10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number	Exact Name of Registrant as Specified in its Charter, Address of Principal  Executive Offices and Telephone Number	State or other jurisdiction of incorporation or organization		I.R.S. Employer Identification No.
001-33072	SAIC, Inc.		Delaware		20-3562868
	1710 SAIC Drive, McLean, Virginia 22102
	(703) 676-4300
000-12771	Science Applications International Corporation		Delaware		95-3630868
	1710 SAIC Drive, McLean, Virginia 22102
	(703) 676-4300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

SAIC, Inc.	Yes  x     No  ¨
Science Applications International Corporation	Yes  x     No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

SAIC, Inc.	Yes  x     No  ¨
Science Applications International Corporation	Yes  x     No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

SAIC, Inc.	Large accelerated filer	x	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨
Science Applications International Corporation	Large accelerated filer	¨	Accelerated filer	¨	Non-accelerated filer	x	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

SAIC, Inc.	Yes  ¨     No  x
Science Applications International Corporation	Yes  ¨     No  x

The number of shares issued and outstanding of each issuer’s classes of common stock as of August 17, 2012 was as follows:

SAIC, Inc.	341,831,289 shares of common stock ($.0001 par value per share)
Science Applications International Corporation	5,000 shares of common stock ($.01 par value per share) held by SAIC, Inc.

Explanatory Note

This Quarterly Report on Form 10-Q is a combined report being filed by SAIC, Inc. (“SAIC”) and Science Applications International Corporation (“Science Applications”). SAIC is a holding company and Science Applications is a direct, 100%-owned subsidiary of SAIC. Each of SAIC and Science Applications is filing on its own behalf all of the information contained in this report that relates to such company. Where information or an explanation is provided that is substantially the same for each company, such information or explanation has been combined in this report. Where information or an explanation is not substantially the same for each company, separate information and explanation has been provided. In addition, separate condensed consolidated financial statements for each company, along with combined notes to the condensed consolidated financial statements, are included in this report. Unless indicated otherwise, references in this report to the “Company”, “we”, “us” and “our” refer collectively to SAIC, Science Applications and its consolidated subsidiaries.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SAIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions, except per share amounts)
Revenues	$	2,848		$	2,596		$	5,630		$	5,284
Costs and expenses:
Cost of revenues		2,504			2,258			4,952			4,615
Selling, general and administrative expenses		153			129			279			230
Operating income		191			209			399			439
Non-operating income (expense):
Interest income		2			—			4			1
Interest expense		(24	)		(28	)		(53	)		(56	)
Other income, net		4			1			6			5
Income from continuing operations before income taxes		173			182			356			389
Provision for income taxes		(63	)		(70	)		(129	)		(147	)
Income from continuing operations		110			112			227			242
Discontinued operations (Note 1):
Income from discontinued operations before income taxes		—			115			—			117
Provision for income taxes		—			(49	)		—			(50	)
Income from discontinued operations		—			66			—			67
Net income	$	110		$	178		$	227		$	309
Earnings per share (Note 2):
Basic:
Income from continuing operations	$	.32		$	.32		$	.67		$	.68
Income from discontinued operations		—			.19			—			.19
	$	.32		$	.51		$	.67		$	.87
Diluted:
Income from continuing operations	$	.32		$	.32		$	.67		$	.68
Income from discontinued operations		—			.18			—			.19
	$	.32		$	.50		$	.67		$	.87
Cash dividends paid per share	$	.12		$	—		$	.24		$	—

See accompanying combined notes to condensed consolidated financial statements.

1

SAIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012			2011
	(in millions)
Net income	$	110	$	178		$	227		$	309
Other comprehensive income, net of tax:
Foreign currency translation adjustments		—		6			(1	)		7
Deferred taxes		—		(2	)		1			(3	)
Foreign currency translation adjustments, net of tax		—		4			—			4
Pension liability adjustments		—		—			16			—
Deferred taxes		—		—			(6	)		—
Pension liability adjustments, net of tax		—		—			10			—
Total other comprehensive income, net of tax		—		4			10			4
Comprehensive income	$	110	$	182		$	237		$	313

See accompanying combined notes to condensed consolidated financial statements.

2

SAIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	July 31, 2012			January 31, 2012
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	756		$	1,592
Receivables, net		1,992			2,174
Inventory, prepaid expenses and other current assets		430			439
Total current assets		3,178			4,205
Property, plant and equipment (less accumulated depreciation and amortization of $438 million and $424 million at July 31, 2012 and January 31, 2012, respectively)		324			348
Intangible assets, net		156			176
Goodwill		1,826			1,826
Deferred income taxes		22			37
Other assets		74			75
	$	5,580		$	6,667
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,296		$	1,964
Accrued payroll and employee benefits		473			508
Income taxes payable		9			—
Notes payable and long-term debt, current portion		3			553
Total current liabilities		1,781			3,025
Notes payable and long-term debt, net of current portion		1,297			1,299
Other long-term liabilities		143			162
Commitments and contingencies (Notes 10 and 11)
Stockholders’ equity:
Common stock, $.0001 par value, 2 billion shares authorized, 342 million and 341 million shares issued and outstanding at July 31, 2012 and January 31, 2012, respectively		—			—
Additional paid-in capital		2,064			2,028
Retained earnings		296			164
Accumulated other comprehensive loss		(1	)		(11	)
Total stockholders’ equity		2,359			2,181
	$	5,580		$	6,667

See accompanying combined notes to condensed consolidated financial statements.

3

SAIC, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Shares of common stock			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
	(in millions)
Balance at January 31, 2012		341		$	2,028		$	164		$	(11	)	$	2,181
Net income		—			—			227			—			227
Other comprehensive income, net of tax		—			—			—			10			10
Issuances of stock		2			14			—			—			14
Repurchases of stock		(1	)		(9	)		(11	)		—			(20	)
Quarterly cash dividends of $0.12 per share		—			—			(84	)		—			(84	)
Adjustments for income tax benefits from stock-based compensation		—			(15	)		—			—			(15	)
Stock-based compensation		—			46			—			—			46
Balance at July 31, 2012		342		$	2,064		$	296		$	(1	)	$	2,359

See accompanying combined notes to condensed consolidated financial statements.

4

SAIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended July 31
	2012			2011
	(in millions)
Cash flows from operating activities of continuing operations:
Net income	$	227		$	309
Income from discontinued operations		—			(67	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization		55			55
Stock-based compensation		46			43
Impairment losses		1			—
Net gain on sales and disposals of assets		(6	)		(28	)
Other		1			1
Increase (decrease) in cash and cash equivalents, excluding effects of acquisitions and divestitures, resulting from changes in:
Receivables		182			(48	)
Inventory, prepaid expenses and other current assets		27			33
Deferred income taxes		—			1
Other assets		1			(18	)
Accounts payable and accrued liabilities		(663	)		2
Accrued payroll and employee benefits		(33	)		(55	)
Income taxes payable		3			(17	)
Other long-term liabilities		(2	)		(1	)
Total cash flows provided by (used in) operating activities of continuing operations		(161	)		210
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment		(33	)		(30	)
Acquisition of a business, net of cash acquired		—			(26	)
Net receipts (payments) for purchase price adjustments related to prior year acquisitions		1			(3	)
Proceeds from sale of assets		2			78
Total cash flows provided by (used in) investing activities of continuing operations		(30	)		19
Cash flows from financing activities of continuing operations:
Payments on notes payable and long-term debt		(552	)		(2	)
Sales of stock and exercises of stock options		10			14
Repurchases of stock		(20	)		(417	)
Dividend payments		(83	)		—
Other		—			(2	)
Total cash flows used in financing activities of continuing operations		(645	)		(407	)
Decrease in cash and cash equivalents from continuing operations		(836	)		(178	)
Cash flows from discontinued operations:
Cash used in operating activities of discontinued operations		—			(20	)
Cash provided by investing activities of discontinued operations		—			166
Increase in cash and cash equivalents from discontinued operations		—			146
Effect of foreign currency exchange rate changes on cash and cash equivalents		—			1
Total decrease in cash and cash equivalents		(836	)		(31	)
Cash and cash equivalents at beginning of period		1,592			1,367
Cash and cash equivalents at end of period	$	756		$	1,336

See accompanying combined notes to condensed consolidated financial statements.

5

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Revenues	$	2,848		$	2,596		$	5,630		$	5,284
Costs and expenses:
Cost of revenues		2,504			2,258			4,952			4,615
Selling, general and administrative expenses		153			129			279			230
Operating income		191			209			399			439
Non-operating income (expense):
Interest income		2			—			4			1
Interest expense		(24	)		(30	)		(53	)		(60	)
Other income, net		4			1			6			5
Income from continuing operations before income taxes		173			180			356			385
Provision for income taxes		(63	)		(68	)		(129	)		(144	)
Income from continuing operations		110			112			227			241
Discontinued operations (Note 1):
Income from discontinued operations before income taxes		—			115			—			117
Provision for income taxes		—			(49	)		—			(50	)
Income from discontinued operations		—			66			—			67
Net income	$	110		$	178		$	227		$	308

See accompanying combined notes to condensed consolidated financial statements.

6

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012			2011
	(in millions)
Net income	$	110	$	178		$	227		$	308
Other comprehensive income, net of tax:
Foreign currency translation adjustments		—		6			(1	)		7
Deferred taxes		—		(2	)		1			(3	)
Foreign currency translation adjustments, net of tax		—		4			—			4
Pension liability adjustments		—		—			16			—
Deferred taxes		—		—			(6	)		—
Pension liability adjustments, net of tax		—		—			10			—
Total other comprehensive income, net of tax		—		4			10			4
Comprehensive income	$	110	$	182		$	237		$	312

See accompanying combined notes to condensed consolidated financial statements.

7

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	July 31, 2012			January 31, 2012
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	556		$	1,592
Receivables, net		1,992			2,174
Inventory, prepaid expenses and other current assets		430			439
Total current assets		2,978			4,205
Property, plant and equipment (less accumulated depreciation and amortization of $438 million and $424 million at July 31, 2012 and January 31, 2012, respectively)		324			348
Intangible assets, net		156			176
Goodwill		1,826			1,826
Deferred income taxes		22			37
Other assets		74			75
Note receivable from SAIC, Inc. (Note 7)		139			—
	$	5,519		$	6,667
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,296		$	1,964
Accrued payroll and employee benefits		473			508
Income taxes payable		9			—
Notes payable and long-term debt, current portion		3			553
Total current liabilities		1,781			3,025
Notes payable and long-term debt, net of current portion		1,297			1,299
Note payable to SAIC, Inc. (Note 7)		—			120
Other long-term liabilities		143			162
Commitments and contingencies (Notes 10 and 11)
Stockholder’s equity:
Common stock, $.01 par value, 10,000 shares authorized, 5,000 shares issued and outstanding at July 31, 2012 and January 31, 2012		—			—
Additional paid-in capital		233			233
Retained earnings		2,066			1,839
Accumulated other comprehensive loss		(1	)		(11	)
Total stockholders’ equity		2,298			2,061
	$	5,519		$	6,667

See accompanying combined notes to condensed consolidated financial statements.

8

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

(UNAUDITED)

	Shares of common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss			Total
	(in millions, except for share amounts)
Balance at January 31, 2012		5,000	$	233	$	1,839	$	(11	)	$	2,061
Net income		—		—		227		—			227
Other comprehensive income, net of tax		—		—		—		10			10
Balance at July 31, 2012		5,000	$	233	$	2,066	$	(1	)	$	2,298

See accompanying combined notes to condensed consolidated financial statements.

9

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended July 31
	2012			2011
	(in millions)
Cash flows from operating activities of continuing operations:
Net income	$	227		$	308
Income from discontinued operations		—			(67	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization		55			55
Stock-based compensation		46			43
Impairment losses		1			—
Net gain on sales and disposals of assets		(6	)		(28	)
Other		1			1
Increase (decrease) in cash and cash equivalents, excluding effects of acquisitions and divestitures, resulting from changes in:
Receivables		182			(48	)
Inventory, prepaid expenses and other current assets		27			33
Deferred income taxes		—			1
Other assets		1			(18	)
Accounts payable and accrued liabilities		(663	)		2
Accrued payroll and employee benefits		(33	)		(55	)
Income taxes payable		3			(17	)
Other long-term liabilities		(2	)		(1	)
Total cash flows provided by (used in) operating activities of continuing operations		(161	)		209
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment		(33	)		(30	)
Acquisition of a business		—			(26	)
Net receipts (payments) for purchase price adjustments related to prior year acquisitions		1			(3	)
Proceeds from sale of assets		2			78
Total cash flows provided by (used in) investing activities of continuing operations		(30	)		19
Cash flows from financing activities of continuing operations:
Proceeds from note payable to SAIC, Inc.		32			466
Payments on note payable to SAIC, Inc.		(324	)		(868	)
Payments on notes payable and long-term debt		(552	)		(2	)
Dividend payments		(1	)		—
Other		—			(2	)
Total cash flows used in financing activities of continuing operations		(845	)		(406	)
Decrease in cash and cash equivalents from continuing operations		(1,036	)		(178	)
Cash flows from discontinued operations:
Cash used in operating activities of discontinued operations		—			(20	)
Cash provided by investing activities of discontinued operations		—			166
Increase in cash and cash equivalents from discontinued operations		—			146
Effect of foreign currency exchange rate changes on cash and cash equivalents		—			1
Total decrease in cash and cash equivalents		(1,036	)		(31	)
Cash and cash equivalents at beginning of period		1,592			1,367
Cash and cash equivalents at end of period	$	556		$	1,336

See accompanying combined notes to condensed consolidated financial statements.

10

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies:

Nature of Operations and Basis of Presentation

SAIC, Inc. (“SAIC”) is a holding company whose direct 100%-owned subsidiary is Science Applications International Corporation (“Science Applications”), a provider of scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S. Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security, and other U.S. Government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets.

The condensed consolidated financial statements of SAIC include the accounts of its majority-owned and 100%-owned subsidiaries, including Science Applications. The condensed consolidated financial statements of Science Applications include the accounts of its majority-owned and 100%-owned subsidiaries. SAIC does not have separate operations, assets or liabilities independent of Science Applications, except for a note with Science Applications (the “related party note”), on which interest is recognized. From time to time, SAIC issues stock to Science Applications employees, which is reflected in SAIC’s Condensed Consolidated Statement of Stockholders’ Equity and results in an increase to the related party note (see Note 7). All intercompany transactions and accounts have been eliminated in consolidation.

These Combined Notes to Condensed Consolidated Financial Statements apply to both SAIC and Science Applications. As SAIC consolidates Science Applications for financial statement purposes, disclosures that relate to activities of Science Applications also apply to SAIC. References to the “Company” refer collectively to SAIC, Science Applications, and its consolidated subsidiaries unless otherwise noted.

The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and combined notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012. The preparation of 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. 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.

In the opinion of management, the financial information as of July 31, 2012 and for the three and six months ended July 31, 2012 and 2011 reflects all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. Operating results for the three and six months ended July 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2013, or any future period.

Unless otherwise noted, references to years are for fiscal years ended January 31. For example, the fiscal year ending January 31, 2013 is referred to as “fiscal 2013” in these combined notes to condensed consolidated financial statements.

Long-Term Receivables

The Company’s accounts receivable include unbilled receivables, which consist of costs and fees billable upon contract completion or the occurrence of a specified event, the majority of which is expected to be billed and collected within one year. Unbilled receivables are stated at estimated realizable value. Contract retentions are billed when the Company has negotiated final indirect rates with the U.S. Government and, once billed, are subject to audit and approval by government representatives. Consequently, the timing of collection of retention balances is outside the Company’s control. Based on the Company’s historical experience, the majority of retention balances are expected to be collected beyond one year. The Company has extended deferred payment terms with contractual maturities that may exceed one year to three commercial customers related to certain construction projects. As of July 31, 2012, the Company had outstanding receivables from these customers with deferred payment terms of $61 million, which are expected to be collected in fiscal 2013 and 2014, when the customer’s financing has been arranged. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.

11

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Changes in Estimates on Contracts

Changes in estimates related to certain types of contracts accounted for using the percentage of completion method of accounting are recognized 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 contract performance period for a variety of reasons, including changes in contract scope, changes in contract cost estimates due to unanticipated cost growth or retirements of risk for amounts different than estimated, and changes in estimated incentive or award fees. Aggregate changes in contract estimates decreased operating income by $3 million ($0.01 per diluted share) for the three months ended July 31, 2012 and increased operating income by $1 million ($0.00 per diluted share) for the six months ended July 31, 2012 and increased operating income by $15 million ($0.03 per diluted share) and $27 million ($0.05 per diluted share) for the three and six months ended July 31, 2011, respectively.

Discontinued Operations

In June 2011, in order to better align its business portfolio with its strategy, the Company sold certain components of its business, which were historically included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing information technology services to international oil and gas companies. In fiscal 2012, the Company received net proceeds of $167 million resulting in a gain on sale before income taxes of $111 million related to this sale. Under the terms of the definitive agreement, the Company has retained the assets and obligations of its defined benefit pension plan in the United Kingdom. The Company has classified the operating results of these business components, including pension expense through the date of sale, as discontinued operations for all periods presented. Following the sale, as a result of retaining the pension obligation, the remaining components of ongoing pension expense, primarily interest costs and assumed return on plan assets, are recorded in continuing operations.

The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Income from discontinued operations also includes other activity that is immaterial and not reflected in the table above.

Subsequent to July 31, 2012, the Company committed to a plan to sell a component of the business, which is included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing operational test and evaluation services. This component of the business will be reflected as a discontinued operation beginning in the third fiscal quarter ending October 31, 2012.

Pension

During the fiscal quarter ended April 30, 2012, the Company transferred $46 million of pension plan assets to a successor contractor’s plan on behalf of certain participants in the Company’s defined benefit pension plan who previously transferred their employment to the successor contractor and settled $63 million of related pension plan obligations. As a result of the transfer, the Company recorded an immaterial settlement gain in selling, general and administrative expenses during the first quarter of fiscal 2013.

12

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Supplementary Cash Flow Information

Supplementary cash flow information, including non-cash investing and financing activities, for the periods presented was as follows:

	Six Months Ended July 31
	2012		2011
	(in millions)
Stock exchanged at fair value upon exercises of stock options	$	—	$	14
Vested stock issued as settlement of annual bonus accruals	$	2	$	3
Increase in accrued stock repurchases	$	—	$	13
Stock issued in lieu of cash dividend	$	2	$	—
Fair value of assets acquired in acquisitions	$	—	$	29
Less: cash paid in acquisitions		—		(26	)
Liabilities assumed in acquisitions	$	—	$	3
Cash paid for interest (including discontinued operations)	$	53	$	52
Cash paid for income taxes (including discontinued operations)	$	96	$	121

Accounting Standards Updates Issued But Not Yet Adopted

Accounting standards and updates issued but not effective for the Company until after July 31, 2012, are not expected to have a material effect on the Company’s consolidated financial position or results of operations.

Note 2—Earnings Per Share (EPS):

The Company is required to allocate a portion of its earnings to its unvested stock awards containing nonforfeitable rights to dividends or dividend equivalents (participating securities) in calculating EPS using the two-class method.

In fiscal 2013, the Company began issuing unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are not participating securities requiring application of the two-class method but are dilutive common share equivalents subject to the treasury stock method. Unvested stock awards granted prior to fiscal 2013 were participating securities requiring application of the two-class method. Basic EPS is computed by dividing income less earnings allocable to participating securities by the basic weighted average number of shares outstanding. Diluted EPS is computed similar 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 income used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Basic EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing basic EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing basic EPS	$	108		$	171		$	221		$	298
Diluted EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing diluted EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing diluted EPS	$	108		$	171		$	221		$	298

13

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Basic weighted average number of shares outstanding		333		338		332		342
Dilutive common share equivalents—stock options and other stock awards		—		1		—		1
Diluted weighted average number of shares outstanding		333		339		332		343

Basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
Basic:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.19		—		.19
	$	.32	$	.51	$	.67	$	.87
Diluted:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.18		—		.19
	$	.32	$	.50	$	.67	$	.87

The following stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Antidilutive stock options excluded		20		22		20		22
Performance-based stock awards excluded		1		1		1		1

Note 3—Stock-Based Compensation:

Total Stock-Based Compensation. Total stock-based compensation expense for the periods presented was as follows:

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012		2011
	(in millions)
Stock options	$	4	$	5		$	7	$	10
Vesting stock awards		17		17			37		35
Performance-based stock awards		1		(3	)		2		(2	)
Total stock-based compensation expense	$	22	$	19		$	46	$	43

Stock Options. Stock options granted during the six months ended July 31, 2012 and 2011 have terms of seven years and a vesting period of four years, except for stock options granted to the Company’s outside directors, which have a vesting period of one year.

14

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average grant-date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were as follows:

	Six Months Ended July 31
	2012			2011
Weighted average grant-date fair value	$	1.81		$	4.21
Expected term (in years)		5.0			4.9
Expected volatility		24.4	%		23.4	%
Risk-free interest rate		1.0	%		2.2	%
Dividend yield		3.7	%		0	%

Stock option activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
	(in millions)					(in years)		(in millions)
Outstanding at January 31, 2012		20.8		$	17.90		2.5	$	—
Options granted		4.9			13.21
Options forfeited or expired		(5.5	)		17.48
Outstanding at July 31, 2012		20.2			16.88		3.4		—
Exercisable at July 31, 2012		9.4			18.33		1.7		—

Vesting Stock Awards. In fiscal 2013, the Company began granting restricted stock units that have forfeitable dividend rights and no voting rights until the units vest and become included in shares of common stock outstanding. Prior to January 31, 2012, the Company granted restricted stock awards that have non-forfeitable dividend rights and voting rights and are included in shares outstanding upon issuance (prior to vesting). Vesting stock award activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock awards			Weighted average grant- date fair value
	(in millions)
Unvested stock awards at January 31, 2012		12.0		$	17.50
Awards granted		6.4			13.19
Awards forfeited		(0.6	)		15.95
Awards vested		(4.6	)		17.88
Unvested stock awards at July 31, 2012		13.2			15.35

The fair value of vesting stock awards that vested during the six months ended July 31, 2012 and 2011 was $62 million and $61 million, respectively.

15

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Performance-Based Stock Awards. The Company’s performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded ranging from zero to 150% of the specified target awards. For awards granted in fiscal 2013, one-third of the target number of shares of stock granted under the awards will be allocated to each fiscal year over the three-year performance period and the actual number of shares to be issued with respect to each fiscal year will be based upon the achievement of that fiscal year’s performance criteria. For performance-based stock awards granted prior to fiscal 2013, the number of shares of stock to be issued under the awards is determined based upon the achievement of the performance criteria measured over the entire three-year performance period. Performance-based stock award activity for the six months ended July 31, 2012 was as follows:

	Expected number of shares of stock to be issued under performance- based stock awards		Weighted average grant- date fair value
	(in millions)
Outstanding at January 31, 2012		0.5	$	17.02
Awards granted		0.8		13.18
Outstanding at July 31, 2012		1.3		14.52

Adjustments to the expected number of shares of stock to be issued may occur due to changes in the expected level of achievement of the performance goals over the life of the awards.

Note 4—Acquisitions:

maxIT Healthcare Holdings, Inc. On August 10, 2012, the Company acquired maxIT Healthcare Holdings, Inc., a provider of clinical, business and information technology services primarily to commercial hospital groups and other medical delivery organizations, for a preliminary purchase price of $473 million paid in cash plus a $14 million cash payment for excess working capital delivered at closing, subject to adjustment. The Company will make an additional payment of up to $20 million after receipt of certain tax refunds. This acquisition expands the Company’s commercial consulting practice in electronic health record (EHR) implementation and optimization and strengthens the Company’s capabilities to provide these services to its federal healthcare customers as those customers migrate to commercial off-the-shelf EHR applications. This acquisition was in the Health, Energy and Civil Solutions segment. The tangible net assets of the business acquired were approximately $50 million. Due to the timing of this acquisition, the initial purchase accounting is not complete as of the date of this report.

Note 5—Goodwill and Intangible Assets:

The changes in the carrying value of goodwill for Defense Solutions (DS), Health, Energy and Civil Solutions (HECS) and Intelligence and Cybersecurity Solutions (ICS) were as follows:

	DS		HECS			ICS		Total
	(in millions)
Goodwill at January 31, 2012	$	410	$	785		$	631	$	1,826
Corporate reorganizations		—		(10	)		10		—
Goodwill at July 31, 2012	$	410	$	775		$	641	$	1,826

Corporate reorganizations in fiscal 2013 resulted from transfers of certain operations between the Company’s reportable segments.

16

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Intangible assets consisted of the following:

	July 31, 2012							January 31, 2012
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	119	$	(71	)	$	48	$	120	$	(62	)	$	58
Software and technology		147		(56	)		91		148		(48	)		100
Other		2		(2	)		—		2		(1	)		1
Total finite-lived intangible assets		268		(129	)		139		270		(111	)		159
Indefinite-lived intangible assets:
In-process research and development		13		—			13		13		—			13
Trade names		4		—			4		4		—			4
Total indefinite-lived intangible assets		17		—			17		17		—			17
Total intangible assets	$	285	$	(129	)	$	156	$	287	$	(111	)	$	176

Finite-lived intangible assets with a gross carrying value of $1 million became fully amortized during the six months ended July 31, 2012 and are no longer reflected in the gross carrying value. Amortization expense related to amortizable intangible assets was $9 million and $19 million for the three and six months ended July 31, 2012, respectively, and $11 million and $22 million for the three and six months ended July 31, 2011, respectively.

During the three and six months ended July 31, 2012, the Company recognized an immaterial impairment loss for intangible assets. There were no impairment losses for intangible assets during the three and six months ended July 31, 2011 and no goodwill impairment losses during the three and six months ended July 31, 2012 and 2011.

The estimated annual amortization expense related to finite-lived intangible assets as of July 31, 2012 was as follows:

Fiscal Year Ending January 31
	(in millions)
2013 (remainder of the fiscal year)	$	15
2014		31
2015		27
2016		22
2017		16
2018		12
2019 and thereafter		16
	$	139

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, the outcome and timing of completion of in-process research and development projects (the assets of which will become amortizable upon completion and placement into service, or will be impaired if abandoned), adjustments to preliminary valuations of intangible assets and other factors.

Note 6—Financial Instruments:

In addition to cash held in insured bank deposits, the Company’s cash equivalents were primarily comprised of investments in several large institutional money market funds that invest primarily in bills, notes and bonds issued by the U.S. Treasury, U.S. Government guaranteed repurchase agreements fully collateralized by U.S. Treasury obligations, U.S. Government guaranteed securities and investment-grade corporate securities that have original maturities of three months or less. There are no restrictions on the withdrawal of the Company’s cash and cash equivalents. The Company’s cash equivalents are recorded at historical cost which equals fair value based on quoted market prices (Level 1 input as defined by the accounting standard for fair value measurements).

SAIC has a revolving credit facility, which is fully and unconditionally guaranteed by Science Applications, providing for up to $750 million in unsecured borrowing capacity at interest rates determined, at SAIC’s option, based on either LIBOR plus a margin or a defined base rate through fiscal 2017. During the first quarter of fiscal 2013, the Company extended the maturity date of the revolving credit facility for one additional year, to March 2016, as provided for in the terms of the revolving credit facility. As of July 31, 2012 and January 31, 2012, there were no borrowings outstanding under the revolving credit facility.

17

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The revolving credit facility contains certain customary representations and warranties, as well as certain affirmative and negative covenants. The financial covenants contained in the revolving credit facility require that, for a period of four trailing fiscal quarters, the Company maintains a ratio of consolidated funded debt, including borrowings under this facility, to earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for other items as defined in the credit facility of not more than 3.0 to 1.0 and a ratio of EBITDA adjusted for other items as defined in the credit facility to interest expense of greater than 3.5 to 1.0. The Company was in compliance with these financial covenants as of July 31, 2012. A failure by the Company to meet these financial covenants in the future would reduce and could eliminate the Company’s borrowing capacity under the revolving credit facility.

Other covenants restrict certain of the Company’s activities, including among other things, its ability to create liens, dispose of certain assets and merge or consolidate with other entities. The revolving credit facility also contains certain customary events of default, including, among others, defaults based on certain bankruptcy and insolvency events, nonpayment, cross-defaults to other debt, breach of specified covenants, Employee Retirement Income Security Act (ERISA) events, material monetary judgments, change of control events and the material inaccuracy of the Company’s representations and warranties.

The Company’s notes payable and long-term debt consisted of the following:

	Stated interest rate			Effective interest rate			July 31, 2012		January 31, 2012
	(in millions)
SAIC senior unsecured notes:
$450 million notes issued in fiscal 2011, which mature in December 2020		4.45	%		4.53	%	$	449	$	449
$300 million notes issued in fiscal 2011, which mature in December 2040		5.95	%		6.03	%		300		300
Science Applications senior unsecured notes:
$550 million notes issued in fiscal 2003, which matured in July 2012		6.25	%		6.50	%		—		550
$250 million notes issued in fiscal 2003, which mature in July 2032		7.13	%		7.43	%		248		248
$300 million notes issued in fiscal 2004, which mature in July 2033		5.50	%		5.78	%		296		296
Capital leases and other notes payable due on various dates through fiscal 2018		0-2.5	%		Various			7		9
Total notes payable and long-term debt								1,300		1,852
Less current portion								3		553
Total notes payable and long-term debt, net of current portion							$	1,297	$	1,299
Fair value of notes payable and long-term debt							$	1,475	$	2,011

The Company paid $550 million to settle the 6.25% notes at maturity on July 2, 2012.

The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements (Level 2 and 3 inputs as defined by the accounting standard for fair value measurements).

The senior unsecured notes contain customary restrictive covenants, including, among other things, restrictions on the Company’s ability to create liens and enter into sale and leaseback transactions. The Company was in compliance with all covenants as of July 31, 2012.

Note 7—Related Party Transactions:

Science Applications has fully and unconditionally guaranteed the obligations of SAIC under its $450 million 4.45% notes and $300 million 5.95% notes. These notes have been reflected as debt of Science Applications in these condensed consolidated financial statements. Science Applications has fully and unconditionally guaranteed any borrowings under SAIC’s amended and restated revolving credit facility maturing in fiscal 2017. SAIC has fully and unconditionally guaranteed the obligations of Science Applications under its $300 million 5.5% notes and $250 million 7.13% notes.

SAIC and Science Applications have a related party note in connection with a loan of cash between the entities, issuances of stock by SAIC to employees of Science Applications and its subsidiaries and Science Applications’ payment of certain obligations on behalf of SAIC. The related party note bears interest based on LIBOR plus a market-based premium. Portions of the related party note may be repaid at any time prior to its maturity date in November 2012. This maturity date will be automatically extended for successive one-year periods unless either SAIC or Science Applications provides prior notice to the other party.

18

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 8—Accumulated Other Comprehensive Loss:

The components of accumulated other comprehensive loss were as follows:

	July 31, 2012			January 31, 2012
	(in millions)
Foreign currency translation adjustments, net of taxes of $(1) million and $(2) million as of July 31, 2012 and January 31, 2012, respectively	$	2		$	2
Unrecognized net loss on settled derivative instruments associated with outstanding debt, net of taxes of $3 million as of July 31, 2012 and January 31, 2012		(5	)		(5	)
Unrecognized net loss on defined benefit plan, net of taxes of ($1) million and $5 million, as of July 31, 2012 and January 31, 2012, respectively		2			(8	)
Total accumulated other comprehensive loss, net of taxes of $1 million and $6 million as of July 31, 2012 and January 31, 2012, respectively	$	(1	)	$	(11	)

As of July 31, 2012, there is less than $1 million of the unrealized net loss on settled derivative instruments (pre-tax) that will be amortized and recognized as interest expense during the next 12 months.

Note 9—Business Segment Information:

The Company defines its reportable segments based on the way the chief operating decision maker (CODM), currently its chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance.

The segment information for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Revenues:
Defense Solutions	$	1,240		$	1,085		$	2,414		$	2,222
Health, Energy and Civil Solutions		692			656			1,370			1,313
Intelligence and Cybersecurity Solutions		919			854			1,849			1,750
Corporate and Other		—			1			—			1
Intersegment elimination		(3	)		—			(3	)		(2	)
Total revenues	$	2,848		$	2,596		$	5,630		$	5,284
Operating income (loss):
Defense Solutions	$	92		$	88		$	193		$	178
Health, Energy and Civil Solutions		53			60			100			114
Intelligence and Cybersecurity Solutions		69			76			135			162
Corporate and Other		(23	)		(15	)		(29	)		(15	)
Total operating income	$	191		$	209		$	399		$	439

Prior to February 1, 2012, the Intelligence and Cybersecurity Solutions reportable segment represented the aggregation of the Cyber and Information Solutions business unit and the Intelligence, Surveillance and Reconnaissance group. Effective February 1, 2012, the Cyber and Information Solutions business unit, which previously reported directly to the CODM, commenced reporting to the Intelligence, Surveillance and Reconnaissance group. After this change the reportable segment name has remained Intelligence and Cybersecurity Solutions. Also effective February 1, 2012, certain operations were transferred between the Company’s reportable segments. Prior year amounts have been adjusted for consistency with the current year’s presentation.

Note 10—Legal Proceedings:

Timekeeping Contract with City of New York

In March 2012, the Company reached a settlement with the U.S. Attorney’s Office for the Southern District of New York and the City of New York (City) relating to investigations being conducted by the U.S. Attorney’s Office and the City with respect to the Company’s contract to develop and implement an automated time and attendance and workforce management

19

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

system (CityTime) for certain agencies of the City. As part of this settlement, the Company entered into a deferred prosecution agreement with the U.S. Attorney’s Office, under which the Company paid approximately $500 million and the U.S. Attorney’s Office deferred prosecution of a single criminal count against the Company, which alleged that the Company, through the conduct of certain managerial employees and others, caused the City to significantly overpay for the CityTime system. If the Company complies with the terms of the deferred prosecution agreement, the U.S Attorney will dismiss the criminal count at the end of a three-year period. In August 2012, the Company entered into an administrative agreement with the U.S. Army, on behalf of all agencies of the U.S. Government that confirms the Company’s continuing eligibility to enter into and perform contracts with all agencies of the U.S. Government following the CityTime settlement. The Army has determined that the U.S. Government will have adequate assurances under the terms of the administrative agreement that initiation of suspension or debarment is not necessary to protect the U.S. Government’s interests following the CityTime settlement. Under the terms of the administrative agreement, the Company has agreed, among other things, to maintain a contractor responsibility program having the specific elements described in the administrative agreement, including retaining a monitor and providing certain reports to the U.S. Army. The administrative agreement will continue in effect for five years, provided that the Company may request earlier termination after three years.

Data Privacy Litigation

The Company is a defendant in the following seven putative class action lawsuits filed in October 2011 through March 2012: (1) Richardson, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (2) Arrellano, et al. v. SAIC, Inc. in U.S. District Court for the Western District of Texas; (3) Biggerman, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (4) Moskowitz, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (5) Palmer, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al., in U.S. District Court for the District of Columbia; (6) Losack, et al. v. SAIC, Inc. in U.S. District Court for the Southern District of California; and (7) Deatrick v. Science Applications International Corporation in U.S. District Court for the Northern District of California. The lawsuits were filed following the theft of computer backup tapes from a vehicle of a Company employee. The employee was transporting the backup tapes between federal facilities under an IT services contract the Company was performing in support of TRICARE, the health care program for members of the military, retirees and their families. The tapes contained personally identifiable and protected health information of approximately five million military clinic and hospital patients. There is no evidence that any of the data on the backup tapes has actually been accessed or viewed by an unauthorized person. In order for an unauthorized person to access or view the data on the backup tapes, it would require knowledge of and access to specific hardware and software and knowledge of the system and data structure. The Company has notified potentially impacted persons by letter and is offering one year of credit monitoring services to those who request these services and in certain circumstances, one year of identity restoration services.

The complaints in the seven lawsuits vary in their allegations and causes of action against the Company and include allegations of negligence, breach of contract, breach of implied-in-fact contract, invasion of privacy by public disclosure of private facts and statutory violations of the Texas Deceptive Trade Practices Act, the California Confidentiality of Medical Information Act, California data breach notification requirements, the California Unfair Competition Law, the Fair Credit Reporting Act and the Privacy Act of 1974. The complaints seek monetary relief, including unspecified actual damages, punitive damages, statutory damages of $1,000 for each class member and attorney’s fees, as well as injunctive and declaratory relief. The Company filed a motion with the Judicial Panel for Multidistrict Litigation (JPML) to transfer the seven pending cases, plus a related case, to a single court for consolidated or coordinated pretrial proceedings. In June 2012, the JPML granted that motion and transferred the related actions to the U.S. District Court for the District of Columbia, where they have since been consolidated for pretrial purposes.

The Company intends to vigorously defend itself against the claims made in the class action lawsuits. The Company has insurance coverage against judgments or settlements relating to the claims being brought in these lawsuits, with a $10 million deductible. The insurance coverage also covers the Company’s defense costs, subject to the same deductible. As of July 31, 2012, the Company has recorded a loss provision of $10 million related to these lawsuits, representing the low end of the Company’s estimated gross loss. The Company believes that, if any loss is experienced by the Company in excess of its estimate, such a loss would not exceed the Company’s insurance coverage. As these lawsuits progress, many factors will affect the amount of the ultimate loss resulting from these claims being brought against the Company, including the outcome of any motions to dismiss, the results of any discovery, the outcome of any pretrial motions and the courts’ rulings on certain legal issues.

The Company has been informed that the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) is investigating matters related to the incident. OCR is the division of HHS charged with enforcement of the Health

20

SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Insurance Portability and Accountability Act of 1996, as amended (HIPAA) and the privacy, security and data breach rules which implement HIPAA. OCR may, among other things, require a corrective action plan and impose civil monetary penalties against the data owner (Department of Defense) and, in certain situations, against the data owners’ contractors, such as the Company. The Company is cooperating with TRICARE in responding to the OCR investigation.

Derivative and Securities Litigation

Between February and April 2012, six stockholder derivative lawsuits were filed, each purportedly on the Company’s behalf. One case has been withdrawn; one case, captioned Martin v. Havenstein et al., is pending in New York Supreme Court, New York County; and four cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Derivative Litigation. Each complaint asserts claims against the Company’s directors and against varying groups of the Company’s current and former officers, including two former chief executive officers, the chief financial officer, the former manager of the CityTime program, and the former chief systems engineer of the CityTime program. The complaints claim that the defendants breached their fiduciary duties to the Company with respect to the CityTime contract for various reasons, including failure to supervise the adequacy of the Company’s internal controls, allowing the Company to issue misleading financial statements, and failure to exercise their oversight responsibilities to ensure that the Company complied with applicable laws, rules and regulations. Some of the complaints further claim that the defendants are liable to the Company under theories of gross mismanagement, contribution and indemnification, abuse of control, waste of corporate assets, and/or violation of Section 14(a) of the Securities Exchange Act. The Company currently intends to file a motion to dismiss each of these complaints because the respective plaintiffs did not serve a pre-suit demand before filing the derivative complaints. The Company has also received two stockholder demand letters related to CityTime (one of which is also related to TRICARE), which an independent committee of the Company’s board of directors is currently reviewing.

Between February and April 2012, alleged stockholders filed three putative securities class actions. One case was withdrawn and two cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Securities Litigation. The consolidated complaint names as defendants the Company, its chief financial officer, two former chief executive officers, a former group president, and the former program manager on the CityTime program, and was filed purportedly on behalf of all purchasers of SAIC’s common stock from April 11, 2007 through September 1, 2011. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegations that the Company and individual defendants made misleading statements or omissions about the Company’s revenues, operating income, and internal controls in connection with disclosures relating to the CityTime project. The plaintiffs seek to recover from the Company and the individual defendants an unspecified amount of damages class members allegedly incurred by buying SAIC’s stock at an inflated price. The Company intends to vigorously defend against these claims.

The Company currently believes that a loss relating to the above-described stockholder matters is reasonably possible, but the Company cannot reasonably estimate the range of loss in light of the fact that these matters are in their early stages.

Greek Government Contract

Background and Arbitration. In May 2003, the Company entered into a firm-fixed-price contract with the Hellenic Republic of Greece (the Customer) to provide a Command, Control, Communications, Coordination and Integration System (the System) to support the 2004 Athens Summer Olympic Games (the Olympics) and to serve as the security system for the Customer’s public order departments following completion of the Olympics.

In November 2008, the Customer accepted the System in writing pursuant to the requirements of the contract. At the time, the Customer determined that the System substantially complied with the terms of the contract and accepted the System with certain alleged minor omissions and deviations. Upon System acceptance, the Company invoiced the Customer for approximately $17 million, representing the undisputed portion of the contract balance owed to the Company. The Customer has not paid this final invoice.

In June 2009, the Company initiated arbitration before the International Chamber of Commerce against the Customer seeking damages for breaches of contract by the Customer. The Company seeks (i) aggregate damages in excess of $85 million for payment of amounts owed and other claims and damages, (ii) recovery of advance payment and performance bond amounts totaling $23 million and (iii) costs and expenses associated with the arbitration. The Customer filed an answer to the complaint denying liability on various grounds and a supplementary answer asserting set-off claims against amounts sought by the Company. The arbitration hearing was held in May 2012, and the Company filed a final brief in July 2012. Due to the complex nature of the legal and factual issues involved, the outcome of the arbitration is uncertain.

Financial Status and Contingencies. As a result of the significant uncertainties on this contract, the Company converted to the completed-contract method of accounting and ceased recognizing revenues for the System development portion of this

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COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

contract in fiscal 2006. No profits or losses were recorded on the Greek contract during the six months ended July 31, 2012 and 2011. As of July 31, 2012, the Company has recorded $123 million of losses under the Greek contract, reflecting the Company’s estimated total cost to complete the System, assuming the Greek contract value was limited to the cash received to date. Based on the complex nature of this contractual situation and the difficulties encountered to date, significant uncertainties exist and the Company is unable to reliably estimate the ultimate outcome. The Company may reverse a portion of the losses from the Greek contract if it receives future payments as required under the modified Greek contract.

As of July 31, 2012, the Company has $14 million of receivables relating to value added tax (VAT) that the Company has paid and believes it is entitled to recover either as a refund from the taxing authorities or as a payment under the Greek contract. The Company has invoiced the Customer for $31 million for VAT and the Customer has failed to make payment. If the Customer fails to pay the outstanding VAT amounts or the Company is unable to recover the amount as a refund from the taxing authorities, the Company’s total losses on the Greek contract could increase.

The Company has met certain advance payment and performance bonding requirements through the issuance of euro-denominated standby letters of credit. As of July 31, 2012, there were $4 million in standby letters of credit outstanding relating to the support and maintenance of the System. The Company is seeking recovery of amounts drawn by the Customer in fiscal 2011 on the standby letters of credit in the ongoing arbitration. The principal subcontractor has provided to the Company euro-denominated standby letters of credit in the amount of $21 million as of July 31, 2012, of which $18 million relates to the delivery of the System. The Company may draw on the subcontractor’s standby letters of credit under certain circumstances by providing a statement to the responsible bank that the subcontractor has not fulfilled its obligations under the subcontract.

Nuclear Regulatory Commission

The U.S. Department of Justice filed a lawsuit against the Company in September 2004 in U.S. District Court for the District of Columbia alleging civil False Claims Act violations and breach of contract by the Company on two contracts that the Company had with the Nuclear Regulatory Commission (NRC). The complaint alleges that the Company’s performance of several subcontracts on separate U.S. Department of Energy (DOE) programs, the participation of a Company employee in an industry trade association, and certain other alleged relationships created organizational conflicts of interest under the two NRC contracts. The Company disputes that the work performed on the DOE programs and the alleged relationships raised by the government created organizational conflicts of interest. In July 2008, the jury found in favor of the government on the breach of contract and two False Claims Act counts. The jury awarded a nominal amount of $78 in damages for breach of contract and $2 million in damages for the False Claims Act claims. The judge entered the judgment in October 2008, trebling the False Claims Act damages and awarding a total of $585,000 in civil penalties. The Company appealed to the U.S. Court of Appeals for the District of Columbia Circuit. In December 2010, the Court of Appeals affirmed the District Court’s judgment as to both liability and damages of $78 on the breach of contract count and rescinded the judgment on the False Claims Act counts, including the aggregate damages and penalties. The Court of Appeals sent the False Claims Act counts back to the District Court for further proceedings. The Company has recorded a liability for an immaterial amount related to this matter as of July 31, 2012 based on its assessment of the likely outcome of this matter.

Other

The Company is also involved in various claims and lawsuits arising in the normal conduct of its business, none of which, in the opinion of the Company’s management, based upon current information, will likely have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Note 11—Other Commitments and Contingencies:

DS&S Joint Venture

In March 2006, the Company sold its interest in DS&S, a joint venture in which the Company owned a 50% interest. As part of the sale, the Company agreed to indemnify the purchaser or DS&S for certain legal costs and expenses, including those related to a government investigation involving DS&S and any litigation resulting from that investigation. The Company had deferred the potential gain on this sale pending resolution of the government investigation involving DS&S. During the fiscal quarter ended July 31, 2012, the Company recorded a gain of $4 million in other income, net and agreed to pay DS&S $4 million in satisfaction of its indemnification obligation relating to the investigation matter.

Variable Interest Entity (VIE)

In fiscal 2012, the Company entered into a fixed price agreement to provide engineering, procurement, and construction services to a special purpose limited liability company for a specific renewable energy project. The Company analyzed this

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COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

arrangement and determined the entity is a VIE. However, this VIE was not consolidated by the Company because the Company is not the primary beneficiary. The project is partially financed by the Company’s provision of extended payment terms in the amount of $100 million for certain of its services performed on the project. The arrangement also contemplates monetary penalties and project guarantees if the Company does not meet certain completion deadlines. The Company expects to bill a total of $216 million to complete the project. At July 31, 2012, the Company had a receivable of $16 million due from this VIE.

Government Investigations and Reviews

The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect 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. Adverse findings in these investigations or reviews can lead to criminal, civil or administrative proceedings and the Company could face penalties, fines, repayments or compensatory damages and suspension or debarment from doing business with governmental agencies. Adverse findings could also have a material adverse effect on the Company’s business, consolidated financial position, results of operations and cash flows due to its reliance on government contracts.

U.S. Government agencies, including the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA) 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 accounting and management internal control systems, including: control environment and overall accounting system, estimating system, purchasing system, property system and earned value management system. Both contractors and the U.S. Government agencies conducting these audits and reviews have come under increased scrutiny. As a result, the current audits and reviews have become more rigorous and the standards to which the Company is held are being more strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome. During the course of its current audits, the DCAA is closely examining and questioning several of the Company’s long established and disclosed practices that it had previously audited and accepted, increasing the uncertainty as to the ultimate conclusion that will be reached.

The Company changed its indirect rate structure used in its indirect cost system and its direct labor bid structure used for its estimating system for fiscal 2011 and future years. The DCAA is performing reviews of these changes and the Company’s compliance with certain other U.S. Government Cost Accounting Standards. A finding of significant control deficiencies in the Company’s system audits or other reviews can result in decremented billing rates to its U.S. Government customers until the control deficiencies are corrected and their remediation is accepted by the DCMA.

The Company’s indirect cost audits by the DCAA have not been completed for fiscal 2006 and subsequent fiscal years. Although the Company has recorded contract revenues subsequent to fiscal 2005 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of July 31, 2012, the Company has recorded a liability of $35 million for its current best estimate of net amounts to be refunded to customers for potential adjustments from such audits or reviews of contract costs.

Tax Audits and Reviews

The Company files income tax returns in the United States and various state and foreign jurisdictions and is subject to routine compliance reviews by the Internal Revenue Service (IRS) and other taxing authorities. The Company has effectively settled with the IRS for fiscal years prior to and including fiscal 2008. The Company also settled fiscal 2011 as a result of the Company’s participation in the IRS Compliance Assurance Process beginning in fiscal 2011, in which the Company and the IRS endeavor to agree on the treatment of all tax positions prior to the tax return being filed, thereby greatly reducing the period of time between tax return submission and settlement with the IRS. Future and ongoing reviews could have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to $103 million of the Company’s unrecognized tax benefits including a negligible amount of previously accrued interest, depending on the timing of ongoing examinations, any litigation and expiration of statute of limitations, either because the Company’s tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. As of July 31, 2012, the Company had liabilities for uncertain tax positions of $132 million, $29 million of which were classified as other long-term liabilities in the consolidated balance sheet.

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COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities 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 the tax authorities.

The Company is subject to periodic audits by government agencies for taxes other than income taxes. The Company does not believe that the outcome of any other such tax matters would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Letters of Credit and Surety Bonds

The Company has outstanding letters of credit of $102 million as of July 31, 2012, principally related to guarantees on contracts. The Company also has outstanding surety bonds in the amount of $377 million, principally related to performance and payment bonds on the Company’s contracts.

Other

The Army Brigade Combat Team Modernization Engineering, Manufacturing and Development program was terminated for convenience by the DoD effective September 30, 2011. From October 2009 through termination, the Company and its prime contractor performed on this program under an undefinitized change order with a provisional billing rate that allowed the Company to receive a lesser amount of the projected fee than the estimated fee due until the contract negotiations are completed. The Company has recognized revenues of approximately $480 million, including estimated fee, from October 2009 through July 31, 2012 under the undefinitized change order. The actual fee payable to the Company on this program is dependent on the outcome of the change order negotiations and may differ from amounts previously recognized.

Note 12—Subsequent Event:

On August 30, 2012, the Company announced that its Board of Directors has authorized management to pursue a plan to separate into two independent, publicly traded companies. The proposed separation is intended to take the form of a tax-free spin-off to the Company’s shareholders of 100% of the shares of a newly formed company focused on government technology and enterprise information technology services. The spin-off is expected to occur in the latter half of calendar year 2013, subject to final approval of the Board of Directors and certain customary conditions, including a ruling from the IRS as to the tax-free nature of the transaction. Although the Company expects that the separation of its businesses will be consummated, there can be no assurance that a separation will ultimately occur.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following combined discussion and analysis of SAIC’s and Science Applications’ financial condition and results of operations and quantitative and qualitative disclosures about market risk should be read in conjunction with our condensed consolidated financial statements and related combined notes. As SAIC is a holding company and consolidates Science Applications for financial statement purposes, disclosures that relate to activities of Science Applications also apply to SAIC, unless otherwise noted. Science Applications’ revenues and operating expenses comprise 100% of SAIC’s revenues and operating expenses. In addition, Science Applications comprises approximately the entire balance of SAIC’s assets, liabilities and operating cash flows. Therefore, the following discussion is applicable to both SAIC and Science Applications, unless otherwise noted.

The following discussion contains forward-looking statements, including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations, backlog, our industry, government budgets, spending and the impact of competition, our intent to create two independent public companies and our expectation that it will be a tax-free spin-off. Such statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. Some of these factors include, but are not limited to, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 31, 2012, as updated periodically through our subsequent quarterly reports on Form 10-Q. Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update these factors or to publicly announce the results of any changes to our forward-looking statements due to future events or developments.

Except with respect to “Results of Operations—Discontinued Operations” and “—Net Income,” and “—Diluted EPS,” all amounts in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are presented for our continuing operations.

We use the terms “Company”, “we”, “us” and “our” to refer to SAIC, Science Applications and its consolidated subsidiaries. Unless otherwise noted, references to years are for fiscal years ended January 31. For example, we refer to the fiscal year ending January 31, 2013 as “fiscal 2013.”

Overview

We are a provider of scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S. Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security and other U.S. Government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets.

Our business is focused on using deep domain knowledge to solve problems of vital importance to the nation and the world in the areas of national security, energy and the environment, critical infrastructure and health. We are focusing our investments in our strategic growth areas including: intelligence, surveillance and reconnaissance; cybersecurity; logistics, readiness and sustainment; energy and environment; and health information technology. Our significant long-term management initiatives include:

• achieving internal, or non-acquisition related, annual revenue growth through internal collaboration and better leveraging of key differentiators across our company and the deployment of resources and investments into higher growth markets;

• improving our operating income margin through strong contract execution and growth in higher-margin business areas and continued improvement in our information technology (IT) systems infrastructure and related business processes for greater effectiveness and efficiency across all business functions;

• disciplined deployment of our cash resources and use of our capital structure to enhance growth and stockholder value through internal growth initiatives, strategic acquisitions, stock repurchases, dividends and other uses as conditions warrant; and

• investing in our people, including enhanced training and career development programs, with a focus on retention and recruiting.

Key financial highlights and events, including progress against management’s initiatives, during the three months ended July 31, 2012 include:

• Revenues for the three months ended July 31, 2012 increased 10% over the same period in the prior year, reflecting internal revenue growth (as defined in “Non-GAAP Financial Measures”) of 8%. Internal revenue growth was driven primarily by increased activity in our Defense Solutions and Intelligence and Cybersecurity Solutions segments partially offset by a decline in our Health, Energy and Civil Solutions segment.

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• Operating income decreased $18 million to $191 million (6.7% as a percentage of revenues) for the three months ended July 31, 2012 from $209 million (8.1% as a percentage of revenues) for the same period in the prior year. The decrease in operating margin is primarily due to an $18 million net unfavorable change in contract estimates and increased indirect spending ($24 million), including charges associated with the corporate relocation and the strategic review leading to the announced spin-off discussed below ($11 million) and bid and proposal costs partially offset by fees on increased revenues.

• Income from continuing operations for the three months ended July 31, 2012 decreased $2 million, or 2%, as compared to the same period in the prior year due to decreased operating income of $18 million offset by a decrease in net non-operating expenses and a lower effective tax rate.

• Diluted earnings per share (EPS) from continuing operations for the three months ended July 31, 2012 remained consistent as compared to the same period in the prior year.

• Cash and cash equivalents decreased $411 million during the three months ended July 31, 2012 primarily due to repayment of $550 million of notes upon maturity and dividend payments of $42 million partially offset by cash generated from operations of $200 million.

• Net bookings (as defined in “Key Financial Metrics—Bookings and Backlog”) were approximately $2.2 billion for the three months ended July 31, 2012. Total backlog was $16.7 billion at July 31, 2012 as compared to $17.4 billion at April 30, 2012.

Announced Spin-Off

On August 30, 2012, we announced that our Board of Directors has authorized management to pursue a plan to separate into two independent, publicly traded companies: (i) a company focused on government technology and enterprise information technology services; and (ii) a company focused on delivering science and technology solutions primarily in the areas of national security, engineering and health.

The proposed separation is intended to take the form of a tax-free spin-off of the government technology and enterprise information technology services business. The spin-off is expected to occur in the latter half of calendar year 2013, subject to final approval of the Board of Directors and certain other conditions. The spin-off is not expected to require a vote of the stockholders of SAIC.

Management is continuing to develop detailed plans on capital structure, management, governance and other significant matters. In addition, the completion of any separation transaction will be subject to certain customary conditions, including implementation of intercompany agreements, filing of required documents with the U.S. Securities and Exchange Commission and receipt of an opinion from tax counsel and a ruling from the Internal Revenue Service as to the tax-free nature of such a transaction. Although we expect that the separation of our businesses, if consummated, would be completed in the latter half of calendar year 2013, there can be no assurance that a separation will ultimately occur. See “Part II, Item 1A—Risk Factors” for certain risk factors relating to the proposed spin-off transaction.

Business Environment and Trends

In fiscal 2012, we generated over 90% of our total revenues from contracts with the U.S. Government, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. Government. Revenues under contracts with the DoD, including subcontracts under which the DoD is the ultimate purchaser, represented approximately 75% of our total revenues in fiscal 2012. Accordingly, our business performance is subject to changes in the overall level of U.S. Government spending, especially national security, including defense, homeland security, and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. Government.

While we believe that national security, including defense, homeland security, and intelligence spending will continue to be a priority, the U.S. Government deficit and budget situation has created increasing pressure to examine and reduce spending in these areas. In August 2011, President Obama signed into law the Budget Control Act of 2011, which increased the U.S. Government’s debt ceiling and enacted 10-year discretionary spending caps expected to generate over $1 trillion in savings for the U.S. Government. According to the Office of Management and Budget, these savings include $487 billion in DoD baseline spending reductions over the next 10 years. The Budget Control Act of 2011 also established a joint bipartisan committee of Congress responsible to recommend at least $1.2 trillion in additional savings by November 2011. The joint committee did not meet the deadline for proposing recommended legislation. Unless the Budget Control Act of 2011 is amended, additional automatic spending cuts (referred to as sequestration) totaling $1.2 trillion over nine years will be triggered. Assuming approximately $200 billion in reduced debt-service costs, these discretionary spending cuts are expected to be evenly split between defense and non-defense areas, reducing spending for each area by approximately $500 billion over a nine-year period, beginning in the government fiscal year ending September 30, 2013 (GFY13). In early August 2012, the President signed the Sequestration Transparency Act of 2012, under which, within 30 calendar days of its enactment, the President is to provide to Congress a detailed report on how sequestration would be implemented, including

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information about specific reductions and any exemptions. We continue to evaluate the potential impact of possible sequestration on our business, and while the ultimate effect on our business is uncertain, the amount and nature of these federal budget spending reductions could adversely impact our future revenues and growth prospects in those markets.

In January 2012, the DoD issued strategic guidance on the U.S. defense priorities for the next ten years, which identified the primary missions of the U.S. armed forces and the capabilities expected to be critical to future success, including intelligence, surveillance and reconnaissance and cybersecurity. Although the impact of implementation of the strategic guidance on the DoD budget and our business is uncertain, we believe that we are well positioned to support many of these critical capabilities.

A GFY13 budget has not been approved by Congress. As a result, Congressional leaders have announced a six-month continuing resolution, which is expected to be enacted to fund the U.S. Government through March 31, 2013. While the continuing resolution would avert a government shutdown and remove GFY13 funding as a major issue to be solved during the upcoming lame duck Congress, it would also contain standard restrictions, including no new program starts and no program increases beyond current service levels that may limit our ability to grow our business.

Competition for contracts with the U.S. Government continues to be intense. The U.S. Government has increasingly used contracting processes that give it the ability to select multiple winners or pre-qualify certain contractors to provide various services or products at established general terms and conditions. Such processes include purchasing services and solutions using indefinite-delivery/indefinite-quantity (IDIQ) and U.S. General Services Administration (GSA) contract vehicles. This trend has served to increase competition for U.S. Government contracts. For more information on these risks and uncertainties, see “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended January 31, 2012, as updated through subsequent quarterly reports on Form 10-Q.

Reportable Segments

Our business is aligned into four reportable segments: Defense Solutions; Health, Energy and Civil Solutions; Intelligence and Cybersecurity Solutions; and Corporate and Other. For additional information regarding our reportable segments, see Note 9 of the combined notes to the condensed consolidated financial statements for the three and six months ended July 31, 2012 contained in this Quarterly Report on Form 10-Q, and “Business” in Part I and Note 15 of the combined notes to consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2012.

Key Financial Metrics

Bookings and Backlog. We received net bookings worth an estimated $2.2 billion and $4.3 billion during the three and six months ended July 31, 2012, respectively. Net bookings represent the estimated amount of revenues to be earned in the future from funded and unfunded contract awards that were received during the period, net of any adjustments to previously awarded backlog amounts. We calculate net bookings as the period’s ending backlog plus the period’s revenues less the prior period’s ending backlog and less the backlog obtained in acquisitions during the period.

Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts as work is performed and excludes contract awards which have been protested by competitors. We segregate our backlog into two categories as follows:

• Funded Backlog. Funded backlog for contracts with government agencies primarily represents contracts for which funding is appropriated less revenues previously recognized on these contracts, and does not include the unfunded portion of contracts where funding is incrementally appropriated or authorized on a quarterly or annual basis by the U.S. Government and other customers, even though the contract may call for performance over a number of years. Funded backlog for contracts with non-government agencies represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on these contracts.

• Negotiated Unfunded Backlog. Negotiated unfunded backlog represents estimated amounts of revenues to be earned in the future from (1) negotiated contracts for which funding has not been appropriated or otherwise authorized and (2) unexercised priced contract options. Negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under IDIQ, GSA Schedule, or other master agreement contract vehicles.

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

	July 31, 2012		April 30, 2012		January 31, 2012
	(in millions)
Defense Solutions:
Funded backlog	$	2,013	$	2,026	$	2,143
Negotiated unfunded backlog		4,309		4,605		4,961
Total Defense Solutions backlog	$	6,322	$	6,631	$	7,104
Health, Energy and Civil Solutions:
Funded backlog	$	1,888	$	1,940	$	2,077
Negotiated unfunded backlog		2,978		3,154		3,336
Total Health, Energy and Civil Solutions backlog	$	4,866	$	5,094	$	5,413
Intelligence and Cybersecurity Solutions:
Funded backlog	$	1,615	$	1,752	$	1,317
Negotiated unfunded backlog		3,867		3,880		4,169
Total Intelligence and Cybersecurity Solutions backlog	$	5,482	$	5,632	$	5,486
Total:
Funded backlog	$	5,516	$	5,718	$	5,537
Negotiated unfunded backlog		11,154		11,639		12,466
Total backlog	$	16,670	$	17,357	$	18,003

Total backlog fluctuates from period to period depending on our success rate in winning contracts and the timing of contract awards, renewals, modifications and cancellations. Contract awards continue to be negatively impacted by on-going industry-wide delays in procurement decisions, which have resulted in an increase in the value of our submitted proposals awaiting decision. Backlog may also be negatively impacted by possible sequestration by the U.S. Government as discussed in “Business Environment and Trends” in this Quarterly Report on Form 10-Q.

We expect to recognize a substantial portion of our funded backlog as revenues within the next 12 months. However, the U.S. Government may cancel any contract at any time. In addition, certain contracts with commercial customers include provisions that allow the customer to cancel at any time. Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed.

Contract Types. Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For additional information regarding the types of contracts under which we generate revenues, see “Business—Contract Types” in Part I of our Annual Report on Form 10-K for the fiscal year ended January 31, 2012. The following table summarizes revenues by contract type as a percentage of total revenues for the periods presented:

	Six Months Ended July 31
	2012			2011
Cost-reimbursement		42	%		43	%
Time and materials (T&M) and fixed-price-level-of-effort (FP-LOE)		29			30
Firm-fixed price (FFP)		29			27
Total		100	%		100	%

The increase in the percentage of revenues generated from FFP contracts during the six months ended July 31, 2012 as compared to the same period of the prior year was primarily due to increased revenues from increased deliveries under certain logistics, readiness and sustainment contracts, increased design and construction services and increased activity on a program to operate and maintain the enterprise network IT infrastructure for the U.S. Department of State.

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Revenue Mix. We generate revenues under our contracts from (1) the efforts of our technical staff, which we refer to as labor-related revenues, and (2) the materials provided on a contract and efforts of our subcontractors, which we refer to as M&S revenues. M&S revenues are generated primarily from large, multi-year systems integration contracts and contracts in our logistics, readiness and sustainment business area, as well as through sales of our proprietary products, such as our border, port and mobile security products and our checked baggage explosive detection systems. While our proprietary products are more profitable, these products represent a small percentage of our M&S revenues and the majority of our M&S revenues generally have lower margins than our labor-related revenues. The following table presents changes in labor-related revenues and M&S revenues for the periods presented:

	Three Months Ended July 31									Six Months Ended July 31
	2012			Percent change			2011			2012			Percent change			2011
	(dollars in millions)
Labor-related revenues	$	1,513			—	%	$	1,517		$	3,023			(1	)%	$	3,059
As a percentage of revenues		53	%					58	%		54	%					58	%
M&S revenues		1,335			24			1,079			2,607			17			2,225
As a percentage of revenues		47	%					42	%		46	%					42	%

In recent years, there have been increases in the relative proportion of M&S revenues as compared to labor-related revenues primarily due to increased activity as a prime contractor on large programs involving significant subcontracted efforts and increased volume of material deliveries under certain programs primarily with DoD customers.

Results of Operations

The following table summarizes our results of operations for the periods presented:

	Three Months Ended July 31									Six Months Ended July 31
	2012			Percent change			2011			2012			Percent change			2011
	(dollars in millions)
Revenues	$	2,848			10	%	$	2,596		$	5,630			7	%	$	5,284
Cost of revenues		2,504			11			2,258			4,952			7			4,615
Selling, general and administrative expenses (SG&A):
General and administrative (G&A)		82			21			68			151			28			118
Bid and proposal (B&P)		53			33			40			96			26			76
Internal research and development (IR&D)		18			(14	)		21			32			(11	)		36
Operating income		191			(9	)		209			399			(9	)		439
Operating income margin		6.7	%					8.1	%		7.1	%					8.3	%
Non-operating expense, net		(18	)					(27	)		(43	)					(50	)
Income from continuing operations before income taxes		173			(5	)		182			356			(8	)		389
Provision for income taxes		(63	)		(10	)		(70	)		(129	)		(12	)		(147	)
Income from continuing operations		110			(2	)		112			227			(6	)		242
Income from discontinued operations, net of tax		—						66			—						67
Net income	$	110			(38	)	$	178		$	227			(27	)	$	309

We classify indirect costs incurred within or allocated to our government customers as overhead (included in cost of revenues) and G&A expenses in the same manner as such costs are defined in our disclosure statements under U.S. Government Cost Accounting Standards.

Changes in Estimates on Contracts. Changes in estimates related to certain types of contracts accounted for using the percentage of completion method of accounting are recognized 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 contract performance period for a variety of reasons, including changes in contract scope, changes in contract cost estimates due to unanticipated cost growth or retirements of risk for amounts different than estimated, and changes in estimated incentive or award fees. Aggregate changes in contract estimates decreased operating income by $3 million ($0.01 per diluted share) for the three months ended July 31, 2012 and increased operating income by $1 million ($0.00 per diluted share) for the six months ended July 31, 2012 and increased operating income by $15 million ($0.03 per diluted share) and $27 million ($0.05 per diluted share) for the three and six months ended July 31, 2011, respectively.

Reportable Segment Results. Effective February 1, 2012, certain operations were transferred between the Company’s reportable segments. Prior year amounts have been adjusted for consistency with the current year’s presentation.

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The following table summarizes changes in Defense Solutions revenues and operating income for the periods presented:

	Three Months Ended July 31									Six Months Ended July 31
Defense Solutions	2012			Percent change			2011			2012			Percent change			2011
	(dollars in millions)
Revenues	$	1,240			14	%	$	1,085		$	2,414			9	%	$	2,222
Operating income		92			5			88			193			8			178
Operating income margin		7.4	%					8.1	%		8.0	%					8.0	%

Defense Solutions revenues increased by $155 million, or 14%, all of which was internal revenue growth, for the three months ended July 31, 2012 as compared to the same period in the prior year. Internal revenue growth was attributable to increased activity on a number of programs, including a systems and software development program for the U.S. Army ($47 million), a program to operate and maintain the enterprise network IT infrastructure for the U.S. Department of State ($38 million), a systems integration and logistics program for tactical and mine resistant ambush protected vehicles ($23 million), and an IT infrastructure support services program for an agency of the DoD ($19 million) as well as the ramp up of a prime contract with the Defense Logistics Agency to provide supply chain management of military land and aircraft tires ($36 million). There was also one additional business day as compared to the same period in the prior year ($19 million). These increases were partially offset by reduced revenue from the U.S. Army Brigade Combat Team Modernization (BCTM) contract as a result of the program’s termination during the third quarter of fiscal 2012 ($57 million).

Defense Solutions revenues increased by $192 million, or 9%, all of which was internal revenue growth, for the six months ended July 31, 2012 as compared to the same period in the prior year. Internal revenue growth was attributable to increased activity on a number of programs, including a program to operate and maintain the enterprise network IT infrastructure for the U.S. Department of State ($80 million), a systems and software development program for the U.S. Army ($69 million), a systems integration and logistics program for tactical and mine resistant ambush protected vehicles ($58 million) as well as the ramp up of a new prime contract with the Defense Logistics Agency to provide supply chain management of military land and aircraft tires ($60 million) and one additional business day as compared to the same period in the prior year ($19 million). These increases were partially offset by reduced revenue from the U.S. Army Brigade Combat Team Modernization contract as a result of the program’s termination during the third quarter of fiscal 2012 ($110 million).

Defense Solutions operating income increased $4 million, or 5%, for the three months ended July 31, 2012 as compared to the same period in the prior year. This increase was primarily due to fees on increased revenues ($13 million) partially offset by an unfavorable change in contract estimates arising from the ongoing contract negotiations on the BCTM contract ($6 million) and increased B&P spending.

Defense Solutions operating income increased $15 million, or 8%, for the six months ended July 31, 2012 as compared to the same period in the prior year. This increase was primarily due to fees on increased revenues ($15 million) partially offset by increased B&P spending.

The following table summarizes changes in Health, Energy and Civil Solutions revenues and operating income for the periods presented:

	Three Months Ended July 31									Six Months Ended July 31
Health, Energy and Civil Solutions	2012			Percent change			2011			2012			Percent change			2011
	(dollars in millions)
Revenues	$	692			5	%	$	656		$	1,370			4	%	$	1,313
Operating income		53			(12	)		60			100			(12	)		114
Operating income margin		7.7	%					9.1	%		7.3	%					8.7	%

Health, Energy and Civil Solutions revenues increased $36 million, or 5%, for the three months ended July 31, 2012 as compared to the same period in the prior year primarily due to the August 2011 acquisition of Vitalize Consulting Solutions, Inc. Internal revenue contracted 1% reflecting declines in various federal civilian programs ($14 million) and program completions with federal health information technology customers, particularly with U.S. DoD military health system customers ($19 million). These declines were partially offset by an increase in healthcare IT consulting services with commercial clients ($16 million) and one additional business day as compared to the same period in the prior year ($11 million).

Health, Energy and Civil Solutions revenues increased $57 million, or 4%, for the six months ended July 31, 2012 as compared to the same period in the prior year primarily due to the August 2011 acquisition of Vitalize Consulting Solutions, Inc. Internal revenue contracted 2% reflecting declines in various federal civilian programs ($42 million) and program

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completions with federal health information technology customers, particularly with U.S. DoD military health system customers ($44 million). These declines were partially offset by increases in healthcare IT consulting services with commercial clients ($28 million), higher volume in our non-intrusive inspection systems business ($20 million) and increased design-build volume related to various power plant construction projects ($7 million). There was also one additional business day as compared to the same period in the prior year ($11 million).

Health, Energy and Civil Solutions operating income decreased $7 million, or 12%, for the three months ended July 31, 2012 as compared to the same period in the prior year. The decline in operating income was primarily due to a net unfavorable change in contract estimates ($5 million) primarily related to certain energy and construction projects compared to a net positive change in contract estimates ($7 million) in the prior year period. Additionally, a charge ($3 million) was recorded in the quarter related to the exit and sublease of an underutilized production and office facility associated with a prior year acquisition in our non-intrusive inspection system business. These decreases were partially offset by reduced research and development expense resulting from the advancement through the product development lifecycle of new non-intrusive inspection system offerings.

Health, Energy and Civil Solutions operating income decreased $14 million, or 12%, for the six months ended July 31, 2012 as compared to the same period in the prior year. The decline in operating income was primarily due to a net unfavorable change in contract estimates ($9 million) primarily related to certain energy and construction projects compared to a net positive change in contract estimates ($8 million) in the prior year period. This decrease was partially offset by reduced research and development expense resulting from the advancement through the product development lifecycle of new non-intrusive inspection system offerings.

The following table summarizes changes in Intelligence and Cybersecurity Solutions revenues and operating income for the periods presented:

	Three Months Ended July 31									Six Months Ended July 31
Intelligence and Cybersecurity Solutions	2012			Percent change			2011			2012			Percent change			2011
	(dollars in millions)
Revenues	$	919			8	%	$	854		$	1,849			6	%	$	1,750
Operating income		69			(9	)		76			135			(17	)		162
Operating income margin		7.5	%					8.9	%		7.3	%					9.3	%

Intelligence and Cybersecurity Solutions revenues increased $65 million, or 8%, all of which was internal revenue growth, for the three months ended July 31, 2012 as compared to the same period in the prior year. Internal revenue growth was primarily attributable to increased activity on two airborne surveillance programs ($25 million), a new intelligence gathering and analysis solution program ($11 million), as well as one additional business day as compared to the same period in the prior year ($14 million).

Intelligence and Cybersecurity Solutions revenues increased $99 million, or 6%, all of which was internal revenue growth, for the six months ended July 31, 2012 as compared to the same period in the prior year. Internal revenue growth was primarily attributable to increased activity on two airborne surveillance programs ($60 million), a new intelligence systems integration program for the U.S. Army ($22 million), a new intelligence and analysis solution program ($17 million), as well as one additional business day as compared to the same period in the prior year ($14 million).

Intelligence and Cybersecurity Solutions operating income decreased $7 million, or 9%, for the three months ended July 31, 2012 as compared to the same period in the prior year. The decrease in operating income was primarily attributable to relatively higher levels of indirect spending, including the timing of B&P and IR&D spending and a decline in sales of higher-margin proprietary products ($4 million). The level of B&P activity fluctuates from period to period depending on the nature and timing of bidding opportunities. These decreases were partially offset by fees on increased revenues ($6 million).

Intelligence and Cybersecurity Solutions operating income decreased $27 million, or 17%, for the six months ended July 31, 2012 as compared to the same period in the prior year. The decrease in operating income was primarily attributable to relatively higher levels of indirect spending, including the timing of B&P and IR&D spending, a reduction in net positive changes in contract estimates ($5 million) and a decline in sales of our higher-margin proprietary products ($8 million). The level of B&P activity fluctuates from period to period depending on the nature and timing of bidding opportunities. These decreases were partially offset by fees on increased revenues ($9 million).

The following table summarizes changes in Corporate and Other revenues and operating loss for the periods presented:

	Three Months Ended July 31						Six Months Ended July 31
Corporate and Other	2012			2011			2012			2011
	(dollars in millions)
Revenues	$	—		$	1		$	—		$	1
Operating loss	$	(23	)	$	(15	)	$	(29	)	$	(15	)

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Corporate and Other operating loss for the three and six months ended July 31, 2012 represents corporate costs that are unallowable under U.S. Government Cost Accounting Standards and the net effect of various items that are not directly related to the operating performance of the reportable segments. Corporate and Other operating loss increased by $8 million and $14 million for the three and six months ended July 31, 2012 as compared to the same periods of the prior year primarily due to relocation and severance charges for the transition of corporate functions to our McLean, Virginia headquarters and other locations ($9 million) and costs associated with the strategic review leading to the announced spin-off described in “Announced Spin-off” ($2 million). Corporate and Other operating loss for the three and six months ended July 31, 2011 also included gains on the sale of real estate of $21 million and $27 million, respectively, offset by charges related to the proposed settlement of a litigation matter of $22 million and other recurring items.

Interest Expense. Interest expense for the three and six months ended July 31, 2012 decreased $4 million and $3 million, respectively, as compared to the same periods of the prior year primarily due to the payment of $550 million on July 2, 2012 to settle the 6.25% notes at maturity.

Interest expense for Science Applications decreased $6 million for the three months ended July 31, 2012 as compared to the same period of the prior year, reflecting a $2 million decrease in interest on its note with SAIC and a $4 million decrease in interest on third-party debt, which was primarily due to the payment of the $550 million notes discussed above. Interest expense for Science Applications decreased $7 million for the six months ended July 31, 2012 as compared to the same period of the prior year, reflecting a $4 million decrease in interest on its note with SAIC and a $3 million decrease in interest on third-party debt. Interest expense related to Science Application’s note with SAIC may fluctuate significantly from year to year based on changes in the underlying note balance and interest rates throughout the fiscal year.

Provision for Income Taxes. The provision for income taxes as a percentage of income from continuing operations before income taxes was 36.4% and 38.5% for the three months ended July 31, 2012 and 2011, respectively. The decrease in the provision for income taxes as a percentage of income from continuing operations was primarily attributable to the tax deductibility of quarterly dividends paid on shares held by the SAIC Retirement Plan (an employee stock ownership plan) and the estimated non-deductible amount of a legal settlement recorded in the prior year quarter, partially offset by a decrease in the domestic manufacturer’s deduction and expiration of the federal research and development tax credit on December 31, 2011.

The provision for income taxes as a percentage of income from continuing operations before income taxes was 36.2% and 37.8% for the six months ended July 31, 2012 and 2011, respectively. The decrease in the provision for income taxes as a percentage of income from continuing operations was primarily attributable to a change in the estimated deductible amount of a prior year legal settlement and the tax deductibility of quarterly dividends paid on shares held by the SAIC Retirement Plan (an employee stock ownership plan), partially offset by a decrease in the domestic manufacturer’s deduction and expiration of the federal research and development tax credit on December 31, 2011.

We file income tax returns in the United States and various state and foreign jurisdictions and have effectively settled with the Internal Revenue Service (IRS) for fiscal years prior to and including fiscal 2008. We also settled fiscal 2011 as a result of our participation in the IRS Compliance Assurance Process beginning in fiscal 2011, in which we and the IRS endeavor to agree on the treatment of all tax positions prior to the filing of the tax return, thereby greatly reducing the period of time between return submission and settlement with the IRS.

Diluted Earnings per Share (EPS) from Continuing Operations. Diluted EPS from continuing operations of $0.32 per share for the three months ended July 31, 2012 remained consistent as compared to the same period in the prior year primarily due to a decrease in income from continuing operations of 2% partially offset by a 6 million, or 2%, decline in the diluted weighted average number of shares outstanding due to stock repurchases in previous quarters of the past year. Diluted EPS from continuing operations decreased $0.01 per share to $0.67 per share for the six months ended July 31, 2012 as compared to the same period in the prior year primarily due to a decrease in income from continuing operations of 6% partially offset by an 11 million, or 3%, decline in the diluted weighted average number of shares outstanding due to stock repurchases in previous quarters of the past year.

Discontinued Operations. In June 2011, in order to better align our business portfolio with our strategy, we sold certain components of our business, which were historically included in the Health, Energy and Civil Solutions segment, primarily focused on providing information technology services to international oil and gas companies. In fiscal 2012, we received net proceeds of $167 million resulting in a gain on sale before income taxes of $111 million related to this sale. Under terms of the definitive agreement, we retained the assets and obligations of our defined benefit pension plan in the United Kingdom. We have classified the operating results of these business components, including pension expense through the date of sale, as discontinued operations. Following the asset sale, as a result of retaining the pension obligation, the remaining components of ongoing pension expense, primarily interest costs and assumed return on plan assets, are recorded in continuing operations.

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The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Income from discontinued operations also includes other activity that is immaterial and not reflected in the amounts above.

Subsequent to July 31, 2012, we committed to a plan to sell a component of the business, which is included in the Health, Energy and Civil Solutions segment, primarily focused on providing operational test and evaluation services. This component of the business will be reflected as a discontinued operation beginning in the third fiscal quarter ending October 31, 2012.

Net Income. Net income decreased $68 million, or 38%, and $82 million, or 27%, for the three and six months ended July 30, 2012, respectively, as compared to the same periods in the prior year. The decreases in net income for the three and six months ended July 31, 2012 as compared to the same periods in the prior year are primarily due to a decrease in income from discontinued operations and a decrease in income from continuing operations.

Net income for Science Applications decreased $68 million, or 38%, and $81 million, or 26%, for the three and six months ended July 30, 2012, respectively, as compared to the same periods in the prior year for the reasons described above.

Diluted EPS. Diluted EPS decreased $0.18 per share to $0.32 per share and $0.20 per share to $0.67 per share for the three and six months ended July 31, 2012, respectively, as compared to the same periods in the prior year primarily due to the decreases in income from discontinued operations for each period in addition to the reasons discussed above for diluted EPS from continuing operations.

Liquidity and Capital Resources

We had $756 million in cash and cash equivalents at July 31, 2012, which were primarily comprised of cash held in insured bank deposits and investments in several large institutional money market funds that invest primarily in bills, notes and bonds issued by the U.S. Treasury, U.S. Government guaranteed repurchase agreements fully collateralized by U.S. Treasury obligations, U.S. Government guaranteed securities and investment-grade corporate securities that have original maturities of three months or less. We anticipate our principal sources of liquidity for the next 12 months and beyond will be our existing cash and cash equivalents and cash flows from operations. We may also borrow under our $750 million revolving credit facility. Our revolving credit facility is backed by a number of financial institutions, matures in fiscal 2017 and, by its terms, can be accessed on a same-day basis. We anticipate our principal uses of cash for the next 12 months and beyond will be for operating expenses, expenses related to the proposed spin-off of our technical services business, capital expenditures, acquisitions of businesses, stock repurchases and dividends. We anticipate that our operating cash flows, existing cash and cash equivalents, which have no restrictions on withdrawal, and borrowing capacity under our revolving credit facility will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

Historical Trends

Cash and cash equivalents was $756 million and $1.592 billion at July 31, 2012 and January 31, 2012, respectively. The following table summarizes cash flow information for the periods presented:

	Six Months Ended July 31
	2012			2011
	(in millions)
Total cash flows provided by (used in) operating activities of continuing operations	$	(161	)	$	210
Total cash flows provided by (used in) investing activities of continuing operations		(30	)		19
Total cash flows used in financing activities of continuing operations		(645	)		(407	)
Increase in cash and cash equivalents from discontinued operations		—			146
Effect of foreign exchange rate changes on cash and cash equivalents		—			1
Total decrease in cash and cash equivalents	$	(836	)	$	(31	)

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Cash Provided by (Used in) Operating Activities of Continuing Operations. Cash flows from operating activities of continuing operations decreased $371 million for the six months ended July 31, 2012 as compared to the same period in the prior year. Cash flows from operating activities of continuing operations were primarily impacted by a $500 million cash settlement payment related to the CityTime program described in Note 10 of the combined notes to the condensed consolidated financial statements partially offset by a reduction in the average time to collect receivables. Days sales outstanding were 63 days for the three months ended July 31, 2012 compared to 74 days for the same period in the prior year.

Any differences in cash flows from operating activities of continuing operations for Science Applications as compared to SAIC are primarily attributable to changes in interest payments made on the related party note.

Cash Provided by (Used in) Investing Activities of Continuing Operations. We used $30 million of cash in support of investing activities of continuing operations during the six months ended July 31, 2012, including $33 million to purchase property, plant and equipment. We generated $19 million of cash from investing activities of continuing operations during the six months ended July 31, 2011 including $78 million of proceeds from the sale of real estate, partially offset by $26 million to acquire a business and $30 million to purchase property, plant and equipment.

Cash Used in Financing Activities of Continuing Operations. We used $645 million of cash in support of financing activities of continuing operations during the six months ended July 31, 2012, including $550 million to settle notes payable at maturity on July 2, 2012, payment of dividends of $83 million and $20 million to repurchase shares of our stock related to employee benefit compensation plans. We used $407 million of cash in support of financing activities of continuing operations during the six months ended July 31, 2011, including $417 million to repurchase shares of our stock.

Science Applications used cash in financing activities of continuing operations of $845 million during the six months ended July 31, 2012, including $550 million to settle notes payable at maturity on July 2, 2012, repayments on the related party note with SAIC of $324 million partially offset by proceeds from the related party note with SAIC of $32 million. Science Applications used cash from financing activities of continuing operations of $406 million during the six months ended July 31, 2011, including repayments on the related party note with SAIC of $868 million partially offset by proceeds from the related party note with SAIC of $466 million.

Cash Flows from Discontinued Operations.Cash flows from discontinued operations were $146 million for the six months ended July 31, 2011, which included proceeds of $169 million from the sale of certain components of the business.

Stock Repurchase Program

In March 2012, our board of directors authorized a stock repurchase program under which we may repurchase up to 40 million shares of SAIC common stock. Stock repurchases may be made on the open market or in privately negotiated transactions with third-parties. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.

Outstanding Indebtedness

Notes Payable and Long-term Debt. Our outstanding notes payable and long-term debt consisted of the following:

	Stated interest rate			Effective interest rate			July 31, 2012		January 31, 2012
	(in millions)
SAIC senior unsecured notes:
$450 million notes issued in fiscal 2011, which mature in December 2020		4.45	%		4.53	%	$	449	$	449
$300 million notes issued in fiscal 2011, which mature in December 2040		5.95	%		6.03	%		300		300
Science Applications senior unsecured notes:
$550 million notes issued in fiscal 2003, which mature in July 2012		6.25	%		6.50	%		—		550
$250 million notes issued in fiscal 2003, which mature in July 2032		7.13	%		7.43	%		248		248
$300 million notes issued in fiscal 2004, which mature in July 2033		5.50	%		5.78	%		296		296
Capital leases and other notes payable due on various dates through fiscal 2018		0-2.5	%		Various			7		9
Total notes payable and long-term debt								1,300		1,852
Less current portion								3		553
Total notes payable and long-term debt, net of current portion							$	1,297	$	1,299
Fair value of notes payable and long-term debt							$	1,475	$	2,011

We paid $550 million to settle the 6.25% notes at maturity on July 2, 2012.

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These notes contain financial covenants and customary restrictive covenants, including, among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions. We were in compliance with all covenants as of July 31, 2012.

Credit Facility. SAIC has a revolving credit facility, which is fully and unconditionally guaranteed by Science Applications, providing for up to $750 million in unsecured borrowing capacity at interest rates determined, at SAIC’s option, based on either LIBOR plus a margin or a defined base rate through March 2016. As of July 31, 2012 and January 31, 2012, there were no borrowings outstanding under the revolving credit facility. The revolving credit facility contains financial covenants and customary restrictive covenants. We were in compliance with all covenants under the revolving credit facility as of July 31, 2012. A failure to meet the financial covenants in the future would reduce and could eliminate our borrowing capacity under the revolving credit facility.

Off-Balance Sheet Arrangements

We have outstanding performance guarantees and cross-indemnity agreements in connection with certain of our unconsolidated joint venture investments. We also have letters of credit outstanding principally related to guarantees on contracts and surety bonds outstanding principally related to performance and payment bonds as described in Note 11 of the combined notes to the condensed consolidated financial statements for the three and six months ended July 31, 2012 contained within this Quarterly Report on Form 10-Q. These arrangements have not had, and management does not believe it is likely that they will in the future have, a material effect on our liquidity, capital resources, operations or financial condition. We have also entered into an agreement with a variable interest entity (VIE) in connection with a renewable energy project as described in Note 11 of the combined notes to the condensed consolidated financial statements for the three and six months ended July 31, 2012 contained within this Quarterly Report on Form 10-Q.

Commitments and Contingencies

We are subject to a number of reviews, investigations, claims, lawsuits and other uncertainties related to our business. For a discussion of these items, see Notes 10 and 11 of the combined notes to the condensed consolidated financial statements for the three and six months ended July 31, 2012 contained within this Quarterly Report on Form 10-Q.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements in accordance 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. Management evaluates these estimates and assumptions on an ongoing basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions.

We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2012, that are both important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Typically, the circumstances that make these judgments difficult, subjective and complex have to do with making estimates about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies during the six months ended July 31, 2012.

Non-GAAP Financial Measures

In this Quarterly Report on Form 10-Q, we refer to internal revenue growth (contraction) percentage, which is a non-GAAP financial measure that we reconcile to the most directly comparable GAAP financial measure. We calculate our internal revenue growth (contraction) percentage by comparing our reported revenues for the current year period to the revenues for the prior year period adjusted to include the actual revenues of acquired businesses for the comparable prior year period before acquisition. This calculation has the effect of adding revenues for the acquired businesses for the comparable prior year period to our prior year period reported revenues.

We use internal revenue growth (contraction) percentage as an indicator of how successful we are at growing our base business and how successful we are at growing the revenues of the businesses that we acquire. Our integration of acquired businesses allows our current management to leverage business development capabilities, drive internal resource collaboration, utilize access to markets and qualifications, and refine strategies to realize synergies, which benefits both acquired and existing businesses. As a result, the performance of the combined enterprise post-acquisition is an important measurement. In addition, as a means of rewarding the successful integration and growth of acquired businesses, and not acquisitions themselves, incentive compensation for our executives and the broader employee population is based, in part, on achievement of revenue targets linked to internal revenue growth.

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The limitation of this non-GAAP financial measure as compared to the most directly comparable GAAP financial measure is that internal revenue growth (contraction) percentage is one of two components of the total revenue growth (contraction) percentage, which is the most directly comparable GAAP financial measure. We address this limitation by presenting the total revenue growth (contraction) percentage next to or near disclosures of internal revenue growth (contraction) percentage. This financial measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. The method that we use to calculate internal revenue growth (contraction) percentage is not necessarily comparable to similarly titled financial measures presented by other companies. Internal revenue growth (contraction) percentages for the three and six months ended July 31, 2012 were calculated as follows:

	Three Months Ended July 31, 2012			Six Months Ended July 31, 2012
	(dollars in millions)
Defense Solutions:
Prior year period’s revenues, as reported	$	1,085		$	2,222
Revenues of acquired businesses for the comparable prior year period		—			—
Prior year period’s revenues, as adjusted	$	1,085		$	2,222
Current year period’s revenues, as reported		1,240			2,414
Internal revenue growth	$	155		$	192
Internal revenue growth percentage		14	%		9	%
Health, Energy and Civil Solutions:
Prior year period’s revenues, as reported	$	656		$	1,313
Revenues of acquired businesses for the comparable prior year period		40			81
Prior year period’s revenues, as adjusted	$	696		$	1,394
Current year period’s revenues, as reported		692			1,370
Internal revenue contraction	$	(4	)	$	(24	)
Internal revenue contraction percentage		(1	)%		(2	)%
Intelligence and Cybersecurity Solutions:
Prior year period’s revenues, as reported	$	854		$	1,750
Revenues of acquired businesses for the comparable prior year period		—			—
Prior year period’s revenues, as adjusted	$	854		$	1,750
Current year period’s revenues, as reported		919			1,849
Internal revenue growth	$	65		$	99
Internal revenue growth percentage		8	%		6	%
Total*:
Prior year period’s revenues, as reported	$	2,596		$	5,284
Revenues of acquired businesses for the comparable prior year period		40			81
Prior year period’s revenues, as adjusted	$	2,636		$	5,365
Current year period’s revenues, as reported		2,848			5,630
Internal revenue growth	$	212		$	265
Internal revenue growth percentage		8	%		5	%

* Total revenues include amounts related to Corporate and Other and intersegment eliminations.

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Effects of Inflation

Approximately 40%-50% of our revenues are derived from cost-reimbursement type contracts, which are generally completed within one year. Bids for longer-term FFP and T&M and FP-LOE contracts typically include sufficient provisions for labor and other cost escalations to cover anticipated cost increases over the period of performance. Consequently, revenues and costs have generally both increased commensurate with inflation. As a result, net income as a percentage of total revenues has not been significantly impacted by inflation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

During the six months ended July 31, 2012, there were no material changes in our market risk exposure. For a discussion of our market risk associated with interest rate risk and foreign currency risk as of January 31, 2012, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2012.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer (our President and Chief Executive Officer) and principal financial officer (our Executive Vice President and Chief Financial Officer), has evaluated the effectiveness of SAIC’s and Science Applications’ disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of July 31, 2012, and our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities Exchange Commission. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes In Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred in the quarterly period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

We have provided information about legal proceedings in which we are involved in Note 10 of the combined notes to condensed consolidated financial statements for the three and six months ended July 31, 2012 contained within this Quarterly Report on Form 10-Q.

In addition to the matters disclosed in Note 10, we are routinely subject to investigations and reviews relating to compliance with various laws and regulations, including in connection with contract procurement, award and performance, with respect to our role as a contractor to governmental agencies and departments and in connection with performing services in countries outside of the United States. Adverse findings in these investigations or reviews can lead to criminal, civil or administrative proceedings and we could face penalties, fines, repayments, compensatory damages or suspension or debarment from doing business with governmental agencies. Adverse findings could also have a material adverse effect on our reputation, our business, consolidated financial position, results of operations and cash flows due to our reliance on government contracts.

Item 1A. Risk Factors.

Except for the risk factors described below, there were no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2012 and our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2012:

A decline in the U.S. Government defense budget, changes in spending or budgetary priorities or delays in contract awards may adversely affect our future revenues and limit our growth prospects.

Revenues under contracts with the DoD, either as a prime contractor or subcontractor to other contractors, represented approximately 75% of our total revenues in fiscal 2012. Our operating results could be adversely affected by spending caps or changes in the budgetary priorities of the U.S. Government or the DoD, as well as delays in program starts or the award of contracts or task orders under contracts. Current U.S. Government spending levels for defense-related programs may not be sustained and future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts. Such changes in spending authorizations and budgetary priorities may occur as a result of the rapid growth of the federal budget deficit, increasing political pressure and legislation, including the Budget Control Act of 2011, designed to reduce overall levels of government spending, shifts in spending priorities from defense-related programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors. The Budget Control Act of 2011 enacted 10-year discretionary spending caps which are expected to generate over $1 trillion in savings for the U.S. Government, a substantial portion of which comes from DoD baseline spending reductions. In addition, unless the Budget Control Act of 2011 is amended, additional automatic spending cuts (referred to as sequestration) totaling $1.2 trillion over 10 years will be triggered beginning in the U.S. Government fiscal year ending September 30, 2013. These spending cuts are expected to further reduce DoD and homeland security spending, as well as other federal agency spending. In early August 2012, the President signed the Sequestration Transparency Act of 2012, under which, within 30 calendar days of its enactment, the President is to provide to Congress a detailed report on how sequestration would be implemented, including information about specific reductions and any exemptions. In light of the current uncertainty regarding how the cuts will be implemented if sequestration goes into effect, we are not able to predict the impact of sequestration on our company or our financial results. However, we expect that implementation of the automatic spending cuts without change will reduce, delay or cancel funding for certain of our contracts and programs and could adversely impact our operations and financial results.

The U.S. Government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoD budgetary priorities, reduce overall U.S. Government spending or delay contract or task order awards for defense-related programs, including programs from which we expect to derive a significant portion of our future revenues. In addition, changes to the DoD acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so. A significant decline in overall U.S. Government spending, including in the areas of national security, intelligence and homeland security, a significant shift in its spending priorities, the substantial reduction or elimination of particular defense-related programs or significant delays in contract or task order awards for large programs could adversely affect our future revenues and limit our growth prospects.

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Our failure to comply with the terms of our deferred prosecution agreement or our administrative agreement would have a material adverse effect on our business and future prospects.

In connection with the resolution of certain investigations related to our CityTime contract, we entered into a three year deferred prosecution agreement with the U.S. Attorney's Office for the Southern District of New York. We also recently entered into a five year administrative agreement with the Army on behalf of the U.S. Government in order to confirm our continuing eligibility to enter into and perform contracts with the U.S. Government. Our compliance with the terms and conditions of both the deferred prosecution agreement and the administrative agreement, including the appointment of an independent monitor, will require significant resources and management involvement. If we fail to comply with the deferred prosecution agreement, including its ongoing legal and regulatory compliance obligations, the U.S. Attorney's Office may extend the term of the deferred prosecution agreement or independent monitor or we could face criminal prosecution, additional damages and penalties. If we fail to comply with the administrative agreement, the Army may extend the term of the administrative agreement or initiate suspension or debarment proceedings against us. In addition, we may suffer reputational harm as a result of the CityTime investigations, the terms of the settlement, the deferred prosecution agreement or the administrative agreement may also damage our reputation, which could make it more difficult to compete effectively and may adversely affect our future revenues and growth prospects. In addition, we continue to be subject to risks in connection with government reviews and investigations and other legal disputes unrelated to the CityTime matter, which may subject us to civil or criminal penalties or administrative sanctions, including the termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines and suspension or debarment from doing business with governmental agencies. See “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended January 31, 2012, as updated periodically through our subsequent quarterly reports on Form 10-Q.

We recently announced that we are pursuing a plan to potentially spin-off our technical services business into a new, independent publicly traded company. This transaction will likely require significant time and attention of our management and we may not be able to complete the transaction or, if completed, realize the anticipated benefits.

In August 2012, we announced a plan to separate into two independent companies through a spin-off of our technical services business. Completion of the transaction will be contingent upon the approval of our Board of Directors, our receipt of a ruling from the Internal Revenue Service (IRS) and an opinion of counsel that the spin-off will be tax-free to us and our stockholders, the effectiveness of a Registration Statement on Form 10 and other conditions. Additionally, our ability to complete the spin-off in a timely manner, if at all, could be affected by several factors, including but not limited to:

• our ability to obtain any necessary financing for the newly-created entity on acceptable terms;

• our ability to obtain any necessary consents or approvals;

• changes in governmental regulations;

• changes in the underlying businesses, contracts, or customers; and

• political and economic conditions at the time of the transaction.

For these and other reasons, we may not be able to complete the spin-off within the expected time frame or at all. Even if completed, we may not realize the anticipated benefits from the spin-off. Moreover, executing the proposed spin-off will likely require significant time and attention from management, which could distract them from other tasks in operating our business and executing our other strategic initiatives.

The proposed spin-off of our technical services business could result in substantial tax liability to us and our stockholders.

Among the conditions to completing the spin-off will be our receipt of a private letter ruling from the IRS and an opinion of counsel substantially to the effect that, for U.S. federal income tax purposes, the spin-off and certain related transactions will qualify for tax-free treatment under certain sections of the Internal Revenue Code. However, if the factual assumptions or representations made in the private letter ruling request or the opinion are inaccurate or incomplete in any material respect, including those relating to the past and future conduct of our business, then we will not be able to rely on the ruling or the opinion. Furthermore, the opinion will cover certain matters on which the IRS does not rule and that opinion will not be binding on the IRS or the courts. Accordingly, the IRS or the courts may challenge the conclusions stated in the opinion and such challenge could prevail.

If, notwithstanding receipt of the private letter ruling and opinion, the spin-off and certain related transactions are determined to be taxable, then we would be subject to a substantial tax liability. In addition, if the spin-off transaction is taxable, each holder of our common stock who receives shares of the new company would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received.

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Even if the spin-off otherwise qualifies as a tax-free transaction, the distribution could be taxable to us (but not to our stockholders) in certain circumstances if future significant acquisitions of our stock or the stock of the new technical services company are deemed to be part of a plan or series of related transactions that include the spin-off. In this event, the resulting tax could be substantial. In connection with the spin-off, we expect to enter into a tax separation agreement with the technical services business, under which the technical services business will agree not to enter into any transaction without our consent that could cause any portion of the spin-off to be taxable to us and to indemnify us for any tax liabilities resulting from such transactions. These obligations and potential tax liabilities may discourage, delay or prevent a change of control of us or of the technical services business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) Purchases of Equity Securities by the Company

In March 2012, our board of directors authorized a stock repurchase program under which we may repurchase up to 40 million shares of SAIC common stock (the 2012 Repurchase Program). Stock repurchases may be made on the open market or in privately negotiated transactions with third-parties. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.

The following table presents repurchases of SAIC common stock during the quarter ended July 31, 2012:

Period	(a) Total Number of Shares (or Units) Purchased (1)		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Repurchase Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
May 1, 2012 – May 31, 2012		4,758	$	11.44		—		40,000,000
June 1, 2012 – June 30, 2012		70,271		12.04		—		40,000,000
July 1, 2012 – July 31, 2012		32,702		13.90		—		40,000,000
Total		107,731		12.58		—

⁽¹⁾  Includes shares purchased as follows:

	May		June		July
Upon surrender by stockholders of previously owned shares to satisfy statutory tax withholding obligations related to vesting of stock awards		4,758		70,271		32,702

⁽²⁾  We may repurchase up to 40 million shares of SAIC common stock under the 2012 Repurchase Program, which was publicly announced in March 2012.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number		Description of Exhibit
	3.1	Restated Bylaws of SAIC, Inc. Incorporated by reference to Exhibit 3.1 to SAIC, Inc.’s Current Report on Form 8-K as filed on June 20, 2012 with the SEC.
	10.1	SAIC, Inc.’s 2006 Equity Incentive Plan (as amended and restated June 15, 2012).
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101	Interactive Data File.

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SAIC, INC.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 30, 2012

SAIC, Inc.

/s/     MARK W. SOPP        

Mark W. Sopp

Executive Vice President and Chief Financial Officer and as a duly authorized officer

Date: August 30, 2012

Science Applications International Corporation

/s/     MARK W. SOPP        

Mark W. Sopp

Executive Vice President and Chief Financial Officer and as a duly authorized officer

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Exhibit Index

Exhibit Number		Description of Exhibit
	3.1	Restated Bylaws of SAIC, Inc. Incorporated by reference to Exhibit 3.1 to SAIC, Inc.’s Current Report on Form 8-K as filed on June 20, 2012 with the SEC.
	10.1	SAIC, Inc.’s 2006 Equity Incentive Plan (as amended and restated June 15, 2012).
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101	Interactive Data File.

EX-10.1

Exhibit 10.1

2006 EQUITY INCENTIVE PLAN

(as amended and restated June 15, 2012)

1. Purpose of this Plan

The purpose of this 2006 Equity Incentive Plan is to enhance the long-term stockholder value of SAIC, Inc. and its affiliated companies by offering opportunities to eligible individuals to participate in the growth in value of the equity of SAIC, Inc.

2. Definitions and Rules of Interpretation

2.1 Definitions.

This Plan uses the following defined terms:

(a)     “Administrator” means the Board or the Committee, or any officer or Employee of the Company to whom the Board or the Committee delegates authority to administer this Plan.

(b)     “Affiliate” means a “parent” or “subsidiary” (as each is defined in Section 424 of the Code) of the Company and any other entity that the Board or Committee designates as an “Affiliate” for purposes of this Plan.

(c)     “Applicable Law” means any and all laws of whatever jurisdiction, within or without the United States, and the rules of any stock exchange or quotation system on which Shares are listed or quoted, applicable to the taking or refraining from taking of any action under this Plan, including the administration of this Plan and the issuance or transfer of Awards or Award Shares.

(d)     “Award” means a Stock Award, SAR, Cash Award, or Option granted in accordance with the terms of this Plan.

(e)     “Award Agreement” means the document, which may be in paper or electronic form, evidencing the grant of an Award and its terms and conditions.

(f)     “Award Shares” means Shares covered by an outstanding Award or purchased under an Award.

(g)     “Awardee” means: (i) a person to whom an Award has been granted, including a holder of a Substitute Award or (ii) a person to whom an Award has been transferred in accordance with all applicable requirements of Sections 6.5, 7(h), 8.1(c), 8.2(d) and 17.

(h)     “Board” means the Board of Directors of the Company.

(i)     “Cash Award” means the right to receive cash as described in Section 8.3.

(j)     “Cause” means employment related dishonesty, fraud, misconduct or disclosure or misuse of confidential information, or other employment related conduct that is likely to cause significant injury to the Company, an Affiliate, or any of their respective employees, officers or directors (including, without limitation, commission of a felony or similar offense), in each case as determined by the Administrator. “Cause” shall not require that a civil judgment or criminal conviction has been entered against or guilty plea shall have been made by the Awardee regarding any of the matters referred to in the previous sentence. Accordingly, the Administrator shall be entitled to determine “Cause” based on the Administrator’s good faith belief. If the Awardee is criminally charged with a felony or similar offense that shall be a sufficient, but not a necessary, basis for such belief.

(k)     “Code” means the Internal Revenue Code of 1986, as amended.

(l)     “Committee” means a committee or subcommittee of the Board of Directors of the Company composed of one or more Company Directors appointed in accordance with the Company’s charter documents and Section 4. As referenced in Section 4.1(a), from time to time throughout this Plan, the term “Committee” is used to refer to both the Board and the Committee.

(m)     “Company” means SAIC, Inc., a Delaware corporation, or any successor corporation thereto.

(n)     “Company Director” means a member of the Board.

(o)     “Consultant” means an individual who, or an employee of any entity that, provides bona fide services to the Company or an Affiliate not in connection with the offer or sale of securities in a capital-raising transaction, but who is not an Employee.

(p)     “Director” means a member of the Board of Directors of the Company or an Affiliate.

(q)     “Divestiture” means any transaction or event that the Board or the Committee specifies as a Divestiture under Section 10.5.

(r)     “Dividend Equivalent Right” means the right of an Awardee, granted at the discretion of the Committee, to receive a credit for the account of such Awardee in an amount equal to the cash dividends paid on one Share for each Share represented by a Stock Award held by such Awardee.

(s)     “Effective Date” means June 15, 2012.

(t)     “Employee” means a regular employee of the Company or an Affiliate, including an officer or Director, who is treated as an employee in the personnel records of the Company or an Affiliate, but not individuals who are classified by the Company or an Affiliate as: (i) leased from or otherwise employed by a third party, (ii) independent contractors, or (iii) intermittent or temporary workers. The Company’s or an Affiliate’s classification of an individual as an “Employee” (or as not an “Employee”) for purposes of this Plan shall not be altered retroactively even if that classification is changed retroactively for another purpose as a result of an audit, litigation or otherwise. An Awardee shall not cease to be an Employee due to transfers between locations of the Company, or between the Company and an Affiliate, or to any successor to the Company or an Affiliate that assumes the Awardee’s Options under Section 10. Neither service as a Director nor receipt of a director’s fee shall be sufficient to make a Director an “Employee.”

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(u)     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(v)     “Executive” means, if the Company has any class of any equity security registered under Section 12 of the Exchange Act, an individual who is subject to Section 16 of the Exchange Act or who is a “covered employee” under Section 162(m) of the Code, in either case because of the individual’s relationship with the Company or an Affiliate. If the Company does not have any class of any equity security registered under Section 12 of the Exchange Act, “Executive” means any (i) Director, (ii) officer elected or appointed by the Board, or (iii) beneficial owner of more than 10% of any class of the Company’s equity securities.

(w)     “Expiration Date” means, with respect to an Award, the date stated in the Award Agreement as the expiration date of the Award or, if no such date is stated in the Award Agreement, then the last day of the exercise period for the Award, disregarding the effect of an Awardee’s Termination or any other event that would shorten that period.

(x)     “Fair Market Value” means the value of a share of the stock of Company as determined under Section 18.2.

(y)     “Fundamental Transaction” means any transaction or event described in Section 10.3.

(z)     “Good Reason” means (i) a material diminution in responsibility or compensation, or (ii) requiring Awardee to work in a location (other than normal business travel) which is more than 50 miles from Awardee’s place of employment before the change so long as not closer to Awardee’s primary residence.

(aa)     “Grant Date” means the date the Administrator approves the grant of an Award. However, if the Administrator specifies that an Award’s Grant Date is a future date or the date on which a condition is satisfied, the Grant Date for such Award is that future date or the date that the condition is satisfied.

(bb)     “Incentive Stock Option” means an Option intended to qualify as an incentive stock option under Section 422 of the Code and designated as an Incentive Stock Option in the Award Agreement for that Option.

(cc)     “Involuntary Termination” means termination by the Company or an Affiliate, as applicable, without Cause or termination by the Awardee for Good Reason.

(dd)     “Nonstatutory Option” means any Option other than an Incentive Stock Option

(ee)     “Objectively Determinable Performance Condition” shall mean a performance condition (i) that is established (A) at the time an Award is granted or (B) no later than the earlier of (1) 90 days after the beginning of the period of service to which it relates, or (2) before the elapse of 25% of the period of service to which it relates, (ii) that is uncertain of achievement at the time it is established, and (iii) the achievement of which is determinable by a third party with knowledge of the relevant facts. Measures that may be used in Objectively Determinable Performance Conditions may be expressed in absolute terms, in terms of growth or improvement, or relative to the performance of one or more comparable companies or an index covering multiple companies and that relate to any of the following, as it may apply to an individual, one or more Affiliates, business unit(s), divisions or the whole of the Company: revenue; earnings per share; return on assets; return on equity; net order dollars; net profit; operating cash flow; operating income; contract bookings; contract awards; profits before tax;; earnings before interest, depreciation and taxes (EBITDA);; return on invested capital;; days working capital; total shareholder return; share price growth; free cash flow; return on sales; operating margin; book-to-bill; headcount; employee retention; new hires; backlog; objective customer satisfaction indicators; and efficiency measures, each with respect to the Company and/or an Affiliate or individual business unit.

3

(ff)     “Officer” means an officer of the Company as defined in Rule 16a-1 adopted under the Exchange Act.

(gg)     “Option” means a right to purchase Shares of the Company granted under this Plan.

(hh)     “Option Price” means the price payable under an Option for Shares, not including any amount payable in respect of withholding or other taxes.

(ii)     “Option Shares” means Shares covered by an outstanding Option or purchased under an Option.

(jj)     “Plan” means this 2006 Equity Incentive Plan, as amended.

(kk)     “Prior Plans” mean the Science Application International Corporation 1999 Stock Incentive Plan, 1998 Stock Option Plan and 1984 Bonus Compensation Plan.

(ll)     “Purchase Price” means the price payable under a Stock Award for Shares, not including any amount payable in respect of withholding or other taxes.

(mm)     “Qualified Domestic Relations Order” means a “qualified domestic relations order” as defined in, and otherwise meeting the requirements of, Section 414(p) of the Code, except that reference to a “plan” in that definition shall be to this Plan.

(nn)     “Rule 16b-3” means Rule 16b-3 adopted under Section 16(b) of the Exchange Act.

(oo)     “SAR” or “Stock Appreciation Right” means a right to receive cash and/or Shares based on a change in the Fair Market Value of a specific number of Shares pursuant to an Award Agreement, as described in Section 8.1.

(pp)     “Securities Act” means the Securities Act of 1933, as amended.

(qq)     “Share” means a share of Common Stock of the Company or other securities substituted for Common Stock under Section 10.

4

(rr)     “Stock Award” means an offer by the Company to sell or issue shares subject to certain restrictions pursuant to the Award Agreement as described in Section 8.2 or, as determined by the Board or Committee, a notional account representing the right to be paid an amount based on Shares. Types of Awards which may be granted as Stock Awards include such awards as are commonly known as restricted stock, deferred stock, restricted stock units, performance shares, phantom stock or similar types of awards as determined by the Administrator.

(ss)     “Substitute Award” means a Substitute Option, Substitute SAR or Substitute Stock Award granted in accordance with the terms of this Plan.

(tt)     “Substitute Option” means an Option granted in substitution for, or upon the conversion of, an option granted by another entity to purchase equity securities in the granting entity.

(uu)     “Substitute SAR” means a SAR granted in substitution for, or upon the conversion of, a stock appreciation right granted by another entity with respect to equity securities in the granting entity.

(vv)     “Substitute Stock Award” means a Stock Award granted in substitution for, or upon the conversion of, a stock award granted by another entity to purchase equity securities in the granting entity.

(ww)     “Ten Percent Stockholder” is any person who, directly or by attribution under Section 424(d) of the Code, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any Affiliate on the Grant Date.

(xx)     “Termination” means that the Awardee has ceased to be, with or without any cause or reason, an Employee, Director or Consultant. However, unless so determined by the Administrator, or otherwise provided in this Plan, “Termination” shall not include a change in status from an Employee, Consultant or Director to another such status. An event that causes an Affiliate to cease being an Affiliate shall be treated as the “Termination” of that Affiliate’s Employees, Directors, and Consultants.

2.2     Rules of Interpretation. Any reference to a “Section,” without more, is to a Section of this Plan. Captions and titles are used for convenience in this Plan and shall not, by themselves, determine the meaning of this Plan. Except when otherwise indicated by the context, the singular includes the plural and vice versa. Any reference to a statute is also a reference to the applicable rules and regulations adopted under that statute. Any reference to a statute, rule or regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or section as amended from time to time, both before and after the Effective Date and including any successor provisions.

3. Shares Subject to This Plan; Term of This Plan

3.1     Number of Award Shares. The Shares issuable under this Plan shall be authorized but unissued or reacquired Shares, including Shares repurchased by the Company on the open market. The number of Shares available for issuance after the Effective Date over the remaining term of this Plan shall be 50,000,000 (including Shares underlying awards that are outstanding as of Effective Date, and subject to adjustment pursuant to Section 10.2). Except as required by Applicable Law, Shares subject to an outstanding Award shall not reduce the number of Shares available for issuance under this Plan until the earlier of the date such Shares are vested pursuant to the terms of the applicable Award or the actual date of delivery of the Shares to the Awardee. Those Shares (i) that are issued under the Plan that are forfeited or repurchased by the Company at the original purchase price or less or that are issuable upon exercise of awards granted under the Plan that expire or become unexercisable for any reason after their Grant Date without having been exercised in full, (ii) that are withheld from an Option or Stock Award pursuant to a Company-approved “net exercise” provision or (iii) that are not delivered to or are Award Shares surrendered by a holder in consideration for applicable tax withholding will continue to be available for issuance under this Plan. Shares issued in settlement of any Dividend Equivalent Rights shall be applied against the number of Shares available for Awards. Shares subject to Substitute Awards and available under a stockholder-approved equity plan of an acquired company shall not be applied against the number of Shares available for Awards.

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3.2     Source of Shares. Award Shares may be: (a) Shares that have never been issued, (b) Shares that have been issued but are no longer outstanding, or (c) Shares that are outstanding and are acquired to discharge the Company’s obligation to deliver Award Shares.

3.3 Term of this Plan.

(a)     This Plan shall become effective on the Effective Date (with any amendments to the Plan being effective on and after the date thereof), and Awards may be granted under this Plan on and after, the Effective Date. Upon effectiveness of this Plan, no additional awards will be made under the Prior Plans.

(b)     Subject to the provisions of Section 14, Awards may be granted under this Plan until June 15, 2022.

4. Administration

4.1 General.

(a)     The Board shall have ultimate responsibility for administering this Plan. To the extent permitted by Applicable Law, the Board may delegate certain of its responsibilities to a Committee. In addition, to the extent permitted by Applicable Law, the Board or the Committee may further delegate its responsibilities to any Employee of the Company or any Affiliate. Where this Plan specifies that an action must be taken or a determination made by the Committee, only the Board or the Committee may take that action or make that determination; provided that Section 5.2 includes reference to actions that only the Committee may perform. Where this Plan references the “Administrator,” the action may be taken or determination made by the Board, the Committee, or other administrator to whom the Board or Committee has delegated specified powers, including those powers set forth in Section 4.2. However, only the Board or a Committee consisting solely of independent directors as defined in the Company’ s Corporate Governance Guidelines may approve grants of Awards to Executives, and an Administrator other than the Board or the Committee may grant Awards only within the guidelines established by the Board or Committee. Moreover, all actions and determinations by any Administrator are subject to the provisions of this Plan.

(b)     So long as the Company has registered and outstanding a class of equity securities under Section 12 of the Exchange Act and to the extent necessary or helpful to comply with Applicable Law with respect to officers subject to Section 16 of the Exchange Act and/or others, a Committee shall consist of two or more Company Directors who are “Non-Employee Directors” as defined in Rule 16b-3 and who are “outside directors” as defined in Section 162(m) of the Code.

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4.2     Authority of the Board or the Committee. Subject to the other provisions of this Plan, the Board or the Committee shall have the authority to:

(a)     grant Awards, including Substitute Awards;

(b)     determine the Fair Market Value of Shares;

(c)     determine the Option Price and the Purchase Price of Awards;

(d)     select the Awardees;

(e)     determine the times Awards are granted;

(f)     determine the number of Shares subject to each Award;

(g)     determine the type of Shares subject to each Award;

(h)     determine the methods of payment that may be used to purchase Award Shares;

(i)     determine the methods of payment that may be used to satisfy withholding tax obligations;

(j)     determine the other terms of each Award, including but not limited to the time or times at which Awards may be exercised, whether and under what conditions an Award is assignable, whether an Option is a Nonstatutory Option or an Incentive Stock Option and automatic cancellation of the Award if certain objective requirements determined by the Administration are not met;

(k)     modify or amend any Award;

(l)     authorize any person to sign any Award Agreement or other document related to this Plan on behalf of the Company;

(m)     determine the form of any Award Agreement or other document related to this Plan, and whether that document, including signatures, may be in electronic form;

(n)     interpret this Plan and any Award Agreement or document related to this Plan;

(o)     correct any defect, remedy any omission, or reconcile any inconsistency in this Plan, any Award Agreement or any other document related to this Plan;

(p)     adopt, amend, and revoke rules and regulations under this Plan, including rules and regulations relating to sub-plans and Plan addenda;

(q)     adopt, amend, and revoke special rules and procedures which may be inconsistent with the terms of this Plan, set forth (if the Administrator so chooses) in sub-plans regarding (for example) the operation and administration of this Plan and the terms of Awards, if and to the extent necessary or useful to accommodate non-U.S. Applicable Laws and practices as they apply to Awards and Award Shares held by, or granted or issued to, persons working or resident outside of the United States or employed by Affiliates incorporated outside the United States;

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(r)     determine whether a transaction or event should be treated as a Divestiture;

(s)     determine the effect of a Fundamental Transaction and, if the Board determines that a transaction or event should be treated as a a Divestiture, then the effect of that Divestiture;

(t)     appoint such additional administrators as are necessary to perform various administrative acts and determine the duties of such administrators; and

(u) make all other determinations the Administrator deems necessary or advisable for the administration of this Plan.

4.3     Scope of Discretion. Subject to the provisions of this Section 4.3, on all matters for which this Plan confers the authority, right or power on the Board, the Committee, or other Administrator to make decisions, that body may make those decisions in its sole and absolute discretion. Those decisions will be final, binding and conclusive. In making its decisions, the Board, Committee or other Administrator need not treat all persons eligible to receive Awards, all Awardees, all Awards or all Award Shares the same way. Notwithstanding anything herein to the contrary, and except as provided in Section 14.3, the discretion of the Board, Committee or other Administrator is subject to the specific provisions and specific limitations of this Plan, as well as all rights conferred on specific Awardees by Award Agreements and other agreements.

5. Persons Eligible to Receive Awards

5.1     Eligible Individuals. Awards (including Substitute Awards) may be granted to, and only to, Employees, Directors and Consultants, including to prospective Employees, Directors and Consultants conditioned on the beginning of their service for the Company or an Affiliate. However, Incentive Stock Options may only be granted to Employees, as provided in Section 7(g).

5.2 Section 162(m) Limitation.

(a)     Options and SARs. Subject to the provisions of this Section 5.2, for so long as the Company is a “publicly held corporation” within the meaning of Section 162(m) of the Code: (i) no Employee may be granted within any fiscal year of the Company under this Plan Options to purchase, and SARs to receive compensation calculated with reference to, more than an aggregate of 3,000,000 Shares, subject to adjustment pursuant to Section 10 and considered without regard to any number of Stock Awards or the dollar amount of any Cash Awards that may have been granted or awarded to such Employee during the applicable fiscal year, and (ii) with respect to any Option or SAR that is granted with the intent of having it qualify as “qualified performance-based compensation” under Code Section 162(m), Options and SARs may be granted to an Executive only by the Committee (and, notwithstanding anything to the contrary in Section 4.1(a), not by the Board). If an Option or SAR is cancelled without being exercised, that cancelled Option or SAR shall continue to be counted against the limit on Awards that may be granted to any individual under this Section 5.2(a).

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(b)     Cash Awards and Other Stock Awards. Subject to the provisions of this Section 5.2, so long as the Company is a “publicly held corporation” within the meaning of Code Section 162(m), with respect to any Stock Award or Cash Award that is granted with the intent of having it qualify as “qualified performance-based compensation” under Code Section 162(m): (i) no Employee may be granted one or more Stock Awards within any single fiscal year of the Company to purchase more than 2,000,000 Shares, subject to adjustment pursuant to Section 10 and considered without regard to any number of Option or SAR Shares or the dollar amount of any Cash Awards that may have been granted or awarded to such Employee during the applicable fiscal year, and (ii) no Employee may be granted one or more Cash Awards within a single fiscal year of the Company having an aggregate amount of more than $5,000,000, considered without regard to any number of Options, SARs or Stock Awards that may have been granted or awarded to such Employee during the applicable fiscal year. With respect to any Stock Award or Cash Award that is granted with the intent of having it qualify as “qualified performance-based compensation” under Code Section 162(m), such Awards may be granted to an Executive only by the Committee (and, notwithstanding anything to the contrary in Section 4.1(a), not by the Board).

(c)     Any Cash Award or Stock Award intended as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code must be awarded, vest or become exercisable contingent on the achievement of one or more Objectively Determinable Performance Conditions. The Committee shall have the discretion to determine the time and manner of compliance with Section 162(m) of the Code.

(d)     Nothing in this Section 5.2 shall prevent the Committee from making any type of Award authorized for grant under this Plan outside of this Plan. In addition, nothing in this Section 5.2 shall prevent the Committee from granting Awards under this Plan that are not intended to qualify as “qualified performance-based compensation” under Code Section 162(m).

(e)     Notwithstanding satisfaction, achievement or completion of any Objectively Determinable Performance Conditions, that may be specified at the time of grant of an Award to a “covered employee” within the meaning of Section 162(m) of the Code, the number of Awards, Shares, or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Objectively Determinable Performance Condition(s) may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.

6. Terms and Conditions of Options

Options will be evidenced by an Award Agreement. In addition, the following rules apply to all Options:

6.1     Price. No Option (other than Substitute Options) may have an Option Price less than the Fair Market Value of the underlying Share on the Grant Date.

6.2     Term. No Option shall be exercisable after its Expiration Date. No Option may have an Expiration Date that is more than ten years after its Grant Date. Additional provisions regarding the term of Incentive Stock Options are provided in Sections 7(a) and
7(e).

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6.3     Vesting. Options shall be exercisable: (a) on the Grant Date, or (b) in accordance with a schedule related to the Grant Date, the date the Awardee’s directorship, employment or consultancy begins, or a different date specified in the Award Agreement. Additional provisions regarding the vesting of Incentive Stock Options are provided in Section 7(c). No Option granted to an individual who is subject to the overtime pay provisions of the Fair Labor Standards Act may be exercised before the expiration of six months after the Grant Date.

6.4     Form and Method of Payment. In accordance with Section 4.2, the Administrator shall have the authority to determine the acceptable form and method of payment for exercising an Option. Acceptable forms of payment that the Administrator may permit with respect to the exercise of Options include:

(a)     cash, check or wire transfer, denominated in U.S. dollars except as specified by the Administrator for non-U.S. Employees or non-U.S. sub-plans;

(b)     other shares of stock of the Company, or the designation of other shares of stock of the Company, which have a Fair Market Value on the date of surrender greater than or equal to the Option Price of the Shares as to which the Option is being exercised;

(c)     provided that a public market exists for the Common Stock, consideration received by the Company under a procedure under which a licensed broker-dealer advances funds on behalf of an Awardee or sells shares of Common Stock issued upon conversion of the Option Shares on behalf of an Awardee (a “Cashless Exercise Procedure”), provided that if the Company extends or arranges for the extension of credit to an Awardee under any Cashless Exercise Procedure, no Officer or Director may participate in that Cashless Exercise Procedure;

(d)     cancellation of any debt owed by the Company or any Affiliate to the Awardee by the Company (including, without limitation, waiver of compensation due or accrued for services previously rendered to the Company);

(e)     payment pursuant to any “cashless net exercise” procedures approved by the Committee; provided that the difference between the full number of Shares covered by the exercised portion of the Award and the number of Shares actually delivered shall be restored to the amount of Shares reserved for issuance under Section 3.1; and

(f)     any combination of the methods of payment permitted by any paragraph of this Section 6.4.

The Committee may also permit any other form or method of payment for Option Shares permitted by Applicable Law. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.

6.5     Nonassignability of Options. Except as otherwise determined by the Administrator and subject to Section 17, no Option shall be assignable or otherwise transferable by the Awardee. Incentive Stock Options may only be assigned in compliance with Section 7(h).

6.6     Substitute Options. The Committee may cause the Company to grant Substitute Options in connection with the acquisition by the Company or an Affiliate of equity securities of any entity (including by merger, tender offer, or other similar transaction) or of all or a portion of the assets of any entity. Any such substitution shall be effective on the effective date of the acquisition. Substitute Options may be Nonstatutory Options or Incentive Stock Options. Unless and to the extent specified otherwise by the Committee, Substitute Options shall have the same terms and conditions as the options they replace, except that (subject to the provisions of Section 10) Substitute Options shall be Options to purchase Shares rather than equity securities of the granting entity, shall have an Option Price determined by the Committee and shall be on terms that, as determined by the Committee in its sole and absolute discretion, properly reflect the substitution.

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6.7     No Repricing. The Committee may not reprice, reduce the exercise price of or make similar adjustments with the effect of lowering the exercise price of Options previously granted under the Plan, including through a cancellation and grant of any new Award or payment of cash, without the approval of the Company’s stockholders other than in connection with a change in the Company’s capitalization pursuant to Section 10 of the Plan.

7. Incentive Stock Options

The following rules apply only to Incentive Stock Options and only to the extent these rules are more restrictive than the rules that would otherwise apply under this Plan. With the consent of the Awardee, or where this Plan provides that an action may be taken notwithstanding any other provision of this Plan, the Administrator may deviate from the requirements of this Section, notwithstanding that any Incentive Stock Option modified by the Administrator will thereafter be treated as a Nonstatutory Option.

(a)     The Expiration Date of an Incentive Stock Option shall not be later than ten years from its Grant Date, with the result that no Incentive Stock Option may be exercised after the expiration of ten years from its Grant Date.

(b)     No Incentive Stock Option may be granted after June 15, 2022.

(c)     Options intended to be incentive stock options under Section 422 of the Code that are granted to any single Awardee under all incentive stock option plans of the Company and its Affiliates, including incentive stock options granted under this Plan, may not vest at a rate of more than $100,000 in Fair Market Value of stock (measured on the grant dates of the options) during any calendar year. For this purpose, an option vests with respect to a given share of stock the first time its holder may purchase that share, notwithstanding any right of the Company to repurchase that share. Unless the administrator of that option plan specifies otherwise in the related agreement governing the option, this vesting limitation shall be applied by, to the extent necessary to satisfy this $100,000 rule, treating certain stock options that were intended to be incentive stock options under Section 422 of the Code as Nonstatutory Options. The stock options or portions of stock options to be reclassified as Nonstatutory Options are those with the highest option prices, whether granted under this Plan or any other equity compensation plan of the Company or any Affiliate that permits that treatment. This Section 7(c) shall not cause an Incentive Stock Option to vest before its original vesting date or cause an Incentive Stock Option that has already vested to cease to be vested.

(d)     In order for an Incentive Stock Option to be exercised for any form of payment other than those described in Section 6.4(a), that right must be stated at the time of grant in the Award Agreement relating to that Incentive Stock Option.

(e)     Any Incentive Stock Option granted to a Ten Percent Stockholder, must have an Expiration Date that is not later than five years from its Grant Date, with the result that no such Option may be exercised after the expiration of five years from the Grant Date.

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(f)     The Option Price of an Incentive Stock Option shall never be less than the Fair Market Value of the Shares at the Grant Date. The Option Price for the Shares covered by an Incentive Stock Option granted to a Ten Percent Stockholder shall never be less than 110% of the Fair Market Value of the Shares at the Grant Date.

(g)     Incentive Stock Options may be granted only to Employees. If an Awardee changes status from an Employee to a Consultant, that Awardee’s Incentive Stock Options become Nonstatutory Options if not exercised within the time period described in Section 7(i) (determined by treating that change in status as a Termination solely for purposes of this Section
7(g)).

(h)     No rights under an Incentive Stock Option may be transferred by the Awardee, other than by will or the laws of descent and distribution. During the life of the Awardee, an Incentive Stock Option may be exercised only by the Awardee. The Company’s compliance with a Qualified Domestic Relations Order, or the exercise of an Incentive Stock Option by a guardian or conservator appointed to act for the Awardee, shall not violate this Section 7(h).

(i)     An Incentive Stock Option shall be treated as a Nonstatutory Option if it remains exercisable after, and is not exercised within, the three-month period beginning with the Awardee’s Termination for any reason other than the Awardee’s death or disability (as defined in Section 22(e) of the Code). In the case of Termination due to death, an Incentive Stock Option shall continue to be treated as an Incentive Stock Option if it remains exercisable after, and is not exercised within, the three month period after the Awardee’s Termination provided it is exercised before the Expiration Date. In the case of Termination due to disability, an Incentive Stock Option shall be treated as a Nonstatutory Option if it remains exercisable after, and is not exercised within, one year after the Awardee’s Termination.

(j)     An Incentive Stock Option may only be modified by the Committee.

8. Stock Appreciation Rights, Stock Awards and Cash Awards

8.1 Stock Appreciation Rights. The following rules apply to SARs:

(a)     General. SARs may be granted either alone, in addition to, or in tandem with other Awards granted under this Plan. The Administrator may grant SARs to eligible participants subject to terms and conditions not inconsistent with this Plan and determined by the Administrator. The specific terms and conditions applicable to the Awardee shall be provided for in the Award Agreement. SARs shall be exercisable, in whole or in part, at such times as the Administrator shall specify in the Award Agreement. The grant or vesting of a SAR may be made contingent on the achievement of Objectively Determinable Performance Conditions. The Expiration Date of an SAR shall not be later than ten years from its Grant Date, with the result that no SAR may be exercised after the expiration of ten years from its Grant Date

(b)     Exercise of SARs. Upon the exercise of an SAR, in whole or in part, an Awardee shall be entitled to a payment in an amount equal to the excess of the Fair Market Value of a fixed number of Shares covered by the exercised portion of the SAR on the date of exercise, over the Fair Market Value of the Shares covered by the exercised portion of the SAR on the Grant Date. The amount due to the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a combination thereof as, and over the period or periods, specified in the Award Agreement. An Award Agreement may place limits on the amount that may be paid over any specified period or periods upon the exercise of a SAR, on an aggregate basis or as to any Awardee. Subject to Section 9.2, a SAR shall be considered exercised when the Company receives written notice of exercise in accordance with the terms of the Award Agreement from the person entitled to exercise the SAR. If a SAR has been granted in tandem with an Option, upon the exercise of the SAR, the number of Shares that may be purchased pursuant to the Option shall be reduced by the number of Shares with respect to which the SAR is exercised.

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(c)     Nonassignability of SARs. Except as determined by the Administrator and subject to Section 17, no SAR shall be assignable or otherwise transferable by the Awardee.

(d)     Substitute SARs. The Committee may cause the Company to grant Substitute SARs in connection with the acquisition by the Company or an Affiliate of equity securities of any entity (including by merger, tender offer, or other similar transaction) or of all or a portion of the assets of any entity. Any such substitution shall be effective on the effective date of the acquisition. Unless and to the extent specified otherwise by the Committee, Substitute SARs shall have the same terms and conditions as the SARs they replace, except that (subject to the provisions of Section 10) Substitute SARs shall be exercisable for Shares rather than equity securities of the granting entity and shall be on terms that, as determined by the Committee in its sole and absolute discretion, properly reflects the substitution.

(e)     No Repricing. The Committee may not reprice, reduce the exercise price of or make similar adjustments with the effect of lowering the exercise price of SARs previously granted under the Plan, including through the cancellation and grant of any new Award or payment of cash, without the approval of the Company’s stockholders other than in connection with a change in the Company’s capitalization pursuant to Section 10 of the Plan.

8.2 Stock Awards. The following rules apply to all Stock Awards:

(a)     General. The specific terms and conditions of a Stock Award applicable to the Awardee may be provided for in the Award Agreement. The Award Agreement shall state the number of Shares that the Awardee shall be entitled to receive or purchase, the terms and conditions on which the Shares shall vest (Stock Awards may be made in fully vested Shares when appropriate in the discretion of the Administrator), the price to be paid, whether Shares are to be delivered at the time of grant or at some deferred date specified in the Award Agreement, whether the Award is payable solely in Shares, cash or either and, if applicable, the manner in which the Award Agreement is to be accepted or acknowledged by the Awardee. The Administrator may require that all Shares subject to a right of repurchase or risk of forfeiture be held in escrow until such repurchase right or risk of forfeiture lapses. The grant or vesting of a Stock Award may be made contingent on the achievement of Objectively Determinable Performance Conditions.

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(b)     Right of Repurchase. If so provided in the Award Agreement, Award Shares acquired pursuant to a Stock Award may be subject to repurchase by the Company or an Affiliate if not vested in accordance with the Award Agreement.

(c)     Form of Payment. The Administrator shall determine the acceptable form and method of payment for exercising a Stock Award, which may include any or all of the forms of payment set forth in Section 6.4.

(d)     Dividend Equivalent Rights. The Committee, in its discretion, may provide in the Award Agreement evidencing any Stock Award that the Awardee shall be entitled to Dividend Equivalent Rights, which may be settled in the form of cash, Shares or a combination of both. Dividend Equivalent Rights will not be permitted on appreciation awards (e.g., SARs and Options), and will not be paid out on unearned performance awards.

(e)     Nonassignability of Stock Awards. Except as otherwise determined by the Administrator and subject to Section 17, no Stock Award subject by its terms to any conditions or restrictions on the issuance or ownership rights of Shares pursuant to such Award, including without limitation any vesting or similar conditions or any deferral elections, shall be assignable or otherwise transferable by the Awardee.

(f)     Substitute Stock Award. The Committee may cause the Company to grant Substitute Stock Awards in connection with the acquisition by the Company or an Affiliate of equity securities of any entity (including by merger, tender offer, or other similar transaction) or of all or a portion of the assets of any entity. Unless and to the extent specified otherwise by the Committee, Substitute Stock Awards shall have the same terms and conditions as the stock awards they replace, except that (subject to the provisions of Section 10) Substitute Stock Awards shall be Stock Awards to purchase Shares rather than equity securities of the granting entity and shall have a Purchase Price and other terms that, as determined by the Committee in its sole and absolute discretion, properly reflects the substitution. Any such Substitute Stock Award shall be effective on the effective date of the acquisition.

(g)     Forfeiture and Repurchase Rights.

(i)     General. In the event of the Awardee’s termination, any unvested Shares and Stock Awards shall be forfeited, or if the Awardee paid a purchase price to acquire the Stock Award, the Company shall have the right, during the seven months after the Awardee’s Termination, to repurchase any or all of the Award Shares that were outstanding and unvested as of the date of that Termination. The repurchase price shall be determined by the Administrator in accordance with this Section 8.2(g) which shall be either (i) the Purchase Price for the Award Shares (minus the amount of any cash dividends paid or payable with respect to the Award Shares for which the record date precedes the repurchase) or (ii) the lower of (A) the Purchase Price for the Shares or (B) the Fair Market Value of those Award Shares as of the date of the Termination. The repurchase price shall be paid in cash. The Company may assign this right of repurchase.

(ii)     Procedure. The Company or its assignee may choose to give the Awardee a written notice of exercise of its repurchase rights under this Section 8.2(g). However, the Company’s failure to give such a notice shall not affect its rights to repurchase Award Shares. The Company must, however, tender the repurchase price during the period specified in this Section 8.2(f) for exercising its repurchase rights in order to exercise such rights.

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8.3     Cash Awards. Cash Awards may be granted either alone, in addition to, or in tandem with other Awards granted under this Plan. After the Administrator determines that it will offer a Cash Award, it shall advise the Awardee, by means of an Award Agreement or otherwise, of the terms, conditions and restrictions related to the Cash Award. The grant or vesting of a Cash Award may be made contingent on the achievement of Objectively Determinable Performance Conditions.

9. Exercise of Awards

9.1     In General. An Award shall be exercisable in accordance with this Plan and the Award Agreement under which it is granted.

9.2     Time of Exercise. Options and Stock Awards shall be considered exercised when the Company or its designee receives: (a) written (including electronically pursuant to Section 18.4 below) notice of exercise from the person entitled to exercise the Option or Stock Award, (b) full payment, or provision for payment, in a form and method approved by the Administrator, for the Shares for which the Option or Stock Award is being exercised, and (c) with respect to any Award the exercise of which triggers any withholding obligation, payment, or provision for payment, in a form and method approved by the Administrator, of all applicable withholding and similar taxes and/or (if applicable) transaction costs due upon exercise. An Award may not be exercised for a fraction of a Share. SARs shall be considered exercised when the Company receives written notice of the exercise from the person entitled to exercise the SAR.

9.3     Issuance of Award Shares. Subject to Sections 12.1 and 13, the Company shall issue Award Shares in the name of the Awardee (or to such other person as to whom the Award Shares may be appropriately and legally issued under procedures and rules, if any, established from time to time by the Administrator). The Company shall endeavor to issue Award Shares promptly after an Award is exercised or after the Grant Date or settlement date of a Stock Award, as applicable. Until Award Shares are actually issued, as evidenced by the appropriate entry on the stock register of the Company or its transfer agent, the Awardee will not have the rights of a stockholder with respect to those Award Shares, even though the Awardee has completed all the steps necessary to exercise the Award. No adjustment shall be made for any dividend, distribution, or other right for which the record date precedes the date the Award Shares are issued, except as provided in Section 10 or in the Award Agreement.

9.4 Termination.

(a)     In General. Except as provided in an Award Agreement or in writing by the Administrator, including in an Award Agreement, and as otherwise provided in Sections 9.4(b), (c), (d) and (e) after an Awardee’s Termination for other than Cause, the Awardee’s Awards shall be exercisable to the extent (but only to the extent) they are vested on the date of that Termination and only during the ninety (90) days after the Termination, but in no event after the Expiration Date. Unless otherwise provided in the Award Agreement, in the event of termination for Cause the Award may not be exercised after the date of Termination. To the extent the Awardee does not exercise an Award within the time specified for exercise, the Award shall automatically terminate.

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(b)     Leaves of Absence. If an Awardee is an employee of the Company or an Affiliate and is on a leave of absence pursuant to the terms of the Company’s Administrative Policy No. SH-1 “Working Hours and Absences” or similar policy maintained by an Affiliate, as such policies may be revised or replaced from time to time, the Awardee shall not, during the period of such absence be deemed, by virtue of such absence alone, to have terminated the Awardee’s employment. The Awardee shall continue to vest in the Award during any approved medical or military leave of absence. Medical leave shall include family or medical leaves, workers’ compensation leave, or pregnancy disability leave. For all other leaves of absence, the Award will fully vest only during active employment and shall not vest during a leave of absence, unless required under local law. However, if an Awardee returns to active employment with the Company or an Affiliate following such a leave, the Award will be construed to vest as if there had been no break in active employment. During any leave of absence, an Awardee shall have the right to exercise the vested portion of the Award.

(c)     Death or Disability. Unless otherwise provided in the Award Agreement or determined by the Administrator, if an Awardee’s Termination is due to death or disability (as determined by the Administrator with respect to all Awards other than Incentive Stock Options and as defined by Section 22(e) of the Code with respect to Incentive Stock Options), the unvested portion of all Awards of that Awardee shall be accelerated and become fully exercisable upon the Termination, and all Awards of the Awardee shall be exercisable until the Expiration Date. In the case of Termination due to death, an Award may be exercised as provided in Section 17. In the case of Termination due to disability, if a guardian or conservator has been appointed to act for the Awardee and been granted this authority as part of that appointment, that guardian or conservator may exercise the Award on behalf of the Awardee. Unless otherwise provided in the Award Agreement, death or disability occurring after an Awardee’s Termination shall not cause the Termination to be treated as having occurred due to death or disability. To the extent an Award is not so exercised within the time specified for its exercise, the Award shall automatically terminate.

(d)     Divestiture. If an Awardee’s Termination is due to a Divestiture, the Committee may take any one or more of the actions described in Section 10.3 with respect to the Awardee’s Awards.

(e)     Administrator Discretion. Notwithstanding the provisions of Section 9.4 (a)-(d), the Administrator shall have complete discretion, exercisable either at the time an Award is granted or at any time while the Award remains outstanding, to:

(i)     Extend the period of time for which the Award is to remain exercisable, following the Awardee’s Termination, from the limited exercise period otherwise in effect for that Award to such greater period of time as the Administrator shall deem appropriate, but in no event beyond the Expiration Date; and/or

(ii)     Permit the Award to be exercised, during the applicable post-Termination exercise period, not only with respect to the number of vested Shares for which such Award may be exercisable at the time of the Awardee’s Termination but also with respect to one or more additional installments in which the Awardee would have vested had the Awardee not been subject to Termination.

(f)     Consulting or Employment Relationship. Nothing in this Plan or in any Award Agreement, and no Award or the fact that Award Shares remain subject to repurchase rights or risk of forfeiture, shall: (A) interfere with or limit the right of the Company or any Affiliate to terminate the employment or consultancy of any Awardee at any time, whether with or without cause or reason, and with or without the payment of severance or any other compensation or payment, (B) confer upon any employee any right to continue in the employ of, or affiliation with, the Company or a Subsidiary nor constitute any promise or commitment by the Company or a Subsidiary regarding future positions, future work assignments, future compensation or any other term or condition of employment or affiliation or (C) interfere with the application of any provision in any of the Company’s or any Affiliate’s charter documents or Applicable Law relating to the election, appointment, term of office, or removal of a Director.

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10. Certain Transactions and Events

10.1     In General. Except as provided in this Section 10, no change in the capital structure of the Company, merger, sale or other disposition of assets or of a subsidiary, change in control, issuance by the Company of shares of any class of securities or securities convertible into shares of any class of securities, exchange or conversion of securities, or other transaction or event shall require or be the occasion for any adjustments of the type described in this Section 10.

10.2     Changes in Capital Structure. In the event of any stock split, reverse stock split, recapitalization, combination or reclassification of stock, stock dividend, spin-off, extraordinary cash dividend or similar change to the capital structure of the Company (not including a Fundamental Transaction), the Committee shall make such adjustments as it concludes are appropriate in order to preserve the proportionate value of Awards before and after the change in capital structure of the Company to: (a) the number and type of Awards and Award Shares that may be granted under this Plan, including (without limitation) to the number of Shares available for issuance over the term of this Plan as set forth in Section 3.1 above, (b) the number and type of Options, SARs and Stock Awards that may be granted to any individual under this Plan, (c) the terms of any SAR, (d) the Purchase Price and repurchase price of any Stock Award or other Award Shares, (e) the Option Price and number and class of securities issuable under each outstanding Option, and (f) the repurchase price of any securities substituted for Award Shares that are subject to repurchase rights. The specific adjustments shall be determined by the Committee. Unless the Committee specifies otherwise, any securities issuable as a result of any such adjustment shall be rounded down to the next lower whole security. The Committee need not adopt the same rules for each Award or each Awardee.

10.3     Fundamental Transactions. In the event of (a) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption shall be binding on all participants), (b) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (c) the sale of all or substantially all of the assets of the Company, or (d) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction (each, a “Fundamental Transaction”), any or all outstanding Options, SARs and Stock Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement shall be binding on all participants under this Plan. In the alternative, the successor corporation may substitute equivalent Options, SARs and Stock Awards or provide substantially similar consideration to participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares held by the participants, substantially similar shares or other property subject to repurchase restrictions no less favorable to the participant. In the event such successor corporation (if any) does not assume or substitute Options, SARs and Stock Awards, as provided above, pursuant to a transaction described in this Subsection 10.3, the vesting with respect to such Awards shall fully and immediately accelerate or the repurchase rights of the Company shall fully and immediately terminate, as the case may be, so that the Awards may be exercised or the repurchase rights shall terminate before, or otherwise in connection with the closing or completion of the Fundamental Transaction or event and the Award shall then terminate. Notwithstanding anything in this Plan to the contrary, the Committee may, in its sole discretion, provide that the vesting of any or all Award Shares subject to vesting or right of repurchase shall accelerate or lapse, as the case may be, upon a transaction described in this Section 10.3. If the Committee exercises such discretion with respect to Options, such Options shall become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the Fundamental Transaction, the Committee may specify that they terminate at such time as determined by the Committee. Subject to any greater rights granted to participants under the foregoing provisions of this Section 10.3, in the event of the occurrence of any Fundamental Transaction, any outstanding Awards shall be treated as provided in the applicable agreement or plan of merger, consolidation or sale of assets.

17

10.4     Additional Rules and Benefits related to Fundamental Transactions. The Committee need not adopt the same rules for each Award or each Awardee. Notwithstanding anything in this Plan to the contrary, in the event of an Involuntary Termination of services for any reason other than death, disability or Cause, within 18 months following the consummation of a Fundamental Transaction, any Options, SARs and Stock Awards assumed or substituted in a Fundamental Transaction, which are subject to vesting conditions and/or the right of repurchase in favor of the Company or a successor entity, shall fully accelerate for vesting so that such Award Shares are immediately exercisable upon Termination or, if subject to the right of repurchase in favor of the Company, such repurchase rights shall lapse as of the date of Termination. Any such Awards having an exercisability feature shall be exercisable for a period of six months following Termination.

10.5     Divestiture. If the Company or an Affiliate sells or otherwise transfers equity securities of an Affiliate to a person or entity other than the Company or an Affiliate, or leases, exchanges or transfers all or any portion of its assets to such a person or entity, then the Committee may specify that such transaction or event constitutes a “Divestiture”. In connection with a Divestiture, notwithstanding any other provision of this Plan, the Committee may, but need not, take one or more of the actions described in Section 10.3 or 10.4 with respect to Awards or Award Shares held by, for example, Employees, Directors or Consultants for whom that transaction or event results in a Termination. The Committee need not adopt the same rules for each Award or Awardee.

10.6     Dissolution. If the Company adopts a plan of dissolution, the Committee may cause Awards to be fully vested and exercisable (but not after their Expiration Date) before the dissolution is completed but contingent on its completion and may cause the Company’s repurchase rights on Award Shares to lapse upon completion of the dissolution. The Committee need not adopt the same rules for each Award or each Awardee. Notwithstanding anything herein to the contrary, in the event of a dissolution of the Company, to the extent not exercised before the earlier of the completion of the dissolution or their Expiration Date, Awards shall terminate immediately prior to the dissolution.

10.7     Cut-Back to Preserve Benefits. If the Administrator determines that the net after-tax amount to be realized by any Awardee, taking into account any accelerated vesting, termination of repurchase rights, or cash payments to that Awardee in connection with any transaction or event set forth in this Section 10 would be greater if one or more of those steps were not taken or payments were not made with respect to that Awardee’s Awards or Award Shares, then, at the election of the Awardee, to such extent, one or more of those steps shall not be taken and payments shall not be made.

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11. Grants to Non-Employee Directors

11.1 Certain Transactions and Events.

(a)     In the event of a Fundamental Transaction while the Awardee remains a non-Employee Director, the Shares at the time subject to each outstanding Award held by such Awardee pursuant to this Plan, but not otherwise vested, shall automatically vest in full and become exercisable for all Shares as fully vested Shares and all repurchase rights shall automatically terminate in full immediately prior to the effective date of the Fundamental Transaction. Immediately following the consummation of the Fundamental Transaction, each Award shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or Affiliate thereof).

(b)     Each Award which is assumed in connection with a Fundamental Transaction shall be appropriately adjusted, immediately after such Fundamental Transaction, to apply to the number and class of securities which would have been issuable to the Awardee in consummation of such Fundamental Transaction had the Award been exercised immediately prior to such Fundamental Transaction. Appropriate adjustments shall also be made to the Option Price or Purchase Price payable per share under each outstanding Award, provided the aggregate Option Price or Purchase Price payable for such securities shall remain the same. To the extent the actual holders of the Company’s outstanding Shares receive cash consideration for their Shares in consummation of the Fundamental Transaction, the successor corporation may, in connection with the assumption of the outstanding Awards granted to non-Employee Directors under this Plan, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per Share in such Fundamental Transaction.

12. Withholding and Tax Reporting

12.1 Tax Withholding Alternatives.

(a)     General. Whenever Awards are granted or exercised, or Award Shares are issued or become free of restrictions, as applicable, the Company may require the Awardee to remit to the Company an amount sufficient to satisfy any applicable tax withholding requirement, whether the related tax is imposed on the Awardee or the Company. The Company shall have no obligation to deliver Award Shares or release Award Shares from an escrow or permit a transfer of Award Shares until the Awardee has satisfied those tax withholding obligations. Whenever payment in satisfaction of Awards is made in cash, the payment will be reduced by an amount sufficient to satisfy all tax withholding requirements.

(b)     Method of Payment. The Awardee shall pay any required withholding using such forms of consideration as are described in Section 6.4 and determined appropriate by the Administrator. The Administrator, in its sole discretion, may also permit Award Shares to be withheld or surrendered to pay required withholding or for required withholding to be paid through payroll deductions. If the Administrator permits Award Shares to be withheld or surrendered, the Fair Market Value of the Award Shares withheld or surrendered, as determined as of the date of withholding, shall not exceed the amount determined by the applicable minimum statutory withholding rates to the extent the Administrator determines such limit is necessary or advisable in light of generally accepted accounting principles.

19

12.2     Reporting of Dispositions. Any holder of Option Shares acquired under an Incentive Stock Option shall promptly notify the Administrator, following such procedures as the Administrator may require, of the sale or other disposition of any of those Option Shares if the disposition occurs during: (a) the longer of two years after the Grant Date of the Incentive Stock Option and one year after the date the Incentive Stock Option was exercised, or (b) such other period as the Administrator has established.

13. Compliance With Law

The grant of Awards and the issuance and subsequent transfer of Award Shares shall be subject to compliance with all Applicable Law, including all applicable securities laws. Awards may not be exercised, and Award Shares may not be transferred, in violation of Applicable Law. Thus, for example, Awards may not be exercised unless: (a) a registration statement under the Securities Act is then in effect with respect to the related Award Shares, or (b) in the opinion of legal counsel to the Company, those Award Shares may be issued in accordance with an applicable exemption from the registration requirements of the Securities Act and any other applicable securities laws. The failure or inability of the Company to obtain from any regulatory body the authority considered by the Company’s legal counsel to be necessary or useful for the lawful issuance of any Award Shares or their subsequent transfer shall relieve the Company of any liability for failing to issue those Award Shares or permitting their transfer. As a condition to the exercise of any Award or the transfer of any Award Shares, the Company may require the Awardee to satisfy any requirements or qualifications that may be necessary or appropriate to comply with or evidence compliance with any Applicable Law.

14. Amendment or Termination of this Plan or Outstanding Awards

14.1     Amendment and Termination. The Board or the Committee may at any time amend, suspend, or terminate this Plan.

14.2     Stockholder Approval. The Company shall obtain the approval of the Company’s stockholders for any amendment to this Plan if stockholder approval is necessary or desirable to comply with any Applicable Law or with the requirements applicable to the grant of Awards intended to be Incentive Stock Options. The Board may also, but need not, require that the Company’s stockholders approve any other amendments to this Plan.

14.3     Effect. No amendment, suspension, or termination of this Plan, and no modification of any Award even in the absence of an amendment, suspension, or termination of this Plan, shall impair any existing contractual rights of any Awardee unless the affected Awardee consents to the amendment, suspension, termination, or modification. Notwithstanding anything herein to the contrary, no such consent shall be required if the Committee determines that the amendment, suspension, termination, or modification (including an amendment of the designation of the class of securities to be issued under Awards): (a) is required or advisable in order for the Company, this Plan or the Award to satisfy Applicable Law, to meet the requirements of any accounting standard or to avoid any adverse accounting treatment, or (b) in connection with any transaction or event described in Section 10, is in the best interests of the Company or its stockholders. The Committee may, but need not, take the tax or accounting consequences to affected Awardees into consideration in acting under the preceding sentence. Those decisions shall be final, binding and conclusive. Termination of this Plan shall not affect the Administrator’s ability to exercise the powers granted to it under this Plan with respect to Awards granted before the termination of this Plan or with respect to Award Shares issued under such Awards even if those Award Shares are issued after the termination of this Plan.

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14.4     Recoupment/Clawback. Notwithstanding anything in this Plan to the contrary, Awards granted under this Plan shall be subject to cancellation, forfeiture and recovery in accordance with the Company’s Recoupment Policy, as the same may be amended from time to time, or any other compensation recoupment policy that may be adopted by the Committee, including any policies and procedures that the Committee determines to be necessary or appropriate to implement Section 10D of the Exchange Act and any rules promulgated thereunder or any other Applicable Law. Without limiting the foregoing, the Committee may provide for such recoupment in Award Agreements or with respect to any Award granted hereunder (including on a retroactive basis without the Awardee’s consent).

15. Reserved Rights

15.1     Nonexclusivity of this Plan. This Plan shall not limit the power of the Company or any Affiliate to adopt other incentive arrangements including, for example, the grant or issuance of stock options, stock, other equity-based rights or cash bonuses or awards under other plans.

15.2     Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Awardees, any such accounts will be used merely as a convenience. The Company shall not be required to segregate any assets on account of this Plan, the grant of Awards, or the issuance of Award Shares. The Company and the Administrator shall not be deemed to be a trustee of stock or cash to be awarded under this Plan. Any obligations of the Company to any Awardee shall be based solely upon contracts entered into under this Plan, such as Award Agreements. No such obligations shall be deemed to be secured by any pledge or other encumbrance on any assets of the Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any such obligations.

15.3     Compensation. The value of Options, SARs and Stock Awards granted pursuant to the Plan will not be included as compensation, earnings, salary or other similar terms used when calculating an Awardee’s benefits under any other employee benefit plan sponsored by the Company or any Affiliate except as such other plan otherwise expressly provides.

16. Escrow of Stock Certificates

To enforce any restrictions on Award Shares, the Administrator may require the holder to deposit any certificates (or indicia of ownership) representing Award Shares, with stock powers or other transfer instruments approved by the Administrator endorsed in blank, with the Company or an agent of the Company to hold in escrow until the restrictions have lapsed or terminated. The Administrator may also cause a legend or legends referencing the restrictions to be placed on any such certificates.

17. Treatment of Awards upon Death of Awardee; Limited Transferability

17.1     Treatment of Awards upon Death of Awardee. The Company may from time to time establish procedures under which the Company may make certain determinations required with respect to Awards in the event of an Awardee’s death. The Company’s determinations and decisions in this regard shall be final and binding on all parties.

17.2     Limited Transferability. Options, SARs and Stock Awards shall generally be nontransferable; provided however that the Administrator may in its discretion (and as reflected in the applicable Award Agreement or an amendment thereto) make an Option, SAR or Stock Award transferable to an Awardee’s family or entities affiliated with the Awardee’s family if and to the extent permitted under the rules and instructions applicable to Form S-8 (or any successor form or other securities laws under which the issuance and sale of Awards and Award Shares hereunder are registered or exempted). If the Administrator makes an Option, SAR or Stock Award transferable, either at the time of grant or thereafter, such Award shall contain such additional terms and conditions as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer.

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18. Miscellaneous

18.1     Governing Law. This Plan, the Award Agreements and all other agreements entered into under this Plan, and all actions taken under this Plan or in connection with Awards or Award Shares, shall be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law.

18.2     Determination of Value. The “Fair Market Value” of a Share shall be determined as follows:

(a)     Listed Stock. If Shares are traded on any established stock exchange or quoted on a national market system, Fair Market Value shall be the closing sales price as quoted on that stock exchange or system for the day before the date the value is to be determined (the “Value Date”) as reported in The Wall Street Journal or a similar publication. If no sales are reported as having occurred on the day before the Value Date, Fair Market Value shall be that closing sales price for the last preceding trading day on which sales of Shares are reported as having occurred. If no sales are reported as having occurred during the five trading days before the Value Date, Fair Market Value shall be the closing bid for the Shares on the day before the Value Date. If the Shares of the Company are listed on multiple exchanges or systems, Fair Market Value shall be based on sales or bid prices on the primary exchange or system on which Shares of the Company are traded or quoted.

(b)     Stock Quoted by Securities Dealer. If Shares are regularly quoted by a recognized securities dealer but selling prices are not reported on any established stock exchange or quoted on a national market system, Fair Market Value shall be the mean between the high bid and low asked prices on the day before the Value Date. If no prices are quoted for the day before the Value Date, Fair Market Value shall be the mean between the high bid and low asked prices on the last preceding trading day on which any bid and asked prices were quoted.

(c)     No Established Market. If Shares are not traded on any established stock exchange or quoted on a national market system and are not quoted by a recognized securities dealer, the Administrator (following guidelines established by the Board or Committee) will determine Fair Market Value of the Shares in good faith.

18.3     Reservation of Shares. During the term of this Plan, the Company shall at all times keep available such number of Shares as are still issuable under this Plan.

18.4     Electronic Communications. Any Award Agreement, notice of exercise of an Award, or other document required or permitted by this Plan may be delivered in writing or, to the extent determined by the Administrator, electronically. Signatures or acknowledgements may also be electronic if permitted by the Administrator.

22

18.5     Notices. Unless the Administrator specifies otherwise, any notice to the Company under any Award Agreement or with respect to any Awards or Award Shares shall be in writing (or, if so authorized by Section 18.4, communicated electronically), shall be addressed to the Secretary of the Company, and shall only be effective when received by the Secretary of the Company.

23

EX-31.1

Exhibit 31.1

SAIC, INC. AND SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John P. Jumper, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended July 31, 2012 of SAIC, Inc. and Science Applications International Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including each registrants’ consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: August 30, 2012

/s/    JOHN P. JUMPER        

John P. Jumper

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

SAIC, INC. AND SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark W. Sopp, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended July 31, 2012 of SAIC, Inc. and Science Applications International Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including each registrants’ consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: August 30, 2012

/s/    MARK W. SOPP        

Mark W. Sopp

Chief Financial Officer

EX-32.1

Exhibit 32.1

SAIC, INC. AND SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SAIC, Inc. (“SAIC”) and Science Applications International Corporation (“Science Applications”, and together with SAIC, the “Company”) on Form 10-Q for the period ended July 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Jumper, Chief Executive Officer and President of each of SAIC and Science Applications, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 30, 2012

/s/     JOHN P. JUMPER         

John P. Jumper

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

SAIC, INC. AND SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SAIC, Inc. (“SAIC”) and Science Applications International Corporation (“Science Applications”, and together with SAIC, the “Company”) on Form 10-Q for the period ended July 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark W. Sopp, Chief Financial Officer of each of SAIC and Science Applications, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 30, 2012

/s/     MARK W. SOPP        

Mark W. Sopp

Chief Financial Officer

XML

Schedule Of Stock Option Activity (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jul. 31, 2012	Jan. 31, 2012
Stock-Based Compensation [Abstract]
Shares of stock under stock options, Outstanding, beginning balance	20.8
Shares of stock under stock options, Options granted	4.9
Shares of stock under stock options, Options forfeited or expired	(5.5)
Shares of stock under stock options, Outstanding, ending balance	20.2	20.8
Options Exercisable at July 31, 2012	9.4
Weighted average exercise price, Outstanding, beginning balance	$ 17.90
Weighted average exercise price, Options granted	$ 13.21
Weighted average exercise price, Options forfeited or expired	$ 17.48
Weighted average exercise price, Outstanding, ending balance	$ 16.88	$ 17.90
Weighted average exercise price, Exercisable at July 31, 2012	$ 18.33
Weighted average remaining contractual term, Outstanding	3 years 4 months 24 days	2 years 6 months
Weighted average remaining contractual term, Exercisable at July 31, 2012	1 year 8 months 12 days
Aggregate intrinsic value, Outstanding, beginning balance
Aggregate intrinsic value, Outstanding, ending balance
Aggregate intrinsic value, Exercisable at July 31, 2012

XML

Schedule Of Segment Reporting Information By Segment (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Segment Reporting Information [Line Items]
Revenues	$ 2,848	$ 2,596	$ 5,630	$ 5,284
Operating income (loss)	191	209	399	439
Defense Solutions
Segment Reporting Information [Line Items]
Revenues	1,240	1,085	2,414	2,222
Operating income (loss)	92	88	193	178
Health, Energy And Civil Solutions
Segment Reporting Information [Line Items]
Revenues	692	656	1,370	1,313
Operating income (loss)	53	60	100	114
Intelligence And Cybersecurity Solutions
Segment Reporting Information [Line Items]
Revenues	919	854	1,849	1,750
Operating income (loss)	69	76	135	162
Intersegment Elimination
Segment Reporting Information [Line Items]
Revenues	(3)		(3)	(2)
Corporate And Other
Segment Reporting Information [Line Items]
Revenues		1		1
Operating income (loss)	$ (23)	$ (15)	$ (29)	$ (15)

XML

Schedule Of Notes Payable And Long-Term Debt (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012	Jan. 31, 2012
Debt Instrument [Line Items]
Total notes payable and long-term debt	$ 1,300	$ 1,852
Less current portion	3	553
Total notes payable and long-term debt, net of current portion	1,297	1,299
Fair value of notes payable and long-term debt	1,475	2,011
Notes Which Mature In December 2020
Debt Instrument [Line Items]
Senior unsecured notes	449	449
Stated interest rate	4.45%
Effective interest rate	4.53%
Notes Which Mature In December 2040
Debt Instrument [Line Items]
Senior unsecured notes	300	300
Stated interest rate	5.95%
Effective interest rate	6.03%
Notes Which Mature In July 2012
Debt Instrument [Line Items]
Senior unsecured notes		550
Stated interest rate	6.25%
Effective interest rate	6.50%
Notes Which Mature In July 2032
Debt Instrument [Line Items]
Senior unsecured notes	248	248
Stated interest rate	7.13%
Effective interest rate	7.43%
Notes Which Mature In July 2033
Debt Instrument [Line Items]
Senior unsecured notes	296	296
Stated interest rate	5.50%
Effective interest rate	5.78%
Capital Leases And Other Notes Payable Due On Various Dates Through Fiscal 2018
Debt Instrument [Line Items]
Other notes payable due on various dates through fiscal 2018	$ 7	$ 9
Minimum stated interest rate	0.00%
Maximum stated interest rate	2.50%

XML

Legal Proceedings - Additional Information (Detail) (USD $)	6 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended									1 Months Ended
	Jul. 31, 2012 LegalMatter Year Item	Jan. 31, 2012	Jul. 31, 2012 Timekeeping Contract With City Of New York	Jul. 31, 2012 Data Privacy Litigation	Apr. 30, 2012 Stockholder derivative complaints LegalMatter	Apr. 30, 2012 Securities class actions LegalMatter	Jul. 31, 2012 Greek Government Contract	Jul. 31, 2011 Greek Government Contract	Jun. 30, 2009 Greek Government Contract	Nov. 30, 2008 Greek Government Contract Invoice For Undisputed Portion Of Contract	Jul. 31, 2012 Greek Government Contract Letters Of Credit Relating To Delivery	Jul. 31, 2012 Greek Government Contract Standby Letters Of Credit	Jul. 31, 2012 Greek Government Contract Value Added Tax	Jul. 31, 2012 Greek Government Contract Letters Of Credit Related System Support And Maintenance Letters Of Credit Relating To Delivery	Jun. 30, 2009 Greek Government Contract Performance Guarantees	Dec. 31, 2010 Nuclear Regulatory Commission Breach Of Contract	Jul. 31, 2008 Nuclear Regulatory Commission Breach Of Contract	Oct. 31, 2008 Nuclear Regulatory Commission False Claims Act Claims	Jul. 31, 2008 Nuclear Regulatory Commission False Claims Act Claims
Legal Proceedings [Line Items]
Cash settlement payment			$ 500,000,000
DPA provides that the monitor will serve for a period (in years)	3
Number of patients (in millions)	5,000,000
Number of lawsuits	7				6	3
Period of identity restoration services	1
Damages sought	1,000
Judgments or settlements relating to the claims				10,000,000
Estimated loss, minimum				10,000,000
Number of lawsuits, withdrawn					1	1
Number of lawsuits, pending					1
Number of lawsuits, consolidated					4	2
Contracts receivable										17,000,000			31,000,000
Damages sought by SAIC									85,000,000						23,000,000
Profit or loss recorded on contract							0	0
Recorded losses							123,000,000
Receivables relating to value added taxes													14,000,000
Amount outstanding	0	0												4,000,000
Letter of credit available to the company											18,000,000	21,000,000
Loss related to litigation settlement																78	78
Judgment rescinded on appeal																		$ 585,000	$ 2,000,000

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Schedule Of Amortization Expense For Finite-Lived Intangible Assets (Detail) (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Goodwill And Intangible Assets [Abstract]
2013 (remainder of the fiscal year)	$ 15
2014	31
2015	27
2016	22
2017	16
2018	12
2019 and thereafter	16
Net carrying value	$ 139	$ 159

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Reconciliation Of Weighted Average Number Of Shares Outstanding (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Earnings Per Share [Abstract]
Basic weighted average number of shares outstanding	333	338	332	342
Dilutive common share equivalents-stock options and other stock awards		1		1
Diluted weighted average number of shares outstanding	333	339	332	343

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Subsequent Event - Additional Information (Detail) (Subsequent Event, Spin Off)	1 Months Ended
	Aug. 30, 2012
Subsequent Event | Spin Off
Subsequent Event [Line Items]
Subsequent event description	On August 30, 2012, the Company announced that its Board of Directors has authorized management to pursue a plan to separate into two independent, publicly traded companies. The proposed separation is intended to take the form of a tax-free spin-off to the Company’s shareholders of 100% of the shares of a newly formed company focused on government technology and enterprise information technology services. The spin-off is expected to occur in the latter half of calendar year 2013, subject to final approval of the Board of Directors and certain customary conditions, including a ruling from the IRS as to the tax-free nature of the transaction.

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Changes In Goodwill By Segment

The changes in the carrying value of goodwill for Defense Solutions (DS), Health, Energy and Civil Solutions (HECS) and Intelligence and Cybersecurity Solutions (ICS) were as follows:

	DS		HECS		ICS		Total
	(in millions)
Goodwill at January 31, 2012	$	410	$	785	$	631	$	1,826

Schedule Of Intangible Assets Including Estimates Of Assets Acquired

Intangible assets consisted of the following:

	July 31, 2012							January 31, 2012
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	119	$	(71	)	$	48	$	120	$	(62	)	$	58
Software and technology		147		(56	)		91		148		(48	)		100
Other		2		(2	)		—		2		(1	)		1
Total finite-lived intangible assets		268		(129	)		139		270		(111	)		159
Indefinite-lived intangible assets:
In-process research and development		13		—			13		13		—			13
Trade names		4		—			4		4		—			4
Total indefinite-lived intangible assets		17		—			17		17		—			17
Total intangible assets	$	285	$	(129	)	$	156	$	287	$	(111	)	$	176

Schedule Of Amortization Expense For Finite-Lived Intangible Assets

The estimated annual amortization expense related to finite-lived intangible assets as of July 31, 2012 was as follows:

Fiscal Year Ending January 31
	(in millions)
2013 (remainder of the fiscal year)	$	15
2014		31
2015		27
2016		22
2017		16
2018		12
2019 and thereafter		16
	$	139

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Related Party Transactions - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012 Year
Related Party Transaction [Line Items]
Credit facility, maturity date	2017
Related party maturity date	November 2012
Period extension for portions of intercompany loans (years)	1
Notes Which Mature In December 2020
Related Party Transaction [Line Items]
Notes payable, related parties	450
Stated interest rate	4.45%
Notes Which Mature In December 2040
Related Party Transaction [Line Items]
Notes payable, related parties	300
Stated interest rate	5.95%
Notes Which Mature In July 2033
Related Party Transaction [Line Items]
Notes payable, related parties	300
Stated interest rate	5.50%
Notes Which Mature In July 2032
Related Party Transaction [Line Items]
Notes payable, related parties	250
Stated interest rate	7.13%

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Acquisitions - Additional Information (Detail) (Subsequent Event, maxIT Healthcare Holdings, Inc., USD $) In Millions, unless otherwise specified	Aug. 10, 2012
Business Acquisition [Line Items]
Cost of acquired entity, cash paid	$ 473
Cost of acquired entity, cash payment for excess working capital delivered at closing	14
Tangible net assets of business acquired	50
Maximum
Business Acquisition [Line Items]
Cost of acquired entity, accrued	$ 20

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Stock-Based Compensation - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	5 years	4 years 10 months 24 days
Vesting period	3 years
Fair value of vesting awards that vested	$ 62	$ 61
Minimum percentage that will ultimately be awarded	0.00%
Maximum percentage that will ultimately be awarded	150.00%
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	7 years	7 years
Vesting period	4 years	4 years
Outside Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year	1 year

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Schedule Of Accumulated Other Comprehensive Loss (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
Foreign currency translation adjustments, tax effect	$ (1)	$ (2)
Unrecognized net loss on settled derivative instruments associated with outstanding debt, tax effect	3	3
Unrecognized loss on defined benefit plan, tax effect	(1)	5
Total accumulated other comprehensive loss, tax effect	$ 1	$ 6

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Financial Instruments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012 Year	Jan. 31, 2012
Financial Instruments [Line Items]
Unsecured borrowing capacity	$ 750
Extended maturity period of revolving credit facility (in years)	1
Extended maturity date of revolving credit facility	March 2016
Borrowings outstanding under the revolving credit facility	0	0
Revolving credit facility financial covenants description	For a period of four trailing fiscal quarters, the Company maintains a ratio of consolidated funded debt, including borrowings under this facility, to earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for other items as defined in the credit facility of not more than 3.0 to 1.0 and a ratio of EBITDA adjusted for other items as defined in the credit facility to interest expense of greater than 3.5 to 1.0.
Ratio of consolidated funded debt to EBITDA, numerator, maximum	3.0
Ratio of consolidated funded debt to EBITDA, denominator, maximum	1.0
Minimum ratio of EBITDA to interest expense, numerator	3.5
Minimum ratio of EBITDA to interest expense, denominator	1.0
Notes Which Mature In July 2012
Financial Instruments [Line Items]
Payments on notes payable	$ 550

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Summary of Significant Accounting Policies

6 Months Ended

Jul. 31, 2012

Summary of Significant Accounting Policies

Note 1—Summary of Significant Accounting Policies:

Nature of Operations and Basis of Presentation

SAIC, Inc. (“SAIC”) is a holding company whose direct 100%-owned subsidiary is Science Applications International Corporation (“Science Applications”), a provider of scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S. Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security, and other U.S. Government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets.

The condensed consolidated financial statements of SAIC include the accounts of its majority-owned and 100%-owned subsidiaries, including Science Applications. The condensed consolidated financial statements of Science Applications include the accounts of its majority-owned and 100%-owned subsidiaries. SAIC does not have separate operations, assets or liabilities independent of Science Applications, except for a note with Science Applications (the “related party note”), on which interest is recognized. From time to time, SAIC issues stock to Science Applications employees, which is reflected in SAIC’s Condensed Consolidated Statement of Stockholders’ Equity and results in an increase to the related party note (see Note 7). All intercompany transactions and accounts have been eliminated in consolidation.

These Combined Notes to Condensed Consolidated Financial Statements apply to both SAIC and Science Applications. As SAIC consolidates Science Applications for financial statement purposes, disclosures that relate to activities of Science Applications also apply to SAIC. References to the “Company” refer collectively to SAIC, Science Applications, and its consolidated subsidiaries unless otherwise noted.

The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and combined notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012. The preparation of 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. 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.

In the opinion of management, the financial information as of July 31, 2012 and for the three and six months ended July 31, 2012 and 2011 reflects all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. Operating results for the three and six months ended July 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2013, or any future period.

Unless otherwise noted, references to years are for fiscal years ended January 31. For example, the fiscal year ending January 31, 2013 is referred to as “fiscal 2013” in these combined notes to condensed consolidated financial statements.

Long-Term Receivables

The Company’s accounts receivable include unbilled receivables, which consist of costs and fees billable upon contract completion or the occurrence of a specified event, the majority of which is expected to be billed and collected within one year. Unbilled receivables are stated at estimated realizable value. Contract retentions are billed when the Company has negotiated final indirect rates with the U.S. Government and, once billed, are subject to audit and approval by government representatives. Consequently, the timing of collection of retention balances is outside the Company’s control. Based on the Company’s historical experience, the majority of retention balances are expected to be collected beyond one year. The Company has extended deferred payment terms with contractual maturities that may exceed one year to three commercial customers related to certain construction projects. As of July 31, 2012, the Company had outstanding receivables from these customers with deferred payment terms of $61 million, which are expected to be collected in fiscal 2013 and 2014, when the customer’s financing has been arranged. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.

Changes in Estimates on Contracts

Changes in estimates related to certain types of contracts accounted for using the percentage of completion method of accounting are recognized 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 contract performance period for a variety of reasons, including changes in contract scope, changes in contract cost estimates due to unanticipated cost growth or retirements of risk for amounts different than estimated, and changes in estimated incentive or award fees. Aggregate changes in contract estimates decreased operating income by $3 million ($0.01 per diluted share) for the three months ended July 31, 2012 and increased operating income by $1 million ($0.00 per diluted share) for the six months ended July 31, 2012 and increased operating income by $15 million ($0.03 per diluted share) and $27 million ($0.05 per diluted share) for the three and six months ended July 31, 2011, respectively.

Discontinued Operations

In June 2011, in order to better align its business portfolio with its strategy, the Company sold certain components of its business, which were historically included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing information technology services to international oil and gas companies. In fiscal 2012, the Company received net proceeds of $167 million resulting in a gain on sale before income taxes of $111 million related to this sale. Under the terms of the definitive agreement, the Company has retained the assets and obligations of its defined benefit pension plan in the United Kingdom. The Company has classified the operating results of these business components, including pension expense through the date of sale, as discontinued operations for all periods presented. Following the sale, as a result of retaining the pension obligation, the remaining components of ongoing pension expense, primarily interest costs and assumed return on plan assets, are recorded in continuing operations.

The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Income from discontinued operations also includes other activity that is immaterial and not reflected in the table above.

Subsequent to July 31, 2012, the Company committed to a plan to sell a component of the business, which is included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing operational test and evaluation services. This component of the business will be reflected as a discontinued operation beginning in the third fiscal quarter ending October 31, 2012.

Pension

During the fiscal quarter ended April 30, 2012, the Company transferred $46 million of pension plan assets to a successor contractor’s plan on behalf of certain participants in the Company’s defined benefit pension plan who previously transferred their employment to the successor contractor and settled $63 million of related pension plan obligations. As a result of the transfer, the Company recorded an immaterial settlement gain in selling, general and administrative expenses during the first quarter of fiscal 2013.

Supplementary Cash Flow Information

Supplementary cash flow information, including non-cash investing and financing activities, for the periods presented was as follows:

	Six Months Ended July 31
	2012		2011
	(in millions)
Stock exchanged at fair value upon exercises of stock options	$	—	$	14
Vested stock issued as settlement of annual bonus accruals	$	2	$	3
Increase in accrued stock repurchases	$	—	$	13
Stock issued in lieu of cash dividend	$	2	$	—
Fair value of assets acquired in acquisitions	$	—	$	29
Less: cash paid in acquisitions		—		(26	)
Liabilities assumed in acquisitions	$	—	$	3
Cash paid for interest (including discontinued operations)	$	53	$	52
Cash paid for income taxes (including discontinued operations)	$	96	$	121

Accounting Standards Updates Issued But Not Yet Adopted

Accounting standards and updates issued but not effective for the Company until after July 31, 2012, are not expected to have a material effect on the Company’s consolidated financial position or results of operations.

Science Applications International Corporation

Summary of Significant Accounting Policies

Note 1—Summary of Significant Accounting Policies:

Nature of Operations and Basis of Presentation

SAIC, Inc. (“SAIC”) is a holding company whose direct 100%-owned subsidiary is Science Applications International Corporation (“Science Applications”), a provider of scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S. Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security, and other U.S. Government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets.

The condensed consolidated financial statements of SAIC include the accounts of its majority-owned and 100%-owned subsidiaries, including Science Applications. The condensed consolidated financial statements of Science Applications include the accounts of its majority-owned and 100%-owned subsidiaries. SAIC does not have separate operations, assets or liabilities independent of Science Applications, except for a note with Science Applications (the “related party note”), on which interest is recognized. From time to time, SAIC issues stock to Science Applications employees, which is reflected in SAIC’s Condensed Consolidated Statement of Stockholders’ Equity and results in an increase to the related party note (see Note 7). All intercompany transactions and accounts have been eliminated in consolidation.

These Combined Notes to Condensed Consolidated Financial Statements apply to both SAIC and Science Applications. As SAIC consolidates Science Applications for financial statement purposes, disclosures that relate to activities of Science Applications also apply to SAIC. References to the “Company” refer collectively to SAIC, Science Applications, and its consolidated subsidiaries unless otherwise noted.

The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and combined notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012. The preparation of 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. 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.

In the opinion of management, the financial information as of July 31, 2012 and for the three and six months ended July 31, 2012 and 2011 reflects all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. Operating results for the three and six months ended July 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2013, or any future period.

Unless otherwise noted, references to years are for fiscal years ended January 31. For example, the fiscal year ending January 31, 2013 is referred to as “fiscal 2013” in these combined notes to condensed consolidated financial statements.

Long-Term Receivables

The Company’s accounts receivable include unbilled receivables, which consist of costs and fees billable upon contract completion or the occurrence of a specified event, the majority of which is expected to be billed and collected within one year. Unbilled receivables are stated at estimated realizable value. Contract retentions are billed when the Company has negotiated final indirect rates with the U.S. Government and, once billed, are subject to audit and approval by government representatives. Consequently, the timing of collection of retention balances is outside the Company’s control. Based on the Company’s historical experience, the majority of retention balances are expected to be collected beyond one year. The Company has extended deferred payment terms with contractual maturities that may exceed one year to three commercial customers related to certain construction projects. As of July 31, 2012, the Company had outstanding receivables from these customers with deferred payment terms of $61 million, which are expected to be collected in fiscal 2013 and 2014, when the customer’s financing has been arranged. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.

Changes in Estimates on Contracts

Changes in estimates related to certain types of contracts accounted for using the percentage of completion method of accounting are recognized 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 contract performance period for a variety of reasons, including changes in contract scope, changes in contract cost estimates due to unanticipated cost growth or retirements of risk for amounts different than estimated, and changes in estimated incentive or award fees. Aggregate changes in contract estimates decreased operating income by $3 million ($0.01 per diluted share) for the three months ended July 31, 2012 and increased operating income by $1 million ($0.00 per diluted share) for the six months ended July 31, 2012 and increased operating income by $15 million ($0.03 per diluted share) and $27 million ($0.05 per diluted share) for the three and six months ended July 31, 2011, respectively.

Discontinued Operations

In June 2011, in order to better align its business portfolio with its strategy, the Company sold certain components of its business, which were historically included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing information technology services to international oil and gas companies. In fiscal 2012, the Company received net proceeds of $167 million resulting in a gain on sale before income taxes of $111 million related to this sale. Under the terms of the definitive agreement, the Company has retained the assets and obligations of its defined benefit pension plan in the United Kingdom. The Company has classified the operating results of these business components, including pension expense through the date of sale, as discontinued operations for all periods presented. Following the sale, as a result of retaining the pension obligation, the remaining components of ongoing pension expense, primarily interest costs and assumed return on plan assets, are recorded in continuing operations.

The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Income from discontinued operations also includes other activity that is immaterial and not reflected in the table above.

Subsequent to July 31, 2012, the Company committed to a plan to sell a component of the business, which is included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing operational test and evaluation services. This component of the business will be reflected as a discontinued operation beginning in the third fiscal quarter ending October 31, 2012.

Pension

During the fiscal quarter ended April 30, 2012, the Company transferred $46 million of pension plan assets to a successor contractor’s plan on behalf of certain participants in the Company’s defined benefit pension plan who previously transferred their employment to the successor contractor and settled $63 million of related pension plan obligations. As a result of the transfer, the Company recorded an immaterial settlement gain in selling, general and administrative expenses during the first quarter of fiscal 2013.

Supplementary Cash Flow Information

Supplementary cash flow information, including non-cash investing and financing activities, for the periods presented was as follows:

	Six Months Ended July 31
	2012		2011
	(in millions)
Stock exchanged at fair value upon exercises of stock options	$	—	$	14
Vested stock issued as settlement of annual bonus accruals	$	2	$	3
Increase in accrued stock repurchases	$	—	$	13
Stock issued in lieu of cash dividend	$	2	$	—
Fair value of assets acquired in acquisitions	$	—	$	29
Less: cash paid in acquisitions		—		(26	)
Liabilities assumed in acquisitions	$	—	$	3
Cash paid for interest (including discontinued operations)	$	53	$	52
Cash paid for income taxes (including discontinued operations)	$	96	$	121

Accounting Standards Updates Issued But Not Yet Adopted

Accounting standards and updates issued but not effective for the Company until after July 31, 2012, are not expected to have a material effect on the Company’s consolidated financial position or results of operations.

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Schedule Of Changes In Goodwill By Segment (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012
Goodwill [Line Items]
Beginning balance, Goodwill	$ 1,826
Corporate reorganizations
Ending balance, Goodwill	1,826
Defense Solutions
Goodwill [Line Items]
Beginning balance, Goodwill	410
Corporate reorganizations
Ending balance, Goodwill	410
Health, Energy And Civil Solutions
Goodwill [Line Items]
Beginning balance, Goodwill	785
Corporate reorganizations	(10)
Ending balance, Goodwill	775
Intelligence And Cybersecurity Solutions
Goodwill [Line Items]
Beginning balance, Goodwill	631
Corporate reorganizations	10
Ending balance, Goodwill	$ 641

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Summary Of Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended			6 Months Ended
	Jul. 31, 2012	Apr. 30, 2012	Jul. 31, 2011	Jul. 31, 2012 Item Year	Jul. 31, 2011
Significant Accounting Policies [Line Items]
Period for billing and collection of unbilled receivables, maximum (in years)				1
Period of collection for contract retentions, minimum (in years)				1
Outstanding receivables	$ 61			$ 61
Period of extension for deferred payment terms (in years)				1
Number of commercial customers within extended deferred payments terms				3
Increase (decrease) in income due to contract estimates	(3)		15	1	27
Increase (decrease) in income due to contract estimates per diluted share	$ (0.01)		$ 0.03	$ 0.00	$ 0.05
Net proceeds from sale of discontinued operations				167
Gain on sale before income taxes				111
Amount of pension plan assets transferred		46
Amount of settlement related to pension plan obligations		$ 63
Science Applications International Corporation
Significant Accounting Policies [Line Items]
Ownership interest	100.00%			100.00%

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Business Segment Information (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Segment Reporting Information By Segment

The segment information for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Revenues:
Defense Solutions	$	1,240		$	1,085		$	2,414		$	2,222
Health, Energy and Civil Solutions		692			656			1,370			1,313
Intelligence and Cybersecurity Solutions		919			854			1,849			1,750
Corporate and Other		—			1			—			1
Intersegment elimination		(3	)		—			(3	)		(2	)
Total revenues	$	2,848		$	2,596		$	5,630		$	5,284
Operating income (loss):
Defense Solutions	$	92		$	88		$	193		$	178
Health, Energy and Civil Solutions		53			60			100			114
Intelligence and Cybersecurity Solutions		69			76			135			162
Corporate and Other		(23	)		(15	)		(29	)		(15	)
Total operating income	$	191		$	209		$	399		$	439

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Other Commitments And Contingencies (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended				6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011	Jan. 31, 2012	Jul. 31, 2012 DS And S	Mar. 31, 2006 DS And S	Jul. 31, 2012 Standby Letters Of Credit	Jul. 31, 2012 Performance Guarantees	Jul. 31, 2012 Government Investigations And Reviews	Jul. 31, 2012 Restructuring Proposals	Jul. 31, 2012 Tax Audits And Reviews
Other Commitments And Contingencies [Line Items]
Ownership interest							50.00%
Gain on sale of interest in joint venture						$ 4
Amount to be paid in satisfaction of indemnification obligation						4
Project financing from the company's provision of extended payment terms			100
Total project billings			216
Receivable due from VIE	16		16
Liability for estimate of loss										35
Unrecognized tax benefits												103
Other long-term liabilities	143		143		162							29
Liabilities for uncertain tax positions												132
Amount outstanding								102
Surety bonds									377
Revenues	$ 2,848	$ 2,596	$ 5,630	$ 5,284							$ 480

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Schedule Of Intangible Assets Including Estimates Of Assets Acquired (Detail) (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	$ 268	$ 270
Accumulated amortization	(129)	(111)
Net carrying value	139	159
Indefinite-lived intangible assets	17	17
Gross carrying value	285	287
Net carrying value	156	176
In-Process Research And Development
Finite-Lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	13	13
Trade Names
Finite-Lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	4	4
Customer Relationships
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	119	120
Accumulated amortization	(71)	(62)
Net carrying value	48	58
Software And Technology
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	147	148
Accumulated amortization	(56)	(48)
Net carrying value	91	100
Other
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	2	2
Accumulated amortization	(2)	(1)
Net carrying value		$ 1

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Schedule Of Pre-Sale Operating Results Of Discontinued Operations (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2011
Summary Of Significant Accounting Policies [Abstract]
Revenues	$ 69
Cost of revenues	54
Selling, general and administrative expenses	8
Operating income	$ 7

XML

Schedule Of Supplementary Cash Flow Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Summary Of Significant Accounting Policies [Abstract]
Stock exchanged at fair value upon exercises of stock options		$ 14
Vested stock issued as settlement of annual bonus accruals	2	3
Increase in accrued stock repurchases		13
Stock issued in lieu of cash dividend	2
Fair value of assets acquired in acquisitions		29
Less: cash paid in acquisitions		(26)
Liabilities assumed in acquisitions		3
Cash paid for interest (including discontinued operations)	53	52
Cash paid for income taxes (including discontinued operations)	$ 96	$ 121

XML

Condensed Consolidated Statements Of Cash Flows (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Cash flows from operating activities of continuing operations:
Net income	$ 227	$ 309
Income from discontinued operations		(67)
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization	55	55
Stock-based compensation	46	43
Impairment losses	1
Net gain on sales and disposals of assets	(6)	(28)
Other	1	1
Increase (decrease) in cash and cash equivalents, excluding effects of acquisitions and divestitures, resulting from changes in:
Receivables	182	(48)
Inventory, prepaid expenses and other current assets	27	33
Deferred income taxes		1
Other assets	1	(18)
Accounts payable and accrued liabilities	(663)	2
Accrued payroll and employee benefits	(33)	(55)
Income taxes payable	3	(17)
Other long-term liabilities	(2)	(1)
Total cash flows provided by (used in) operating activities of continuing operations	(161)	210
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment	(33)	(30)
Acquisition of a business		(26)
Net receipts (payments) for purchase price adjustments related to prior year acquisitions	1	(3)
Proceeds from sale of assets	2	78
Total cash flows provided by (used in) investing activities of continuing operations	(30)	19
Cash flows from financing activities of continuing operations:
Payments on notes payable and long-term debt	(552)	(2)
Sales of stock and exercises of stock options	10	14
Repurchases of stock	(20)	(417)
Dividend payments	(83)
Other		(2)
Total cash flows used in financing activities of continuing operations	(645)	(407)
Decrease in cash and cash equivalents from continuing operations	(836)	(178)
Cash flows from discontinued operations:
Cash used in operating activities of discontinued operations		(20)
Cash provided by investing activities of discontinued operations		166
Increase in cash and cash equivalents from discontinued operations		146
Effect of foreign currency exchange rate changes on cash and cash equivalents		1
Total decrease in cash and cash equivalents	(836)	(31)
Cash and cash equivalents at beginning of period	1,592	1,367
Cash and cash equivalents at end of period	756	1,336
Science Applications International Corporation
Cash flows from operating activities of continuing operations:
Net income	227	308
Income from discontinued operations		(67)
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:
Depreciation and amortization	55	55
Stock-based compensation	46	43
Impairment losses	1
Net gain on sales and disposals of assets	(6)	(28)
Other	1	1
Increase (decrease) in cash and cash equivalents, excluding effects of acquisitions and divestitures, resulting from changes in:
Receivables	182	(48)
Inventory, prepaid expenses and other current assets	27	33
Deferred income taxes		1
Other assets	1	(18)
Accounts payable and accrued liabilities	(663)	2
Accrued payroll and employee benefits	(33)	(55)
Income taxes payable	3	(17)
Other long-term liabilities	(2)	(1)
Total cash flows provided by (used in) operating activities of continuing operations	(161)	209
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment	(33)	(30)
Acquisition of a business		(26)
Net receipts (payments) for purchase price adjustments related to prior year acquisitions	1	(3)
Proceeds from sale of assets	2	78
Total cash flows provided by (used in) investing activities of continuing operations	(30)	19
Cash flows from financing activities of continuing operations:
Proceeds from note payable to SAIC, Inc.	32	466
Payments on note payable to SAIC, Inc.	(324)	(868)
Payments on notes payable and long-term debt	(552)	(2)
Dividend payments	(1)
Other		(2)
Total cash flows used in financing activities of continuing operations	(845)	(406)
Decrease in cash and cash equivalents from continuing operations	(1,036)	(178)
Cash flows from discontinued operations:
Cash used in operating activities of discontinued operations		(20)
Cash provided by investing activities of discontinued operations		166
Increase in cash and cash equivalents from discontinued operations		146
Effect of foreign currency exchange rate changes on cash and cash equivalents		1
Total decrease in cash and cash equivalents	(1,036)	(31)
Cash and cash equivalents at beginning of period	1,592	1,367
Cash and cash equivalents at end of period	$ 556	$ 1,336

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Reconciliation Of Income Used In Calculating Earnings Per Share (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Basic EPS:
Income from continuing operations, as reported	$ 110	$ 112	$ 227	$ 242
Less: allocation of distributed and undistributed earnings to participating securities	(2)	(4)	(6)	(9)
Income from continuing operations, for computing basic EPS	108	108	221	233
Net income, as reported	110	178	227	309
Less: allocation of distributed and undistributed earnings to participating securities	(2)	(7)	(6)	(11)
Net income, for computing basic EPS	108	171	221	298
Diluted EPS:
Income from continuing operations, as reported	110	112	227	242
Less: allocation of distributed and undistributed earnings to participating securities	(2)	(4)	(6)	(9)
Income from continuing operations, for computing diluted EPS	108	108	221	233
Net income, as reported	110	178	227	309
Less: allocation of distributed and undistributed earnings to participating securities	(2)	(7)	(6)	(11)
Net income, for computing diluted EPS	$ 108	$ 171	$ 221	$ 298

XML

Schedule Of Vesting Stock Award Activity (Detail) (Vesting Stock Awards, USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jul. 31, 2012
Vesting Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, beginning balance	12.0
Shares of stock under stock awards, Awards granted	6.4
Shares of stock under stock awards, Awards forfeited	(0.6)
Shares of stock under stock awards, Awards vested	(4.6)
Shares, ending balance	13.2
Weighted average grant-date fair value, Shares, beginning balance	$ 17.50
Weighted average grant-date fair value, Awards granted	$ 13.19
Weighted average grant-date fair value, Awards forfeited	$ 15.95
Weighted average grant-date fair value, Awards vested	$ 17.88
Weighted average grant-date fair value, Shares, ending balance	$ 15.35

XML

Accumulated Other Comprehensive Loss - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized net loss on settled derivatives which will be amortized and recognized	$ 1

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Condensed Consolidated Statements Of Income (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Revenues	$ 2,848	$ 2,596	$ 5,630	$ 5,284
Costs and expenses:
Cost of revenues	2,504	2,258	4,952	4,615
Selling, general and administrative expenses	153	129	279	230
Operating income	191	209	399	439
Non-operating income (expense):
Interest income	2		4	1
Interest expense	(24)	(28)	(53)	(56)
Other income, net	4	1	6	5
Income from continuing operations before income taxes	173	182	356	389
Provision for income taxes	(63)	(70)	(129)	(147)
Income from continuing operations	110	112	227	242
Discontinued operations (Note 1):
Income from discontinued operations before income taxes		115		117
Provision for income taxes		(49)		(50)
Income from discontinued operations		66		67
Net income	110	178	227	309
Basic:
Income from continuing operations	$ 0.32	$ 0.32	$ 0.67	$ 0.68
Income from discontinued operations		$ 0.19		$ 0.19
Total basic earnings per share	$ 0.32	$ 0.51	$ 0.67	$ 0.87
Diluted:
Income from continuing operations	$ 0.32	$ 0.32	$ 0.67	$ 0.68
Income from discontinued operations		$ 0.18		$ 0.19
Total diluted earnings per share	$ 0.32	$ 0.50	$ 0.67	$ 0.87
Cash dividends paid per share	$ 0.12		$ 0.24
Science Applications International Corporation
Revenues	2,848	2,596	5,630	5,284
Costs and expenses:
Cost of revenues	2,504	2,258	4,952	4,615
Selling, general and administrative expenses	153	129	279	230
Operating income	191	209	399	439
Non-operating income (expense):
Interest income	2		4	1
Interest expense	(24)	(30)	(53)	(60)
Other income, net	4	1	6	5
Income from continuing operations before income taxes	173	180	356	385
Provision for income taxes	(63)	(68)	(129)	(144)
Income from continuing operations	110	112	227	241
Discontinued operations (Note 1):
Income from discontinued operations before income taxes		115		117
Provision for income taxes		(49)		(50)
Income from discontinued operations		66		67
Net income	$ 110	$ 178	$ 227	$ 308

XML

Goodwill And Intangible Assets - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Goodwill and Intangible Assets [Line Items]
Finite-lived intangible assets, amortized amount			$ 1
Amortization expense related to amortizable intangible assets	$ 9	$ 11	$ 19	$ 22

XML

Condensed Consolidated Statement Of Stockholders' Equity (USD $) In Millions, except Share data	Total USD ($)	Shares of Common stock	Additional paid-in capital USD ($)	Retained earnings USD ($)	Accumulated other comprehensive loss USD ($)	Science Applications International Corporation USD ($)	Science Applications International Corporation Shares of Common stock	Science Applications International Corporation Additional paid-in capital USD ($)	Science Applications International Corporation Retained earnings USD ($)	Science Applications International Corporation Accumulated other comprehensive loss USD ($)
Balance, value at Jan. 31, 2012	$ 2,181		$ 2,028	$ 164	$ (11)	$ 2,061		$ 233	$ 1,839	$ (11)
Balance, shares at Jan. 31, 2012		341,000,000					5,000
Net income	227			227		227			227
Other comprehensive income, net of tax	10				10	10				10
Issuances of stock, value	14		14
Issuances of stock, shares		2,000,000
Repurchases of stock, value	(20)		(9)	(11)
Repurchases of stock, shares		(1,000,000)
Quarterly cash dividends of $0.12 per share	(84)			(84)
Adjustments for income tax benefits from stock-based compensation	(15)		(15)
Stock-based compensation	46		46
Balance, value at Jul. 31, 2012	2,359		2,064	296	(1)	2,298		233	2,066	(1)
Balance, shares at Jul. 31, 2012		342,000,000					5,000
Balance, value at Apr. 30, 2012
Net income	110					110
Balance, value at Jul. 31, 2012	$ 2,359					$ 2,298		$ 233
Balance, shares at Jul. 31, 2012							5,000

XML

Schedule Of Stock-Based Awards Excluded From Weighted Average Shares Outstanding (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive stock based awards	20	22	20	22
Outstanding Stock Awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive stock based awards	1	1	1	1

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Pre-Sale Operating Results Of Discontinued Operations

The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Schedule Of Supplementary Cash Flow Information

Supplementary cash flow information, including non-cash investing and financing activities, for the periods presented was as follows:

	Six Months Ended July 31
	2012		2011
	(in millions)
Stock exchanged at fair value upon exercises of stock options	$	—	$	14
Vested stock issued as settlement of annual bonus accruals	$	2	$	3
Increase in accrued stock repurchases	$	—	$	13
Stock issued in lieu of cash dividend	$	2	$	—
Fair value of assets acquired in acquisitions	$	—	$	29
Less: cash paid in acquisitions		—		(26	)
Liabilities assumed in acquisitions	$	—	$	3
Cash paid for interest (including discontinued operations)	$	53	$	52
Cash paid for income taxes (including discontinued operations)	$	96	$	121

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Schedule Of Stock-Based Compensation Expenses (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 22	$ 19	$ 46	$ 43
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	4	5	7	10
Performance-Based Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	1	(3)	2	(2)
Vesting Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 17	$ 17	$ 37	$ 35

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Stock-Based Compensation Expenses

Total stock-based compensation expense for the periods presented was as follows:

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012		2011
	(in millions)
Stock options	$	4	$	5		$	7	$	10
Vesting stock awards		17		17			37		35
Performance-based stock awards		1		(3	)		2		(2	)
Total stock-based compensation expense	$	22	$	19		$	46	$	43

Schedule Of Weighted Average Grant-Date Fair Value And Assumptions Used

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average grant-date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were as follows:

	Six Months Ended July 31
	2012			2011
Weighted average grant-date fair value	$	1.81		$	4.21
Expected term (in years)		5.0			4.9
Expected volatility		24.4	%		23.4	%
Risk-free interest rate		1.0	%		2.2	%
Dividend yield		3.7	%		0	%

Schedule Of Stock Option Activity

Stock option activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
	(in millions)					(in years)		(in millions)
Outstanding at January 31, 2012		20.8		$	17.90		2.5	$	—
Options granted		4.9			13.21
Options forfeited or expired		(5.5	)		17.48
Outstanding at July 31, 2012		20.2			16.88		3.4		—
Exercisable at July 31, 2012		9.4			18.33		1.7		—

Schedule Of Vesting Stock Award Activity

Vesting stock award activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock awards			Weighted average grant- date fair value
	(in millions)
Unvested stock awards at January 31, 2012		12.0		$	17.50
Awards granted		6.4			13.19
Awards forfeited		(0.6	)		15.95
Awards vested		(4.6	)		17.88
Unvested stock awards at July 31, 2012		13.2			15.35

Schedule Of Performance-Based Stock Award Activity

Performance-based stock award activity for the six months ended July 31, 2012 was as follows:

	Expected number of shares of stock to be issued under performance- based stock awards		Weighted average grant- date fair value
	(in millions)
Outstanding at January 31, 2012		0.5	$	17.02
Awards granted		0.8		13.18
Outstanding at July 31, 2012		1.3		14.52

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Condensed Consolidated Statement Of Stockholders' Equity (Parenthetical) (USD $)	3 Months Ended	6 Months Ended
	Jul. 31, 2012	Jul. 31, 2012
Quarterly cash dividends paid per share	$ 0.12	$ 0.24

XML

Condensed Consolidated Statements Of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Net income	$ 110	$ 178	$ 227	$ 309
Other comprehensive income, net of tax:
Foreign currency translation adjustments		6	(1)	7
Deferred taxes		(2)	1	(3)
Foreign currency translation adjustments, net of tax		4		4
Pension liability adjustments			16
Deferred taxes			(6)
Pension liability adjustments, net of tax			10
Total other comprehensive income, net of tax		4	10	4
Comprehensive income	110	182	237	313
Science Applications International Corporation
Net income	110	178	227	308
Other comprehensive income, net of tax:
Foreign currency translation adjustments		6	(1)	7
Deferred taxes		(2)	1	(3)
Foreign currency translation adjustments, net of tax		4		4
Pension liability adjustments			16
Deferred taxes			(6)
Pension liability adjustments, net of tax			10
Total other comprehensive income, net of tax		4	10	4
Comprehensive income	$ 110	$ 182	$ 237	$ 312

XML

Business Segment Information

6 Months Ended

Jul. 31, 2012

Business Segment Information

Note 9—Business Segment Information:

The Company defines its reportable segments based on the way the chief operating decision maker (CODM), currently its chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance.

The segment information for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Revenues:
Defense Solutions	$	1,240		$	1,085		$	2,414		$	2,222
Health, Energy and Civil Solutions		692			656			1,370			1,313
Intelligence and Cybersecurity Solutions		919			854			1,849			1,750
Corporate and Other		—			1			—			1
Intersegment elimination		(3	)		—			(3	)		(2	)
Total revenues	$	2,848		$	2,596		$	5,630		$	5,284
Operating income (loss):
Defense Solutions	$	92		$	88		$	193		$	178
Health, Energy and Civil Solutions		53			60			100			114
Intelligence and Cybersecurity Solutions		69			76			135			162
Corporate and Other		(23	)		(15	)		(29	)		(15	)
Total operating income	$	191		$	209		$	399		$	439

Prior to February 1, 2012, the Intelligence and Cybersecurity Solutions reportable segment represented the aggregation of the Cyber and Information Solutions business unit and the Intelligence, Surveillance and Reconnaissance group. Effective February 1, 2012, the Cyber and Information Solutions business unit, which previously reported directly to the CODM, commenced reporting to the Intelligence, Surveillance and Reconnaissance group. After this change the reportable segment name has remained Intelligence and Cybersecurity Solutions. Also effective February 1, 2012, certain operations were transferred between the Company’s reportable segments. Prior year amounts have been adjusted for consistency with the current year’s presentation.

Science Applications International Corporation

Business Segment Information

Note 9—Business Segment Information:

The Company defines its reportable segments based on the way the chief operating decision maker (CODM), currently its chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance.

The segment information for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Revenues:
Defense Solutions	$	1,240		$	1,085		$	2,414		$	2,222
Health, Energy and Civil Solutions		692			656			1,370			1,313
Intelligence and Cybersecurity Solutions		919			854			1,849			1,750
Corporate and Other		—			1			—			1
Intersegment elimination		(3	)		—			(3	)		(2	)
Total revenues	$	2,848		$	2,596		$	5,630		$	5,284
Operating income (loss):
Defense Solutions	$	92		$	88		$	193		$	178
Health, Energy and Civil Solutions		53			60			100			114
Intelligence and Cybersecurity Solutions		69			76			135			162
Corporate and Other		(23	)		(15	)		(29	)		(15	)
Total operating income	$	191		$	209		$	399		$	439

Prior to February 1, 2012, the Intelligence and Cybersecurity Solutions reportable segment represented the aggregation of the Cyber and Information Solutions business unit and the Intelligence, Surveillance and Reconnaissance group. Effective February 1, 2012, the Cyber and Information Solutions business unit, which previously reported directly to the CODM, commenced reporting to the Intelligence, Surveillance and Reconnaissance group. After this change the reportable segment name has remained Intelligence and Cybersecurity Solutions. Also effective February 1, 2012, certain operations were transferred between the Company’s reportable segments. Prior year amounts have been adjusted for consistency with the current year’s presentation.

XML

Document and Entity Information	6 Months Ended
	Jul. 31, 2012	Aug. 17, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	SAI
Entity Registrant Name	SAIC, Inc.
Entity Central Index Key	0001336920
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		341,831,289
Science Applications International Corporation
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Entity Registrant Name	SCIENCE APPLICATIONS INTERNATIONAL CORP
Entity Central Index Key	0000353394
Current Fiscal Year End Date	--01-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		5,000

XML

Legal Proceedings

6 Months Ended

Jul. 31, 2012

Legal Proceedings

Note 10—Legal Proceedings:

Timekeeping Contract with City of New York

In March 2012, the Company reached a settlement with the U.S. Attorney’s Office for the Southern District of New York and the City of New York (City) relating to investigations being conducted by the U.S. Attorney’s Office and the City with respect to the Company’s contract to develop and implement an automated time and attendance and workforce management system (CityTime) for certain agencies of the City. As part of this settlement, the Company entered into a deferred prosecution agreement with the U.S. Attorney’s Office, under which the Company paid approximately $500 million and the U.S. Attorney’s Office deferred prosecution of a single criminal count against the Company, which alleged that the Company, through the conduct of certain managerial employees and others, caused the City to significantly overpay for the CityTime system. If the Company complies with the terms of the deferred prosecution agreement, the U.S Attorney will dismiss the criminal count at the end of a three-year period. In August 2012, the Company entered into an administrative agreement with the U.S. Army, on behalf of all agencies of the U.S. Government that confirms the Company’s continuing eligibility to enter into and perform contracts with all agencies of the U.S. Government following the CityTime settlement. The Army has determined that the U.S. Government will have adequate assurances under the terms of the administrative agreement that initiation of suspension or debarment is not necessary to protect the U.S. Government’s interests following the CityTime settlement. Under the terms of the administrative agreement, the Company has agreed, among other things, to maintain a contractor responsibility program having the specific elements described in the administrative agreement, including retaining a monitor and providing certain reports to the U.S. Army. The administrative agreement will continue in effect for five years, provided that the Company may request earlier termination after three years.

Data Privacy Litigation

The Company is a defendant in the following seven putative class action lawsuits filed in October 2011 through March 2012: (1) Richardson, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (2) Arrellano, et al. v. SAIC, Inc. in U.S. District Court for the Western District of Texas; (3) Biggerman, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (4) Moskowitz, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (5) Palmer, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al., in U.S. District Court for the District of Columbia; (6) Losack, et al. v. SAIC, Inc. in U.S. District Court for the Southern District of California; and (7) Deatrick v. Science Applications International Corporation in U.S. District Court for the Northern District of California. The lawsuits were filed following the theft of computer backup tapes from a vehicle of a Company employee. The employee was transporting the backup tapes between federal facilities under an IT services contract the Company was performing in support of TRICARE, the health care program for members of the military, retirees and their families. The tapes contained personally identifiable and protected health information of approximately five million military clinic and hospital patients. There is no evidence that any of the data on the backup tapes has actually been accessed or viewed by an unauthorized person. In order for an unauthorized person to access or view the data on the backup tapes, it would require knowledge of and access to specific hardware and software and knowledge of the system and data structure. The Company has notified potentially impacted persons by letter and is offering one year of credit monitoring services to those who request these services and in certain circumstances, one year of identity restoration services.

The complaints in the seven lawsuits vary in their allegations and causes of action against the Company and include allegations of negligence, breach of contract, breach of implied-in-fact contract, invasion of privacy by public disclosure of private facts and statutory violations of the Texas Deceptive Trade Practices Act, the California Confidentiality of Medical Information Act, California data breach notification requirements, the California Unfair Competition Law, the Fair Credit Reporting Act and the Privacy Act of 1974. The complaints seek monetary relief, including unspecified actual damages, punitive damages, statutory damages of $1,000 for each class member and attorney’s fees, as well as injunctive and declaratory relief. The Company filed a motion with the Judicial Panel for Multidistrict Litigation (JPML) to transfer the seven pending cases, plus a related case, to a single court for consolidated or coordinated pretrial proceedings. In June 2012, the JPML granted that motion and transferred the related actions to the U.S. District Court for the District of Columbia, where they have since been consolidated for pretrial purposes.

The Company intends to vigorously defend itself against the claims made in the class action lawsuits. The Company has insurance coverage against judgments or settlements relating to the claims being brought in these lawsuits, with a $10 million deductible. The insurance coverage also covers the Company’s defense costs, subject to the same deductible. As of July 31, 2012, the Company has recorded a loss provision of $10 million related to these lawsuits, representing the low end of the Company’s estimated gross loss. The Company believes that, if any loss is experienced by the Company in excess of its estimate, such a loss would not exceed the Company’s insurance coverage. As these lawsuits progress, many factors will affect the amount of the ultimate loss resulting from these claims being brought against the Company, including the outcome of any motions to dismiss, the results of any discovery, the outcome of any pretrial motions and the courts’ rulings on certain legal issues.

The Company has been informed that the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) is investigating matters related to the incident. OCR is the division of HHS charged with enforcement of the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA) and the privacy, security and data breach rules which implement HIPAA. OCR may, among other things, require a corrective action plan and impose civil monetary penalties against the data owner (Department of Defense) and, in certain situations, against the data owners’ contractors, such as the Company. The Company is cooperating with TRICARE in responding to the OCR investigation.

Derivative and Securities Litigation

Between February and April 2012, six stockholder derivative lawsuits were filed, each purportedly on the Company’s behalf. One case has been withdrawn; one case, captioned Martin v. Havenstein et al., is pending in New York Supreme Court, New York County; and four cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Derivative Litigation. Each complaint asserts claims against the Company’s directors and against varying groups of the Company’s current and former officers, including two former chief executive officers, the chief financial officer, the former manager of the CityTime program, and the former chief systems engineer of the CityTime program. The complaints claim that the defendants breached their fiduciary duties to the Company with respect to the CityTime contract for various reasons, including failure to supervise the adequacy of the Company’s internal controls, allowing the Company to issue misleading financial statements, and failure to exercise their oversight responsibilities to ensure that the Company complied with applicable laws, rules and regulations. Some of the complaints further claim that the defendants are liable to the Company under theories of gross mismanagement, contribution and indemnification, abuse of control, waste of corporate assets, and/or violation of Section 14(a) of the Securities Exchange Act. The Company currently intends to file a motion to dismiss each of these complaints because the respective plaintiffs did not serve a pre-suit demand before filing the derivative complaints. The Company has also received two stockholder demand letters related to CityTime (one of which is also related to TRICARE), which an independent committee of the Company’s board of directors is currently reviewing.

Between February and April 2012, alleged stockholders filed three putative securities class actions. One case was withdrawn and two cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Securities Litigation. The consolidated complaint names as defendants the Company, its chief financial officer, two former chief executive officers, a former group president, and the former program manager on the CityTime program, and was filed purportedly on behalf of all purchasers of SAIC’s common stock from April 11, 2007 through September 1, 2011. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegations that the Company and individual defendants made misleading statements or omissions about the Company’s revenues, operating income, and internal controls in connection with disclosures relating to the CityTime project. The plaintiffs seek to recover from the Company and the individual defendants an unspecified amount of damages class members allegedly incurred by buying SAIC’s stock at an inflated price. The Company intends to vigorously defend against these claims.

The Company currently believes that a loss relating to the above-described stockholder matters is reasonably possible, but the Company cannot reasonably estimate the range of loss in light of the fact that these matters are in their early stages.

Greek Government Contract

Background and Arbitration. In May 2003, the Company entered into a firm-fixed-price contract with the Hellenic Republic of Greece (the Customer) to provide a Command, Control, Communications, Coordination and Integration System (the System) to support the 2004 Athens Summer Olympic Games (the Olympics) and to serve as the security system for the Customer’s public order departments following completion of the Olympics.

In November 2008, the Customer accepted the System in writing pursuant to the requirements of the contract. At the time, the Customer determined that the System substantially complied with the terms of the contract and accepted the System with certain alleged minor omissions and deviations. Upon System acceptance, the Company invoiced the Customer for approximately $17 million, representing the undisputed portion of the contract balance owed to the Company. The Customer has not paid this final invoice.

In June 2009, the Company initiated arbitration before the International Chamber of Commerce against the Customer seeking damages for breaches of contract by the Customer. The Company seeks (i) aggregate damages in excess of $85 million for payment of amounts owed and other claims and damages, (ii) recovery of advance payment and performance bond amounts totaling $23 million and (iii) costs and expenses associated with the arbitration. The Customer filed an answer to the complaint denying liability on various grounds and a supplementary answer asserting set-off claims against amounts sought by the Company. The arbitration hearing was held in May 2012, and the Company filed a final brief in July 2012. Due to the complex nature of the legal and factual issues involved, the outcome of the arbitration is uncertain.

Financial Status and Contingencies. As a result of the significant uncertainties on this contract, the Company converted to the completed-contract method of accounting and ceased recognizing revenues for the System development portion of this contract in fiscal 2006. No profits or losses were recorded on the Greek contract during the six months ended July 31, 2012 and 2011. As of July 31, 2012, the Company has recorded $123 million of losses under the Greek contract, reflecting the Company’s estimated total cost to complete the System, assuming the Greek contract value was limited to the cash received to date. Based on the complex nature of this contractual situation and the difficulties encountered to date, significant uncertainties exist and the Company is unable to reliably estimate the ultimate outcome. The Company may reverse a portion of the losses from the Greek contract if it receives future payments as required under the modified Greek contract.

As of July 31, 2012, the Company has $14 million of receivables relating to value added tax (VAT) that the Company has paid and believes it is entitled to recover either as a refund from the taxing authorities or as a payment under the Greek contract. The Company has invoiced the Customer for $31 million for VAT and the Customer has failed to make payment. If the Customer fails to pay the outstanding VAT amounts or the Company is unable to recover the amount as a refund from the taxing authorities, the Company’s total losses on the Greek contract could increase.

The Company has met certain advance payment and performance bonding requirements through the issuance of euro-denominated standby letters of credit. As of July 31, 2012, there were $4 million in standby letters of credit outstanding relating to the support and maintenance of the System. The Company is seeking recovery of amounts drawn by the Customer in fiscal 2011 on the standby letters of credit in the ongoing arbitration. The principal subcontractor has provided to the Company euro-denominated standby letters of credit in the amount of $21 million as of July 31, 2012, of which $18 million relates to the delivery of the System. The Company may draw on the subcontractor’s standby letters of credit under certain circumstances by providing a statement to the responsible bank that the subcontractor has not fulfilled its obligations under the subcontract.

Nuclear Regulatory Commission

The U.S. Department of Justice filed a lawsuit against the Company in September 2004 in U.S. District Court for the District of Columbia alleging civil False Claims Act violations and breach of contract by the Company on two contracts that the Company had with the Nuclear Regulatory Commission (NRC). The complaint alleges that the Company’s performance of several subcontracts on separate U.S. Department of Energy (DOE) programs, the participation of a Company employee in an industry trade association, and certain other alleged relationships created organizational conflicts of interest under the two NRC contracts. The Company disputes that the work performed on the DOE programs and the alleged relationships raised by the government created organizational conflicts of interest. In July 2008, the jury found in favor of the government on the breach of contract and two False Claims Act counts. The jury awarded a nominal amount of $78 in damages for breach of contract and $2 million in damages for the False Claims Act claims. The judge entered the judgment in October 2008, trebling the False Claims Act damages and awarding a total of $585,000 in civil penalties. The Company appealed to the U.S. Court of Appeals for the District of Columbia Circuit. In December 2010, the Court of Appeals affirmed the District Court’s judgment as to both liability and damages of $78 on the breach of contract count and rescinded the judgment on the False Claims Act counts, including the aggregate damages and penalties. The Court of Appeals sent the False Claims Act counts back to the District Court for further proceedings. The Company has recorded a liability for an immaterial amount related to this matter as of July 31, 2012 based on its assessment of the likely outcome of this matter.

Other

The Company is also involved in various claims and lawsuits arising in the normal conduct of its business, none of which, in the opinion of the Company’s management, based upon current information, will likely have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Science Applications International Corporation

Legal Proceedings

Note 10—Legal Proceedings:

Timekeeping Contract with City of New York

In March 2012, the Company reached a settlement with the U.S. Attorney’s Office for the Southern District of New York and the City of New York (City) relating to investigations being conducted by the U.S. Attorney’s Office and the City with respect to the Company’s contract to develop and implement an automated time and attendance and workforce management system (CityTime) for certain agencies of the City. As part of this settlement, the Company entered into a deferred prosecution agreement with the U.S. Attorney’s Office, under which the Company paid approximately $500 million and the U.S. Attorney’s Office deferred prosecution of a single criminal count against the Company, which alleged that the Company, through the conduct of certain managerial employees and others, caused the City to significantly overpay for the CityTime system. If the Company complies with the terms of the deferred prosecution agreement, the U.S Attorney will dismiss the criminal count at the end of a three-year period. In August 2012, the Company entered into an administrative agreement with the U.S. Army, on behalf of all agencies of the U.S. Government that confirms the Company’s continuing eligibility to enter into and perform contracts with all agencies of the U.S. Government following the CityTime settlement. The Army has determined that the U.S. Government will have adequate assurances under the terms of the administrative agreement that initiation of suspension or debarment is not necessary to protect the U.S. Government’s interests following the CityTime settlement. Under the terms of the administrative agreement, the Company has agreed, among other things, to maintain a contractor responsibility program having the specific elements described in the administrative agreement, including retaining a monitor and providing certain reports to the U.S. Army. The administrative agreement will continue in effect for five years, provided that the Company may request earlier termination after three years.

Data Privacy Litigation

The Company is a defendant in the following seven putative class action lawsuits filed in October 2011 through March 2012: (1) Richardson, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (2) Arrellano, et al. v. SAIC, Inc. in U.S. District Court for the Western District of Texas; (3) Biggerman, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (4) Moskowitz, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al. in U.S. District Court for the District of Columbia; (5) Palmer, et al. v. TRICARE Management Activity, Science Applications International Corporation, United States Department of Defense, et al., in U.S. District Court for the District of Columbia; (6) Losack, et al. v. SAIC, Inc. in U.S. District Court for the Southern District of California; and (7) Deatrick v. Science Applications International Corporation in U.S. District Court for the Northern District of California. The lawsuits were filed following the theft of computer backup tapes from a vehicle of a Company employee. The employee was transporting the backup tapes between federal facilities under an IT services contract the Company was performing in support of TRICARE, the health care program for members of the military, retirees and their families. The tapes contained personally identifiable and protected health information of approximately five million military clinic and hospital patients. There is no evidence that any of the data on the backup tapes has actually been accessed or viewed by an unauthorized person. In order for an unauthorized person to access or view the data on the backup tapes, it would require knowledge of and access to specific hardware and software and knowledge of the system and data structure. The Company has notified potentially impacted persons by letter and is offering one year of credit monitoring services to those who request these services and in certain circumstances, one year of identity restoration services.

The complaints in the seven lawsuits vary in their allegations and causes of action against the Company and include allegations of negligence, breach of contract, breach of implied-in-fact contract, invasion of privacy by public disclosure of private facts and statutory violations of the Texas Deceptive Trade Practices Act, the California Confidentiality of Medical Information Act, California data breach notification requirements, the California Unfair Competition Law, the Fair Credit Reporting Act and the Privacy Act of 1974. The complaints seek monetary relief, including unspecified actual damages, punitive damages, statutory damages of $1,000 for each class member and attorney’s fees, as well as injunctive and declaratory relief. The Company filed a motion with the Judicial Panel for Multidistrict Litigation (JPML) to transfer the seven pending cases, plus a related case, to a single court for consolidated or coordinated pretrial proceedings. In June 2012, the JPML granted that motion and transferred the related actions to the U.S. District Court for the District of Columbia, where they have since been consolidated for pretrial purposes.

The Company intends to vigorously defend itself against the claims made in the class action lawsuits. The Company has insurance coverage against judgments or settlements relating to the claims being brought in these lawsuits, with a $10 million deductible. The insurance coverage also covers the Company’s defense costs, subject to the same deductible. As of July 31, 2012, the Company has recorded a loss provision of $10 million related to these lawsuits, representing the low end of the Company’s estimated gross loss. The Company believes that, if any loss is experienced by the Company in excess of its estimate, such a loss would not exceed the Company’s insurance coverage. As these lawsuits progress, many factors will affect the amount of the ultimate loss resulting from these claims being brought against the Company, including the outcome of any motions to dismiss, the results of any discovery, the outcome of any pretrial motions and the courts’ rulings on certain legal issues.

The Company has been informed that the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) is investigating matters related to the incident. OCR is the division of HHS charged with enforcement of the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA) and the privacy, security and data breach rules which implement HIPAA. OCR may, among other things, require a corrective action plan and impose civil monetary penalties against the data owner (Department of Defense) and, in certain situations, against the data owners’ contractors, such as the Company. The Company is cooperating with TRICARE in responding to the OCR investigation.

Derivative and Securities Litigation

Between February and April 2012, six stockholder derivative lawsuits were filed, each purportedly on the Company’s behalf. One case has been withdrawn; one case, captioned Martin v. Havenstein et al., is pending in New York Supreme Court, New York County; and four cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Derivative Litigation. Each complaint asserts claims against the Company’s directors and against varying groups of the Company’s current and former officers, including two former chief executive officers, the chief financial officer, the former manager of the CityTime program, and the former chief systems engineer of the CityTime program. The complaints claim that the defendants breached their fiduciary duties to the Company with respect to the CityTime contract for various reasons, including failure to supervise the adequacy of the Company’s internal controls, allowing the Company to issue misleading financial statements, and failure to exercise their oversight responsibilities to ensure that the Company complied with applicable laws, rules and regulations. Some of the complaints further claim that the defendants are liable to the Company under theories of gross mismanagement, contribution and indemnification, abuse of control, waste of corporate assets, and/or violation of Section 14(a) of the Securities Exchange Act. The Company currently intends to file a motion to dismiss each of these complaints because the respective plaintiffs did not serve a pre-suit demand before filing the derivative complaints. The Company has also received two stockholder demand letters related to CityTime (one of which is also related to TRICARE), which an independent committee of the Company’s board of directors is currently reviewing.

Between February and April 2012, alleged stockholders filed three putative securities class actions. One case was withdrawn and two cases were consolidated in the U.S. District Court for the Southern District of New York in In re SAIC, Inc. Securities Litigation. The consolidated complaint names as defendants the Company, its chief financial officer, two former chief executive officers, a former group president, and the former program manager on the CityTime program, and was filed purportedly on behalf of all purchasers of SAIC’s common stock from April 11, 2007 through September 1, 2011. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegations that the Company and individual defendants made misleading statements or omissions about the Company’s revenues, operating income, and internal controls in connection with disclosures relating to the CityTime project. The plaintiffs seek to recover from the Company and the individual defendants an unspecified amount of damages class members allegedly incurred by buying SAIC’s stock at an inflated price. The Company intends to vigorously defend against these claims.

The Company currently believes that a loss relating to the above-described stockholder matters is reasonably possible, but the Company cannot reasonably estimate the range of loss in light of the fact that these matters are in their early stages.

Greek Government Contract

Background and Arbitration. In May 2003, the Company entered into a firm-fixed-price contract with the Hellenic Republic of Greece (the Customer) to provide a Command, Control, Communications, Coordination and Integration System (the System) to support the 2004 Athens Summer Olympic Games (the Olympics) and to serve as the security system for the Customer’s public order departments following completion of the Olympics.

In November 2008, the Customer accepted the System in writing pursuant to the requirements of the contract. At the time, the Customer determined that the System substantially complied with the terms of the contract and accepted the System with certain alleged minor omissions and deviations. Upon System acceptance, the Company invoiced the Customer for approximately $17 million, representing the undisputed portion of the contract balance owed to the Company. The Customer has not paid this final invoice.

In June 2009, the Company initiated arbitration before the International Chamber of Commerce against the Customer seeking damages for breaches of contract by the Customer. The Company seeks (i) aggregate damages in excess of $85 million for payment of amounts owed and other claims and damages, (ii) recovery of advance payment and performance bond amounts totaling $23 million and (iii) costs and expenses associated with the arbitration. The Customer filed an answer to the complaint denying liability on various grounds and a supplementary answer asserting set-off claims against amounts sought by the Company. The arbitration hearing was held in May 2012, and the Company filed a final brief in July 2012. Due to the complex nature of the legal and factual issues involved, the outcome of the arbitration is uncertain.

Financial Status and Contingencies. As a result of the significant uncertainties on this contract, the Company converted to the completed-contract method of accounting and ceased recognizing revenues for the System development portion of this contract in fiscal 2006. No profits or losses were recorded on the Greek contract during the six months ended July 31, 2012 and 2011. As of July 31, 2012, the Company has recorded $123 million of losses under the Greek contract, reflecting the Company’s estimated total cost to complete the System, assuming the Greek contract value was limited to the cash received to date. Based on the complex nature of this contractual situation and the difficulties encountered to date, significant uncertainties exist and the Company is unable to reliably estimate the ultimate outcome. The Company may reverse a portion of the losses from the Greek contract if it receives future payments as required under the modified Greek contract.

As of July 31, 2012, the Company has $14 million of receivables relating to value added tax (VAT) that the Company has paid and believes it is entitled to recover either as a refund from the taxing authorities or as a payment under the Greek contract. The Company has invoiced the Customer for $31 million for VAT and the Customer has failed to make payment. If the Customer fails to pay the outstanding VAT amounts or the Company is unable to recover the amount as a refund from the taxing authorities, the Company’s total losses on the Greek contract could increase.

The Company has met certain advance payment and performance bonding requirements through the issuance of euro-denominated standby letters of credit. As of July 31, 2012, there were $4 million in standby letters of credit outstanding relating to the support and maintenance of the System. The Company is seeking recovery of amounts drawn by the Customer in fiscal 2011 on the standby letters of credit in the ongoing arbitration. The principal subcontractor has provided to the Company euro-denominated standby letters of credit in the amount of $21 million as of July 31, 2012, of which $18 million relates to the delivery of the System. The Company may draw on the subcontractor’s standby letters of credit under certain circumstances by providing a statement to the responsible bank that the subcontractor has not fulfilled its obligations under the subcontract.

Nuclear Regulatory Commission

The U.S. Department of Justice filed a lawsuit against the Company in September 2004 in U.S. District Court for the District of Columbia alleging civil False Claims Act violations and breach of contract by the Company on two contracts that the Company had with the Nuclear Regulatory Commission (NRC). The complaint alleges that the Company’s performance of several subcontracts on separate U.S. Department of Energy (DOE) programs, the participation of a Company employee in an industry trade association, and certain other alleged relationships created organizational conflicts of interest under the two NRC contracts. The Company disputes that the work performed on the DOE programs and the alleged relationships raised by the government created organizational conflicts of interest. In July 2008, the jury found in favor of the government on the breach of contract and two False Claims Act counts. The jury awarded a nominal amount of $78 in damages for breach of contract and $2 million in damages for the False Claims Act claims. The judge entered the judgment in October 2008, trebling the False Claims Act damages and awarding a total of $585,000 in civil penalties. The Company appealed to the U.S. Court of Appeals for the District of Columbia Circuit. In December 2010, the Court of Appeals affirmed the District Court’s judgment as to both liability and damages of $78 on the breach of contract count and rescinded the judgment on the False Claims Act counts, including the aggregate damages and penalties. The Court of Appeals sent the False Claims Act counts back to the District Court for further proceedings. The Company has recorded a liability for an immaterial amount related to this matter as of July 31, 2012 based on its assessment of the likely outcome of this matter.

Other

The Company is also involved in various claims and lawsuits arising in the normal conduct of its business, none of which, in the opinion of the Company’s management, based upon current information, will likely have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

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Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Current assets:
Cash and cash equivalents	$ 756	$ 1,592
Receivables, net	1,992	2,174
Inventory, prepaid expenses and other current assets	430	439
Total current assets	3,178	4,205
Property, plant and equipment (less accumulated depreciation and amortization of $438 million and $424 million at July 31, 2012 and January 31, 2012, respectively)	324	348
Intangible assets, net	156	176
Goodwill	1,826	1,826
Deferred income taxes	22	37
Other assets	74	75
Total assets	5,580	6,667
Current liabilities:
Accounts payable and accrued liabilities	1,296	1,964
Accrued payroll and employee benefits	473	508
Income taxes payable	9
Notes payable and long-term debt, current portion	3	553
Total current liabilities	1,781	3,025
Notes payable and long-term debt, net of current portion	1,297	1,299
Other long-term liabilities	143	162
Commitments and contingencies (Notes 10 and 11)
Stockholder's equity:
Common stock
Additional paid-in capital	2,064	2,028
Retained earnings	296	164
Accumulated other comprehensive loss	(1)	(11)
Total stockholders' equity	2,359	2,181
Total liabilities and stockholders' equity	5,580	6,667
Science Applications International Corporation
Current assets:
Cash and cash equivalents	556	1,592
Receivables, net	1,992	2,174
Inventory, prepaid expenses and other current assets	430	439
Total current assets	2,978	4,205
Property, plant and equipment (less accumulated depreciation and amortization of $438 million and $424 million at July 31, 2012 and January 31, 2012, respectively)	324	348
Intangible assets, net	156	176
Goodwill	1,826	1,826
Deferred income taxes	22	37
Other assets	74	75
Note receivable from SAIC, Inc. (Note 7)	139
Total assets	5,519	6,667
Current liabilities:
Accounts payable and accrued liabilities	1,296	1,964
Accrued payroll and employee benefits	473	508
Income taxes payable	9
Notes payable and long-term debt, current portion	3	553
Total current liabilities	1,781	3,025
Notes payable and long-term debt, net of current portion	1,297	1,299
Note payable to SAIC, Inc. (Note 7)		120
Other long-term liabilities	143	162
Commitments and contingencies (Notes 10 and 11)
Stockholder's equity:
Common stock
Additional paid-in capital	233	233
Retained earnings	2,066	1,839
Accumulated other comprehensive loss	(1)	(11)
Total stockholders' equity	2,298	2,061
Total liabilities and stockholders' equity	$ 5,519	$ 6,667

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Acquisitions

6 Months Ended

Jul. 31, 2012

Acquisitions

Note 4—Acquisitions:

maxIT Healthcare Holdings, Inc. On August 10, 2012, the Company acquired maxIT Healthcare Holdings, Inc., a provider of clinical, business and information technology services primarily to commercial hospital groups and other medical delivery organizations, for a preliminary purchase price of $473 million paid in cash plus a $14 million cash payment for excess working capital delivered at closing, subject to adjustment. The Company will make an additional payment of up to $20 million after receipt of certain tax refunds. This acquisition expands the Company’s commercial consulting practice in electronic health record (EHR) implementation and optimization and strengthens the Company’s capabilities to provide these services to its federal healthcare customers as those customers migrate to commercial off-the-shelf EHR applications. This acquisition was in the Health, Energy and Civil Solutions segment. The tangible net assets of the business acquired were approximately $50 million. Due to the timing of this acquisition, the initial purchase accounting is not complete as of the date of this report.

Science Applications International Corporation

Acquisitions

Note 4—Acquisitions:

maxIT Healthcare Holdings, Inc. On August 10, 2012, the Company acquired maxIT Healthcare Holdings, Inc., a provider of clinical, business and information technology services primarily to commercial hospital groups and other medical delivery organizations, for a preliminary purchase price of $473 million paid in cash plus a $14 million cash payment for excess working capital delivered at closing, subject to adjustment. The Company will make an additional payment of up to $20 million after receipt of certain tax refunds. This acquisition expands the Company’s commercial consulting practice in electronic health record (EHR) implementation and optimization and strengthens the Company’s capabilities to provide these services to its federal healthcare customers as those customers migrate to commercial off-the-shelf EHR applications. This acquisition was in the Health, Energy and Civil Solutions segment. The tangible net assets of the business acquired were approximately $50 million. Due to the timing of this acquisition, the initial purchase accounting is not complete as of the date of this report.

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Stock-Based Compensation

6 Months Ended

Jul. 31, 2012

Stock-Based Compensation

Note 3—Stock-Based Compensation:

Total Stock-Based Compensation. Total stock-based compensation expense for the periods presented was as follows:

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012		2011
	(in millions)
Stock options	$	4	$	5		$	7	$	10
Vesting stock awards		17		17			37		35
Performance-based stock awards		1		(3	)		2		(2	)
Total stock-based compensation expense	$	22	$	19		$	46	$	43

Stock Options. Stock options granted during the six months ended July 31, 2012 and 2011 have terms of seven years and a vesting period of four years, except for stock options granted to the Company’s outside directors, which have a vesting period of one year.

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average grant-date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were as follows:

	Six Months Ended July 31
	2012			2011
Weighted average grant-date fair value	$	1.81		$	4.21
Expected term (in years)		5.0			4.9
Expected volatility		24.4	%		23.4	%
Risk-free interest rate		1.0	%		2.2	%
Dividend yield		3.7	%		0	%

Stock option activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
	(in millions)					(in years)		(in millions)
Outstanding at January 31, 2012		20.8		$	17.90		2.5	$	—
Options granted		4.9			13.21
Options forfeited or expired		(5.5	)		17.48
Outstanding at July 31, 2012		20.2			16.88		3.4		—
Exercisable at July 31, 2012		9.4			18.33		1.7		—

Vesting Stock Awards. In fiscal 2013, the Company began granting restricted stock units that have forfeitable dividend rights and no voting rights until the units vest and become included in shares of common stock outstanding. Prior to January 31, 2012, the Company granted restricted stock awards that have non-forfeitable dividend rights and voting rights and are included in shares outstanding upon issuance (prior to vesting). Vesting stock award activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock awards			Weighted average grant- date fair value
	(in millions)
Unvested stock awards at January 31, 2012		12.0		$	17.50
Awards granted		6.4			13.19
Awards forfeited		(0.6	)		15.95
Awards vested		(4.6	)		17.88
Unvested stock awards at July 31, 2012		13.2			15.35

The fair value of vesting stock awards that vested during the six months ended July 31, 2012 and 2011 was $62 million and $61 million, respectively.

Performance-Based Stock Awards. The Company’s performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded ranging from zero to 150% of the specified target awards. For awards granted in fiscal 2013, one-third of the target number of shares of stock granted under the awards will be allocated to each fiscal year over the three-year performance period and the actual number of shares to be issued with respect to each fiscal year will be based upon the achievement of that fiscal year’s performance criteria. For performance-based stock awards granted prior to fiscal 2013, the number of shares of stock to be issued under the awards is determined based upon the achievement of the performance criteria measured over the entire three-year performance period. Performance-based stock award activity for the six months ended July 31, 2012 was as follows:

	Expected number of shares of stock to be issued under performance- based stock awards		Weighted average grant- date fair value
	(in millions)
Outstanding at January 31, 2012		0.5	$	17.02
Awards granted		0.8		13.18
Outstanding at July 31, 2012		1.3		14.52

Adjustments to the expected number of shares of stock to be issued may occur due to changes in the expected level of achievement of the performance goals over the life of the awards.

Science Applications International Corporation

Stock-Based Compensation

Note 3—Stock-Based Compensation:

Total Stock-Based Compensation. Total stock-based compensation expense for the periods presented was as follows:

	Three Months Ended July 31					Six Months Ended July 31
	2012		2011			2012		2011
	(in millions)
Stock options	$	4	$	5		$	7	$	10
Vesting stock awards		17		17			37		35
Performance-based stock awards		1		(3	)		2		(2	)
Total stock-based compensation expense	$	22	$	19		$	46	$	43

Stock Options. Stock options granted during the six months ended July 31, 2012 and 2011 have terms of seven years and a vesting period of four years, except for stock options granted to the Company’s outside directors, which have a vesting period of one year.

The fair value of the Company’s stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average grant-date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were as follows:

	Six Months Ended July 31
	2012			2011
Weighted average grant-date fair value	$	1.81		$	4.21
Expected term (in years)		5.0			4.9
Expected volatility		24.4	%		23.4	%
Risk-free interest rate		1.0	%		2.2	%
Dividend yield		3.7	%		0	%

Stock option activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
	(in millions)					(in years)		(in millions)
Outstanding at January 31, 2012		20.8		$	17.90		2.5	$	—
Options granted		4.9			13.21
Options forfeited or expired		(5.5	)		17.48
Outstanding at July 31, 2012		20.2			16.88		3.4		—
Exercisable at July 31, 2012		9.4			18.33		1.7		—

Vesting Stock Awards. In fiscal 2013, the Company began granting restricted stock units that have forfeitable dividend rights and no voting rights until the units vest and become included in shares of common stock outstanding. Prior to January 31, 2012, the Company granted restricted stock awards that have non-forfeitable dividend rights and voting rights and are included in shares outstanding upon issuance (prior to vesting). Vesting stock award activity for the six months ended July 31, 2012 was as follows:

	Shares of stock under stock awards			Weighted average grant- date fair value
	(in millions)
Unvested stock awards at January 31, 2012		12.0		$	17.50
Awards granted		6.4			13.19
Awards forfeited		(0.6	)		15.95
Awards vested		(4.6	)		17.88
Unvested stock awards at July 31, 2012		13.2			15.35

The fair value of vesting stock awards that vested during the six months ended July 31, 2012 and 2011 was $62 million and $61 million, respectively.

Performance-Based Stock Awards. The Company’s performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded ranging from zero to 150% of the specified target awards. For awards granted in fiscal 2013, one-third of the target number of shares of stock granted under the awards will be allocated to each fiscal year over the three-year performance period and the actual number of shares to be issued with respect to each fiscal year will be based upon the achievement of that fiscal year’s performance criteria. For performance-based stock awards granted prior to fiscal 2013, the number of shares of stock to be issued under the awards is determined based upon the achievement of the performance criteria measured over the entire three-year performance period. Performance-based stock award activity for the six months ended July 31, 2012 was as follows:

	Expected number of shares of stock to be issued under performance- based stock awards		Weighted average grant- date fair value
	(in millions)
Outstanding at January 31, 2012		0.5	$	17.02
Awards granted		0.8		13.18
Outstanding at July 31, 2012		1.3		14.52

Adjustments to the expected number of shares of stock to be issued may occur due to changes in the expected level of achievement of the performance goals over the life of the awards.

XML

Earnings Per Share (EPS) (Tables)

6 Months Ended

Jul. 31, 2012

Reconciliation Of Income Used In Calculating Earnings Per Share

A reconciliation of the income used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Basic EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing basic EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing basic EPS	$	108		$	171		$	221		$	298
Diluted EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing diluted EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing diluted EPS	$	108		$	171		$	221		$	298

Reconciliation Of Weighted Average Number Of Shares Outstanding

A reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Basic weighted average number of shares outstanding		333		338		332		342
Dilutive common share equivalents—stock options and other stock awards		—		1		—		1
Diluted weighted average number of shares outstanding		333		339		332		343

Schedule Of Basic And Diluted EPS

Basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
Basic:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.19		—		.19
	$	.32	$	.51	$	.67	$	.87
Diluted:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.18		—		.19
	$	.32	$	.50	$	.67	$	.87

Schedule Of Stock-Based Awards Excluded From Weighted Average Shares Outstanding

The following stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Antidilutive stock options excluded		20		22		20		22
Performance-based stock awards excluded		1		1		1		1

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Other Commitments and Contingencies

6 Months Ended

Jul. 31, 2012

Other Commitments and Contingencies

Note 11—Other Commitments and Contingencies:

DS&S Joint Venture

In March 2006, the Company sold its interest in DS&S, a joint venture in which the Company owned a 50% interest. As part of the sale, the Company agreed to indemnify the purchaser or DS&S for certain legal costs and expenses, including those related to a government investigation involving DS&S and any litigation resulting from that investigation. The Company had deferred the potential gain on this sale pending resolution of the government investigation involving DS&S. During the fiscal quarter ended July 31, 2012, the Company recorded a gain of $4 million in other income, net and agreed to pay DS&S $4 million in satisfaction of its indemnification obligation relating to the investigation matter.

Variable Interest Entity (VIE)

In fiscal 2012, the Company entered into a fixed price agreement to provide engineering, procurement, and construction services to a special purpose limited liability company for a specific renewable energy project. The Company analyzed this arrangement and determined the entity is a VIE. However, this VIE was not consolidated by the Company because the Company is not the primary beneficiary. The project is partially financed by the Company’s provision of extended payment terms in the amount of $100 million for certain of its services performed on the project. The arrangement also contemplates monetary penalties and project guarantees if the Company does not meet certain completion deadlines. The Company expects to bill a total of $216 million to complete the project. At July 31, 2012, the Company had a receivable of $16 million due from this VIE.

Government Investigations and Reviews

The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect 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. Adverse findings in these investigations or reviews can lead to criminal, civil or administrative proceedings and the Company could face penalties, fines, repayments or compensatory damages and suspension or debarment from doing business with governmental agencies. Adverse findings could also have a material adverse effect on the Company’s business, consolidated financial position, results of operations and cash flows due to its reliance on government contracts.

U.S. Government agencies, including the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA) 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 accounting and management internal control systems, including: control environment and overall accounting system, estimating system, purchasing system, property system and earned value management system. Both contractors and the U.S. Government agencies conducting these audits and reviews have come under increased scrutiny. As a result, the current audits and reviews have become more rigorous and the standards to which the Company is held are being more strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome. During the course of its current audits, the DCAA is closely examining and questioning several of the Company’s long established and disclosed practices that it had previously audited and accepted, increasing the uncertainty as to the ultimate conclusion that will be reached.

The Company changed its indirect rate structure used in its indirect cost system and its direct labor bid structure used for its estimating system for fiscal 2011 and future years. The DCAA is performing reviews of these changes and the Company’s compliance with certain other U.S. Government Cost Accounting Standards. A finding of significant control deficiencies in the Company’s system audits or other reviews can result in decremented billing rates to its U.S. Government customers until the control deficiencies are corrected and their remediation is accepted by the DCMA.

The Company’s indirect cost audits by the DCAA have not been completed for fiscal 2006 and subsequent fiscal years. Although the Company has recorded contract revenues subsequent to fiscal 2005 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of July 31, 2012, the Company has recorded a liability of $35 million for its current best estimate of net amounts to be refunded to customers for potential adjustments from such audits or reviews of contract costs.

Tax Audits and Reviews

The Company files income tax returns in the United States and various state and foreign jurisdictions and is subject to routine compliance reviews by the Internal Revenue Service (IRS) and other taxing authorities. The Company has effectively settled with the IRS for fiscal years prior to and including fiscal 2008. The Company also settled fiscal 2011 as a result of the Company’s participation in the IRS Compliance Assurance Process beginning in fiscal 2011, in which the Company and the IRS endeavor to agree on the treatment of all tax positions prior to the tax return being filed, thereby greatly reducing the period of time between tax return submission and settlement with the IRS. Future and ongoing reviews could have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to $103 million of the Company’s unrecognized tax benefits including a negligible amount of previously accrued interest, depending on the timing of ongoing examinations, any litigation and expiration of statute of limitations, either because the Company’s tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. As of July 31, 2012, the Company had liabilities for uncertain tax positions of $132 million, $29 million of which were classified as other long-term liabilities in the consolidated balance sheet.

While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities 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 the tax authorities.

The Company is subject to periodic audits by government agencies for taxes other than income taxes. The Company does not believe that the outcome of any other such tax matters would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Letters of Credit and Surety Bonds

The Company has outstanding letters of credit of $102 million as of July 31, 2012, principally related to guarantees on contracts. The Company also has outstanding surety bonds in the amount of $377 million, principally related to performance and payment bonds on the Company’s contracts.

Other

The Army Brigade Combat Team Modernization Engineering, Manufacturing and Development program was terminated for convenience by the DoD effective September 30, 2011. From October 2009 through termination, the Company and its prime contractor performed on this program under an undefinitized change order with a provisional billing rate that allowed the Company to receive a lesser amount of the projected fee than the estimated fee due until the contract negotiations are completed. The Company has recognized revenues of approximately $480 million, including estimated fee, from October 2009 through July 31, 2012 under the undefinitized change order. The actual fee payable to the Company on this program is dependent on the outcome of the change order negotiations and may differ from amounts previously recognized.

Science Applications International Corporation

Other Commitments and Contingencies

Note 11—Other Commitments and Contingencies:

DS&S Joint Venture

In March 2006, the Company sold its interest in DS&S, a joint venture in which the Company owned a 50% interest. As part of the sale, the Company agreed to indemnify the purchaser or DS&S for certain legal costs and expenses, including those related to a government investigation involving DS&S and any litigation resulting from that investigation. The Company had deferred the potential gain on this sale pending resolution of the government investigation involving DS&S. During the fiscal quarter ended July 31, 2012, the Company recorded a gain of $4 million in other income, net and agreed to pay DS&S $4 million in satisfaction of its indemnification obligation relating to the investigation matter.

Variable Interest Entity (VIE)

In fiscal 2012, the Company entered into a fixed price agreement to provide engineering, procurement, and construction services to a special purpose limited liability company for a specific renewable energy project. The Company analyzed this arrangement and determined the entity is a VIE. However, this VIE was not consolidated by the Company because the Company is not the primary beneficiary. The project is partially financed by the Company’s provision of extended payment terms in the amount of $100 million for certain of its services performed on the project. The arrangement also contemplates monetary penalties and project guarantees if the Company does not meet certain completion deadlines. The Company expects to bill a total of $216 million to complete the project. At July 31, 2012, the Company had a receivable of $16 million due from this VIE.

Government Investigations and Reviews

The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect 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. Adverse findings in these investigations or reviews can lead to criminal, civil or administrative proceedings and the Company could face penalties, fines, repayments or compensatory damages and suspension or debarment from doing business with governmental agencies. Adverse findings could also have a material adverse effect on the Company’s business, consolidated financial position, results of operations and cash flows due to its reliance on government contracts.

U.S. Government agencies, including the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA) 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 accounting and management internal control systems, including: control environment and overall accounting system, estimating system, purchasing system, property system and earned value management system. Both contractors and the U.S. Government agencies conducting these audits and reviews have come under increased scrutiny. As a result, the current audits and reviews have become more rigorous and the standards to which the Company is held are being more strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome. During the course of its current audits, the DCAA is closely examining and questioning several of the Company’s long established and disclosed practices that it had previously audited and accepted, increasing the uncertainty as to the ultimate conclusion that will be reached.

The Company changed its indirect rate structure used in its indirect cost system and its direct labor bid structure used for its estimating system for fiscal 2011 and future years. The DCAA is performing reviews of these changes and the Company’s compliance with certain other U.S. Government Cost Accounting Standards. A finding of significant control deficiencies in the Company’s system audits or other reviews can result in decremented billing rates to its U.S. Government customers until the control deficiencies are corrected and their remediation is accepted by the DCMA.

The Company’s indirect cost audits by the DCAA have not been completed for fiscal 2006 and subsequent fiscal years. Although the Company has recorded contract revenues subsequent to fiscal 2005 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of July 31, 2012, the Company has recorded a liability of $35 million for its current best estimate of net amounts to be refunded to customers for potential adjustments from such audits or reviews of contract costs.

Tax Audits and Reviews

The Company files income tax returns in the United States and various state and foreign jurisdictions and is subject to routine compliance reviews by the Internal Revenue Service (IRS) and other taxing authorities. The Company has effectively settled with the IRS for fiscal years prior to and including fiscal 2008. The Company also settled fiscal 2011 as a result of the Company’s participation in the IRS Compliance Assurance Process beginning in fiscal 2011, in which the Company and the IRS endeavor to agree on the treatment of all tax positions prior to the tax return being filed, thereby greatly reducing the period of time between tax return submission and settlement with the IRS. Future and ongoing reviews could have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to $103 million of the Company’s unrecognized tax benefits including a negligible amount of previously accrued interest, depending on the timing of ongoing examinations, any litigation and expiration of statute of limitations, either because the Company’s tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. As of July 31, 2012, the Company had liabilities for uncertain tax positions of $132 million, $29 million of which were classified as other long-term liabilities in the consolidated balance sheet.

While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities 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 the tax authorities.

The Company is subject to periodic audits by government agencies for taxes other than income taxes. The Company does not believe that the outcome of any other such tax matters would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Letters of Credit and Surety Bonds

The Company has outstanding letters of credit of $102 million as of July 31, 2012, principally related to guarantees on contracts. The Company also has outstanding surety bonds in the amount of $377 million, principally related to performance and payment bonds on the Company’s contracts.

Other

The Army Brigade Combat Team Modernization Engineering, Manufacturing and Development program was terminated for convenience by the DoD effective September 30, 2011. From October 2009 through termination, the Company and its prime contractor performed on this program under an undefinitized change order with a provisional billing rate that allowed the Company to receive a lesser amount of the projected fee than the estimated fee due until the contract negotiations are completed. The Company has recognized revenues of approximately $480 million, including estimated fee, from October 2009 through July 31, 2012 under the undefinitized change order. The actual fee payable to the Company on this program is dependent on the outcome of the change order negotiations and may differ from amounts previously recognized.

XML

Related Party Transactions

6 Months Ended

Jul. 31, 2012

Related Party Transactions

Note 7—Related Party Transactions:

Science Applications has fully and unconditionally guaranteed the obligations of SAIC under its $450 million 4.45% notes and $300 million 5.95% notes. These notes have been reflected as debt of Science Applications in these condensed consolidated financial statements. Science Applications has fully and unconditionally guaranteed any borrowings under SAIC’s amended and restated revolving credit facility maturing in fiscal 2017. SAIC has fully and unconditionally guaranteed the obligations of Science Applications under its $300 million 5.5% notes and $250 million 7.13% notes.

SAIC and Science Applications have a related party note in connection with a loan of cash between the entities, issuances of stock by SAIC to employees of Science Applications and its subsidiaries and Science Applications’ payment of certain obligations on behalf of SAIC. The related party note bears interest based on LIBOR plus a market-based premium. Portions of the related party note may be repaid at any time prior to its maturity date in November 2012. This maturity date will be automatically extended for successive one-year periods unless either SAIC or Science Applications provides prior notice to the other party.

Science Applications International Corporation

Related Party Transactions

Note 7—Related Party Transactions:

Science Applications has fully and unconditionally guaranteed the obligations of SAIC under its $450 million 4.45% notes and $300 million 5.95% notes. These notes have been reflected as debt of Science Applications in these condensed consolidated financial statements. Science Applications has fully and unconditionally guaranteed any borrowings under SAIC’s amended and restated revolving credit facility maturing in fiscal 2017. SAIC has fully and unconditionally guaranteed the obligations of Science Applications under its $300 million 5.5% notes and $250 million 7.13% notes.

SAIC and Science Applications have a related party note in connection with a loan of cash between the entities, issuances of stock by SAIC to employees of Science Applications and its subsidiaries and Science Applications’ payment of certain obligations on behalf of SAIC. The related party note bears interest based on LIBOR plus a market-based premium. Portions of the related party note may be repaid at any time prior to its maturity date in November 2012. This maturity date will be automatically extended for successive one-year periods unless either SAIC or Science Applications provides prior notice to the other party.

XML

Goodwill and Intangible Assets

6 Months Ended

Jul. 31, 2012

Goodwill and Intangible Assets

Note 5—Goodwill and Intangible Assets:

The changes in the carrying value of goodwill for Defense Solutions (DS), Health, Energy and Civil Solutions (HECS) and Intelligence and Cybersecurity Solutions (ICS) were as follows:

	DS		HECS			ICS		Total
	(in millions)
Goodwill at January 31, 2012	$	410	$	785		$	631	$	1,826
Corporate reorganizations		—		(10	)		10		—
Goodwill at July 31, 2012	$	410	$	775		$	641	$	1,826

Corporate reorganizations in fiscal 2013 resulted from transfers of certain operations between the Company’s reportable segments.

Intangible assets consisted of the following:

	July 31, 2012							January 31, 2012
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	119	$	(71	)	$	48	$	120	$	(62	)	$	58
Software and technology		147		(56	)		91		148		(48	)		100
Other		2		(2	)		—		2		(1	)		1
Total finite-lived intangible assets		268		(129	)		139		270		(111	)		159
Indefinite-lived intangible assets:
In-process research and development		13		—			13		13		—			13
Trade names		4		—			4		4		—			4
Total indefinite-lived intangible assets		17		—			17		17		—			17
Total intangible assets	$	285	$	(129	)	$	156	$	287	$	(111	)	$	176

Finite-lived intangible assets with a gross carrying value of $1 million became fully amortized during the six months ended July 31, 2012 and are no longer reflected in the gross carrying value. Amortization expense related to amortizable intangible assets was $9 million and $19 million for the three and six months ended July 31, 2012, respectively, and $11 million and $22 million for the three and six months ended July 31, 2011, respectively.

During the three and six months ended July 31, 2012, the Company recognized an immaterial impairment loss for intangible assets. There were no impairment losses for intangible assets during the three and six months ended July 31, 2011 and no goodwill impairment losses during the three and six months ended July 31, 2012 and 2011.

The estimated annual amortization expense related to finite-lived intangible assets as of July 31, 2012 was as follows:

Fiscal Year Ending January 31
	(in millions)
2013 (remainder of the fiscal year)	$	15
2014		31
2015		27
2016		22
2017		16
2018		12
2019 and thereafter		16
	$	139

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, the outcome and timing of completion of in-process research and development projects (the assets of which will become amortizable upon completion and placement into service, or will be impaired if abandoned), adjustments to preliminary valuations of intangible assets and other factors.

Science Applications International Corporation

Goodwill and Intangible Assets

Note 5—Goodwill and Intangible Assets:

The changes in the carrying value of goodwill for Defense Solutions (DS), Health, Energy and Civil Solutions (HECS) and Intelligence and Cybersecurity Solutions (ICS) were as follows:

	DS		HECS			ICS		Total
	(in millions)
Goodwill at January 31, 2012	$	410	$	785		$	631	$	1,826
Corporate reorganizations		—		(10	)		10		—
Goodwill at July 31, 2012	$	410	$	775		$	641	$	1,826

Corporate reorganizations in fiscal 2013 resulted from transfers of certain operations between the Company’s reportable segments.

Intangible assets consisted of the following:

	July 31, 2012							January 31, 2012
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	119	$	(71	)	$	48	$	120	$	(62	)	$	58
Software and technology		147		(56	)		91		148		(48	)		100
Other		2		(2	)		—		2		(1	)		1
Total finite-lived intangible assets		268		(129	)		139		270		(111	)		159
Indefinite-lived intangible assets:
In-process research and development		13		—			13		13		—			13
Trade names		4		—			4		4		—			4
Total indefinite-lived intangible assets		17		—			17		17		—			17
Total intangible assets	$	285	$	(129	)	$	156	$	287	$	(111	)	$	176

Finite-lived intangible assets with a gross carrying value of $1 million became fully amortized during the six months ended July 31, 2012 and are no longer reflected in the gross carrying value. Amortization expense related to amortizable intangible assets was $9 million and $19 million for the three and six months ended July 31, 2012, respectively, and $11 million and $22 million for the three and six months ended July 31, 2011, respectively.

During the three and six months ended July 31, 2012, the Company recognized an immaterial impairment loss for intangible assets. There were no impairment losses for intangible assets during the three and six months ended July 31, 2011 and no goodwill impairment losses during the three and six months ended July 31, 2012 and 2011.

The estimated annual amortization expense related to finite-lived intangible assets as of July 31, 2012 was as follows:

Fiscal Year Ending January 31
	(in millions)
2013 (remainder of the fiscal year)	$	15
2014		31
2015		27
2016		22
2017		16
2018		12
2019 and thereafter		16
	$	139

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, the outcome and timing of completion of in-process research and development projects (the assets of which will become amortizable upon completion and placement into service, or will be impaired if abandoned), adjustments to preliminary valuations of intangible assets and other factors.

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Financial Instruments

6 Months Ended

Jul. 31, 2012

Financial Instruments

Note 6—Financial Instruments:

In addition to cash held in insured bank deposits, the Company’s cash equivalents were primarily comprised of investments in several large institutional money market funds that invest primarily in bills, notes and bonds issued by the U.S. Treasury, U.S. Government guaranteed repurchase agreements fully collateralized by U.S. Treasury obligations, U.S. Government guaranteed securities and investment-grade corporate securities that have original maturities of three months or less. There are no restrictions on the withdrawal of the Company’s cash and cash equivalents. The Company’s cash equivalents are recorded at historical cost which equals fair value based on quoted market prices (Level 1 input as defined by the accounting standard for fair value measurements).

SAIC has a revolving credit facility, which is fully and unconditionally guaranteed by Science Applications, providing for up to $750 million in unsecured borrowing capacity at interest rates determined, at SAIC’s option, based on either LIBOR plus a margin or a defined base rate through fiscal 2017. During the first quarter of fiscal 2013, the Company extended the maturity date of the revolving credit facility for one additional year, to March 2016, as provided for in the terms of the revolving credit facility. As of July 31, 2012 and January 31, 2012, there were no borrowings outstanding under the revolving credit facility.

The revolving credit facility contains certain customary representations and warranties, as well as certain affirmative and negative covenants. The financial covenants contained in the revolving credit facility require that, for a period of four trailing fiscal quarters, the Company maintains a ratio of consolidated funded debt, including borrowings under this facility, to earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for other items as defined in the credit facility of not more than 3.0 to 1.0 and a ratio of EBITDA adjusted for other items as defined in the credit facility to interest expense of greater than 3.5 to 1.0. The Company was in compliance with these financial covenants as of July 31, 2012. A failure by the Company to meet these financial covenants in the future would reduce and could eliminate the Company’s borrowing capacity under the revolving credit facility.

Other covenants restrict certain of the Company’s activities, including among other things, its ability to create liens, dispose of certain assets and merge or consolidate with other entities. The revolving credit facility also contains certain customary events of default, including, among others, defaults based on certain bankruptcy and insolvency events, nonpayment, cross-defaults to other debt, breach of specified covenants, Employee Retirement Income Security Act (ERISA) events, material monetary judgments, change of control events and the material inaccuracy of the Company’s representations and warranties.

The Company’s notes payable and long-term debt consisted of the following:

	Stated interest rate			Effective interest rate			July 31, 2012		January 31, 2012
	(in millions)
SAIC senior unsecured notes:
$450 million notes issued in fiscal 2011, which mature in December 2020		4.45	%		4.53	%	$	449	$	449
$300 million notes issued in fiscal 2011, which mature in December 2040		5.95	%		6.03	%		300		300
Science Applications senior unsecured notes:
$550 million notes issued in fiscal 2003, which matured in July 2012		6.25	%		6.50	%		—		550
$250 million notes issued in fiscal 2003, which mature in July 2032		7.13	%		7.43	%		248		248
$300 million notes issued in fiscal 2004, which mature in July 2033		5.50	%		5.78	%		296		296
Capital leases and other notes payable due on various dates through fiscal 2018		0-2.5	%		Various			7		9
Total notes payable and long-term debt								1,300		1,852
Less current portion								3		553
Total notes payable and long-term debt, net of current portion							$	1,297	$	1,299
Fair value of notes payable and long-term debt							$	1,475	$	2,011

The Company paid $550 million to settle the 6.25% notes at maturity on July 2, 2012.

The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements (Level 2 and 3 inputs as defined by the accounting standard for fair value measurements).

The senior unsecured notes contain customary restrictive covenants, including, among other things, restrictions on the Company’s ability to create liens and enter into sale and leaseback transactions. The Company was in compliance with all covenants as of July 31, 2012.

Science Applications International Corporation

Financial Instruments

Note 6—Financial Instruments:

In addition to cash held in insured bank deposits, the Company’s cash equivalents were primarily comprised of investments in several large institutional money market funds that invest primarily in bills, notes and bonds issued by the U.S. Treasury, U.S. Government guaranteed repurchase agreements fully collateralized by U.S. Treasury obligations, U.S. Government guaranteed securities and investment-grade corporate securities that have original maturities of three months or less. There are no restrictions on the withdrawal of the Company’s cash and cash equivalents. The Company’s cash equivalents are recorded at historical cost which equals fair value based on quoted market prices (Level 1 input as defined by the accounting standard for fair value measurements).

SAIC has a revolving credit facility, which is fully and unconditionally guaranteed by Science Applications, providing for up to $750 million in unsecured borrowing capacity at interest rates determined, at SAIC’s option, based on either LIBOR plus a margin or a defined base rate through fiscal 2017. During the first quarter of fiscal 2013, the Company extended the maturity date of the revolving credit facility for one additional year, to March 2016, as provided for in the terms of the revolving credit facility. As of July 31, 2012 and January 31, 2012, there were no borrowings outstanding under the revolving credit facility.

The revolving credit facility contains certain customary representations and warranties, as well as certain affirmative and negative covenants. The financial covenants contained in the revolving credit facility require that, for a period of four trailing fiscal quarters, the Company maintains a ratio of consolidated funded debt, including borrowings under this facility, to earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for other items as defined in the credit facility of not more than 3.0 to 1.0 and a ratio of EBITDA adjusted for other items as defined in the credit facility to interest expense of greater than 3.5 to 1.0. The Company was in compliance with these financial covenants as of July 31, 2012. A failure by the Company to meet these financial covenants in the future would reduce and could eliminate the Company’s borrowing capacity under the revolving credit facility.

Other covenants restrict certain of the Company’s activities, including among other things, its ability to create liens, dispose of certain assets and merge or consolidate with other entities. The revolving credit facility also contains certain customary events of default, including, among others, defaults based on certain bankruptcy and insolvency events, nonpayment, cross-defaults to other debt, breach of specified covenants, Employee Retirement Income Security Act (ERISA) events, material monetary judgments, change of control events and the material inaccuracy of the Company’s representations and warranties.

The Company’s notes payable and long-term debt consisted of the following:

	Stated interest rate			Effective interest rate			July 31, 2012		January 31, 2012
	(in millions)
SAIC senior unsecured notes:
$450 million notes issued in fiscal 2011, which mature in December 2020		4.45	%		4.53	%	$	449	$	449
$300 million notes issued in fiscal 2011, which mature in December 2040		5.95	%		6.03	%		300		300
Science Applications senior unsecured notes:
$550 million notes issued in fiscal 2003, which matured in July 2012		6.25	%		6.50	%		—		550
$250 million notes issued in fiscal 2003, which mature in July 2032		7.13	%		7.43	%		248		248
$300 million notes issued in fiscal 2004, which mature in July 2033		5.50	%		5.78	%		296		296
Capital leases and other notes payable due on various dates through fiscal 2018		0-2.5	%		Various			7		9
Total notes payable and long-term debt								1,300		1,852
Less current portion								3		553
Total notes payable and long-term debt, net of current portion							$	1,297	$	1,299
Fair value of notes payable and long-term debt							$	1,475	$	2,011

The Company paid $550 million to settle the 6.25% notes at maturity on July 2, 2012.

The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements (Level 2 and 3 inputs as defined by the accounting standard for fair value measurements).

The senior unsecured notes contain customary restrictive covenants, including, among other things, restrictions on the Company’s ability to create liens and enter into sale and leaseback transactions. The Company was in compliance with all covenants as of July 31, 2012.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jul. 31, 2012

Accumulated Other Comprehensive Loss

Note 8—Accumulated Other Comprehensive Loss:

The components of accumulated other comprehensive loss were as follows:

	July 31, 2012			January 31, 2012
	(in millions)
Foreign currency translation adjustments, net of taxes of $(1) million and $(2) million as of July 31, 2012 and January 31, 2012, respectively	$	2		$	2
Unrecognized net loss on settled derivative instruments associated with outstanding debt, net of taxes of $3 million as of July 31, 2012 and January 31, 2012		(5	)		(5	)
Unrecognized net loss on defined benefit plan, net of taxes of ($1) million and $5 million, as of July 31, 2012 and January 31, 2012, respectively		2			(8	)
Total accumulated other comprehensive loss, net of taxes of $1 million and $6 million as of July 31, 2012 and January 31, 2012, respectively	$	(1	)	$	(11	)

As of July 31, 2012, there is less than $1 million of the unrealized net loss on settled derivative instruments (pre-tax) that will be amortized and recognized as interest expense during the next 12 months.

Science Applications International Corporation

Accumulated Other Comprehensive Loss

Note 8—Accumulated Other Comprehensive Loss:

The components of accumulated other comprehensive loss were as follows:

	July 31, 2012			January 31, 2012
	(in millions)
Foreign currency translation adjustments, net of taxes of $(1) million and $(2) million as of July 31, 2012 and January 31, 2012, respectively	$	2		$	2
Unrecognized net loss on settled derivative instruments associated with outstanding debt, net of taxes of $3 million as of July 31, 2012 and January 31, 2012		(5	)		(5	)
Unrecognized net loss on defined benefit plan, net of taxes of ($1) million and $5 million, as of July 31, 2012 and January 31, 2012, respectively		2			(8	)
Total accumulated other comprehensive loss, net of taxes of $1 million and $6 million as of July 31, 2012 and January 31, 2012, respectively	$	(1	)	$	(11	)

As of July 31, 2012, there is less than $1 million of the unrealized net loss on settled derivative instruments (pre-tax) that will be amortized and recognized as interest expense during the next 12 months.

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Schedule Of Basic And Diluted EPS (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2012	Jul. 31, 2011
Basic:
Income from continuing operations	$ 0.32	$ 0.32	$ 0.67	$ 0.68
Income from discontinued operations		$ 0.19		$ 0.19
Total basic earnings per share	$ 0.32	$ 0.51	$ 0.67	$ 0.87
Diluted:
Income from continuing operations	$ 0.32	$ 0.32	$ 0.67	$ 0.68
Income from discontinued operations		$ 0.18		$ 0.19
Total diluted earnings per share	$ 0.32	$ 0.50	$ 0.67	$ 0.87

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Schedule Of Accumulated Other Comprehensive Loss (Detail) (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Accumulated Other Comprehensive Loss [Abstract]
Foreign currency translation adjustments, net of taxes of $(1) million and $(2) million as of July 31, 2012 and January 31, 2012, respectively	$ 2	$ 2
Unrecognized net loss on settled derivative instruments associated with outstanding debt, net of taxes of $3 million as of July 31, 2012 and January 31, 2012	(5)	(5)
Unrecognized net loss on defined benefit plan, net of taxes of ($1) million and $5 million, as of July 31, 2012 and January 31, 2012, respectively	2	(8)
Total accumulated other comprehensive loss, net of taxes of $1 million and $6 million as of July 31, 2012 and January 31, 2012, respectively	$ (1)	$ (11)

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2012

Nature of Operations and Basis of Presentation

Nature of Operations and Basis of Presentation

SAIC, Inc. (“SAIC”) is a holding company whose direct 100%-owned subsidiary is Science Applications International Corporation (“Science Applications”), a provider of scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S. Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security, and other U.S. Government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets.

The condensed consolidated financial statements of SAIC include the accounts of its majority-owned and 100%-owned subsidiaries, including Science Applications. The condensed consolidated financial statements of Science Applications include the accounts of its majority-owned and 100%-owned subsidiaries. SAIC does not have separate operations, assets or liabilities independent of Science Applications, except for a note with Science Applications (the “related party note”), on which interest is recognized. From time to time, SAIC issues stock to Science Applications employees, which is reflected in SAIC’s Condensed Consolidated Statement of Stockholders’ Equity and results in an increase to the related party note (see Note 7). All intercompany transactions and accounts have been eliminated in consolidation.

These Combined Notes to Condensed Consolidated Financial Statements apply to both SAIC and Science Applications. As SAIC consolidates Science Applications for financial statement purposes, disclosures that relate to activities of Science Applications also apply to SAIC. References to the “Company” refer collectively to SAIC, Science Applications, and its consolidated subsidiaries unless otherwise noted.

The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and combined notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012. The preparation of 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. 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.

In the opinion of management, the financial information as of July 31, 2012 and for the three and six months ended July 31, 2012 and 2011 reflects all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. Operating results for the three and six months ended July 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2013, or any future period.

Unless otherwise noted, references to years are for fiscal years ended January 31. For example, the fiscal year ending January 31, 2013 is referred to as “fiscal 2013” in these combined notes to condensed consolidated financial statements.

Long-Term Receivables

Long-Term Receivables

The Company’s accounts receivable include unbilled receivables, which consist of costs and fees billable upon contract completion or the occurrence of a specified event, the majority of which is expected to be billed and collected within one year. Unbilled receivables are stated at estimated realizable value. Contract retentions are billed when the Company has negotiated final indirect rates with the U.S. Government and, once billed, are subject to audit and approval by government representatives. Consequently, the timing of collection of retention balances is outside the Company’s control. Based on the Company’s historical experience, the majority of retention balances are expected to be collected beyond one year. The Company has extended deferred payment terms with contractual maturities that may exceed one year to three commercial customers related to certain construction projects. As of July 31, 2012, the Company had outstanding receivables from these customers with deferred payment terms of $61 million, which are expected to be collected in fiscal 2013 and 2014, when the customer’s financing has been arranged. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.

Changes in Estimates on Contracts

Changes in Estimates on Contracts

Changes in estimates related to certain types of contracts accounted for using the percentage of completion method of accounting are recognized 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 contract performance period for a variety of reasons, including changes in contract scope, changes in contract cost estimates due to unanticipated cost growth or retirements of risk for amounts different than estimated, and changes in estimated incentive or award fees. Aggregate changes in contract estimates decreased operating income by $3 million ($0.01 per diluted share) for the three months ended July 31, 2012 and increased operating income by $1 million ($0.00 per diluted share) for the six months ended July 31, 2012 and increased operating income by $15 million ($0.03 per diluted share) and $27 million ($0.05 per diluted share) for the three and six months ended July 31, 2011, respectively.

Discontinued Operations

Discontinued Operations

In June 2011, in order to better align its business portfolio with its strategy, the Company sold certain components of its business, which were historically included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing information technology services to international oil and gas companies. In fiscal 2012, the Company received net proceeds of $167 million resulting in a gain on sale before income taxes of $111 million related to this sale. Under the terms of the definitive agreement, the Company has retained the assets and obligations of its defined benefit pension plan in the United Kingdom. The Company has classified the operating results of these business components, including pension expense through the date of sale, as discontinued operations for all periods presented. Following the sale, as a result of retaining the pension obligation, the remaining components of ongoing pension expense, primarily interest costs and assumed return on plan assets, are recorded in continuing operations.

The pre-sale operating results of this discontinued operation were as follows:

	Six Months Ended July 31 2011
	(in millions)
Revenues	$	69
Costs and expenses:
Cost of revenues		54
Selling, general and administrative expenses		8
Operating income	$	7

Income from discontinued operations also includes other activity that is immaterial and not reflected in the table above.

Subsequent to July 31, 2012, the Company committed to a plan to sell a component of the business, which is included in the Company’s Health, Energy and Civil Solutions segment, primarily focused on providing operational test and evaluation services. This component of the business will be reflected as a discontinued operation beginning in the third fiscal quarter ending October 31, 2012.

Pension

Pension

During the fiscal quarter ended April 30, 2012, the Company transferred $46 million of pension plan assets to a successor contractor’s plan on behalf of certain participants in the Company’s defined benefit pension plan who previously transferred their employment to the successor contractor and settled $63 million of related pension plan obligations. As a result of the transfer, the Company recorded an immaterial settlement gain in selling, general and administrative expenses during the first quarter of fiscal 2013.

Supplementary Cash Flow Information

Supplementary Cash Flow Information

Supplementary cash flow information, including non-cash investing and financing activities, for the periods presented was as follows:

	Six Months Ended July 31
	2012		2011
	(in millions)
Stock exchanged at fair value upon exercises of stock options	$	—	$	14
Vested stock issued as settlement of annual bonus accruals	$	2	$	3
Increase in accrued stock repurchases	$	—	$	13
Stock issued in lieu of cash dividend	$	2	$	—
Fair value of assets acquired in acquisitions	$	—	$	29
Less: cash paid in acquisitions		—		(26	)
Liabilities assumed in acquisitions	$	—	$	3
Cash paid for interest (including discontinued operations)	$	53	$	52
Cash paid for income taxes (including discontinued operations)	$	96	$	121

Accounting Standards Updates Issued But Not Yet Adopted

Accounting Standards Updates Issued But Not Yet Adopted

Accounting standards and updates issued but not effective for the Company until after July 31, 2012, are not expected to have a material effect on the Company’s consolidated financial position or results of operations.

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Financial Instruments (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Notes Payable And Long-Term Debt

The Company’s notes payable and long-term debt consisted of the following:

	Stated interest rate			Effective interest rate			July 31, 2012		January 31, 2012
	(in millions)
SAIC senior unsecured notes:
$450 million notes issued in fiscal 2011, which mature in December 2020		4.45	%		4.53	%	$	449	$	449
$300 million notes issued in fiscal 2011, which mature in December 2040		5.95	%		6.03	%		300		300
Science Applications senior unsecured notes:
$550 million notes issued in fiscal 2003, which matured in July 2012		6.25	%		6.50	%		—		550
$250 million notes issued in fiscal 2003, which mature in July 2032		7.13	%		7.43	%		248		248
$300 million notes issued in fiscal 2004, which mature in July 2033		5.50	%		5.78	%		296		296
Capital leases and other notes payable due on various dates through fiscal 2018		0-2.5	%		Various			7		9
Total notes payable and long-term debt								1,300		1,852
Less current portion								3		553
Total notes payable and long-term debt, net of current portion							$	1,297	$	1,299
Fair value of notes payable and long-term debt							$	1,475	$	2,011

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Schedule Of Notes Payable And Long-Term Debt (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 31, 2012
Notes Which Mature In December 2020
Debt Instrument [Line Items]
Senior unsecured notes, face amount	$ 450
Debt maturity date	Dec. 01, 2020
Notes Which Mature In December 2040
Debt Instrument [Line Items]
Senior unsecured notes, face amount	300
Debt maturity date	Dec. 01, 2040
Notes Which Mature In July 2012
Debt Instrument [Line Items]
Senior unsecured notes, face amount	550
Debt maturity date	Jul. 01, 2012
Notes Which Mature In July 2032
Debt Instrument [Line Items]
Senior unsecured notes, face amount	250
Debt maturity date	Jul. 01, 2032
Notes Which Mature In July 2033
Debt Instrument [Line Items]
Senior unsecured notes, face amount	$ 300
Debt maturity date	Jul. 01, 2033

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Schedule Of Performance-Based Stock Award Activity (Detail) (Performance-Based Stock Awards, USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jul. 31, 2012
Performance-Based Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, beginning balance	0.5
Expected number of shares of stock to be issued under performance-based stock awards, Awards granted	0.8
Shares, ending balance	1.3
Weighted average grant-date fair value, Shares, beginning balance	$ 17.02
Weighted average grant-date fair value, Awards granted	$ 13.18
Weighted average grant-date fair value, Shares, ending balance	$ 14.52

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Jul. 31, 2012	Jan. 31, 2012
Property, plant and equipment, accumulated depreciation and amortization	$ 438	$ 424
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	342,000,000	341,000,000
Common stock, shares outstanding	342,000,000	341,000,000
Science Applications International Corporation
Property, plant and equipment, accumulated depreciation and amortization	$ 438	$ 424
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000	10,000
Common stock, shares issued	5,000	5,000
Common stock, shares outstanding	5,000	5,000

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Earnings Per Share (EPS)

6 Months Ended

Jul. 31, 2012

Earnings Per Share (EPS)

Note 2—Earnings Per Share (EPS):

The Company is required to allocate a portion of its earnings to its unvested stock awards containing nonforfeitable rights to dividends or dividend equivalents (participating securities) in calculating EPS using the two-class method.

In fiscal 2013, the Company began issuing unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are not participating securities requiring application of the two-class method but are dilutive common share equivalents subject to the treasury stock method. Unvested stock awards granted prior to fiscal 2013 were participating securities requiring application of the two-class method. Basic EPS is computed by dividing income less earnings allocable to participating securities by the basic weighted average number of shares outstanding. Diluted EPS is computed similar 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 income used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Basic EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing basic EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing basic EPS	$	108		$	171		$	221		$	298
Diluted EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing diluted EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing diluted EPS	$	108		$	171		$	221		$	298

A reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Basic weighted average number of shares outstanding		333		338		332		342
Dilutive common share equivalents—stock options and other stock awards		—		1		—		1
Diluted weighted average number of shares outstanding		333		339		332		343

Basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
Basic:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.19		—		.19
	$	.32	$	.51	$	.67	$	.87
Diluted:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.18		—		.19
	$	.32	$	.50	$	.67	$	.87

The following stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Antidilutive stock options excluded		20		22		20		22
Performance-based stock awards excluded		1		1		1		1

Science Applications International Corporation

Earnings Per Share (EPS)

Note 2—Earnings Per Share (EPS):

The Company is required to allocate a portion of its earnings to its unvested stock awards containing nonforfeitable rights to dividends or dividend equivalents (participating securities) in calculating EPS using the two-class method.

In fiscal 2013, the Company began issuing unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are not participating securities requiring application of the two-class method but are dilutive common share equivalents subject to the treasury stock method. Unvested stock awards granted prior to fiscal 2013 were participating securities requiring application of the two-class method. Basic EPS is computed by dividing income less earnings allocable to participating securities by the basic weighted average number of shares outstanding. Diluted EPS is computed similar 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 income used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31						Six Months Ended July 31
	2012			2011			2012			2011
	(in millions)
Basic EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing basic EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing basic EPS	$	108		$	171		$	221		$	298
Diluted EPS:
Income from continuing operations, as reported	$	110		$	112		$	227		$	242
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(4	)		(6	)		(9	)
Income from continuing operations, for computing diluted EPS	$	108		$	108		$	221		$	233
Net income, as reported	$	110		$	178		$	227		$	309
Less: allocation of distributed and undistributed earnings to participating securities		(2	)		(7	)		(6	)		(11	)
Net income, for computing diluted EPS	$	108		$	171		$	221		$	298

A reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Basic weighted average number of shares outstanding		333		338		332		342
Dilutive common share equivalents—stock options and other stock awards		—		1		—		1
Diluted weighted average number of shares outstanding		333		339		332		343

Basic and diluted EPS for the periods presented was as follows:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
Basic:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.19		—		.19
	$	.32	$	.51	$	.67	$	.87
Diluted:
Income from continuing operations	$	.32	$	.32	$	.67	$	.68
Income from discontinued operations		—		.18		—		.19
	$	.32	$	.50	$	.67	$	.87

The following stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended July 31				Six Months Ended July 31
	2012		2011		2012		2011
	(in millions)
Antidilutive stock options excluded		20		22		20		22
Performance-based stock awards excluded		1		1		1		1

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jul. 31, 2012

Schedule Of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows:

	July 31, 2012			January 31, 2012
	(in millions)
Foreign currency translation adjustments, net of taxes of $(1) million and $(2) million as of July 31, 2012 and January 31, 2012, respectively	$	2		$	2
Unrecognized net loss on settled derivative instruments associated with outstanding debt, net of taxes of $3 million as of July 31, 2012 and January 31, 2012		(5	)		(5	)
Unrecognized net loss on defined benefit plan, net of taxes of ($1) million and $5 million, as of July 31, 2012 and January 31, 2012, respectively		2			(8	)
Total accumulated other comprehensive loss, net of taxes of $1 million and $6 million as of July 31, 2012 and January 31, 2012, respectively	$	(1	)	$	(11	)

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Schedule Of Weighted Average Grant-Date Fair Value And Assumptions Used (Detail) (USD $)	6 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Stock-Based Compensation [Abstract]
Weighted average grant-date fair value	$ 1.81	$ 4.21
Expected term (in years)	5 years	4 years 10 months 24 days
Expected volatility	24.40%	23.40%
Risk-free interest rate	1.00%	2.20%
Dividend yield	3.70%	0.00%

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Subsequent Event

6 Months Ended

Jul. 31, 2012

Subsequent Event

Note 12—Subsequent Event:

On August 30, 2012, the Company announced that its Board of Directors has authorized management to pursue a plan to separate into two independent, publicly traded companies. The proposed separation is intended to take the form of a tax-free spin-off to the Company’s shareholders of 100% of the shares of a newly formed company focused on government technology and enterprise information technology services. The spin-off is expected to occur in the latter half of calendar year 2013, subject to final approval of the Board of Directors and certain customary conditions, including a ruling from the IRS as to the tax-free nature of the transaction. Although the Company expects that the separation of its businesses will be consummated, there can be no assurance that a separation will ultimately occur.

Science Applications International Corporation

Subsequent Event

Note 12—Subsequent Event:

On August 30, 2012, the Company announced that its Board of Directors has authorized management to pursue a plan to separate into two independent, publicly traded companies. The proposed separation is intended to take the form of a tax-free spin-off to the Company’s shareholders of 100% of the shares of a newly formed company focused on government technology and enterprise information technology services. The spin-off is expected to occur in the latter half of calendar year 2013, subject to final approval of the Board of Directors and certain customary conditions, including a ruling from the IRS as to the tax-free nature of the transaction. Although the Company expects that the separation of its businesses will be consummated, there can be no assurance that a separation will ultimately occur.