Vesting may be accelerated for employees meeting retirement eligibility conditions.

The requisite service period is accelerated for employees meeting retirement eligibility conditions.

Vesting accelerates for eligible officers upon termination of employment, subject to certain conditions set forth in the Company’s Executive Severance, Change in Control and Retirement Policy effective July 1, 2020.

1 unchanged sentence

Vesting stock awards and performance share awards have forfeitable rights to dividends.

In June 2014, the EIP was amended and restated to increase the total authorized shares of common stock for issuance under the EIP from 5.7 million to 8.5 million.

As of February 3, 2023, the total authorized shares of common stock for issuance under the EIP is 8.5 million.

The Company grants performance-based stock awards to certain officers and key employees under the EIP.

Performance shares are rights to receive shares of the Company’s stock on the satisfaction of certain requirements.

Performance shares are rights to receive shares of the Company’s stock upon satisfaction of certain requirements.

Performance-based stock awards granted prior to fiscal 2022 include service and performance conditions.

These awards cliff vest at the end of the third fiscal year following the grant date, subject to meeting the minimum service requirements and the achievement of certain annual and cumulative financial metrics of the Company’s performance, with the number of shares ultimately issued, if any, ranging up to 200 % of the specified target shares.

If performance is below the minimum threshold level of performance, no shares will be issued.

For all performance share awards granted, the annual financial metrics are based on operating cash flows and the cumulative financial metrics are based on a measure of earnings.

Performance-based stock awards granted in fiscal 2022 also include market conditions in addition to the service and performance conditions described above.

The market conditions are based on the Company’s total shareholder return over the three year performance period as compared to the total shareholder return for a specified index of companies over the same period.

Performance-based stock awards granted in fiscal 2022 and thereafter also include market conditions.

For performance-based stock awards granted prior to fiscal 2023, the performance metrics are based on annual operating cash flows and a three year cumulative measure of earnings.

For performance-based stock awards granted in fiscal 2023, the performance metrics are based on three year cumulative operating cash flows and a three year cumulative measure of earnings.

The market conditions for awards granted in fiscal 2022 and thereafter are based on the Company's total shareholder return over the three year performance period as compared to the total shareholder return for a specified group of companies over the same period.

These awards cliff vest at the end of the third fiscal year following the grant date, subject to meeting the minimum service requirements and the achievement of the Company’s performance metrics and market conditions, with the number of shares ultimately issued, if any, ranging up to 200 % of the specified target shares.

If performance is below a minimum threshold level of performance, no shares will be issued.

The Management Stock Compensation Plan provides for awards in share units to eligible employees.

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The Company’s ESPP allows eligible employees to purchase shares of the Company’s stock at a discount of up to 15 % of the fair market value on the date of purchase.

During the three fiscal years ended January 28, 2022, the discount was 5 % of the fair market value on the date of purchase for purchases made under the Company’s ESPP, thereby resulting in the ESPP being non-compensatory.

As of January 28, 2022, 3.4 million shares of the Company’s stock are authorized for issuance under the ESPP.

During the three fiscal years ended February 3, 2023, the ESPP discount was 5 % of the fair market value on the date of purchase, thereby resulting in the ESPP being non-compensatory.

As of February 3, 2023, 3.4 million shares of the Company’s stock are authorized for issuance under the ESPP.

The LTPP provides certain employees of the Company the opportunity to receive various types of stock-based compensation awards.

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Tax benefits recognized from stock-based compensation $ 16 $ 15 $ 14

Stock-based compensation expense for stock options was not material for fiscal 2023.

Stock Options

Stock options are granted with their exercise price equal to the closing market price of the Company’s stock on the last trading day preceding the grant date.

Stock option activity for the year ended January 28, 2022 was:

Shares of stocks under stock options Weighted-average exercise price Weighted-average remaining contractual term Aggregate intrinsic value

Stock option activity for the year ended February 3, 2023 was:

Shares of stock under stock options Weighted-average exercise price Weighted-average remaining contractual term Aggregate intrinsic value

(in millions) (in years) (in millions)

3 unchanged sentences

Options exercised ( 0.2 ) 68.89

Outstanding at January 28, 2022 0.6 $ 72.34 3.3 $ 6

Exercisable at January 28, 2022 0.5 $ 71.96 3.0 $ 5

Vested and expected to vest at January 28, 2022 0.6 $ 72.33 3.3 $ 6

As of January 28, 2022, the unrecognized compensation cost, net of estimated forfeitures, related to stock options was not material.

Outstanding at February 3, 2023 0.4 $ 74.57 2.9 $ 11

Exercisable at February 3, 2023 0.3 $ 74.67 2.8 $ 10

Vested and expected to vest at February 3, 2023 0.4 $ 74.57 2.9 $ 11

As of February 3, 2023, the unrecognized compensation cost, net of estimated forfeitures, related to stock options was not material.

The following table summarizes activity related to exercises of stock options:

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Expected Term --The expected term was calculated from the Company's historical settlement data.

Expected Volatility --The expected volatility is based on the historical volatility of the Company over a period commensurate with the expected term of the stock option as of the date of grant.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Expected Volatility --The expected volatility is based on the historical volatility of the Company over a period commensurate with the expected term of the stock option as of the date of grant.

Risk-Free Interest Rate --The risk-free interest rate is based on the yield curve of a zero-coupon U.S.

2 unchanged sentences

The weighted-average grant date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were:

2021 January 31,

Weighted-average grant-date fair value $ 17.54

4 unchanged sentences

Vesting Stock Awards

Vesting stock award activity for the year ended January 28, 2022 was:

Shares of stock under stock awards Weighted-average grant date fair value

Vesting stock award activity for the year ended February 3, 2023 was:

Shares of stock under vesting stock awards Weighted-average grant date fair value

(in millions)

3 unchanged sentences

Awards vested ( 0.5 ) 79.87

Unvested at January 28, 2022 1.0 $ 80.78

Unvested at February 3, 2023 1.0 $ 89.60

The grant date fair value of vesting stock awards is based on the closing market price of the Company’s stock on the last trading day preceding the grant date.

The weighted-average grant date fair value of the vesting stock awards granted in fiscal 2023, 2022 and 2021 was $ 95.43 , $ 83.65 and $ 76.41 , respectively.

As of January 28, 2022 there was $ 38 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted-average period of 1.7 years.

As of February 3, 2023 there was $ 46 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted-average period of 1.8 years.

The fair value of vesting stock awards that vested in fiscal 2023, 2022 and 2021 was $ 44 million, $ 39 million and $ 32 million, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Performance Share Awards

Performance share award activity for the year ended January 28, 2022 was:

Performance share award activity for the year ended February 3, 2023 was:

Shares of stock under performance shares Weighted-average grant date fair value

(in millions)

Unvested performance shares at January 29, 2021 0.2 $ 76.54

Performance shares granted 0.1 80.57

Performance shares forfeited — —

Performance shares vested ( 0.1 ) 79.04

Performance shares adjustment — —

Unvested performance shares at January 28, 2022 0.2 $ 78.13

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For performance share awards granted in fiscal 2022 and 2021, the actual number of shares to be issued upon vesting range between 0 - 200 % of the specified target shares.

For performance share awards granted prior to fiscal 2021, the actual number of shares to be issued upon vesting range between 0 - 150 % of the specified target shares.

The number of performance shares are presented at 100 % of the specified target shares in the table above, except for performance shares that vested and performance shares adjustment.

Performance shares vested reflects the number of shares to be issued based on the actual achievement of the performance goals for shares that vested during the period.

Performance shares adjustment reflects the increase or decrease in the number of performance shares vested compared to the number of performance shares that would have vested at target.

Unvested at January 28, 2022 0.2 $ 78.13

Awards granted 0.2 100.94

Awards forfeited — —

Awards vested ( 0.1 ) 74.46

Performance adjustments — —

Unvested at February 3, 2023 0.3 $ 91.63

The actual number of shares to be issued upon vesting range between 0 - 200 % of the specified target shares.

In the table above, the number of performance shares are presented at 100 % of the specified target shares, except for awards that vested and the performance adjustment.

The vested amount reflects the number of shares to be issued based on the actual achievement of the performance goals for shares that vested during the period.

The performance adjustment amount reflects the increase or decrease in the number of performance shares vested compared to the number of performance shares that would have vested at target.

The weighted-average grant date fair value of the performance share awards granted in fiscal 2023, 2022 and 2021 was $ 100.94 , $ 80.57 and $ 74.40 , respectively.

For performance shares granted prior to fiscal 2022, the grant date fair value was based on the closing market price of the Company’s common stock on the last trading day preceding the grant date.

For performance share awards granted in fiscal 2022, the grant date fair value was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return market condition.

The primary assumptions included an expected volatility of 39.73 % and a risk-free interest rate of 0.32 %.

For performance share awards granted in fiscal 2022 and thereafter, the grant date fair value was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the Company's expected total shareholder return relative to a specified group of companies defined within the award agreement.

The primary assumptions included an expected volatility of 38.02 % and 39.73 % for fiscal 2023 and 2022, respectively, and a risk-free interest rate of 2.44 % and 0.32 % for fiscal 2023 and 2022, respectively.

The expected volatility was based on the historical volatility of the Company over a period commensurate with the expected term of the award as of the date of grant.

2 unchanged sentences

The fair value of performance share awards that vested in fiscal 2023 was $ 10 million.

For unvested performance shares as of January 28, 2022 the Company expects to issue 0.2 million shares of stock in the future based on estimated future achievement of the performance goals.

As of January 28, 2022 there was $ 9.6 million of unrecognized compensation cost, net of estimated forfeitures, related to performance share awards, which is expected to be recognized over a weighted-average period of 1.7 years.

For unvested performance shares as of February 3, 2023 the Company expects to issue 0.3 million shares of stock in the future based on the estimated future achievement of the performance goals.

As of February 3, 2023 there was $ 11 million of unrecognized compensation cost, net of estimated forfeitures, related to performance share awards, which is expected to be recognized over a weighted-average period of 1.8 years.

Note 9— Retirement Plans:

4 unchanged sentences

The Company contributions expensed for defined contribution plans were $ 80 million, $ 79 million and $ 73 million in fiscal 2023, 2022 and 2021, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation Plans

The Company has established the Science Applications International Corporation Deferred Compensation Plan (DCP) effective January 1, 2015, providing certain eligible employees and directors an opportunity to defer some or all of their compensation on an unfunded, nonqualified basis.

The Company maintains the Science Applications International Corporation Deferred Compensation Plan (DCP) which provides certain eligible employees and directors an opportunity to defer some or all of their compensation on an unfunded, nonqualified basis.

Participant deferrals are fully vested and diversified at the participant’s direction among the investment options offered under the DCP.

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Deferred balances are paid on retirement or termination.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plans

In connection with the acquisition of Engility on January 14, 2019, SAIC assumed two defined benefit plans sponsored by Engility for certain current and former employees:

In connection with the acquisition of Engility in fiscal 2019, SAIC assumed two defined benefit plans sponsored by Engility for certain current and former employees:

a Defined Benefit Pension Plan (Pension Plan) and a Retiree Health Reimbursement Account Plan (RHRA Benefit Plan).

4 unchanged sentences

During fiscal 2023, the Company recognized a net gain of $ 4 million on its retirement plans within other comprehensive income.

The gain was comprised of a $ 10 million gain due to an increase in discount rates, partially offset by a $ 6 million loss due to the difference between actual investment return and expected return.

During fiscal 2022, the Company recognized a net gain of $ 5 million on its retirement plans within other comprehensive income.

The gain was comprised of a $ 4 million gain due to an increase in discount rates and a $ 1 million gain from the excess in actual investment return over the expected return.

2 unchanged sentences

The settlement charges were driven by the Company transferring out $ 6 million of assets to settle the obligations of certain retirees within the Pension Plan.

During fiscal 2020, the Company recognized net losses of $ 5 million and $ 1 million within other comprehensive loss due to changes in the net benefit obligations for the Pension Plan and RHRA Benefit Plan, respectively.

The net loss of $ 6 million was attributable to a $ 9 million increase in the projected benefit obligation due to a decrease in the discount rate, partially offset by an actual investment return in excess of the expected return of $ 3 million.

Net Periodic Benefit Costs

The net periodic benefit cost was as follows:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net Periodic Benefit Cost

The net periodic benefit (income) cost was as follows:

Pension Plan RHRA Benefit Plan

January 28, 2022 January 29, 2021 January 31, 2020 January 28, 2022 January 29, 2021 January 31, 2020

February 3, 2023 January 28, 2022 January 29, 2021 February 3, 2023 January 28, 2022 January 29, 2021

(in millions)

2 unchanged sentences

Settlement cost — — 1 — — —

Net periodic benefit cost $ ( 2 ) $ — $ — $ 1 $ — $ 1

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net periodic benefit (income) cost $ ( 1 ) $ ( 2 ) $ — $ — $ 1 $ —

Obligations and Funded Status

1 unchanged sentence

Pension Plan RHRA Benefit Plan

January 28, 2022 January 29, 2021 January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022 February 3, 2023 January 28, 2022

(in millions)

3 unchanged sentences

Benefits paid ( 5 ) ( 5 ) ( 1 ) ( 1 )

Actuarial (gain) loss ( 3 ) 3 ( 1 ) ( 2 )

Settlements — ( 6 ) — —

Actuarial gain ( 8 ) ( 3 ) ( 2 ) ( 1 )

Benefit obligation at end of year $ 52 $ 63 $ 10 $ 13

4 unchanged sentences

Benefits paid ( 5 ) ( 5 ) ( 1 ) ( 1 )

Settlements — ( 6 ) — —

Fair value of plan assets at end of year $ 46 $ 54 $ — $ —

2 unchanged sentences

Pension Plan RHRA Benefit Plan

January 28, 2022 January 29, 2021 January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022 February 3, 2023 January 28, 2022

(in millions)

4 unchanged sentences

Under the spot rate approach, the Company uses individual spot rates along the yield curve that correspond with the timing of each benefit payment.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The discount rates represent the estimated rate at which we could effectively settle our defined benefit obligations using a high quality bond yield curve.

2 unchanged sentences

This process included determining expected returns for the various asset classes that comprise the Pension Plan's target asset allocation.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:

Pension Plan RHRA Benefit Plan

January 28, 2022 January 29, 2021 January 31, 2020 January 28, 2022 January 29, 2021 January 31, 2020

February 3, 2023 January 28, 2022 January 29, 2021 February 3, 2023 January 28, 2022 January 29, 2021

Discount rate 4.94 % 3.13 % 2.47 % 4.85 % 2.78 % 1.86 %

4 unchanged sentences

During fiscal 2023, the Company's overall investment strategy was for plan assets to achieve a long-term rate of return of 5.25 %, with a wide diversification of asset types, fund strategies and fund managers.

The target allocation for the plan assets is 44 % in domestic equity securities, 20 % international equity, 31 % in fixed income securities and 5 % in cash and cash equivalents.

The target allocation for the plan assets is 44 % in domestic equity securities, 20 % international equity securities, 31 % in fixed income securities and 5 % in cash and cash equivalents.

The risk management practices include regular evaluations of fund managers to ensure the risk assumed is commensurate with the given investment style and objectives.

1 unchanged sentence

The fair value measurement of plan assets by category is as follows:

Asset Category Fair Value Hierarchy January 28, 2022 January 29, 2021

Asset Category Fair Value Hierarchy February 3, 2023 January 28, 2022

(in millions)

7 unchanged sentences

(1) Collective trusts are measured at fair value using net asset value (NAV) as a practical expedient and have not been categorized in the fair value hierarchy.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurement Using Significant Unobservable Inputs (Level 3)

4 unchanged sentences

Balance at January 28, 2022

Balance at February 3, 2023

The GDA is designed to provide liquidity and safety of principal with a competitive guaranteed rate of return.

1 unchanged sentence

Principal and accumulated interest are fully guaranteed by Prudential Retirement Insurance and Annuity Company (PRIAC).

The declared interest rate is

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

announced each year in advance and is determined by PRIAC.

The declared interest rate is announced each year in advance and is determined by PRIAC.

The GDA invests in a broadly diversified, fixed-income portfolio within PRIAC's general account.

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Five subsequent fiscal years $ 21 $ 5 $ 26

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 10— Income Taxes:

Substantially all of the Company’s income before income taxes for the three years ended January 28, 2022 is subject to taxation in the United States.

Substantially all of the Company’s income before income taxes for the three fiscal years ended February 3, 2023 is subject to taxation in the United States.

The provision for income taxes for each of the periods presented include the following:

3 unchanged sentences

Federal $ 69 $ 13 $ 34

State 20 7 14

Federal ( 15 ) 48 10

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Effective income tax rate 19.3 % 22.1 % 22.1 %

The effective income tax rate for fiscal 2023 is below the rate in fiscal 2022 primarily due to additional tax deductions from foreign-derived intangible income studies.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The effective income tax rate for fiscal 2022 is consistent with the rate in fiscal 2021.

Federal and state tax expense is higher in fiscal 2022 as compared to fiscal 2021 because of increased income before taxes.

This is partially offset by research and development tax credits and increased tax benefits from the deduction of foreign-derived intangible income as a result of increased qualifying foreign sales income.

Deferred income taxes are recorded for differences in the basis of assets and liabilities for financial reporting purposes and tax reporting purposes.

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Net operating loss and other carryforwards 80 94

Fixed asset basis difference 2 —

Deferred revenue — 17

Lease liability 50 63

Payroll tax deferral — 11

Research and development expenditures 152 —

Accumulated other comprehensive loss — 13

1 unchanged sentence

Total deferred tax assets 347 250

Deferred revenue ( 21 ) —

Payroll tax deferral ( 2 ) ( 2 )

Purchased intangible assets ( 235 ) ( 198 )

Fixed asset basis difference — ( 3 )

Purchased intangible assets ( 264 ) ( 235 )

Right of use assets ( 40 ) ( 53 )

Accumulated other comprehensive income ( 6 ) —

Total deferred tax liabilities ( 333 ) ( 293 )

Net deferred tax (liabilities) assets $ ( 43 ) $ 35

For fiscal 2022, net deferred tax liabilities are presented as deferred income taxes on the consolidated balance sheets.

Net deferred tax assets (liabilities) $ 14 $ ( 43 )

For fiscal 2023, net deferred tax assets are presented in other assets on the consolidated balance sheets.

For fiscal 2022, net deferred tax liabilities are presented as deferred income taxes on the consolidated balance sheets.

Deferred tax assets for both periods include state tax credit carryforwards for which the Company has set up a valuation allowance.

9 unchanged sentences

Unrecognized tax benefits that, if recognized, would affect the effective income tax rate $ 90 $ 70 $ 66

Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at January 28, 2022.

During the year ended January 28, 2022, we recognized an increase in

Beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the option for taxpayers to deduct certain research and development expenditures in the year incurred and instead requires taxpayers to capitalize and amortize such research expenditures over five years.

During the year ended February 3, 2023, as a result of

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

unrecognized tax benefits of approximately $ 12 million related to an increase in available tax credits in fiscal year 2022.

the TCJA, the Company recognized an increase in unrecognized tax benefits of approximately $ 61 million with a corresponding increase to net deferred tax assets.

It is reasonably possible that within the next twelve months our liabilities associated with uncertain tax positions may increase by approximately $ 50 million related to capitalized research and development costs.

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.

The Company recognizes net interest and penalties as a component of income tax expense.

As of February 3, 2023, our accrued interest and penalties related to unrecognized tax benefits was approximately $ 8 million.

The Company has filed income tax returns in the U.S.

and various state jurisdictions, which may be subject to routine compliance reviews by the Internal Revenue Service (IRS) and other taxing authorities.

and in various foreign jurisdictions, which may be subject to routine compliance reviews by the Internal Revenue Service (IRS) and other taxing authorities.

While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities 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 tax authorities.

1 unchanged sentence

The Company is currently under examination by the IRS for fiscal years 2016 through 2019.

As of January 28, 2022, the Company has approximately $ 72 million of tax effected federal loss carryforwards, $ 12 million of tax effected state loss carryforwards and approximately $ 8 million of state credit carryforwards that will begin to expire in fiscal 2027.

The valuation allowance of $ 7 million at January 28, 2022 relates to these state credit carryforwards.

As of February 3, 2023, the Company has approximately $ 62 million of tax effected federal loss carryforwards, $ 9 million of tax effected state loss carryforwards and approximately $ 9 million of state credit carryforwards that will begin to expire in fiscal 2025.

The valuation allowance of $ 8 million at February 3, 2023 relates to these state credit carryforwards.

Note 11— Debt Obligations:

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

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

Stated interest rate Effective interest rate Principal Unamortized debt issuance costs Net Principal Unamortized debt issuance costs Net

(in millions)

Term Loan A Facility due June 2027 5.91 % 6.03 % $ 1,230 $ ( 5 ) $ 1,225 $ — $ — $ —

Term Loan A Facility due October 2023

10 unchanged sentences

$ 2,359 $ ( 16 ) $ 2,343 $ 2,392 $ ( 22 ) $ 2,370

As of January 28, 2022, the Company has a $ 2.5 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 $ 983 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.

The Revolving Credit Facility is available to the Company through October 2023 and there is no balance outstanding as of January 28, 2022.

As of February 3, 2023, the Company has a $ 3.0 billion secured credit facility (the Credit Facility) consisting of a Term Loan A Facility due June 2027, a Term Loan B Facility due October 2025, a Term Loan B2 Facility due March 2027 (together, the Term Loan Facilities), and a $ 1.0 billion secured Revolving Credit Facility due June 2027.

Any obligations under the Credit Facility are secured by liens on substantially all of the assets of the Company and its subsidiaries.

As of January 28, 2022, the Company was in compliance with the covenants under its Credit Facility.

During fiscal 2019, the Company entered into the Third Amended and Restated Credit Agreement (Third Amended Credit Agreement).

Borrowings under the Term Loan A Facility due October 2023 amortize quarterly beginning on January 31, 2020 at 1.25 % of the original borrowed amount thereunder, with such quarterly amortization payments increasing to 1.875 % on January 31, 2021 and then to 2.50 % on January 31, 2022.

Beginning January 31, 2019, the Term Loan B Facility due October 2025 amortizes quarterly at 0.25 % of the original borrowed amount.

The scheduled principal repayments for the Term Loan A and Term Loan B facilities may be further reduced or eliminated by annual mandatory prepayments of a portion of SAIC’s Excess Cash Flow (as defined in the Third

The Revolving Credit Facility is available to the Company through June 2027 and there is no balance outstanding as of February 3, 2023.

During fiscal 2023, the Company borrowed and repaid $ 410 million under the Revolving Credit Facility.

As of February 3, 2023, the Company was in compliance with the covenants under its Credit Facility.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amended Credit Agreement).

Mandatory principal prepayments are allocated to the Term Loan A and Term Loan B facilities on a pro rata basis and reduce the remaining scheduled principal installments for each facility.

Voluntary principal prepayments may be applied to either or both loans at the Company’s direction.

During fiscal year 2020, the Company made $ 150 million of voluntary principal prepayments on the Term Loan A Facility due October 2023.

During fiscal 2020, the Company borrowed and repaid $ 100 million under the Revolving Credit Facility.

During fiscal 2022, the Company made $ 35 million of voluntary principal prepayments on the Term Loan B Facility due October 2025.

Borrowings under the Third Amended Credit Agreement bear interest at a variable rate of interest based on LIBOR or a base rate, plus in each case an applicable margin.

Applicable margins with respect to borrowings under the Term Loan B Facility due October 2025 are 1.75 % for LIBOR loans and 0.75 % for base rate loans.

Applicable margins with respect to borrowings under the Term Loan A Facility due October 2023 and the Revolving Credit Facility due October 2023 range from 1.25 % to 2.00 % for LIBOR loans and 0.25 % to 1.00 % for base rate loans, in each case based on the then applicable Leverage Ratio (as defined in the Third Amended Credit Agreement).

The Company also pays a commitment fee with respect to undrawn amounts under the Revolving Credit Facility due October 2023 ranging from 0.20 % to 0.35 %.

During fiscal 2019, the Company entered into the Third Amended and Restated Credit Agreement (Third Amended Credit Agreement).

The Third Amended Credit Agreement contains certain restrictive covenants applicable to the Company and its subsidiaries including a requirement to maintain a Senior Secured Leverage Ratio (as defined in the Third Amended Credit Agreement) of not greater than 3.75 to 1.00 until the effectiveness of the acquisition of Engility, not greater than 4.50 to 1.00 upon the effectiveness of the acquisition and for the succeeding six fiscal quarters, and not greater than 4.00 to 1.00 thereafter, unless a Permitted Acquisition (as defined in the Third Amended Credit Agreement) occurs in which case not greater than 4.25 to 1.00 for three consecutive quarters following such a transaction.

Borrowings under the Term Loan A Facility due October 2023 amortized quarterly beginning on January 31, 2020 at 1.25 % of the original borrowed amount thereunder, with such quarterly amortization payments increasing to 1.875 % on January 31, 2021 and then to 2.50 % on January 31, 2022.

Borrowings under the Term Loan B Facility due October 2025 amortize quarterly at 0.25 % of the original borrowed amount.

On March 13, 2020, the Company entered into the Second Amendment to the Third Amended and Restated Credit Agreement (Second Amendment), which established, among other things, a new $ 600 million senior secured term loan "B" credit facility commitment (the Term Loan B2 Facility due March 2027) that was funded in full contemporaneously with the closing of the acquisition of Unisys Federal (see Note 4).

The Term Loan B2 Facility due March 2027 bears interest at a variable rate of interest based on LIBOR or a base rate, plus an applicable margin of 2.25 % for LIBOR loans and 1.25 % for base rate loans.

Effective upon funding the Term Loan B2 Facility due March 2027, the applicable margin for the Term Loan B Facility due October 2025 was increased from 1.75 % to 1.875 % for LIBOR loans and from 0.75 % to 0.875 % for base rate loans.

Borrowings under the Term Loan B2 Facility due March 2027 amortize quarterly beginning on July 31, 2020 at 0.25 % of the original borrowed amount with the remaining unamortized balance due in full upon its maturity, March 13, 2027.

8 unchanged sentences

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On July 2, 2021, the Company executed the Fourth Amendment to the Third Amended and Restated Credit Agreement, which established a new senior secured incremental term loan credit facility commitment in the amount of $ 100 million (the Term Loan A2 Facility due October 2023).

The entirety of the Term Loan A2 Facility due October 2023 was borrowed by the Company and the proceeds were immediately used to pay a portion of the purchase price of Halfaker (see Note 4).

The Term Loan A2 Facility due October 2023 will amortize quarterly beginning October 31, 2021 at 0.3125 % of the original borrowed amount thereunder.

The Term Loan A2 Facility due October 2023 may be prepaid at any time without penalty and is subject to the same mandatory prepayments, including from excess cash flow, as the Company's existing term loans under the Credit Facility.

The Term Loan A2 Facility due October 2023 will mature and be due and payable in full on October 31, 2023.

The Term Loan A2 Facility due October 2023 will bear interest at a variable rate of interest based on LIBOR or a base rate, plus an applicable margin of 1.25 % to 2.00 % for LIBOR loans and 0.25 % to 1.00 % for base rate loans, dependent upon the Company's leverage ratio.

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.

Maturities of long-term debt as of January 28, 2022 are:

On June 30, 2022, the Company executed the Fifth Amendment to the Third Amended and Restated Credit Agreement (Fifth Amendment), which established, among other things, a $ 1,230 million senior secured term loan credit facility (Term Loan A Facility due June 2027) and increased the Revolving Credit Facility commitment from $ 400 million to $ 1,000 million.

The entire Term Loan A Facility due June 2027 was immediately borrowed by the Company and the proceeds were used to pay in full the outstanding principal balances under the Term Loan A Facility due October 2023 and Term Loan A2 Facility due October 2023 and to prepay $ 400 million of principal on the Term Loan B Facility due October 2025.

In fiscal 2023, the Company wrote off deferred debt issuance costs of $ 3 million associated with the Term Loan B Facility due October 2025 voluntary principal prepayments which was recognized in interest expense.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the Term Loan A Facility due June 2027 amortize quarterly beginning on October 31, 2023 at 1.250 % of the original borrowed amount thereunder, with such quarterly amortization increasing to 1.875 % on October 31, 2024 and to 2.500 % on October 31, 2025.

The Term Loan A Facility due June 2027 may be prepaid at any time without penalty and is subject to the same mandatory prepayments, including from excess cash flow, as the Company’s existing term loans under the Credit Facility.

Prior to its prepayment on June 30, 2022, borrowings under the Term Loan A2 Facility due October 2023 amortized quarterly beginning on October 31, 2021 at 0.3125 % of the original borrowed amount thereunder.

The Term Loan A2 Facility due October 2023 bore interest at a variable rate of interest based on LIBOR or a base rate, plus an applicable margin of 1.25 % to 2.00 % for LIBOR loans and 0.25 % to 1.00 % for base rate loans, dependent on the Company’s leverage ratio.

As a result of the Fifth Amendment, the maturity date for the Revolving Credit Facility was extended to, and the maturity date of the Term Loan A Facility due June 2027 is, the earlier of June 30, 2027 or 91 days prior to the earliest term loan “B” facility maturity date (subject to acceleration in certain circumstances).

The Term Loan A Facility due June 2027 is secured by substantially all of the assets of the Company and the Company’s wholly owned domestic subsidiaries, and is guaranteed by each of the Company’s wholly owned domestic subsidiaries.

The Term Loan A Facility due June 2027 is subject to the same covenants and events of default as the Company’s existing term loans under the Credit Facility.

Effective with the Fifth Amendment, all interest rates under the Credit Facility transitioned from LIBOR to Term Secured Overnight Financing Rate (Term SOFR) plus 0.10 % for US dollar denominated loans, Sterling Overnight Index Average (SONIA) for UK pound sterling denominated loans, and Euro Interbank Offered Rate (EURIBOR) for Euro denominated loans.

The applicable interest rate margins under the Term Loan A Facility due June 2027 and the Revolving Credit Facility were reduced to a range from 0.75 % to 1.75 % per annum for Term SOFR, SONIA and EURIBOR loans, and from 0 % to 0.75 % per annum for base rate loans, in each case based on the Company’s leverage ratio.

Commitment fees for undrawn amounts under the Revolving Credit Facility were also reduced to a range of 0.125 % to 0.25 % per annum based on the Company’s leverage ratio.

The Company incurred $ 8 million of debt issuance costs associated with the Fifth Amendment, of which $ 2 million was recognized in interest expense, with the remaining $ 6 million deferred and amortized to interest expense through the maturity dates of the facilities utilizing the effective interest rate method.

The scheduled principal repayments for the Term Loan Facilities may be further reduced or eliminated by annual mandatory prepayments of a portion of SAIC’s Excess Cash Flow (as defined in the Third Amended Credit Agreement).

Mandatory principal prepayments are allocated to the Term Loan Facilities on a pro rata basis and reduce the remaining scheduled principal installments for each facility.

Voluntary principal prepayments may be applied to either or individual loans at the Company’s direction.

In addition to the voluntary principal prepayments mentioned above associated with the Second Amendment and Fifth Amendment, the Company made $ 90 million and $ 35 million of voluntary principal prepayments on the Term Loan B Facility due October 2025 in fiscal 2023 and 2022, respectively.

Maturities of long-term debt as of February 3, 2023 are:

Fiscal Year Total

2 unchanged sentences

Total principal payments $ 2,390

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 12— Derivative Instruments Designated as Cash Flow Hedges:

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

Fair Value of Liability (1) at

Notional Amount at January 28, 2022 Pay Fixed Rate Receive Variable Rate Settlement and Termination January 28,

Fair Value of Asset (Liability) (1) at

Notional Amount at February 3, 2023 Pay Fixed Rate Receive Variable Rate Settlement and Termination February 3,

2023 January 28,

(in millions) (in millions)

Interest rate swaps #1 $ — 2.78 % 1-month LIBOR Monthly through July 30, 2021 $ — $ ( 3 )

Interest rate swaps #2 685 3.07 % 1-month LIBOR Monthly through October 31, 2025 ( 39 ) ( 81 )

Interest rate swaps #3 563 2.49 % 1-month LIBOR Monthly through October 31, 2023 ( 12 ) ( 33 )

Interest rate swaps #1 685 2.96 % Term SOFR Monthly through October 31, 2025 16 ( 39 )

Interest rate swaps #2 475 2.36 % Term SOFR Monthly through October 31, 2023 9 ( 12 )

Total $ 1,160 $ 25 $ ( 51 )

(1) The fair value of the fixed interest rate swap asset is included in other assets on the consolidated balance sheets.

The fair value of the fixed interest rate swaps liability is included in other accrued liabilities on the consolidated balance sheets.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company is party to fixed interest rate swap instruments that are designated and accounted for as cash flow hedges to manage risks associated with interest rate fluctuations on a portion of the Company’s floating rate debt.

The counterparties to all swap agreements are financial institutions.

See Note 13 for the unrealized change in fair values on cash flow hedges recognized in other comprehensive (loss) income and the amounts reclassified from accumulated other comprehensive (loss) income into earnings for the current and comparative periods presented.

The Company estimates that it will reclassify $ 25 million of unrealized losses from accumulated other comprehensive loss into earnings in the twelve months following January 28, 2022.

Note 13— Changes in Accumulated Other Comprehensive Loss by Component:

The following table presents the changes in accumulated other comprehensive loss attributable to the Company’s defined benefit plans and fixed interest rate swap cash flow hedges that are discussed in Note 9 and Note 12, respectively.

See Note 13 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 income (loss) into earnings for the current and comparative periods presented.

The Company estimates that it will reclassify $ 22 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following February 3, 2023.

On June 30, 2022 and in conjunction with the Fifth Amendment, the Company transitioned the variable rate on its interest rate swaps from 1-month LIBOR to 1-month Term SOFR.

Effective with the transition, the Company will pay fixed rates of 2.96 % and 2.36 % on the group of interest rate swaps maturing on October 31, 2025 and October 31, 2023, respectively.

The Company elected to apply the optional expedient in ASC 848, Reference Rate Reform, in connection with transitioning its interest rate swaps from LIBOR to Term SOFR that enabled it to consider the new swaps a continuation of the existing contracts.

As a result, the transition did not have an impact on the Company’s hedge accounting or a material impact to the Company’s financial statements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 13— Changes in Accumulated Other Comprehensive Income (Loss) by Component:

The following table presents the changes in accumulated other comprehensive income (loss) attributable to the Company’s defined benefit plans and fixed interest rate swap cash flow hedges that are discussed in Note 9 and Note 12, respectively.

Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges (1)

1 unchanged sentence

(in millions)

Balance at February 1, 2019 $ ( 14 ) $ — $ ( 14 )

Other comprehensive loss before reclassifications ( 76 ) ( 6 ) ( 82 )

Amounts reclassified from accumulated other comprehensive loss 4 — 4

Income tax impact 19 1 20

Net other comprehensive loss ( 53 ) ( 5 ) ( 58 )

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

9 unchanged sentences

Balance at January 28, 2022 $ ( 38 ) $ 1 $ ( 37 )

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

(2) The amount reclassified from accumulated other comprehensive loss is included in other (income) expense, net.

Other comprehensive income before reclassifications 67 4 71

Amounts reclassified from accumulated other comprehensive income (loss) 9 — 9

Income tax impact ( 20 ) ( 1 ) ( 21 )

Net other comprehensive income 56 3 59

Balance at February 3, 2023 $ 18 $ 4 $ 22

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

(2) The amount reclassified from accumulated other comprehensive income (loss) is included in other (income) expense, net.

Note 14— Sale of Receivables:

On January 21, 2020 the Company entered into the MARPA Facility with MUFG Bank, Ltd.

The Company has a Master Accounts Receivable Purchase Agreement (MARPA Facility) with MUFG Bank, Ltd.

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

On March 17, 2020, the Company amended the MARPA Facility to increase the aggregate facility limit from $ 200 million to $ 300 million.

Effective March 31, 2022, the Company amended the MARPA Facility to transition the purchase discount rate defined within the facility agreement from using LIBOR to Term SOFR.

The amendment did not have a material impact on the Company's financial statements.

The receivables sold under the MARPA Facility are without recourse for any U.S.

government credit risk.

The MARPA Facility had an initial term of one year, but effective with the renewal on January 21, 2021 will automatically renew each year unless one of the parties gives prior notice to terminate.

The Company accounts for receivable transfers under the MARPA Facility as sales under ASC 860, Transfers and Servicing, and removes the sold receivables from its balance sheet.

The MARPA Facility automatically renews each year unless one of the parties gives prior notice to terminate.

The receivable transfers under the MARPA Facility have been recognized as sales, as the receivables had been legally isolated from the Company, the financial institution had a right to pledge or exchange the assets received and we do not maintain effective control over the transferred receivables.

The fair value of the sold receivables approximated their book value due to their short-term nature.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company does not retain an ongoing financial interest in the transferred receivables other than cash collection and administrative services.

The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of January 28, 2022 and January 29, 2021.

The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of February 3, 2023 and January 28, 2022.

Proceeds from the sale of receivables are reflected as cash flows from operating activities on the consolidated statements of cash flows.

During fiscal 2022 and 2021, the Company incurred purchase discount fees of $ 2 million, which are presented in other (income) expense, net on the consolidated statements of income.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During fiscal 2023, 2022 and 2021, the Company incurred purchase discount fees of $ 8 million, $ 2 million and $ 2 million, respectively, which are presented in other (income) expense, net on the consolidated statements of income.

MARPA Facility activity consisted of the following:

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

(in millions)

7 unchanged sentences

(1) For fiscal 2023 and 2022, the Company recorded a net increase to cash flows from operating activities of $ 50 million and $ 15 million, respectively, from sold receivables.

(2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of January 28, 2022 and January 29, 2021.

This balance is included in accounts payable on the consolidated balance sheets as of January 28, 2022 and January 29, 2021.

(2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of February 3, 2023 and January 28, 2022.

This balance is included in accounts payable on the consolidated balance sheets.

Note 15— Leases: