What changed in this filing

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Item 1. Financial Statements

2024-06-03 compared with 2023-12-04 · 261 added, 283 removed, 296 unchanged (65% of the section changed)

1 unchanged sentence

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

(in millions, except per share amounts)

2 unchanged sentences

Selling, general and administrative expenses 85 84

Acquisition and integration costs — 1 1 11

Other operating income (includes gain on divestiture, see Note 4)

( 1 ) — ( 242 ) —

(Gain) loss on divestitures, net of transaction costs — ( 6 )

Other operating (income) expense

Operating income 131 157

Interest expense 31 30 97 87

Interest expense, net

Other (income) expense, net 2 2

2 unchanged sentences

Net income $ 77 $ 98

Net income attributable to non-controlling interest — — — 2

Net income attributable to common stockholders $ 93 $ 80 $ 438 $ 226

Earnings per share:

1 unchanged sentence

Diluted $ 1.48 $ 1.79

See accompanying notes to condensed and consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Table of Conten ts

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

(in millions)

Net income $ 77 $ 98

Other comprehensive (loss) income, net of tax:

Net unrealized (loss) gain on derivative instruments

( 3 ) 29 ( 2 ) 63

Total other comprehensive (loss) income, net of tax

( 3 ) 29 ( 2 ) 63

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on derivative instruments

Total other comprehensive income (loss), net of tax

Comprehensive income $ 80 $ 92

Comprehensive income attributable to non-controlling interest — — — 2

Comprehensive income attributable to common stockholders $ 90 $ 109 $ 436 $ 289

See accompanying notes to condensed and consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Table of Conten ts

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

2024 February 2,

3 unchanged sentences

Receivables, net 934 914

Inventory, prepaid expenses and other current assets 67 152

Prepaid expenses and other current assets

Total current assets 1,091 1,131

1 unchanged sentence

Intangible assets, net 865 894

Property, plant, and equipment (net of accumulated depreciation of $ 176 million and $ 194 million at November 3, 2023 and February 3, 2023, respectively)

Property, plant, and equipment (net of accumulated depreciation of $ 188 million and $ 184 million at May 3, 2024 and February 2, 2024, respectively)

Operating lease right of use assets 148 152

3 unchanged sentences

Current liabilities:

Accounts payable and accrued liabilities $ 840 $ 767

Accounts payable

Accrued payroll and employee benefits 287 370

Other accrued liabilities

Long-term debt, current portion 90 77

2 unchanged sentences

Operating lease liabilities 136 147

Deferred income taxes 29 28

Other long-term liabilities 179 174

Commitments and contingencies (Note 12)

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

Common stock, $ 0.0001 par value, 1 billion shares authorized, 51 million and 52 million shares issued and outstanding as of May 3, 2024 and February 2, 2024, respectively

Additional paid-in capital 251 337

1 unchanged sentence

Accumulated other comprehensive income 19 16

Total common stockholders' equity 1,828 1,694

Non-controlling interest — 10

Total stockholders' equity 1,759 1,785

Total liabilities and stockholders' equity $ 5,250 $ 5,314

See accompanying notes to condensed and consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

stock Additional

5 unchanged sentences

(in millions)

Balance at August 4, 2023 53 $ 480 $ 1,340 $ 23 $ — $ 1,843

Net income — — 93 — — 93

Issuances of stock — 4 — — — 4

Other comprehensive income, net of tax — — — ( 3 ) — ( 3 )

Cash dividends of $ 0.37 per share

— — ( 20 ) — — ( 20 )

Stock-based compensation — 14 — — — 14

Repurchases of stock ( 1 ) ( 103 ) — — — ( 103 )

Balance at November 3, 2023 52 $ 395 $ 1,413 $ 20 $ — $ 1,828

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

4 unchanged sentences

— — ( 20 ) — — ( 20 )

Stock-based compensation — 21 — — — 21

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

— ( 9 ) — — — ( 9 )

Repurchases of stock ( 1 ) ( 81 ) — — — ( 81 )

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

Balance at November 3, 2023 52 $ 395 $ 1,413 $ 20 $ — $ 1,828

Balance at July 29, 2022 55 $ 723 $ 923 $ ( 3 ) $ 10 $ 1,653

Balance at May 3, 2024 51 $ 251 $ 1,489 $ 19 $ — $ 1,759

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

Net income — — 98 — — 98

1 unchanged sentence

Other comprehensive loss, net of tax

Cash dividends of $ 0.37 per share

— — — ( 6 ) — ( 6 )

Stock-based compensation — 11 — — — 11

Repurchases of stock — ( 60 ) — — — ( 60 )

Distributions to non-controlling interest — — — — — —

Balance at October 28, 2022 55 $ 679 $ 981 $ 26 $ 10 $ 1,696

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

Net income — — 226 — 2 228

Issuances of stock 1 13 — — — 13

Other comprehensive income, net of tax — — — 63 — 63

Cash dividends of $ 0.37 per share

— — ( 20 ) — — ( 20 )

Stock-based compensation — 19 — — — 19

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

— ( 7 ) — — — ( 7 )

Repurchases of stock ( 1 ) ( 71 ) — — — ( 71 )

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

Balance at October 28, 2022 55 $ 679 $ 981 $ 26 $ 10 $ 1,696

See accompanying notes to condensed and consolidated financial statements.

Deconsolidation of non-controlling interest

— — — — ( 10 ) ( 10 )

Balance at May 5, 2023 54 $ 563 $ 1,113 $ 16 $ — $ 1,692

(1) During the three months ended May 3, 2024 and May 5, 2023, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 22 million and $ 19 million, respectively.

See accompanying notes to condensed consolidated financial statements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

2023 October 28,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(in millions)

3 unchanged sentences

Depreciation and amortization 35 36

Amortization of off-market customer contracts ( 5 ) ( 12 )

Amortization of debt issuance costs 4 8

Deferred income taxes — ( 6 )

Stock-based compensation expense 13 12

Gain on sale of long-lived assets ( 3 ) —

Gain on divestitures ( 247 ) —

(Gain) loss on divestitures

Other ( 1 ) ( 1 )

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

Receivables ( 20 ) ( 127 )

Inventory, prepaid expenses and other current assets 13 7

Prepaid expenses and other current assets

Other assets — 4

1 unchanged sentence

Accrued payroll and employee benefits ( 83 ) ( 43 )

Income taxes payable 21 59

Operating lease assets and liabilities, net ( 3 ) ( 3 )

5 unchanged sentences

Sales of marketable securities 4 1

Proceeds from sale of long-lived assets 3 —

Proceeds from divestitures 356 —

Proceeds from assets held for sale — 355

Cash divested upon deconsolidation of joint venture — ( 8 )

Other ( 1 ) ( 3 )

Net cash provided by (used in) investing activities 324 ( 23 )

Net cash (used in) provided by investing activities

Cash flows from financing activities:

4 unchanged sentences

Proceeds from borrowings 293 160

Debt issuance costs — ( 6 )

Distributions to non-controlling interest — ( 2 )

Net cash used in financing activities ( 136 ) ( 105 )

Net increase (decrease) in cash, cash equivalents and restricted cash 202 ( 53 )

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period 103 118

Cash, cash equivalents and restricted cash at end of period $ 58 $ 431

See accompanying notes to condensed and consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Business Overview and Summary of Significant Accounting Policies :

Science Applications International Corporation (collectively, with its consolidated subsidiaries, and herein referred to as "SAIC," the “Company,” "we," "us," or "our") is a leading provider of technical, engineering and enterprise information technology (IT) services primarily to the U.S.

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

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

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

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

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

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

federal government.

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

Core service offerings include systems engineering and the operation and maintenance of existing IT systems and networks.

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

The Company's five business groups, which are also its operating segments, are aggregated into two reportable segments for financial reporting purposes given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve.

The Company’s two reportable segments are the Defense and Intelligence segment and the Civilian segment.

The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the defense and intelligence departments and agencies of the United States Government.

The Civilian segment provides solutions to the civilian markets, encompassing federal, state, and local governments, in order to deliver services for citizen well-being and protecting lives.

This includes integrating solutions into a spectrum of public service missions that impact travel, trade, health and the economy.

The offerings of both reportable segments entail the integration of emerging technologies into mission critical operations that modernize and enable national imperatives, including IT modernization, digital engineering, artificial intelligence ("AI"), mission systems support, training and simulation, and ground vehicles support.

These services include end-to-end solutions spanning the design, development, integration, deployment, management and operations, sustainment and security of the customers’ entire IT infrastructure.

The Company's Innovation Factory supports the operating segments by developing enterprise-class solutions which are delivered to the Company's customers as stand-alone solutions or integrated with and aligned to product offerings through the operations of the business 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.

Costs associated with corporate functions that are not allocable to the reportable segments are presented as Corporate activities.

See Note 11—Business Segments Information for additional information.

Within this report, the Company has recast historical financial information to reflect the new reportable segments.

The recast historical information has no impact on the Company's previously reported condensed consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The accompanying financial information was prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting purposes.

References to “financial statements” refer to the condensed and 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.

References to “financial statements” refer to the condensed 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.

1 unchanged sentence

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

The financial statements are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation thereof.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Interest income was reclassified from "Other (income) expense, net" to "Interest expense, net" on the condensed consolidated statements of income, gains on divestitures, net of transaction costs were reclassified from "Other operating (income) expense" to "(Gain) loss on divestitures, net of transaction costs" on the condensed consolidated statements of income, and "Accounts Payable" is now presented separately from "Other accrued liabilities" on the condensed consolidated balance sheets.

The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year and should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended February 2, 2024.

5 unchanged sentences

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 ends on February 2, 2024, while fiscal 2023 began on January 29, 2022 and ended on February 3, 2023.

Fiscal 2025 began on February 3, 2024 and ends on January 31, 2025, while fiscal 2024 began on February 4, 2023 and ended on February 2, 2024.

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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments Designated as Cash Flow Hedges

Derivative instruments are recorded on the condensed and consolidated balance sheets at fair value.

Derivative instruments are recorded on the condensed 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.

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

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

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

See Note 8—Derivative Instruments Designated as Cash Flow Hedges for further discussion on the Company’s derivative instruments designated as cash flow hedges.

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 November 3, 2023 and February 3, 2023, the fair value of the Company's investments totaled $ 29 million and $ 28 million, respectively, and are included in other assets on the condensed and consolidated balance sheets.

As of May 3, 2024 and February 2, 2024, the fair value of the Company's investments totaled $ 32 million, and are included in "Other assets" on the condensed consolidated balance sheets.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents and Restricted Cash

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

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

2024 February 2,

1 unchanged sentence

Cash and cash equivalents $ 49 $ 94

Restricted cash included in inventory, prepaid expenses and other current assets 4 5

Restricted cash included in prepaid expenses and other current assets

Restricted cash included in other assets 5 5

Cash, cash equivalents and restricted cash $ 58 $ 103

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 consolidations, employee related costs, such as retention and severance, costs to integrate information technology infrastructure, enterprise planning systems, processes, and other non-recurring integration-related costs.

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

Acquisition costs for the three and nine months ended November 3, 2023 were immaterial.

During the three and nine months ended October 28, 2022, the Company recognized a benefit of $ 1 million and $ 2 million, respectively, related to the acquisition of Koverse.

During the nine months ended November 3, 2023, the Company incurred $ 1 million of integration costs related to the acquisitions of Halfaker and Koverse.

During the three and nine months ended October 28, 2022, the Company incurred $ 2 million and $ 13 million of integration costs, respectively, related to the acquisitions of Halfaker and Koverse.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Restructuring

During the three and nine months ended November 3, 2023, the Company incurred $ 2 million and $ 8 million of restructuring costs, respectively.

During the three and nine months ended October 28, 2022, the Company incurred $ 5 million and $ 7 million of restructuring costs.

These costs are associated with the optimization and consolidation of certain facilities and are presented within selling, general and administrative expenses on the condensed and consolidated statements of income.

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.

Restructuring costs for the three months ended May 3, 2024 were $ 2 million and were primarily related to activities associated with the reorganization of its business sectors into business groups.

Restructuring costs for the three months ended May 5, 2023 were $ 1 million and were primarily associated with the optimization and consolidation of certain facilities.

Restructuring costs are presented within "Selling, general and administrative expenses" on the condensed consolidated statements of income.

Investments in Equity Securities

2 unchanged sentences

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 unaudited condensed and 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 condensed and 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.

The results of these investments are not material to the condensed 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) expense" on the condensed 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 and do not qualify to be measured at their Net Asset Value per share (or equivalent) are carried at cost or cost net of other-than-temporary impairments.

Accounting Standards Updates

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

2023-07, Segment Reporting (Topic 280) , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

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 condensed 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 chief operating decision maker ("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 is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

In September 2022, the FASB issued ASU No.

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

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

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

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

beginning after December 15, 2024.

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 and accrued liabilities on the condensed and consolidated balance sheets and were immaterial as of November 3, 2023 .

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

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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Basic EPS is computed by dividing net income 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-based awards.

The dilutive effect of outstanding 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:

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

Three Months Ended

(in millions)

Basic weighted-average number of shares outstanding

52.8 55.0 53.5 55.6

Dilutive common share equivalents - stock options and other stock-based awards

0.5 0.5 0.5 0.4

Diluted weighted-average number of shares outstanding

53.3 55.5 54.0 56.0

Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for the three and nine months ended November 3, 2023 and October 28, 2022 were immaterial .

Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for the three months ended May 3, 2024 and May 5, 2023 were immaterial .

Share Repurchases

2 unchanged sentences

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

In June 2022, the number of shares of the Company's common stock that may be repurchased under its 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 November 3, 2023, the Company has repurchased approximately 19.6 million shares of common stock under the program.

The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended November 3, 2023.

Subsequent to the end of the quarter, on November 30, 2023, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on January 26, 2024 to stockholders of record on January 12, 2024.

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 May 3, 2024, the Company has repurchased approximately 20.9 million shares of its common stock under the plan.

The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended May 3, 2024.

Subsequent to the end of the quarter, on May 30, 2024, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on July 26, 2024 to stockholders of record on July 12, 2024.

Note 3—Revenues :

6 unchanged sentences

and performance being better or worse than previously estimated.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED 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.

1 unchanged sentence

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

Three Months Ended

(in millions, except per share amounts)

Net (unfavorable) favorable adjustments $ 2 $ ( 6 ) $ 6 $ 4

Net (unfavorable) favorable adjustments, after tax 2 ( 5 ) 5 3

Net favorable adjustments

Net favorable adjustments, after tax

Diluted EPS impact $ 0.02 $ 0.07

Revenues were $ 4 million and $ 8 million higher for the three and nine months ended November 3, 2023, respectively, and $ 2 million lower and $ 7 million higher for the three and nine months ended October 28, 2022, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Revenues were $ 1 million and $ 5 million higher for the three months ended May 3, 2024 and May 5, 2023, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Disaggregation of Revenues

1 unchanged sentence

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

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

The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government for each of its reportable segments.

Disaggregated revenues by customer were as follows:

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

Three Months Ended May 3, 2024

Defense and Intelligence

(in millions)

Department of Defense $ 974 $ 2 $ 976

Other federal government agencies 863 903 2,611 2,827

Commercial, state and local 40 37 114 110

Intelligence and other federal government agencies

Commercial, state and local governments and international

Total $ 1,436 $ 411 $ 1,847

Three Months Ended May 5, 2023

Defense and Intelligence

(in millions)

Department of Defense $ 1,069 $ 2 $ 1,071

Intelligence and other federal government agencies

Commercial, state and local governments and international

Total $ 1,597 $ 431 $ 2,028

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenues by contract type were as follows:

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

Three Months Ended May 3, 2024

Defense and Intelligence

(in millions)

3 unchanged sentences

Total $ 1,436 $ 411 $ 1,847

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended May 5, 2023

Defense and Intelligence

(in millions)

Cost reimbursement $ 1,091 $ 21 $ 1,112

Time and materials ("T&M")

Firm-fixed price ("FFP")

Total $ 1,597 $ 431 $ 2,028

Disaggregated revenues by prime versus subcontractor were as follows:

Three Months Ended Nine Months Ended

2023 October 28,

2022 November 3,

2023 October 28,

Three Months Ended May 3, 2024

Defense and Intelligence

(in millions)

3 unchanged sentences

Total $ 1,436 $ 411 $ 1,847

Three Months Ended May 5, 2023

Defense and Intelligence

(in millions)

Prime contractor to federal government $ 1,489 $ 366 $ 1,855

Subcontractor to federal government 104 32 136

Other 4 33 37

Total $ 1,597 $ 431 $ 2,028

Contract Balances

Contract balances for the periods presented were as follows:

Balance Sheet line item November 3,

Balance Sheet line item May 3,

2024 February 2,

4 unchanged sentences

Contract assets - contract retentions Other assets 15 14

Contract liabilities - current Accounts payable and accrued liabilities 48 48

Contract liabilities - current Other accrued liabilities

Contract liabilities - non-current Other long-term liabilities $ 1 $ 2

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

During the three and nine months ended November 3, 2023, the Company recognized revenues of $ 5 million and $ 38 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of February 3, 2023.

During the three and nine months ended October 28, 2022, the Company recognized revenues of $ 4 million and $ 39 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 28, 2022.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended May 3, 2024 and May 5, 2023, the Company recognized revenues of $ 20 million and $ 21 million relating to amounts that were included in the opening balance of contract liabilities as of February 2, 2024 and February 3, 2023, respectively.

Remaining Performance Obligations

As of November 3, 2023, the Company had approximately $ 5.5 billion of 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 May 3, 2024, the Company had approximately $ 5.4 billion of remaining performance obligations.

The Company expects to recognize revenue on approximately 81 % of the remaining performance obligations over the next 12 months and approximately 91 % over the next 24 months, with the remaining recognized thereafter.

Lessor Revenue

The Company leases IT equipment and hardware to its customers.

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

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

During the nine months ended October 28, 2022, the Company recognized revenue of $ 23 million from the exercise of purchase options under certain lessor arrangements.

Operating lease income was immaterial for the three and nine months ended November 3, 2023 and October 28, 2022.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Note 4—Divestitures :

2 unchanged sentences

("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 will account for its retained interest as an equity method investment as of the date of the transaction.

The Company remeasured its retained investment in FSA to a fair value of $ 14 million.

The equity method investment is included within other assets on the condensed and consolidated balance sheets.

The remeasurement resulted in a gain of $ 7 million which is included within other operating income on the condensed and consolidated statements of income and is reflected within gain on divestitures on the condensed and consolidated statements of cash flows.

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

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

1 unchanged sentence

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 other operating income on the condensed and consolidated statements of income.

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

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

(in millions)

Receivables, net $ 46

Inventory, prepaid expenses and other current assets 73

Operating lease right of use assets 2

Total assets divested $ 181

Accounts payable and accrued liabilities $ 63

Accrued payroll and employee benefits 1

Operating lease liabilities 1

Total liabilities divested $ 65

In connection with the sale, 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 end of fiscal 2024 on a cost reimbursable basis.

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

On March 23, 2023, the Company executed a definitive agreement to sell its logistics and supply chain management business ("Supply Chain Business") to ASRC Federal Holding Company, LLC ("ASRC Federal"), a subsidiary of Arctic Slope Regional Corporation, for $ 350 million of pre-tax cash proceeds, subject to certain adjustments for working capital.

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

During the first quarter of fiscal 2024, the Company received a refundable cash deposit of $ 355 million which represented the expected proceeds due upon closing of the transaction with ASRC Federal including preliminary adjustments for working capital.

The Company recognized the cash as "Proceeds from assets held for sale" on the condensed consolidated statements of cash flows.

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

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5—Goodwill and Intangible Assets :

Goodwill had a carrying value of $ 2,851 million and $ 2,911 million as of November 3, 2023 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 4).

There were no impairments of goodwill during the periods presented.

The following table presents the carrying value of goodwill by reportable segment:

2024 February 2,

(in millions)

Defense and Intelligence

$ 2,001 $ 2,001

$ 2,851 $ 2,851

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

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

As a result of the internal reorganization on February 3, 2024, the Company reallocated its goodwill to its five new goodwill reporting units.

The Company performed a goodwill impairment test immediately before and after the reorganization, both of which resulted in no impairment.

For the goodwill impairment test immediately after the reorganization, the Company performed a quantitative assessment of its goodwill as of February 3, 2024 for its five new goodwill reporting units.

The Company estimated the fair value of each reporting unit using a 50:50 weighting of fair values derived from an income approach and market approach.

Under the income approach, the Company estimated the fair value of its reporting units using a multi-year discounted cash flow model involving assumptions about projected future revenue growth, operating margins, income tax rates, capital expenditures, discount rate, and terminal value.

Under the market approach, the Company estimated the fair value of its reporting units based on multiples of earnings derived from observable market data of comparable public companies.

Intangible Assets

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

November 3, 2023 February 3, 2023

May 3, 2024 February 2, 2024

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

4 unchanged sentences

Total intangible assets $ 1,473 $ ( 608 ) $ 865 $ 1,473 $ ( 579 ) $ 894

Amortization expense related to intangible assets was $ 28 million and $ 86 million for the three and nine months ended November 3, 2023, respectively, and $ 29 million and $ 94 million for the three and nine months ended October 28, 2022, respectively.

Amortization expense related to intangible assets was $ 29 million for the three months ended May 3, 2024 and May 5, 2023.

There were no intangible asset impairment losses during the periods presented.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of May 3, 2024, the estimated future annual amortization expense related to intangible assets is as follows:

Fiscal Year (in millions)

3 unchanged sentences

Note 6—Income Taxes :

The Company's effective income tax rate was 18.0 % and 23.4 % for the three and nine months ended November 3, 2023, respectively, and 20.3 % and 21.3 % for the three and nine months ended October 28, 2022, respectively.

The Company’s effective tax rate for the three months ended November 3, 2023, is lower compared to the effective tax rate from the same period in the prior year due to higher tax benefits from the deduction for foreign-derived intangible income.

The Company's effective tax rate for the nine months ended November 3, 2023, is higher compared to the effective tax rate from the same period in the prior year due to the gain from the disposition of the Supply Chain Business and the associated non-deductible goodwill.

The increase was partially offset by higher tax benefits from stock-based compensation and the deduction for foreign-derived intangible income.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

Beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 (TCJA) removed the ability of taxpayers to immediately deduct specific research and development expenditures in the year incurred and instead requires taxpayers to capitalize and amortize such research expenditures over a period of five years.

As of November 3, 2023, the Company's unrecognized tax benefits were $ 225 million, compared to $ 156 million as of February 3, 2023.

The increase during the nine months ended November 3, 2023 is primarily attributable to research tax credits and capitalized research and development costs in accordance with the TCJA.

This increase also resulted in a corresponding $ 44 million increase to deferred tax assets.

The unrecognized tax benefits are presented within other long-term liabilities on the condensed and consolidated balance sheets.

As of November 3, 2023 and February 3, 2023, the net deferred tax asset balance was $ 92 million and $ 14 million, respectively, and is presented in other assets on the condensed and consolidated balance sheets.

The Company's effective income tax rate was 19.0 % and 20.0 % for the three months ended May 3, 2024 and May 5, 2023, respectively.

The Company’s effective tax rate for the three months ended May 3, 2024, is lower compared to the effective tax rate from the same period in the prior year primarily due to higher tax benefits from the deduction for foreign-derived intangible income.

Note 7—Debt Obligations :

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

November 3, 2023 February 3, 2023

May 3, 2024 February 2, 2024

rate Effective

4 unchanged sentences

Term Loan B Facility due October 2025 — % — % — — — 328 ( 1 ) 327

7.30 % 7.51 % 424 ( 1 ) 423 488 ( 3 ) 485

Term Loan B2 Facility due March 2027 — % — % — — — 182 ( 2 ) 180

Term Loan B3 Facility due February 2031

7.19 % 7.35 % 510 ( 4 ) 506 — — —

4 unchanged sentences

$ 2,004 $ ( 11 ) $ 1,993 $ 2,032 $ ( 10 ) $ 2,022

As of November 3, 2023, the Company had a $ 2.9 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 Revolving Credit Facility due June 2027 (the Revolving Credit Facility).

During the nine months ended November 3, 2023, the Company made a scheduled principal payment of $ 15 million on the Term Loan A Facility due June 2027 and principal prepayments of $ 64 million and $ 36 million on the Term Loan B Facility due October 2025 and the Term Loan B2 Facility due March 2027, respectively.

During the nine months ended November 3, 2023, the Company borrowed and repaid $ 160 million under the Revolving Credit Facility.

There was no balance outstanding on the Revolving Credit Facility as of November 3, 2023.

As of May 3, 2024, the Company had a $ 2.7 billion secured credit facility (the Credit Facility) consisting of a Term Loan A Facility due June 2027, a Term Loan B3 Facility due February 2031 (together, the "Term Loan Facilities"), and a $ 1.0 billion Revolving Credit Facility due June 2027 (the "Revolving Credit Facility").

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.

The Tranche B3 Facility is subject to the same covenants and events of default as the Company's existing Term Loan Facilities.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 Secured Overnight Financing Rate ("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, 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.

During the three months ended May 3, 2024, the Company incurred $ 5 million of debt issuance costs associated with the Sixth Amendment, of which $ 3 million was recognized in interest expense and the remaining $ 2 million deferred and amortized to interest expense through the maturity date of the facility utilizing the effective interest rate method.

During the three months ended May 3, 2024, the Company made a scheduled principal payment of $ 15 million on the Term Loan A Facility due June 2027.

During the three months ended May 3, 2024, the Company borrowed and repaid $ 190 million under the Revolving Credit Facility.

There was no balance outstanding on the Revolving Credit Facility as of May 3, 2024.

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

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

As of November 3, 2023 and February 3, 2023, the carrying value of the Company’s outstanding debt obligations approximated its fair value.

As of May 3, 2024, the Company was in compliance with the covenants under its Credit Facility.

As of May 3, 2024 and February 2, 2024, the carrying value of the Company’s outstanding debt obligations approximated its fair value.

The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s Term Loan Facilities and Senior Notes.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

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

Maturities of long-term debt as of May 3, 2024 are:

Fiscal Year Total

3 unchanged sentences

Total principal payments $ 2,094

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8—Derivative Instruments Designated as Cash Flow Hedges :

1 unchanged sentence

Fair Value of Asset (1) at

Notional Amount at November 3, 2023 Pay Fixed

Notional Amount at May 3, 2024 Pay Fixed

Rate Settlement and

Termination November 3,

Termination May 3,

2024 February 2, 2024

(in millions) (in millions)

Interest rate swaps #1 $ 685 2.96 % Term SOFR Monthly through October 31, 2025 $ 22 $ 16

Interest rate swaps #2 — 2.36 % Term SOFR Monthly through October 31, 2023 — 9

Total $ 685 $ 22 $ 25

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

Interest rate swaps

$ 685 2.96 % 1-month Term SOFR Monthly through October 31, 2025 $ 19 $ 15

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

The counterparties to all swap agreements are financial institutions.

See Note 9 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 the three months ended November 3, 2023, Interest Rate Swaps #2 matured which had a notional value of $ 450 million upon maturity.

The Company estimates that it will reclassify $ 15 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following November 3, 2023.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

See Note 9—Changes in Accumulated Other Comprehensive Income (Loss) 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.

The Company estimates that it will reclassify $ 14 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following May 3, 2024.

Note 9—Changes in Accumulated Other Comprehensive Income (Loss) by Component :

The following table presents the changes in accumulated other comprehensive income (loss) attributable to the Company’s fixed interest rate swap cash flow hedges that are discussed in Note 8 and the Company's defined benefit plans.

Unrealized Gains

5 unchanged sentences

(in millions)

Three months ended November 3, 2023

Balance at August 4, 2023 $ 19 $ 4 $ 23

Three months ended May 3, 2024

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

Other comprehensive income before reclassifications 8 — 8

1 unchanged sentence

Income tax impact ( 1 ) — ( 1 )

Net other comprehensive loss

( 3 ) — ( 3 )

Balance at November 3, 2023 $ 16 $ 4 $ 20

Three months ended October 28, 2022

Balance at July 29, 2022 $ ( 4 ) $ 1 $ ( 3 )

Other comprehensive loss before reclassifications 38 — 38

Amounts reclassified from accumulated other comprehensive loss

Income tax impact ( 10 ) — ( 10 )

Net other comprehensive income

Balance at October 28, 2022 $ 25 $ 1 $ 26

Nine months ended November 3, 2023

Balance at May 3, 2024 $ 14 $ 5 $ 19

Three months ended May 5, 2023

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

Other comprehensive income before reclassifications 17 — 17

Amounts reclassified from accumulated other comprehensive income ( 20 ) — ( 20 )

Income tax impact 1 — 1

Net other comprehensive loss

( 2 ) — ( 2 )

Balance at November 3, 2023 $ 16 $ 4 $ 20

Nine months ended October 28, 2022

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

Other comprehensive income before reclassifications 72 — 72

Other comprehensive loss before reclassifications ( 2 ) — ( 2 )

Amounts reclassified from accumulated other comprehensive loss

( 6 ) — ( 6 )

Income tax impact 2 — 2

Net other comprehensive loss

( 6 ) — ( 6 )

Net other comprehensive income 63 — 63

Balance at October 28, 2022 $ 25 $ 1 $ 26

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

Balance at May 5, 2023 $ 12 $ 4 $ 16

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10—Sales of Receivables :

1 unchanged sentence

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

During the nine months ended November 3, 2023 and October 28, 2022, the Company incurred purchase discount fees of $ 7 million and $ 4 million, respectively, which are presented in other (income) expense, net on the condensed and consolidated statements of income and are reflected as cash flows from operating activities on the condensed and consolidated statements of cash flows.

During the three months ended May 3, 2024 and May 5, 2023, the Company incurred purchase discount fees of $ 3 million, which are presented in "Other (income) expense, net" on the condensed consolidated statements of income and are reflected as cash flows from operating activities on the condensed consolidated statements of cash flows.

MARPA Facility activity consisted of the following:

Nine Months Ended

2023 October 28,

Three Months Ended

(in millions)

6 unchanged sentences

Remaining sold receivables $ 218 $ 210

(1) For the nine months ended November 3, 2023 there was no net impact to cash flows from operating activities from sold receivables.

For the nine months ended October 28, 2022, the Company recorded a net increase to cash flows from operating activities of $ 60 million from sold receivables.

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

This balance is included in accounts payable and accrued liabilities on the condensed and consolidated balance sheets.

(1) For the three months ended May 3, 2024, the Company recorded a net increase of $ 79 million to cash flows from operating activities from sold receivables.

For the three months ended May 5, 2023, there was no net impact to cash flows from operating activities from sold receivables.

(2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of May 3, 2024 and May 5, 2023.

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

Note 11—Business Segments Information:

The five business groups represent the Company’s operating segments and have been aggregated into two reportable segments (Defense and Intelligence, and Civilian) given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve.

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

The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the defense and intelligence departments and agencies of the United States Government.

The Civilian segment provides solutions to the civilian markets, encompassing federal, state, and local governments, in order to deliver services for citizen well-being and protecting lives.

This includes integrating solutions into a spectrum of public service missions that impact travel, trade, health and the economy.

The offerings of both reportable segments entail the integration of emerging technologies into mission critical operations that modernize and enable national imperatives, including IT modernization, digital engineering, AI, mission systems support, training and simulation, and ground vehicles support.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Costs associated with corporate functions that are not allocable to the reportable segments are presented as Corporate.

The segment information for the periods presented was as follows:

Three Months Ended

(in millions)

Defense and Intelligence

$ 1,436 $ 1,597

Total revenues

$ 1,847 $ 2,028

Operating income (loss):

Defense and Intelligence

Total operating income

The income statement performance measures regularly provided to the CODM are "Revenues" and "Operating income." As a result, "Interest expense, net," "Other (income) expense, net" and "Provision for income taxes" as reported in the condensed consolidated statements of income are not allocated to the Company's segments.

Asset information by segment is not a key measure of performance used by the CODM.

Note 12—Legal Proceedings and Other Commitments and Contingencies :

1 unchanged sentence

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 a Federal Grand Jury Subpoena in connection with a criminal investigation being conducted by the U.S.

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

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

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

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

The Company is fully cooperating with the investigation.

4 unchanged sentences

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Government Investigations, Audits and Reviews

7 unchanged sentences

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

As of November 3, 2023, 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 U.S.

As of May 3, 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 U.S.

government Cost Accounting Standards.

Letters of Credit and Surety Bonds

The Company has outstanding obligations relating to letters of credit of $ 9 million as of November 3, 2023, principally related to guarantees on insurance policies.

The Company has outstanding obligations relating to letters of credit of $ 10 million as of May 3, 2024, principally related to guarantees on insurance policies.

The Company also has outstanding obligations relating to surety bonds of $ 19 million, principally related to performance and payment bonds on the Company’s contracts.

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements