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Item 1. Financial Statements

2024-09-05 compared with 2024-06-03 · 224 added, 110 removed, 447 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions, except per share amounts)

4 unchanged sentences

Other operating (income) expense

( 1 ) — ( 4 ) —

Operating income 134 362 265 519

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions)

Net income $ 81 $ 247 $ 158 $ 345

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on derivative instruments

Total other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax:

Net unrealized (loss) gain on derivative instruments

( 8 ) 7 ( 5 ) 1

Total other comprehensive (loss) income, net of tax

( 8 ) 7 ( 5 ) 1

Comprehensive income $ 73 $ 254 $ 153 $ 346

12 unchanged sentences

Intangible assets, net 836 894

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

Property, plant, and equipment (net of accumulated depreciation of $ 193 million and $ 184 million at August 2, 2024 and February 2, 2024, respectively)

Operating lease right of use assets 168 152

6 unchanged sentences

Other accrued liabilities

Long-term debt, current portion 90 77

Debt, current portion 197 77

Total current liabilities 1,292 1,158

Long-term debt, net of current portion 1,993 2,022

Debt, net of current portion 1,970 2,022

Operating lease liabilities 158 147

2 unchanged sentences

Commitments and contingencies (Note 12)

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

Common stock, $ 0.0001 par value, 1 billion shares authorized, 50 million and 52 million shares issued and outstanding as of August 2, 2024 and February 2, 2024, respectively

Additional paid-in capital 63 337

13 unchanged sentences

(in millions)

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

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

Net income — — 81 — — 81

Issuances of stock — 5 — — — 5

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

Other comprehensive loss, net of tax

— — — ( 8 ) — ( 8 )

Cash dividends of $ 0.37 per share

3 unchanged sentences

Repurchases of stock ( 1 ) ( 204 ) — — — ( 204 )

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

Balance at August 2, 2024 50 $ 63 $ 1,551 $ 11 $ — $ 1,625

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

6 unchanged sentences

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

Repurchases of stock ( 2 ) ( 285 ) — — — ( 285 )

Balance at August 2, 2024 50 $ 63 $ 1,551 $ 11 $ — $ 1,625

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

Net income — — 247 — — 247

Issuances of stock — 5 — — — 5

Other comprehensive income, net of tax

Cash dividends of $ 0.37 per share

— — ( 20 ) — — ( 20 )

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

— 14 — — — 14

Repurchases of stock ( 1 ) ( 102 ) — — — ( 102 )

Deconsolidation of non-controlling interest

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

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

Net income — — 345 — — 345

Issuances of stock 1 9 — — — 9

Other comprehensive income, net of tax

Cash dividends of $ 0.74 per share

— — ( 40 ) — — ( 40 )

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.

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

Repurchases of stock ( 2 ) ( 173 ) — — — ( 173 )

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

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

(1) During the three months ended August 2, 2024 and August 4, 2023, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 1 million.

During the six months ended August 2, 2024 and August 4, 2023, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 23 million and $ 20 million, respectively.

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

2024 August 4,

(in millions)

5 unchanged sentences

Stock-based compensation expense 25 27

(Gain) loss on sale of long-lived assets

(Gain) loss on divestitures

6 unchanged sentences

Accrued payroll and employee benefits ( 32 ) 9

Income taxes payable ( 2 ) 74

Operating lease assets and liabilities, net ( 5 ) ( 2 )

5 unchanged sentences

Sales of marketable securities 6 4

Proceeds from assets held for sale — 355

Proceeds from sale of long-lived assets — 3

Proceeds from divestitures — 355

Cash divested upon deconsolidation of joint venture — ( 8 )

24 unchanged sentences

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.

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 and advisory, 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.

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

It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions 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.

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Investments in marketable securities consist of equity securities, which are recorded at fair value using observable inputs such as quoted prices in active markets (Level 1).

As of 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.

As of August 2, 2024 and February 2, 2024, the fair value of the Company's investments totaled $ 36 million and $ 32 million, respectively, 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.

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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 for the three and six months ended August 2, 2024 were $ 2 million and $ 4 million, respectively, and were primarily related to activities associated with the reorganization of its business sectors into business groups and the optimization and consolidation of certain facilities.

Restructuring costs for the three and six months ended August 4, 2023 were $ 5 million and $ 6 million, respectively, 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

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 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

6 unchanged sentences

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.

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

In November 2023, the FASB issued ASU No.

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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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

beginning after December 15, 2024.

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 condensed consolidated financial statements.

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

3 unchanged sentences

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions)

Basic weighted-average number of shares outstanding

50.9 53.5 51.3 53.9

Dilutive common share equivalents - stock options and other stock-based awards 0.3 0.4 0.4 0.4

Diluted weighted-average number of shares outstanding

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 .

51.2 53.9 51.7 54.3

Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for the three and six months ended August 2, 2024 and August 4, 2023 were immaterial .

Share Repurchases

3 unchanged sentences

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.

As of August 2, 2024, the Company has repurchased approximately 22.6 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 August 2, 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 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

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions, except per share amounts)

Net favorable adjustments

Net favorable adjustments, after tax

Net (unfavorable) favorable adjustments

$ ( 1 ) $ ( 1 ) $ — $ 4

Net (unfavorable) favorable adjustments, after tax

( 1 ) ( 1 ) — 3

Diluted EPS impact $ ( 0.02 ) $ ( 0.02 ) $ — $ 0.06

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.

Revenues were $ 1 million higher for the six months ended August 2, 2024 and $ 1 million lower and $ 4 million higher for the three and six months ended August 4, 2023, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Disaggregation of Revenues

3 unchanged sentences

Disaggregated revenues by customer were as follows:

Three Months Ended May 3, 2024

Three Months Ended

August 2, 2024

August 4, 2023

Defense and Intelligence

(in millions)

1 unchanged sentence

Intelligence and other federal government agencies

455 369 824 469 359 828

Commercial, state and local governments and international

10 34 44 3 34 37

Total $ 1,415 $ 403 $ 1,818 $ 1,389 $ 395 $ 1,784

Three Months Ended May 5, 2023

Six Months Ended

August 2, 2024

August 4, 2023

Defense and Intelligence

(in millions)

1 unchanged sentence

Intelligence and other federal government agencies

913 745 1,658 993 755 1,748

Commercial, state and local governments and international

14 67 81 7 67 74

Total $ 2,851 $ 814 $ 3,665 $ 2,986 $ 826 $ 3,812

2 unchanged sentences

Disaggregated revenues by contract type were as follows:

Three Months Ended May 3, 2024

Three Months Ended

August 2, 2024

August 4, 2023

Defense and Intelligence

(in millions)

1 unchanged sentence

Time and materials ("T&M")

162 264 426 115 243 358

Firm-fixed price ("FFP")

168 119 287 182 139 321

Total $ 1,415 $ 403 $ 1,818 $ 1,389 $ 395 $ 1,784

Three Months Ended May 5, 2023

Six Months Ended

August 2, 2024

August 4, 2023

Defense and Intelligence

(in millions)

1 unchanged sentence

Time and materials ("T&M")

311 532 843 229 496 725

Firm-fixed price ("FFP")

321 241 562 574 296 870

Total $ 2,851 $ 814 $ 3,665 $ 2,986 $ 826 $ 3,812

Disaggregated revenues by prime versus subcontractor were as follows:

Three Months Ended May 3, 2024

Three Months Ended

August 2, 2024 August 4, 2023

Defense and Intelligence

(in millions)

3 unchanged sentences

Total $ 1,415 $ 403 $ 1,818 $ 1,389 $ 395 $ 1,784

Three Months Ended May 5, 2023

Six Months Ended

August 2, 2024

August 4, 2023

Defense and Intelligence

(in millions)

3 unchanged sentences

Total $ 2,851 $ 814 $ 3,665 $ 2,986 $ 826 $ 3,812

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

Contract balances for the periods presented were as follows:

Balance Sheet line item May 3,

Balance Sheet line item August 2,

2024 February 2,

6 unchanged sentences

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

(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.

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

During the three and six months ended August 2, 2024, the Company recognized revenues of $ 10 million and $ 30 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of February 2, 2024.

During the three and six months ended August 4, 2023, the Company recognized revenues of $ 12 million and $ 33 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of February 3, 2023.

Remaining Performance Obligations

1 unchanged sentence

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.

As of August 2, 2024, the Company had approximately $ 5.4 billion of RPO.

The Company expects to recognize revenue on approximately 79 % of the RPO over the next 12 months and approximately 90 % over the next 24 months, with the remaining recognized thereafter.

Note 4—Divestitures:

5 unchanged sentences

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.

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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sale of Logistics and Supply Chain Management Business

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.

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, including $ 355 million received at closing and a preliminary post-closing adjustment for working capital.

The Company recognized the cash as "Proceeds from divestitures" on the condensed consolidated statements of cash flows.

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

During the second quarter of fiscal 2024, the Company recorded a preliminary pre-tax gain of $ 233 million, net of $ 7 million of transaction costs, which is included within "(Gain) loss on divestitures, net of transaction costs" on the condensed consolidated statements of income.

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.

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

(in millions)

Receivables, net $ 46

Inventories, net

Prepaid expenses

Operating lease right of use assets 2

Total assets divested $ 181

Accounts payable

Accrued payroll and employee benefits 1

Other accrued liabilities

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 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 CONSOLIDATED FINANCIAL STATEMENTS

Note 5—Goodwill and Intangible Assets:

6 unchanged sentences

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.

The goodwill impairment test is performed at

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

6 unchanged sentences

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

May 3, 2024 February 2, 2024

August 2, 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 $ ( 637 ) $ 836 $ 1,473 $ ( 579 ) $ 894

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

Amortization expense related to intangible assets was $ 29 million and $ 58 million for the three and six months ended August 2, 2024 and August 4, 2023, respectively.

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

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:

As of August 2, 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 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.

The Company's effective income tax rate was 19.6 % and 19.3 % for the three and six months ended August 2, 2024, respectively, and 26.4 % and 24.7 % for the three and six months ended August 4, 2023, respectively.

The Company’s effective tax rate primarily differs from the statutory tax rate due to the deduction for foreign derived intangible income, research and development tax credits, and stock-based compensation windfalls.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s effective tax rate for the three and six months ended August 2, 2024 decreased compared to the same periods in the prior year due to the non-recurrence of a gain from the disposition of the Supply Chain Business and the associated non-deductible goodwill.

Note 7—Debt Obligations:

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

May 3, 2024 February 2, 2024

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

August 2, 2024 February 2, 2024

rate Effective

5 unchanged sentences

Term Loan B2 Facility due March 2027

— % — % — — — 182 ( 2 ) 180

Term Loan B3 Facility due February 2031

1 unchanged sentence

Senior Notes due April 2028 4.88 % 5.11 % 400 ( 3 ) 397 400 ( 3 ) 397

Total long-term debt $ 2,094 $ ( 11 ) $ 2,083 $ 2,109 $ ( 10 ) $ 2,099

Revolving Credit Facility due June 2027 6.69 % 6.69 % 100 — 100 — — —

$ 2,177 $ ( 10 ) $ 2,167 $ 2,109 $ ( 10 ) $ 2,099

Less current portion 197 — 197 77 — 77

Total long-term debt, net of current portion

Total debt, net of current portion

$ 1,980 $ ( 10 ) $ 1,970 $ 2,032 $ ( 10 ) $ 2,022

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").

As of August 2, 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").

1 unchanged sentence

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.

2 unchanged sentences

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.

During the six months ended August 2, 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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended August 2, 2024, the Company made scheduled principal payments of $ 16 million and $ 31 million, respectively, on the Term Loan A Facility due June 2027 and made a scheduled principal payment of $ 1 million on the Term Loan B3 Facility due February 2031.

During the three and six months ended August 2, 2024, the Company borrowed $ 380 million and $ 570 million, respectively, and repaid $ 280 million and $ 470 million, respectively, under the Revolving Credit Facility.

As of August 2, 2024, the outstanding principal under the Revolving Credit Facility was classified as current portion of debt on the condensed consolidated balance sheets.

Subsequent to quarter end, the Company repaid $ 50 million on the Revolving Credit Facility.

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 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.

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

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

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

The fair value of 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.

Maturities of debt as of August 2, 2024 are:

Fiscal Year Total

3 unchanged sentences

Total principal payments $ 2,177

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 May 3, 2024 Pay Fixed

Notional Amount at August 2, 2024 Pay Fixed

Rate Settlement and

Termination May 3,

Termination August 2,

2024 February 2, 2024

6 unchanged sentences

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.

The Company estimates that it will reclassify $ 8 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following August 2, 2024.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

7 unchanged sentences

(in millions)

Three months ended May 3, 2024

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

Three months ended August 2, 2024

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

Other comprehensive loss before reclassifications

( 6 ) — ( 6 )

Amounts reclassified from accumulated other comprehensive income ( 4 ) — ( 4 )

Income tax impact 2 — 2

Net other comprehensive loss

( 8 ) — ( 8 )

Balance at August 2, 2024 $ 6 $ 5 $ 11

Three months ended August 4, 2023

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

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income

( 6 ) — ( 6 )

Income tax impact ( 2 ) — ( 2 )

Net other comprehensive income

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

Three months ended May 5, 2023

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

Six months ended August 2, 2024

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

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

Amounts reclassified from accumulated other comprehensive loss

( 6 ) — ( 6 )

Other comprehensive income before reclassifications 2 — 2

Amounts reclassified from accumulated other comprehensive income ( 8 ) — ( 8 )

Income tax impact 1 — 1

1 unchanged sentence

( 5 ) — ( 5 )

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

Balance at August 2, 2024 $ 6 $ 5 $ 11

Six months ended August 4, 2023

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

Other comprehensive income before reclassifications 13 — 13

Amounts reclassified from accumulated other comprehensive income

( 12 ) — ( 12 )

Income tax impact

Net other comprehensive income

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

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

4 unchanged sentences

(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 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.

During the three and six months ended August 2, 2024, the Company incurred purchase discount fees of $ 4 million and $ 7 million, respectively.

During the three and six months ended August 4, 2023, the Company incurred purchase discount fees of $ 2 million and $ 5 million, respectively.

The purchase discount fees 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:

Three Months Ended

Six Months Ended

2024 August 4,

(in millions)

6 unchanged sentences

Remaining sold receivables $ 144 $ 225

(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.

(1) For the six months ended August 2, 2024, the Company recorded a net decrease of $ 30 million to cash flows from operating activities from sold receivables.

For the six months ended August 4, 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 August 2, 2024 and August 4, 2023.

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

13 unchanged sentences

Three Months Ended

Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions)

1 unchanged sentence

$ 1,415 $ 1,389 $ 2,851 $ 2,986

403 395 814 826

Total revenues

2 unchanged sentences

Defense and Intelligence

Total operating income

$ 107 $ 106 $ 214 $ 230

( 7 ) 213 ( 17 ) 204

Total operating income (loss)

$ 134 $ 362 $ 265 $ 519

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.

22 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 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.

As of August 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 U.S.

government Cost Accounting Standards.

Letters of Credit and Surety Bonds

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 has outstanding obligations relating to letters of credit of $ 9 million as of August 2, 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.

Note 13—Subsequent Events

Sale of Equity Method Investment

On August 30, 2024, Morpheus Data, one of the Company’s unconsolidated venture investments, completed a transaction to sell all its outstanding equity to Hewlett Packard Enterprise (NYSE:

The carrying value of the Company’s investment was $ 5 million as of August 2, 2024 and is recorded within "Other assets" on the condensed consolidated balance sheets.

The transaction is not expected to result in a loss for the Company.

Quarterly Dividend Declared

On August 29, 2024, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on October 25, 2024 to stockholders of record on October 11, 2024.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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