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Item 1. Financial Statements

2024-12-05 compared with 2024-09-05 · 220 added, 129 removed, 542 unchanged (39% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

Three Months Ended Nine Months Ended

2024 November 3,

2023 November 1,

2024 November 3,

(in millions, except per share amounts)

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

Three Months Ended Nine Months Ended

2024 November 3,

2023 November 1,

2024 November 3,

(in millions)

19 unchanged sentences

Intangible assets, net 807 894

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

Property, plant, and equipment (net of accumulated depreciation of $ 197 million and $ 184 million at November 1, 2024 and February 2, 2024, respectively)

Operating lease right of use assets 176 152

13 unchanged sentences

Commitments and contingencies (Note 12)

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

Common stock, $ 0.0001 par value, 1 billion shares authorized, 49 million and 52 million shares issued and outstanding as of November 1, 2024 and February 2, 2024, respectively

Additional paid-in capital — 337

13 unchanged sentences

(in millions)

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

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

Net income — — 106 — — 106

7 unchanged sentences

Repurchases of stock ( 1 ) ( 79 ) ( 37 ) — — ( 116 )

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

Balance at November 1, 2024 49 $ — $ 1,602 $ 10 $ — $ 1,612

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)

— 13 — — — 13

Repurchases of stock ( 3 ) ( 364 ) ( 37 ) — — ( 401 )

Balance at November 1, 2024 49 $ — $ 1,602 $ 10 $ — $ 1,612

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

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

Net income — — 93 — — 93

1 unchanged sentence

Other comprehensive income, net of tax

— — — ( 3 ) — ( 3 )

Cash dividends of $ 0.37 per share

3 unchanged sentences

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

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

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

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

2 unchanged sentences

Other comprehensive income, net of tax

— — — ( 2 ) — ( 2 )

Cash dividends of $ 1.11 per share

1 unchanged sentence

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

— 21 — — — 21

Repurchases of stock ( 3 ) ( 276 ) — — — ( 276 )

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.

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

(1) During the three months ended November 1, 2024 and November 3, 2023, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 2 million and $ 1 million, respectively.

During the nine months ended November 1, 2024 and November 3, 2023, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 25 million and $ 21 million, respectively.

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

2024 August 4,

Nine Months Ended

2024 November 3,

(in millions)

5 unchanged sentences

Stock-based compensation expense 38 42

(Gain) loss on sale of long-lived assets

(Gain) loss on divestitures

Gain on sale of equity method investments and long-lived assets

Gain on divestitures

Other ( 4 ) ( 1 )

14 unchanged sentences

Proceeds from sale of long-lived assets — 3

Proceeds from sale of equity method investments 10 —

Proceeds from divestitures — 356

7 unchanged sentences

Stock repurchased and retired or withheld for taxes on equity awards ( 425 ) ( 293 )

Excise tax payments on stock repurchases ( 3 ) —

Proceeds from borrowings 1,114 160

54 unchanged sentences

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 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.

As of November 1, 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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, including the Company's equity investment, to Hewlett Packard Enterprise (NYSE:

The transaction resulted in a pre-tax gain of $ 5 million which is included within "Other operating (income) expense" on the condensed consolidated statements of income.

Cash, Cash Equivalents and Restricted Cash

9 unchanged sentences

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 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 for the nine months ended November 1, 2024 were $ 4 million 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 nine months ended November 3, 2023 were $ 2 million and $ 8 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.

Accounting Standards Updates

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

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The standard includes new disclosure requirements relating to specified categories of expenses (purchases of inventory, employee compensation, depreciation, and amortization) that are included in certain expense captions presented on the face of the income statement.

The standard is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted.

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

The Company is currently evaluating the impact of adoption of this standard on its financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

5 unchanged sentences

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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In November 2023, the FASB issued ASU No.

5 unchanged sentences

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 financial statement disclosures.

The Company will 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 financial statement disclosures.

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 Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

Three Months Ended Nine Months Ended

2024 November 3,

2023 November 1,

2024 November 3,

(in millions)

4 unchanged sentences

49.8 53.3 51.1 54.0

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 .

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 1, 2024 and November 3, 2023 were immaterial .

Share Repurchases

1 unchanged sentence

The Company retires its common stock upon repurchase with the excess over par value allocated to additional paid-in capital.

When repurchases for the period exceed total additional-paid-in-capital, the excess repurchases are recorded as a reduction to retained earnings.

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

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

As of 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.

As of November 1, 2024, the Company has repurchased approximately 23.4 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 November 1, 2024.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Revenues:

9 unchanged sentences

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 Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

Three Months Ended Nine Months Ended

2024 November 3,

2023 November 1,

2024 November 3,

(in millions, except per share amounts)

Net (unfavorable) favorable adjustments

$ ( 1 ) $ ( 1 ) $ — $ 4

Net (unfavorable) favorable adjustments, after tax

Net favorable (unfavorable) adjustments

$ 15 $ 2 $ 15 $ 6

Net favorable (unfavorable) adjustments, after tax

Diluted EPS impact $ 0.26 $ 0.04 $ 0.23 $ 0.09

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.

Revenues were $ 13 million and $ 14 million higher for the three and nine months ended November 1, 2024 and $ 4 million and $ 8 million higher for the three and nine months ended November 3, 2023, respectively, due to net revenue recognized from performance obligations satisfied in prior periods.

Disaggregation of Revenues

4 unchanged sentences

Three Months Ended

August 2, 2024

August 4, 2023

November 1, 2024

November 3, 2023

Defense and Intelligence

7 unchanged sentences

Total $ 1,515 $ 461 $ 1,976 $ 1,479 $ 416 $ 1,895

Six Months Ended

August 2, 2024

August 4, 2023

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended

November 1, 2024

November 3, 2023

Defense and Intelligence

7 unchanged sentences

Total $ 4,366 $ 1,275 $ 5,641 $ 4,465 $ 1,242 $ 5,707

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenues by contract type were as follows:

Three Months Ended

August 2, 2024

August 4, 2023

November 1, 2024

November 3, 2023

Defense and Intelligence

7 unchanged sentences

Total $ 1,515 $ 461 $ 1,976 $ 1,479 $ 416 $ 1,895

Six Months Ended

August 2, 2024

August 4, 2023

Nine Months Ended

November 1, 2024

November 3, 2023

Defense and Intelligence

9 unchanged sentences

Three Months Ended

August 2, 2024 August 4, 2023

November 1, 2024 November 3, 2023

Defense and Intelligence

5 unchanged sentences

Total $ 1,515 $ 461 $ 1,976 $ 1,479 $ 416 $ 1,895

Six Months Ended

August 2, 2024

August 4, 2023

Nine Months Ended

November 1, 2024

November 3, 2023

Defense and Intelligence

9 unchanged sentences

Contract balances for the periods presented were as follows:

Balance Sheet line item August 2,

Balance Sheet line item November 1,

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 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.

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

During the three and nine months ended November 1, 2024, the Company recognized revenues of $ 3 million and $ 33 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of February 2, 2024.

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.

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

As of November 1, 2024, the Company had approximately $ 5.7 billion of RPO.

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

6 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 for the six months ended August 4, 2023.

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 on divestitures" on the condensed consolidated statements of cash flows for the nine months ended November 3, 2023.

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

42 unchanged sentences

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

August 2, 2024 February 2, 2024

November 1, 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 $ ( 666 ) $ 807 $ 1,473 $ ( 579 ) $ 894

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.

Amortization expense related to intangible assets was $ 29 million and $ 87 million for the three and nine months ended November 1, 2024, respectively, and $ 28 million and $ 86 million for the three and nine months ended November 3, 2023, respectively.

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

As of August 2, 2024, the estimated future annual amortization expense related to intangible assets is as follows:

As of November 1, 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 19.6 % 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.

The Company's effective income tax rate was 15.6 % and 17.8 % for the three and nine months ended November 1, 2024, respectively, and 18.0 % and 23.4 % for the three and nine months ended November 3, 2023, respectively.

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

The effective

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.

tax rate in the prior year further differed from the statutory tax rate due to a gain from the disposition of the Supply Chain Business and the associated non-deductible goodwill.

The Company’s effective tax rate for the three and nine months ended November 1, 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.

In addition, the effective tax rates for the three and nine months ended November 1, 2024 benefited from the release of certain state liabilities for uncertain tax positions.

Note 7—Debt Obligations:

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

August 2, 2024 February 2, 2024

November 1, 2024 February 2, 2024

rate Effective

11 unchanged sentences

7.29 % — % 115 — 115 — — —

$ 2,168 $ ( 9 ) $ 2,159 $ 2,109 $ ( 10 ) $ 2,099

Less current portion 220 — 220 77 — 77

1 unchanged sentence

$ 1,948 $ ( 9 ) $ 1,939 $ 2,032 $ ( 10 ) $ 2,022

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").

(1) The stated interest rate for the Revolving Credit Facility due June 2027 reflects the weighted average interest rate for the outstanding borrowings as of November 1, 2024.

As of November 1, 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.

The Tranche B3 Facility due February 2031 is subject to the same covenants and events of default as the Company's existing Term Loan Facilities.

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 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.

On October 18, 2024, the Company executed the Seventh Amendment to the Third Amended and Restated Credit Agreement ("Seventh Amendment"), which lowered the applicable margin for the Term Loan B3 Facility due February 2031 from 1.875 % to 1.750 % for Term SOFR loans and from 0.875 % to 0.750 % for base rate loans.

In the event any portion of the Term Loan B3 Facility due February 2031 is repaid prior to April 18, 2025 as a result of a repricing event, the Company will be required to repay a 1.00 % fee of the amount repaid.

After April 18, 2025, 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.

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.

During the nine months ended November 1, 2024, the Company incurred $ 6 million of debt issuance costs associated with the Sixth and Seventh Amendments, of which $ 4 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 and nine months ended November 1, 2024, the Company made scheduled principal payments of $ 23 million and $ 54 million, respectively, on the Term Loan A Facility due June 2027 and made scheduled principal payments of $ 1 million and $ 2 million, respectively, on the Term Loan B3 Facility due February 2031.

During the three and nine months ended November 1, 2024, the Company borrowed $ 405 million and $ 975 million, respectively, and repaid $ 390 million and $ 860 million, respectively, under the Revolving Credit Facility.

As of November 1, 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 $ 65 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 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.

As of November 1, 2024, the Company was in compliance with the covenants under its Credit Facility.

As of November 1, 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:

Maturities of debt as of November 1, 2024 are:

Fiscal Year Total

6 unchanged sentences

Fair Value of Asset (1) at

Notional Amount at August 2, 2024 Pay Fixed

Notional Amount at November 1, 2024 Pay Fixed

Rate Settlement and

Termination August 2,

Termination November 1,

2024 February 2, 2024

5 unchanged sentences

The counterparties to all swap agreements are financial institutions.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED 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 $ 8 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following August 2, 2024.

During the three months ended November 3, 2023, Interest Rate Swaps due October 31, 2023 matured, which had a notional value of $ 450 million upon maturity.

The Company estimates that it will reclassify $ 8 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following November 1, 2024.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

9 unchanged sentences

(in millions)

Three months ended August 2, 2024

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

Other comprehensive loss before reclassifications

( 6 ) — ( 6 )

Three months ended November 1, 2024

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

Other comprehensive income before reclassifications

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

2 unchanged sentences

( 1 ) — ( 1 )

Balance at November 1, 2024 $ 5 $ 5 $ 10

Three months ended November 3, 2023

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

Three months ended August 4, 2023

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

Other comprehensive income before reclassifications

2 unchanged sentences

Income tax impact 1 — 1

Net other comprehensive income

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

Six months ended August 2, 2024

Net other comprehensive loss

( 3 ) — ( 3 )

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

Nine months ended November 1, 2024

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

4 unchanged sentences

( 6 ) — ( 6 )

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

Six months ended August 4, 2023

Balance at November 1, 2024 $ 5 $ 5 $ 10

Nine months ended November 3, 2023

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

3 unchanged sentences

Income tax impact

Net other comprehensive income

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

Net other comprehensive loss

( 2 ) — ( 2 )

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

(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 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.

During the three and nine months ended November 1, 2024, the Company incurred purchase discount fees of $ 4 million and $ 11 million, respectively.

During the three and nine months ended November 3, 2023, the Company incurred purchase discount fees of $ 2 million and $ 7 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:

Six Months Ended

2024 August 4,

Nine Months Ended

2024 November 3,

(in millions)

6 unchanged sentences

Remaining sold receivables $ 233 $ 217

(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.

(1) For the nine months ended November 1, 2024, the Company recorded a net increase of $ 95 million to cash flows from operating activities from sold receivables.

For the nine months ended November 3, 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 November 1, 2024 and November 3, 2023.

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

8 unchanged sentences

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.

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

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 CODM reviews and evaluates segment operating performance using segment "Revenues" and "Adjusted operating income (loss)".

Adjusted operating income is a performance measure that primarily excludes the impact of non-recurring transactions that we do not consider to be indicative of our ongoing operating performance.

The segment information for the periods presented was as follows:

Three Months Ended

Six Months Ended

2024 August 4,

2023 August 2,

2024 August 4,

(in millions)

November 1, 2024 November 3, 2023

Defense and Intelligence

(in millions)

Revenues $ 1,515 $ 461 $ — $ 1,976 $ 1,479 $ 416 $ — $ 1,895

Operating income (loss)

130 37 ( 7 ) 160 106 54 ( 17 ) 143

Depreciation of property, plant, and equipment 1 — 5 6 1 — 5 6

Amortization of intangible assets 17 12 — 29 16 12 — 28

Restructuring and impairment costs

— — — — — — 2 2

Total revenues

Recovery of restructuring and impairment costs (1)

— — — — — — ( 1 ) ( 1 )

Operating income (loss):

Adjusted operating income (loss)

$ 148 $ 49 $ ( 2 ) $ 195 $ 123 $ 66 $ ( 11 ) $ 178

(1) Adjustment reflects the portion of restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

The table below includes a reconciliation of total "Adjusted operating income" to "Income before income taxes" for the three months ended November 1, 2024.

Three Months Ended

2024 November 3,

(in millions)

Adjusted operating income

Depreciation of property, plant, and equipment

Amortization of intangible assets

( 29 ) ( 28 )

Restructuring and impairment costs — ( 2 )

Recovery restructuring and impairment costs (1)

Interest expense, net

( 32 ) ( 27 )

Other (income) expense, net

Income before income taxes

(1) Adjustment reflects the portion of restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended

November 1, 2024 November 3, 2023

Defense and Intelligence

(dollars in millions)

Revenues $ 4,366 $ 1,275 $ — $ 5,641 $ 4,465 $ 1,242 $ — $ 5,707

Operating income (loss)

344 105 ( 24 ) 425 336 139 187 662

Depreciation of property, plant, and equipment 1 — 16 17 1 — 18 19

Amortization of intangible assets 51 36 — 87 50 36 — 86

Acquisition and integration costs (1)

— — ( 2 ) ( 2 ) — — 1 1

Total operating income (loss)

Restructuring and impairment costs — — 4 4 — — 8 8

Recovery of acquisition and integration costs and restructuring and impairment costs (2)

— — ( 2 ) ( 2 ) — — ( 1 ) ( 1 )

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.

(Gain) loss on divestitures, net of transaction costs — — — — — — ( 240 ) ( 240 )

Adjusted operating income (loss)

$ 396 $ 141 $ ( 8 ) $ 529 $ 387 $ 175 $ ( 27 ) $ 535

(1) Adjustment consists of a reversal of immaterial costs related to the Koverse acquisition.

(2) Adjustment reflects the portion of acquisition and integration costs and restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

The table below includes a reconciliation of total "Adjusted operating income" to "Income before income taxes" for the nine months ended November 1, 2024.

Nine Months Ended

2024 November 3,

(in millions)

Adjusted operating income

Depreciation of property, plant, and equipment

( 17 ) ( 19 )

Amortization of intangible assets

( 87 ) ( 86 )

Acquisition and integration costs (1)

Restructuring and impairment costs ( 4 ) ( 8 )

Recovery of acquisition and integration costs and restructuring and impairment costs (2)

(Gain) loss on divestitures, net of transaction costs

Interest expense, net

( 97 ) ( 88 )

Other (income) expense, net

Income before income taxes

(1) Adjustment consists of a reversal of immaterial costs related to the Koverse acquisition.

(2) Adjustment reflects the portion of acquisition and integration costs and restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

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

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12—Legal Proceedings and Other Commitments and Contingencies:

8 unchanged sentences

On August 27, 2018, the Company received a stop-work order from the United States Marine Corps on the Assault Amphibious Vehicle ("AAV") contract and on October 3, 2018 the program was terminated for convenience by the customer.

The Company is continuing to negotiate with the Marine Corps to recover costs associated with the termination.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the third quarter of fiscal 2025, the Company entered into a $ 21.2 million termination settlement agreement with the customer to recover the contract costs associated with the termination, which resulted in an increase to "Revenues" of $ 13 million on the Company's condensed consolidated statements of income for the three and nine months ended November 1, 2024.

The settlement agreement releases the customer from all obligation and claims from the Company.

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 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.

As of November 1, 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 August 2, 2024, principally related to guarantees on insurance policies.

The Company has outstanding obligations relating to letters of credit of $ 11 million as of November 1, 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.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

On December 4, 2024, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on January 24, 2025 to stockholders of record on January 10, 2025.

Plan Share Repurchase Authorization

On December 4, 2024, the Company's Board of Directors authorized the repurchase of up to $ 1.2 billion of the company’s outstanding common stock.

This authorization is effective as of December 16, 2024 and has no expiration date.

The share repurchase program will be used as part of the Company’s capital allocation strategy, which includes returning capital to its shareholders.

This share repurchase authorization replaces the Company’s existing share repurchase program.

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