Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 04, 2018 | May 25, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | May 4, 2018 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | SAIC | |
Entity Registrant Name | Science Applications International Corporation | |
Entity Central Index Key | 1,571,123 | |
Current Fiscal Year End Date | --02-01 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 42,444,944 |
CONDENSED AND CONSOLIDATED STAT
CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Revenues | $ 1,175 | $ 1,103 |
Cost of revenues | 1,074 | 1,007 |
Selling, general and administrative expenses | 35 | 33 |
Operating income | 66 | 63 |
Interest expense | 12 | 11 |
Other (income) expense, net | (1) | 0 |
Income before income taxes | 55 | 52 |
Provision for income taxes (Note 5) | (6) | (3) |
Net income | 49 | 49 |
Other comprehensive income, net of tax (Note 8) | 1 | 1 |
Comprehensive income | $ 50 | $ 50 |
Earnings per share (Note 2): | ||
Basic (in dollars per share) | $ 1.16 | $ 1.12 |
Diluted (in dollars per share) | 1.13 | 1.08 |
Cash dividends declared per share (in dollars per share) | 0.31 | 0.31 |
Cash dividends paid per share (in dollars per share) | $ 0.31 | $ 0.31 |
CONDENSED AND CONSOLIDATED BALA
CONDENSED AND CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | May 04, 2018 | Feb. 02, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 152 | $ 144 |
Receivables, net | 671 | 674 |
Inventories, prepaid expenses and other current assets | 107 | 132 |
Total current assets | 930 | 950 |
Goodwill | 863 | 863 |
Intangible assets (net of accumulated amortization of $60 million and $55 million at May 4, 2018 and February 2, 2018, respectively) | 174 | 179 |
Property, plant, and equipment (net of accumulated depreciation of $147 million and $143 million at May 4, 2018 and February 2, 2018, respectively) | 66 | 61 |
Other assets | 28 | 20 |
Total assets | 2,061 | 2,073 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 466 | 504 |
Accrued payroll and employee benefits | 184 | 150 |
Long-term debt, current portion (Note 6) | 45 | 41 |
Total current liabilities | 695 | 695 |
Long-term debt, net of current portion (Note 6) | 971 | 983 |
Deferred income taxes | 24 | 23 |
Other long-term liabilities | 46 | 45 |
Commitments and contingencies (Note 9) | ||
Equity: | ||
Common stock, $.0001 par value, 1 billion shares authorized, 43 million shares issued and outstanding as of May 4, 2018 and February 2, 2018 | 0 | 0 |
Additional paid-in capital | 0 | 0 |
Retained earnings | 320 | 323 |
Accumulated other comprehensive income (Note 8) | 5 | 4 |
Total equity | 325 | 327 |
Total liabilities and equity | $ 2,061 | $ 2,073 |
CONDENSED AND CONSOLIDATED BAL4
CONDENSED AND CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | May 04, 2018 | Feb. 02, 2018 |
Statement of Financial Position [Abstract] | ||
Intangible assets, accumulated amortization | $ 60 | $ 55 |
Property, plant and equipment, accumulated depreciation | $ 147 | $ 143 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued (in shares) | 43,000,000 | 43,000,000 |
Common stock, shares outstanding (in shares) | 43,000,000 | 43,000,000 |
CONDENSED AND CONSOLIDATED STA5
CONDENSED AND CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total | Shares of common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative impact from adopting ASC 606 (Note 1) on February 3, 2018 | $ 3 | $ 3 | |||
Balance, beginning (in shares) at Feb. 02, 2018 | 43,000,000 | 43,000,000 | |||
Balance, beginning at Feb. 02, 2018 | $ 327 | $ 0 | 323 | $ 4 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 49 | 49 | |||
Issuances of stock (in shares) | 1,000,000 | ||||
Issuances of stock | 2 | 2 | |||
Other comprehensive income, net of tax | 1 | 1 | |||
Cash dividends of $0.31 per share | (13) | (13) | |||
Stock-based compensation | (11) | (2) | (9) | ||
Repurchases of stock (in shares) | (1,000,000) | ||||
Repurchases of stock | $ (33) | (33) | |||
Balance, ending (in shares) at May. 04, 2018 | 43,000,000 | 43,000,000 | |||
Balance, ending at May. 04, 2018 | $ 325 | $ 0 | $ 320 | $ 5 |
CONDENSED AND CONSOLIDATED STA6
CONDENSED AND CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Statement of Stockholders' Equity [Abstract] | ||
Cash dividends paid per share (in dollars per share) | $ 0.31 | $ 0.31 |
Cash dividends declared per share (in dollars per share) | $ 0.31 | $ 0.31 |
CONDENSED AND CONSOLIDATED STA7
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 49 | $ 49 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 11 | 10 |
Stock-based compensation expense | 8 | 8 |
Increase (decrease) resulting from changes in operating assets and liabilities: | ||
Receivables | 8 | (43) |
Inventory, prepaid expenses and other current assets | 7 | 23 |
Other assets | (6) | 1 |
Accounts payable and accrued liabilities | (24) | 16 |
Accrued payroll and employee benefits | 34 | 22 |
Other long-term liabilities | 1 | 2 |
Net cash provided by operating activities | 88 | 88 |
Cash flows from investing activities: | ||
Expenditures for property, plant, and equipment | (6) | (4) |
Net cash used in investing activities | (6) | (4) |
Cash flows from financing activities: | ||
Dividend payments to stockholders | (14) | (14) |
Principal payments on borrowings | (8) | (9) |
Issuances of stock | 2 | 2 |
Stock repurchased and retired or withheld for taxes on equity awards | (53) | (65) |
Disbursements for obligations assumed from Scitor acquisition | 0 | (2) |
Deferred financing costs | (1) | 0 |
Net cash used in financing activities | (74) | (88) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 8 | (4) |
Cash, cash equivalents and restricted cash at beginning of period | 152 | 218 |
Cash, cash equivalents and restricted cash at end of period (Note 1) | $ 160 | $ 214 |
Business Overview and Summary o
Business Overview and Summary of Significant Accounting Policies | 3 Months Ended |
May 04, 2018 | |
Accounting Policies [Abstract] | |
Business Overview and Summary of Significant Accounting Policies | Business Overview and Summary of Significant Accounting Policies: Overview Science Applications International Corporation (collectively, with its consolidated subsidiaries, the “Company”) is a leading provider of technical, engineering and enterprise information technology (IT) services primarily to the U.S. government. The Company provides engineering and integration services for large, complex projects and offers a broad range of services with a targeted emphasis on higher-end, differentiated technology services. The Company is organized as a matrix comprised of three customer facing operating segments supported by three market service line organizations. Each of the Company’s three customer facing operating segments is focused on providing the Company’s comprehensive technical and enterprise IT service offerings to one or more agencies of the U.S federal government. The Company's operating segments are aggregated into one reportable segment for financial reporting purposes. Principles of Consolidation and Basis of Presentation The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting purposes. References to “financial statements” refer to the condensed and consolidated financial statements of the Company, which include the statements of income and comprehensive income, balance sheets, statement of equity and statements of cash flows. These financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). All intercompany transactions and account balances within the Company have been eliminated. The financial statements are unaudited, but in the opinion of management include all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year and should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended February 2, 2018 . Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Significant estimates inherent in the preparation of the financial statements may include, but are not limited to estimated profitability of long-term contracts, income taxes, fair value measurements, fair value of goodwill and other intangible assets, and contingencies. Estimates have been prepared by management on the basis of the most current and best available information at the time of estimation and actual results could differ from those estimates. Reporting Periods The Company utilizes a 52/53 week fiscal year ending on the Friday closest to January 31, with fiscal quarters typically consisting of 13 weeks. Fiscal 2018 began on February 4, 2017 and ended on February 2, 2018 , while fiscal 2019 began on February 3, 2018 and ends on February 1, 2019 . Operating Cycle The Company’s operating cycle may be greater than one year and is measured by the average time intervening between the inception and the completion of contracts. Contract assets and liabilities are recorded net on a contract-by-contract basis and generally are classified as current, based on our contract operating cycle. Derivative Instruments Designated as Cash Flow Hedges Derivative instruments are recorded on the condensed and consolidated balance sheets at fair value. Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income (loss) and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The Company’s fixed interest rate swaps are considered over-the-counter derivatives, and fair value is calculated using a standard pricing model for interest rate swaps with contractual terms for maturities, amortization and interest rates. Level 2, or market observable inputs (such as yield and credit curves), are used within the standard pricing models in order to determine fair value. The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party or canceled. See Note 7 for further discussion on the Company’s derivative instruments designated as cash flow hedges. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed and consolidated balance sheets for the periods presented: May 4, February 2, (in millions) Cash and cash equivalents $ 152 $ 144 Restricted cash included in other assets 8 8 Cash, cash equivalents and restricted cash $ 160 $ 152 Accounting Standards Updates In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements and some cost guidance included in the Accounting Standards Codification (ASC). This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The Company adopted the standard on February 3, 2018, using the modified retrospective method. Under this method, the Company recognized the cumulative effect of adoption as an adjustment to its opening balance of retained earnings on February 3, 2018. In determining the cumulative impact of the adoption the Company applied the provisions of ASC 606 only to contracts that had not yet been completed at the date of adoption. Prior periods were not retrospectively adjusted, but the Company will maintain dual reporting for the year of initial application, disclosing the effect of adoption. Under the new standard, the Company continues to recognize revenue over time as services are rendered to fulfill its contractual obligations; however, the Company generally accounts for customer option period exercises (renewals) and service contract modifications prospectively, instead of as a cumulative adjustment to revenue under a single unit of accounting. Also, under the new standard, award and incentive-based fees generally are recognized during the discrete periods of performance to which they relate as opposed to on a cumulative basis over the contract period. The net impact to opening retained earnings from these changes as a result of the adoption was $3 million . The Company no longer defers the recognition of revenues and costs associated with significant upfront material acquisitions on programs previously accounted for using the efforts-expended method of percentage of completion. Under the new standard, the Company recognizes revenue on an adjusted cost-to-cost basis, where the amount of revenue that is recognized is equal to the amount of costs incurred plus profit based on the adjusted cost input measure of progress. This change resulted in a $15 million reduction in inventories, prepaid expenses and other current assets and accounts payable and accrued liabilities on February 3, 2018, but had no impact on the adjustment to opening retained earnings. The cumulative effect of adopting ASC 606 on the Company's opening balance sheet is as follows: Balance at February 2, 2018 Adjustments due to ASC 606 Opening Balance at February 3, 2018 (in millions) Assets Receivables, net $ 674 $ 5 $ 679 Inventories, prepaid expenses and other current assets 132 (18 ) 114 Liabilities and Equity Accounts payable and accrued liabilities 504 (16 ) 488 Retained earnings $ 323 $ 3 $ 326 The amounts by which the Company’s financial statements were impacted by the adoption of ASC 606, as compared to the guidance in effect before the change, as of and for the three months ended May 4, 2018 were as follows: Three Months Ended May 4, 2018 As reported Balances without adoption of ASC 606 Effect of change Higher/(Lower) (in millions) Income Statement Revenues $ 1,175 $ 1,185 $ (10 ) Cost of revenues 1,074 1,083 (9 ) Operating income $ 66 $ 67 $ (1 ) May 4, 2018 As reported Balances without adoption of ASC 606 Effect of change Higher/(Lower) (in millions) Balance Sheet Assets Receivables, net $ 671 $ 667 $ 4 Inventories, prepaid expenses and other current assets 107 117 (10 ) Other assets 28 26 2 Liabilities and Equity Accounts payable and accrued liabilities 466 472 (6 ) Retained earnings $ 320 $ 318 $ 2 These impacts were primarily attributable to the change in accounting for programs previously accounted for using the efforts-expended method of percentage of completion. In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) , which supersedes the existing lease accounting standards ( Topic 840 ). Under the new guidance, a lessee will be required to recognize lease assets and lease liabilities for all leases with lease terms in excess of twelve months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as either a finance lease or operating lease. The criteria for distinction between a finance lease and an operating lease are substantially similar to existing lease guidance for capital leases and operating leases. Some changes to lessor accounting have been made to conform and align that guidance with the lessee guidance and other areas within GAAP, such as Revenue from Contracts with Customers (Topic 606) . ASU 2016-2 becomes effective for the Company in the first quarter of fiscal 2020 and will be adopted using a modified retrospective approach. The Company has commenced the assessment phase of the project and is evaluating the impact on its financial statements from the future adoption of the standard. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedge Activities , which simplifies the application of hedge accounting and eliminates the requirement to separately measure and report hedge ineffectiveness. The Company early adopted the provisions of the standard in the first quarter of fiscal 2019 and it did not have a material impact on the Company's financial statements. Other Accounting Standards Updates effective after May 4, 2018 are not expected to have a material effect on the Company’s financial statements. |
Earnings Per Share and Dividend
Earnings Per Share and Dividends | 3 Months Ended |
May 04, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share and Dividends | Earnings Per Share and Dividends: Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income by the basic weighted-average number of shares outstanding. Diluted EPS is computed similarly to basic EPS, except the weighted-average number of shares outstanding is increased to include the dilutive effect of outstanding stock options and other stock-based awards. A reconciliation of the weighted-average number of shares outstanding used to compute basic and diluted EPS was: Three Months Ended May 4, May 5, (in millions) Basic weighted-average number of shares outstanding 42.4 43.7 Dilutive common share equivalents - stock options and other stock-based awards 1.0 1.8 Diluted weighted-average number of shares outstanding 43.4 45.5 The following stock-based awards were excluded from the weighted-average number of shares outstanding used to compute diluted EPS: Three Months Ended May 4, May 5, (in millions) Antidilutive stock options excluded 0.3 0.1 Dividends The Company declared and paid a quarterly dividend of $0.31 per share of its common stock during the three months ended May 4, 2018. On June 6, 2018, the Company's Board of Directors declared a quarterly dividend of $0.31 per share of the Company's common stock payable on July 27, 2018 to stockholders of record on July 13, 2018. |
Revenues
Revenues | 3 Months Ended |
May 04, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenues | Revenues: Revenue Recognition The Company provides technical, engineering and enterprise IT services under long-term service arrangements primarily with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company also serves a number of state and local governments, foreign governments and U.S. commercial customers. The Company provides services under various contract types, including firm-fixed price (FFP), time-and-materials (T&M), cost-plus-fixed-fee, cost-plus-award-fee and cost-plus-incentive-fee contracts. Our service arrangements typically involve an annual base period of performance followed by renewal periods that are accounted for as separate contracts upon each exercise. The Company recognizes revenue when, or as, we satisfy our performance obligations under a contract. A performance obligation is the unit of account for revenue recognition and refers to a promise in a contract to transfer a distinct service or good to the customer. The majority of the Company’s contracts contain a single performance obligation involving a significant integration of various activities that are performed together to deliver a combined service or solution. Performance obligations may be satisfied over time or at a point in time, but the majority of the Company’s performance obligations are satisfied over time. The Company selects the appropriate measure of progress for revenue recognition based on the nature of the performance obligation, contract type and other pertinent contract terms. Over time performance obligations may involve a series of recurring services, such as network operations and maintenance, operation and program support services, IT outsourcing services, and other IT arrangements where the Company is standing ready to provide support, when-and-if needed. Such performance obligations are satisfied over time because the customer simultaneously receives and consumes the benefits of our performance as services are provided. Alternatively, over time performance obligations may involve the completion of a contract deliverable. Examples include systems integration, network engineering, network design, and engineering and build services. Deliverable-based performance obligations are satisfied over time when the Company’s performance creates or enhances an asset that is controlled by the customer, or when the Company’s performance creates an asset that is customized to the customer’s specifications and the Company has a right to payment, including profit, for work performed to date. For recurring services performance obligations, the Company measures progress using either a cost input measure (cost-to-cost), a time-elapsed output measure, or the as-invoiced practical expedient. A cost input measure typically is applied to the Company’s cost-reimbursable contracts. Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion. Award or incentive fees are allocated to the distinct periods to which they relate. For fixed-price contracts, a time-elapsed output measure is applied to fixed consideration, such that revenue is recognized ratably over the period of performance. Where fixed-price contracts also provide for reimbursement of certain costs, such as travel or other direct costs, consideration may be attributed only to a distinct subset of time within the performance period. The Company’s time-and-material and fixed price-level of effort contracts generally qualify for the as-invoiced practical expedient. Revenue is recognized in the amount to which the Company has a contractual right to invoice. Contract modifications typically create new enforceable rights and obligations, which are accounted for prospectively. Changes to our estimates of the transaction price are recognized as a cumulative adjustment to revenue. For deliverable-based performance obligations satisfied over time, the Company recognizes revenue using a cost input measure of progress (cost-to-cost), regardless of contract type. Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion, except for certain contracts for which the costs associated with significant materials or hardware procurements are excluded from the measure of progress and revenue is recognized on an adjusted cost-to-cost basis. Contract modifications typically change currently enforceable rights and obligations and are accounted for as a cumulative adjustment to revenue. Changes to our estimates of transaction price are recognized as a cumulative adjustment to revenue. For performance obligations in which the Company does not transfer control over time, we recognize revenue at the point-in-time when the customer obtains control of the related asset, usually at the time of shipment or upon delivery. The Company accrues for shipping and handling costs occurring after the point-in-time control transfers to the customer. Recognizing revenue on long-term contracts involves significant estimates and judgments. The transaction price is the estimated amount of consideration we expect to receive for performance under our contracts. Contract terms may include variable consideration, such as reimbursable costs, award and incentive fees, usage-based fees, service-level penalties, performance bonuses, or other provisions that can either increase or decrease the transaction price. Variable amounts generally are determined upon our achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion. When making our estimates, the Company considers the customer, contract terms, the complexity of the work and related risks, the extent of customer discretion, historical experience and the potential of a significant reversal of revenue. The Company includes variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimating costs at completion is complex due to the nature of the services being performed and the length of certain contracts. Contract costs generally include direct costs, such as labor, subcontract costs and materials, and indirect costs identifiable with or allocable to a specific contract. Management must make assumptions regarding the complexity of the work to be performed, the schedule and associated tasks, labor productivity and availability, increases in wages and prices of materials, execution by our subcontractors, overhead cost rates, and other variables. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by the Defense Contract Audit Agency ("DCAA"). Contract fulfillment costs are expensed as incurred except for certain costs incurred for transition, set-up or other fulfillment activities under contracts, which are capitalized and amortized on a straight-line basis over the expected period of benefit, which generally includes the base contract period of performance and anticipated renewal periods. The Company provides for anticipated losses on contracts with the U.S. government by recording an expense for the total expected loss during the period in which the losses are first determined. For contracts with multiple performance obligations, the Company allocates transaction price to each performance obligation based on the relative standalone selling price of each distinct performance obligation within the contract. Because the Company typically provides customized services and solutions that are specific to a single customer’s requirements, standalone selling price is most often estimated based on expected costs plus a reasonable profit margin. Changes in Estimates Changes in estimates of revenues, cost of revenues or profits related to performance obligations satisfied over time are recognized in operating income in the period in which such changes are made for the inception-to-date effect of the changes. Changes in these estimates can routinely occur over the performance period for a variety of reasons, which include: changes in scope; changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs; changes in the estimated transaction price, such as variable amounts for incentive or award fees; and performance being better or worse than previously estimated. In cases when total expected costs exceed total estimated revenues for a performance obligation, the Company recognizes the total estimated loss in the quarter identified. Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss. Aggregate changes in these estimates decreased operating income by $5 million ( $0.09 per diluted share) for the three months ended May 4, 2018 , and decreased operating income by $5 million ( $0.10 per diluted share) for the three months ended May 5, 2017 . In addition, revenues for the three months ended May 4, 2018 , were $1 million higher due to net revenue recognized from performance obligations satisfied in prior periods. Disaggregation of Revenues The Company's revenues are generated primarily from long-term contracts with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract-type and prime vs. subcontractor to the federal government. Disaggregated revenues by customer was as follows: Three Months Ended May 4, (in millions) Department of Defense $ 746 Other federal government agencies 413 Commercial, state and local 16 Total $ 1,175 Disaggregated revenues by contract-type was as follows: Three Months Ended May 4, (in millions) Cost reimbursement $ 533 Time and materials (T&M) 315 Firm-fixed price (FFP) 327 Total $ 1,175 Disaggregated revenues by prime vs. subcontractor was as follows: Three Months Ended May 4, (in millions) Prime contractor to federal government $ 1,077 Subcontractor to federal government 82 Other 16 Total $ 1,175 Contract Balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, typically biweekly or monthly in arrears, or upon achievement of contractual milestones. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include unbillable receivables and contract retentions, but exclude billed and billable receivables. Billed and billable receivables are rights to consideration which are unconditional other than to the passage of time. Contract liabilities include customer advances, cash collected in excess of revenues and deferred revenue. Contract assets and liabilities are recorded net on a contract-by-contract basis and are generally classified as current based on our contract operating cycle. Deferred revenue attributable to long-term contract material renewal options may be classified as non-current when the option renewal period will not occur within one year of the balance sheet date. Contract balances for the periods presented were as follows: Balance Sheet line item May 4, February 3, 2018 (1) (in millions) Billed and billable receivables, net (2) Receivables, net $ 501 $ 510 Contract assets (3) Receivables, net 170 169 Contract liabilities - current Accounts payable and accrued liabilities $ 7 $ 12 (1) Includes the cumulative effect of the changes made to the Company's opening balance sheet at February 3, 2018 from the modified retrospective adoption of ASC 606. (2) Net of allowance for doubtful accounts of $2 million and $1 million as of May 4, 2018 and February 3, 2018, respectively. (3) Includes contract retentions of $10 million and $11 million as of May 4, 2018 and February 3, 2018, respectively; the remaining balances of contract assets consists of unbillable receivables. The changes in the Company's contract assets and contract liabilities during the current period primarily results from the timing differences between the Company's performance, invoicing and customer payments. During the three-months ended May 4, 2018 , the Company recognized revenues of $9 million relating to amounts that were included in the opening balance of contract liabilities - current as of February 3, 2018. Deferred Costs Certain eligible costs, typically incurred during the initial phases of our service contracts, are capitalized when the costs relate directly to the contract, are expected to be recovered, and generate or enhance resources to be used in satisfying the performance obligation. These costs primarily consist of transition and set-up costs. Capitalized fulfillment costs are amortized on a straight-line basis over the expected period of benefit, which generally includes the contract base period and anticipated renewals. The Company defers fulfillment costs incurred to transfer service to a customer prior to the establishment of a contract provided recovery is probable. These pre-contract costs are typically expensed upon contract award unless they are eligible for capitalization. The Company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. The carrying amount of the asset is compared to the remaining amount of consideration the Company expects to receive for the services to which the asset relates, less the costs that relate directly to providing those services that have not yet been recognized. If the carrying amount is not recoverable, an impairment loss is recognized. Deferred costs for the periods presented were as follows: Balance Sheet line item May 4, February 3, 2018 (1) (in millions) Pre-contract costs Inventory, prepaid expenses and other current assets $ 2 $ 1 Fulfillment costs - current Inventory, prepaid expenses and other current assets — 3 Fulfillment costs - non-current Other assets $ 6 $ — (1) Includes the cumulative effect of the changes made to the Company's opening balance sheet at February 3, 2018 from the modified retrospective adoption of ASC 606. Pre-contract costs expensed and fulfillment costs amortized during the three months ended May 4, 2018 were not material. Remaining Performance Obligations As of May 4, 2018 , the Company had $0.9 billion of remaining performance obligations. Remaining performance obligations exclude contracts with original durations of one year or less, contracts in which we recognize revenue using the as-invoiced practical expedient and any variable consideration that is allocated entirely to unsatisfied performance obligations on our supply chain contracts. The Company expects to recognize revenue on approximately 75% of the remaining performance obligations over the next 12 months and approximately 90% over the next 24 months, with the remaining recognized thereafter. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
May 04, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation: Stock Options During the three months ended May 4, 2018 , the Company granted certain employees 0.1 million stock options with an exercise price and grant date fair value of $85.31 and $19.27 , respectively. These options will expire on the seven th anniversary of the grant date and will vest ratably on each anniversary of the grant date over a three -year period. Restricted Stock Units (RSUs) During the three months ended May 4, 2018 , the Company granted certain employees 0.3 million RSUs with a weighted-average grant date fair value of $85.26 , which will vest ratably on each anniversary of the grant date over a four -year period. Performance Shares During the three months ended May 4, 2018 , the Company granted to certain employees 0.1 million performance share awards with a grant date fair value of $85.31 per award. These awards will cliff vest at the end of the third fiscal year following the grant date, subject to meeting the minimum service requirements and the achievement of certain annual and cumulative financial metrics of the Company’s performance, with the number of shares ultimately issued, if any, ranging up to 150% of the specified target shares. |
Income Taxes
Income Taxes | 3 Months Ended |
May 04, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes: The Company's effective income tax rate was 10.3% for the three months ended May 4, 2018 , and 5.9% for the three months ended May 5, 2017 . The Company's effective tax rate was higher for the three months ended May 4, 2018 compared to the prior year period due to lower excess tax benefits related to employee share-based compensation, the repeal of the manufacturer’s deduction and the changes in deductibility of executive compensation due to the Tax Cuts and Jobs Act (the "Tax Act"), partially offset by the lower statutory federal income tax rate. Tax rates for the period ended May 4, 2018 were lower than the combined federal and state statutory rates due to excess tax benefits related to employee share-based compensation and research and development credits. As of May 4, 2018 , the balance of unrecognized tax benefits included liabilities for uncertainty in income taxes of $7 million ; $6 million of which is classified as other long-term liabilities on the condensed and consolidated balance sheets and $1 million of which is classified as a reduction to the corresponding deferred tax asset and is presented in other assets on the condensed and consolidated balance sheets. $7 million of unrecognized tax benefits, if recognized, would affect the effective income tax rate for the Company. While the Company believes it has adequate accruals for uncertainty in income taxes, the tax authorities, on review of the Company’s tax filings, may determine that the Company owes taxes in excess of recorded accruals, or the recorded accruals may be in excess of the final settlement amounts agreed to by tax authorities. Although the timing of such reviews is not certain, we do not believe that it is reasonably possible that the unrecognized tax benefits will materially change in the next 12 months. The Tax Act was enacted on December 22, 2017, which amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No 118 (“SAB 118”), which allows registrants to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As of May 4, 2018, the Company has not completed the accounting for the tax effects of enactment of the Tax Act. Areas still under review include: (1) the expensing of qualified assets and (2) the limitation on the deductibility of certain executive compensation. The Company is collecting information on expensing of qualified assets and is waiting for guidance on the deductibility of certain executive compensation. However, the Company made reasonable estimates and has recognized provisional amounts of these effects in the provision for income taxes for the year ended February 2, 2018 and for the three months ended May 4, 2018 . The ultimate impact may differ from the provisional amounts recorded. The Company expects to complete the analysis within the measurement period in accordance with SAB 118. |
Debt Obligations
Debt Obligations | 3 Months Ended |
May 04, 2018 | |
Debt Disclosure [Abstract] | |
Debt Obligations | Debt Obligations: The Company’s long-term debt as of the dates presented was as follows: May 4, 2018 February 2, 2018 Stated interest rate Effective interest rate Principal Unamortized Debt Issuance Costs Net Principal Unamortized Debt Issuance Costs Net (in millions) Term Loan A Facility due August 2021 3.69 % 3.82 % $ 627 $ (2 ) $ 625 $ 635 $ (2 ) $ 633 Term Loan B Facility due May 2022 3.81 % 4.40 % 400 (9 ) 391 400 (9 ) 391 Total long-term debt $ 1,027 $ (11 ) $ 1,016 $ 1,035 $ (11 ) $ 1,024 Less current portion 45 — 45 41 — 41 Total long-term debt, net of current portion $ 982 $ (11 ) $ 971 $ 994 $ (11 ) $ 983 As of May 4, 2018 , the Company has a $1.2 billion credit facility (the Credit Facility), which consists of a $200 million secured revolving credit facility (the Revolving Credit Facility), a $627 million secured term facility (Term Loan A Facility), and a $400 million secured term facility (Term Loan B Facility) (together, the Term Loan Facilities). The Revolving Credit Facility is available to the Company through August 2021 and there is no balance outstanding as of May 4, 2018 . On February 7, 2018, the Company entered into the Second Amendment to the Second Amended and Restated Credit Agreement (2 nd Amendment) to reduce the interest rate margins by 0.25% , 0.50% , and 0.25% , across all leverage ratios for the Term Loan A Facility, the Term Loan B Facility and the Revolving Credit Facility, respectively. Effective upon execution of the 2 nd Amendment, the applicable margin with respect to Term Loan A Facility and borrowings under the Revolving Credit Facility range from 1.25% to 2.00% for Eurocurrency Rate loans, and 0.25% to 1.00% for Base Rate loans. Under the 2 nd Amendment, interest rate margins for the Term Loan B Facility are 2.00% , subject to a 0.75% floor for Eurocurrency Rate loans, or 1.00% for Base Rate loans. The Company incurred and paid $2 million in fees associated with the 2 nd amendment, including $1 million of deferred financing fees. The Credit Facility contains certain restrictive covenants applicable to the Company and its subsidiaries including a requirement to maintain a Senior Secured Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of not greater than 4.00 to 1.00 until July 31, 2016, and not greater than 3.75 to 1.00 thereafter, and requires the Company to make an annual prepayment as a portion of its Excess Cash Flow (as defined in the Second Amended and Restated Credit Agreement). As of May 4, 2018 , the Company was in compliance with the covenants under its Credit Facility. As of May 4, 2018 and February 2, 2018 , 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. |
Derivative Instruments Designat
Derivative Instruments Designated as Cash Flow Hedges | 3 Months Ended |
May 04, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments Designated as Cash Flow Hedges | Derivative Instruments Designated as Cash Flow Hedges: The Company’s derivative instruments designated as cash flow hedges consist of: Asset Fair Value (1) at Notional Amount at May 4, 2018 Pay Fixed Rate Receive Variable Rate Settlement and Termination May 4, 2018 February 2, 2018 (in millions) (in millions) Term loan A interest rate swaps $ 350 1.41 % 1-month LIBOR Monthly through September 26, 2018 $ 1 $ 1 Term loan B interest rate swaps 350 1.88 % 3-month LIBOR (2) Quarterly through May 7, 2020 6 4 Total $ 700 $ 7 $ 5 (1) The fair value of the fixed interest rate swaps asset is included in other assets on the condensed and consolidated balance sheets. (2) Subject to a 0.75% floor. The Company is party to fixed interest rate swap instruments that are designated and accounted for as cash flow hedges to manage risks associated with interest rate fluctuations on a portion of the Company’s floating rate debt. The counterparties to all swap agreements are financial institutions. See Note 8 for the unrealized change in fair values on cash flow hedges recognized in other comprehensive income and the amounts reclassified from accumulated other comprehensive income into earnings for the current and comparative periods presented. The Company recognized no ineffectiveness during the periods presented prior to the adoption of ASU 2017-12. The Company estimates that it will reclassify $3 million of unrealized gains from accumulated other comprehensive income into earnings in the twelve months following May 4, 2018 . |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Income by Component | 3 Months Ended |
May 04, 2018 | |
Equity [Abstract] | |
Changes in Accumulated Other Comprehensive Income by Component | Changes in Accumulated Other Comprehensive Income by Component: The following table presents the changes in accumulated other comprehensive income attributable to the Company’s fixed interest rate swap cash flow hedges that are discussed in Note 7 . Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges Pre-Tax Amount (1) Income Tax (2) Net Amount (in millions) Three months ended May 4, 2018 Balance at February 2, 2018 $ 5 $ (1 ) $ 4 Other comprehensive income before reclassifications 2 (1 ) 1 Amounts reclassified from accumulated other comprehensive income — — — Net other comprehensive income 2 (1 ) 1 Balance at May 4, 2018 $ 7 $ (2 ) $ 5 Three months ended May 5, 2017 Balance at February 3, 2017 $ (3 ) $ 1 $ (2 ) Other comprehensive income before reclassifications — — — Amounts reclassified from accumulated other comprehensive income 1 — 1 Net other comprehensive income 1 — 1 Balance at May 5, 2017 $ (2 ) $ 1 $ (1 ) (1) The amount reclassified from accumulated other comprehensive income was included in interest expense. (2) The amount reclassified from accumulated other comprehensive income was included in the provision for income taxes. |
Legal Proceedings and Other Com
Legal Proceedings and Other Commitments and Contingencies | 3 Months Ended |
May 04, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings and Other Commitments and Contingencies | Legal Proceedings and Other Commitments and Contingencies: Legal Proceedings The Company is involved in various claims and lawsuits arising in the normal conduct of its business, none of which the Company’s management believes, based on current information, is expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Scitor Acquisition On May 4, 2015 , the Company completed the acquisition of Scitor, a leading global provider of technical services to the U.S. intelligence community and other U.S. government customers. The acquisition was funded from cash on hand and increased borrowings. Purchase consideration paid to acquire Scitor was $764 million (net of cash acquired), including $43 million which was deposited to escrow accounts. In August 2015, $3 million was released from escrow to the sellers after finalizing the working capital adjustment and another $13 million was released in September 2016 that was held to secure a portion of the sellers’ indemnification obligations. During the first quarter of fiscal 2019, the Company received a $6 million distribution from escrow to settle a claim, which was recognized as a reduction to selling, general, and administrative costs. As of May 4, 2018 there is no remaining amount in escrow. Agreements with Former Parent The Company commenced its operations on September 27, 2013 (the Distribution Date) following completion of a tax-free spin-off transaction from its former parent company, Leidos Holdings, Inc. (formerly SAIC, Inc., collectively with its consolidated subsidiaries, “former Parent”). In the spin-off transaction, former Parent’s technical, engineering and enterprise IT services business was separated (the separation) into an independent, publicly traded company named Science Applications International Corporation (formerly SAIC Gemini, Inc.). Former Parent and the Company executed various agreements to provide mechanisms for an orderly transition and to govern certain ongoing relationships between the companies following the separation. The agreements include a Distribution Agreement, Employee Matters Agreement, Tax Matters Agreement, Master Transition Services Agreement, and Master Transitional Contracting Agreement (MTCA). These agreements generally provide that each party is responsible for its respective assets, liabilities and obligations, including employee benefits, insurance and tax-related assets and liabilities. The MTCA also governs the relationship between former Parent and the Company with regard to the treatment of contracts, proposals, and teaming arrangements where both companies are or will be jointly performing work after separation. Each of former Parent and the Company indemnify the other party for work performed by it under the MTCA. Contingent losses that were unknown at the time of separation and arise from the operation of the Company’s historical business or the former Parent’s historical corporate losses will be shared between the parties to the extent that losses in any such category exceed $50 million in the aggregate. If they arise and exceed the $50 million threshold, the Company will be responsible for 30% of the former Parent’s incremental contingent losses on corporate claims (and former Parent will be responsible for 70% of the Company’s incremental losses on claims relating to operations that exceed $50 million ). Government Investigations, Audits and Reviews The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect, in particular, to its role as a contractor to federal, state and local government customers and in connection with performing services in countries outside of the United States. U.S. government agencies, including the DCAA, the Defense Contract Management Agency and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of the contractor’s compliance with government standards for its business systems. Adverse findings in these investigations, audits, or reviews can lead to criminal, civil or administrative proceedings, and the Company could face disallowance of previously billed costs, penalties, fines, compensatory damages and suspension or debarment from doing business with governmental agencies. Due to the Company’s reliance on government contracts, adverse findings could also have a material impact on the Company’s business, including its financial position, results of operations and cash flows. The indirect cost audits by the DCAA of the Company’s business remain open for fiscal 2012 and subsequent years. Although the Company has recorded contract revenues subsequent to and including fiscal 2012 based on an estimate of costs that the Company believes will be approved on final audit, the Company does not know the outcome of any ongoing or future audits. If future completed audit adjustments exceed the Company’s reserves for potential adjustments, the Company’s profitability could be materially adversely affected. The Company has recorded reserves for estimated net amounts to be refunded to customers for potential adjustments for indirect cost audits and compliance with Cost Accounting Standards, which include indemnification obligations owing to former Parent for periods prior to the Distribution Date. As of May 4, 2018 , the Company has recorded a total liability of $42 million for estimated net amounts to be refunded to customers for potential adjustments from audits of contract costs, which is presented in accounts payable and accrued liabilities on the condensed and consolidated balance sheets. Any additional amounts which may be determined to be owed for periods prior to the separation will be allocated to former Parent and the Company in proportions determined in accordance with the Distribution Agreement. Letters of Credit and Surety Bonds The Company has outstanding obligations relating to letters of credit of $12 million as of May 4, 2018 , principally related to guarantees on insurance policies. The Company also has outstanding obligations relating to surety bonds in the amount of $17 million , principally related to performance and payment bonds on the Company’s contracts. The majority of the surety bonds outstanding were initially obtained by former Parent and the Company is required to satisfy these obligations under the terms of the Distribution Agreement. |
Business Overview and Summary17
Business Overview and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
May 04, 2018 | |
Accounting Policies [Abstract] | |
Segment Reporting | The Company is organized as a matrix comprised of three customer facing operating segments supported by three market service line organizations. Each of the Company’s three customer facing operating segments is focused on providing the Company’s comprehensive technical and enterprise IT service offerings to one or more agencies of the U.S federal government. The Company's operating segments are aggregated into one reportable segment for financial reporting purposes. |
Basis of Presentation | The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting purposes. References to “financial statements” refer to the condensed and consolidated financial statements of the Company, which include the statements of income and comprehensive income, balance sheets, statement of equity and statements of cash flows. These financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). |
Consolidation | All intercompany transactions and account balances within the Company have been eliminated. |
Use of Estimates | The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Significant estimates inherent in the preparation of the financial statements may include, but are not limited to estimated profitability of long-term contracts, income taxes, fair value measurements, fair value of goodwill and other intangible assets, and contingencies. Estimates have been prepared by management on the basis of the most current and best available information at the time of estimation and actual results could differ from those estimates. |
Reporting Periods | The Company utilizes a 52/53 week fiscal year ending on the Friday closest to January 31, with fiscal quarters typically consisting of 13 weeks. Fiscal 2018 began on February 4, 2017 and ended on February 2, 2018 , while fiscal 2019 began on February 3, 2018 and ends on February 1, 2019 . |
Operating Cycle | The Company’s operating cycle may be greater than one year and is measured by the average time intervening between the inception and the completion of contracts. Contract assets and liabilities are recorded net on a contract-by-contract basis and generally are classified as current, based on our contract operating cycle. |
Derivative Instruments Designated as Cash Flow Hedges | Derivative instruments are recorded on the condensed and consolidated balance sheets at fair value. Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income (loss) and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The Company’s fixed interest rate swaps are considered over-the-counter derivatives, and fair value is calculated using a standard pricing model for interest rate swaps with contractual terms for maturities, amortization and interest rates. Level 2, or market observable inputs (such as yield and credit curves), are used within the standard pricing models in order to determine fair value. The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party or canceled. See Note 7 for further discussion on the Company’s derivative instruments designated as cash flow hedges. |
Accounting Standards Updates | In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements and some cost guidance included in the Accounting Standards Codification (ASC). This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The Company adopted the standard on February 3, 2018, using the modified retrospective method. Under this method, the Company recognized the cumulative effect of adoption as an adjustment to its opening balance of retained earnings on February 3, 2018. In determining the cumulative impact of the adoption the Company applied the provisions of ASC 606 only to contracts that had not yet been completed at the date of adoption. Prior periods were not retrospectively adjusted, but the Company will maintain dual reporting for the year of initial application, disclosing the effect of adoption. Under the new standard, the Company continues to recognize revenue over time as services are rendered to fulfill its contractual obligations; however, the Company generally accounts for customer option period exercises (renewals) and service contract modifications prospectively, instead of as a cumulative adjustment to revenue under a single unit of accounting. Also, under the new standard, award and incentive-based fees generally are recognized during the discrete periods of performance to which they relate as opposed to on a cumulative basis over the contract period. The net impact to opening retained earnings from these changes as a result of the adoption was $3 million . The Company no longer defers the recognition of revenues and costs associated with significant upfront material acquisitions on programs previously accounted for using the efforts-expended method of percentage of completion. Under the new standard, the Company recognizes revenue on an adjusted cost-to-cost basis, where the amount of revenue that is recognized is equal to the amount of costs incurred plus profit based on the adjusted cost input measure of progress. This change resulted in a $15 million reduction in inventories, prepaid expenses and other current assets and accounts payable and accrued liabilities on February 3, 2018, but had no impact on the adjustment to opening retained earnings. In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) , which supersedes the existing lease accounting standards ( Topic 840 ). Under the new guidance, a lessee will be required to recognize lease assets and lease liabilities for all leases with lease terms in excess of twelve months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as either a finance lease or operating lease. The criteria for distinction between a finance lease and an operating lease are substantially similar to existing lease guidance for capital leases and operating leases. Some changes to lessor accounting have been made to conform and align that guidance with the lessee guidance and other areas within GAAP, such as Revenue from Contracts with Customers (Topic 606) . ASU 2016-2 becomes effective for the Company in the first quarter of fiscal 2020 and will be adopted using a modified retrospective approach. The Company has commenced the assessment phase of the project and is evaluating the impact on its financial statements from the future adoption of the standard. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedge Activities , which simplifies the application of hedge accounting and eliminates the requirement to separately measure and report hedge ineffectiveness. The Company early adopted the provisions of the standard in the first quarter of fiscal 2019 and it did not have a material impact on the Company's financial statements. Other Accounting Standards Updates effective after May 4, 2018 are not expected to have a material effect on the Company’s financial statements. |
Earnings Per Share | Basic earnings per share (EPS) is computed by dividing net income by the basic weighted-average number of shares outstanding. Diluted EPS is computed similarly to basic EPS, except the weighted-average number of shares outstanding is increased to include the dilutive effect of outstanding stock options and other stock-based awards. |
Revenue Recognition, Change in Estimates, Disaggregation of Revenues, Contract Balances, Deferred Costs | Contract Balances Timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, typically biweekly or monthly in arrears, or upon achievement of contractual milestones. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance of recognizing revenue. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets include unbillable receivables and contract retentions, but exclude billed and billable receivables. Billed and billable receivables are rights to consideration which are unconditional other than to the passage of time. Contract liabilities include customer advances, cash collected in excess of revenues and deferred revenue. Contract assets and liabilities are recorded net on a contract-by-contract basis and are generally classified as current based on our contract operating cycle. Deferred revenue attributable to long-term contract material renewal options may be classified as non-current when the option renewal period will not occur within one year of the balance sheet date. Disaggregation of Revenues The Company's revenues are generated primarily from long-term contracts with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract-type and prime vs. subcontractor to the federal government. Revenue Recognition The Company provides technical, engineering and enterprise IT services under long-term service arrangements primarily with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company also serves a number of state and local governments, foreign governments and U.S. commercial customers. The Company provides services under various contract types, including firm-fixed price (FFP), time-and-materials (T&M), cost-plus-fixed-fee, cost-plus-award-fee and cost-plus-incentive-fee contracts. Our service arrangements typically involve an annual base period of performance followed by renewal periods that are accounted for as separate contracts upon each exercise. The Company recognizes revenue when, or as, we satisfy our performance obligations under a contract. A performance obligation is the unit of account for revenue recognition and refers to a promise in a contract to transfer a distinct service or good to the customer. The majority of the Company’s contracts contain a single performance obligation involving a significant integration of various activities that are performed together to deliver a combined service or solution. Performance obligations may be satisfied over time or at a point in time, but the majority of the Company’s performance obligations are satisfied over time. The Company selects the appropriate measure of progress for revenue recognition based on the nature of the performance obligation, contract type and other pertinent contract terms. Over time performance obligations may involve a series of recurring services, such as network operations and maintenance, operation and program support services, IT outsourcing services, and other IT arrangements where the Company is standing ready to provide support, when-and-if needed. Such performance obligations are satisfied over time because the customer simultaneously receives and consumes the benefits of our performance as services are provided. Alternatively, over time performance obligations may involve the completion of a contract deliverable. Examples include systems integration, network engineering, network design, and engineering and build services. Deliverable-based performance obligations are satisfied over time when the Company’s performance creates or enhances an asset that is controlled by the customer, or when the Company’s performance creates an asset that is customized to the customer’s specifications and the Company has a right to payment, including profit, for work performed to date. For recurring services performance obligations, the Company measures progress using either a cost input measure (cost-to-cost), a time-elapsed output measure, or the as-invoiced practical expedient. A cost input measure typically is applied to the Company’s cost-reimbursable contracts. Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion. Award or incentive fees are allocated to the distinct periods to which they relate. For fixed-price contracts, a time-elapsed output measure is applied to fixed consideration, such that revenue is recognized ratably over the period of performance. Where fixed-price contracts also provide for reimbursement of certain costs, such as travel or other direct costs, consideration may be attributed only to a distinct subset of time within the performance period. The Company’s time-and-material and fixed price-level of effort contracts generally qualify for the as-invoiced practical expedient. Revenue is recognized in the amount to which the Company has a contractual right to invoice. Contract modifications typically create new enforceable rights and obligations, which are accounted for prospectively. Changes to our estimates of the transaction price are recognized as a cumulative adjustment to revenue. For deliverable-based performance obligations satisfied over time, the Company recognizes revenue using a cost input measure of progress (cost-to-cost), regardless of contract type. Revenue is recognized based on the ratio of costs incurred to total estimated costs at completion, except for certain contracts for which the costs associated with significant materials or hardware procurements are excluded from the measure of progress and revenue is recognized on an adjusted cost-to-cost basis. Contract modifications typically change currently enforceable rights and obligations and are accounted for as a cumulative adjustment to revenue. Changes to our estimates of transaction price are recognized as a cumulative adjustment to revenue. For performance obligations in which the Company does not transfer control over time, we recognize revenue at the point-in-time when the customer obtains control of the related asset, usually at the time of shipment or upon delivery. The Company accrues for shipping and handling costs occurring after the point-in-time control transfers to the customer. Recognizing revenue on long-term contracts involves significant estimates and judgments. The transaction price is the estimated amount of consideration we expect to receive for performance under our contracts. Contract terms may include variable consideration, such as reimbursable costs, award and incentive fees, usage-based fees, service-level penalties, performance bonuses, or other provisions that can either increase or decrease the transaction price. Variable amounts generally are determined upon our achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion. When making our estimates, the Company considers the customer, contract terms, the complexity of the work and related risks, the extent of customer discretion, historical experience and the potential of a significant reversal of revenue. The Company includes variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimating costs at completion is complex due to the nature of the services being performed and the length of certain contracts. Contract costs generally include direct costs, such as labor, subcontract costs and materials, and indirect costs identifiable with or allocable to a specific contract. Management must make assumptions regarding the complexity of the work to be performed, the schedule and associated tasks, labor productivity and availability, increases in wages and prices of materials, execution by our subcontractors, overhead cost rates, and other variables. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by the Defense Contract Audit Agency ("DCAA"). Contract fulfillment costs are expensed as incurred except for certain costs incurred for transition, set-up or other fulfillment activities under contracts, which are capitalized and amortized on a straight-line basis over the expected period of benefit, which generally includes the base contract period of performance and anticipated renewal periods. The Company provides for anticipated losses on contracts with the U.S. government by recording an expense for the total expected loss during the period in which the losses are first determined. For contracts with multiple performance obligations, the Company allocates transaction price to each performance obligation based on the relative standalone selling price of each distinct performance obligation within the contract. Because the Company typically provides customized services and solutions that are specific to a single customer’s requirements, standalone selling price is most often estimated based on expected costs plus a reasonable profit margin. Changes in Estimates Changes in estimates of revenues, cost of revenues or profits related to performance obligations satisfied over time are recognized in operating income in the period in which such changes are made for the inception-to-date effect of the changes. Changes in these estimates can routinely occur over the performance period for a variety of reasons, which include: changes in scope; changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs; changes in the estimated transaction price, such as variable amounts for incentive or award fees; and performance being better or worse than previously estimated. In cases when total expected costs exceed total estimated revenues for a performance obligation, the Company recognizes the total estimated loss in the quarter identified. Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss. Deferred Costs Certain eligible costs, typically incurred during the initial phases of our service contracts, are capitalized when the costs relate directly to the contract, are expected to be recovered, and generate or enhance resources to be used in satisfying the performance obligation. These costs primarily consist of transition and set-up costs. Capitalized fulfillment costs are amortized on a straight-line basis over the expected period of benefit, which generally includes the contract base period and anticipated renewals. The Company defers fulfillment costs incurred to transfer service to a customer prior to the establishment of a contract provided recovery is probable. These pre-contract costs are typically expensed upon contract award unless they are eligible for capitalization. The Company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. The carrying amount of the asset is compared to the remaining amount of consideration the Company expects to receive for the services to which the asset relates, less the costs that relate directly to providing those services that have not yet been recognized. If the carrying amount is not recoverable, an impairment loss is recognized. |
Business Overview and Summary18
Business Overview and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
May 04, 2018 | |
Accounting Policies [Abstract] | |
Reconciliation of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed and consolidated balance sheets for the periods presented: May 4, February 2, (in millions) Cash and cash equivalents $ 152 $ 144 Restricted cash included in other assets 8 8 Cash, cash equivalents and restricted cash $ 160 $ 152 |
Schedule of Cumulative Effect of Adopting ASC 606 | The cumulative effect of adopting ASC 606 on the Company's opening balance sheet is as follows: Balance at February 2, 2018 Adjustments due to ASC 606 Opening Balance at February 3, 2018 (in millions) Assets Receivables, net $ 674 $ 5 $ 679 Inventories, prepaid expenses and other current assets 132 (18 ) 114 Liabilities and Equity Accounts payable and accrued liabilities 504 (16 ) 488 Retained earnings $ 323 $ 3 $ 326 The amounts by which the Company’s financial statements were impacted by the adoption of ASC 606, as compared to the guidance in effect before the change, as of and for the three months ended May 4, 2018 were as follows: Three Months Ended May 4, 2018 As reported Balances without adoption of ASC 606 Effect of change Higher/(Lower) (in millions) Income Statement Revenues $ 1,175 $ 1,185 $ (10 ) Cost of revenues 1,074 1,083 (9 ) Operating income $ 66 $ 67 $ (1 ) May 4, 2018 As reported Balances without adoption of ASC 606 Effect of change Higher/(Lower) (in millions) Balance Sheet Assets Receivables, net $ 671 $ 667 $ 4 Inventories, prepaid expenses and other current assets 107 117 (10 ) Other assets 28 26 2 Liabilities and Equity Accounts payable and accrued liabilities 466 472 (6 ) Retained earnings $ 320 $ 318 $ 2 |
Earnings Per Share and Divide19
Earnings Per Share and Dividends (Tables) | 3 Months Ended |
May 04, 2018 | |
Earnings Per Share [Abstract] | |
Reconciliation of Weighted Average Number of Shares Outstanding Used to Compute Basic and Diluted EPS | A reconciliation of the weighted-average number of shares outstanding used to compute basic and diluted EPS was: Three Months Ended May 4, May 5, (in millions) Basic weighted-average number of shares outstanding 42.4 43.7 Dilutive common share equivalents - stock options and other stock-based awards 1.0 1.8 Diluted weighted-average number of shares outstanding 43.4 45.5 |
Stock-Based Awards Excluded from Weighted Average Number of Shares Outstanding Used to Compute Diluted EPS | The following stock-based awards were excluded from the weighted-average number of shares outstanding used to compute diluted EPS: Three Months Ended May 4, May 5, (in millions) Antidilutive stock options excluded 0.3 0.1 |
Revenues (Tables)
Revenues (Tables) | 3 Months Ended |
May 04, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregated Revenues | Disaggregated revenues by customer was as follows: Three Months Ended May 4, (in millions) Department of Defense $ 746 Other federal government agencies 413 Commercial, state and local 16 Total $ 1,175 Disaggregated revenues by contract-type was as follows: Three Months Ended May 4, (in millions) Cost reimbursement $ 533 Time and materials (T&M) 315 Firm-fixed price (FFP) 327 Total $ 1,175 Disaggregated revenues by prime vs. subcontractor was as follows: Three Months Ended May 4, (in millions) Prime contractor to federal government $ 1,077 Subcontractor to federal government 82 Other 16 Total $ 1,175 |
Contract Related Assets and Liabilities | Contract balances for the periods presented were as follows: Balance Sheet line item May 4, February 3, 2018 (1) (in millions) Billed and billable receivables, net (2) Receivables, net $ 501 $ 510 Contract assets (3) Receivables, net 170 169 Contract liabilities - current Accounts payable and accrued liabilities $ 7 $ 12 (1) Includes the cumulative effect of the changes made to the Company's opening balance sheet at February 3, 2018 from the modified retrospective adoption of ASC 606. (2) Net of allowance for doubtful accounts of $2 million and $1 million as of May 4, 2018 and February 3, 2018, respectively. (3) Includes contract retentions of $10 million and $11 million as of May 4, 2018 and February 3, 2018, respectively; the remaining balances of contract assets consists of unbillable receivables. |
Deferred Costs | Deferred costs for the periods presented were as follows: Balance Sheet line item May 4, February 3, 2018 (1) (in millions) Pre-contract costs Inventory, prepaid expenses and other current assets $ 2 $ 1 Fulfillment costs - current Inventory, prepaid expenses and other current assets — 3 Fulfillment costs - non-current Other assets $ 6 $ — (1) Includes the cumulative effect of the changes made to the Company's opening balance sheet at February 3, 2018 from the modified retrospective adoption of ASC 606. |
Debt Obligations (Tables)
Debt Obligations (Tables) | 3 Months Ended |
May 04, 2018 | |
Debt Disclosure [Abstract] | |
Long-term Debt | The Company’s long-term debt as of the dates presented was as follows: May 4, 2018 February 2, 2018 Stated interest rate Effective interest rate Principal Unamortized Debt Issuance Costs Net Principal Unamortized Debt Issuance Costs Net (in millions) Term Loan A Facility due August 2021 3.69 % 3.82 % $ 627 $ (2 ) $ 625 $ 635 $ (2 ) $ 633 Term Loan B Facility due May 2022 3.81 % 4.40 % 400 (9 ) 391 400 (9 ) 391 Total long-term debt $ 1,027 $ (11 ) $ 1,016 $ 1,035 $ (11 ) $ 1,024 Less current portion 45 — 45 41 — 41 Total long-term debt, net of current portion $ 982 $ (11 ) $ 971 $ 994 $ (11 ) $ 983 |
Derivative Instruments Design22
Derivative Instruments Designated as Cash Flow Hedges (Tables) | 3 Months Ended |
May 04, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments | The Company’s derivative instruments designated as cash flow hedges consist of: Asset Fair Value (1) at Notional Amount at May 4, 2018 Pay Fixed Rate Receive Variable Rate Settlement and Termination May 4, 2018 February 2, 2018 (in millions) (in millions) Term loan A interest rate swaps $ 350 1.41 % 1-month LIBOR Monthly through September 26, 2018 $ 1 $ 1 Term loan B interest rate swaps 350 1.88 % 3-month LIBOR (2) Quarterly through May 7, 2020 6 4 Total $ 700 $ 7 $ 5 (1) The fair value of the fixed interest rate swaps asset is included in other assets on the condensed and consolidated balance sheets. (2) Subject to a 0.75% floor. |
Changes in Accumulated Other 23
Changes in Accumulated Other Comprehensive Income by Component (Tables) | 3 Months Ended |
May 04, 2018 | |
Equity [Abstract] | |
Changes in Accumulated Other Comprehensive Income Attributable to the Company's Fixed Interest Rate Swap Cash Flow Hedges | The following table presents the changes in accumulated other comprehensive income attributable to the Company’s fixed interest rate swap cash flow hedges that are discussed in Note 7 . Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges Pre-Tax Amount (1) Income Tax (2) Net Amount (in millions) Three months ended May 4, 2018 Balance at February 2, 2018 $ 5 $ (1 ) $ 4 Other comprehensive income before reclassifications 2 (1 ) 1 Amounts reclassified from accumulated other comprehensive income — — — Net other comprehensive income 2 (1 ) 1 Balance at May 4, 2018 $ 7 $ (2 ) $ 5 Three months ended May 5, 2017 Balance at February 3, 2017 $ (3 ) $ 1 $ (2 ) Other comprehensive income before reclassifications — — — Amounts reclassified from accumulated other comprehensive income 1 — 1 Net other comprehensive income 1 — 1 Balance at May 5, 2017 $ (2 ) $ 1 $ (1 ) (1) The amount reclassified from accumulated other comprehensive income was included in interest expense. (2) The amount reclassified from accumulated other comprehensive income was included in the provision for income taxes. |
Business Overview and Summary24
Business Overview and Summary of Significant Accounting Policies - Narrative (Detail) $ in Millions | 3 Months Ended | ||
May 04, 2018USD ($)segmentorganization | Feb. 03, 2018USD ($) | Feb. 02, 2018USD ($) | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Number of operating segments | segment | 3 | ||
Number of market service line organizations | organization | 3 | ||
Number of reportable segments | segment | 1 | ||
Operating cycle (in years) | greater than one year | ||
Retained earnings | $ 320 | $ 326 | $ 323 |
Reduction in inventories, prepaid expenses and other current assets | (107) | (114) | (132) |
Reduction in accounts payable and accrued liabilities | (466) | (488) | (504) |
Accounting Standards Update 2014-09, Revenue Recognition, Adjusted Cost-To-Cost Basis | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Reduction in inventories, prepaid expenses and other current assets | 15 | ||
Reduction in accounts payable and accrued liabilities | 15 | ||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Retained earnings | 2 | 3 | |
Reduction in inventories, prepaid expenses and other current assets | 10 | 18 | |
Reduction in accounts payable and accrued liabilities | $ 6 | $ 16 | |
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09, Revenue Recognition, Adjusted Cost-To-Cost Basis | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Retained earnings | $ 3 |
Business Overview and Summary25
Business Overview and Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Detail) - USD ($) $ in Millions | May 04, 2018 | Feb. 02, 2018 | May 05, 2017 | Feb. 03, 2017 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 152 | $ 144 | ||
Restricted cash included in other assets | 8 | 8 | ||
Cash, cash equivalents and restricted cash | $ 160 | $ 152 | $ 214 | $ 218 |
Business Overview and Summary26
Business Overview and Summary of Significant Accounting Policies - Schedule of Cumulative Effect of Adopting ASC 606 (Details) - USD ($) $ in Millions | May 04, 2018 | Feb. 03, 2018 | Feb. 02, 2018 |
Assets | |||
Receivables, net | $ 671 | $ 679 | $ 674 |
Inventories, prepaid expenses and other current assets | 107 | 114 | 132 |
Liabilities and Equity | |||
Accounts payable and accrued liabilities | 466 | 488 | 504 |
Retained earnings | 320 | 326 | 323 |
Calculated under Revenue Guidance in Effect before Topic 606 | |||
Assets | |||
Receivables, net | 667 | 674 | |
Inventories, prepaid expenses and other current assets | 117 | 132 | |
Liabilities and Equity | |||
Accounts payable and accrued liabilities | 472 | 504 | |
Retained earnings | 318 | $ 323 | |
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | |||
Assets | |||
Receivables, net | 4 | 5 | |
Inventories, prepaid expenses and other current assets | (10) | (18) | |
Liabilities and Equity | |||
Accounts payable and accrued liabilities | (6) | (16) | |
Retained earnings | $ 2 | $ 3 |
Business Overview and Summary27
Business Overview and Summary of Significant Accounting Policies - Impact of Adoption of ASC 606 (Details) - USD ($) $ in Millions | 3 Months Ended | |||
May 04, 2018 | May 05, 2017 | Feb. 03, 2018 | Feb. 02, 2018 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | $ 1,175 | $ 1,103 | ||
Cost of revenues | 1,074 | 1,007 | ||
Operating income | 66 | $ 63 | ||
Receivables, net | 671 | $ 679 | $ 674 | |
Inventories, prepaid expenses and other current assets | 107 | 114 | 132 | |
Other assets | 28 | 20 | ||
Accounts payable and accrued liabilities | 466 | 488 | 504 | |
Retained earnings | 320 | 326 | 323 | |
Calculated under Revenue Guidance in Effect before Topic 606 | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,185 | |||
Cost of revenues | 1,083 | |||
Operating income | 67 | |||
Receivables, net | 667 | 674 | ||
Inventories, prepaid expenses and other current assets | 117 | 132 | ||
Other assets | 26 | |||
Accounts payable and accrued liabilities | 472 | 504 | ||
Retained earnings | 318 | $ 323 | ||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | (10) | |||
Cost of revenues | (9) | |||
Operating income | (1) | |||
Receivables, net | 4 | 5 | ||
Inventories, prepaid expenses and other current assets | (10) | (18) | ||
Other assets | 2 | |||
Accounts payable and accrued liabilities | (6) | (16) | ||
Retained earnings | $ 2 | $ 3 |
Earnings Per Share and Divide28
Earnings Per Share and Dividends (Detail) - $ / shares shares in Millions | Jun. 06, 2018 | May 04, 2018 | May 05, 2017 |
Computation Of Earnings Per Share [Line Items] | |||
Basic weighted-average number of shares outstanding (in shares) | 42.4 | 43.7 | |
Dilutive common share equivalents - stock options and other stock-based awards (in shares) | 1 | 1.8 | |
Diluted weighted-average number of shares outstanding (in shares) | 43.4 | 45.5 | |
Cash dividends paid per share (in dollars per share) | $ 0.31 | $ 0.31 | |
Cash dividends declared per share (in dollars per share) | 0.31 | $ 0.31 | |
Quarterly Dividend | |||
Computation Of Earnings Per Share [Line Items] | |||
Cash dividends paid per share (in dollars per share) | 0.31 | ||
Cash dividends declared per share (in dollars per share) | $ 0.31 | ||
Stock Options | |||
Computation Of Earnings Per Share [Line Items] | |||
Antidilutive stock options excluded (in shares) | 0.3 | 0.1 | |
Subsequent Event | Quarterly Dividend | |||
Computation Of Earnings Per Share [Line Items] | |||
Cash dividends declared per share (in dollars per share) | $ 0.31 |
Revenues - Narrative (Details)
Revenues - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Decrease in income from change in contract estimates | $ (66) | $ (63) |
Decrease in income from change in contract estimates per diluted share | $ (1.13) | $ (1.08) |
Contract with customer, performance obligation satisfied in previous period | $ 1 | |
Contract with customer, liability, revenue recognized | 9 | |
Revenue, remaining performance obligation | 900 | |
Change in Accounting Method Accounted for as Change in Estimate | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Decrease in income from change in contract estimates | $ 5 | $ 5 |
Decrease in income from change in contract estimates per diluted share | $ 0.09 | $ 0.10 |
Revenues - Disaggregated Revenu
Revenues - Disaggregated Revenues (Details) $ in Millions | 3 Months Ended |
May 04, 2018USD ($) | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | $ 1,175 |
Department of Defense | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 746 |
Other federal government agencies | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 413 |
Commercial, state and local | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 16 |
Cost reimbursement | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 533 |
Time and materials (T&M) | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 315 |
Firm-fixed price (FFP) | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 327 |
Prime contractor to federal government | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 1,077 |
Subcontractor to federal government | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | 82 |
Other | |
Disaggregation of Revenue [Line Items] | |
Revenue from contract with customer, excluding assessed tax | $ 16 |
Revenues - Contract Related Ass
Revenues - Contract Related Assets and Liabilities (Details) - USD ($) $ in Millions | May 04, 2018 | Feb. 03, 2018 |
Disaggregation of Revenue [Line Items] | ||
Allowance for doubtful accounts | $ 2 | $ 1 |
Receivables, net | ||
Disaggregation of Revenue [Line Items] | ||
Billed and billable receivables, net | 501 | 510 |
Contract assets | 170 | 169 |
Accounts payable and accrued liabilities | ||
Disaggregation of Revenue [Line Items] | ||
Contract liabilities - current | 7 | 12 |
Contract retentions | Receivables, net | ||
Disaggregation of Revenue [Line Items] | ||
Contract assets | $ 10 | $ 11 |
Revenues - Deferred Costs (Deta
Revenues - Deferred Costs (Details) - USD ($) $ in Millions | May 04, 2018 | Feb. 03, 2018 |
Inventory, prepaid expenses and other current assets | Pre-contract costs | ||
Capitalized Contract Cost [Line Items] | ||
Deferred costs | $ 2 | $ 1 |
Inventory, prepaid expenses and other current assets | Fulfillment costs - current | ||
Capitalized Contract Cost [Line Items] | ||
Deferred costs | 0 | 3 |
Other assets | Fulfillment costs - non-current | ||
Capitalized Contract Cost [Line Items] | ||
Deferred costs | $ 6 | $ 0 |
Revenues - Remaining Performanc
Revenues - Remaining Performance Obligations (Details) | 3 Months Ended |
May 04, 2018 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation (percent) | 75.00% |
Revenue, remaining performance obligation, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation (percent) | 15.00% |
Revenue, remaining performance obligation, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation (percent) | 10.00% |
Revenue, remaining performance obligation, period |
Stock-Based Compensation (Detai
Stock-Based Compensation (Detail) shares in Millions | 3 Months Ended |
May 04, 2018$ / sharesshares | |
Employee Stock Option | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options granted (in shares) | shares | 0.1 |
Stock option weighted-average exercise price (in dollars per share) | $ 85.31 |
Weighted-average grant date fair value of options awarded (in dollars per share) | $ 19.27 |
Contractual term | 7 years |
Vesting period | 3 years |
Restricted Stock Units (RSUs) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Vesting period | 4 years |
Awards granted (in shares) | shares | 0.3 |
Weighted-average grant date fair value (in dollars per share) | $ 85.26 |
Performance Shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Vesting period | 3 years |
Weighted-average grant date fair value (in dollars per share) | $ 85.31 |
Share awards granted (in shares) | shares | 0.1 |
Percentage of target shares | 150.00% |
Income Taxes (Detail)
Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Income Taxes [Line Items] | ||
Effective income tax rate | 10.30% | 5.90% |
Liabilities for uncertainty in income taxes | $ 7 | |
Unrecognized tax benefits | 7 | |
Other long-term liabilities | ||
Income Taxes [Line Items] | ||
Unrecognized tax benefits | 6 | |
Other assets | ||
Income Taxes [Line Items] | ||
Unrecognized tax benefits | $ 1 |
Debt Obligations - Long-term De
Debt Obligations - Long-term Debt (Detail) - USD ($) | May 04, 2018 | Feb. 02, 2018 |
Debt Instrument [Line Items] | ||
Principal amount of long-term debt | $ 1,027,000,000 | $ 1,035,000,000 |
Unamortized debt issuance costs, total long-term debt | (11,000,000) | (11,000,000) |
Total long-term debt | 1,016,000,000 | 1,024,000,000 |
Less current portion | 45,000,000 | 41,000,000 |
Principal amount of long-term debt, net of current portion | 982,000,000 | 994,000,000 |
Unamortized debt issuance costs, total long-term debt, net of current portion | (11,000,000) | (11,000,000) |
Total long-term debt, net of current portion | $ 971,000,000 | 983,000,000 |
Term Loan A Facility due August 2021 | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 3.69% | |
Effective interest rate | 3.82% | |
Principal amount of long-term debt | $ 627,000,000 | 635,000,000 |
Unamortized debt issuance costs, total long-term debt | (2,000,000) | (2,000,000) |
Total long-term debt | $ 625,000,000 | 633,000,000 |
Term Loan B Facility due May 2022 | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 3.81% | |
Effective interest rate | 4.40% | |
Principal amount of long-term debt | $ 400,000,000 | 400,000,000 |
Unamortized debt issuance costs, total long-term debt | (9,000,000) | (9,000,000) |
Total long-term debt | $ 391,000,000 | $ 391,000,000 |
Debt Obligations - Narrative (D
Debt Obligations - Narrative (Detail) | Feb. 07, 2018USD ($) | May 04, 2018USD ($) | May 05, 2017USD ($) | Feb. 02, 2018USD ($) |
Debt Instrument [Line Items] | ||||
Credit facility, maximum borrowing capacity | $ 1,200,000,000 | |||
Principal amount of long-term debt | 1,027,000,000 | $ 1,035,000,000 | ||
Debt instrument, financing fee | $ 2,000,000 | |||
Debt instrument, deferred financing fee | $ 1,000,000 | $ 1,000,000 | $ 0 | |
Second Amended and Restated Credit Agreement | Maximum | Until July 31, 2016 | ||||
Debt Instrument [Line Items] | ||||
Credit Agreement financial covenant, leverage ratio | 4 | |||
Second Amended and Restated Credit Agreement | Maximum | After July 31, 2016 | ||||
Debt Instrument [Line Items] | ||||
Credit Agreement financial covenant, leverage ratio | 3.75 | |||
Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Credit facility, maximum borrowing capacity | $ 200,000,000 | |||
Revolving credit facility, current | 0 | |||
Debt instrument, reduction to interest rate margin | 0.25% | |||
Term Loan A Facility due August 2021 | ||||
Debt Instrument [Line Items] | ||||
Principal amount of long-term debt | 627,000,000 | 635,000,000 | ||
Debt instrument, reduction to interest rate margin | 0.25% | |||
Term Loan B Facility due May 2022 | ||||
Debt Instrument [Line Items] | ||||
Principal amount of long-term debt | $ 400,000,000 | $ 400,000,000 | ||
Debt instrument, reduction to interest rate margin | 0.50% | |||
Interest rate margin under credit agreement | 2.00% | |||
Eurodollar | Term Loan A Facility due August 2021 | Minimum | ||||
Debt Instrument [Line Items] | ||||
Interest rate margin under credit agreement | 1.25% | |||
Eurodollar | Term Loan A Facility due August 2021 | Maximum | ||||
Debt Instrument [Line Items] | ||||
Interest rate margin under credit agreement | 2.00% | |||
Eurodollar | Term Loan B Facility due May 2022 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument floor rate | 0.75% | |||
Base Rate | Term Loan A Facility due August 2021 | Minimum | ||||
Debt Instrument [Line Items] | ||||
Interest rate margin under credit agreement | 0.25% | |||
Base Rate | Term Loan A Facility due August 2021 | Maximum | ||||
Debt Instrument [Line Items] | ||||
Interest rate margin under credit agreement | 1.00% | |||
Base Rate | Term Loan B Facility due May 2022 | ||||
Debt Instrument [Line Items] | ||||
Interest rate margin under credit agreement | 1.00% |
Derivative Instruments Design38
Derivative Instruments Designated as Cash Flow Hedges - Schedule of Derivative Instruments (Detail) - USD ($) | 3 Months Ended | |
May 04, 2018 | Feb. 02, 2018 | |
Derivative [Line Items] | ||
Notional amount | $ 700,000,000 | |
Derivative Assets, at Fair Value, Net | 7,000,000 | $ 5,000,000 |
Term Loan A Facility | Interest Rate Swaps | ||
Derivative [Line Items] | ||
Notional amount | $ 350,000,000 | |
Pay fixed rate | 1.41% | |
Receive variable rate | 1-month LIBOR | |
Settlement and termination | Monthly through September 26, 2018 | |
Derivative Assets, at Fair Value, Net | $ 1,000,000 | 1,000,000 |
Term Loan B Facility | Interest Rate Swaps | ||
Derivative [Line Items] | ||
Notional amount | $ 350,000,000 | |
Pay fixed rate | 1.88% | |
Receive variable rate | 3-month LIBOR(2) | |
Settlement and termination | Quarterly through May 7, 2020 | |
Derivative Assets, at Fair Value, Net | $ 6,000,000 | $ 4,000,000 |
Derivative instrument floor rate | 0.75% |
Derivative Instruments Design39
Derivative Instruments Designated as Cash Flow Hedges - Narrative (Detail) - Interest Rate Swaps - USD ($) | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Derivative [Line Items] | ||
Unrealized gains estimated to be reclassified from accumulated other comprehensive income into earnings in the next twelve months | $ 3,000,000 | |
Cash Flow Hedging | ||
Derivative [Line Items] | ||
Ineffective portion of the unrealized change in fair value, net of tax | $ 0 | $ 0 |
Changes in Accumulated Other 40
Changes in Accumulated Other Comprehensive Income by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Equity [Abstract] | ||
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, beginning balance, pre-tax amount | $ 5 | $ (3) |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, other comprehensive income before reclassifications, pre-tax amount | 2 | 0 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, amounts reclassified from accumulated other comprehensive income, pre-tax amount | 0 | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, net other comprehensive income, pre-tax amount | 2 | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, ending balance, pre-tax amount | 7 | (2) |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, beginning balance, income tax | (1) | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, other comprehensive income before reclassifications, income tax | (1) | 0 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, amounts reclassified from accumulated other comprehensive income, income tax | 0 | 0 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, net other comprehensive income, income tax | (1) | 0 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, ending balance, income tax | (2) | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, beginning balance, net amount | 4 | (2) |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, other comprehensive income before reclassifications, net amount | 1 | 0 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, amounts reclassified from accumulated other comprehensive income, net amount | 0 | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, net other comprehensive income, net amount | 1 | 1 |
Unrealized gains (losses) on fixed interest rate swap cash flow hedges, ending balance, net amount | $ 5 | $ (1) |
Legal Proceedings and Other C41
Legal Proceedings and Other Commitments and Contingencies (Detail) - USD ($) | May 04, 2015 | May 04, 2015 | Sep. 30, 2016 | Aug. 31, 2015 | May 04, 2018 |
Commitments And Contingencies [Line Items] | |||||
Contingent losses, loss sharing percentage in excess of threshold | 30.00% | ||||
Government Investigations And Reviews | |||||
Commitments And Contingencies [Line Items] | |||||
Estimated net amounts to be refunded for potential adjustments | $ 42,000,000 | ||||
Letters of Credit | |||||
Commitments And Contingencies [Line Items] | |||||
Outstanding obligations | 12,000,000 | ||||
Surety Bonds | |||||
Commitments And Contingencies [Line Items] | |||||
Outstanding obligations | $ 17,000,000 | ||||
Former Parent | |||||
Commitments And Contingencies [Line Items] | |||||
Contingent losses, loss sharing percentage in excess of threshold | 70.00% | ||||
Former Parent | Minimum | |||||
Commitments And Contingencies [Line Items] | |||||
Contingent losses, threshold for loss sharing with former parent | $ 50,000,000 | ||||
Scitor Holdings, Inc. | |||||
Commitments And Contingencies [Line Items] | |||||
Purchase consideration paid, net of cash acquired | $ 764,000,000 | ||||
Amount deposited to adjustment and indemnification escrow accounts included in cash consideration paid | $ 43,000,000 | ||||
Amount released from escrow account | $ 13,000,000 | $ 3,000,000 | |||
Distribution from escrow for settlement of a claim recognized as a reduction to selling, general, and administrative costs | 6,000,000 | ||||
Escrow balance | $ 0 |