What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-04 compared with 2025-06-02 · 145 added, 95 removed, 214 unchanged (53% of the section changed)

39 unchanged sentences

Economic Opportunities, Challenges, and Risks

During the three months ended May 2, 2025, we generated 98% of our revenues from contracts with the U.S.

During the three and six months ended August 1, 2025, we generated 98% of our revenues from contracts with the U.S.

government, including subcontracts on which we perform.

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The CR also provides flexibility for new starts on programs at the DoD, which are typically not allowed under CRs.

Under terms of the Fiscal Responsibility Act, a 1% sequestration is to be applied to all agencies operating under CRs past April 30, 2025.

However, the law provides discretion on implementation of these reductions to the Office of Management and Budget ("OMB").

It is unclear where or if the OMB will choose to implement such cuts.

Congress is currently working on a budget reconciliation package that will add new defense and border defense spending, among other provisions.

In July 2025, Congress passed a budget reconciliation package that will add approximately $150 billion in new non-border defense spending, and $175 billion in new border security and enforcement spending, among other provisions.

This funding is available to agencies immediately, and can be used through GFY 2029.

Portions of this new funding will increase spending in areas addressable to us, including new investments in Naval operations and border surveillance.

The measure also extended and expanded key tax provisions that will positively impact our Company.

To avoid a government shutdown starting October 1, 2025, Congress will need to pass, and the President will need to sign, additional appropriations.

Failure to pass full-year appropriations or a CR by September 30, 2025 could result in an interruption in government funding that could impact many of our contracts.

As part of the budget reconciliation package signed into law in July 2025, the federal debt limit was increased by $5 trillion.

This is expected to extend protection from a potential government default until at least the end of calendar year 2026.

government administration is putting in place a number of executive orders and actions which could affect our business.

In addition, the Department of Government Efficiency is driving changes in the structure and priorities of Federal agencies.

Reductions in personnel, changes in agency alignment, and required reviews of new contracting activity are slowing new awards.

Agencies are expected to conduct comprehensive reviews of existing and new contracting activity to identify potential efficiencies or nonalignment with new Administration priorities.

SAIC contracts will be subject to these reviews.

We have not experienced a material financial statement impact from recent executive orders or program cancellations across the government, however decreases in, or delays in contract awards and in government spending on the types of programs that we support, and terminations or stop-work-orders on government contracts on which we are currently performing could adversely affect our future revenues and profitability.

In January 2025, the Federal debt ceiling was reached, and the U.S.

Department of the Treasury is operating under "extraordinary measures" to service debt obligations of the U.S.

Failure to pass legislation surrounding the Federal debt ceiling could lead to negative impacts on our business, and any agreement to raise the ceiling that significantly reduces future funding could affect our addressable market in subsequent years.

Agencies are conducting comprehensive reviews of existing and new contracting activity to identify potential efficiencies or nonalignment with new Administration priorities.

Our contracts have been, and will continue to be, subject to these reviews.

We have not experienced a material financial statement impact from recent executive orders or program cancellations across the government.

However, ongoing reductions in personnel, changes in agency alignment, required reviews of new contracting activity, decreases or delays in new or existing contract awards and in government spending on the types of programs that we support, and terminations or stop-work-orders and delay in funding on government contracts on which we are currently performing could adversely affect our future revenues, cash flows and profitability.

Adverse changes in fiscal and economic conditions could materially impact our business.

Some changes that could have an adverse impact on our business include adverse regulations, the implementation of future spending reductions (including sequestration), delayed passage of appropriations bills resulting in temporary or full-year continuing resolutions, extreme inflationary increases adversely impacting fixed price contracts, and potential government shutdowns.

Spending packages, including the infrastructure bill, Inflation Reduction Act, and CHIPS and Science Act, as well as future potential spending packages, may provide additional opportunity in areas of SAIC focus such as digital modernization, cyber, microelectronics support, and climate resiliency.

Spending packages, including the infrastructure bill, Inflation Reduction Act, and CHIPS and Science Act, as well as future potential spending packages, may provide additional opportunity in areas of our focus such as digital modernization, cyber, microelectronics support, and climate resiliency.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

government has increasingly relied on contracts that are subject to a competitive bidding process (including indefinite delivery, indefinite quantity ("IDIQ"), U.S.

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government has put renewed emphasis on increasing the number of small business prime set-aside contracts that further reduce the addressable market in some areas.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Despite the budget and competitive pressures affecting the industry, we believe we are well-positioned to protect and expand existing customer relationships and benefit from opportunities that we have not previously pursued.

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Throughout each contract's life cycle, program managers review performance and update contract performance estimates to reflect their understanding of the best information available.

We evaluate our results of operations by considering the drivers causing changes in revenues, operating income, adjusted operating income (1) , adjusted EBITDA (1) , and operating cash flows.

The primary financial measures used to evaluate our consolidated results of operations include revenues, operating income, adjusted operating income (1) , adjusted EBITDA (1) , and operating cash flows.

Given that revenues fluctuate on our contract portfolio over time due to contract awards and completions, changes in customer requirements, and increases or decreases in ordering volume of materials, we evaluate significant trends and fluctuations resulting from these factors.

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Condensed Consolidated Results of Operations

The primary financial performance measures we use to manage our consolidated business and monitor results of operations are revenues, operating income, and cash flows from operating activities.

The following table summarizes our condensed consolidated results of operations:

Three Months Ended

change May 3,

Three Months Ended Six Months Ended

change August 2,

2024 August 1,

change August 2,

(dollars in millions)

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Selling, general and administrative expenses

75 (3 %) 77 164 1 % 162

Other operating (income) expense

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As a percentage of revenues 7.9 % 7.4 % 7.1 % 7.2 %

Provision for income taxes (18) — % (18)

Income tax (expense) benefit 19 (200 %) (19) 1 (103 %) (37)

$ 127 57 % $ 81 $ 195 23 % $ 158

Revenues increased $30 million for the three months ended May 2, 2025 as compared to the same period in the prior year primarily due to ramp up in volume in existing and new contracts, partially offset by contract completions.

Revenues decreased $49 million for the three months ended August 1, 2025 as compared to the same period in the prior year primarily due to contract completions and ramp down in volume on existing contracts, partially offset by new contracts.

Revenues decreased $19 million for the six months ended August 1, 2025 as compared to the same period in the prior year primarily due to due to contract completions, partially offset by ramp up in volume on existing and new contracts.

Operating Income.

Operating income as a percentage of revenues for the three months ended May 2, 2025 decreased from the comparable prior year period primarily due to timing and volume mix in our contract portfolio.

Operating income as a percentage of revenues for the three months ended August 1, 2025 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio and a recovery of costs from the settlement of a patent infringement matter (see Note 11—Legal Proceedings and Other Commitments and Contingencies for additional information), partially offset by costs related to the settlement of federal tax audits and the indirect rates impact of state taxes related to the One Big Beautiful Bill Act ("the Act").

Operating income as a percentage of revenues for the six months ended August 1, 2025 decreased from the comparable prior year period primarily due to costs related to the settlement of federal tax audits and the indirect rates impact of state taxes related to the Act, partially offset by a recovery of costs from the settlement of a patent infringement matter.

Income Taxes.

Our effective income tax rate was 20.6% and 19.0% for the three months ended May 2, 2025 and May 3, 2024, respectively.

Our 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 tax benefits from employee share-based compensation.

Our effective tax rate for the three months ended May 2, 2025 increased compared to the same period in the prior year primarily due to lower tax benefits from employee share-based compensation.

Beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes.

While the impact to income taxes payable was most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six.

The actual impact will depend on the amount of research and development costs incurred by us, whether Congress modifies or repeals this provision and whether new guidance and interpretive rules are issued by the U.S.

Treasury, among other factors.

Our effective income tax rate was (17.2)% and (0.4)% for the three and six months ended August 1, 2025 and 19.6% and 19.3% for the three and six months ended August 2, 2024, respectively.

The effective tax rate significantly decreased compared to the same period last year primarily due to a $47 million benefit from an IRS audit settlement subject to final administrative approvals covering fiscal years 2016 through 2019 and decreases in liabilities for uncertain tax positions for the remaining open tax years.

Additionally, our effective tax rate differs from the statutory tax rate primarily due to research and development tax credits and tax benefits from employee share-based compensation.

On July 4, 2025, the Act was enacted, introducing several significant changes to U.S.

corporate income tax law.

One key provision of the Act is the permanent reinstatement of the immediate expensing of U.S.

research and development expenditures.

Based on our interpretation, the Act results in an increase to our income taxes receivable with an offsetting decrease to our deferred tax assets and an immaterial increase to our effective tax rate for the year.

These changes are reflected in our current period effective tax rate.

We are awaiting interpretive guidance from the IRS, and therefore the current estimated impacts of the Act are subject to change.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

In December 2021, the Organisation for Economic Co-operation and Development (OECD) enacted a 15% global minimum tax framework (“Pillar Two”) which became effective in certain jurisdictions beginning in fiscal 2024.

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We do not anticipate Pillar Two to have a significant impact on our effective tax rate or our condensed consolidated results of operations, financial position, and cash flows.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Segment and Corporate Results

The primary financial performance measures we use to manage our reportable segments and monitor results of operations are revenues and adjusted operating income.

Adjusted operating income is a Non-GAAP measure.

See "Non-GAAP Measures" section below for additional information about this measure.

Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs.

The following tables summarize our results of operations by reportable segment:

Defense and Intelligence Three Months Ended

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Defense and Intelligence Three Months Ended Six Months Ended

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2024 August 1,

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(dollars in millions)

Revenues $ 1,374 (3 %) $ 1,415 $ 2,807 (2 %) $ 2,851

Operating income 98 (8 %) 107

As a percentage of revenues 6.8 % 7.5 %

Amortization of intangible assets

Restructuring and impairment costs 1 100 % —

Recovery of acquisition and integration costs and restructuring and impairment costs (1)

Adjusted operating income

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As a percentage of revenues 9.0 % 8.8 % 8.5 % 8.7 %

(1) 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.

(2) Non-GAAP measure, see "Non-GAAP Measures" section below for additional information about this measure.

Revenues decreased $3 million for the three months ended May 2, 2025 as compared to the same period in the prior year primarily due to contract completions, partially offset by ramp up in volume on existing and new contracts.

Operating and adjusted operating income (2) :

Operating and adjusted operating income as a percentage of revenues for the three months ended May 2, 2025 decreased from the comparable prior year period primarily due to timing and volume mix in our contract portfolio.

Three Months Ended

change May 3,

Revenues decreased $41 million for the three months ended August 1, 2025 as compared to the same period in the prior year primarily due to contract completions and ramp down in volume on existing contracts, partially offset by new contracts.

Revenues decreased $44 million for the six months ended August 1, 2025 as compared to the same period in the prior year primarily due to contract completions, partially offset by ramp up in volume on existing and new contracts.

Adjusted operating income:

Adjusted operating income as a percentage of revenues for the three months ended August 1, 2025 increased compared to the comparable prior year period primarily due to timing and volume mix in our contract portfolio.

Adjusted operating income as a percentage of revenues for the six months ended August 1, 2025 decreased from the comparable prior year period primarily due to timing and volume mix in our contract portfolio.

Three Months Ended Six Months Ended

change August 2,

2024 August 1,

change August 2,

(dollars in millions)

Revenues $ 395 (2 %) $ 403 $ 839 3 % $ 814

Operating income 40 18 % 34

As a percentage of revenues 9.0 % 8.3 %

Amortization of intangible assets 12 — % 12

Adjusted operating income

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As a percentage of revenues 13.7 % 11.4 % 12.6 % 11.3 %

(1) Non-GAAP measure, see "Non-GAAP Measures" section below for additional information about this measure.

Revenues increased $33 million for the three months ended May 2, 2025 as compared to the same period in the prior year primarily due to ramp up in volume on existing and new contracts.

Operating and adjusted operating income (1) :

Operating and adjusted operating income as a percentage of revenues for the three months ended May 2, 2025 increased from the comparable prior year period due to ramp up in volume on existing and new contracts.

Revenues decreased $8 million for the three months ended August 1, 2025 as compared to the same period in the prior year primarily due to contract completions and ramp down in volume on existing contracts.

Revenues increased $25 million for the six months ended August 1, 2025 as compared to the same period in the prior year primarily due to ramp up in volume on existing contracts, partially offset by contract completions.

Adjusted operating income:

Adjusted operating income as a percentage of revenues for the three and six months ended August 1, 2025 increased from the comparable prior year period due to improved profitability across our contract portfolio.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Three Months Ended

change May 3,

Three Months Ended Six Months Ended

change August 2,

2024 August 1,

change August 2,

(dollars in millions)

Operating loss

$ (17) 70 % $ (10)

Depreciation of property, plant, and equipment 7 17 % 6

Acquisition and integration costs

Restructuring and impairment costs 2 — % 2

Recovery of acquisition and integration costs and restructuring and impairment costs (1)

Adjusted operating loss (2)

Adjusted operating income (loss)

$ 4 (500 %) $ (1) $ (5) (17 %) $ (6)

(1) 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.

(2) Non-GAAP measure, see "Non-GAAP Measures" section below for additional information about this measure.

Operating and adjusted operating loss (2) :

Operating and adjusted operating loss increased $7 million and $4 million, respectively, for the three months ended May 2, 2025 as compared to the same period in the prior year primarily due to higher selling, general and administrative expenses.

Adjusted operating income (loss):

Adjusted operating income was $4 million for the three months ended August 1, 2025 compared to an adjusted operating loss of $1 million during the same period in the prior year primarily due to a recovery of costs from the settlement of a patent infringement matter, partially offset by higher other selling, general and administrative expenses.

Adjusted operating loss decreased $1 million for the six months ended August 1, 2025 as compared to the same period in the prior year primarily due to a recovery of costs from the settlement of a patent infringement matter, partially offset by higher other selling, general and administrative expenses.

Non-GAAP Measures

Adjusted operating income, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and adjusted EBITDA are non-GAAP financial measures.

Consolidated adjusted operating income, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and adjusted EBITDA are non-GAAP financial measures.

While we believe that these non-GAAP financial measures are also useful for management and investors in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP.

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Adjusted operating income.

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.

Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisition and integration costs, impairments, restructuring costs, and any other material non-recurring costs.

The acquisition and integration costs relate to our acquisitions.

The restructuring and impairment costs represent the reorganization and facilities optimization costs and impairments of long-lived assets, along with associated depreciation.

The recovery of acquisition and integration costs and restructuring and impairment costs relate to costs recovered through our indirect rates in accordance with Cost Accounting Standards.

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

Acquisition, integration, restructuring and impairment costs represent costs incurred related to acquisitions, the reorganization, facilities optimization efforts, and impairments of long-lived assets, along with associated depreciation.

Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards.

Depreciation of property, plant, and equipment relates to property, plant, and equipment specifically identifiable for each segment.

Adjusted operating income also excludes amortization of intangible assets because we do not have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and the related amortization term are unique to each acquisition.

Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019 .

We believe that these performance measures provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Adjusted operating income for the periods presented were calculated as follows:

Three Months Ended Six Months Ended

2025 August 2,

2024 August 1,

2025 August 2,

(dollars in millions)

$ 1,769 $ 1,818 $ 3,646 $ 3,665

Operating income

$ 139 $ 134 $ 260 $ 265

Operating income as a percentage of revenues

7.9 % 7.4 % 7.1 % 7.2 %

Depreciation of property, plant and equipment

Amortization of intangible assets

Acquisition, integration, restructuring and impairment costs

Recovery of acquisition, integration, restructuring and impairment costs (1)

— (1) (2) (2)

Costs related to the settlement of federal tax audits

Adjusted operating income

$ 182 $ 169 $ 340 $ 334

Adjusted operating income as a percentage of revenues

10.3 % 9.3 % 9.3 % 9.1 %

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

government Cost Accounting Standards.

EBITDA and Adjusted EBITDA.

The performance measure EBITDA is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization.

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

Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition and integration costs, impairments, restructuring costs, and any other material non-recurring costs.

The acquisition and integration costs relate to our acquisitions.

The restructuring and impairment costs represent the reorganization and facilities optimization costs or impairments of long-lived assets.

The recovery of acquisition and integration costs and restructuring and impairment costs relate to costs recovered through our indirect rates in accordance with Cost Accounting Standards.

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

Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition, integration, restructuring and impairment costs, and any other material non-recurring costs.

Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards.

Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019 .

We believe that EBITDA and adjusted EBITDA provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.

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EBITDA and adjusted EBITDA for the periods presented were calculated as follows:

Three Months Ended

Three Months Ended Six Months Ended

2025 August 2,

2024 August 1,

2025 August 2,

(dollars in millions)

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Interest expense, net and loss on sale of receivables

Provision for income taxes 18 18

Income tax expense (benefit)

(19) 19 (1) 37

Depreciation and amortization 35 34 71 69

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EBITDA as a percentage of revenues 10.0 % 9.3 % 9.1 % 9.2 %

Acquisition and integration costs

Restructuring and impairment costs 3 2

Recovery of acquisition and integration costs and restructuring and impairment costs (1)

Acquisition, integration, restructuring and impairment costs

Recovery of acquisition, integration, restructuring and impairment costs (1)

— (1) (2) (2)

Costs related to the settlement of federal tax audits

Adjusted EBITDA $ 185 $ 170 $ 342 $ 336

Adjusted EBITDA as a percentage of revenues 10.5 % 9.4 % 9.4 % 9.2 %

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

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

government Cost Accounting Standards.

Adjusted EBITDA as a percentage of revenues for the three months ended May 2, 2025 decreased compared to the same period in the prior year primarily due to timing and volume mix in our contract portfolio.

Adjusted operating income and adjusted EBITDA as a percentage of revenues for the three months ended August 1, 2025 increased compared to the same period in the prior year primarily due to improved profitability across our contract portfolio and a recovery of costs from the settlement of a patent infringement matter, partially offset by the indirect rates impact of state taxes related to the Act.

Adjusted operating income and adjusted EBITDA as a percentage of revenues for the six months ended August 1, 2025 increased compared to the same period in the prior year primarily due to a recovery of costs from the settlement of a patent infringement matter, partially offset by the indirect rates impact of state taxes related to the Act.

Other Key Performance Measures

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Additionally, we do not include in backlog contract awards that are under protest until the protest is resolved in our favor.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We segregate our backlog into two categories as follows:

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Funded backlog for contracts with non-government customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on these contracts.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

• Negotiated Unfunded Backlog.

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The estimated value of our total backlog as of the dates presented was:

May 2, 2025 January 31, 2025

August 1, 2025 January 31, 2025

Defense and Intelligence

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Total backlog $ 18,640 $ 4,532 $ 23,172 $ 17,940 $ 3,917 $ 21,857

We had net bookings worth an estimated $2.4 billion during the three months ended May 2, 2025.

We had net bookings worth an estimated $2.6 billion and $5.0 billion during the three and six months ended August 1, 2025.

Contract Types.

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Three Months Ended

August 1, 2025

August 2, 2024

Defense and Intelligence

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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Six Months Ended

August 1, 2025

August 2, 2024

Defense and Intelligence

Cost reimbursement 79 % 4 % 62 % 78 % 5 % 62 %

Time and materials ("T&M")

9 % 68 % 23 % 11 % 65 % 23 %

Firm-fixed price ("FFP")

12 % 28 % 15 % 11 % 30 % 15 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

Cost of Revenues Mix.

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Three Months Ended

August 1, 2025

August 2, 2024

Defense and Intelligence

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Total 100 % 100 % 100 % 100 % 100 % 100 %

Six Months Ended

August 1, 2025

August 2, 2024

Defense and Intelligence

Labor-related cost of revenues 59 % 59 % 59 % 57 % 59 % 57 %

Subcontractor-related cost of revenues 29 % 32 % 30 % 29 % 32 % 30 %

Other materials-related cost of revenues 12 % 9 % 11 % 14 % 9 % 13 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

Liquidity and Capital Resources

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Nevertheless, we believe that our existing cash on hand, generation of future operating cash flows, and access to bank financing and capital markets will provide adequate resources to meet our short-term liquidity and long-term capital needs.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Historical Cash Flow Trends

The following table summarizes our cash flows:

Three Months Ended

Six Months Ended

2025 August 2,

(in millions)

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Net Cash Provided by Operating Activities.

Cash flows provided by operating activities for the three months ended May 2, 2025 increased $2 million compared to the prior year primarily due to higher cash provided by the Master Accounts Receivable Purchase Agreement ("MARPA Facility") in the current year (see Note 9—Sales of Receivables to the condensed consolidated financial statements contained within this report for additional

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

information) and lower incentive-based compensation payments in the current year, partially offset by timing of vendor payments and other changes in working capital.

Cash flows provided by operating activities for the six months ended August 1, 2025 decreased $14 million compared to the prior year primarily due to timing of customer collections and vendor payments, partially offset by higher cash provided by the Master Accounts Receivable Purchase Agreement ("MARPA Facility") (see Note 9—Sales of Receivables to the condensed consolidated financial statements contained within this report for additional information), lower incentive-based compensation payments in the current year and other changes in working capital.

Net Cash Used in Investing Activities.

Cash used in investing activities for the three months ended May 2, 2025 increased $8 million compared to the prior year primarily due to higher contributions to investments in the current year.

Cash used in investing activities for the six months ended August 1, 2025 increased $6 million compared to the prior year primarily due to higher contributions to investments in the current year.

Net Cash Used in Financing Activities.

Cash used in financing activities for the three months ended May 2, 2025 decreased $42 million compared to the prior year period primarily due to higher proceeds from borrowings, net of principal payments, partially offset by higher plan share repurchases in the current year.

Cash used in financing activities for the six months ended August 1, 2025 decreased $59 million compared to the prior year period primarily due to lower plan share repurchases and higher proceeds from borrowings, net of principal payments in the current year.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates during the three months ended May 2, 2025 from those disclosed in our most recently filed Annual Report on Form 10-K.

There have been no changes to our critical accounting policies and estimates during the six months ended August 1, 2025 from those disclosed in our most recently filed Annual Report on Form 10-K.

Recently Issued But Not Yet Adopted Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis