Science Applications International Corp 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of 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 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 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 37 Table of Contents 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; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with GAAP; (iii) provide reasonable assurance that our receipts and expenditures are made only in accordance with the authorization of our management and directors; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting as of February 2, 2024 based on the framework established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management has assessed in its evaluation the effectiveness of our internal control over financial reporting as of February 2, 2024 and has concluded that our internal control over financial reporting was effective. Ernst & Young LLP, an independent registered public accounting firm, audited our consolidated financial statements included in this report and our internal control over financial reporting, and the firm’s report on our internal control over financial reporting are set forth below this report. Although our management, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, because of inherent limitations, our management does not expect that our internal controls over financial reporting will prevent or detect all errors and all fraud. Also, projections of any evaluation of effectiveness in such assessment to future periods are subject to the risk that controls may be inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. 38 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Science Applications International Corporation Opinion on Internal Control Over Financial Reporting We have audited Science Applications International Corporation's internal control over financial reporting as of 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) (the COSO criteria). In our opinion, Science Applications International Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of 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 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 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia March 20, 2024 39 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Item 9B. Other Information 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. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections No information is required in response to this item. 40 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Part III Item 10. Directors, Executive Officers and Corporate Governance 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 Toni Townes-Whitley 60 Chief Executive Officer since October 2023. Prior to this role, Ms. 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. Hilary L. Hageman 55 Executive Vice President, General Counsel and Corporate Secretary since July 2022. Ms. Hageman previously served as Senior Vice President and Deputy General Counsel at SAIC until 2019 when she became the General Counsel and Corporate Secretary of Cubic Corporation. Immediately prior to her return to SAIC, Ms. Hageman served as Executive Vice President, General Counsel and Corporate Secretary for a public satellite company primarily supporting the defense and aerospace industries. Ms. Hageman has also held other senior legal roles at CACI and at the U.S. Department of Defense. Prabu Natarajan 53 Executive Vice President and Chief Financial Officer (CFO) since January 2021. Prior to joining us, Mr. Natarajan was Vice President of Financial Planning and Merger and Acquisition for Northrop Grumman from January 2016 to December 2020. Mr. Natarajan joined Northrop Grumman in August 2011 and was also Vice President of Business Management and CFO for the Information Systems Sector from August 2014 to January 2016 and Vice President, Treasurer and Taxes from August 2011 to August 2014. Mr. Natarajan has held positions at The AES Corporation and PricewaterhouseCoopers LLP. Michelle A. 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. 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. Vincent P. DiFronzo 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. Mr. 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. Josh J. Jackson 48 Executive Vice President of the Army Business Group since February 2024. Mr. 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. 41 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Name of officer Age Position(s) with the Company and prior business experience David C. Ray 48 Executive Vice President of the Space and Intelligence Business Group since February 2024. Mr. 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. Barbara M. Supplee 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. This code applies to all executive officers and employees and forms the foundation of our corporate policies and procedures designed to promote ethical behavior in all aspects of our business. To obtain copies of the Code of Conduct, visit our website at www.saic.com and click on the links titled “Corporate Governance” then "Governance Documents" and then “Code of Conduct.” We intend to post on our website any material changes to or waivers from our code of business ethics. The information on our website is not incorporated by reference into and is not a part of this report. Item 11. Executive Compensation For information required by Item 11 with respect to executive compensation, see the information set forth under the captions “Compensation Discussion and Analysis,” “Executive Compensation” and “Corporate Governance” in the 2024 Definitive Proxy Statement, which information is incorporated by reference into this report. For information required by Item 11 with respect to compensation committee interlocks, insider participation, and the compensation committee report, see the information set forth under the captions “Corporate Governance” and "Compensation Discussion and Analysis" in the 2024 Definitive Proxy Statement, which information is incorporated by reference into this report. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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 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. 42 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION The following table provides the number of shares of our common stock to be issued, the weighted-average exercise price of the outstanding stock options and the number of shares remaining for future award grants as of February 2, 2024: Equity Compensation Plan Information Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (3) (a) (b) (c) Equity compensation plans approved by security holders 1,759,649 $ 77.85 4,068,734 Equity compensation plans not approved by security holders — — — Total 1,759,649 $ 77.85 4,068,734 (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 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. Item 13. Certain Relationships and Related Transactions, and Director Independence For information required by Item 13 with respect to certain relationships and related transactions and the independence of directors and nominees, see the information set forth under the caption “Corporate Governance” in the 2024 Definitive Proxy Statement, which information is incorporated by reference into this report. Item 14. Principal Accountant Fees and Services For information required by Item 14 with respect to principal accountant fees and services, see the information set forth under the caption “Audit Matters” in the 2024 Definitive Proxy Statement, which information is incorporated by reference into this report. 43 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Part IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of the report: 1. Financial Statements Our consolidated financial statements are attached hereto and listed on the Index to Consolidated Financial Statements set forth on page F-1 of this report. 2. Financial Statement Schedules Financial statement schedules are omitted because they are not applicable or the required information is shown in our consolidated financial statements or the notes thereto. 3. Exhibits Exhibit Number Description of Exhibit 2.1 Distribution Agreement dated September 25, 2013, between the Company (formerly SAIC Gemini, Inc.) and Leidos Holdings, Inc. (formerly SAIC, Inc.). Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2013. 2.2 Agreement and Plan of Merger, dated September 9, 2018, by and among Science Applications International Corporation, Inc., a Delaware corporation, Engility, a Delaware corporation, and Raptors Merger Sub, Inc., a Delaware corporation. (Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby agrees to supplementally furnish to the Securities and Exchange Commission upon request any omitted schedule or exhibit to the Agreement and Plan of Merger.) Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on September 10, 2018. 2.3 Asset Purchase Agreement, dated February 5, 2020, by and among Science Applications International Corporation, Inc., a Delaware corporation and Unisys Corporation, a Delaware corporation. Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K as filed with the SEC on February 6, 2020. 3.1 Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2013. 3.2 Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on March 29, 2023. 4.1 Description of Securities. 4.2 Indenture, dated March 13, 2020, by and among Science Applications International Corporation, the guarantors party thereto and U.S. Bank National Association, as trustee. Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2020. 10.1 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. 10. 2 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. 44 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Exhibit Number Description of Exhibit 10. 3 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. 10. 4 Third Amended and Restated Credit Agreement by and among SAIC, Citibank, as administrative agent and collateral agent, and certain other agents and lenders party thereto, dated October 31, 2018. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 5, 2018. 10. 5 First Amendment to the Third Amended and Restated Credit Agreement by and among SAIC, Citibank, as administrative agent and collateral agent, and certain other agents and lenders party thereto, dated February 19, 2020. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 24, 2020. 10. 6 Second Amendment, dated March 13, 2020, to the Third Amended and Restated Credit Agreement, dated October 31, 2018 by and among Science Applications International Corporation, Citibank, N.A., as administrative agent and collateral agent, and certain other agents and lenders party thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2020. 10. 7 Third Amendment to the Third Amended and Restated Credit Agreement, dated March 1, 2021, by and among SAIC, Citibank N.A., as administrative agent and collateral agent, and certain other lenders and parties thereto. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 5, 2021. 10. 8 Second Amended and Restated Credit Agreement, dated May 4, 2015 by and among the Company, Citibank N.A. as administrative agent and collateral agent, and Bank of America, N.A., as a syndication agent, and certain other lenders and parties thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on May 4, 2015. 10. 9 First Amendment to the Second Amended and Restated Credit Agreement, dated August 23, 2016 by and among the Company, Citibank N.A. as administrative agent and collateral agent, and certain other lenders and parties thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on August 25, 2016. 10. 10 Second Amendment to the Second Amended and Restated Credit Agreement, dated February 7, 2018 by and among the Company, Citibank N.A. as administrative agent and collateral agent, and certain other lenders and parties thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 9, 2018. 10. 11 Master Accounts Receivable Purchase Agreement, dated January 21, 2020, among Science Applications International Corporation, Engility Services, LLC, and MUFG Bank, Ltd. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 12, 2020. 10.1 2 Performance Undertaking, January 21, 2020, made by Science Applications International Corporation in favor of MUFG Bank, Ltd. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 12, 2020. 10.1 3 Amendment No.1 to Master Accounts Receivable Purchase Agreement, dated March 17, 2020, among Science Applications International Corporation, Engility Services, LLC, and MUFG Bank, Ltd. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on March 26, 2020. 10.1 4 * Science Applications International Corporation Management Stock Compensation Plan, effective September 27, 2013. Incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013. 10.1 5 * Science Applications International Corporation Key Executive Stock Deferral Plan, effective September 27, 2013. Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013. 45 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Exhibit Number Description of Exhibit 10.16* Science Applications International Corporation 401(k) Excess Deferral Plan, effective September 27, 2013. Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013. 10.17* Science Applications International Corporation Retirement Plan, effective September 27, 2013. Incorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-8 as filed with the SEC on September 27, 2013. 10.18* Science Applications International Corporation Amended and Restated 2013 Equity Incentive Plan, effective June 4, 2014. Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A as filed with the SEC on April 24, 2014. 10.19* Form of Restricted Stock Unit Award Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan. Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014. 10.20* Form of Nonstatutory Stock Option Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan. Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014. 10.21* Form of Performance Share Award Agreement of the Science Applications International Corporation 2013 Equity Incentive Plan. Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K as filed with the SEC on April 9, 2014. 10.22* Form of Restricted Stock Unit Award Agreement of the Science Applications International Corporation 2013 Amended and Restated Equity Incentive Plan. Incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 28, 2022. 10.23* Form of Performance Share Award Agreement of the Science Applications International Corporation 2013 Amended and Restated Equity Incentive Plan. Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 28, 2022. 10.24* Deferred Compensation Plan, effective January 1, 2015. Incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K as filed with the SEC on March 31, 2015. 10.25* SAIC Executive Severance, Change in Control and Retirement Policy, effective July 1, 2020. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on July 2, 2020. 10.26* Science Applications International Corporation Third Amended and Restated 2012 Long Term Performance Plan. Incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019. 10.2 7 Master Transitional Contracting Agreement between the Company (formerly SAIC Gemini, Inc.) and Leidos Holdings, Inc. (formerly SAIC, Inc.) dated September 25, 2013. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on December 13, 2013. 10.28* Form of Performance Unit Award Agreement of the Science Applications International Corporation 2012 Long Term Performance Plan. Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019. 10.29* Form of Restricted Stock Unit Agreement of the Science Applications International Corporation 2012 Long Term Performance Plan. Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K as filed with the SEC on March 29, 2019. 10.30* 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. 46 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Exhibit Number Description of Exhibit 10. 3 1 * 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. 10. 3 2 * 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. 10. 3 3 * 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. 10. 3 4 * 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. 21 Subsidiaries of Registrant. 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 Policy Relating to Recovery of Erroneously Awarded Compensation 101 Interactive Data File. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 104 The cover page from this Annual Report on Form 10-K, formatted as Inline XBRL. * Management contract or compensatory plan or agreement. Item 16. Form 10-K Summary None. 47 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Science Applications International Corporation By /s/ Prabu Natarajan Prabu Natarajan Chief Financial Officer Dated: 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/ Toni Townes-Whitley Principal Executive Officer and Director March 20, 2024 Toni Townes-Whitley /s/ Prabu Natarajan Principal Financial Officer and Principal Accounting Officer March 20, 2024 Prabu Natarajan /s/ Donna S. Morea Chair of the Board March 20, 2024 Donna S. Morea /s/ Dana S. Deasy Director March 20, 2024 Dana S. Deasy /s/ Garth N. Graham Director March 20, 2024 Garth N. Graham /s/ Carolyn B. Handlon Director March 20, 2024 Carolyn B. Handlon /s/ Yvette M. Kanouff Director March 20, 2024 Yvette M. Kanouff /s/ Timothy J. Mayopoulos Director March 20, 2024 Timothy J. Mayopoulos /s/ Katharina G. McFarland Director March 20, 2024 Katharina G. McFarland /s/ Milford W. McGuirt Director March 20, 2024 Milford W. McGuirt /s/ James C. Reagan Director March 20, 2024 James C. Reagan /s/ Steven R. Shane Director March 20, 2024 Steven R. Shane 48 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( PCAOB ID: 42 ) F- 2 Consolidated Statements of Income F- 5 Consolidated Statements of Comprehensive Income F- 6 Consolidated Balance Sheets F- 7 Consolidated Statements of Equity F- 8 Consolidated Statements of Cash Flows F- 9 Notes to the Consolidated Financial Statements F- 10 Note 1—Business Overview and Summary of Significant Accounting Policies F- 10 Note 2—Earnings Per Share, Share Repurchases and Dividends F- 20 Note 3—Revenues F- 21 Note 4—Acquisitions F- 23 Note 5—Divestitures F- 23 Note 6 —Restructuring and Impairment F- 24 Note 7 —Goodwill and Intangible Assets F- 25 Note 8 —Property, Plant, and Equipment F- 26 Note 9 —Stock-Based Compensation F- 26 Note 10 —Retirement Plans F- 30 Note 1 1 —Income Taxes F- 34 Note 1 2 —Debt Obligations F- 36 Note 1 3 —Derivative Instruments Designated as Cash Flow Hedges F- 38 Note 1 4 —Changes in Accumulated Other Comprehensive Income (Loss) by Component F- 39 Note 1 5 — Sale of Receivables F- 39 Note 1 6 —Leases F- 40 Note 1 7 —Business Segment Information F- 41 Note 1 8 —Legal Proceedings and Commitments and Contingencies F- 42 Note 19—Subsequent Events F- 42 Financial statement schedules are omitted because they are not applicable or the required information is shown in our consolidated financial statements or the notes thereto. F-1 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Science Applications International Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Science Applications International Corporation (the Company) as of 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 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-2 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 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. As described in Note 1 to the consolidated financial statements, recognizing revenue on long-term contracts involves significant judgments and estimates. 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 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 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. We also evaluated whether a lack of change in estimate was appropriate, where applicable, on contracts. F-3 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 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. Federal jurisdiction and various state jurisdictions. 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. 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. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for income taxes, including unrecognized tax benefits. 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, 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 We have served as the Company’s auditor since 2018. Tysons, Virginia March 20, 2024 F-4 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions, except per share amounts) Revenues $ 7,444 $ 7,704 $ 7,394 Cost of revenues 6,572 6,816 6,535 Selling, general and administrative expenses 373 374 344 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, net 120 118 105 Other expense (income), net 1 8 ( 1 ) Income before income taxes 620 375 358 Provision for income taxes ( 143 ) ( 72 ) ( 79 ) Net income $ 477 $ 303 $ 279 Net income attributable to non-controlling interest — 3 2 Net income attributable to common stockholders $ 477 $ 300 $ 277 Earnings per share: Basic $ 8.98 $ 5.42 $ 4.81 Diluted $ 8.88 $ 5.38 $ 4.77 See accompanying notes to consolidated financial statements. F-5 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Net income $ 477 $ 303 $ 279 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 (loss) income, net of tax ( 6 ) 59 52 Comprehensive income $ 471 $ 362 $ 331 Comprehensive income attributable to non-controlling interest — 3 2 Comprehensive income attributable to common stockholders $ 471 $ 359 $ 329 See accompanying notes to consolidated financial statements. F-6 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS February 2, 2024 February 3, 2023 (in millions) ASSETS Current assets: Cash and cash equivalents $ 94 $ 109 Receivables, net 914 936 Inventories, net 3 71 Prepaid expenses 93 58 Other current assets 27 23 Total current assets 1,131 1,197 Goodwill 2,851 2,911 Intangible assets, net 894 1,009 Property, plant, and equipment, net 91 92 Operating lease right of use assets 152 158 Deferred income taxes — 14 Other assets 195 162 Total assets $ 5,314 $ 5,543 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 567 $ 624 Accrued payroll and other employee benefits 249 205 Accrued vacation 121 123 Other accrued liabilities 144 143 Long-term debt, current portion 77 31 Total current liabilities 1,158 1,126 Long-term debt, net of current portion 2,022 2,343 Operating lease liabilities 147 152 Deferred income taxes 28 — Other long-term liabilities 174 218 Commitments and contingencies (Note 18) Equity: 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 16 22 Total common stockholders' equity 1,785 1,694 Non-controlling interest — 10 Total stockholders' equity 1,785 1,704 Total liabilities and stockholders' equity $ 5,314 $ 5,543 See accompanying notes to consolidated financial statements. F-7 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF EQUITY Shares of common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Non-controlling interest Total (in millions) Balance at January 29, 2021 58 $ 1,004 $ 627 $ ( 89 ) $ 10 $ 1,552 Net income — — 277 — 2 279 Issuances of stock 1 16 — — — 16 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 ) Distributions to non-controlling interest — — — — ( 2 ) ( 2 ) Balance at January 28, 2022 56 838 818 ( 37 ) 10 1,629 Net income — — 300 — 3 303 Issuances of stock 1 17 — — — 17 Other comprehensive income, net of tax — — — 59 — 59 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 February 3, 2023 54 637 1,035 22 10 1,704 Net income — — 477 — — 477 Issuances of stock 1 18 — — — 18 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 ) 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. F-8 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Cash flows from operating activities: Net income $ 477 $ 303 $ 279 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 142 157 165 Amortization of off-market customer contracts ( 5 ) ( 14 ) ( 33 ) Amortization of debt issuance costs 7 9 7 Deferred income taxes ( 17 ) ( 17 ) 59 Stock-based compensation expense 68 48 46 Gain on divestitures ( 247 ) — ( 2 ) Impairment of assets — 4 18 Other ( 8 ) — — Increase (decrease) resulting from changes in operating assets and liabilities, net of the effect of the acquisitions and divestitures: Receivables ( 46 ) 79 ( 31 ) Inventory, prepaid expenses, and other current assets ( 43 ) ( 10 ) 14 Other assets ( 14 ) 6 ( 3 ) Accounts payable and accrued liabilities 13 ( 9 ) 30 Accrued payroll and employee benefits 49 ( 36 ) 10 Operating lease assets and liabilities, net ( 4 ) ( 3 ) 5 Other long-term liabilities 24 15 ( 46 ) Net cash provided by operating activities 396 532 518 Cash flows from investing activities: Expenditures for property, plant, and equipment ( 27 ) ( 25 ) ( 36 ) Purchases of marketable securities ( 8 ) ( 7 ) ( 9 ) Sales of marketable securities 6 4 6 Cash paid for acquisitions, net of cash acquired — — ( 255 ) Proceeds from divestitures 356 — 8 Cash divested upon deconsolidation of joint venture ( 8 ) — — Other ( 5 ) ( 8 ) ( 6 ) Net cash provided by (used in) investing activities 314 ( 36 ) ( 292 ) Cash flows from financing activities: Dividend payments to stockholders ( 79 ) ( 83 ) ( 86 ) Principal payments on borrowings ( 441 ) ( 990 ) ( 119 ) Issuances of stock 17 16 16 Stock repurchased and retired or withheld for taxes on equity awards ( 382 ) ( 267 ) ( 226 ) Proceeds from borrowings 160 840 116 Debt issuance costs — ( 6 ) — Distributions to non-controlling interest — ( 3 ) ( 2 ) 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 Cash, cash equivalents and restricted cash at end of period $ 103 $ 118 $ 115 See accompanying notes to consolidated financial statements. Supplementary cash flow disclosure: Cash paid for interest $ 125 $ 111 $ 98 Cash paid for income taxes $ 165 $ 70 $ 7 Non-cash investing and financing activities: Increase (decrease) in accrued plan share repurchases $ 4 $ ( 2 ) $ 2 Decrease in accrued property, plant, and equipment $ ( 1 ) $ ( 1 ) $ ( 2 ) See accompanying notes to consolidated financial statements. F-9 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1—Business Overview and Summary of Significant Accounting Policies : Overview Description of Business. 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. government. 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 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 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 References to “financial statements” refer to the consolidated financial statements of the Company, which include the statements of income and comprehensive income, balance sheets, statements of equity and statements of cash flows. These financial statements were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). 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. 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 F-10 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 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. Estimates have been prepared by management on the basis of the most current and best available information at the time of estimation and actual results could differ from those estimates. Reporting Periods 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 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 The Company provides technical, engineering and enterprise IT services under long-term service arrangements primarily with the U.S. government, including subcontracts with other contractors engaged in work for the U.S. government. The Company also serves a number of state and local governments, foreign governments and U.S. commercial customers. 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. Contract modifications that do not add distinct goods or services are accounted for through cumulative catch-up adjustments. Contract modifications that add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price are accounted for as separate contracts. The Company recognizes revenue when, or as, 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. The majority of the Company’s contracts contain a single performance obligation involving a significant integration of various activities that are performed together to deliver a combined service or solution. Performance obligations may be satisfied over time or at a point in time, but the majority of the Company’s performance obligations are satisfied over time. The Company selects the appropriate measure of progress for revenue recognition based on the nature of the performance obligation, contract type and other pertinent contract terms. 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 the Company's performance as services are provided. Alternatively, performance obligations satisfied over time may involve the completion of a contract deliverable. Examples include systems integration, network engineering, network design, and engineering and build services. Deliverable-based performance obligations are satisfied over time when the Company’s performance creates or enhances an asset that is controlled by the customer, or when the Company’s performance creates an asset that is customized to the customer’s specifications and the Company has a right to payment, including a reasonable profit margin, for work performed to date. F-11 Table of Contents 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 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. Award or incentive fees are allocated to the distinct periods to which they relate. For fixed-price contracts, a time-elapsed output measure is applied to fixed consideration, such that revenue is recognized ratably over the period of performance. Where fixed-price contracts also provide for reimbursement of certain costs, such as travel or other direct costs, consideration may be attributed only to a distinct subset of time within the performance period. The Company’s time-and-material and fixed price-level of effort contracts generally qualify for the as-invoiced practical expedient. Revenue on these contracts is recognized in the amount to which the Company has a contractual right to invoice. For deliverable-based performance obligations satisfied over time, the Company recognizes revenue using a cost input measure of progress (cost-to-cost), regardless of contract type. Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion. The Company may incur costs associated with significant materials or hardware procurements that are not proportionate to the Company’s progress in satisfying its performance obligations. For these contracts, costs are excluded from the measure of progress, and revenue is recognized equal to the costs incurred. For performance obligations in which the Company does not transfer control over time, 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 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 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. 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. Since the Company typically provides customized services and solutions that are specific to a single customer’s requirements, standalone selling price is most often estimated based on expected costs plus a reasonable profit margin. Changes in Estimates on Contracts Changes in estimates of revenues, cost of revenues or profits related to performance obligations satisfied over time are recognized in operating income in the period in which such changes are made for the inception-to-date effect of the changes. Changes in these estimates can occur routinely over the performance period for a variety of reasons, which include: changes in scope; changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs; changes in the estimated transaction price, such as variable amounts for incentive or award fees; and performance being better or worse than previously estimated. F-12 Table of Contents 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 The timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, typically biweekly or monthly in arrears, or upon achievement of contractual milestones. 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. Contract assets include unbillable receivables and contract retentions, but exclude billed and billable receivables. Billed and billable receivables are rights to consideration, which are unconditional other than to the passage of time. Contract liabilities include customer advances, billings in excess of revenues and deferred revenue. 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 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. Capitalized costs to obtain and fulfill a contract are amortized on a straight-line basis over the expected period of benefit, which generally includes the contract base period and anticipated renewals. The Company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. The carrying amount of the asset is compared to the remaining amount of consideration the Company expects to receive for the services to which the asset relates, less the costs that relate directly to providing those services that have not yet been recognized. 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 The Company classifies indirect costs as overhead (included in cost of revenues) or general and administrative expenses in the same manner as such costs are defined in the Company’s Disclosure Statements under U.S. government Cost Accounting Standards ("CAS"). F-13 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Stock-based Compensation The Company issues stock-based awards as compensation to employees and directors. Stock-based awards include stock options, vesting stock awards and performance share awards. These awards are accounted for as equity awards. 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 vest. 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. Income Taxes 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 basis of assets and liabilities. Under this method, changes in tax rates and laws are recognized in income in the period such changes are enacted. The provision for federal, state, local and foreign income taxes is calculated on income before income taxes based on current tax law and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provision differs from the amounts currently payable because certain items of income and expense are recognized in different reporting periods for financial reporting purposes than for income tax purposes. Recording the provision for income taxes requires management to make significant judgments and estimates for matters for which the ultimate resolution may not become known until the final resolution of an examination by taxing authorities or the statute of limitations lapses. Additionally, recording liabilities for uncertainty in income taxes involves significant judgment in evaluating the Company’s tax positions and developing the best estimate of the taxes ultimately expected to be paid. Tax penalties and interest are included in income tax expense. The Company has also recognized liabilities for uncertainty in income taxes when it is more likely than not that a tax position will not be sustained on examination and settlement with various taxing authorities. 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 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. Cash, Cash Equivalents and Restricted Cash 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 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 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: F-14 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS February 2, 2024 February 3, 2023 (in millions) Cash and cash equivalents $ 94 $ 109 Restricted cash included in other current assets 4 5 Restricted cash included in other assets 5 4 Cash, cash equivalents and restricted cash $ 103 $ 118 Receivables Receivables include billed and billable receivables, and unbilled receivables. The Company’s receivables are primarily due from the U.S. government, or from prime contractors on which we are subcontractors and the end customer is the U.S. government, and are generally considered collectable from the perspective of the customer’s ability to pay. The Company does not have a material credit risk exposure. Unbilled receivables, substantially all of which are expected to be billed and collected within one year , are stated at their estimated realizable value and consist of costs and fees billable on contract completion or the occurrence of a specified event, other than the passage of time. Legal title to the related accumulated costs of contracts in progress generally vests with the U.S. government on the Company’s receipt of progress payments. 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. government. 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—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. Inventories 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. Business Combinations The Company records all tangible and intangible assets acquired and liabilities assumed in a business combination at fair value as of the acquisition date, which is determined using a cost, market or income approach. The excess amount of the aggregated purchase consideration paid over the fair value of the net of assets acquired and liabilities assumed is recorded as goodwill. Acquisition date fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as measured on the acquisition date. The valuations are based on information that existed as of the acquisition date. During the measurement period that shall not exceed one year from the acquisition date, the Company may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that the Company has subsequently obtained regarding facts and circumstances that existed as of the acquisition date. Acquisition and Integration Costs Acquisition-related costs that are not part of the purchase price consideration are generally expensed as incurred, except for certain costs that are deferred in connection with the issuance of debt. These costs typically include transaction-related costs, such as finder’s fees, legal, accounting and other professional costs. 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, F-15 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 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: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Acquisition (1) $ — $ ( 2 ) $ 3 Integration (2) 1 15 53 Total acquisition and integration costs $ 1 $ 13 $ 56 (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, 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. Leases The Company occupies most of its facilities under operating leases. Certain equipment is also leased under short-term or cancelable operating leases. The Company recognizes a right of use ("ROU") asset and a lease liability upon the commencement of its operating leases. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate on a secured basis. The lease term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise those rights. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives. The Company recognizes lease costs on a straight-line basis over the remaining lease term, except for variable lease payments that are expensed in the period in which the obligation for those payments is incurred. For its facility leases, the Company combines and accounts for lease and non-lease components together as a single component. The Company does not recognize lease liabilities and ROU assets for leases with original terms of 12 months or less. ROU assets are evaluated for impairment as a long-lived asset. The Company leases IT equipment and hardware to its customers. All of the Company’s lessor arrangements are operating leases. Operating lease income is recognized on a straight-line basis over the term of the lease and is F-16 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS presented in "Revenues" on the consolidated statements of income. Goodwill and Intangible Assets Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill and indefinite-lived intangible assets are not amortized, but rather are tested for potential impairment annually at the beginning of the Company's fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. There were no impairments during the periods presented. 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. If the fair value is less than the carrying value, the amount of impairment expense is equal to the difference between the reporting unit’s fair value and the reporting unit’s carrying value. Intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the asset group level. Property, Plant, and Equipment Property, plant, and equipment are carried at cost net of accumulated depreciation and amortization. Purchases of property, plant, and equipment, as well as costs associated with major renewals and betterments, are capitalized. Maintenance, repairs and minor renewals and betterments are expensed as incurred. When assets are sold or 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 The Company evaluates its long-lived assets (including right of use lease assets) for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount of the asset exceeds its estimated future undiscounted cash flows (including sublease income) at the asset group level. When the carrying amount of the asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized to reduce the asset’s carrying amount to its estimated fair value based on the present value of its estimated future cash flows. In circumstances in which the Company has the ability and intent to sublease an exited facility, the Company performs an impairment test of the asset group (mainly consisting of right of use lease assets and leasehold improvements) on the earlier of the cease use date or sublease inception date by comparing the carrying amount of the asset group to the undiscounted cash flows associated with the asset group (mainly sublease income). When the carrying amount of the asset group exceeds its estimated future undiscounted cash flows, an impairment loss is recognized to reduce the asset group’s carrying amount to its estimated fair value based on the present value of estimated future cash flows. 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. F-17 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Commitments and Contingencies Accruals for commitments and loss contingencies are recorded when it is both probable that they will occur and the amounts can be reasonably estimated. In addition, legal fees are accrued for cases where a loss is probable and the related fees can be reasonably estimated. Significant judgment is required to determine both the probability and the estimated amount of loss. The Company reviews these accruals quarterly and adjusts the accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other updated information. Pension and Defined Benefit Plans The Company measures plan assets and benefit obligations as of the month-end that is closest to its fiscal year-end. Accounting and reporting for the Company's pension and defined benefit plans requires the use of assumptions, including but not limited to, a discount rate and an expected return on assets. These assumptions are reviewed at least annually based on reviews of current plan information and consultation with the Company's independent actuary and the plans’ investment advisor. If these assumptions differ materially from actual results, the Company's obligations under the pension and defined benefit plans could also differ materially, potentially requiring the Company to record an additional liability. The Company's pension and defined benefit plan liabilities are developed from actuarial valuations performed each year. Fair Value Measurements The Company utilizes fair value measurement guidance prescribed by GAAP to value its financial instruments. The accounting standard for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than the quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3). The carrying amounts of cash and cash equivalents, receivables, accounts payable and other amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value due to the short-term nature of these amounts. The carrying value of the Company’s outstanding debt obligations approximates its fair value, which is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements. 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—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. Marketable Securities 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 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 Derivative instruments are recorded on the consolidated balance sheets at fair value. 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. F-18 Table of Contents 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. Level 2, or market observable inputs (such as yield and credit curves), are used within the standard pricing models in order to determine fair value. The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party. 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 The Company’s operating cycle may be greater than one year and is measured by the average time intervening between the inception and the completion of contracts. Research and Development The Company conducts research and development activities under customer-funded contracts and with company-funded independent research and development ("IR&D") funds. IR&D efforts consist of projects involving basic research, applied research, development, and systems and other concept formulation studies. Company-funded IR&D expense is included in selling, general and administrative expenses ("SG&A") and was $ 4 million, $ 1 million and $ 4 million in fiscal 2024, 2023 and 2022, respectively. 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 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 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 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. F-19 Table of Contents 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. These amendments are effective for fiscal years beginning after December 15, 2022, except for the requirement to provide rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company 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 : Earnings Per Share ("EPS") Basic EPS is computed by dividing net income attributable to common stockholders by the basic weighted-average number of shares outstanding. 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: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Basic weighted-average number of shares outstanding 53.1 55.3 57.6 Dilutive common share equivalents - stock options and other stock-based awards 0.6 0.5 0.5 Diluted weighted-average number of shares outstanding 53.7 55.8 58.1 Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for fiscal 2024, 2023, and 2022 were immaterial . Share Repurchases The Company may repurchase shares in accordance with established repurchase plans. The Company retires its common stock upon repurchase with the excess over par value allocated to additional paid-in capital. 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 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. Dividends The Company declared and paid quarterly dividends of $ 0.37 per share every quarter for the years presented. Total dividends declared and paid were $ 1.48 per share during fiscal 2024, 2023 and 2022. F-20 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 3—Revenues : Changes in Estimates on Contracts Aggregate net changes in estimates on contracts accounted for using the cost-to-cost method of accounting were recognized in operating income as follows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions, except per share amounts) Favorable adjustments $ 32 $ 40 $ 40 Unfavorable adjustments ( 32 ) ( 36 ) ( 27 ) Net favorable adjustments — 4 13 Income tax effect — ( 1 ) ( 3 ) Net favorable adjustments, after tax — 3 10 Basic EPS impact $ — $ 0.05 $ 0.17 Diluted EPS impact $ — $ 0.05 $ 0.17 Revenues were $ 2 million, $ 7 million and $ 21 million higher for fiscal 2024, 2023 and 2022, respectively, due to net revenue recognized from performance obligations satisfied in prior periods. Disaggregation of Revenues The Company's revenues are generated primarily from long-term contracts with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government. Disaggregated revenues by customer were as follows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Department of Defense $ 3,840 $ 3,806 $ 3,578 Other federal government agencies 3,450 3,750 3,671 Commercial, state and local governments and international 154 148 145 Total $ 7,444 $ 7,704 $ 7,394 Disaggregated revenues by contract type were as follows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Cost reimbursement $ 4,527 $ 4,282 $ 4,020 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 F-21 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Disaggregated revenues by prime versus subcontractor were as follows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Prime contractor to federal government $ 6,722 $ 6,996 $ 6,683 Subcontractor to federal government 568 560 566 Other 154 148 145 Total $ 7,444 $ 7,704 $ 7,394 Contract Balances Contract balances for the periods presented were as follows: Balance Sheet line item February 2, 2024 February 3, 2023 (in millions) Billed and billable receivables, net (1) Receivables, net $ 555 $ 572 Contract assets - unbillable receivables Receivables, net 359 364 Contract assets - contract retentions Other assets 14 15 Contract liabilities - current Other accrued liabilities 53 48 Contract liabilities - non-current Other long-term liabilities $ 2 $ 4 (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 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 Deferred costs for the periods presented were as follows: Balance Sheet line item February 2, 2024 February 3, 2023 (in millions) Pre-contract costs Other current assets $ 9 $ 7 Prepaid contract costs Prepaid expenses 19 10 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. 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. 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. F-22 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 4—Acquisitions: Halfaker 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 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. The allocation of the purchase price resulted in goodwill of $ 104 million and intangible assets of $ 114 million, both of which are deductible for income tax purposes. The recognized goodwill is primarily associated with future customer relationships and an acquired assembled work force. The intangible assets consist of customer relationships of $ 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. Koverse On May 3, 2021, the Company acquired Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data, for a purchase price of $ 30 million, net of $ 2 million cash acquired. The purchase price included $ 3 million of contingent consideration, representing the acquisition date fair value recognized for up to $ 27 million gross of potential future earnout payments based on the achievement of certain revenue targets over the next four years . The Company has completed the allocation of the purchase price which resulted in goodwill of $ 21 million and intangible assets of $ 10 million, both of which are not deductible for income tax purposes. The goodwill is primarily associated with intellectual capital, future customer relationships, and an acquired assembled work force. The intangible assets, which primarily consist of developed technology, are being amortized over a weighted average period of seven years . 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. 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. 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. F-23 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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) Assets: Receivables, net $ 46 Inventories, net 72 Prepaid expenses 1 Goodwill 60 Operating lease ROU assets 2 Total assets divested $ 181 Liabilities: Accounts payable $ 62 Accrued payroll and employee benefits 1 Other accrued liabilities 1 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: Year Ended 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 $ 10 $ — $ — 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: Other associated costs SG&A — — 1 Total restructuring costs 23 20 1 Impairment of assets SG&A — 4 1 Impairment of assets Acquisition and integration costs — — 17 Total impairment of assets — 4 18 Total restructuring costs and impairment $ 23 $ 24 $ 19 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, F-24 Table of Contents 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 severance will be paid in fiscal 2025. 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 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. 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 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 2, 2024 February 3, 2023 Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value (in millions) Customer relationships $ 1,462 $ ( 574 ) $ 888 $ 1,467 $ ( 466 ) $ 1,001 Developed technology 10 ( 4 ) 6 10 ( 2 ) 8 Trade name 1 ( 1 ) — 1 ( 1 ) — Total intangible assets $ 1,473 $ ( 579 ) $ 894 $ 1,478 $ ( 469 ) $ 1,009 Amortization expense related to intangible assets was $ 115 million, $ 125 million and $ 128 million for fiscal 2024, 2023 and 2022, respectively. There were no impairments of intangible assets during the periods presented. Intangible assets with a gross carrying value of $ 5 million became fully amortized during fiscal 2024 and are no longer reflected in the gross carrying value and accumulated amortization as of February 2, 2024. F-25 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of February 2, 2024, the estimated future annual amortization expense related to intangible assets is as follows: Fiscal Year (in millions) 2025 $ 115 2026 115 2027 115 2028 98 2029 97 Thereafter 354 Total $ 894 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, depreciation and amortization methods, and estimated useful lives by major asset class were as follows: Depreciation or amortization method Estimated useful lives (in years) February 2, 2024 February 3, 2023 (in millions) Computer equipment Straight-line or declining balance 3 - 10 $ 92 $ 92 Capitalized software and software licenses Straight-line or declining balance 6 47 47 Leasehold improvements Straight-line Shorter of lease term or 12 104 109 Office furniture and fixtures Straight-line or declining balance 4 - 10 14 19 Buildings and improvements Straight-line 40 7 7 Construction in process 10 11 Land 1 1 Property, plant, and equipment 275 286 Accumulated depreciation and amortization ( 184 ) ( 194 ) Property, plant, and equipment, net $ 91 $ 92 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 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. F-26 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. 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. 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 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. Performance shares are rights to receive shares of the Company’s stock upon satisfaction of certain requirements. Performance-based stock awards granted prior to fiscal 2022 include service and performance conditions. Performance-based stock awards granted in fiscal 2022 and thereafter also include market conditions. For performance-based stock awards granted prior to fiscal 2023, the performance metrics are based on annual operating cash flows and a three year cumulative measure of earnings. For performance-based stock awards granted in fiscal 2023 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. These awards cliff vest at the end of the third fiscal year following the grant date, subject to meeting the minimum service requirements and the achievement of the Company’s performance metrics and market conditions, with the number of shares ultimately issued, if any, ranging up to 200 % of the specified target shares. If performance is below a minimum threshold level of performance, no shares will be issued. The Management Stock Compensation Plan provides for awards in share units to eligible employees. Benefits are payable in shares of the Company’s stock that are held in a trust for the purpose of funding benefit payments to the participants. During fiscal 2017, all remaining outstanding awards in the Management Stock Compensation Plan vested. The Board of Directors may at any time amend or terminate the Management Stock Compensation Plan. In the event of a change in control of the Company (as defined by the Management Stock Compensation Plan), participant accounts will be immediately distributed, otherwise participant accounts will generally be distributed upon retirement based on the participant’s payout election, or upon termination. The Management Stock Compensation Plan does not provide for a maximum number of shares available for future issuance. 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 2, 2024, 1.9 million shares of the Company’s common stock are authorized for issuance under the ESPP. F-27 Table of Contents 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. Vesting stock awards issued under the LTPP generally cliff vest at the end of the third fiscal year following the grant date. Vesting may be accelerated for employees meeting retirement eligibility conditions. Vesting stock awards under the LTPP have forfeitable rights to dividends. Expense and Related Tax Benefits Recognized Stock-based compensation expense and related tax benefits recognized under the Plans were: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Stock-based compensation expense: 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 2024 and 2023. Vesting Stock Awards Vesting stock award activity for the year ended February 2, 2024 was: Shares of stock under vesting stock awards Weighted-average grant date fair value (in millions) Unvested at February 3, 2023 1.0 $ 89.60 Awards granted 0.4 108.64 Awards forfeited ( 0.1 ) 96.15 Awards vested ( 0.4 ) 84.75 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 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. As of February 2, 2024 there was $ 39 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted-average period of 1.8 years. The fair value of vesting stock awards that vested in fiscal 2024, 2023 and 2022 was $ 48 million, $ 44 million and $ 39 million, respectively. F-28 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Performance Share Awards Performance share award activity for the year ended February 2, 2024 was: Shares of stock under performance shares Weighted-average grant date fair value (in millions) Unvested at February 3, 2023 0.3 $ 91.63 Awards granted 0.1 116.25 Awards forfeited — 96.92 Awards vested ( 0.1 ) 80.57 Performance adjustments 0.2 119.39 Unvested at February 2, 2024 0.5 $ 112.86 The actual number of shares to be issued upon vesting range between 0 - 200 % of the specified target shares. In the table above, the number of performance shares are presented at 100 % of the specified target shares, except for awards that vested and the performance adjustment. The vested amount reflects the number of shares to be issued based on the actual achievement of the performance goals for shares that vested during the period. The performance adjustment amount reflects the increase or decrease in the number of performance shares vested compared to the number of performance shares that would have vested at target. The weighted-average grant date fair value of the performance share awards granted in fiscal 2024, 2023 and 2022 was $ 116.25 , $ 100.94 and $ 80.57 , respectively. 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. The expected volatility was based on the historical volatility of the Company over a period commensurate with the expected term of the award as of the date of grant. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the award on the date of grant. The fair value of performance share awards that vested in fiscal 2024 was $ 18 million. 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. F-29 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes activity related to exercises of stock options: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (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 : Defined Contribution Plans The Company sponsors the Science Applications International Corporation Retirement Plan (a qualified defined contribution 401(k) plan) and an employee stock ownership plan, in which most employees are eligible to participate. There are a variety of investment options available, including the Company's stock. The Science Applications International Corporation Retirement Plan allows eligible participants to contribute a portion of their income through payroll deductions and the Company makes matching company contributions and may also make discretionary contributions. The Company contributions expensed for defined contribution plans were $ 82 million, $ 80 million and $ 79 million in fiscal 2024, 2023 and 2022, respectively. Deferred Compensation Plans The Company maintains the Science Applications International Corporation Deferred Compensation Plan ("DCP") which provides certain eligible employees and directors an opportunity to defer some or all of their compensation on an unfunded, nonqualified basis. Participant deferrals are fully vested and diversified at the participant’s direction among the investment options offered under the DCP. Participant accounts are credited with a rate of return based on the performance of the investment options selected. Distributions are made in cash. Deferred balances are paid on retirement based on the participant’s payout election, or upon termination. The Company may provide discretionary contributions to participants, but no Company contributions have been made. The Science Applications International Corporation Key Executive Stock Deferral Plan ("KESDP") was closed on December 31, 2014, and no further deferrals are allowed. Benefits from the KESDP are payable in shares of the Company’s stock that may be held in trust for the purpose of funding benefit payments to KESDP participants. Vested deferred balances are paid on retirement based on the participant’s payout election, or upon termination. The Science Applications International Corporation 401(k) Excess Deferral Plan ("Excess Plan") was also closed on December 31, 2014, and no further deferrals are allowed. Participant deferrals are fully vested and diversified at the participant’s direction among the investment options offered under the Excess Plan. Deferred balances are paid on retirement or termination. Defined Benefit Plans 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. 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. F-30 Table of Contents 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. The gain was comprised of a $ 10 million gain due to an increase in discount rates, partially offset by a $ 6 million loss due to the difference between actual investment return and expected return. During fiscal 2022, the Company recognized a net gain of $ 5 million on its retirement plans within other comprehensive income. The gain was comprised of a $ 4 million gain due to an increase in discount rates and a $ 1 million gain from the excess in actual investment return over the expected return. Net Periodic Benefit Cost The net periodic benefit (income) cost was as follows: Pension Plan RHRA Benefit Plan Year Ended February 2, 2024 February 3, 2023 January 28, 2022 February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Interest cost on projected benefit obligation $ 2 $ 2 $ 1 $ 1 $ — $ 1 Expected return on plan assets ( 2 ) ( 3 ) ( 3 ) — — — Amortization of (gain) loss — — — ( 1 ) — — Net periodic benefit (income) cost $ — $ ( 1 ) $ ( 2 ) $ — $ — $ 1 Obligations and Funded Status The projected benefit obligation, fair value of plan assets and funded status for each plan are as follows: Pension Plan RHRA Benefit Plan February 2, 2024 February 3, 2023 February 2, 2024 February 3, 2023 (in millions) Change in benefit obligation: Benefit obligation at beginning of year $ 52 $ 63 $ 10 $ 13 Interest cost 2 2 1 — Benefits paid ( 4 ) ( 5 ) ( 1 ) ( 1 ) Actuarial gain ( 1 ) ( 8 ) — ( 2 ) Benefit obligation at end of year $ 49 $ 52 $ 10 $ 10 Change in plan assets: Fair value of plan assets at beginning of year 46 54 — — Actual return on plan assets 3 ( 3 ) — — Employer contributions — — 1 1 Benefits paid ( 4 ) ( 5 ) ( 1 ) ( 1 ) Fair value of plan assets at end of year $ 45 $ 46 $ — $ — Unfunded status $ 4 $ 6 $ 10 $ 10 F-31 Table of Contents 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 2, 2024 February 3, 2023 February 2, 2024 February 3, 2023 (in millions) Other accrued liabilities $ — $ — $ 1 $ 1 Other long-term liabilities 4 6 9 9 Net amount recognized $ 4 $ 6 $ 10 $ 10 Assumptions The Company uses the spot rate approach to measure liabilities and interest costs for defined benefit obligations. Under the spot rate approach, the Company uses individual spot rates along the yield curve that correspond with the timing of each benefit payment. 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. In selecting the expected long-term rate of return on assets used for the Pension Plan, the Company considered its investment return goals stated in the Pension Plan's investment policy. This process included determining expected returns for the various asset classes that comprise the Pension Plan's target asset allocation. The following assumptions were used to determine the benefit obligations and net periodic benefit costs: Pension Plan RHRA Benefit Plan 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 % Interest cost effective rate 4.82 % 2.61 % 1.72 % 4.75 % 2.33 % 1.35 % Expected rate of return on assets 5.25 % 5.25 % 5.50 % N/A N/A N/A Pension Plan Assets The Company's investment policy includes a periodic review of the Pension Plan's investment in the various asset classes. During fiscal 2024, the Company's overall investment strategy was for plan assets to achieve a long-term rate of return of 5.25 %, with a wide diversification of asset types, fund strategies and fund managers. The target allocation for the plan assets is 44 % in domestic equity securities, 20 % international equity securities, 31 % in fixed income securities and 5 % in cash and cash equivalents. The risk management practices include regular evaluations of fund managers to ensure the risk assumed is commensurate with the given investment style and objectives. 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. F-32 Table of Contents 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 2, 2024 February 3, 2023 (in millions) Mutual funds Equity Level 1 $ 29 $ 30 Fixed income Level 1 7 8 Guaranteed deposit account Level 3 2 1 Subtotal 38 39 Collective trust - fixed income (1) Measured at NAV 7 7 Total $ 45 $ 46 (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. Fair Value Measurement Using Significant Unobservable Inputs (Level 3) A reconciliation of the beginning and ending balances of the Guaranteed Deposit Account ("GDA") is as follows: Guaranteed Deposit Account (in millions) Balance at January 28, 2022 $ 3 Purchases 3 Sales ( 5 ) Balance at February 3, 2023 1 Purchases 6 Sales ( 5 ) Balance at February 2, 2024 $ 2 The GDA is designed to provide liquidity and safety of principal with a competitive guaranteed rate of return. The fair value of the GDA approximates the market value of underlying investments by discounting expected future investment cash flow from both investment income and repayment of principal for each investment purchased directly for the defined benefit segment of the General Account. Principal and accumulated interest are fully guaranteed by Prudential Retirement Insurance and Annuity Company ("PRIAC"). The declared interest rate is announced each year in advance and is determined by PRIAC. The GDA invests in a broadly diversified, fixed-income portfolio within PRIAC's general account. The portfolio is invested in public bonds, commercial mortgages and private placement bonds. Estimated Future Benefit Payments The following table sets forth the expected timing of benefit payments by fiscal year: Fiscal Year Pension Plan RHRA Benefit Plan Total (in millions) 2025 $ 5 $ 1 $ 6 2026 4 1 5 2027 5 1 6 2028 4 2 6 2029 4 1 5 Five subsequent fiscal years $ 20 $ 4 $ 24 F-33 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 11—Income Taxes : 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: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Current: Federal $ 125 $ 69 $ 13 State 35 20 7 Deferred: Federal ( 19 ) ( 15 ) 48 State 2 ( 2 ) 11 Total $ 143 $ 72 $ 79 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: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Amount computed at the statutory federal income tax rate $ 130 $ 79 $ 75 State income taxes, net of federal tax benefit 32 13 16 Research and development and other federal credits ( 17 ) ( 8 ) ( 9 ) Non-deductible compensation 10 3 3 Excess tax benefits for stock-based compensation ( 4 ) ( 3 ) ( 3 ) Non-deductible goodwill 13 — — Foreign-derived intangible income ( 22 ) ( 12 ) ( 6 ) Other 1 — 3 Total $ 143 $ 72 $ 79 Effective income tax rate 23.1 % 19.3 % 22.1 % 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. F-34 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Deferred income taxes are recorded for differences in the basis of assets and liabilities for financial reporting purposes and tax reporting purposes. Deferred tax assets (liabilities) were comprised of: February 2, 2024 February 3, 2023 (in millions) Accrued vacation and bonuses $ 28 $ 28 Accrued liabilities 12 17 Deferred compensation 20 17 Stock awards 8 9 Net operating loss and other carryforwards 70 80 Fixed asset basis difference 1 2 Lease liability 48 50 Research and development expenditures 159 152 Valuation allowance ( 8 ) ( 8 ) Total deferred tax assets 338 347 Deferred revenue ( 34 ) ( 21 ) Payroll tax deferral ( 2 ) ( 2 ) Purchased intangible assets ( 287 ) ( 264 ) Right of use assets ( 39 ) ( 40 ) Accumulated other comprehensive income ( 4 ) ( 6 ) Total deferred tax liabilities ( 366 ) ( 333 ) 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 were: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Unrecognized tax benefits at beginning of the year $ 158 $ 78 $ 66 Additions for tax positions related to prior years 5 5 2 Additions for tax positions related to the current year 21 75 10 Reductions for tax positions related to prior years ( 59 ) — — Reductions for prior year tax positions related to statute expiration ( 8 ) — — 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 Accrued interest and penalties $ 13 $ 8 $ 4 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. F-35 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 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. As of February 2, 2024, the Company has approximately $ 53 million of tax effected federal loss carryforwards, $ 8 million of tax effected state loss carryforwards and approximately $ 10 million of state credit carryforwards that will begin to expire in fiscal 2025. The valuation allowance of $ 8 million at February 2, 2024 relates to these state credit carryforwards. Note 12—Debt Obligations : The Company’s long-term debt as of the periods presented was as follows: February 2, 2024 February 3, 2023 Stated interest rate Effective interest rate Principal Unamortized debt issuance costs Net Principal Unamortized debt issuance costs Net (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 B Facility due October 2025 7.31 % 7.51 % 328 ( 1 ) 327 488 ( 3 ) 485 Term Loan B2 Facility due March 2027 7.31 % 7.74 % 182 ( 2 ) 180 272 ( 4 ) 268 Senior Notes due April 2028 4.88 % 5.11 % 400 ( 3 ) 397 400 ( 4 ) 396 Total long-term debt $ 2,109 $ ( 10 ) $ 2,099 $ 2,390 $ ( 16 ) $ 2,374 Less current portion 77 — 77 31 — 31 Total long-term debt, net of current portion $ 2,032 $ ( 10 ) $ 2,022 $ 2,359 $ ( 16 ) $ 2,343 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. As of February 2, 2024, the Company was in compliance with the covenants under its Credit Facility. 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. 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. F-36 Table of Contents 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—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. 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. As a result of the Fifth Amendment, the maturity date for the Revolving Credit Facility was extended to, and the maturity date of the Term Loan A Facility due June 2027 is, the earlier of June 30, 2027 or 91 days prior to the earliest term loan “B” facility maturity date (subject to acceleration in certain circumstances). The Term Loan A Facility due June 2027 is secured by substantially all of the assets of the Company and the Company’s wholly owned domestic subsidiaries, and is guaranteed by each of the Company’s wholly owned domestic subsidiaries. The Term Loan A Facility due June 2027 is subject to the same covenants and events of default as the Company’s existing term loans under the Credit Facility. Effective with the Fifth Amendment, all interest rates under the Credit Facility transitioned from LIBOR to Term Secured Overnight Financing Rate ("Term SOFR") plus 0.10 % for US dollar denominated loans, Sterling Overnight Index Average ("SONIA") for UK pound sterling denominated loans, and Euro Interbank Offered Rate ("EURIBOR") for Euro denominated loans. The applicable interest rate margins under the Term Loan A Facility due June 2027 and the Revolving Credit Facility were reduced to a range from 0.75 % to 1.75 % per annum for Term SOFR, SONIA and EURIBOR loans, and from 0 % to 0.75 % per annum for base rate loans, in each case based on the Company’s leverage ratio. Commitment fees for undrawn amounts under the Revolving Credit Facility were also reduced to a range of 0.125 % to 0.25 % per annum based on the Company’s leverage ratio. The Company incurred $ 8 million of debt issuance costs associated with the Fifth Amendment, of which $ 2 million was recognized in interest expense, with the remaining $ 6 million deferred and amortized to interest expense through the maturity dates of the facilities utilizing the effective interest rate method. The scheduled principal repayments for the Term Loan Facilities may be further reduced or eliminated by annual mandatory prepayments of a portion of 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. 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 F-37 Table of Contents 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: Fiscal Year Total (in millions) 2025 $ 77 2026 435 2027 123 2028 1,074 2029 400 Thereafter — Total principal payments $ 2,109 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 (1) at Notional Amount at February 2, 2024 Pay Fixed Rate Receive Variable Rate Settlement and Termination February 2, 2024 February 3, 2023 (in millions) (in millions) Interest rate swaps #1 685 2.96 % Term SOFR Monthly through October 31, 2025 15 16 Interest rate swaps #2 — 2.36 % Term SOFR Monthly through October 31, 2023 — 9 Total $ 685 $ 15 $ 25 (1) The fair value of the fixed interest rate swap asset is included in "Other assets" 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 within the Credit Facility. The counterparties to all swap agreements are financial institutions. 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 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 consolidated financial statements. F-38 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 14—Changes in Accumulated Other Comprehensive Income 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 10—Retirement Plans and Note 13—Derivative Instruments Designated as Cash Flow Hedges, respectively. Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges (1) Defined Benefit Obligation Adjustment (2) Total (in millions) Balance at January 29, 2021 $ ( 86 ) $ ( 3 ) $ ( 89 ) Other comprehensive income before reclassifications 31 5 36 Amounts reclassified from accumulated other comprehensive loss 34 — 34 Income tax impact ( 17 ) ( 1 ) ( 18 ) Net other comprehensive income 48 4 52 Balance at January 28, 2022 $ ( 38 ) $ 1 $ ( 37 ) Other comprehensive income before reclassifications 67 4 71 Amounts reclassified from accumulated other comprehensive loss 9 — 9 Income tax impact ( 20 ) ( 1 ) ( 21 ) Net other comprehensive income 56 3 59 Balance at February 3, 2023 $ 18 $ 4 $ 22 Other comprehensive income before reclassifications 14 2 16 Amounts reclassified from accumulated other comprehensive income ( 24 ) — ( 24 ) Income tax impact 3 ( 1 ) 2 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, net." (2) The amount reclassified from accumulated other comprehensive income (loss) is included in "Other expense (income), net. " Note 15—Sale of Receivables : The Company has a Master Accounts Receivable Purchase Agreement ("MARPA Facility") with MUFG Bank, Ltd. (the "Purchaser") for the sale of up to a maximum amount of $ 300 million of certain designated eligible receivables with the U.S. government. Effective March 31, 2022, the Company amended the MARPA Facility to transition the purchase discount rate defined within the facility agreement from using LIBOR to Term SOFR. The amendment did not have a material impact on the Company's financial statements. The receivables sold under the MARPA Facility are without recourse for any U.S. government credit risk. The MARPA Facility automatically renews each year unless one of the parties gives prior notice to terminate. The receivable transfers under the MARPA Facility have been recognized as sales, as the receivables had been legally isolated from the Company, the financial institution had a right to pledge or exchange the assets received and we do not maintain effective control over the transferred receivables. The fair value of the sold receivables approximated their book value due to their short-term nature. 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 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. F-39 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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: Year Ended February 2, 2024 February 3, 2023 (in millions) Beginning balance $ 250 $ 200 Sale of receivables 2,560 3,729 Cash collections ( 2,605 ) ( 3,679 ) Outstanding balance sold to Purchaser (1) 205 250 Cash collected, not remitted to Purchaser (2) ( 54 ) ( 30 ) Remaining sold receivables $ 151 $ 220 (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 16—Operating Leases : Total operating lease cost is comprised of the following: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Operating lease cost $ 56 $ 67 $ 92 Variable lease cost 13 11 17 Short-term lease cost 2 2 9 Sublease income — — ( 1 ) 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 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 2, 2024 February 3, 2023 (in millions) Operating lease ROU asset Operating lease right of use assets $ 152 $ 158 Operating lease current liability Other accrued liabilities 39 42 Operating lease non-current liability Operating lease liabilities 147 152 Total operating lease liabilities $ 186 $ 194 F-40 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other supplemental operating lease information consists of the following: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Cash paid for amounts included in the measurement of operating lease liabilities $ 59 $ 62 $ 74 ROU assets obtained in exchange for new operating lease obligations $ 43 $ 15 $ 54 Maturities of operating lease liabilities as of February 2, 2024 were as follows: Fiscal Year Total (in millions) 2025 $ 45 2026 48 2027 42 2028 26 2029 19 Thereafter 30 Total minimum lease payments 210 Less: imputed interest ( 24 ) Present value of operating lease liabilities $ 186 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 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 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. F-41 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 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. government. 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 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 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 subpoenas were issued. AAV Termination for Convenience On August 27, 2018, the Company received a stop-work order from the United States Marine Corps on the Assault Amphibious Vehicle ("AAV") contract and on October 3, 2018 the program was terminated for convenience by the customer. The Company is continuing to negotiate with the Marine Corps to recover costs associated with the termination. Government Investigations, Audits and Reviews The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect, in particular, to its role as a contractor to federal, state and local government customers and in connection with performing services in countries outside of the United States. U.S. government agencies, including the DCAA, the Defense Contract Management Agency and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of the contractor’s compliance with government standards for its business systems. Adverse findings in these investigations, audits, or reviews can lead to criminal, civil or administrative proceedings, and the Company could face disallowance of previously billed costs, penalties, fines, compensatory damages, and suspension or debarment from doing business with governmental agencies. Due to the Company’s reliance on government contracts, adverse findings could also have a material impact on the Company’s business, including its financial position, results of operations and cash flows. The indirect cost audits by the DCAA of the Company’s business remain open for certain prior years and the current year. 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. F-42 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. Letters of Credit and Surety Bonds The Company has outstanding obligations relating to letters of credit of $ 9 million as of February 2, 2024, principally related to guarantees on insurance policies. The Company also has outstanding obligations relating to surety bonds in the amount of $ 19 million, principally related to performance and payment bonds on the Company’s contracts. Note 19—Subsequent Events: 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 Subsequent to the end of fiscal 2024, on March 14, 2024, the Company’s Board of Directors declared a cash dividend of $ 0.37 per share of the Company’s common stock payable on April 26, 2024 to stockholders of record on April 12, 2024. F-43