What changed in this filing

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Item 1A. Risk Factors

2024-03-20 compared with 2023-04-03 · 53 added, 48 removed, 283 unchanged (26% of the section changed)

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government agencies as our primary customer and, if our reputation or relationships with these agencies were harmed, our future revenues and cash flows would be adversely affected.

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

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

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

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

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

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government agencies, our operating results could be adversely affected by spending caps or changes in budgetary priorities, as well as by delays in the government budget process, program starts or the award of contracts or task orders under contracts.

government spending levels for defense-related and other programs may not be sustained beyond government fiscal year (GFY) 2023.

government spending levels for defense-related and other programs may not be sustained through government fiscal year ("GFY") 2024.

Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.

Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities.

A reprioritization may reduce defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts or other factors.

A change in administrations or changing national priorities may reduce defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts or other factors.

When the U.S.

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

While the federal government is currently funded in full through the end of GFY 2023, there is a strong possibility that GFY 2024 will begin under a continuing resolution lasting several weeks or months.

In addition, it is possible that an impasse on policy issues could threaten continuous government funding past September 30, 2023 or result in another federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows and financial results.

In addition, it is possible that an impasse on policy issues could threaten continuous government funding through September 30, 2024 or result in another federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows and financial results.

government also conducts periodic reviews of U.S.

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

A significant portion of our revenues are recognized on performance obligations using a cost input measure, which requires estimates of total costs at completion, fees earned, or both.

Particularly due to the technical nature of the services being performed and the length of certain performance obligations, this estimation process is complex and involves significant judgment.

A significant portion of our revenues are recognized on contracts using a cost input measure, which requires estimates of total costs at completion, fees earned, or both.

Particularly due to the technical nature of the services being performed and the length of certain contracts, this estimation process is complex and involves significant judgment.

Adjustments to original estimates are often required as work progresses, experience is gained and additional information becomes known, even though the scope of the work required under the performance obligation may not change.

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Our business is subject to governmental review and investigation, which could adversely affect our profitability, cash position and growth prospects.

We are routinely subject to governmental investigations relating to our contracts and operations.

We are routinely subject to governmental investigations relating to all aspects of our business including our contracts and operations.

If a review or investigation identifies improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, which could include the termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines, and suspension or debarment from doing business with governmental agencies.

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

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

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

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

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

We will incur direct and indirect costs as a result of the acquisitions of Unisys Federal, Halfaker, and Koverse.

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

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

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

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

government contractor and a provider of IT services operating in multiple regulated industries and geographies, we handle a variety of sensitive information including personally identifiable information, personnel information, protected health information, classified information and controlled unclassified information, and financial information, concerning our business and employees and those of our customers.

We are continuously exposed to cyber and other security threats, including malware/computer viruses, ransomware, phishing attacks, insider threats and physical break-ins.

Any unauthorized electronic or physical intrusion or other security threat may jeopardize the protection of sensitive or other information stored or transmitted through our IT systems and networks.

This could lead to disruptions in mission-critical systems, unauthorized release of sensitive information and the theft or corruption of data.

Although we have implemented and regularly update and improve policies, procedures and other controls to monitor, protect against, detect and mitigate cyber and other security threats, attempts to gain unauthorized access to our IT systems and networks are becoming more prevalent and sophisticated.

We, however, proactively seek to detect, investigate, mitigate and remediate all security events.

In addition, we work with the defense industrial base industry and the U.S.

government to gather and share threat intelligence and promote increased awareness and enhanced protections against cybersecurity threats.

However, because of the evolving nature of these security threats, there can be no assurance that our policies, procedures and other controls will detect or prevent them, and we cannot predict their full impact.

We may experience similar security threats to the IT systems that we develop, install or maintain under customer contracts, including customer contracts under which we may have access to or management responsibility for customer databases or networks that contain sensitive information relating to our customers, their employees or related third parties.

Although we work cooperatively with our customers to seek to minimize the impacts of cyber and other security threats, we must usually rely on the safeguards used or required by those customers.

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

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

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

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

We use and deploy AI solutions for our customers which may result in harm to our reputation or liability if they do not function as predicted.

We deploy and integrate AI solutions for our business operations and for customers, including AI solutions that assist with the design, deployment, and management of AI applications and allow customers to work with their complex and sensitive data to power the most demanding analytics, data science, and AI use cases.

These AI solutions may be vulnerable to misuse, or cyberattack and because this technology is developing so rapidly we may be unable to keep up with new AI developments.

The AI solutions we use are developed by us and obtained from third parties.

The development methods and algorithms of these solutions could be flawed, and the datasets could contain incorrect or biased information.

Content or code generated by AI systems may be vulnerable to cyber attack, require human review, be unreliable, illegal, or offensive, and could result in the AI solution not working as intended.

If we deploy AI solutions that have unintended consequences or are more controversial than we anticipate, our customers may seek redress and we may experience reputational harm which could affect our business or financial results.

Our use of AI solutions could be limited or subject to regulatory action or legal liability under proposed rules or legislation regarding privacy, intellectual property and other laws.

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

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

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

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

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

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

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

Re-occurrence of an epidemic may also cause disruption in our supply chain;

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

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and cause other unpredictable events.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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

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

Customer systems failures could damage our reputation and adversely affect our revenues and profitability.

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Our errors and omissions liability insurance may be inadequate to compensate us for all of the damages that we may incur and, as a result, our future results could be adversely affected.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We depend on our teaming arrangements and relationships with other contractors and subcontractors.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

some of our operations or properties.

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

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

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Although our international operations have historically generated a small proportion of our revenues, we do not know the impact that these regulatory, geopolitical and other factors may have on our business in the future and any of these factors could adversely affect our business.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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government for a portion of our postretirement costs and plan contributions.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

For additional information related to our pension funding and costs, see Note 10—Retirement Plans to the consolidated financial statements contained within this report.

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

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

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

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

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

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.

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

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

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

If our customers, suppliers, insurers, joint venture partners, sureties, or other parties

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

with whom we do business with are affected by issues in the banking industry it may have an adverse impact on our operational and financial performance.

Cybersecurity Risks

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

We encounter cybersecurity and physical security threats as part of the work we do for our customers and our internal business.

Our IT systems contain a variety of sensitive and classified information which attract adversaries including nation-state threat actors and we face cybersecurity threats including attempts to disrupt our critical systems, gain unauthorized access to data, release or corrupt sensitive information, and interfere with operations.

Adversaries that acquire unauthorized access to customer accounts can use that information to compromise data and inadequate account security practices which could potentially result in malicious activity effecting customer use of our solutions.

We work cooperatively with our customers to seek to address cybersecurity threats and often must rely on the safeguards used or required by those customers.

Our solutions include custom software code we develop and may include open source or AI-generated code which may make our products susceptible to cyberattacks.

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

We also face cybersecurity threats from our supply chain through threat actors who may seek and gain access to our systems through our business partners and suppliers.

Our information security staff manage cybersecurity risks by implementing security controls in accordance with industry standards and conducting regular employee cybersecurity training.

Our cybersecurity policies, procedures and maturity are subject to review and audit by third parties.

Although we have implemented and regularly update cybersecurity controls, there can be no assurance that these measures will successfully prevent or mitigate cybersecurity incidents.

Cybersecurity incidents, disruptions and data loss have occurred including attacks targeting customer data and our systems and data.

We report cybersecurity incidents to involved customers and applicable regulatory authorities including the DOD and the FBI to support national security initiatives.

Such incidents did not have a material adverse impact on our financial condition or the results of our operations.

However, future cybersecurity incidents could damage our reputation, exposing us to liability, or prevent us from winning future work from government customers and could have a material adverse impact on our business.

Because of the rapidly evolving nature of these threats, there can be no assurance that our policies, procedures and security controls will detect or prevent them, mitigate their affects and we cannot predict their full impact.

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

Any remediation costs, damages or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means.

Forward-Looking Statement Risks

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These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance or achievements.

Although we believe that the expectations

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance or achievements.

There are a number of important factors that could cause our actual results to differ materially from those results anticipated by our forward-looking statements, which include, but are not limited to, the risk factors discussed above.

We do not undertake any obligation to update or revise any of the forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements or to conform these statements to actual results.

Unresolved Staff Comments

No information is required in response to this item.

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

What changed 10-K

Item 1A. Risk Factors