What changed in this filing

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Item 9A. Controls and Procedures

2024-03-20 compared with 2023-04-03 · 527 added, 477 removed, 1121 unchanged (47% of the section changed)

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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 2, 2024, 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.

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.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal 2023 that materially affected, or are likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

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.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

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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In our opinion, Science Applications International Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of February 2, 2024, 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 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.

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 2, 2024 and February 3, 2023, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended February 2, 2024, and the related notes and our report dated March 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Tysons, Virginia

April 3, 2023

March 20, 2024

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Other Information

No information is required in response to this item.

During the three months ended February 2, 2024, neither the Company nor any director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as such terms are defined in Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Directors, Executive Officers and Corporate Governance

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.

Our executive officers as of March 20, 2024, 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.

Name of officer Age Position(s) with the Company and prior business experience

Keene 62 Chief Executive Officer (CEO) since July 2019.

Toni Townes-Whitley

60 Chief Executive Officer since October 2023.

Prior to this role, Ms.

Keene served as Chief Operating Officer (COO) from June 2017 to July 2019, as Sector President, Global Markets and Missions from September 2013 to June 2017, and Leidos Holding Inc.

(formerly SAIC, Inc.) Senior Vice President for Corporate Strategy and Planning from August 2012 to September 2013.

Prior to joining us, Ms.

Keene was the Senior Vice President and General Manager for U.S.

Enterprise Markets at CGI Group, Inc.

Hageman 54 General Counsel and Corporate Secretary since July 2022.

Townes-Whitley served as President of U.S.

Regulated Industries at Microsoft from July 2018 to October 2022 and Corporate Vice President of Industry from March 2015 to July 2018.

Before joining Microsoft, she served as President of CGI Federal from May 2010 to March 2015 and Senior Vice President from 2011 through 2014.

Previously, she held several management roles at Unisys Corporation leading global and commercial-sector system integration and the Federal Civilian group.

Hageman 55 Executive Vice President, 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.

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Department of Defense.

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

Prabu Natarajan 53 Executive Vice President and Chief Financial Officer (CFO) since January 2021.

Prior to joining us, Mr.

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Natarajan has held positions at The AES Corporation and PricewaterhouseCoopers LLP.

O'Hara 47 Chief Human Resources Officer since October 2019.

O'Hara 48 Executive Vice President and Chief Human Resources Officer since October 2019.

Prior to this role, Ms.

O’Hara served as Senior Vice President for Human Resources, after serving as head of talent strategy, total rewards, learning and development, diversity, executive compensation, and talent acquisition.

Prior to joining SAIC, Ms.

O’Hara served as the head of talent acquisition at Bearingpoint.

Genter 47 President, Defense and Civilian Sector, since 2016.

Genter is responsible for strategy, business development, and program execution for the portfolio including the majority of the Department of Defense, the FAA, Department of State, USDA, EPA, DOE, Commerce, DHS, GSA, and FTRB.

Genter previously served as the Senior Vice President and General Manager of Strategic Growth Markets customer group.

From 2004 to 2013, Mr.

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.

LaRouche is responsible for supporting a variety of Intelligence Community customers, NASA and the U.S.

Before joining SAIC, Mr.

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

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.

Before joining SAIC, Ms.

O’Hara served in senior leadership roles at global professional services and technology companies including BearingPoint, Perot Systems Corporation and Booz Allen Hamilton.

65 Executive Vice President of the Air Force and Combatant Commands Business Group since February 2024.

Previously, Mr.

DiFronzo served as Vice President and Senior Vice President of Operations, Air Force, Space Force, and Combatant Commands from March 2020 until October 2020 and as an SAIC Vice President from June 2015 until March 2020.

DiFronzo served as Assistant Vice President at Alion Science and Technology Corporation from December 2013 to May 2015 and as Senior Program Manager at Scientific Research Corporation from November 2008 through December 2010.

48 Executive Vice President of the Army Business Group since February 2024.

Jackson served as Senior Vice President of the Army Business Unit from February 2023 to January 2024 and Senior Vice President of the Navy and U.S.

Marine Corps Portfolio from August 2020 until February 2023;

as Senior Vice President for the Solutions and Technology Group from July 2018 to July 2020;

as Senior Vice President for the Engineering, Integration and Mission Solutions Market Segment from November 2014 until June 2018;

as Vice President of Training and Simulation from November 2010 until November 2014;

and Vice President and Division Manager from March 2008 through October 2011.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Name of officer Age Position(s) with the Company and prior business experience

48 Executive Vice President of the Space and Intelligence Business Group since February 2024.

Ray served as Senior Vice President for the Space Business Unit from February 2021 through January 2024.

Before joining SAIC, he served as President of Government and Defense at FLIR Systems from January 2018 until June 2020.

Previously, he held several positions at Raytheon, including Vice President for Global Business Development and Strategy, October 2015 until December 2017;

Senior Director of Business Development and Strategy, August 2013 until October 2015;

Senior Director and General Manager of Civil Mission Solutions, September 2011 until August 2013;

and Director of Maritime and Littoral Systems, September 2018 until November 2011.

54 Executive Vice President of the Navy Business Group since February 2024 and SAIC Senior Vice President from March 2023 until February 2024.

Before joining SAIC, Ms.

Supplee served as Vice President and General Manager for Navy and Marine Corps at GDIT from November 2022 until March 2023.

She previously held several positions at CACI International, including Senior Vice President, August 2021 until November 2022;

Vice President of Business Development, February 2021 until August 2021;

and Vice President, April 2019 until February 2021.

Before joining GDIT, she was Senior Capture Director and Executive Director at BAE Systems from June 2014 until February 2021.

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 2024 Definitive Proxy Statement, which information is incorporated by reference into this report.

We have adopted a code of conduct, which describes our standards for protecting SAIC and customer assets, fostering a safe and healthy work environment, dealing fairly with customers and others, conducting international business properly, reporting misconduct and protecting employees from retaliation.

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For information required by Item 12 with respect to the security ownership of certain beneficial owners and management, see the information set forth under the caption “Other Information” in the 2024 Definitive Proxy Statement, which information is incorporated by reference into this report.

We currently maintain four shareholder-approved equity compensation plans that issue stock-based awards including the 2013 Equity Incentive Plan, the Management Stock Compensation Plan, the 2013 Employee Stock Purchase Plan and the 2012 Long Term Performance Plan.

For summaries of these plans, see Note 8 to the consolidated financial statements contained within this report.

We currently maintain three shareholder-approved equity compensation plans that issue stock-based awards including the 2023 Equity Incentive Plan ("2023 EIP"), the Management Stock Compensation Plan, and the Amended and Restated 2013 Employee Stock Purchase Plan ("ESPP").

For summaries of these plans, see Note 9—Stock-Based Compensation to the consolidated financial statements contained within this report.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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Total 1,759,649 $ 77.85 4,068,734

(1) This amount includes 376,545 stock options outstanding and 1,651,351 shares issuable for other stock-based awards under the 2013 Equity Incentive Plan.

This amount does not include shares to be issued pursuant to purchase rights under the 2013 Employee Stock Purchase Plan.

(1) This amount includes 112,773 stock options outstanding and 1,455,511 shares subject to other stock-based awards previously granted but not yet issued under the 2013 Equity Incentive Plan ("2013 EIP"), and 191,365 shares issuable for other stock-based awards under the 2023 EIP.

This amount does not include shares to be issued pursuant to purchase rights under the ESPP.

(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 2,335,409 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.

The ESPP provides for an automatic increase to the share reserve on the first day of each fiscal year beginning on February 1, 2014 in an amount equal to the lesser of (i) 1 million shares, (ii) two percent of the number of shares of our common stock outstanding on the last day of the immediately preceding fiscal year or (iii) a number determined by the Compensation Committee of the Board of Directors.

The amount authorized for issuance under the ESPP increased 500,000, 916,198 and 973,477 during fiscal 2017, 2016 and 2015 respectively.

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

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.

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.

(3) Includes 1,876,021 shares of our common stock available for issuance under the ESPP and 2,192,713 shares under the 2023 EIP.

On June 7, 2023, the Company’s stockholders approved an amended and restated ESPP which limits the total number of shares reserved for issuance to 2.0 million and extends the ESPP expiration date from September 26, 2023 to the earlier of its termination by the Board or the issuance of all shares available for issuance.

On June 7, 2023, the Company's stockholders approved the 2023 EIP.

The 2023 EIP authorized 2.2 million new shares of the Company's common stock to be issued as various types of stock-based compensation and cash awards.

After June 7, 2023, no new awards may be issued under the 2013 EIP and any awards that subsequently expire, are forfeited or canceled, are settled in cash, or are used to cover recipient tax obligations, will become available for issuance under the 2023 Plan.

Awards previously issued and outstanding under the 2013 EIP will continue to remain outstanding and be subject to the terms of the 2013 EIP.

We expect that the number of shares actually issued under the 2023 EIP will be significantly less than the number of total awards outstanding under the plan 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.

Certain Relationships and Related Transactions, and Director Independence

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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.

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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.

Sixth Amendment to the Third Amended and Restated Credit Agreement, dated February 8, 2024, 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 February 12, 2024.

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

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.

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.

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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

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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.

Transition Letter, dated May 15, 2023.

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 18, 2023.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Description of Exhibit

Science Applications International Corporation 2023 Equity Incentive Plan, effective June 7, 2023.

Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (File No.

333-272484) as filed with the Securities and Exchange Commission (SEC) on June 7, 2023.

Form of Restricted Stock Unit Award Agreement of the Science Applications International Corporation 2023 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on June 13, 2023.

Form of Performance Stock Unit Award Agreement of the Science Applications International Corporation 2023 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on June 13, 2023.

Science Applications International Corporation Amended and Restated 2013 Employee Stock Purchase Plan, effective June 7, 2023.

Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on June 13, 2023.

Subsidiaries of Registrant.

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

Policy Relating to Recovery of Erroneously Awarded Compensation

101 Interactive Data File.

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

* Compensation Plans and Arrangements

* Management contract or compensatory plan or agreement.

Form 10-K Summary

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Chief Financial Officer

April 3, 2023

March 20, 2024

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.

Signature Title Date

/s/ Nazzic S.

Keene Principal Executive Officer and Director April 3, 2023

/s/ Toni Townes-Whitley

Principal Executive Officer and Director March 20, 2024

Toni Townes-Whitley

/s/ Prabu Natarajan Principal Financial Officer and

Principal Accounting Officer

April 3, 2023

March 20, 2024

Prabu Natarajan

Morea Chair of the Board April 3, 2023

/s/ Robert A.

Bedingfield Director April 3, 2023

Goode Director April 3, 2023

Graham Director April 3, 2023

Hamre Director April 3, 2023

Morea Chair of the Board March 20, 2024

Director March 20, 2024

Graham Director March 20, 2024

/s/ Carolyn B.

Handlon Director April 3, 2023

Handlon Director March 20, 2024

/s/ Yvette M.

Kanouff Director April 3, 2023

Kanouff Director March 20, 2024

/s/ Timothy J.

Mayopoulos Director April 3, 2023

Mayopoulos Director March 20, 2024

/s/ Katharina G.

McFarland Director April 3, 2023

McFarland Director March 20, 2024

/s/ Milford W.

McGuirt Director April 3, 2023

Reagan Director April 3, 2023

McGuirt Director March 20, 2024

Reagan Director March 20, 2024

/s/ Steven R.

Shane Director April 3, 2023

Shane Director March 20, 2024

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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Note 4—Acquisitions

Note 5—Divestitures

Note 6 —Restructuring and Impairment

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Opinion on the Financial Statements

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.

We have audited the accompanying consolidated balance sheets of Science Applications International Corporation (the Company) as of February 2, 2024 and February 3, 2023, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended February 2, 2024, 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 2, 2024 and February 3, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2024, 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 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.

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 2, 2024, 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 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Revenue recognition based on a cost input measure of progress

Description of the Matter The Company recognizes a significant portion of its revenues using a cost input (cost-to-cost) measure of progress.

Revenue recognition based on certain contracts using a cost input measure of progress

Description of the Matter The Company recognizes a portion of its revenues using a cost input (cost-to-cost) measure of progress.

Under the cost-to-cost measure of progress, revenue is recognized based on the ratio of costs incurred to the total estimated costs at completion.

The transaction price used as the basis for revenue is the estimated amount of consideration expected to be received for performance and may include variable consideration such as reimbursable costs, award fees, incentive fees, or other provisions that can either increase or decrease the transaction price.

As described in Note 1 to the consolidated financial statements, recognizing revenue on long-term contracts involves significant judgments and estimates.

Changes in estimates (as quantified in Note 3 to the consolidated financial statements) can routinely occur due to changes in the estimated transaction price or estimated costs to completion and for a variety of reasons including changes in scope, changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs, and changes in the estimated transaction price, such as variable amounts for incentive or award fees.

A significant change in an estimate on one or more contracts could have a material effect on the Company’s results of operations.

Auditing the Company’s accounting for revenue using the cost input measure of progress was complex due to the judgment involved in estimating the transaction price and total estimated costs at completion for these contracts.

The transaction price may include variable consideration.

Additionally, management estimates total costs at completion by making 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 subcontractors, overhead cost rates, and other variables.

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

Changes in estimates (as quantified in Note 3 to the consolidated financial statements) can routinely occur due to a variety of reasons including changes in scope, changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs.

Changes in estimates on these contracts, if significant, could have a material effect on the Company’s results of operations.

Auditing the Company’s accounting for revenue for certain contracts using the cost input measure of progress was complex due to the judgment involved in estimating the total estimated costs at completion for these contracts.

Management estimates total costs at completion by making 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 subcontractors, overhead cost rates, and other variables.

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 recognition of revenue using the cost input measure of progress.

For example, we tested controls over management’s review of the estimated transaction price and estimated costs at completion used in determining revenue using the cost input measure of progress.

For example, we tested controls over the significant assumptions applied in determining the estimation of costs to be incurred on the contract and controls evaluating the appropriateness of changes in estimated costs to complete throughout the contract’s period of performance.

We also tested internal controls that management executes to validate the data used in determining this revenue was complete and accurate.

To test the accuracy of the Company’s estimated transaction price and estimated costs at completion, our audit procedures included, among others, comparing estimates of labor costs, subcontractor costs, materials and variable consideration to historical results of similar contracts, and agreeing the key terms, including the terms of the variable consideration, to contract documentation and management’s estimates.

Our audit procedures also included, among others, evaluating the nature, timing and extent of the amounts of revenue and costs recorded to date, including any changes in transaction price or estimated costs at completion from the prior period.

To test the accuracy of the Company’s estimated costs at completion, our audit procedures included, among others, comparing estimates of labor costs, subcontractor costs, and materials to actual costs incurred to date, comparing estimated margins to margins on similar contracts, and agreeing the key terms to contract documentation and prior management estimates.

Our audit procedures also included, among others, evaluating the nature, timing and extent of the amounts of revenue and costs recorded to date, including any changes in estimated costs at completion from the prior period.

For example, to test a change in estimate, we inspected underlying evidence for the reason for the change in estimate and the timing of such change, and we recalculated the inception-to-date effect recorded.

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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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

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

Description of the Matter As discussed in Notes 1 and 11 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 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.

Auditing these liabilities associated with unrecognized tax benefits that, if recognized, would affect the effective income tax rate 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.

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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.

To test the recognition of the Company’s unrecognized tax benefits that, if recognized, would 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 these unrecognized tax benefits, and testing the assumptions used by management in estimating the valuation of any associated liability.

/s/ Ernst & Young LLP

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Tysons, Virginia

April 3, 2023

March 20, 2024

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

2023 January 28,

2024 February 3,

2023 January 28,

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Acquisition and integration costs 1 13 56

Gain on divestitures, net of transaction costs

( 240 ) — ( 2 )

Other operating income ( 3 ) — ( 1 )

Operating income 741 501 462

Interest expense 120 105 122

Other (income) expense, net 6 ( 1 ) ( 3 )

Interest expense, net

Other expense (income), net

Income before income taxes 620 375 358

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

Net income $ 477 $ 303 $ 279

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on derivative instruments 56 48 ( 19 )

Other comprehensive (loss) income, net of tax:

Net unrealized (loss) gain on derivative instruments ( 7 ) 56 48

Defined benefit obligation adjustment 1 3 4

Total other comprehensive income (loss), net of tax 59 52 ( 17 )

Total other comprehensive (loss) income, net of tax ( 6 ) 59 52

Comprehensive income $ 471 $ 362 $ 331

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CONSOLIDATED BALANCE SHEETS

2023 January 28,

2024 February 3,

(in millions)

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Operating lease right of use assets 152 158

Deferred income taxes

Other assets 195 162

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Commitments and contingencies (Note 18)

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

Common stock, $ 0.0001 par value, 1 billion shares authorized, 52 million shares and 54 million shares issued and outstanding as of February 2, 2024 and February 3, 2023, respectively

Additional paid-in capital 337 637

Retained earnings 1,432 1,035

Accumulated other comprehensive income (loss) 22 ( 37 )

Accumulated other comprehensive income 16 22

Total common stockholders' equity 1,785 1,694

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comprehensive

income (loss) Non-controlling Interest Total

income (loss) Non-controlling interest

(in millions)

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Issuances of stock 1 16 — — — 16

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

Cash dividends of $1.48 per share — — ( 88 ) — — ( 88 )

Stock-based compensation — 30 — — — 30

Other comprehensive income, net of tax

— — — 52 — 52

Dividends of $ 1.48 per share

— — ( 86 ) — — ( 86 )

Stock-based compensation, net of shares withheld for taxes (1)

— 32 — — — 32

Repurchases of stock ( 3 ) ( 214 ) — — — ( 214 )

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Other comprehensive income, net of tax — — — 59 — 59

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

Stock-based compensation — 32 — — — 32

Dividends of $ 1.48 per share

— — ( 83 ) — — ( 83 )

Stock-based compensation, net of shares withheld for taxes (1)

— 29 — — — 29

Repurchases of stock ( 3 ) ( 247 ) — — — ( 247 )

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

Net income — — 477 — — 477

Issuances of stock 1 18 — — — 18

Other comprehensive income, net of tax — — — 59 — 59

Cash dividends of $1.48 per share — — ( 83 ) — — ( 83 )

Stock-based compensation — 29 — — — 29

Other comprehensive loss, net of tax

— — — ( 6 ) — ( 6 )

Dividends of $ 1.48 per share

— — ( 80 ) — — ( 80 )

Stock-based compensation, net of shares withheld for taxes (1)

— 45 — — — 45

Repurchases of stock ( 3 ) ( 363 ) — — — ( 363 )

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

Deconsolidation of non-controlling interest — — — — ( 10 ) ( 10 )

Balance at February 2, 2024 52 $ 337 $ 1,432 $ 16 $ — $ 1,785

(1) In fiscal 2024, fiscal 2023 and fiscal 2022, the shares withheld for taxes related to stock-based compensation arrangements amounted to $ 23 million, $ 19 million, and $ 14 million, respectively.

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

2023 January 28,

2024 February 3,

2023 January 28,

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Stock-based compensation expense 68 48 46

(Gain) loss on divestitures — ( 2 ) 10

Gain on divestitures ( 247 ) — ( 2 )

Impairment of assets — 4 18

Increase (decrease) resulting from changes in operating assets and liabilities, net of the effect of the acquisitions:

Increase (decrease) resulting from changes in operating assets and liabilities, net of the effect of the acquisitions and divestitures:

Receivables ( 46 ) 79 ( 31 )

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Proceeds from divestitures 356 — 8

Cash divested upon deconsolidation of joint venture ( 8 ) — —

Other ( 5 ) ( 8 ) ( 6 )

Net cash used in investing activities ( 36 ) ( 292 ) ( 1,231 )

Net cash provided by (used in) investing activities

314 ( 36 ) ( 292 )

Cash flows from financing activities:

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Distributions to non-controlling interest — ( 3 ) ( 2 )

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

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

Net cash used in financing activities

( 725 ) ( 493 ) ( 301 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 15 ) 3 ( 75 )

Cash, cash equivalents and restricted cash at beginning of period 118 115 190

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Non-cash investing and financing activities:

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

Increase (decrease) in accrued plan share repurchases

$ 4 $ ( 2 ) $ 2

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

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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 integrates emerging technology securely and in real-time into mission critical operations that modernize and enable national imperatives.

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 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 is organized as a matrix comprised of two customer facing operating sectors supported by the enterprise organizations, including the Innovation Factory.

The Company's Innovation Factory develops superior enterprise-class solutions which are delivered to the Company's customers as stand-alone solutions or integrated with and aligned to its product offerings to meet complex customer needs and accelerate digital transformation.

The Innovation Factory includes designated teams focused on Artificial Intelligence ("AI"), application development, network services, platforms and cloud, and cyber.

It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions quickly and works with customers to enhance solutions going forward.

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

See Note 16 for additional information.

Acquisitions.

On July 2, 2021, the Company completed the acquisition of Halfaker and Associates, LLC (Halfaker), a mission focused, pure-play health IT company.

On May 3, 2021, the Company completed the acquisition of Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data.

On March 13, 2020, the Company completed the acquisition of Unisys Federal, a former operating unit of Unisys Corporation, which enhances our capabilities in government priority areas, expands our portfolio of intellectual property and technology-driven offerings, and increases our access to current and new customers.

See Note 4 for additional information.

See Note 17—Business Segment Information for additional information.

Effective February 3, 2024, the first day of fiscal 2025, the Company completed a business reorganization which replaced its current two operating sectors with five customer facing business groups supported by the enterprise organizations, including the Innovation Factory.

The reorganization is designed to enhance management's involvement with customers and advance the Company’s innovation and go-to-market strategy.

The new business group leaders will report directly to the Company's Chief Executive Officer ("CEO") who will continue to be the chief operating decision maker ("CODM").

The Company is currently evaluating the impact of the reorganization on its segment reporting.

Principles of Consolidation and Basis of Presentation

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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.

Interest income was reclassified from "Other expense (income), net" to "Interest expense, net" on the consolidated statements of income and gains on divestitures, net of transaction costs were reclassified from "Other operating income" to "Gain on divestitures, net of transaction costs" on the consolidated statements of income.

"Deferred income taxes" for the prior year was reclassified from "Other assets" to its own line item on the consolidated balance sheets.

Non-controlling Interest.

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.

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

On February 4, 2023, the Company sold 0.1 % of its 50.1 % majority ownership interest in Forfeiture Support Associates J.V.

("FSA") to its sole joint venture partner for a nominal amount.

As a result of the sale and amendment to the joint venture operating agreement of FSA, the Company no longer controls the joint venture and accounts for its retained interest as an equity method investment as of the date of the transaction.

Prior to February 4, 2023, the Company held a 50.1 % majority interest in FSA.

For fiscal 2023 and 2022, the results of operations of FSA were included in the Company's consolidated statements of income and comprehensive income and statements of cash flows.

As of February 3, 2023, the non-controlling interest reported on the consolidated balance sheet represents the portion of FSA’s equity that is attributable to the non-controlling interest.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.

Significant estimates inherent in the preparation of the financial statements may include, but are not limited to, estimated profitability of long-term contracts, income taxes, fair value measurements, fair value of goodwill and other intangible assets, pension and defined benefit plan obligations, and contingencies.

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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 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

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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.

Fiscal 2024 began on February 4, 2023 and ended on February 2, 2024, fiscal 2023 began on January 29, 2022 and ended on February 3, 2023, and fiscal 2022 began on January 30, 2021 and ended on January 28, 2022.

Fiscal 2024 consisted of 52 weeks, while fiscal 2023 and 2022 consisted of 53 weeks and 52 weeks, respectively.

Revenue Recognition

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commercial customers.

The Company provides services under various contract types, including firm-fixed price (FFP), time-and-materials (T&M), cost-plus-fixed-fee, cost-plus-award-fee and cost-plus-incentive-fee contracts.

Our service arrangements typically involve an annual base period of performance followed by renewal option periods that upon exercise are generally accounted for as separate contracts.

To determine the proper revenue recognition, the Company first evaluates whether we have a duly approved and enforceable contract with a customer, in which rights of parties and payment terms are identified and collectability is probable.

We also evaluate whether two or more contracts should be combined and accounted for as a single contract and whether modifications to existing contracts should be accounted for as part of the original contract or as a separate contract.

The Company provides services under various contract types, including fixed price contracts such as firm-fixed price ("FFP"), time-and-materials ("T&M") contracts including fixed-price-level-of-effort contracts, and cost reimbursement contracts such as cost-plus-fixed-fee, cost-plus-award-fee and cost-plus-incentive-fee contracts.

The Company's service arrangements typically involve an annual base period of performance followed by renewal option periods that upon exercise are generally accounted for as separate contracts.

To determine the proper revenue recognition, the Company first evaluates whether there is a duly approved and enforceable contract with a customer, in which rights of parties and payment terms are identified and collectability is probable.

The Company also evaluates whether two or more contracts should be combined and accounted for as a single contract and whether modifications to existing contracts should be accounted for as part of the original contract or as a separate contract.

Contract modifications that create new enforceable rights and obligations are accounted for prospectively.

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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.

The Company recognizes revenue when, or as, performance obligations under a contract are satisfied.

A performance obligation is the unit of account for revenue recognition and refers to a promise in a contract to transfer a distinct service or good to the customer.

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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.

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

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

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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 a reasonable profit margin, for work performed to date.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

A cost input measure or the as-invoiced practical expedient typically is applied to the Company’s cost-reimbursable contracts.

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

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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.

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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.

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

The Company accrues for shipping and handling costs occurring after the point-in-time control transfers to the customer.

Recognizing revenue on long-term contracts involves significant estimates and judgments.

The transaction price is the estimated amount of consideration we expect to receive for performance under our contracts.

The transaction price is the estimated amount of consideration the Company expects to receive for performance under the Company's contracts.

Contract terms may include variable consideration, such as reimbursable costs, award and incentive fees, usage-based fees, service-level penalties, performance bonuses, or other provisions that can either increase or decrease the transaction price.

Variable amounts are generally determined upon our achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion.

When making our estimates, the Company considers the customer, contract terms, the complexity of the work and related risks, the extent of customer discretion, historical experience and the potential of a significant reversal of revenue.

Variable amounts are generally determined upon the Company's achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion.

When making estimates, the Company considers the customer, contract terms, the complexity of the work and related risks, the extent of customer discretion, historical experience and the potential of a significant reversal of revenue.

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.

Contract costs generally include direct costs, such as labor, subcontract costs and materials, and indirect costs identifiable with or allocable to a specific contract.

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).

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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and performance being better or worse than previously estimated.

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

In cases when total expected costs exceed total estimated revenues for a performance obligation, 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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A significant portion of the Company's contracts recognize revenue on performance obligations 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.

Contract costs generally include direct costs, such as labor, subcontract costs and materials, and indirect costs identifiable with or allocable to a specific contract.

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 the Company's 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").

Contract Balances

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Amounts are invoiced as work progresses, typically biweekly or monthly in arrears, or upon achievement of contractual milestones.

We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue.

The Company records a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue.

A contract asset is a right to consideration that is conditional upon factors other than the passage of time.

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

Contract assets and liabilities are recorded net on a contract-by-contract basis and are generally classified as current based on our contract operating cycle.

Contract assets and liabilities are recorded net on a contract-by-contract basis and are generally classified as current based on the Company's contract operating cycle.

Deferred revenue attributable to long-term contract material renewal options may be classified as non-current when the option renewal period will not occur within one year of the balance sheet date.

Deferred Costs

Certain eligible costs, such as costs to obtain and costs to fulfill our service contracts, are capitalized when the costs relate directly to the contract, are expected to be recovered, and generate or enhance resources to be used in satisfying the performance obligation.

Certain eligible costs, such as costs to obtain and costs to fulfill the Company's service contracts, are capitalized when the costs relate directly to the contract, are expected to be recovered, and generate or enhance resources to be used in satisfying the performance obligation.

These costs primarily consist of commissions, transition and set-up costs.

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If the carrying amount is not recoverable, an impairment loss is recognized.

Pre-contract costs are deferred when eligible costs are incurred prior to the start of a contract and it is probable the costs will be recovered upon contract issuance.

Pre-contract costs are expensed when the contract is executed.

Prepaid contract costs may be incurred for certain customer contracts to secure the use of assets or the receipt of services at a future date or over a period of time.

For contracts using the as-invoiced practical expedient or a time-elapsed revenue recognition measure, prepaid contract costs are amortized on a straight-line basis over the expected period of benefit.

Costs Allocated to Contracts

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government Cost Accounting Standards ("CAS").

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-based Compensation

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The Company recognizes stock-based compensation expense, net of estimated forfeitures, on a straight-line basis over the underlying award’s requisite service period, as measured using the award’s grant date fair value.

For performance share awards, the Company reassesses the probability of achieving the performance conditions at each reporting period end and adjusts compensation expense based on the number of shares the Company expects to ultimately issue.

The Company accounts for income taxes under the asset and liability method of accounting, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

Under the Company's stock-based compensation arrangements, upon vesting, shares are often withheld from the award for the purposes of satisfying statutory withholding tax obligations.

Under this method, changes in tax rates and laws are recognized in income in the period such changes are enacted.

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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

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.

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.

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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.

To the extent the Company prevail in matters for which accruals have been established or are required to pay amounts in excess of reserves, the Company's 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 February 3, 2023 and January 28, 2022 these amounts were $ 49 million and $ 54 million, respectively.

The Company includes outstanding payments within "Cash and cash equivalents" and "Accounts payable" on the consolidated balance sheets and as of February 2, 2024 and February 3, 2023 these amounts were $ 26 million and $ 49 million, respectively.

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

The cash in bank accounts at times may exceed federally insured limits.

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 includes cash amounts held that are contractually restricted from use in operations, but are subject to future claims of creditors.

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:

February 3, 2023 January 28, 2022

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 2, 2024 February 3, 2023

(in millions)

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government on the Company’s receipt of progress payments.

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

Progress payments received of $ 90 million and $ 42 million offset unbilled receivables as of February 2, 2024 and February 3, 2023, respectively.

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

Based on historical experience, the majority of retention balances are expected to be collected beyond one year.

Retention is presented in other assets on the consolidated balance sheets, see Note 3.

Retention is presented in "Other assets" on the consolidated balance sheets, see Note 3—Revenues.

Write-offs of retention balances have not been significant.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 cost method.

Inventory is substantially comprised of finished goods and is valued at the lower of cost or net realizable value, generally using the average cost method.

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

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Integration-related costs represent costs directly related to combining the Company and its acquired businesses.

Integration-related costs typically include strategic consulting services, facility consolidation, employee related costs, such as retention and severance, costs to integrate information technology infrastructure, enterprise planning systems, processes, and other non-recurring integration-related costs.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

and other non-recurring integration-related costs.

Acquisition and integration costs are presented together as "Acquisition and integration costs" on the consolidated statements of income.

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

2023 January 28,

2024 February 3,

2023 January 28,

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Total acquisition and integration costs $ 1 $ 13 $ 56

(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 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 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.

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

Acquisition costs recognized for fiscal 2022 were related to the acquisitions of Halfaker and Associates, LLC ("Halfaker") and Koverse.

See Note 4—Acquisitions for additional information.

(2) Integration costs include $ 17 million for the impairment of assets for fiscal 2022.

See Note 6—Restructuring and Impairment for additional information.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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.

Other employee related termination costs include the impact of accelerated stock compensation expense for terminated employees that have a reduction in the requisite service period for their stock-based awards.

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.

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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.

Operating lease income is recognized on a straight-line basis over the term of the lease and is

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

presented in "Revenues" on the consolidated statements of income.

Goodwill and Intangible Assets

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The goodwill impairment test is performed at the reporting unit level.

In the Company’s qualitative assessment, an evaluation is performed to determine whether it is more likely than not that an impairment exists based on qualitative factors.

Qualitative factors include macroeconomic, industry and market conditions, cost factors, overall financial performance, relevant entity-specific events, factors affecting the reporting unit, and share price.

The Company may additionally perform a quantitative assessment in which 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.

The Company estimates and compares the fair value of each reporting unit to its respective carrying value including goodwill.

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.

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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

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.

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.

See Note 8—Property, Plant, and Equipment for depreciation and amortization methods and estimated useful lives by major asset class.

Impairment of Long-lived Assets

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In circumstances in which the Company does not have the ability or intent to sublease an exited facility, the Company adjusts the estimated useful life of the facility related assets to end on the cease use date and recognizes accelerated depreciation and amortization.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

17 unchanged sentences

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.

See Note 4 for additional information.

See Note 4—Acquisitions for additional information.

The fair value measurements were estimated using significant inputs that are not observable in the market and thus represent a Level 3 measurement.

1 unchanged sentence

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 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.

As of February 2, 2024 and February 3, 2023, the fair value of the Company's investments totaled $ 32 million and $ 28 million, respectively, and are 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 its deferred compensation plan liabilities.

Derivative Instruments Designated as Cash Flow Hedges

1 unchanged sentence

Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income (loss) and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions.

Settlement amounts related to derivatives designated as cash flow hedges are presented within operating activities on the consolidated statement of cash flows.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company’s fixed interest rate swaps are considered over-the-counter derivatives, and their fair value is calculated using a standard pricing model for interest rate swaps with contractual terms for maturities, amortization and interest rates.

1 unchanged sentence

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.

See Note 13—Derivative Instruments Designated as Cash Flow Hedges for further discussion on the Company’s derivative instruments designated as cash flow hedges.

Operating Cycle

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Customer-funded research and development activities performed under customer contracts are charged directly to cost of revenues for those particular contracts.

Investments in Equity Securities

The Company invests in certain companies that advance or develop new technologies applicable to its business.

The Company also occasionally forms joint ventures as a part of its investment strategy for the purpose of bidding and executing on specific projects.

Each investment is evaluated for consolidation under the variable interest entities ("VIEs") model and/or the voting interest model.

The results of these investments are not material to the consolidated financial statements for the periods presented.

The Company applies the equity method of accounting to its unconsolidated investments when it has the ability to exercise significant influence over the entity and recognizes its proportionate share of the entities’ net income or loss within "Other operating income" on the consolidated statements of income.

Equity investments in entities over which the Company does not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost or cost net of other-than-temporary impairments.

Accounting Standards Updates

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.

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The standard includes amendments that enhance annual income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The standard is effective for fiscal years beginning after December 15, 2024.

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.

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

The amendments can be applied on a prospective or retrospective basis.

The Company plans to adopt this standard in fiscal 2026 and is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Amongst other amendments, the standard requires annual and interim disclosures of significant segment expenses that are regularly provided to the CODM, and interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

This standard does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

The Company plans to adopt the annual disclosure in fiscal 2025 and the interim disclosure in fiscal 2026 and is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In September 2022, the FASB issued ASU No.

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , 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.

Early adoption is permitted.

The Company adopted the requirements of ASU 2022-04 effective the first day of fiscal 2024.

The Company maintains a supplier finance program through a financial institution in which participating suppliers, at their sole discretion, may enroll with the financial institution to finance at a discounted price one or more payment obligations of the Company prior to their scheduled due dates.

Payment obligations outstanding under the Company’s supplier finance program are presented within "Accounts payable" on the consolidated balance sheets and were immaterial as of February 2, 2024.

During the twelve months ended February 2, 2024, total payment obligations financed and financed obligations paid under the Company’s supplier finance program were immaterial.

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.

The dilutive effect of outstanding stock options and other stock-based awards is computed using the treasury stock method.

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,

2024 February 3,

2023 January 28,

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

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.

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

As of February 2, 2024, the Company has repurchased approximately 20.3 million shares of its common stock under the plan.

6 unchanged sentences

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

2023 January 28,

2024 February 3,

2023 January 28,

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Disaggregated revenues by customer were as follows:

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

1 unchanged sentence

Other federal government agencies 3,450 3,750 3,671

Commercial, state and local 148 145 153

Commercial, state and local governments and international

Total $ 7,444 $ 7,704 $ 7,394

Disaggregated revenues by contract type were as follows:

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

1 unchanged sentence

Time and materials ("T&M")

1,463 1,464 1,473

Firm-fixed price ("FFP")

1,454 1,958 1,901

Total $ 7,444 $ 7,704 $ 7,394

2 unchanged sentences

Disaggregated revenues by prime versus subcontractor were as follows:

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

6 unchanged sentences

Balance Sheet line item February 2,

2023 January 28,

2024 February 3,

(in millions)

5 unchanged sentences

Contract liabilities - non-current Other long-term liabilities $ 2 $ 4

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

(1) Net of allowance of $ 3 million and $ 4 million as of February 2, 2024 and February 3, 2023, respectively.

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.

During fiscal 2023 and 2022, the Company recognized revenues of $ 46 million and $ 75 million relating to amounts that were included in the opening balance of contract liabilities as of January 28, 2022 and January 29, 2021, respectively.

During fiscal 2024 and 2023, the Company recognized revenues of $ 40 million and $ 46 million relating to amounts that were included in the opening balance of contract liabilities as of February 3, 2023 and January 28, 2022, respectively.

Deferred Costs

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Balance Sheet line item February 2,

2023 January 28,

2024 February 3,

(in millions)

Pre-contract costs Other current assets $ 9 $ 7

Fulfillment costs - non-current Other assets 11 16

Prepaid contract costs

Prepaid expenses

Fulfillment costs

Other assets 7 11

Costs to obtain Other assets $ 6 $ 5

Pre-contract costs of $ 9 million and $ 6 million were expensed during fiscal 2024 and 2023, respectively.

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

Prepaid contract costs of $ 46 million and $ 40 million were amortized during fiscal 2024 and 2023, respectively.

Fulfillment costs of $ 5 million were amortized during fiscal 2024 and 2023.

Costs to obtain of $ 1 million were amortized during fiscal 2024 and 2023.

Remaining Performance Obligations

Remaining performance obligations ("RPO") represent the transaction price of exercised contracts (both funded and unfunded) less inception to date revenue recognized.

RPO does not include unexercised option periods and future task orders expected to be awarded under IDIQ contracts.

As of February 2, 2024, the Company had approximately $ 5.5 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.

The Company expects to recognize revenue on approximately 79 % of the remaining performance obligations over the next 12 months and approximately 92 % over the next 24 months, with the remaining recognized thereafter.

3 unchanged sentences

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.

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 funded the transaction from increased borrowings (as discussed in Note 12—Debt Obligations) and cash on hand.

During 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.

1 unchanged sentence

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

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 intangible assets consist of customer relationships of $ 97 million and backlog of $ 17 million and are being amortized beginning on July 2, 2021 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.

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

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

On March 13, 2020, the Company completed the acquisition of Unisys Federal, a former operating unit of Unisys Corporation.

Unisys Federal provides infrastructure modernization, cloud migration, managed services, and enterprise IT-as-a-service solutions to U.S.

federal civilian agencies and the Department of Defense.

The Company purchased substantially all of the assets and liabilities of Unisys Federal for an aggregate purchase price of $ 1.2 billion.

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.

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.

An income approach was used to estimate fair value, involving estimates for future costs to complete the remaining performance under the contract as well as a market participant profit rate of return.

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.

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.

As of February 2, 2024, the Company has recognized $ 13 million of post-combination compensation expense associated with employee retention agreements.

Note 5—Divestitures:

FSA Amendment

On February 4, 2023, the Company sold 0.1 % of its 50.1 % majority ownership interest in FSA to its sole joint venture partner for a nominal amount.

In conjunction with the sale, the Company remeasured its retained investment in FSA to a fair value of $ 14 million.

The equity method investment is included within "Other assets" on the consolidated balance sheets.

The remeasurement resulted in a gain of $ 7 million which is included within "Gain on divestitures, net of transaction costs" on the consolidated statements of income and is reflected within "Gain on divestitures" on the consolidated statements of cash flows.

The Company estimated the fair value of its retained investment in FSA based on Level 3 inputs of the fair value hierarchy.

The Company used the income approach which involves the use of estimates and assumptions, including revenue growth rates, projected operating margins, discount rates and terminal growth rates.

Sale of Logistics and Supply Chain Management Business

On May 6, 2023, the Company closed the sale of its logistics and supply chain management business ("Supply Chain Business") to ASRC Federal Holding Company, LLC ("ASRC Federal") for $ 356 million in cash.

The sale enables the Company to focus its resources on long-term strategic growth areas.

The Company recorded a pre-tax gain of $ 233 million, net of $ 7 million of transaction costs, which is included within "Gain on divestitures, net of transaction costs" on the consolidated statements of income in fiscal 2024.

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 the first day of fiscal 2020.

They include adjustments for intangible asset amortization;

interest expense and debt issuance costs on long-term debt;

acquisition and other transaction costs;

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 the first day of fiscal 2020, nor is it indicative of future operating results.

The disposition does not represent a strategic shift in operations that will have a material effect on the Company's operations and financial results, and accordingly has not been presented as discontinued operations.

The major classes of assets and liabilities divested were as follows:

(in millions)

Receivables, net $ 46

Inventories, net

Prepaid expenses

Operating lease ROU assets

Total assets divested $ 181

Accounts payable

Accrued payroll and employee benefits

Other accrued liabilities

Operating lease liabilities 1

Total liabilities divested $ 65

In connection with the sale of the Supply Chain Business, the Company and ASRC Federal entered into certain transition services agreements pursuant to which the Company will provide certain services to ASRC Federal through approximately the first quarter of fiscal 2025 on a cost reimbursable basis.

The transition services include certain IT, finance and other services necessary to support the transition of the sale.

Note 6—Restructuring and Impairment :

Restructuring and impairment costs recognized were as follows:

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

Statements of Income line item

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

2024 Restructuring:

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

Severance and other employee costs SG&A

Other associated costs SG&A 13 — —

2023 Restructuring:

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

Other associated costs SG&A — 14 —

2022 Restructuring:

Severance and other employee costs SG&A — — 4

2019 Restructuring:

Severance and other employee costs Acquisition and integration costs — — 2

Other associated costs Acquisition and integration costs — — 4

Other associated costs SG&A — — 1

Total restructuring costs 23 20 1

3 unchanged sentences

Total restructuring costs and impairment $ 23 $ 24 $ 19

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.

In fiscal 2024, the Company initiated restructuring activities associated with the reorganization of its business sectors into business groups and the optimization and consolidation of certain facilities (collectively, the “2024 Restructuring”).

As part of the 2024 Restructuring, the Company incurred severance and other employee costs,

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

consulting costs and costs related to the consolidation and exit of certain facilities.

Other employee costs include the impact of accelerated stock compensation expense for terminated employees.

The 2024 Restructuring activities are expected to be completed in fiscal 2025.

During fiscal 2024, cash paid for consulting costs was $ 1 million.

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

The remaining liability for consulting costs ($ 2 million) and severance will be paid in fiscal 2025.

The Company completed the 2023 Restructuring activities in fiscal 2024.

During fiscal 2024 and 2023, cash paid for consulting costs was $ 2 million and $ 5 million, respectively, and there was no remaining liability for the 2023 Restructuring as of February 2, 2024.

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

The 2022 Restructuring included total restructuring costs of $ 1 million which were fully paid as of January 28, 2022.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In fiscal 2021, the Company initiated and completed restructuring activities (the "2021 Restructuring") associated with an internal reorganization.

As of January 29, 2021, the remaining liability associated with this restructuring was $ 4 million.

During fiscal 2022, the Company made cash payments to fully settle this liability.

In fiscal 2019, the Company initiated restructuring activities (the "2019 Restructuring") to realize cost synergies from the integration of Engility Holdings, Inc.

(collectively with its consolidated subsidiaries, "Engility," which we acquired on January 14, 2019), which included employee termination costs and other costs associated with the optimization and consolidation of facilities.

The 2019 Restructuring included total restructuring costs of $ 51 million, comprised of $ 40 million for severance and other employee costs and $ 11 million of other associated costs, such as contract terminations and costs incurred for facility consolidation.

Cash paid for severance and other employee costs was $ 3 million and $ 12 million during fiscal 2021 and 2020, respectively.

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 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.

During fiscal 2024, the Company's impairment charges for certain assets associated with exited facilities were immaterial .

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

Note 7—Goodwill and Intangible Assets

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.

Goodwill had a carrying value of $ 2,851 million and $ 2,911 million as of February 2, 2024 and February 3, 2023, respectively.

Goodwill decreased $ 60 million compared to February 3, 2023 due to the sale of the Supply Chain Business (see Note 5—Divestitures).There were no impairments of goodwill during the periods presented.

Intangible Assets

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

February 3, 2023 January 28, 2022

February 2, 2024 February 3, 2023

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

1 unchanged sentence

Customer relationships $ 1,462 $ ( 574 ) $ 888 $ 1,467 $ ( 466 ) $ 1,001

Backlog — — — 17 ( 10 ) 7

Developed technology 10 ( 4 ) 6 10 ( 2 ) 8

9 unchanged sentences

Thereafter 354

Total $ 1,009

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors.

Note 8—Property, Plant, and Equipment:

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

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

Depreciation or

1 unchanged sentence

Estimated useful lives (in years) February 2,

2023 January 28,

2024 February 3,

(in millions)

12 unchanged sentences

Depreciation and amortization expense for property, plant, and equipment was $ 26 million, $ 32 million and $ 37 million in fiscal 2024, 2023 and 2022, respectively.

The change in accumulated depreciation and amortization from fiscal 2023 to fiscal 2024 is primarily due to write offs of fully depreciated assets and divestitures, partially offset by capital expenditures during the year.

Note 9—Stock-Based Compensation :

Plan Summaries

Certain of the Company’s employees participate in the following four stock-based compensation plans:

“2013 Equity Incentive Plan” (EIP), “Management Stock Compensation Plan,” “2013 Employee Stock Purchase Plan” (ESPP), and the "2012 Long Term Performance Plan" (LTPP), which are herein referred to together as the “Plans.” The Company issues new shares on the vesting of stock awards or exercise of stock options under these Plans.

As of February 2, 2024, the Company had stock-based compensation awards outstanding under the following plans:

“2023 Equity Incentive Plan” ("2023 EIP"), “2013 Equity Incentive Plan” ("2013 EIP"), “Management Stock Compensation Plan”, and the “Amended and Restated 2013 Employee Stock Purchase Plan” ("ESPP") which are herein referred to together as the “Plans.” The Company issues new shares on the vesting of stock awards or exercise of stock options under these Plans.

During fiscal year 2024, the Company terminated the Third Amended and Restated 2012 Long Term Performance Plan ("LTPP") and deregistered all remaining unissued shares thereunder.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The EIP provides the Company’s employees and directors the opportunity to receive various types of stock-based compensation and cash awards.

On June 7, 2023, the Company’s stockholders approved the 2023 EIP.

The 2023 EIP authorized 2.2 million new shares of the Company’s common stock, par value $ 0.0001 per share, to be issued as various types of stock-based compensation and cash awards.

Awards previously issued and outstanding under the 2013 EIP will continue to remain outstanding and be subject to the terms of the 2013 EIP.

As of February 2, 2024, the total authorized shares of common stock for issuance under the 2023 EIP is 2.2 million.

The 2023 EIP and 2013 EIP both provide the Company’s employees and directors the opportunity to receive various types of stock-based compensation and cash awards.

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 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.

Vesting stock awards granted in fiscal 2020 and thereafter generally vest 33 %, 33 % and 33 % after one, two and three years, respectively.

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.

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.

Stock-based awards generally provide for accelerated vesting if there is a change in control (as defined in the EIP).

As of February 2, 2024, the Company has unvested stock and performance share awards under the 2023 EIP and 2013 EIP and outstanding stock options under the 2013 EIP.

Vesting stock awards granted in fiscal 2020 and thereafter generally vest equally over three years, while vesting stock awards granted prior to fiscal 2020 generally vest equally over four years.

Stock options generally become exercisable evenly over three years.

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

The requisite service period for stock-based awards is accelerated for employees meeting certain retirement eligibility conditions.

Certain officers are eligible for continued vesting of previously granted awards upon termination of employment or voluntary retirement, subject to the conditions set forth in the Company’s Executive Severance, Change in Control and Retirement Policy effective July 1, 2020.

Stock-based awards generally provide for accelerated vesting if there is a change in control (as defined in the 2023 EIP and 2013 EIP, as applicable).

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

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 upon satisfaction of certain requirements.

2 unchanged sentences

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.

For performance-based stock awards granted in fiscal 2023 and 2024, 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.

7 unchanged sentences

The Management Stock Compensation Plan does not provide for a maximum number of shares available for future issuance.

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.

On June 7, 2023, the Company’s stockholders approved an amended and restated ESPP which limits the total number of shares reserved for issuance to 2.0 million and extends the plan’s expiration date from September 26, 2023 to the earlier of its termination by the Board of Directors or the issuance of all shares available for issuance thereunder.

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

During the three fiscal years ended February 2, 2024, 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.

As of February 2, 2024, 1.9 million shares of the Company’s common stock are authorized for issuance under the ESPP.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2 unchanged sentences

Vesting stock awards under the LTPP have forfeitable rights to dividends.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Expense and Related Tax Benefits Recognized

Stock-based compensation expense and related tax benefits recognized under the Plans were:

2023 January 28,

2024 February 3,

2023 January 28,

1 unchanged sentence

Stock-based compensation expense:

Stock options $ — $ 1 $ 3

Vesting stock awards $ 45 $ 38 $ 36

Performance share awards 23 10 9

Stock options — — 1

Total stock-based compensation expense $ 68 $ 48 $ 46

Tax benefits recognized from stock-based compensation $ 25 $ 16 $ 15

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 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)

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

Options granted — —

Options forfeited or expired — —

Options exercised ( 0.2 ) 68.89

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:

2023 January 28,

2022 January 29,

(in millions)

Cash received from exercises of stock options $ — $ 1 $ —

Stock exchanged at fair value upon exercises of stock options $ 1 $ 1 $ 1

Tax benefits from exercises of stock options $ 1 $ 1 $ 2

Total intrinsic value of options exercised $ 8 $ 4 $ 8

The fair value of stock option awards granted under the Company’s plan were valued using the Black-Scholes option-pricing model based on the following assumptions:

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

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.

Treasury bond with a maturity equal to the expected term of the stock option on the date of grant.

Dividend Yield --The dividend yield assumed over the expected term of the option is calculated based on the most recently announced dividend as of the grant date.

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

Weighted-average grant-date fair value $ 17.54

Expected term (in years) 3.8

Expected volatility 35.5 %

Risk-free interest rate 0.3 %

Dividend yield 1.8 %

Stock-based compensation expense for stock options was not material for fiscal 2024 and 2023.

Vesting Stock Awards

2 unchanged sentences

(in millions)

Unvested at January 28, 2022 1.0 $ 80.78

Unvested at February 3, 2023 1.0 $ 89.60

Awards granted 0.4 108.64

2 unchanged sentences

Unvested at February 2, 2024 0.9 $ 100.51

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 grant date fair value of vesting stock awards is based on the closing market price of the Company’s common 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 2024, 2023 and 2022 was $ 108.64 , $ 95.43 and $ 83.65 , respectively.

7 unchanged sentences

(in millions)

Unvested at January 28, 2022 0.2 $ 78.13

Unvested at February 3, 2023 0.3 $ 91.63

Awards granted 0.1 116.25

8 unchanged sentences

The weighted-average grant date fair value of the performance share awards granted in fiscal 2024, 2023 and 2022 was $ 116.25 , $ 100.94 and $ 80.57 , 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 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 grant date fair value of performance shares 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 27.35 %, 38.02 %, and 39.73 % for fiscal 2024, 2023 and 2022, respectively, and a risk-free interest rate of 3.68 %, 2.44 % and 0.32 % for fiscal 2024, 2023 and 2022, respectively.

3 unchanged sentences

The fair value of performance share awards that vested in fiscal 2024 was $ 18 million.

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 2, 2024 there was $ 14 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.

Stock Options

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

Stock option activity for the year ended February 2, 2024 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)

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

Options exercised ( 0.3 ) 73.17

Outstanding at February 2, 2024 0.1 $ 77.85 2.2 $ 6

Exercisable at February 2, 2024 0.1 $ 77.85 2.2 $ 6

Vested and expected to vest at February 2, 2024 0.1 $ 77.85 2.2 $ 6

As of February 2, 2024, the unrecognized compensation cost, net of estimated forfeitures, related to stock options was not material.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2024 February 3,

2023 January 28,

(in millions)

Cash received from exercises of stock options $ — $ — $ 1

Stock exchanged at fair value upon exercises of stock options $ 1 $ 1 $ 1

Tax benefits from exercises of stock options $ 1 $ 1 $ 1

Total intrinsic value of options exercised $ 9 $ 8 $ 4

Note 10—Retirement Plans :

4 unchanged sentences

The Company contributions expensed for defined contribution plans were $ 82 million, $ 80 million and $ 79 million in fiscal 2024, 2023 and 2022, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation Plans

12 unchanged sentences

Defined Benefit Plans

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:

In connection with the acquisition of Engility in fiscal 2019, the Company 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").

Membership and participants' calculated pension benefit are frozen in the Pension Plan and membership in the RHRA Benefit Plan is frozen.

Our funding policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974.

The Company's funding policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974.

Additional amounts are contributed to assure that plan assets will be adequate to provide retirement benefits.

During fiscal 2025, the Company expects to contribute $ 1 million to fund the RHRA Benefit Plan.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During fiscal 2024, the Company recognized a net gain of $ 1 million on its retirement plans within other comprehensive income due to an increase in discount rates and the difference between actual investment return and expected return.

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

2 unchanged sentences

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.

During fiscal 2021, the Company recognized a net gain of $ 2 million on its retirement plans within other comprehensive loss.

The gain was primarily comprised of a $ 3 million gain due to assumption changes other than discount rates, $ 2 million gain from the excess in actual investment return over the expected return, and $ 1 million in settlement charges, partially offset by a $ 4 million increase in liability caused by a decrease in the discount rates.

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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net Periodic Benefit Cost

1 unchanged sentence

Pension Plan RHRA Benefit Plan

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

February 2, 2024 February 3, 2023 January 28, 2022 February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

1 unchanged sentence

Expected return on plan assets ( 2 ) ( 3 ) ( 3 ) — — —

Settlement cost — — 1 — — —

Amortization of (gain) loss

— — — ( 1 ) — —

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

2 unchanged sentences

Pension Plan RHRA Benefit Plan

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

February 2, 2024 February 3, 2023 February 2, 2024 February 3, 2023

(in millions)

12 unchanged sentences

Unfunded status $ 4 $ 6 $ 10 $ 10

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the consolidated balance sheets consist of:

Pension Plan RHRA Benefit Plan

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

February 2, 2024 February 3, 2023 February 2, 2024 February 3, 2023

(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.

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

The assumed long-term rate of return on plan assets, which is the average return expected on the funds invested or to be invested to provide future benefits to pension plan participants, is determined by an annual review of historical returns on plan assets.

3 unchanged sentences

Pension Plan RHRA Benefit Plan

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

February 2, 2024 February 3, 2023 January 28, 2022 February 2, 2024 February 3, 2023 January 28, 2022

Discount rate 5.16 % 4.94 % 3.13 % 5.08 % 4.85 % 2.78 %

7 unchanged sentences

According to the plan's investment policy, performance will be evaluated across all time periods, with a particular emphasis on longer-term returns relative to associated peers and benchmarks.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

Asset Category Fair Value Hierarchy February 2, 2024 February 3, 2023

(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)

3 unchanged sentences

Balance at January 28, 2022

Balance at February 3, 2023

Balance at February 2, 2024

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

13 unchanged sentences

Note 11—Income Taxes :

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.

Substantially all of the Company’s income before income taxes for the fiscal year ended February 2, 2024 and the two preceding fiscal years is subject to taxation in the United States.

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

2023 January 28,

2024 February 3,

2023 January 28,

6 unchanged sentences

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes for each of the periods presented was as follows:

2023 January 28,

2024 February 3,

2023 January 28,

5 unchanged sentences

Excess tax benefits for stock-based compensation ( 4 ) ( 3 ) ( 3 )

Non-deductible goodwill

Foreign-derived intangible income ( 22 ) ( 12 ) ( 6 )

Other — 3 ( 1 )

Total $ 143 $ 72 $ 79

Effective income tax rate 23.1 % 19.3 % 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.

The effective income tax rate for fiscal 2024 is higher than the rate in fiscal 2023 primarily due to the gain from the divestiture of the Supply Chain Business and the associated non-deductible goodwill, along with an increase in non-deductible compensation related to the Company's reorganization and executive transition.

These expenses are partially offset by additional deductions for foreign-derived intangible income and the expiration of an uncertain tax position.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

2 unchanged sentences

Deferred tax assets (liabilities) were comprised of:

2023 January 28,

2024 February 3,

(in millions)

5 unchanged sentences

Fixed asset basis difference 1 2

Deferred revenue — 17

Lease liability 48 50

Research and development expenditures 159 152

Accumulated other comprehensive loss — 13

Valuation allowance ( 8 ) ( 8 )

2 unchanged sentences

Payroll tax deferral ( 2 ) ( 2 )

Fixed asset basis difference — ( 3 )

Purchased intangible assets ( 287 ) ( 264 )

2 unchanged sentences

Total deferred tax liabilities ( 366 ) ( 333 )

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.

Net deferred tax (liabilities) assets

$ ( 28 ) $ 14

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

The changes in the unrecognized tax benefits, excluding accrued interest and penalties, were:

2023 January 28,

The changes in the unrecognized tax benefits were:

2024 February 3,

2023 January 28,

3 unchanged sentences

Additions for tax positions related to the current year 21 75 10

Reductions for tax positions related to prior years

Reductions for prior year tax positions related to statute expiration ( 8 ) — —

Unrecognized tax benefits at end of the year $ 158 $ 78 $ 66

Unrecognized tax benefits at end of the year, excluding accrued interest and penalties

$ 117 $ 158 $ 78

Unrecognized tax benefits that, if recognized, would affect the effective income tax rate $ 111 $ 90 $ 70

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

Accrued interest and penalties

In fiscal 2024, unrecognized tax benefits decreased from $ 158 million to $ 117 million.

This decline was primarily driven by a $ 59 million decrease, with a corresponding decrease in net deferred tax assets, resulting from our analysis of Internal Revenue Service ("IRS") Notice 2023-63 released on September 8, 2023 indicating that certain expenditures related to the performance of cost-type contracts are not subject to capitalization for tax purposes.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 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.

The Company’s tax returns for fiscal years 2016 through 2022 remain subject to examination by the IRS and various other tax jurisdictions.

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

While the Company believes it has recorded 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.

The Company’s tax returns for fiscal years 2016 through 2019 and 2021 through 2023 remain subject to examination by the IRS and various other tax jurisdictions.

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

3 unchanged sentences

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

February 3, 2023 January 28, 2022

February 2, 2024 February 3, 2023

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

(in millions)

(dollars in millions)

Term Loan A Facility due June 2027 6.43 % 6.55 % $ 1,199 $ ( 4 ) $ 1,195 $ 1,230 $ ( 5 ) $ 1,225

Term Loan A Facility due October 2023

— % — % $ — $ — $ — $ 785 $ ( 5 ) $ 780

Term Loan A2 Facility due October 2023 — % — % — — — 100 — 100

Term Loan B Facility due October 2025 7.31 % 7.51 % 328 ( 1 ) 327 488 ( 3 ) 485

7 unchanged sentences

$ 2,032 $ ( 10 ) $ 2,022 $ 2,359 $ ( 16 ) $ 2,343

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.

As of February 2, 2024, the Company has a $ 2.7 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 (the "Revolving Credit Facility").

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

The Revolving Credit Facility is available to the Company through June 2027 and there is no balance outstanding as of February 2, 2024.

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

As of February 2, 2024, the Company was in compliance with the covenants under its Credit Facility.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company's Third Amended and Restated Credit Agreement ("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 4.00 to 1.00, 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 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).

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.

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

The Term Loan B2 Facility due March 2027 is subject to the same mandatory prepayments as the Company’s existing term loans under the Credit Facility and is subject to the same covenants and events of default as the Company's Term Loan B Facility due October 2025.

During fiscal 2021, the Company made voluntary principal prepayments on the Term Loan B2 Facility due March 2027 of $ 325 million.

The Company wrote off debt issuance costs associated with the voluntary principal prepayments of $ 8 million.

On March 13, 2020, to partially finance the acquisition of Unisys Federal, the Company issued $ 400 million of unsecured 4.875 % Senior Notes due 2028 (the Senior Notes) through a private offering.

Interest is payable semi-annually on April 1 and October 1 of each year, commencing on October 1, 2020, and the principal is due on April 1, 2028.

The Company incurred $ 27 million of debt issue costs associated with the Second Amendment, the issuance of the Senior Notes, and an undrawn bridge facility that terminated upon the consummation of the acquisition of Unisys Federal.

The Company deferred $ 22 million of financing fees and recognized $ 5 million of expenses associated with the undrawn bridge facility, which was included in interest expense.

Deferred financing fees are amortized to interest expense utilizing the effective interest method.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company's Senior Notes due 2028 (the "Senior Notes") have 4.875 % interest payable semi-annually on April 1 and October 1 of each year, and the principal is due April 2028.

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 %.

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 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—Acquisitions).

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).

5 unchanged sentences

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).

The scheduled principal repayments for the Term Loan Facilities may be further reduced or eliminated by annual mandatory prepayments of a portion of the Company’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.

During fiscal 2024, the Company made scheduled principal repayments of $ 31 million on the Term Loan A Facility due June 2027 and voluntary principal prepayments of $ 160 million and $ 90 million on the Term Loan B Facility due October 2025 and the Term Loan B2 Facility due March 2027, respectively.

During fiscal 2023, in addition to the voluntary principal prepayment mentioned above associated with the Fifth Amendment, the Company made voluntary principal prepayments on the Term Loan B Facility due October 2025 of $ 90 million.

The Company wrote off deferred debt issuance costs of

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

$ 2 million and $ 3 million during fiscal 2024 and 2023, respectively, associated with voluntary principal prepayments which were recognized in interest expense.

During fiscal 2024 and fiscal 2023, the Company borrowed and repaid $ 160 million and $ 410 million under the Revolving Credit Facility, respectively.

Maturities of long-term debt as of February 2, 2024 are:

1 unchanged sentence

(in millions)

Thereafter 400

Total principal payments $ 2,109

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 13—Derivative Instruments Designated as Cash Flow Hedges :

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

Fair Value of Asset (Liability) (1) at

Fair Value of Asset (1) at

Notional Amount at February 2, 2024 Pay Fixed Rate Receive Variable Rate Settlement and Termination February 2,

2023 January 28,

2024 February 3,

(in millions) (in millions)

3 unchanged sentences

(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.

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 income (loss) and the amounts reclassified from accumulated other comprehensive income (loss) into earnings for the current and comparative periods presented.

See Note 14—Changes in Accumulated Other Comprehensive Income by Component 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.

During fiscal 2024, Interest Rate Swaps #2 matured which had a notional value of $ 450 million upon maturity.

The Company estimates that it will reclassify $ 13 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following February 2, 2024.

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.

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

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.

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

Note 14—Changes in Accumulated Other Comprehensive Income by Component :

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

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

Other comprehensive (loss) income before reclassifications ( 55 ) 1 ( 54 )

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive loss 34 — 34

Income tax impact ( 17 ) ( 1 ) ( 18 )

Net other comprehensive (loss) income ( 19 ) 2 ( 17 )

Net other comprehensive income

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

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Net other comprehensive income 56 3 59

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

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

Other comprehensive income before reclassifications 14 2 16

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

Amounts reclassified from accumulated other comprehensive income

( 24 ) — ( 24 )

Income tax impact 3 ( 1 ) 2

Net other comprehensive income 56 3 59

Net other comprehensive loss

( 7 ) 1 ( 6 )

Balance at February 2, 2024 $ 11 $ 5 $ 16

(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.

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

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

Note 15—Sale of Receivables :

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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 February 3, 2023 and January 28, 2022.

The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of February 2, 2024 and February 3, 2023.

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

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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.

During fiscal 2024, 2023 and 2022, the Company incurred purchase discount fees of $ 9 million, $ 8 million and $ 2 million, respectively, which are presented in "Other expense (income), net" on the consolidated statements of income.

MARPA Facility activity consisted of the following:

February 3, 2023 January 28, 2022

February 2, 2024 February 3, 2023

(in millions)

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Remaining sold receivables $ 151 $ 220

(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 February 3, 2023 and January 28, 2022.

(1) For fiscal 2024 and 2023, the Company recorded a net decrease of $ 45 million and a net increase of $ 50 million to cash flows from operating activities, respectively, from sold receivables.

(2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of February 2, 2024 and February 3, 2023.

This balance is included in "Accounts payable" on the consolidated balance sheets.

Note 15— Leases:

Note 16—Operating Leases :

Total operating lease cost is comprised of the following:

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

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Total lease cost $ 71 $ 80 $ 117

Lease cost and sublease income are included primarily in cost of revenues and SG&A, except for $ 12 million and $ 1 million of impairment of right of use assets for fiscal 2022 and 2021, respectively, that are included in acquisition and integration costs.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Lease cost and sublease income are included primarily in cost of revenues and SG&A, except for $ 12 million of impairment of right of use assets for fiscal 2022 that are included in acquisition and integration costs.

The Company's ROU assets and lease liabilities consisted of the following:

Balance Sheet line item February 3, 2023 January 28, 2022

Balance Sheet line item February 2, 2024 February 3, 2023

(in millions)

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Total operating lease liabilities $ 186 $ 194

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other supplemental operating lease information consists of the following:

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

February 2, 2024 February 3, 2023 January 28, 2022

(in millions)

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Present value of operating lease liabilities $ 186

The weighted-average remaining lease term and the weighted-average discount rate was 5 years and 3.5 % as of February 3, 2023, respectively, and 5 years and 3.1 % as of January 28, 2022, respectively.

The weighted-average remaining lease term and the weighted-average discount rate was 5 years and 4.3 % as of February 2, 2024, respectively, and 5 years and 3.5 % as of February 3, 2023, respectively.

As of February 2, 2024, the Company had rental commitments of $ 7 million for facility leases that have not yet commenced.

These operating leases are expected to commence in fiscal 2025 and have a weighted-average lease term of approximately 8 years.

During fiscal 2023, the Company recognized revenue of $ 23 million from the exercise of purchase options under certain lessor arrangements.

Operating lease income was $ 2 million, $ 18 million and $ 40 million for fiscal 2023, 2022 and 2021, respectively.

As of February 3, 2023, the Company's remaining lessor arrangements were immaterial .

During fiscal 2024 and 2023, revenue recognized from the exercise of purchase options under certain lessor arrangements was immaterial and $ 23 million, respectively.

Operating lease income was immaterial for fiscal 2024, but was $ 2 million and $ 18 million for fiscal 2023 and 2022, respectively.

Note 17—Business Segment Information :

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

We define our operating sectors based on the way our chief operating decision maker (CODM), currently our Chief Executive Officer, manages the operations for the purpose of allocating resources and assessing performance.

The Company is organized as a matrix comprised of two customer facing operating sectors supported by the enterprise organizations, including the Innovation Factory.

The Company defines its operating sectors based on the way the CODM, currently the Company's CEO, manages the operations for the purpose of allocating resources and assessing performance.

The two operating sectors are responsible for customer relationships, program management, delivery and execution, and, in collaboration with the enterprise organizations, manage the development of the Company's offerings, solutions and capabilities which support the Company's four strategic pivots — portfolio, go-to-market, culture and brand.

The Company's Innovation Factory develops superior enterprise-class solutions which are delivered to its customers as stand-alone solutions or integrated with and aligned to the Company's product offerings to meet complex customer needs and accelerate digital transformation.

The Innovation Factory includes designated teams focused on AI, application development, network services, platforms and cloud, and cyber.

It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions quickly and works with customers to enhance solutions going forward.

The Company's operating sectors are aggregated into one reportable segment because they have similar economic characteristics and meet the other aggregation criteria including similarities in the nature of the services provided, methods of service delivery, customers served and the regulatory environment in which they operate.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The two operating sectors are responsible for customer relationships, business development and program management, and delivery and execution, while the enterprise solutions and operations organization manages the development of our offerings, solutions and capabilities.

federal government.

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

Effective February 3, 2024, the first day of fiscal 2025, the Company completed a business reorganization which replaces its current two operating sectors with five customer facing business groups supported by the enterprise organizations, including the Innovation Factory.

The reorganization is designed to enhance management's involvement with customers and advance the Company’s innovation and go-to-market strategy.

The new business group leaders will report directly to the Company's CEO, who will continue to be the CODM.

The Company is currently evaluating the impact of the reorganization on its segment reporting.

Substantially all of the Company’s revenues and tangible long-lived assets are generated and located in the United States.

As such, financial information by geographic location is not presented.

In each of fiscal 2023, 2022 and 2021, 98 % of our total revenues were attributable to prime contracts with the U.S.

In each of fiscal 2024, 2023 and 2022, 98 % of the Company's total revenues were attributable to prime contracts with the U.S.

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

Note 17— Legal Proceedings and Commitments and Contingencies:

Note 18—Legal Proceedings and Other Commitments and Contingencies :

Legal Proceedings

The Company is involved in various claims and lawsuits arising in the normal conduct of its business, none of which the Company’s management believes, based on current information, is expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

In April 2022, the Company received a Federal Grand Jury Subpoena in connection with a criminal investigation being conducted by the U.S.

In April 2022 and October 2023, the Company received Federal Grand Jury Subpoenas in connection with a criminal investigation being conducted by the U.S.

Department of Justice, Antitrust Division ("DOJ").

As required by the subpoena, the Company has provided the DOJ with a broad range of documents related to the investigation, and the Company’s collection and production process remains ongoing.

As required by the subpoenas, the Company has provided the DOJ with a broad range of documents related to the investigation, and the Company’s collection and production process remains ongoing.

The Company is fully cooperating with the investigation.

At this time, it is not possible to determine whether the Company will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoena was issued.

AAV Termination for Convenience

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Although the Company has recorded contract revenues based on an estimate of costs that the Company believes will be approved on final audit, the Company does not know the outcome of any ongoing or future audits.

If future completed audit adjustments exceed the Company’s reserves for potential adjustments, the Company’s profitability could be materially adversely affected.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

future completed audit adjustments exceed the Company’s reserves for potential adjustments, the Company’s profitability could be materially adversely affected.

As of February 2, 2024, the Company believes it has adequately reserved for estimated net amounts to be refunded to customers for potential adjustments for indirect cost audits and compliance with CAS.

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Note 19—Subsequent Events:

FSA Amendment

On February 4, 2023, the Company sold 0.1 % of its ownership interest in FSA to its sole joint venture partner for a nominal amount.

As a result of the sale and the corresponding amendment to the joint venture operating agreement, the Company will no longer control the joint venture as of the date of the transaction and will therefore account for its retained interest as an equity method investment from the date of the transaction.

Silicon Valley Bank

On March 10, 2023, it was announced that Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

As of March 10, 2023 , the Company held an immaterial amount of its cash and cash equivalents at SVB.

As of the date of this report, the Company regained access to all of its funds that were previously held in deposit accounts with SVB and has transferred substantially all funds to an alternative financial institution.

Agreement to Sell Logistics and Supply Chain Management Business

On March 23, 2023, SAIC executed a definitive agreement to sell its logistics and supply chain management business to ASRC Federal Holding Company, LLC (ASRC Federal), a subsidiary of Arctic Slope Regional Corporation, for $ 350 million of pre-tax cash proceeds, which allows us to advance our focus on long-term strategic growth areas.

The transaction is expected to close in the first half of fiscal 2024, subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals, and is expected to result in a gain.

Debt Refinancing

On February 8, 2024, the Company executed the Sixth Amendment to the Third Amended and Restated Credit Agreement ("Sixth Amendment"), which established a $ 510 million senior secured term loan credit facility ("Term Loan B3 Facility due February 2031").

The entire Term Loan B3 Facility due February 2031 was immediately borrowed by the Company and the proceeds were used to pay in full the outstanding principal balances under the Term Loan B Facility due October 2025 and Term Loan B2 Facility due March 2027.

Borrowings under the Term Loan B3 Facility due February 2031 amortize quarterly beginning on July 31, 2024 at 0.25 % of the original borrowed amount with the remaining unamortized balance due in full upon its maturity on February 8, 2031.

Borrowings will bear interest based on the Term SOFR or a base rate, plus an applicable margin of 1.875 % for Term SOFR loans and 0.875 % for base rate loans.

In the event any portion of the Term Loan B3 Facility due February 2031 is repaid prior to August 8, 2024 as a result of a Repricing Event (as defined in the Sixth Amendment), the Company will be required to repay a 1.00 % fee of the amount repaid.

After this initial six month period, the Term Loan B3 Facility due February 2031 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.

Transfer of Listing of Common Stock to The Nasdaq Stock Market LLC ("Nasdaq")

On February 20, 2024, the Company provided notice to the New York Stock Exchange (“NYSE”) that it intended to have its shares of common stock voluntarily delisted from the NYSE after the close of trading on March 4, 2024.

The Company’s common stock was authorized for listing on Nasdaq, and effective as of the opening of trading on March 5, 2024, the Company voluntarily transferred the listing of its shares of common stock from the NYSE to the Nasdaq.

The Company’s common stock will continue to trade under the symbol “SAIC."

Quarterly Dividend Declared

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

What changed 10-K

Item 9A. Controls and Procedures