EX-99.1 3 exhibit991informationstate.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 2015
INFORMATION STATEMENT
Computer Sciences Government Services Inc.
to be renamed
CSRA Inc.
3170 Fairview Park Drive
Falls Church, Virginia 22042
Common Stock
(par value $0.001)
We are providing you this Information Statement in connection with the spin-off by Computer Sciences Corporation (CSC) of its wholly-owned subsidiary, Computer Sciences Government Services Inc., which will be renamed CSRA Inc. (CSRA). To effect the spin-off, CSC will distribute all of the shares of CSRA common stock on a pro rata basis to the record holders of CSC common stock (the Distribution).
Promptly following the Distribution, holders of CSC common stock who are entitled to receive shares of CSRA in the Distribution will also receive a special dividend totaling approximately $10.50 per share in the aggregate in cash (of which $8.25 per share will be paid by us and $2.25 per share will be paid by CSC) (the Special Dividend). The portion of the Special Dividend that will be paid by CSC will be funded by a note payable to CSC that we intend to repay with the incurrence of additional indebtedness as described in “Management’s Discussion and Analysis of Financial Condition—Liquidity and Capital Resources.”
Pursuant to the Agreement and Plan of Merger dated as of August 31, 2015, following two mergers with wholly-owned subsidiaries of CSRA (the Mergers), SRA Companies, Inc. (SRA Parent), the indirect parent of SRA International, Inc. (SRA), will become an indirect wholly-owned subsidiary of CSRA, subject to the terms and conditions in the Agreement and Plan of Merger.
If you are a record holder of CSC common stock as of the close of business on November 18, 2015, which is the record date for the Distribution, you will be entitled to receive one share of CSRA common stock for every one share of CSC common stock you hold on that date. CSC will distribute the shares of CSRA common stock in book-entry form, which means that we will not issue physical stock certificates. As discussed under “The Transactions—Trading Prior to the Distribution Date,” if you sell your CSC common stock in the “regular-way” market after the record date and before the Distribution, you also will be selling your right to receive shares of CSRA common stock in connection with the Distribution and the Special Dividend.
The stockholders of SRA Parent will receive cash and shares of CSRA as consideration for the Mergers. All of the outstanding shares of SRA Parent common stock will be automatically converted into the right to receive, in the aggregate, merger consideration consisting of (1) $390,000,000 in cash and (2) shares of CSRA common stock representing in the aggregate approximately 15.32% of the total number of shares of CSRA common stock outstanding immediately after the Mergers.




It is intended that the Distribution will be tax-free to CSC stockholders, and it is intended that the Mergers will be tax-free to stockholders of CSRA, in each case for U.S. federal income tax purposes. We expect the Special Dividend to be taxable to the recipient, but you should consult your own tax advisor. The Distribution will be effective by 11:59 p.m., New York City time, on November 27, 2015. Immediately after the Distribution, CSRA will be an independent company.
CSC’s stockholders are not required to vote on or take any other action in connection with the spin-off. We are not asking you for a proxy, and request that you do not send us a proxy. CSC stockholders will not be required to pay any consideration for the shares of CSRA common stock they receive in the spin-off, and they will not be required to surrender or exchange their shares of CSC common stock or take any other action in connection with the spin-off.
CSC currently owns all of the outstanding shares of CSRA common stock. Accordingly, no trading market for CSRA common stock currently exists. We expect, however, that a limited trading market for CSRA common stock, commonly known as a “when-issued” trading market, will develop as early as two trading days prior to the record date for the Distribution, and we expect “regular-way” trading of CSRA common stock will begin on the first trading day after the Distribution Date. We intend to list CSRA common stock on the New York Stock Exchange under the symbol “CSRA.”
You should carefully consider the matters described in the section titled “Risk Factors” beginning on page 35 of this Information Statement for a discussion of factors that should be considered by recipients of CSRA common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.
This Information Statement is not an offer to sell, or a solicitation of an offer to buy, any securities.
The date of this Information Statement is                , 2015.


    



TABLE OF CONTENTS
 
 
TRADEMARKS AND COPYRIGHTS
INDUSTRY AND MARKET DATA
INTRODUCTION
SUMMARY
SUMMARY HISTORICAL COMBINED FINANCIAL DATA OF COMPUTER SCIENCES GS
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF SRA
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF COMBINED COMPANY
RISK FACTORS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
THE TRANSACTIONS
THE MERGER AGREEMENT
THE MASTER SEPARATION AND DISTRIBUTION AGREEMENT AND ANCILLARY AGREEMENTS
DIVIDEND POLICY
CAPITALIZATION
SELECTED HISTORICAL COMBINED FINANCIAL DATA FOR COMPUTER SCIENCES GS
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR SRA
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF COMBINED COMPANY
BUSINESS OF COMPUTER SCIENCES GS
BUSINESS OF SRA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF COMPUTER SCIENCES GS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SRA
MANAGEMENT OF CSRA FOLLOWING THE TRANSACTIONS
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
DESCRIPTION OF OUR CAPITAL STOCK
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO FINANCIAL STATEMENTS
    




TRADEMARKS AND COPYRIGHTS
We own or have rights to various trademarks, logos, service marks and trade names that we use in connection with the operation of our business. We also own or have the rights to copyrights that protect the content of our products, including those which will be retained by CSC and governed by the Intellectual Property Matters Agreement. This information statement also refers to the trademarks, logos, service marks and trade names of other companies, including SRA Parent. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Information Statement are listed without the ™, ® and © symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, trade names and copyrights included or referred to in this Information Statement.



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INDUSTRY AND MARKET DATA
Unless otherwise indicated, information contained in this Information Statement concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets, which we believe to be reasonable. Such data involve uncertainties and risk and are subject to change due to a variety of factors, including those described under “Risk Factors.”



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INTRODUCTION

On May 19, 2015, CSC announced plans to separate its U.S. public sector business from CSC. Prior to CSC’s distribution of the shares of CSRA common stock to CSC stockholders, CSC is undertaking a series of internal transactions, following which CSRA will hold the businesses constituting CSC’s current North American Public Sector segment, as described in CSC’s Annual Report on Form 10-K for the year ended April 3, 2015, which we refer to as the “Computer Sciences GS Business.” We refer to this series of internal transactions, which is described in more detail under “The Master Separation and Distribution Agreement and Ancillary Agreements,” as the “Internal Reorganization.”

We refer to CSC’s distribution of the shares of our common stock to its stockholders as the “Distribution” and to the Internal Reorganization and the Distribution collectively as the “Spin-Off.” We refer to the payment promptly following the Distribution of a cash dividend of approximately $350 million by CSC (which will be funded by the repayment by us of a note to CSC that we will incur debt to pay) and a cash dividend of approximately $1.15 billion by us as the “Special Dividend.” The Special Dividend will total approximately $1.5 billion in cash (or an aggregate of approximately $10.50 per CSC share entitled to participate in the Distribution).

In this Information Statement, unless the context otherwise requires:

“CSRA,” “Computer Sciences GS,” “we,” “our” and “us” refer to Computer Sciences Government Services Inc. (to be renamed CSRA Inc.) and its combined subsidiaries after giving effect to the Spin-Off for periods prior to the consummation of the Mergers; “CSRA”, “we”, “our” and “us” refer to Computer Sciences Government Services Inc. (to be renamed CSRA Inc.) and its combined subsidiaries, including the combined business of SRA, after giving effect to the Spin-Off and the Mergers for periods following the consummation of the Mergers; and

“CSC” refers to Computer Sciences Corporation and its consolidated subsidiaries other than, for all periods following the Spin-Off, Computer Sciences Government Services Inc. (to be renamed CSRA Inc.) and its combined subsidiaries.

On August 31, 2015, CSC announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of August 31, 2015, with SRA, SRA Parent, CSRA, Merger Sub Inc., Merger Sub LLC and certain stockholders of SRA Parent.

The Merger Agreement provides that Merger Sub Inc. will merge with and into SRA Parent (the “First Merger”), with SRA Parent surviving the First Merger, and immediately after the First Merger, SRA Parent will merge with and into Merger Sub LLC (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub LLC surviving the Second Merger, in each case subject to the terms and conditions in the Merger Agreement. As a result of the Mergers, SRA will become an indirect wholly-owned subsidiary of CSRA.

Pursuant to and subject to the conditions in the Merger Agreement, the Mergers will occur following the consummation by CSC of the Internal Reorganization, the Distribution and the payment of the Special Dividend.

The consummation of the Mergers is subject to, among other conditions:

the completion of the Spin-Off and payment of the Special Dividend,

the expiration of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), which condition was satisfied on October 9, 2015;

the effectiveness of the registration statement of which this Information Statement forms a part in connection with the Distribution and the approval for listing on the New York Stock Exchange (“NYSE”) or the NASDAQ Global Market (“NASDAQ”) of CSRA common stock;



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the entry by CSRA into definitive agreements providing for debt financing (the “CSRA Financing”) to fund (a) the Special Dividend, (b) the cash consideration for the Mergers and (c) the payoff amount for indebtedness outstanding on the closing date of the Mergers under the SRA credit facility;

the accuracy of the parties’ representations and warranties and the performance of their respective covenants contained in the Merger Agreement; and

certain other customary conditions.

The Merger Agreement contains customary representations, warranties and covenants, including a requirement to use commercially reasonable efforts to consummate the Spin-Off, the Special Dividend and the Mergers prior to April 1, 2016.



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SUMMARY

This summary highlights information contained elsewhere in this Information Statement relating to the transactions (the “Transactions”) contemplated by the Master Separation and Distribution Agreement and the Merger Agreement, which provide, among other things, for the Spin-Off and the Mergers, as described under the section “The Transactions.” It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should read this entire Information Statement carefully, including the risk factors, our and SRA’s management’s discussion and analysis of financial condition and results of operations, our and SRA’s historical financial statements and our unaudited pro forma combined financial statements and the respective notes to those historical and pro forma financial statements appearing elsewhere in this information statement.

Spin-Off

CSRA Business

Upon completion of the Distribution, CSRA will be one of the nation’s largest independent providers of IT services to the U.S. federal government. With more than five decades of government partnership, we believe we make best practices succeed in government contexts. With public sector customers that include nearly every agency within the U.S. federal government, we leverage our domain expertise and extensive resources to support our customers through dedicated, customer-focused teams.

Headquartered in Falls Church, Virginia, and with approximately 14,000 employees, we deliver comprehensive offerings from concept through sustainment. We manage our business with a matrix model composed of industry verticals that are customer-facing and have deep knowledge of our customers’ missions, and horizontal delivery organizations with a depth of technical expertise that is delivered across industries. As a new public company, we will operate in two industry verticals: (1) Defense and Intelligence and (2) Civil. Our two horizontal delivery organizations that provide capabilities and solutions across our customer base are: (1) Mission Services and (2) Enterprise Services. We believe we differentiate ourselves by combining our technical expertise in applications and IT infrastructure solutions with our deep public sector mission knowledge and experience in order to engage our customers at the highest levels with thought leadership that drives change.

Our Business Strategy

In the U.S. public sector, technology demands are increasing and government customers are increasingly looking for providers with a strong, focused vision to address the unique challenges and resource needs of the U.S. federal government. The success of our business will depend on our ability to deliver solutions that generate real and measurable business results in terms of mission value and cost efficiency. Targeting specific growth areas in the government and rapidly adapting next-generation solutions tailored to the public sector environment will be key. We expect to continue to work in concert with our next-generation IT partners to create, position and deliver innovative solutions from across our delivery capabilities to support our customers’ mission success, which will be critical to our efforts to sustain and grow our market position.

To address the market trends within our competitive environment, we have developed a strategy that comprises three elements, Get Fit, Grow, and Lead:

1Get Fit: Continue with disciplined management of our overhead costs and general and administrative (“G&A”) expenses, as well as shift to performance-based contracts to improve operating income on existing programs, allowing us to reinvest in our business and improve our ability to compete in a “Lowest Price Technically Acceptable” environment. Implicit within our Get Fit strategy is the priority of driving excellence in executing programs, demand generation, proposals and capture.

2Grow: Despite the negative trends in overall IT spending by our customers and our own declining revenues over the past few years, we aim to capitalize on growth aligned with government priorities in hybrid cloud


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infrastructure, citizen benefit services, cloud-based analytics and health. We aim to continue to leverage our deep domain knowledge of our customers’ core missions and our intimacy with their data and critical work packages and grow our customer relationships through tailored offerings and mission-critical employees. The combination of Computer Sciences GS and SRA is part of this growth strategy.

3Lead: Pursue the hybrid cloud migration market, driving policy- and governance-based integration of solutions in as-a-service and next-generation offerings in cloud, big data, software-as-a-service implementation and mobile computing. We expect the migration to the hybrid cloud will be enabled by an ecosystem of federally compliant partners. We also plan to invest internally on program management and delivery processes.

Our Key Strengths:

We bring several key competitive strengths:

History of public sector delivery. We have 50+ years of public sector experience that combines an in-depth customer knowledge with our proven, next-generation IT and mission expertise.

Our People. Our passionate employees have a commitment to our customers’ mission blend business process, design, and technical capabilities.

Offering Brands. Our brands are a proven holistic approach to solving customer business challenges, drawing on best practices and technical expertise.

Next Generation. We are driving innovation through next-generation technology and solutions in cloud, big data, mobility and application solutions and services.

Alliance Partners. We have enhanced our technical and domain expertise with strategic partnerships that deliver innovative end-to-end solutions.

Technology Independence. Our flexible and informed point of view optimizes customers’ technology choices.

Our Key Markets

Flat Top Line Federal Budgets. We compete in an environment driven by federal budget constraints. Nevertheless, we see potential for positive developments in U.S. federal government fiscal year (“GFY”) 2016 (a GFY starts on October 1 and ends on September 30). Budget request figures released by the Office of Management and Budget in June 2014 projected IT expenditures for Civil agencies and the DoD to increase by 2% in GFY 2016, from $47.7 billion to $48.6 billion and from $30.4 billion to $30.9 billion, respectively. Budget request figures released by the Office of the Director of National Intelligence in February 2015 projected overall expenditures for U.S. Intelligence Community agencies to increase by 15% in GFY 2016, from $62.7 billion to $71.8 billion. We are also experiencing an increased number of requests to extend the period of performance for our large and most complex IT contracts, are observing increased procurement activity across the U.S. federal government and expect to see adjudications increase.

Market Shift to Applications Modernization. Since 2011, the government has delayed application enhancements and new application program starts in favor of data consolidation and IT efficiency initiatives. Consequently, the demand for IT services has been driven by infrastructure and cloud support opportunities, with a government focus on cost savings and new hybrid cloud approaches. We anticipate a possible shift toward application modernization to meet future civilian and military requirements. Cloud, mobile and as-a-service solutions approved by the Federal Risk and Authorization Management Program (“FedRAMP”), a government assessment process for certifying cloud-based services and applications, are fostering new alternative approaches with which CIOs are beginning to engage.



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Transaction Rationale

The Spin-Off

The CSC Board considered the following potential benefits in deciding to pursue the Spin-Off:

Strategic Focus and Flexibility. Following the Spin-Off, CSC and CSRA will each have a more focused business and be better able to dedicate financial resources to pursue appropriate growth opportunities and execute strategic plans best suited to its respective business. The Spin-Off will also allow each of CSC and CSRA to enhance its strategic flexibility to respond to industry dynamics. In the U.S. public sector, technology demands are increasing, and clients want service providers with specific experience in government-focused innovation. By separating, the Computer Sciences GS Business will have the scale as well as the focus to meet unique customer needs and industry requirements.

Focused Management. The Spin-Off will allow the management of each of CSC and CSRA to devote its time and attention to the development and implementation of corporate strategies and policies that are based primarily on the specific business characteristics of their respective companies.

Management Incentives. The Spin-Off will enable CSRA to create incentives for its management and employees that are more closely tied to its business performance and stockholder expectations. CSRA’s equity-based compensation arrangements will more closely align the interests of CSRA’s management and employees with the interests of its stockholders and should increase CSRA’s ability to attract and retain personnel.

Capital Structure and Stockholder Flexibility. The segments in which CSC and CSRA expect to operate have historically had different growth profiles and cash flow dynamics. The Spin-Off will allow CSC and CSRA to separately manage their capital strategies and cost structures and will allow investors to make independent investment decisions with respect to CSC and CSRA, including the ability for CSRA to achieve alignment with a more natural stockholder base. Investment in one or the other company may appeal to investors with different goals, interests and concerns.

Focused Investments. While operating as part of CSC, internal investments were often directed according to CSC’s strategic interests as a whole. The Spin-Off will allow us to focus our investments on projects that optimize returns for our own businesses.

The Mergers

On August 31, 2015, CSC announced that it had entered into a definitive agreement to combine Computer Sciences GS and SRA. For details of the structure of the transaction, see “The Transactions” and “The Merger Agreement.” In connection with this announcement, CSC highlighted certain aspects of its strategic rationale for the Mergers, including:

Expanded Expertise. CSC highlighted the opportunity for Computer Sciences GS and SRA, on a combined basis, to become the largest pure-play IT services provider serving the U.S. government sector, with pro forma combined revenues of approximately $5.5 billion in fiscal 2015 and nearly 19,000 employees on a combined basis.

Strategic Positioning in Consolidating Industry. CSC also highlighted that the combination of Computer Sciences GS and SRA is a strategic move to position the combined company as the government IT Services industry consolidates. Computer Sciences GS’s next-generation software platforms and solutions – together with SRA’s go-to-market capabilities and customer intimacy – offer potential to deliver benefits to U.S. government clients, open new opportunities for employees of both companies and create value for stockholders. The combination of Computer Sciences GS and SRA is expected to provide opportunities for the combined company to leverage its scope and scale to capitalize on future growth opportunities.


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Complementary Businesses. CSC further highlighted that the combined company will bring together highly complementary IT capabilities, with approximately three-quarters of combined revenues generated from cybersecurity, software development, cloud and IT infrastructure, and additional revenues anticipated from domain-specific professional services, including intelligence analysis, bioinformatics and health sciences, energy and environmental consulting, and enterprise planning and resource management. Computer Sciences GS’s depth in defense and national security will complement SRA’s expertise in the health and civil markets. Together the companies will be diversified across their customers with the combination providing a complementary contract base. Computer Sciences GS has an established portfolio of over 1,250 contracts and task orders with 25 large contracts generating 65% of its revenue. SRA brings a complementary mix of approximately 900 smaller contracts and task orders with no contract representing more than 5% of its revenue. We expect the combination to reduce risk of individual market or contract disruptions.

Synergies. We expect the combination of Computer Sciences GS and SRA to provide opportunities for cost savings and other operating synergies, which we currently estimate at $80 million in annual cost savings within six to 18 months following the Mergers through the consolidation of account management costs, corporate overhead costs, improved facility efficiencies, lower equipment vendor costs, and reductions in associated fringe benefits. We believe our one-time costs to realize these recurring annual cost savings will be approximately $30 million.  The size of these expected cost synergies is partly a function of the significant steps both CSC and SRA have already taken over the past three years to become cost-competitive, with a focus on next generation IT services and solutions. We believe these further cost reductions and operating efficiencies will better position us to compete for U.S. federal government contracts as a portion of these savings should result in lower costs for our customers on cost-plus contracts. As a result of these cost savings passed on to some of our customers on cost-plus contracts, we expect the estimated $80 million in annual costs savings, once fully realized, will reduce our revenue by approximately $30 million annually, but to result in approximately $50 million in net synergies per year.

The Companies

Computer Sciences GS

Computer Sciences GS delivers information technology (“IT”) mission- and operations-related services across the United States (“U.S.”) federal government to Department of Defense (“DoD”), Intelligence Community, homeland security, civil and healthcare agencies, as well as to certain state and local government agencies. We leverage deep domain-based customer intimacy and decades of experience in helping customers execute their mission with a fundamental understanding of their IT environment that has earned us the ability to introduce next-generation technologies. We bring scalable and more cost-effective IT solutions to government departments and agencies that are seeking to improve mission-critical effectiveness and efficiency through innovation. This approach is designed to yield lower implementation and operational costs as well as a higher standard of delivery excellence. Demand for our U.S. public sector offerings is driven by evolving government priorities such as: (1) migration to next-generation IT solutions, such as hybrid cloud infrastructure, application modernization, and as-a-service delivery, (2) big data solutions, (3) health IT and informatics, (4) cyber security and (5) mobility.

We are a Nevada corporation. Our principal executive offices are located at 3170 Fairview Park Drive, Falls Church, Virginia 22042. Our telephone number is 703-642-2000. Following the Distribution, our website address will be www.csra.com. Information contained on, or connected to, our website or CSC’s website does not and will not constitute part of this Information Statement or the registration statement on Form 10 of which this Information Statement is a part.

SRA

SRA is a leading provider of sophisticated IT and professional services to the U.S. federal government. SRA’s services help its government customers address complex IT needs in order to achieve their missions more


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effectively, while also increasing efficiency and reducing expenses. Approximately 70% of SRA’s revenue is derived from IT service offerings, including software and systems development, network infrastructure and cloud services, and cybersecurity, with the remaining 30% derived from domain-specific professional services in areas such as intelligence analysis, bioinformatics and health sciences, energy and environmental consulting, and enterprise planning and resource management. SRA’s business has an operating model characterized by recurring revenues, diverse multi-year contracts, and strong free cash flow conversion.

The Transactions

Overview

On May 19, 2015, CSC announced plans for the complete legal and structural separation of CSRA from CSC. To effect the separation, first CSC will undertake the Internal Reorganization described under “The Master Separation and Distribution Agreement and Ancillary Agreements.” Following the Internal Reorganization, CSRA, CSC’s wholly-owned subsidiary, will hold the shares of the legal entities operating the Computer Sciences GS Business. Then, CSC will distribute all of CSRA’s common stock to CSC’s stockholders, and CSRA will become an independent, publicly-traded company.

Shortly prior to the Distribution, we will issue a note payable to CSC by us in the amount of $350 million that will be repaid by us in connection with the Distribution and the proceeds of which will be used by CSC to pay a portion of the Special Dividend. CSC expects to use any remaining proceeds to repay or retire certain of CSC’s existing indebtedness. We expect the Special Dividend to total approximately $1.5 billion in cash ($10.50 per CSC share entitled to participate in the Distribution, of which $8.25 per share will be paid by us and $2.25 per share will be paid by CSC).

Prior to completion of the Spin-Off, we intend to enter into a Master Separation and Distribution Agreement and several other agreements with CSC related to the Spin-Off. These agreements will govern the relationship between CSC and us up to and after completion of the Spin-Off and allocate between CSC and us various assets, liabilities and obligations, including employee benefits, intellectual property and tax-related assets and liabilities and contingencies. See “The Master Separation and Distribution Agreements and Ancillary Agreements” and “Certain Relationships and Related Party Transactions—Agreements with CSC” for more detail.

Completion of the Spin-Off is subject to the satisfaction or waiver of a number of conditions. In addition, CSC has the right not to complete the Spin-Off if, at any time, CSC’s board of directors (the “CSC Board”) determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of CSC or its stockholders, or is otherwise not advisable. See “The Transactions—Conditions to the Spin-Off” for more detail. Additionally, prior to, or concurrently with, the completion of the Spin-Off and the Mergers, we expect to raise indebtedness of approximately $3.0 billion, of which approximately $1.5 billion will be available upon consummation of the Spin-Off and approximately $1.5 billion will be available upon consummation of the Mergers. The amount of indebtedness to be incurred by us prior to the completion of the Spin-Off and the Mergers has been determined by CSC based on its view regarding an appropriate capital structure and amount of leverage for us as a standalone entity. We expect the net proceeds of the indebtedness we incur at or prior to the Distribution will be used to fund the Special Dividend (including the portion of the Special Dividend to be paid by CSC to its stockholders) as well as to pay the cash portion of the Merger Consideration and to refinance substantially all existing debt of SRA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS—Liquidity and Capital Resources.”

On August 31, 2015, CSC announced that it had entered into the Merger Agreement, which provides that Merger Sub Inc. will merge with and into SRA Parent, with SRA Parent surviving the First Merger, and immediately after the First Merger, SRA Parent will merge with and into Merger Sub LLC, with Merger Sub LLC surviving the Second Merger. As a result of the Mergers, SRA will become an indirect wholly-owned subsidiary of CSRA.


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Questions and Answers about the Transactions

The following provides only a summary of the terms of the Spin-Off, the Mergers and the transactions contemplated thereby. You should read the sections titled “The Transactions,” “The Merger Agreement” and “The Master Separation and Distribution Agreement and Ancillary Agreements” below in this Information Statement for a more detailed description of the matters described below.

Q:
What is the Spin-Off?

A:
The Spin-Off is the method by which we will separate from CSC. In the Spin-Off, CSC will distribute to its stockholders all the outstanding shares of our common stock. Following the Spin-Off, we will be an independent, publicly-traded company, and CSC will not retain any ownership interest in us.

Q:
What are the Mergers?

A:
Under the terms of the Merger Agreement, after the Distribution Merger Sub Inc. will merge with and into SRA Parent, with SRA Parent surviving the First Merger, and immediately after the First Merger, SRA Parent will merge with and into Merger Sub LLC, with Merger Sub LLC surviving the Second Merger. As a result of the Mergers, stockholders of SRA Parent will receive merger consideration consisting of cash and shares of CSRA common stock. The Mergers will result in SRA Parent stockholders owning approximately 15.32% of the common stock of CSRA outstanding immediately after the effective time of the First Merger. Shares issued to CSC stockholders in the Distribution will constitute approximately 84.68% of the common stock of CSRA outstanding after the effective time of the First Merger.

Q:
Will the number of CSC shares I own change as a result of the Spin-Off and the Mergers?

A:
No, the number of shares of CSC common stock you own will not change as a result of the Spin-Off and the Mergers.

Q:
What are the reasons for the Spin-Off?

A:
The CSC Board considered the following potential benefits in deciding to pursue the Spin-Off:

Strategic Focus and Flexibility. Following the Spin-Off, CSC and CSRA will each have a more focused business and be better able to dedicate financial resources to pursue appropriate growth opportunities and execute strategic plans best suited to its respective business. The Spin-Off will also allow each of CSC and CSRA to enhance its strategic flexibility to respond to industry dynamics. In the U.S. public sector, technology demands are increasing, and clients want service providers with specific experience in government-focused innovation. By separating, our business will have the scale as well as the focus to meet unique customer needs and industry requirements.

Focused Management. The Spin-Off will allow the management of each of CSC and CSRA to devote its time and attention to the development and implementation of corporate strategies and policies that are based primarily on the specific business characteristics of their respective companies.

Management Incentives. The Spin-Off will enable CSRA to create incentives for its management and employees that are more closely tied to its business performance and stockholder expectations. CSRA’s equity-based compensation arrangements will more closely align the interests of CSRA’s management and employees with the interests of its stockholders and should increase CSRA’s ability to attract and retain personnel.

Capital Structure and Stockholder Flexibility. The segments in which CSC and CSRA expect to operate have historically had different growth profiles and cash flow dynamics. The Spin-Off will allow CSC and


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CSRA to separately manage their capital strategies and cost structures and will allow investors to make independent investment decisions with respect to CSC and CSRA, including the ability for CSRA to achieve alignment with a more natural stockholder base. Investment in one or the other company may appeal to investors with different goals, interests and concerns.

Focused Investments. While operating as part of CSC, internal investments were often directed according to CSC’s strategic interests as a whole. The Spin-Off will allow us to focus our investments on projects that optimize returns for our own businesses.

Q:
What are the reasons for the Mergers?

A:
The CSC Board considered the following potential benefits in deciding to pursue the Mergers:

Expanded Expertise. CSC highlighted the opportunity for Computer Sciences GS and SRA, on a combined basis, to become the largest pure-play IT services provider serving the U.S. government sector, with pro forma combined revenues of approximately $5.5 billion in fiscal 2015 and nearly 19,000 employees on a combined basis.

Strategic Positioning in Consolidating Industry. CSC also highlighted that the combination of Computer Sciences GS and SRA is a strategic move to position the combined company as the government IT Services industry consolidates. Computer Sciences GS’s next-generation software platforms and solutions – together with SRA's go-to-market capabilities and customer intimacy – offer potential to deliver benefits to U.S. government clients, open new opportunities for employees of both companies and create value for stockholders. The combination of Computer Sciences GS and SRA is expected to provide opportunities for the combined company to leverage its scope and scale to capitalize on future growth opportunities.

Complementary Businesses. CSC further highlighted that the combination of Computer Sciences GS and SRA will bring together highly complementary IT capabilities, with approximately three-quarters of revenues generated from cybersecurity, software development, cloud and IT infrastructure, and additional revenues anticipated from domain-specific professional services, including intelligence analysis, bioinformatics and health sciences, energy and environmental consulting, and enterprise planning and resource management. Computer Sciences GS’s depth in defense and national security will complement SRA’s expertise in the health and civil markets. Together the companies will be diversified across their customers with the combination providing a complementary contract base. Computer Sciences GS has an established portfolio of over 1,250 contracts and task orders with 25 large contracts generating 65% of its revenue. SRA brings a complementary mix of approximately 900 smaller contracts and task orders with no contract representing more than 5% of its revenue. We expect the combination to reduce risk of individual market or contract disruptions.

Synergies. We expect the combination of Computer Sciences GS and SRA to provide opportunities for cost savings and other operating synergies, which we currently estimate at $80 million in annual cost savings within six to 18 months following the Mergers through the consolidation of account management costs, corporate overhead costs, improved facility efficiencies, lower equipment vendor costs, and reductions in associated fringe benefits. We believe our one-time costs to realize these recurring annual cost savings will be approximately $30 million.  The size of these expected cost synergies is partly a function of the significant steps both CSC and SRA have already taken over the past three years to become cost-competitive, with a focus on next generation IT services and solutions. We believe these further cost reductions and operating efficiencies will better position us to compete for U.S. federal government contracts as a portion of these savings should result in lower costs for our customers on cost-plus contracts. As a result of these cost savings passed on to some of our customers on cost-plus contracts, we expect the estimated $80 million in annual costs savings, once fully realized, will reduce our revenue by approximately $30 million annually, but to result in approximately $50 million in net synergies per year.



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Q:
Why is the separation of CSRA structured as a spin-off?

A:
CSC believes that a tax-free distribution of our shares is the most efficient way to separate our business from CSC in a manner that will achieve the benefits described above.

Q:
What will I receive in the Spin-Off?

A:
As a holder of CSC common stock, you will receive a dividend of one share of our common stock for every one share of CSC common stock you hold on the Record Date. Thus, the distribution agent will distribute only whole shares of our common stock in the Spin-Off. No fractional shares of our common stock will be issued pursuant to the dividend. Your proportionate interest in CSC will not change as a result of the Spin-Off. For a more detailed description, see “The Transactions.”

Q:
What is being distributed in the Spin-Off?

A:
CSC will distribute approximately 138.8 million shares of our common stock in the Spin-Off, based on the approximately 138.8 million shares of CSC common stock outstanding as of October 30, 2015. The actual number of shares of our common stock that CSC will distribute in the Spin-Off will depend on the actual number of shares of CSC common stock outstanding on the Record Date, which will reflect any issuance of new shares or exercises of outstanding options pursuant to CSC’s equity plans, and any repurchase of CSC shares by CSC under its common stock repurchase program, on or prior to the Record Date. The shares of our common stock that CSC distributes will constitute all of the issued and outstanding shares of our common stock immediately prior to the Distribution. For more information on the shares being distributed in the Spin-Off, see “Description of Our Capital Stock—Common Stock.”

CSC stockholders will not receive any new shares of common stock of CSRA in the Mergers and will continue to hold the CSRA shares they received in the Distribution. The Mergers will result in SRA Parent stockholders owning approximately 15.32% of the common stock of CSRA outstanding immediately after the effective time of the First Merger. Shares issued to CSC stockholders in the Distribution will constitute approximately 84.68% of the common stock of CSRA outstanding after the effective time of the First Merger.

Q:
What is the record date for the Distribution?

A:
CSC will determine record ownership as of the close of business on November 18, 2015, which we refer to as the “Record Date.”

Q:
When will the Distribution occur?

A:
The Distribution will be effective by 11:59 p.m., New York City time, on November 27, 2015, which we refer to as the “Distribution Date.” On or shortly after the Distribution Date, shares of our common stock will be credited in book-entry accounts for CSC stockholders entitled to receive the shares in the Distribution. See “How will CSC distribute shares of our common stock?” for more information on how to access your book-entry account or your bank, brokerage or other account holding the CSRA common stock you receive in the Distribution on and following the Distribution Date.

Q:
What do I have to do to participate in the Distribution?

A:
You are not required to take any action, but we urge you to read this information statement carefully. Holders of CSC common stock will not need to pay any cash or deliver any other consideration, including any shares of CSC common stock, in order to receive shares of our common stock in the Distribution. In addition, no stockholder approval of the Distribution is required. We are not asking you for a vote and request that you do not send us a proxy.



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Neither the Distribution nor the Mergers will result in any changes in CSC stockholders’ ownership of CSC common stock. No vote of CSC stockholders is required or sought in connection with the Distribution or the Mergers.

Q:
If I sell my shares of CSC common stock on or before the Distribution Date, will I still be entitled to receive shares of CSRA common stock in the Distribution?

A:
If you hold shares of CSC common stock on the Record Date and sell them on or before the Distribution Date in the “regular-way” market, you also will be selling your right to receive shares of CSRA common stock in connection with the Distribution and that part of the Special Dividend that will be paid by CSRA. If you wish to sell your CSC common stock with or without your entitlement to our common stock or the Special Dividend, you should discuss these alternatives with your bank, broker or other nominee. See “The Transactions—Trading Prior to the Distribution Date” for more information.

Q:
What is “regular-way” and “ex-distribution” trading of CSC common stock?

A:
We anticipate that, as early as two trading days prior to the Record Date, there will be two markets in CSC common stock: (1) a “regular-way” market on which shares of CSC common stock will trade with the entitlement for the purchaser of CSC common stock to receive shares of our common stock to be distributed in the Distribution and the Special Dividend, and (2) an “ex-distribution” market on which shares of CSC common stock will trade without the entitlement for the purchaser of CSC common stock to receive shares of our common stock and the Special Dividend. If you hold shares of CSC common stock on the Record Date and then sell those shares before the Distribution Date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your shares of CSC common stock with or without your entitlement to CSRA common stock pursuant to the Distribution and the Special Dividend.

Q:
How will CSC distribute shares of our common stock?

A:
Registered stockholders: If you are a registered stockholder (meaning you own your shares of CSC common stock directly through CSC’s transfer agent, Computershare Trust Company, N.A.), our distribution agent will credit the shares of our common stock you receive in the Distribution to a new book-entry account with our transfer agent on or shortly after the Distribution Date. Our distribution agent will mail you a book-entry account statement that reflects the number of shares of our common stock you own. You will be able to access information regarding your book-entry account holding the CSRA shares at www.computershare.com/investor or by calling Computershare Trust Company, N.A. at 800-522-6645 or +1 201-680-6578 (for international callers).

“Street name” or beneficial stockholders: If you own your shares of CSC common stock beneficially through a bank, broker or other nominee, your bank, broker or other nominee will credit your account with the shares of our common stock you receive in the Distribution on or shortly after the Distribution Date. Please contact your bank, broker or other nominee for further information about your account.

We will not issue any physical stock certificates to any stockholders, even if requested. See “The Transactions—When and How You Will Receive CSRA Shares” for a more detailed explanation.

Q:
What are the U.S. federal income tax consequences to me of the Distribution?

A:
It is a condition to the Distribution that CSC receive a written opinion from its outside tax advisor that is in form and substance reasonably acceptable to CSC regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Section 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). Assuming the Distribution so qualifies, for U.S. federal income tax purposes, no gain or loss will be recognized by, or be includible in the income of, a U.S. Holder (as defined in “The Transactions—Material U.S. Federal Income Tax Consequences of the Spin-Off”) as a result of the Distribution. In addition, the aggregate tax basis of the CSC common stock and our common stock held by each U.S. Holder immediately


9


after the Distribution (and immediately prior to the Special Dividend) will be the same as the aggregate tax basis of the CSC common stock held by the U.S. Holder immediately before the Distribution, allocated between the CSC common stock and our common stock in proportion to their relative fair market values on the date of the Distribution (subject to certain adjustments). Unlike the Distribution, we expect the Special Dividend, because it consists solely of cash, to be taxable to the recipient. U.S. Holders should consult their own tax advisors on the tax treatment of the Special Dividend.

See “The Transactions—Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the potential tax consequences to you of the Spin-Off.

Q:
Does CSRA intend to pay cash dividends?

A:
We and CSC expect to pay the Special Dividend, which is a one-time cash dividend totaling approximately $1.5 billion in cash, promptly following the Distribution. We currently anticipate paying quarterly cash dividends following the Spin-Off, subject to our Board’s approval. The timing, declaration, amount and payment of any future dividends to our stockholders will fall within the discretion of our Board of Directors and will depend on many factors, including our financial condition, results of operations and capital requirements, legal requirements, regulatory constraints, industry practice and other business considerations that our Board of Directors deems relevant from time to time. In addition, the terms of the agreements governing our debt or debt that we may incur in the future may restrict the payments of dividends. See “Dividend Policy” for more information.

Q: What are the financing plans for CSRA, and what will be the indebtedness of CSRA following the completion of the Transactions?

A:
CSRA intends to obtain financing in connection with the Spin-Off and Mergers under various facilities as follows: (1) a five-year senior secured revolving credit facility with an initial borrowing capacity of $700 million (the “Revolving Credit Facility”), of which at least $500 million is expected to be available but undrawn upon consummation of the Spin-Off, (2) a three-year senior secured tranche A1 term loan facility in an aggregate principal amount of $600 million (the “Tranche A1 Facility”), (3) a five-year senior secured tranche A2 term loan facility in an aggregate principal amount of $1.45 billion (the “Tranche A2 Facility”; and, together with the Revolving Credit Facility and the Tranche A1 Facility, the “Pro Rata Facilities”) and (4) a seven-year senior secured term loan B facility in an aggregate principal amount of $750 million (the “Term Loan B Facility”; and, together with the Pro Rata Facilities, the “Credit Facilities”). Borrowings under the Credit Facilities will be used to fund the Special Dividend (including the portion of the Special Dividend to be paid by CSC to its stockholders), to fund the cash consideration portion of the Mergers, to repay, refinance or redeem substantially all of SRA’s existing indebtedness, to pay for transaction costs and for general corporate purposes. In addition, CSRA entered into a Second Amended and Restated Master Accounts Receivable Purchase Agreement dated as of October 1, 2015 establishing a receivables purchase facility (the “MARPA Facility”) for up to $450 million that is in the process of being amended to include SRA as an additional seller following consummation of the Mergers.  See “Description of Material Indebtedness and Other Financing Arrangements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS—Liquidity and Capital Resources” for more information.

Q:
How will CSRA common stock trade?

A:
Currently, there is no public market for our common stock. We intend to list our common stock on the New York Stock Exchange under the symbol “CSRA.” We anticipate that trading in our common stock will begin on a “when-issued” basis as early as two trading days prior to the Record Date for the Distribution and will continue up to and including the Distribution Date. “When-issued” trading in this context refers to a sale or purchase of our common stock without the entitlement to the Special Dividend and made conditionally on or before the Distribution Date, because the securities of the spun-off entity have not yet been distributed. “When-issued” trades of our common stock are expected to settle within four trading days after the Distribution Date. On the first trading day following the Distribution Date, any “when-issued” trading of our common stock will


10


end and “regular-way” trading of our common stock will begin. In this context, “regular-way” trading refers to trading after our common stock has been distributed and the Special Dividend has been paid and typically involves a trade that settles on the third full trading day following the date of the trade. See “The Transactions—Trading Prior to the Distribution Date” for more information. We cannot predict the trading prices for our common stock before, on or after the Distribution Date.

Q:
What will be the relationship between CSC and CSRA following the Distribution?

A:
Following the Distribution, CSC will not own any of our shares and we will operate independently of CSC. Apart from our Chairman, who will remain Chief Executive Officer (“CEO”) of CSC after the Distribution, we do not expect any members of our Board to be officers or directors of CSC. In addition, we do not expect to depend on CSC to conduct our business following the Distribution apart from certain limited transitional support services as well as intellectual property licenses and non-U.S. agency services. In order to govern the ongoing relationships between us and CSC after the Spin-Off and to facilitate an orderly transition, we and CSC intend to enter into agreements providing for various services and rights following the Spin-Off and under which we and CSC will agree to indemnify each other against certain liabilities arising from our respective businesses. These agreements will, among other things, provide arrangements for employee and pension-related matters, tax matters, intellectual property matters as well as transitional services and non-U.S. agency services. See “Risk Factors—Risks Relating to the Spin-Off and the Mergers,” “The Master Separation and Distribution Agreement and Ancillary Agreements” and “Certain Relationships and Related Party Transactions—Agreements with CSC” for details.

Q:
Will the Spin-Off affect the trading price of my CSC common stock?

A:
Yes. We expect the trading price of shares of CSC common stock immediately following the Distribution to be lower than the “regular-way” trading price of such shares immediately prior to the Distribution because the trading price will no longer reflect the value of the Computer Sciences GS Business and the Special Dividend. Furthermore, until the market has fully analyzed the value of CSC without the Computer Sciences GS Business, the trading price of shares of CSC common stock may fluctuate. There can be no assurance that, following the Distribution, the combined trading prices of CSC common stock and our common stock will equal or exceed what the trading price of CSC common stock would have been in the absence of the Spin-Off, including due to payment of the Special Dividend.

It is possible that after the Spin-Off, the combined market value of the equity of CSC and CSRA will be less than CSC’s equity value before the Spin-Off even after adjusting for the effect of the Special Dividend.

Q:
Do I have appraisal rights in connection with the Spin-Off?

A:
No. Holders of CSC common stock are not entitled to appraisal rights in connection with the Spin-Off.

Q:
Are there risks associated with owning shares of CSRA common stock?

A:
Yes. Our business faces both general and specific risks and uncertainties relating to the Computer Sciences GS Business and the SRA business. Our business also faces risks relating to the Spin-Off and Mergers. Following the Spin-Off, we will also face risks associated with being an independent, publicly-traded company. Accordingly, you should read carefully the information set forth in the section titled “Risk Factors” in this Information Statement.

Q:
Who is the distribution agent, transfer agent and registrar for CSRA common stock?

A:
Computershare Trust Company, N.A.



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Q:
Where can I get more information?

A:
If you have any questions relating to the mechanics of the Distribution, you should contact Computershare Trust Company, N.A. at:

Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842
Phone: 800-522-6645 or +1 201-680-6578 (for international callers)

Before the Spin-Off, if you have any questions relating to the Spin-Off, you should contact CSC at:

George Price
Director of Investor Relations
Computer Sciences Corporation
3170 Fairview Park Drive
Falls Church, Virginia 22042
Phone: 800-542-3070 Option #1 or +1 703-641-3000 (for international callers)
Email: investorrelations@csc.com

After the Spin-Off, if you have any questions relating to CSRA, you should contact us at:

Investor Relations
CSRA Inc.
3170 Fairview Park Drive
Falls Church, Virginia 22042
Phone: 703-642-2000


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Summary of the Spin-Off
Distributing Company
Computer Sciences Corporation, a Nevada corporation that holds all of our common stock issued and outstanding prior to the Distribution. After the Distribution, CSC will not own any shares of our common stock.
Distributed Company
Computer Sciences Government Services Inc. (to be renamed CSRA Inc.), a Nevada corporation and a wholly-owned subsidiary of CSC. At the time of the Distribution, we will hold through our subsidiaries assets and liabilities relating to CSRA as well as certain other assets and liabilities allocated to us by CSC. After the Spin-Off, we will be an independent publicly-traded company.
Distributed Securities
100% of our common stock issued and outstanding immediately prior to the Distribution. Based on the approximately 138.8 million shares of CSC common stock outstanding on October 30, 2015, and applying the distribution ratio of one share of CSRA common stock for every share of CSC common stock, approximately 138.8 million shares of CSRA common stock will be distributed in the Spin-Off. The actual number of shares of our common stock CSC will distribute in the Spin-Off will depend on the actual number of shares of CSC common stock outstanding on the Record Date, which will reflect any issuance of new shares or exercises of outstanding options pursuant to CSC’s equity plans, and any repurchase of CSC shares by CSC under its common stock repurchase program, on or prior to the Record Date.
Record Date
The Record Date is the close of business on November 18, 2015.
Distribution Date
The Distribution Date is November 27, 2015.
Internal Reorganization
In connection with the Spin-Off, CSC will undertake the Internal Reorganization so that we hold the Computer Sciences GS Business together with certain other assets and liabilities. See “The Master Separation and Distribution Agreement and Ancillary Agreements” for a description of the Internal Reorganization.
Distribution Ratio
Each holder of CSC common stock will receive a dividend of one share of our common stock for every one share of CSC common stock it holds on the Record Date. Thus, the distribution agent will distribute only whole shares of our common stock in the Spin-Off. No fractional shares of our common stock will be issued pursuant to the dividend. Please note that if you sell your shares of CSC common stock on or before the Distribution Date in the “regular-way” market, the buyer of those shares may in some circumstances be entitled to receive the shares of our common stock to be distributed in respect of the CSC shares that you sold. See “The Transactions—Trading Prior to the Distribution Date” for more detail.
The Distribution
On the Distribution Date, CSC will release the shares of our common stock to the distribution agent to distribute to CSC stockholders. CSC will distribute our shares in book-entry form and thus we will not issue any physical stock certificates. We expect that it will take the distribution agent up to two weeks to electronically issue shares of our common stock to you or your bank or brokerage firm on your behalf by way of direct registration in book-entry form. The ability to trade our shares will not be affected during that time. You will not be required to make any payment, surrender or exchange your shares of CSC common stock or take any other action to receive your shares of our common stock.


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Incurrence of Debt
It is anticipated that, substantially concurrently with the consummation of the Spin-Off and the Mergers, CSRA will incur approximately $3.0 billion in principal amount of secured indebtedness, of which approximately $1.5 billion will be available upon consummation of the Spin-Off and approximately $1.5 billion will be available upon consummation of the Mergers. This indebtedness will consist of (1) a five-year senior secured revolving credit facility with an initial borrowing capacity of $700 million (the “Revolving Credit Facility”), of which at least $500 million is expected to be available but undrawn upon consummation of the Spin-Off, (2) a three-year senior secured tranche A1 term loan facility in an aggregate principal amount of $600 million (the “Tranche A1 Facility”), (3) a five-year senior secured tranche A2 term loan facility in an aggregate principal amount of $1.45 billion (the “Tranche A2 Facility”; and, together with the Revolving Credit Facility and the Tranche A1 Facility, the “Pro Rata Facilities”) and (4) a seven-year senior secured term loan B facility in an aggregate principal amount of $750 million (the “Term Loan B Facility”; and, together with the Pro Rata Facilities, the “Credit Facilities”), will include customary affirmative, negative, and, with respect to the Pro Rata Facilities only, financial covenants, and will be guaranteed by CSRA’s material domestic subsidiaries and secured by substantially all of the assets of CSRA and the guarantors. We expect to use the net proceeds of the Credit Facilities to fund the Special Dividend (including the portion of the Special Dividend to be paid by CSC to its stockholders), as well as the cash portion of the Merger Consideration to stockholders of SRA Parent, the repayment, refinancing and/or redemption of substantially all of SRA’s existing indebtedness and other related fees and expenses associated with the Mergers and for general corporate purposes. We have also entered into the MARPA Facility that is in the process of being amended to include SRA as an additional seller following consummation of the Mergers. See “Description of Material Indebtedness and Other Financing Arrangements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS—Liquidity and Capital Resources” for more information.
Conditions to the Spin-Off
The Spin-Off is subject to the satisfaction, or the CSC Board’s waiver, of the following conditions:
 
the CSC Board shall have authorized and approved the Internal Reorganization and Distribution and not withdrawn such authorization and approval, and shall have declared the dividend of CSRA common stock to CSC stockholders;
 
the ancillary agreements contemplated by the Master Separation and Distribution Agreement shall have been executed by each party to those agreements;
 
the Securities and Exchange Commission (the “SEC”) shall have declared effective our Registration Statement on Form 10, of which this Information Statement is a part, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;
 
our common stock shall have been accepted for listing on the New York Stock Exchange or another national securities exchange approved by CSC, subject to official notice of issuance;
 
CSC shall have received a written opinion from its outside tax advisor that is in form and substance reasonably acceptable to CSC, and which shall remain in full force and effect, regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code;


14


 
the Internal Reorganization (as described in “The Master Separation and Distribution Agreement and Ancillary Agreements”) shall have been completed;
 
no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect, and no other event outside the control of CSC shall have occurred or failed to occur that prevents the consummation of the Distribution;
 
no other events or developments shall have occurred prior to the Distribution Date that, in the judgment of the CSC Board, would result in the Spin-Off having a material adverse effect on CSC or its stockholders;
 
prior to the Distribution Date, this Information Statement shall have been mailed to the holders of CSC common stock as of the Record Date;
 
CSC shall have duly elected the individuals to be listed as members of our post-Distribution board of directors in this Information Statement, and such individuals shall be the members of our board of directors (the “Board”) immediately after the Distribution;
 
prior to the Distribution Date, CSC’s Board shall have obtained opinions from a nationally recognized valuation firm, in form and substance satisfactory to CSC, with respect to the capital adequacy and solvency of each of CSC and CSRA after giving pro forma effect to the Distribution and the Special Dividend;
 
immediately prior to the Distribution Date, our Articles of Incorporation and Bylaws, each in substantially the form filed as an exhibit to the Registration Statement on Form 10 of which this Information Statement is a part, shall be in effect; and
 
prior to the Distribution Date, CSC shall have transferred its U.S. federal government contracts and subcontracts to one or more wholly-owned subsidiaries of CSRA and, for its U.S. federal government prime contracts, it shall have finalized a Change of Name agreement with the Defense Contract Management Agency (“DCMA”), which condition was satisfied July 4, 2015.
 
The fulfillment of the foregoing conditions will not create any obligation on the part of CSC to effect the Spin-Off. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the approval for listing of our common stock and the SEC’s declaration of the effectiveness of the Registration Statement, in connection with the Distribution. CSC has the right not to complete the Spin-Off if, at any time, the CSC Board determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of CSC or its stockholders or is otherwise not advisable.
Trading Market and Symbol
We intend to file an application to list our common stock on the New York Stock Exchange under the symbol “CSRA.” We anticipate that, as early as two trading days prior to the Record Date, trading of shares of our common stock will begin on a “when-issued” basis and will continue up to and including the Distribution Date, and we expect that “regular-way” trading of our common stock will begin the first trading day after the Distribution Date.


15


 
We anticipate that, as early as two trading days prior to the Record Date, there will be two markets in CSC common stock: (1) a “regular-way” market on which shares of CSC common stock will trade with the entitlement for the purchaser of CSC common stock to receive shares of our common stock to be distributed in the Distribution and the Special Dividend, and (2) an “ex-distribution” market on which shares of CSC common stock will trade without the entitlement for the purchaser of CSC common stock to receive shares of our common stock and the Special Dividend. If you hold shares of CSC common stock on the Record Date and then decide to sell any shares of CSC common stock before the Distribution Date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your shares of CSC common stock with or without your entitlement to CSRA common stock pursuant to the Distribution and the Special Dividend.
Tax Consequences to CSC Stockholders
It is a condition to the Distribution that CSC receive a written opinion from its outside tax advisor that is in form and substance reasonably acceptable to CSC regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. Assuming the Distribution so qualifies, for U.S. federal income tax purposes, no gain or loss will be recognized by, or be includible in the income of, a U.S. Holder (as defined in “The Transactions—Material U.S. Federal Income Tax Consequences of the Spin-Off”) as a result of the Distribution. In addition, the aggregate tax basis of the CSC common stock and our common stock held by each U.S. Holder immediately after the Distribution (and immediately prior to the Special Dividend) will be the same as the aggregate tax basis of the CSC common stock held by the U.S. Holder immediately before the Distribution, allocated between the CSC common stock and our common stock in proportion to their relative fair market values on the date of the Distribution (subject to certain adjustments). Unlike the Distribution, we expect the Special Dividend, because it consists solely of cash, to be taxable to the recipient. U.S. Holders should consult their own tax advisors on the tax treatment of the Special Dividend. See “The Transactions—Material U.S. Federal Income Tax Consequences of the Spin-Off.”
 
We urge you to consult your tax advisor as to the specific tax consequences of the Distribution to you, including the effect of any U.S. federal, state, local or foreign tax laws and of changes in applicable tax laws.
Relationship with CSC after the Spin-Off
Following the Distribution, CSC will not own any of our shares and we will operate independently of CSC. In addition, we do not expect to depend on CSC to conduct our business following the Distribution apart from certain limited transitional support services as well as intellectual property licenses and non-U.S. agency services. In order to govern the ongoing relationships between us and CSC after the Spin-Off and to facilitate an orderly transition, we and CSC intend to enter into agreements providing for various services and rights following the Spin-Off and under which we and CSC will agree to indemnify each other against certain liabilities arising from our respective businesses. These agreements include:
 
a Master Separation and Distribution Agreement that will set forth CSC’s and our agreements regarding the principal actions that both parties will take in connection with the Spin-Off and aspects of our relationship following the Spin-Off;
 
a Transition Services Agreement pursuant to which CSC and we will provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off;


16


 
a Tax Matters Agreement that will govern the respective rights, responsibilities and obligations of CSC and us after the Spin-Off with respect to all tax matters and will include restrictions to preserve the tax-free status of the Distribution;
 
an Employee Matters Agreement that will address employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Distribution as well as matters relating to transfer to and assumption by us of assets and liabilities related to defined benefit pension plans;
 
a Real Estate Matters Agreement that will address the sharing and leasing of facilities owned by CSC and/or us following the Distribution Date;
 
an Intellectual Property Matters Agreement that will govern our rights to intellectual property developed by CSC and us including limitations on our ability to use intellectual property for certain purposes and on behalf of certain customers other than the U.S. federal and certain state and local governments and pursuant to which we will pay CSC a net maintenance fee of $30 million per year plus certain additional maintenance fees if we exceed certain revenue thresholds for an initial term of five years in exchange for maintenance services including the right to updates, patches and new versions that are made generally available to CSC customers during that period that relate to the software products and workflow and design methodologies that are covered by the license.
 
a Non-U.S. Agency Agreement that will appoint CSC as our exclusive agent outside the U.S. for certain non-U.S. customers.
 
We describe these arrangements in greater detail under “The Master Separation and Distribution Agreement and Ancillary Agreements” and “Certain Relationships and Related Party Transactions—Agreements with CSC,” and describe some of the risks of these arrangements under “Risk Factors—Risks Relating to the Spin-Off and the Mergers.”
Dividend Policy
We and CSC expect to pay the one-time cash Special Dividend of approximately $1.5 billion in the aggregate promptly following the Distribution. We currently anticipate paying quarterly cash dividends following the Spin-Off. The timing, declaration, amount and payment of any future dividends to our stockholders will fall within the discretion of our Board and will depend on many factors, including our financial condition, results of operations and capital requirements, legal requirements, regulatory constraints, industry practice and other business considerations that our Board deems relevant from time to time. In addition, the terms of the agreements governing our debt or debt that we may incur in the future may restrict the payments of dividends. See “Dividend Policy.”
Transfer Agent
Computershare Trust Company, N.A.
Risk Factors
Our business faces both general and specific risks and uncertainties relating to the Computer Sciences GS Business and the SRA business. Our business also faces risks relating to the Spin-Off and Mergers. Following the Spin-Off, we will also face risks associated with being an independent, publicly-traded company. Accordingly, you should read carefully the information set forth under “Risk Factors.”


17


Summary of the Mergers

Structure of the Mergers
Under the Merger Agreement and in accordance with Delaware law, in the First Merger, Merger Sub Inc. will merge with and into SRA Parent, with SRA Parent surviving the First Merger, and immediately after the First Merger, in the Second Merger SRA Parent will merge with and into Merger Sub LLC, with Merger Sub LLC surviving the Second Merger. As a result of the Mergers, SRA will become an indirect wholly-owned subsidiary of CSRA.
Consideration for the Mergers
At the effective time of the First Merger, all of the outstanding shares of SRA Parent common stock will be automatically converted into the right to receive, in the aggregate, merger consideration consisting of (1) $390,000,000 in cash and (2) shares of CSRA common stock representing in the aggregate approximately 15.32% of the total number of shares of CSRA common stock outstanding immediately after the effective time of the First Merger (the “Merger Consideration”). The cash and stock portions of the Merger Consideration will be allocated among the stockholders and certain optionholders of SRA Parent on a pro rata basis (based on the number of shares and options held by them immediately prior to the effective time of the First Merger), except that the Merger Consideration received by certain SRA Parent stockholders and the holders of unvested performance-based options will consist solely of shares of CSRA common stock.

Following the effective time of the Mergers, all shares of SRA Parent common stock will be automatically cancelled and cease to exist.
Incurrence of Debt
It is anticipated that substantially concurrently with the consummation of the Spin-Off and the Mergers, CSRA will incur approximately $3.0 billion in principal amount of secured indebtedness, of which approximately $1.5 billion will be available upon consummation of the Spin-Off to fund the Special Dividend (including the portion of the Special Dividend to be paid by CSC to its stockholders) and approximately $1.5 billion will be available upon consummation of the Mergers to fund the cash portion of the Merger Consideration to stockholders of SRA Parent, to repay, refinance or redeem substantially all of SRA’s existing indebtedness to pay other related fees and expenses associated with the Mergers and for general corporate purposes as described in “Summary—Summary of the Spin-Off—Incurrence of Debt,” “Description of Material Indebtedness and Other Financing Arrangements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS—Liquidity and Capital Resources.”
Approval of the Mergers
No vote by CSC stockholders is required or is being sought in connection with the Mergers. CSC, as the sole stockholder of CSRA, has already approved the Mergers. The board of directors of SRA Parent has approved the Merger Agreement, the Mergers and all other actions necessary to consummate the Mergers. Stockholders of SRA Parent representing the voting power required to approve the Merger Agreement and First Merger have also delivered written consents approving the Merger Agreement, the Mergers and all other actions necessary to consummate the Mergers, in accordance with the Delaware General Corporation Law.
Conditions to the Mergers
The obligations of each party to consummate the Mergers are subject to the satisfaction or waiver (to the extent permitted by applicable law) of closing conditions that are contained in the Merger Agreement, including:
 
the Spin-Off having occurred and the Special Dividend having been paid pursuant to the terms of the Master Separation and Distribution Agreement;


18


 
the receipt of all consents, approvals and authorizations by governmental authorities;
 
the expiration or termination of any required waiting period under the HSR Act, which condition was satisfied on October 9, 2015;
 
the effectiveness of the registration statement of which this information statement forms a part in connection with the Distribution, and the approval for listing on the NYSE or NASDAQ of the shares of CSRA common stock to be issued in the Distribution and the Mergers, subject to official notice of issuance; and
 
the absence of any order issued by any governmental authority of competent jurisdiction or other legal impediment preventing or making illegal the consummation of the Mergers.
 
In addition, CSC, CSRA, Merger Sub Inc. and Merger Sub LLC’s obligations to consummate the Mergers are subject to the satisfaction or waiver (to the extent permitted by applicable law) of the following conditions:
 
certain fundamental representations and warranties of SRA Parent, disregarding all materiality or material adverse effect qualifications, being true and correct in all respects in each case as of the effective time of the First Merger as if made as of the effective time of the First Merger;
 
the representations and warranties of the stockholders of SRA Parent that are party to the Merger Agreement, SRA Parent and SRA, disregarding all materiality or material adverse effect qualifications, being true and correct in all respects in each case as of the effective time of the First Merger as if made as of the effective time of the First Merger (except to the extent such representations and warranties address matters as of a particular date, in which case as of such date), except where the failure to be true and correct has not had or would not, individually or in the aggregate, reasonably be expected to be an SRA Parent MAE (as defined below—see “The Merger Agreement”) (other than the certain fundamental representations and warranties which must be true and correct in all respects);
 
the covenants and agreements being performed by the stockholders of SRA Parent that are party to the Merger Agreement, SRA Parent and SRA in all material respects at or prior to the effective time of the First Merger (other than certain covenants and agreements which must be performed in all respects, subject to de minimis exceptions);
 
the delivery by SRA Parent of an officer’s certificate certifying the satisfaction of the above conditions, and the delivery by each stockholder of SRA Parent that is a party to the Merger Agreement of a certificate certifying the satisfaction of the above conditions;
 
the absence of an SRA Parent MAE since June 30, 2015; and
 
entrance into definitive agreements providing for the CSRA Financing;
 
the termination of certain stockholders agreements between SRA Parent and the stockholders of SRA Parent that are party to the Merger Agreement as well as the termination of certain other agreements between SRA Parent and any of its subsidiaries on the one hand and any SRA Parent stockholder or affiliate of any SRA Parent stockholder, without liability to CSRA or its subsidiaries following the effective time of the First Merger.


19


 
Furthermore, SRA Parent and SRA’s obligations to consummate the Mergers are subject to the satisfaction or waiver (to the extent permitted by applicable law) of the following conditions:
 
certain representations and warranties of CSC, CSRA, Merger Sub Inc. and Merger Sub LLC, disregarding all materiality or material adverse effect qualifications, being true and correct in all respects in each case as of the effective time of the First Merger as if made as of the effective time of the First Merger (except to the extent such representations and warranties address matters as of a particular date, which must be true and correct as of the specified date);
 
the representations and warranties of CSC, CSRA, Merger Sub Inc. and Merger Sub LLC, disregarding all materiality or material adverse effect qualifications, being true and correct in all respects in each case as of the effective time of the First Merger as if made as of the effective time of the First Merger (except to the extent such representations and warranties address matters as of a particular date, in which case as of such date), except where the failure to be true and correct has not had or would not, individually or in the aggregate, reasonably be expected to be a CSRA MAE as defined below—see “The Merger Agreement”) (other than the certain representations and warranties which must be true and correct in all respects);
 
the covenants and agreements being performed by CSC, CSRA, Merger Sub Inc. and Merger Sub LLC in all material respects at or prior to the effective time of the First Merger;
 
the delivery by CSRA of an officer’s certificate certifying the satisfaction of the above conditions;
 
the absence of any CSRA MAE since June 30, 2015;
 
the entrance into and delivery of the applicable Transaction Agreements (as defined below—see “The Merger Agreement”) by CSC and CSRA, which are in full force and effect; and
 
the receipt by CSRA of the opinion from CSC's outside tax advisor regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code.
 
To the extent permitted by applicable law, each party to the Merger Agreement may waive, at its sole discretion, any of the conditions to its respective obligations to complete the Mergers.


20


Termination of the Merger Agreement
The Merger Agreement may be terminated at any time before the effective time of the First Merger by the mutual written consent of CSC and SRA Parent. It may also be terminated by either CSC or SRA Parent if:
 
the effective time of the First Merger has not occurred on or before April 1, 2016 unless the failure to effect the Merger by that date is due to the failure of the party seeking to terminate the Merger Agreement to perform its obligations set forth in the Merger Agreement; or
 
if any law or order of any governmental authority preventing or prohibiting the completion of the Mergers has become final and nonappealable; or
 
if the board of directors of CSC has not authorized and approved the Spin-Off or has withdrawn such authorization and approval, or if the board of Directors of CSRA has not declared the Special Dividend.
 
The Merger Agreement may also be terminated by:
 
SRA Parent at any time before the effective time of the First Merger if there has been a material breach by CSC or CSRA of any of its representations, warranties or covenants or agreements contained in the Merger Agreement, or any such representation and warranty has become untrue in any material respect, and such breach or inaccuracy has not been cured within 30 business days following notice of such breach or there has been a material breach by CSC or CSRA of their obligations to consummate the Spin-Off and pay the Special Dividend (so long as SRA Parent is not then in material breach of any covenant, representation or warranty or other agreement contained in the Merger Agreement which breach would cause the closing conditions of CSC or Computer Sciences GS not to be satisfied if the closing were to occur at the time of termination); or
 
CSC at any time before the effective time of the First Merger if there has been a material breach by SRA Parent of any of its representations, warranties or covenants or agreements contained in the Merger Agreement, or any such representation and warranty has become untrue in any material respect, and such breach or inaccuracy has not been cured within 30 business days following notice of such breach (so long as CSC is not then in material breach of any covenant, representation or warranty or other agreement contained in the Merger Agreement which breach would cause the closing conditions of SRA Parent or the stockholders of SRA Parent that are party to the Merger Agreement not to be satisfied if the closing were to occur at the time of termination).
Termination Fees and Expenses
In the event the Merger Agreement is terminated because the Spin-Off is not completed in accordance with the terms and conditions of the Separation Agreements on or before April 1, 2016, a termination fee of $100,000,000 may be payable by CSC to SRA Parent upon termination of the Merger Agreement under specified circumstances.
Tax Consequences to CSRA Stockholders
CSRA stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes as a result of the Mergers. Each CSRA stockholder is urged to consult his, her or its tax advisor as to the specific tax consequences of the Mergers to that stockholder, including the effect of any state, local or non-U.S. tax laws and of changes in applicable tax laws.
Accounting Treatment of the Mergers
The combined financial information presented in the Information Statement was prepared using the purchase method of accounting, with CSRA treated as the “acquirer” of SRA for accounting purposes.


21


SUMMARY HISTORICAL COMBINED FINANCIAL DATA OF COMPUTER SCIENCES GS
The following table presents our summary historical financial data. The historical combined statement of operations data and the historical combined statement of cash flows data for each of the twelve months ended April 3, 2015, March 28, 2014 and March 29, 2013, and the historical combined balance sheet data as of April 3, 2015 and March 28, 2014 set forth below are derived from our audited Combined Financial Statements included in this Information Statement. The historical combined balance sheet data as of March 29, 2013 is derived from our unaudited Combined Financial Statements which are not included in this Information Statement. The unaudited combined balance sheet data as of July 3, 2015 and the unaudited combined statement of operations data for each of the three months ended July 3, 2015 and July 4, 2014 are derived from our unaudited combined condensed interim financial statements which are included in this Information Statement. The unaudited combined balance sheet data as of July 4, 2014 is derived from our “Unaudited Combined Condensed Financial Statements” which are not included in this Information Statement.
The summary financial data should be read in conjunction with our “Capitalization,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS,” the audited Combined Financial Statements and accompanying notes and the unaudited Combined Condensed Financial Statements and accompanying notes included in this Information Statement. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent publicly-traded company during the periods presented. In addition, our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from CSC or the Mergers, including changes in the financing, operations, cost structure and personnel needs of our business, or the Mergers. Further, the historical financial information includes allocations of certain CSC corporate expenses. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. Such expenses may not, however, be indicative of the expenses that we would have incurred if we had operated as an independent, publicly-traded company during the period presented or of the costs expected to be incurred in the future.
 
 
As of or for the Three Months Ended
 
 
As of or for the Twelve Months Ended
 
 
July 3, 2015
 
July 4, 2014
 
 
April 3, 2015
 
March 28, 2014
 
March 29, 2013
Dollars in millions
 
Historical
 
 
Historical
Combined Statement of Operations data:
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
959

$
1,033

 
$
4,070

$
4,103

$
4,676

Income from continuing operations before taxes
 
109

 
112

 
 
429

 
401

 
431

Income from continuing operations
 
67

 
71

 
 
268

 
254

 
269

Combined Balance Sheet data:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (including restricted cash)
$
7

$
4

 
$
5

$
4

$
10

Total assets
 
1,939

 
2,177

 
 
2,161

 
2,216

 
2,513

Capital lease liabilities
 
146

 
162

 
 
151

 
169

 
169

Other long-term liabilities
 
97

 
100

 
 
81

 
106

 
105

Combined Statements of Cash Flows data:
 
 
 
 
 
 
 
 
 
 
 
Cash flows provided by operating activities
$
247

$
81

 
$
487

$
578

$
563

Cash flows provided by (used in) investing activities
 
19

 
(1
)
 
 
(117
)
 
75

 
(115
)
Cash flows used in financing activities
 
(264
)
 
(80
)
 
 
(369
)
 
(659
)
 
(454
)
Non-GAAP Measures:
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
142

$
159

 
$
618

$
587

$
634

Operating Income
 
125

 
135

 
 
546

 
500

 
509



22


Non-GAAP measures
 
Adjusted EBITDA

The following table presents a reconciliation of Income from continuing operations to Adjusted EBITDA:
 
 
Three Months Ended
 
Twelve Months Ended
 
 
July 3, 2015
 
July 4, 2014
 
April 3, 2015
 
March 28, 2014
 
March 29, 2013
Dollars in millions
 
Historical
 
Historical
Income from continuing operations(a)
$
67

$
71

$
268

$
254

$
269

 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
5

 
6

 
22

 
20

 
18

Tax expense on income
 
42

 
41

 
161

 
147

 
162

Depreciation and amortization
 
33

 
35

 
137

 
145

 
159

Provision for losses on accounts receivable
 

 

 

 
4

 
4

Stock based compensation
 
(1
)
 
5

 
18

 
18

 
10

Restructuring costs
 

 

 
5

 
2

 
13

Foreign currency loss
 

 
1

 
1

 

 
1

Pension and postretirement benefit plans actuarial losses (gains), settlement losses, and amortization of other comprehensive income
 
(1
)
 

 
6

 
(3
)
 
(2
)
Gain on disposition
 
(18
)
 

 

 

 

Separation costs(b)
 
15

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
142

$
159

$
618

$
587

$
634


(a) The net periodic pension (cost) income within income from continuing operations includes $1 million and $1 million, and $3 million, $6 million and $4 million, of pre-tax actual return on plan assets for the three months ended July 3, 2015 and July 4, 2014 and for the twelve months ended April 3, 2015, March 28, 2014 and March 29, 2013, respectively, whereas the net periodic pension cost within non-GAAP operating income includes $4 million, $4 million, and $3 million of expected long-term return on pension assets of defined benefit plans for the twelve months ended April 3, 2015, March 28, 2014 and March 29, 2013, respectively.

(b) Includes costs related to the separation of Computer Sciences GS from CSC.

In addition to our Income from continued operations determined in accordance with U.S. generally accepted accounting principles (“GAAP”) we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) measure.

Adjusted EBITDA is a non-GAAP measure that we use to evaluate financial performance and is one of the measures used in assessing management performance. We believe that this non-GAAP financial measure provides useful information to investors regarding our results of operations as it provides another measure of our profitability, our ability to service our planned debt, and is considered an important measure by financial analysts covering Computer Sciences GS and peer companies in our industry. Additionally, Adjusted EBITDA is an important measure associated with the proposed credit facility. This definition of Adjusted EBITDA is based on CSC’s current credit agreement, which we expect to be substantially the same under our planned $1.5 billion indebtedness. Our definition of such measure may differ from that of other companies.

The reconciliation from Income (Loss) from continuing operations to Adjusted EBITDA includes certain adjustments such as:

Provision for losses on accounts receivable which represents the amount of uncollectible accounts receivable.


23


Stock based compensation which represents the stock compensation expense related to CSC’s equity plans. These charges are included in cost of services (“COS”) and selling, general and administrative (“SG&A”) in our Combined Statements of Operations.
Foreign currency loss related to our hedging transactions and intercompany accounts.
Gain on disposition of Welkin Associates Limited (“Welkin”)
Separation costs are expenses incurred associated with activities for separation from CSC. These costs are primarily comprised of third-party accounting, legal and other consulting services.
Pension and postretirement actuarial losses (gains), settlement losses, and amortization of other comprehensive income which represents:
Mark-to-market adjustments related to pensions and postretirement benefit plans resulting from periodic revaluation of our plan assets and liabilities.
Lump-sum settlement charges
Amortization of prior service costs (credit) which is included in our Combined Statements of Comprehensive Income.

Operating Income
A reconciliation of consolidated Operating income to Income (Loss) from continuing operations before taxes is as follows:
 
 
Three Months Ended
 
 
Twelve Months Ended
 
 
July 3, 2015
 
July 4, 2014
 
 
April 3, 2015
 
March 28, 2014
 
March 29, 2013
Dollars in millions
 
Historical
 
 
Historical
Operating income(a)(b)
$
125

$
135

 
$
546

$
500

$
509

Pension and postretirement plans actuarial (losses) gains, and pension settlement losses
 

 

 
 
(8
)
 
2

 
2

Corporate G&A
 
(15
)
 
(16
)
 
 
(81
)
 
(79
)
 
(61
)
Separation costs
 
(15
)
 

 
 

 

 

Interest expense, net
 
(5
)
 
(6
)
 
 
(22
)
 
(20
)
 
(18
)
Other income (expenses), net
 
19

 
(1
)
 
 
(6
)
 
(2
)
 
(1
)
Income from continuing operations before taxes(b)
$
109

$
112

 
$
429

$
401

$
431

(a) The net periodic pension (cost) income within income from continuing operations before taxes includes $1 million and $1 million, and $3 million, $6 million and $4 million, of actual return on plan assets for the three months ended July 3, 2015 and July 4, 2014 and for the twelve months ended April 3, 2015, March 28, 2014 and March 29, 2013, respectively, whereas the net periodic pension cost within non-GAAP operating income includes $4 million, $4 million, and $3 million of expected long-term return on pension assets of defined benefit plans for the twelve months ended April 3, 2015, March 28, 2014 and March 29, 2013, respectively.

(b) Operating income as presented does not include the contribution from net periodic pension income related to the CSC U.S. defined benefit pension plans that we expect to assume at Spin-Off; net periodic pension income relating to these plans has not been included in the Computer Sciences GS Business’s historical non-GAAP operating income nor in the historical Combined Financial Statements or in the unaudited Combined Condensed Financial Statements, but will be included in our results of operations beginning in the period after the date of Distribution. The contribution to non-GAAP operating income from net periodic pension income from CSC’s U.S. defined benefit pension plans amounted to approximately $(21) million and $(22) million for the three months ended July 3, 2015 and July 4, 2014 and $(82) million, $(60) million and $(7) million for fiscal 2015, fiscal 2014 and fiscal 2013, respectively.
Operating income is a non-GAAP measure which provides useful information to our management for assessment of our performance and results of operations, and is one of the financial measures utilized to determine executive compensation. We define Operating income as revenue less COS, general and administrative (“G&A”) expense and depreciation and amortization expense. Operating income excludes actuarial and settlement charges related to pension and OPEB plans and corporate G&A. Management adjusts for the limitations of this non-GAAP measure by also reviewing Income from continuing operations before taxes, which includes costs excluded from the Operating income definition such as corporate G&A, interest and other income (expense).



24


SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF SRA
The following table presents SRA’s summary historical consolidated financial data. The historical consolidated statement of operations data and the historical consolidated statement of cash flows data for each of the twelve months ended June 30, 2015, 2014 and 2013, and the historical consolidated balance sheet data as of June 30, 2015 and June 30, 2014 set forth below are derived from SRA’s audited Consolidated Financial Statements included in this Information Statement. The historical consolidated balance sheet data as of June 30, 2013 is derived from SRA’s audited Consolidated Financial Statements which are not included in this Information Statement.
The summary financial data should be read in conjunction with SRA’s “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SRA,” and audited Consolidated Financial Statements and accompanying notes.
 
 
As of or for the Twelve Months Ended
 
 
June 30, 2015
 
June 30, 2014
 
June 30, 2013
Dollars in millions
 
Historical
Combined Statement of Operations data:
 
 
 
 
 
 
Revenue
$
1,389

$
1,386

$
1,508

Loss from continuing operations before taxes
 
(19
)
 
(40
)
 
(377
)
Loss from continuing operations
 
(12
)
 
(24
)
 
(317
)
Combined Balance Sheet data:
 
 
 
 
 
 
Cash and cash equivalents (including restricted cash)
$
97

$
110

$
6

Total assets
 
1,563

 
1,576

 
1,627

Total long-term debt
 
1,060

 
1,048

 
1,109

Other long-term liabilities
 
19

 
23

 
27

Combined Statements of Cash Flows data:
 
 
 
 
 
 
Cash flows provided by operating activities
$
77

$
146

$
67

Cash flows used in investing activities
 
(79
)
 
(2
)
 
(45
)
Cash flows used in financing activities
 
(11
)
 
(40
)
 
(20
)
Non-GAAP Measures:
 
 
 
 
 
 
Adjusted EBITDA
$
183

$
165

$
190

Operating Income
 
88

 
64

 
70



25


Non-GAAP measures
 
Adjusted EBITDA

The following table presents a reconciliation of Loss from continuing operations to Adjusted EBITDA:
 
 
Twelve Months Ended
 
 
June 30, 2015
 
June 30, 2014
 
June 30, 2013
Dollars in millions
 
Historical
Loss from continuing operations
$
(12
)
$
(24
)
$
(317
)
 
 
 
 
 
 
 
Interest expense, net
 
107

 
104

 
101

Tax benefit on income
 
(7
)
 
(16
)
 
(60
)
Depreciation and amortization
 
68

 
83

 
102

Loss on sale of receivables
 
1

 

 

Stock based compensation
 
4

 
3

 
3

Restructuring costs
 
8

 
14

 
7

Gain on disposition
 

 
(2
)
 

Merger and acquisition costs
 
1

 
1

 
2

Impairment of goodwill and other assets
 

 

 
346

Providence management fees
 
2

 
2

 
2

Impact of acquisitions
 
11

 

 
4

 
 
 
 
 
 
 
Adjusted EBITDA
$
183

$
165

$
190


Adjusted EBITDA is a non-GAAP measure that SRA uses to evaluate financial performance and is one of the measures used in assessing management performance. SRA believes that this non-GAAP financial measure provides useful information to investors regarding SRA’s results of operations as it provides another measure of SRA’s profitability, SRA’s ability to service SRA’s planned debt, and is considered an important measure by financial analysts covering SRA and peer companies in SRA’s industry. Additionally, Adjusted EBITDA is an important measure associated with the proposed credit facility. The proposed credit facility will permit the combined company to exclude these and other charges and expenses in calculating “Consolidated EBITDA” pursuant to such credit facility. SRA’s definition of such measure may differ from that of other companies.

Adjusted EBITDA, as defined in SRA’s Existing Credit Agreement, includes the impact of quantifiable run-rate cost savings for actions taken or expected to be taken within 12 months of the reporting date.

The reconciliation from Income (Loss) from continuing operations to Adjusted EBITDA includes certain adjustments such as:
Loss on sale of accounts receivable which represents the difference between the amount of accounts receivable sold and the payment from the related factoring agreement.
Stock based compensation which represents the stock compensation expense related to SRA’s equity plans. These charges are included in SG&A in SRA’s Combined Statements of Operations.
Impact of the acquisitions which represent the acquisition of MorganFranklin Corporation’s National Security Solutions division in December 2012 and of substantially all of the Government Services business from Qbase LLC in April 2015. SRA adds the estimated impact of acquisitions as if the businesses had been acquired on the first day of the respective period in which an adjustment is recorded, and not for any prior periods.



26


Operating Income
A reconciliation of consolidated Operating income to Loss from continuing operations before taxes is as follows:
 
 
Twelve Months Ended
 
June 30, 2015
 
June 30, 2014
 
June 30, 2013
Dollars in millions
 
Historical
Operating income
$
88

$
64

$
70

Interest expense, net
 
(107
)
 
(104
)
 
(101
)
Impairment of goodwill
 

 

 
(346
)
Income (Loss) from continuing operations before taxes
$
(19
)
$
(40
)
$
(377
)
Operating income is a non-GAAP measure which provides useful information to SRA’s management for assessment of SRA’s performance and results of operations. SRA defines Operating income as revenue less COS, G&A expense and depreciation and amortization expense. Management adjusts for the limitations of this non-GAAP measure by also reviewing Loss from continuing operations before taxes, which includes costs excluded from the Operating income definition such as interest and other income (expense).


27


SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA OF COMBINED COMPANY
The Pro Forma information presented below is derived from the “Unaudited Pro Forma Condensed Combined Financial Statements” included elsewhere in this Information Statement, and is based upon the historical combined financial information of Computer Sciences GS and SRA included elsewhere in this Information Statement, and has been prepared to reflect the Spin-Off and Mergers. The unaudited pro forma condensed combined financial information was prepared using the purchase method of accounting, with Computer Sciences GS treated as the “acquirer” of SRA for accounting purposes.
The following table presents our summary historical and unaudited pro forma condensed combined financial data. The last fiscal year end for Computer Sciences GS and SRA was April 3, 2015 and June 30, 2015, respectively, which are different by 88 days and have been presented together for comparison purposes. The historical combined statement of operations data for the three months ended July 3, 2015 and the twelve months ended April 3, 2015 for Computer Sciences GS and the three and twelve months ended June 30, 2015 for SRA set forth below are derived from the unaudited Combined Condensed Financial Statements, the audited Combined Financial Statements, and the Consolidated Financial Statements included in this Information Statement. The historical combined balance sheet data as of July 3, 2015 for Computer Sciences GS and June 30, 2015 for SRA set forth below are derived from Computer Sciences GS’s unaudited Combined Condensed Financial Statements and SRA’s Consolidated Financial Statements, respectively, included in this Information Statement.

The unaudited pro forma condensed combined statement of operations data presented for the three months ended July 3, 2015 for Computer Sciences GS and June 30, 2015 for SRA, and the twelve months ended April 3, 2015 for Computer Sciences GS and June 30, 2015 for SRA assumes the separation occurred on March 29, 2014. The unaudited pro forma condensed combined balance sheet data presented as of July 3, 2015 for Computer Sciences GS and June 30, 2015 for SRA assumes the separation occurred on July 3, 2015.
The summary financial data should be read in conjunction with our “Unaudited Pro Forma Condensed Combined Financial Statements,” “Capitalization,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SRA,” the audited Combined Financial Statements and accompanying notes, the unaudited Combined Condensed Financial Statements and accompanying notes and the audited Consolidated Financial Statements and accompanying notes included elsewhere in this Information Statement. The financial information included herein may not necessarily reflect our financial position and results of operations in the future or what our financial position and results of operations would have been had we been an independent publicly-traded company during the periods presented. In addition, our historical financial information does not reflect changes that we expect to experience in the future as a result of the effects of the Spin-Off or the Mergers, including changes in the financing, operations, cost structure and personnel needs of our business. Further, the historical financial information of Computer Sciences GS includes allocations of certain CSC corporate expenses. SRA has not historically reported Corporate G&A as it maintains one segment, whereas Computer Sciences GS reports Corporate G&A to allocate overhead costs by segment. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. Such expenses may not, however, be indicative of the expenses that we would have incurred if we had operated as an independent, combined, publicly-traded company during the period presented or of the costs expected to be incurred in the future.


28


Computer Sciences GS
Unaudited Pro Forma Condensed Combined Financial Statement Data
As of and for the Three Months Ended July 3, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
Historical Computer Sciences GS
Three Months Ended July 3, 2015
 
Effect of Spin-Off
 
 
Pro Forma for Spin-Off Only
 
Historical SRA Three Months Ended June 30, 2015
 
Effect of Mergers
 
 
Pro Forma for Spin-Off and Mergers
Combined Statement of Operations data:
 
 
 
 
 
 


 
 
 
 
 
 


Revenue
$
959

$

 
$
959

$
359

$

 
$
1,318

Income (Loss) from continuing operations before taxes
 
109

 
22

 
 
131

 
(1
)
 
13

 
 
143

Income from continuing operations
 
67

 
30

 
 
97

 

 
8

 
 
105

Income from continuing operations attributable to Parent
 
63

 
30

 
 
93

 

 
8

 
 
101

Combined Balance Sheet data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7

$
293

 
$
300

$
97

$
(42
)
 
$
355

Total assets
 
1,939

 
482

 
 
2,421

 
1,563

 
950

 
 
4,934

Total long-term debt (including current portion of debt)
 

 
1,500

 
 
1,500

 
1,060

 
440

 
 
3,000

Capital lease liabilities
 
146

 

 
 
146

 

 

 
 
146

Other long-term liabilities
 
97

 
517

 
 
614

 
19

 

 
 
633

Non-GAAP Measures:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
142

$
14

 
$
156

$
49

$

 
$
205

Operating Income
 
125

 
17

 
 
142

 
26

 

 
 
168

Computer Sciences GS
Unaudited Pro Forma Condensed Combined Financial Statement Data
As of and for the Fiscal Year Ended April 3, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
Historical Computer Sciences GS
Fiscal Year Ended April 3, 2015
 
Effect of Spin-Off
 
 
Pro Forma for Spin-Off Only
 
Historical SRA Fiscal Year Ended June 30, 2015
 
Effect of Mergers
 
 
Pro Forma for Spin-Off and Mergers
Combined Statement of Operations data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
4,070

$

 
$
4,070

$
1,389

$

 
$
5,459

Income (Loss) from continuing operations before taxes
 
429

 
(472
)
 
 
(43
)
 
(19
)
 
58

 
 
(4
)
Income (Loss) from continuing operations
 
268

 
(287
)
 
 
(19
)
 
(12
)
 
35

 
 
4

Income (loss) from continuing operations attributable to Parent
 
254

 
(287
)
 
 
(33
)
 
(12
)
 
35

 
 
(10
)
Non-GAAP Measures:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
618

$
55

 
$
673

$
183

$

 
$
856

Operating Income
 
546

 
64

 
 
610

 
88

 
2

 
 
700



29


Non-GAAP measures
 
Adjusted EBITDA

Computer Sciences GS
Unaudited Pro Forma Adjusted EBITDA
For the Three Months Ended July 3, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
 
Historical Computer Sciences GS
Three Months Ended July 3, 2015
 
Effect of Spin-Off
 
 
Pro Forma for Spin-Off Only
 
Historical SRA Three Months Ended June 30, 2015
 
Effect of Mergers
 
 
Pro Forma for Spin-Off and Mergers
Income from continuing operations
$
67

$
30

 
$
97

$

$
8

 
$
105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
5

 
10

 
 
15

 
27

 
(13
)
 
 
29

Tax expense (benefit) on income
 
42

 
(8
)
 
 
34

 
(1
)
 
5

 
 
38

Depreciation and amortization
 
33

 

 
 
33

 
17

 

 
 
50

Stock based compensation
 
(1
)
 

 
 
(1
)
 

 

 
 
(1
)
Restructuring costs
 

 

 
 

 
3

 

 
 
3

Pension and postretirement benefit plans actuarial losses (gains), settlement losses, and amortization of other comprehensive income
 
(1
)
 
(3
)
 
 
(4
)
 

 

 
 
(4
)
Gain on disposition
 
(18
)
 

 
 
(18
)
 
1

 

 
 
(17
)
Merger and acquisition costs
 

 

 
 

 
1

 

 
 
1

Separation costs
 
15

 
(15
)
 
 

 

 

 
 

Impact of acquisitions
 

 

 
 

 
1

 

 
 
1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
142

$
14

 
$
156

$
49

$

 
$
205




30


Computer Sciences GS
Unaudited Pro Forma Adjusted EBITDA
For the Fiscal Year Ended April 3, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
Historical Computer Sciences GS
Fiscal Year Ended April 3, 2015
 
Effect of Spin-Off
 
 
Pro Forma for Spin-Off Only
 
Historical SRA Fiscal Year Ended June 30, 2015
 
Effect of Mergers
 
 
Pro Forma for Spin-Off and Mergers
Income (loss) from continuing operations
$
268

 $
(287
)
 
 $
(19
)
 $
(12
)
 $
35

 
 $
4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
22

 
41

 
 
63

 
107

 
(56
)
 
 
114

Tax expense (benefit) on income
 
161

 
(185
)
 
 
(24
)
 
(7
)
 
23

 
 
(8
)
Depreciation and amortization
 
137

 
(1
)
 
 
136

 
68

 

 
 
204

Loss on sale of receivables
 

 

 
 

 
1

 
 
 
 
1

Stock based compensation
 
18

 

 
 
18

 
4

 

 
 
22

Restructuring costs
 
5

 

 
 
5

 
8

 

 
 
13

Foreign currency loss
 
1

 

 
 
1

 

 

 
 
1

Pension and postretirement benefit plans actuarial losses (gains), settlement losses, and amortization of other comprehensive income
 
6

 
487

 
 
493

 

 

 
 
493

Merger and acquisition costs
 

 

 
 

 
1

 

 
 
1

Providence management fees
 

 

 
 

 
2

 
(2
)
 
 

Impact of acquisitions
 

 

 
 

 
11

 

 
 
11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
618

 $
55

 
 $
673

 $
183

 $

 
 $
856


In addition to our Income (Loss) from continued operations determined in accordance with GAAP we use an Adjusted EBITDA measure.

Adjusted EBITDA is a non-GAAP measure that both CSC and SRA use to evaluate financial performance. We believe that this non-GAAP financial measure provides useful information to investors regarding our results of operations as it provides another measure of our profitability, our ability to service our planned debt, and is considered an important measure by financial analysts covering our industry. Additionally, Adjusted EBITDA is an important measure associated with the proposed credit facility. This definition of Adjusted EBITDA is based on CSC’s current credit agreement, which we expect to be substantially the same under our planned indebtedness of approximately $3.0 billion. Our definition of such measure may differ from that of other companies.

The reconciliation from Income (Loss) from continuing operations to Adjusted EBITDA includes certain adjustments such as:

Stock based compensation which represents the stock compensation expense related to our equity plans. These charges are included in COS and SG&A in our Combined Statements of Operations.
Foreign currency loss related to our hedging transactions and intercompany accounts.
Pension and postretirement actuarial losses (gains), settlement losses, and amortization of other comprehensive income which represents:
Mark-to-market adjustments related to pensions and postretirement benefit plans resulting from periodic revaluation of our plan assets and liabilities.
Lump-sum settlement charges
Amortization of prior service costs (credit) which is included in our Combined Statements of Comprehensive Income.



31


Operating Income
A reconciliation of consolidated Operating income to Income (Loss) from continuing operations before taxes is as follows:
Computer Sciences GS
Unaudited Pro Forma Operating Income to Income (Loss) from Continuing Operations Before Taxes Reconciliation
For the Three Months Ended July 3, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
Historical Computer Sciences GS
Three Months Ended July 3, 2015
 
Effect of Spin-Off
 
Pro Forma for Spin-Off Only
 
Historical SRA Three Months Ended June 30, 2015
 
Effect of Mergers
 
Pro Forma for Spin-Off and Mergers
Operating income
$
125

$
17

$
142

$
26

$

$
168

Corporate G&A(a)
 
(15
)
 

 
(15
)
 

 

 
(15
)
Separation costs
 
(15
)
 
15

 

 

 

 

Other income and interest expense, net
 
14

 
(10
)
 
4

 
(27
)
 
13

 
(10
)
Income from continuing operations before taxes
$
109

$
22

$
131

$
(1
)
$
13

$
143

(a) SRA has not historically reported Corporate G&A as it maintains one segment, whereas Computer Sciences GS reports Corporate G&A to allocate overhead costs by segment.
Computer Sciences GS
Unaudited Pro Forma Operating Income to Income (Loss) from Continuing Operations Before Taxes Reconciliation
For the Fiscal Year Ended April 3, 2015


 
 
 
 
 
 
 
 
 
 
 
 
 
Dollars in millions
Historical Computer Sciences GS
Fiscal Year Ended April 3, 2015
 
Effect of Spin-Off
 
Pro Forma for Spin-Off Only
 
Historical SRA Fiscal Year Ended June 30, 2015
 
Effect of Mergers
 
Pro Forma for Spin-Off and Mergers
Operating income
$
546

$
64

$
610

$
88

$
2

$
700

Pension and postretirement plans actuarial (losses) gains, and pension settlement losses
 
(8
)
 
(495
)
 
(503
)
 

 

 
(503
)
Corporate G&A(a)
 
(81
)
 

 
(81
)
 

 

 
(81
)
Interest expense and other, net
 
(28
)
 
(41
)
 
(69
)
 
(107
)
 
56

 
(120
)
Income (Loss) from continuing operations before taxes
$
429

$
(472
)
$
(43
)
$
(19
)
$
58

$
(4
)
(a) SRA has not historically reported Corporate G&A as it maintains one segment, whereas Computer Sciences GS reports Corporate G&A to allocate overhead costs by segment.
Operating income is a non-GAAP measure which provides useful information to our management for assessment of our performance and results of operations, and is one of the financial measures utilized to determine executive compensation. We define Operating income as revenue less COS, segment G&A expense and depreciation and amortization expense. Operating income excludes actuarial and settlement charges related to pension and OPEB plans and corporate G&A. Management compensates for the limitations of this non-GAAP measure by also reviewing Income (Loss) from continuing operations before taxes, which includes costs excluded from the Operating income definition such as corporate G&A, interest and other income (expense).

Recent Developments

On November 4, 2015, CSC released preliminary second quarter fiscal year 2016 financial information, including the following operating results of its North American Public Sector (NPS) segment. NPS segment revenue was $967 million during the second quarter, a decrease of 7.1% when compared with $1,041 million in the second


32


quarter of fiscal 2015. The revenue decline was driven by program completions and changes in task orders, which more than offset new work across all parts of the business. NPS operating margin, excluding the impact of certain items, was 16.6% which compares favorably with 15.4% in the same period in the prior year. Contract awards for NPS were $1.5 billion in the quarter. The financial information presented in this paragraph is presented on a segment basis as reported by CSC and has not been adjusted to reflect the results of operations of Computer Sciences GS as if it had operated on a standalone basis and is, therefore, not comparable to the financial information for Computer Sciences GS presented elsewhere in this Information Statement. NPS segment’s anticipated results for the second quarter fiscal year 2016 are preliminary and unaudited. Such preliminary results are subject to finalization of our quarterly financial and accounting procedures.
On November 4, 2015, SRA filed a Form 8-K releasing certain preliminary results for the period ended September 30, 2015. SRA revenue was $351 million, an increase of 3.7% when compared with $339 in the same period in the prior year. Operating income of $20 million remains stable with the same period prior year operating income of $21 million. Contract awards for SRA were $795 million in the quarter. SRA’s anticipated results for the period ended September 30, 2015 are preliminary, unaudited and subject to completion, reflect SRA management’s current views and may change as a result of management’s review of results and other factors. Such preliminary results are subject to finalization of SRA’s quarterly financial and accounting procedures and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with GAAP.
 



33


RISK FACTORS
You should carefully consider all of the information in this Information Statement and each of the risks described below, which we believe are the principal risks that we face. Some of the risks relate to the businesses of CSRA and SRA, others to the Spin-Off, and others to the Mergers. Some risks relate principally to the securities markets and ownership of our common stock.
Any of the following risks could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this Information Statement. In such case, the trading price of our common stock could decline, and you could lose all or part of your investment. While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition and results of operations in the future.
Past performance may not be a reliable indicator of future financial performance. Future performance and historical trends may be adversely affected by the following factors, as well as other variables, and should not be relied upon to project future period results.
Risks Relating to the Combined Company’s Business
Contracts with the U.S. federal government and its prime contractors account for most of our revenue and earnings; consequently, a decline in the U.S. federal government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects.
Computer Sciences GS generated approximately 91% of our total revenues for the twelve months ended April 3, 2015 from sales to the U.S. federal government either as a prime contractor or subcontractor to other contractors. Computer Sciences GS generated approximately 53% of our total revenues from the DoD (including all branches of the U.S. military) and Intelligence Community and approximately 38% of our total revenues from civilian agencies. Similarly, SRA generated greater than 97% of its revenue from services provided on engagements with various agencies of the U.S. federal government in each of fiscal 2014 and fiscal 2015. We expect to continue to derive most of our revenues from work performed under U.S. federal government contracts.
We also provide services to state and local governments. Approximately 8% of the total revenues of Computer Sciences GS for fiscal 2015 were generated from state government contracts.
Because we derive a substantial majority of our revenue from contracts with the U.S. federal government, we believe that the success and development of our business will continue to depend on our successful participation in U.S. federal government contract programs. Changes in U.S. federal government budgetary priorities could directly affect our financial performance. A significant decline in government expenditures, a shift of expenditures away from programs that we support or a change in U.S. federal government contracting policies could cause U.S. federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty or not to exercise options to renew contracts. Consequently, we closely monitor federal budget, legislative and contracting trends and activities and continually examine our strategies to take these into consideration.
The U.S. federal government continues to face significant fiscal and economic challenges such as financial deficits and the debt ceiling limit. The Administration and Congress make decisions in a constrained fiscal environment largely imposed by the Budget Control Act of 2011 (the “Budget Act”). The Budget Act established limits on discretionary spending that began with GFY 2012. The Bipartisan Budget Act of 2013 (the “BBA”) that was signed into law on December 26, 2013 did not significantly alter the spending constraints established by the Budget Act.


34


The Budget Act provided for additional automatic spending reductions, known as sequestration, which went into effect on March 1, 2013, and further reduced planned government spending. The BBA extended the sequestration budget caps into GFY 2023. While the defense budget sustained the largest single reduction, civil agencies and programs were also impacted significantly by sequestration cuts. In light of the Budget Act, the BBA and other deficit reduction pressures, it is likely that discretionary spending by the U.S. federal government will remain constrained for the foreseeable future. As a result of sequestration, our U.S. federal government customers are more cautious with contract awards and spending, resulting in longer procurement cycles, smaller award values and an inclination towards an extension of existing customer contracts, and we expect this behavior to continue.
We continuously review our operations in an attempt to identify those programs that could be at risk so that we can make appropriate contingency plans. While we have experienced reduced funding on some of our programs, and may see further reductions, we do not expect the cancellation of any of our major programs. Although sequestration continued into GFY 2014, the BBA revised the amount of discretionary spending to be reduced for GFY 2014 and GFY 2015 under the Budget Act. Even with the reduced amount of sequestration for GFY 2014 and GFY 2015, the resulting automatic across-the-board budget cuts are having, and may continue to have, significant consequences for our business and industry.
Our business could be adversely affected by delays caused by our competitors protesting major contract awards received by us, resulting in delay of the initiation of work.
Our contracts and subcontracts are composed of a wide range of contract types, including firm fixed-price, cost reimbursement, and time-and-materials. Some contracts are ordering vehicles, including indefinite delivery/indefinite quantity and government-wide acquisition contracts such as General Services Administration (“GSA”) schedule contracts, and orders under these contracts include firm fixed-price, time-and-materials or cost reimbursable types. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process. The U.S. federal government has increasingly relied on contracts that are subject to a competitive bidding process, including indefinite delivery/indefinite quantity, GSA schedule and other multi-award contracts, which has resulted in greater competition, increased pricing pressure and more protested awards. It can take many months to resolve protests by one or more of our competitors of contract or task order awards we receive. The resulting delay in the start-up and funding of the work under these vehicles may cause our actual results to differ materially and adversely from those anticipated. Due to the competitive process to obtain contracts and an increase in bid protests, we may be unable to achieve or sustain revenue growth and profitability.
Our U.S. federal government contracts may be terminated by the government at any time and may contain other provisions permitting the government not to continue with contract performance and, if lost contracts are not replaced, our operating results may differ materially and adversely from those anticipated.
We derive substantially all of our revenue from U.S. federal government contracts that typically span one or more base years and one or more option years. The option periods typically cover more than half of a contract’s potential duration. U.S. federal government agencies generally have the right not to exercise these option periods. In addition, our contracts typically also contain provisions permitting a government customer to terminate the contract for its convenience. A decision not to exercise option periods or to terminate contracts for convenience could result in significant revenue shortfalls from those anticipated. Virtually all of our U.S. federal government contracts contain one of the form clauses for termination for convenience set forth in the Federal Acquisition Regulation and, therefore, our revenues from these contracts could be at risk if the government elected to exercise its termination for convenience rights. If the government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, we may be unable to recover even those amounts and instead may be liable for excess costs incurred by the government in procuring undelivered items and services from another source. As is common with government contractors, we have experienced and continue to experience occasional performance issues under certain of our contracts. Depending upon the value of the matters affected, a performance problem that impacts our performance of a program or contract could cause our actual results to differ materially and adversely from those anticipated.


35


Our state and local government contracts subject us to similar budgetary and termination risks. Unlike U.S. federal government contracts, where limitations of liability are established in the Federal Acquisition Regulation (the “FAR”) and agency supplements, state and local government contracts have negotiated liability limits that are often higher than typical commercial liability caps and, in some instances, are uncapped. Our state contracts also have termination for convenience and termination for cause provisions and, therefore, our revenues from these contracts could be at risk if the state agencies elected to exercise their termination for convenience rights. Local contracts also typically contain termination for convenience clauses. For state and local government contracts, based on total revenues for FY2015, $330.3 million in revenues is associated with contracts that contain termination for convenience clauses.
U.S. federal government contracts contain numerous provisions that are unfavorable to us.
U.S. federal government contracts contain provisions and are subject to laws and regulations that give the government rights and remedies, some of which are not typically found in commercial contracts, including allowing the government to:

cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;

claim rights in systems and software developed by us;

suspend or debar us from doing business with the U.S. federal government or with a governmental agency;

impose fines and penalties and subject us to criminal prosecution;

control or prohibit the export of our data and technology; and

impose special handling and control requirements for controlled unclassified information.
Certain of our and SRA’s contracts also contain organizational conflict of interest (“OCI”) clauses that limit our ability to compete for or perform certain other contracts. OCIs arise any time we engage in activities that: (1) make us unable or potentially unable to render impartial assistance or advice to the government; (2) impair or might impair our objectivity in performing contract work; or (3) provide us with an unfair competitive advantage. For example, when we work on the design of a particular system, we may be precluded from competing for the contract to develop and install that system or supporting a prime contractor. We have divested lines of business in the past to avoid and/or mitigate OCIs. We are evaluating the OCI provisions in our contracts and those of SRA to determine the potential effects of those clauses on future business. Depending upon the value of the matters affected, an OCI issue that precludes our participation in, or performance of, a program or contract could cause our actual results to differ materially and adversely from those anticipated.
Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. federal government contracts, disqualification from bidding on future U.S. federal government contracts and suspension or debarment from U.S. federal government contracting.
We must comply with laws and regulations relating to the formation, administration and performance of U.S. federal government contracts, which affect how we do business with our customers and may impose added costs on our business. Some significant statutes and regulations that affect us include:

the FAR and agency supplements, which regulate the formation, administration and performance of U.S. federal government contracts;

the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations;


36



the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials;

the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. federal government for payment or approval; and

the U.S. federal government Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. federal government contracts.
Our business is subject to reviews, audits and cost adjustments by the U.S. federal government which, if resolved unfavorably, could adversely affect our profitability, cash position or growth prospects.
U.S. federal government agencies, including the Defense Contract Audit Agency (“DCAA”), the DCMA and others, routinely audit and/or review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of the contractor’s compliance with government standards for its business systems, including its accounting system, earned value management system, estimating system, materials management and accounting system, property management system and purchasing system.
Both contractors and the U.S. federal government agencies conducting these audits and reviews have come under increased scrutiny. As a result, the current audits and reviews have a greater scope, have become more rigorous and the standards to which we are held are being more strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome. During the course of its audits, the DCAA has made unfavorable audit findings and recommendations with regard to the qualifications of employees and subcontractors for contract labor categories that were charged under contracts and have concluded that costs we deemed to be allowable costs under the FAR cost principles were unallowable. We have vigorously disputed many of the DCAA’s findings over the years. Some of these audits have been resolved through negotiation with a lesser amount recovered by the government while other audit findings remain in dispute. This is a typical pattern for us and the DCAA that we expect to continue.
A finding of significant control deficiencies in our system audits or other reviews can result in decremented billing rates to our U.S. federal government customers until the control deficiencies are corrected and our corrections are accepted by the DCMA. Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds. Such adjustments can be applied retroactively, which could result in significant customer refunds. The receipt of adverse audit findings or the failure to obtain an “approved” determination of our various accounting and management internal control systems from the responsible U.S. federal government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process. A determination of non-compliance with applicable contracting and procurement laws, regulations and standards could also result in the U.S. federal government imposing penalties and sanctions against us, including the withholding of payments, suspension of payments and increased government scrutiny that could delay or adversely affect our ability to invoice and receive timely payment on contracts, perform contracts or compete for contracts with the U.S. federal government. Most of our subcontractors are subject to these same regulatory requirements. As a prime contractor, we may incur additional costs or our ability to invoice and receive timely payment on contracts may be affected if a subcontractor does not comply with these regulations and its lack of compliance affects our performance under a prime contract.
CSC’s indirect cost audits by the DCAA have not been completed for fiscal 2004 and subsequent fiscal years. Although we have recorded contract revenues subsequent to fiscal 2003 based upon our estimate of costs that we believe will be approved upon final audit or review, we do not know the outcome of any ongoing or future audits or reviews and adjustments and, if future adjustments exceed our estimates, our profitability would be adversely affected.


37


The DCAA has not completed audits of SRA’s incurred cost submissions for fiscal 2009 and subsequent fiscal years. SRA has recorded financial results subsequent to fiscal 2008 based upon costs that SRA believes will be approved upon final audit or review. If incurred cost audits result in adverse findings that exceed SRA’s estimates, it may have an adverse effect on our financial position, results of operations or cash flows.
Our state and local government contracts are also subject to audits and reviews by state and local government agencies including state comptrollers and inspector generals. Where federal funds are used by a state to fund all or part of a contract we perform, the state and the Computer Sciences GS Business may be subject to audit by a U.S. federal government agency and/or the Government Accountability Office. See “Business of Computer Sciences GS—Legal Proceedings” for more information.
Our business is subject to governmental review and investigation which could adversely affect our profitability, cash position and growth prospects.
We are routinely subject to governmental investigations relating to our contracts and operations. If a review or investigation identifies improper or illegal activities, we may be subject 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. We may suffer harm to our reputation if allegations of impropriety are made against us, which would impair our ability to win new contract awards or receive contract renewals. Penalties and sanctions are not uncommon in our industry. If we incur a material penalty or administrative sanction or otherwise suffer harm to our reputation, our profitability, cash position and future prospects could be adversely affected.
More generally, increases in scrutiny and investigations from government organizations, legislative bodies or agencies into business practices and major programs supported by contractors may lead to increased legal costs and may harm our reputation, profitability, growth prospects and ability to recruit and retain employees.
If our customers request out-of-scope work, we may not be able to collect our receivables, which would materially and adversely affect our profitability.
We may perform work for the U.S. federal government and state governments, with respect to which we must file requests for equitable adjustment or claims with the proper agency to seek recovery in whole or in part, for out-of-scope work directed or caused by the government customer in support of its critical missions. While we may resort to other methods to pursue our claims or collect our receivables, these methods are expensive and time consuming and successful collection is not guaranteed. Failure to collect our receivables or prevail on our claims would have an adverse effect on our profitability.
The U.S. federal government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.
Our industry has experienced, and we expect it will continue to experience, significant changes to business practices as a result of an increased focus on affordability, efficiencies and recovery of costs, among other items. U.S. federal government agencies may face restrictions or pressure regarding the type and amount of services that they may obtain from private contractors. Legislation, regulations and initiatives dealing with procurement reform, mitigation of potential conflicts of interest, deterrence of fraud and environmental responsibility or sustainability, as well as any resulting shifts in the buying practices of U.S. federal government agencies, such as increased usage of fixed-price contracts, multiple award contracts and small business set-aside contracts, could have adverse effects on government contractors, including us. Any of these changes could impair our ability to obtain new contracts or renew our existing contracts when those contracts are recompeted. Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future revenues, profitability and prospects.


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Misconduct of employees, subcontractors, agents and business partners could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a significant adverse impact on our business and reputation.
Misconduct could include fraud or other improper activities such as falsifying time or other records and violations of laws and regulations, including anti-corruption laws. Other examples could include the failure to comply with our Code of Business Conduct, policies and procedures or with federal, state or local government procurement regulations, rules regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign government officials, international trade controls (particularly the International Traffic in Arms Regulations), lobbying or similar activities and any other applicable laws or regulations. Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in claims, remediation costs, regulatory sanctions against us, loss of current and future contracts and serious harm to our reputation. Although we have implemented policies, procedures and controls to prevent and detect these activities, these precautions may not prevent all misconduct and, as a result, we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or misconduct by any of our employees, subcontractors, agents or business partners could damage our reputation and subject us to fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business and our future results.
Our ability to perform services for certain of our U.S. federal government customers is dependent on our ability to maintain necessary security clearances.
Select U.S. federal government customers require us to maintain security clearances for certain of our facilities used in the performance of classified contracts. Employees who perform under certain government contracts are required to possess appropriate personnel security clearances for access to classified information granted by the respective government agency. The competition for qualified personnel who possess security clearance is very strong in certain public sector markets. In the event that a government customer were to revoke the facility and/or personnel clearances of all or substantially all of the employees performing work under a classified contract, such revocation could be grounds for termination of the contract by the government customer. Similarly, if we are unable to hire sufficient qualified and cleared personnel to meet contractual commitments, a contract could be terminated for non-performance. Under either circumstance, such termination, depending on the contract value, could have a material adverse effect on our consolidated financial position, results of operations and cash flows.
We have contracts with the U.S. federal government that are classified which may limit investor insight into portions of our business.
Over the last three fiscal years, an average of 13% of the revenues of Computer Sciences GS was derived from classified programs with the U.S. federal government that are subject to security restrictions which preclude the dissemination of information that is classified for national security purposes. SRA also derives a portion of their revenues from programs with the U.S. government that are subject to security restrictions. We are limited in our ability to provide information about these classified programs, their risks or any disputes or claims relating to such programs. As a result, investors may have less insight into our classified programs than our other programs and therefore less ability to fully evaluate the risks related to our classified business.
Our failure to attract and retain qualified employees, including our senior management team, could adversely affect our business.
Our success depends to a substantial degree on our ability to recruit and retain the technically-skilled personnel we need to serve our customers effectively. Our business involves the development of tailored solutions for our customers, a process that relies heavily upon the expertise and services of our employees. Accordingly, our employees are our most valuable resource. Competition for skilled personnel in the IT services industry is intense, and technology service companies often experience high attrition among their skilled employees. There is a shortage


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of people capable of filling these positions, particularly those with government security clearances, and they are likely to remain a limited resource for the foreseeable future. Recruiting and training these personnel require substantial resources. Our failure to attract and retain technical personnel could increase our costs of performing our contractual obligations, reduce our ability to efficiently satisfy our customers’ needs, limit our ability to win new business and cause our actual results to differ materially and adversely from those anticipated.
In addition to attracting and retaining qualified technical personnel, we believe that our success will depend on the continued employment of our senior management team and its ability to generate new business and execute projects successfully. Our senior management team is very important to our business because personal reputations and individual business relationships are a critical element of obtaining and maintaining customer engagements in our industry, particularly with agencies performing classified operations. The loss of any of our senior executives could cause us to lose customer relationships or new business opportunities, which could cause actual results to differ materially and adversely from those anticipated.
Our markets are highly competitive, and many of the companies we compete against have substantially greater resources.
The markets in which we operate include a large number of participants and are highly competitive. Many of our competitors may compete more effectively than we can because they are larger, better financed and better known companies than we are. In order to stay competitive in our industry, we must also keep pace with changing technologies and customer preferences. If we are unable to differentiate our services from those of our competitors, our revenue may decline. In addition, our competitors have established relationships among themselves or with third parties to increase their ability to address customer needs. As a result, new competitors or alliances among competitors may emerge and compete more effectively than we can. There is also a significant industry trend towards consolidation, which may result in the emergence of companies which are better able to compete against us. The results of these competitive pressures could cause our actual results to differ materially and adversely from those anticipated.
We may not realize as revenues the full amounts reflected in our backlog, which could adversely affect our expected future revenues and growth prospects.
As of April 3, 2015, the total backlog of Computer Sciences GS was $11.1 billion, which included $2.6 billion in funded backlog. As of June 30, 2015, SRA’s total backlog was $3.4 billion, which included $643.7 million in funded backlog. Due to the U.S. federal government’s ability to not exercise contract options or to terminate, modify or curtail our programs or contracts and the rights of our state customers to cancel contracts and purchase orders in certain circumstances, we may realize less than expected or in some cases never realize revenues from some of the contracts that are included in our backlog. Our unfunded backlog, in particular, contains management’s estimate of amounts expected to be realized on unfunded contract work that may never be realized as revenues. If we fail to realize as revenues amounts included in our backlog, our expected future revenues, growth prospects and profitability could be adversely affected.
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to accurately estimate and manage costs, time and resources.
We generate revenues under various types of contracts, which include cost reimbursement, time-and-materials, fixed-price-level-of-effort and firm-fixed-price contracts. The accounting for these contracts requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical issues. Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract, the nature of offerings provided, our ability to negotiate advantageous reseller agreements with vendors as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined. Subcontractors’ assertions are also assessed and considered in estimating costs and profitability. In addition, our contracts contain provisions relating to cost controls and audit rights.


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To varying degrees, each contract type involves some risk that we could underestimate the costs and resources necessary to fulfill the contract. Cost reimbursement and time-and-materials contracts generally have lower profitability than firm fixed-price contracts; however, due to their nature, fixed-price contract types tend to have more risk than cost type contracts. While firm fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues derived from firm fixed-price contracts represented approximately 44% of the total revenues of Computer Sciences GS for fiscal 2015. When making proposals on these types of contracts, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as assumptions regarding technical issues. In each case, our failure to accurately estimate costs or the resources and technology needed to perform our contracts or to effectively manage and control our costs during the performance of our work could result, and in some instances has resulted, in reduced profits or in losses.
More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, government shutdown due to congressional inaction, the effect of any changes in laws or regulations, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable. Our profitability is adversely affected when we incur contract costs that we cannot bill to our customers.
Internal system or service failures, including as a result of cyber or other security threats, could disrupt our business and impair our ability to effectively provide our services to our customers, which could damage our reputation and have a material adverse effect on our business and results of operations.
We create, deploy, and maintain IT and engineering systems, and provide services that are often critical to our customers’ missions, some of which involve sensitive information and may be conducted in war zones or other hazardous environments. As a result, we are subject to systems or service failures, not only resulting from our own failures or the failures of third-party service providers, natural disasters, power shortages, or terrorist attacks, but also from continuous exposure to cyber and other security threats, including computer malware and attacks by computer hackers or physical break-ins. There has been an increase in the frequency and sophistication of the cyber and security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us because we hold controlled unclassified, classified or other sensitive information. As a result, we face a heightened risk of a security breach or disruption with respect to sensitive information resulting from an attack by computer hackers, foreign governments, and cyber terrorists. We have been the target of these types of attacks in the past and future attacks are likely to occur. Threat incidents identified to date have not resulted in a material adverse effect on us or our business operations. Our security measures are designed to identify and protect against security breaches and cyber attacks; however, if successful, these types of attacks on our network or other systems or service failures could have a material adverse effect on our business and results of operations, due to, among other things, the loss of customer or proprietary data, interruptions or delays in our customers’ businesses and damage to our reputation. In addition, the failure or disruption of our systems, communications or utilities could cause us to interrupt or suspend our operations, which could have a material adverse effect on our business and results of operations. In addition, if our employees inadvertently do not adhere to appropriate information security protocols, our protocols are inadequate, or our employees intentionally avoid these protocols, our or our customers’ sensitive information may be released thereby causing significant negative impacts to our reputation and could expose us or our customers to liability.
If our systems, services or other applications have significant defects or errors, are successfully attacked by cyber and other security threats, suffer delivery delays, or otherwise fail to meet our customers’ security expectations, we may:

lose revenue due to adverse customer reaction;

be required to provide additional services or remediation to a customer at no charge;

incur additional costs related to monitoring and increasing our security posture;



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lose revenue due to the deployment of internal staff for remediation efforts instead of performing billable work;

receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain customers;

suffer claims by customers or impacted third parties for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of customer and/or third-party information; or

lose our ability to perform and pursue classified work and/or experience a suspension of our export privileges.
In addition to any costs resulting from contract performance or required corrective action, these failures may result in increased costs or loss of revenue if they result in customers postponing subsequently scheduled work or canceling or failing to renew contracts.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Additionally, some cyber technologies and techniques that we utilize or develop may raise potential liabilities related to legal compliance, intellectual property and civil liberties, including privacy concerns, which may not be fully insured or indemnified. Our errors and omissions insurance coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims or the insurer may disclaim coverage as to some types of future claims. The successful assertion of any large claim against us could seriously harm our business. Even if not successful, these claims could result in significant legal and other costs, may be a distraction to our management and may harm our customer relationships. In certain new business areas, we may not be able to obtain sufficient insurance and may decide not to accept or solicit business in these areas.
As a contractor supporting national security customers, we are also subject to regulatory compliance requirements under the Defense Federal Acquisition Regulations and other federal regulations requiring that our networks and IT systems comply with the security and privacy controls in National Institute of Standards and Technology Special Publication 800-53. Failure to comply with the security control requirements could result in our ineligibility to bid for certain agency contracts.
The strength of our financial capitalization and our credit ratings may impact our borrowing costs, our ability to raise additional capital for future needs, and our competitiveness.
We expect our balance sheet to be capitalized consistent with an investment grade credit profile and expect to execute financial policies consistent with such strategy. However, there is no assurance that our credit ratings will reflect such capitalization or financial policies, as our credit ratings are determined by credit rating agencies from their own independent review, assessment and information sources. Our credit ratings are subject to revision, suspension or withdrawal by one or more rating agencies at any time. Rating agencies may review our credit ratings due to developments that are beyond our control, including as a result of new standards requiring the agencies to reassess rating practices and methodologies.
If adverse changes in our credit ratings were to occur, it could result in higher borrowing costs, may limit our access to capital markets or may negatively impact our financial condition and the market price for our common stock. Any ratings downgrades could negatively impact the perception of us by lenders and other third parties, including our customers. Some of our customer contracts are long-term and mission critical to our customers’ operations, and we believe that our credit ratings may be relied upon to assess our financial strength and our financial wherewithal to perform such critical services. In certain situations, we are required to procure financial surety bonds in order to guarantee our financial performance, and the cost of such surety bonds may increase as a result of adverse changes in our credit ratings.


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We may make acquisitions, which could involve inherent risks and uncertainties.
We may make acquisitions, which could involve inherent risks and uncertainties, including:

the difficulty in integrating newly acquired businesses and operations in an efficient and effective manner and acclimating the employees to our culture of compliance, integrity and values;

the challenge in achieving strategic objectives, cost savings and other anticipated benefits;

the potential loss of key employees of the acquired businesses;

the potential diversion of senior management’s attention from our operations;

the risks associated with integrating financial reporting and internal control systems;

the difficulty in expanding IT systems and other business processes to incorporate the acquired businesses;

potential future impairments of goodwill associated with the acquired businesses; and

in some cases, the potential for increased regulation.
If an acquired business fails to operate as anticipated, cannot be successfully integrated with our existing business, or one or more of the other risks and uncertainties identified occur in connection with our acquisitions, our business, results of operations and financial condition could be adversely affected.
Our ability to pursue strategic acquisitions and partnerships may impact our ability to compete in the markets we serve.
Besides pursuing organic growth, we intend to explore potential strategic acquisitions that could allow us to expand our operations. However, we may be unable to identify attractive candidates or complete acquisitions on terms favorable to us. In addition, our ability to successfully integrate the operations we acquire and leverage these operations to generate revenue and earnings growth may significantly impact future revenue and earnings as well as investor returns. Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage such integrations successfully. Failure to successfully integrate acquired operations may adversely affect our cost structure, thereby reducing our margins and return on investment.
We have also entered into, and expect to seek to enter into additional strategic partnerships with other industry participants as part of an effort to expand our business. However, we may be unable to identify attractive strategic partnership candidates or complete such partnerships on terms favorable to us. In addition, if we are unable to successfully implement our partnership strategies or our strategic partners do not fulfill their obligations or otherwise do not prove advantageous to our business, our investments in such partnerships and our anticipated business expansion could be adversely affected.
Achieving our growth objectives may prove unsuccessful. We may be unable to identify future attractive acquisitions and strategic partnerships, which may adversely affect our growth. In addition, our ability to consummate or integrate acquisitions or to consummate or implement our strategic partnerships may be materially and adversely affected.
We could suffer losses due to asset impairment charges.
We test our goodwill for impairment during the second quarter of every year, and on an interim date should events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. If the fair value of a reporting unit is revised downward due to declines in business performance or other factors, an impairment could result and a non-cash charge could be required.


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We have acquired software and other long-lived intangible assets that are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the asset, or group of assets, may not be recoverable. If the carrying amount is not recoverable and it exceeds its fair value, a non-cash impairment charge would be recognized.
We also test certain equipment and deferred cost balances associated with contracts when the contract is materially underperforming or is expected to materially underperform in the future, as compared to the original bid model or budget. If the projected cash flows of a particular contract are not adequate to recover the unamortized cost balance of the asset group, the balance is adjusted in the tested period based on the contract’s fair value. Either of these impairments could materially affect our reported net earnings.
We are defendants in pending litigation that may have a material and adverse impact on our profitability.
As noted in “Business of Computer Sciences GS-Legal Proceedings” and Note 18 to the Combined Financial Statements of the Computer Sciences GS Business, we are currently party to a number of disputes which involve or may involve litigation. We are not able to predict the ultimate outcome of these disputes or the actual impact of these matters on our profitability. If we agree to settle these matters or judgments are secured against us, we may incur liabilities which may have a material and adverse impact on our liquidity and earnings.
We may be exposed to negative publicity and other potential risks if we are unable to maintain effective internal controls over financial reporting.
We will be required under the Sarbanes-Oxley Act of 2002 to prepare a report of management on our internal controls that contains an assessment by management of the effectiveness of our internal control over financial reporting. In addition, the public accounting firm that will be auditing our financial statements will report on the effectiveness of our internal control over financial reporting. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting as of each fiscal year end, we may be exposed to negative publicity. The resulting negative publicity may materially and adversely affect our business and stock price.
Pension costs are dependent on several economic assumptions which if changed may cause our future earnings and cash flow to fluctuate significantly as well as affect the affordability of our products and services.
As a result of the Internal Reorganization, we expect to assume most obligations under substantially all of CSC’s material U.S. domestic defined benefit pension plans, including various supplemental executive retirement plans and substantial assets and liabilities in respect of pension obligations to current and former CSC employees who are not our current or former employees. The Pension Benefit Guaranty Corporation (“PBGC”) is a federal agency created by the Employee Retirement Income Security Act of 1974 to protect pension benefits in private-sector defined benefit plans. The PBGC is funded by insurance premiums paid by companies that sponsor defined benefit pension plans. If a defined benefit plan is terminated without sufficient funding to pay all the promised benefits, the PBGC's insurance program pays the promised benefits for the covered plan, up to limits set by law. As part of its risk monitoring practices, the PBGC analyzes long-run loss scenarios associated with corporate spin-offs and other transactions to ensure that covered plans do not incur unreasonable additional risk from such corporate transactions. The PBGC is conducting an analysis of our defined benefit pension plans in relation to our spin-off from CSC. Such analysis of the spin-off may result in a negotiated settlement between us and the PBGC pursuant to which we may agree to make additional pension plan contributions if certain conditions related to our indebtedness are not satisfied by us at the end of fiscal years 2018 and 2019.
We will also have obligations to provide certain health care and life insurance benefits to eligible retirees. The impact of these plans on our GAAP earnings may be volatile in that the amount of expense we record for our pension and other postretirement benefit plans may materially change from year to year because those calculations are sensitive to changes in several key economic assumptions that will impact our annual remeasurement “mark-to-market,” or under immediate recognition, accounting results, including interest rates, realized investment returns,


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and other actuarial assumptions including participant longevity (also known as mortality) estimates. Changes in these factors may also affect our required plan funding, cash flow and stockholders’ equity. In addition, the funding of our plans and recovery of costs on our contracts, as described below, may be subject to changes caused by legislative or regulatory actions. CSC has taken certain actions over the last few years to mitigate the volatility the defined benefit pension plans may have on our earnings and cash flows, including amendments made in 2009 to certain of our defined benefit pension plans to freeze pension accrual benefits, making discretionary contributions from proceeds from the sale of businesses, diversifying our investment asset allocation strategies, and liquidating liabilities via lump sum settlements. In addition, CSC implemented heath care insurance exchanges during fiscal 2015 to improve local medical care and to reduce our costs in providing retiree medical benefits and other post-employment benefits and, where possible, eliminated future financial impact on us from inflation in retiree medical care costs. However, the impact of these actions may be less than anticipated or may be offset by other pension and other postretirement benefits cost increases due to factors such as changes in actuarial assumptions, reduced investment returns, or changes in discount rates.
Changes in our tax rates could affect our future results.
Our future effective tax rates could be affected by changes in the valuation of deferred tax assets and liabilities, or by changes in tax laws or their interpretation. We are subject to the continuous examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance that the outcomes from these examinations will not have a material adverse effect on our financial condition and operating results.
We may be adversely affected by disruptions in the credit markets, including disruptions that reduce our suppliers’ access to credit.
The credit markets have historically been volatile and therefore it is not possible for us to predict the ability of our suppliers or partners to access short-term financing and other forms of capital. If a disruption in the credit markets were to occur, it could also pose a risk to our business if certain government suppliers are unable to obtain financing to meet payment or delivery obligations to us.
We will have substantial indebtedness after the Spin-Off and Special Dividend, as well as after the Mergers, and we will have the ability to incur significant additional indebtedness, which could adversely affect our business, financial condition and results of operations.
Following the Spin-Off and Special Dividend, and following the Mergers, we will have substantial indebtedness and we may increase our indebtedness in the future. As of April 3, 2015, after giving effect to the incurrence of estimated indebtedness in connection with the Spin-Off and Special Dividend, our pro forma total outstanding indebtedness would have been approximately $1.65 billion. As of April 3, 2015, after giving effect to the incurrence of estimated indebtedness in connection with the Spin-Off, Special Dividend and Mergers, our pro forma total outstanding indebtedness would have been approximately $3.15 billion.
Our level of indebtedness could have important consequences. For example, it could:

increase our vulnerability to general adverse economic and industry conditions;

limit our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements or to carry out other aspects of our business;

increase our cost of borrowing;

require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures and other general corporate requirements or to carry out other aspects of our business;


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limit our ability to make material acquisitions or take advantage of business opportunities that may arise;

expose us to fluctuations in interest rates, to the extent our borrowings bear variable rates of interest;

limit our flexibility in planning for, or reacting to, changes in our business and industry; and

place us at a potential disadvantage compared to our competitors that have less debt.
Our ability to make scheduled payments on and to refinance our indebtedness will depend on and be subject to our future financial and operating performance, which in turn is affected by general economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the banking and capital markets. Our business may fail to generate sufficient cash flow from operations or to borrow funds in an amount sufficient to enable us to make payments on our debt, to refinance our debt or to fund our other liquidity needs. If we were unable to make payments on or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as asset sales, equity issuances or negotiations with our lenders to restructure the applicable debt. The terms of debt agreements that we enter into in connection with the Spin-Off and Mergers and market or business conditions may limit our ability to take some or all of these actions. In addition, if we incur additional debt, the related risks described above could be exacerbated.
The agreements governing our indebtedness will contain restrictive covenants, which will restrict our operational flexibility.
The agreements governing our indebtedness will contain restrictions and limitations on our ability to engage in activities that may be in our long-term best interests, including covenants that place limitations on the incurrence of additional indebtedness; the creation of liens; the payment of dividends; sales of assets; fundamental changes, including mergers and acquisitions; loans and investments; negative pledges; transactions with affiliates; restrictions affecting subsidiaries; modification to charter documents in a manner materially adverse to the lenders; changes in fiscal year and limitations on conduct of business.
In addition, certain agreements governing our indebtedness will contain financial covenants, including covenants requiring, as at the end of, and for, each fiscal quarter of CSRA ending after the Distribution Date, (a) a ratio of consolidated total net debt to consolidated EBITDA not in excess of 4:00:1:00, stepping down to 3.50:1.00 at the end of the first full fiscal quarter ending at least 18 months after the Distribution Date; and (b) a consolidated EBITDA to interest expense ratio of not less than 3.00:1.00. The agreements governing our indebtedness will also contain affirmative covenants and representations and warranties customary for financings of this type.
Events beyond our control could affect our ability to meet these covenants. Our failure to comply with obligations under the agreements governing our indebtedness may result in an event of default under those agreements. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. This could have serious consequences to our financial condition, operating results and business and could cause us to become insolvent or enter bankruptcy proceedings.
We may need to raise additional capital, and we cannot be sure that additional financing will be available.
Subsequent to the Spin-Off, we will need to fund our ongoing working capital, capital expenditure and financing requirements through cash flows from operations and new sources of capital, including additional financing. Our ability to obtain future financing will depend, among other things, on our financial condition and results of operations as well as on the condition of the capital markets or other credit markets at the time we seek financing. Increased volatility and disruptions in the financial markets could make it more difficult and more expensive for us to obtain financing. In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws or new interpretations or the enforcement of older laws and regulations applicable to the


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financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit. Historically, we have relied on CSC and its credit facilities and its access to capital for our financing needs but, after the Spin-Off, we will not have access to CSC’s credit for our future financings. There can be no assurance that, as a new independent public company, we will have sufficient access to the capital markets on terms that we will we find acceptable.
In the course of providing services to customers, we may inadvertently infringe on the intellectual property rights of others and be exposed to claims for damages and equitable relief.
The solutions we provide to our customers may inadvertently infringe on the intellectual property rights of third parties resulting in claims for damages and equitable relief against us or our customers. Customer agreements can require a solution provider to indemnify the customer for infringement. Under the FAR, the government can require a contractor to indemnify it for infringement. The expense and time of defending against these claims may have a material and adverse impact on our profitability. Additionally, the publicity we may receive as a result of infringing intellectual property rights may damage our reputation and adversely impact our ability to develop new business. We will not be entitled to indemnification from CSC in connection with most intellectual property we license from CSC if the use by us of that intellectual property infringes the rights of third parties, other than certain software and process improvements we license in connection with the annual maintenance fee we will pay to CSC.
Our business may suffer if we cannot continue to enforce the intellectual property rights on which our business depends.
Our business carefully maintains a combination of patents, trade secrets, trademarks, trade names, copyrights and proprietary rights, as well as contractual arrangements, including licenses, to protect our intellectual property. Our other intellectual property rights are important to our continued success and our competitive position. See “Business of Computer Sciences GS—Intellectual Property” for a description of our intellectual property assets. Under the intellectual property matters agreement we intend to enter into with CSC, CSC is entitled to enforce certain intellectual property rights licensed to us. If CSC fails to enforce those rights or enforces them in a way that is not advantageous to us, the value to us of that intellectual property may be diminished. Any impairment of our intellectual property, including due to changes in U.S. and worldwide intellectual property laws or the absence of effective legal protections or enforcement measures, could adversely impact our business, financial condition and results of operations.
We have been, and may be in the future, subject to claims of intellectual property infringement, which could require us to change our business practices.
Successful claims that we infringe the intellectual property of others could require us to enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question. This could require us to change our business practices and limit our ability to compete effectively. Even if we believe that claims of intellectual property infringement are without merit, defending against the claims can be time-consuming and costly and divert management’s attention and resources away from our business.
SRA’s income tax returns are subject to audit in various jurisdictions and its fiscal 2011 U.S. federal income tax returns are currently under audit.
SRA’s income tax returns are subject to review and audit in the United States and other jurisdictions with varying statutes of limitation. SRA has not recognized the benefit of income tax positions that we believe would be more-likely-than-not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges SRA’s tax positions, our effective tax rate on our earnings could increase substantially, and our earnings and cash flows from operations could be materially adversely affected.
Periods for SRA’s fiscal years ended after July 1, 2010 generally remain subject to examination by federal and state tax authorities. In foreign jurisdictions, tax years after 2010 may remain subject to examination by tax


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authorities. SRA’s consolidated U.S. federal income tax return for the fiscal year ended June 30, 2011 is currently under audit by the IRS. SRA has been notified that the IRS intends to contest a significant deduction taken during that period, which SRA plans to defend vigorously. Nonetheless, if the IRS were to challenge SRA’s prior tax positions and SRA is unsuccessful in defending them, we may be required to pay taxes for prior periods, interest, fines or penalties, and/or be obligated to pay increased taxes in the future, any of which could have a material adverse effect on our business, financial condition, and results of operations.
SRA has agreed to either obtain insurance or indemnify Computer Sciences GS for certain taxes, interest, penalties and defense costs attributable to certain deductions taken by SRA that may be contested by the IRS. See “The Merger Agreement—Worthless Stock Loss Insurance”.
Risks Relating to the Spin-Off and the Mergers
The Spin-Off could result in significant tax liability to CSC and its stockholders.
Completion of the Spin-Off is conditioned on CSC’s receipt of a written opinion from its outside tax advisor that is in form and substance reasonably acceptable to CSC regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. CSC can waive receipt of the tax opinion as a condition to the completion of the Spin-Off.
The opinion of counsel does not address any U.S. state, local or foreign tax consequences of the Spin-Off. The opinion assumes that the Spin-Off will be completed according to the terms of the Master Separation and Distribution Agreement and relies on facts as stated in the Master Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this Information Statement and a number of other documents. In addition, the opinion is based on certain representations as to factual matters from, and certain covenants by, CSC and us. The opinion cannot be relied on if any of the assumptions, representations or covenants are incorrect, incomplete or inaccurate or are violated in any material respect.
The opinion of counsel is not binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. CSC has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. federal income tax consequences of the Spin-Off.
If the Distribution were determined not to qualify for tax-free treatment, U.S. Holders could be subject to tax. In this case, each U.S. Holder who receives our common stock in the Distribution would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (1) a taxable dividend to the U.S. Holder to the extent of that U.S. Holder’s pro rata share of CSC’s current and accumulated earnings and profits; (2) a reduction in the U.S. Holder’s basis (but not below zero) in CSC common stock to the extent the amount received exceeds the stockholder’s share of CSC’s earnings and profits; and (3) a taxable gain from the exchange of CSC common stock to the extent the amount received exceeds the sum of the U.S. Holder’s share of CSC’s earnings and profits and the U.S. Holder’s basis in its CSC common stock.
If the Distribution were determined not to qualify for tax-free treatment, then CSC would recognize gain in an amount up to the fair market value of our common stock held by it immediately before the Distribution. Under certain circumstances, we could have an indemnification obligation to CSC with respect to tax on any such gain. See below and “The Transactions—Material U.S. Federal Income Tax Consequences of the Spin-Off.”
We could have an indemnification obligation to CSC if the Distribution were determined not to qualify for tax-free treatment, which could materially adversely affect our financial condition.
If, due to any of our representations being untrue or our covenants being breached, it were determined that the Distribution did not qualify for tax-free treatment under Section 355 of the Code, we could be required to indemnify CSC for the resulting taxes and related expenses. Any such indemnification obligation could materially adversely affect our financial condition.


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In addition, Section 355(e) of the Code generally creates a presumption that the Distribution would be taxable to CSC, but not to stockholders, for U.S. federal income tax purposes, if we or our stockholders were to engage in transactions that result in a 50% or greater change by vote or value in the ownership of our stock during the period beginning two years before the date of the Distribution through two years after the date of the Distribution, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions giving effect to such a change in ownership. If the Distribution were taxable to CSC due to such a 50% or greater change in ownership of our stock, CSC would recognize gain in an amount up to the fair market value of our common stock held by it immediately before the Distribution, and we generally would be required to indemnify CSC for the tax on such gain and related expenses. Any such indemnification obligation could materially adversely affect our financial condition. See “The Master Separation and Distribution Agreement and Ancillary Agreements—Tax Matters Agreement.”
We intend to agree to numerous restrictions to preserve the tax-free treatment of the Distribution, which may reduce our strategic and operating flexibility.
We intend to agree in the Tax Matters Agreement to covenants and indemnification obligations that address compliance with Section 355(e) of the Code. These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and might discourage or delay a strategic transaction that our stockholders may consider favorable. See “The Master Separation and Distribution Agreement and Ancillary Agreements—Tax Matters Agreement.”
Our ability to expand our business beyond U.S. federal and certain state and local government customers may be constrained.
We intend to enter into agreements with CSC prior to the Distribution that will restrict our ability to use certain intellectual property to sell our services to customers other than our existing customer base (i.e., U.S. federal and certain state and local government customers) for a period after the Distribution. In addition, we expect to appoint CSC as our exclusive agent outside the U.S. with regard to certain non-U.S. customers, subject to some exceptions, for a period after the Distribution and to agree not to solicit certain shared state and local government customers for a period after the Distribution. While we have no current plans to expand our existing business in ways that would require us to engage in business beyond the scope of the rights to intellectual property we expect to have at the time of Distribution, we would be unable to engage in business activities outside the scope of that license after the Distribution until the expiration of those restrictions unless we develop or acquire new intellectual property. See “The Master Separation and Distribution Agreement and Ancillary Agreements” and “Certain Relationships and Related Party Transactions—Agreements with CSC” for more information.
We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.
We believe that, as an independent publicly-traded company, we will be able to, among other things, better focus our financial and operational resources on our specific business, implement and maintain a capital structure designed to meet our specific needs, design and implement corporate strategies and policies that are targeted to our business, more effectively respond to industry dynamics and create effective incentives for our management and employees that are more closely tied to our business performance. However, by separating from CSC, we may be more susceptible to market fluctuations and other adverse events. In addition, we may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. The completion of the Spin-Off will also require significant amounts of our management’s time and effort, which may divert management’s attention from operating and growing our business. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition and results of operations could be adversely affected.


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We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent publicly-traded company, and we may experience increased costs after the Spin-Off.
We have historically operated as part of CSC’s corporate organization, and CSC has provided us with various corporate functions. Following the Spin-Off, CSC will have no obligation to provide us with assistance other than the transition services described under “The Master Separation and Distribution Agreements and Ancillary Agreements” and “Certain Relationships and Related Party Transactions—Agreements with CSC.” These services do not include every service that we have received from CSC in the past, and CSC is only obligated to provide these services for limited periods following completion of the Spin-Off. Accordingly, following the Spin-Off, we will need to provide internally or obtain from unaffiliated third parties the services we currently receive from CSC. These services include IT, tax administration, treasury activities, technical accounting, benefits administration, procurement, legal and ethics and compliance program administration, the effective and appropriate performance of which are critical to our operations. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from CSC. Because our business has historically operated as part of the wider CSC organization, we may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently, or may incur additional costs that could adversely affect our business. As part of CSC, we have benefited from CSC’s size and purchasing power in procuring certain goods and services such as insurance and health care benefits, and technology such as computer software licenses. If we fail to obtain the quality of services necessary to operate effectively or incur greater costs in obtaining goods and services, our business, financial condition and results of operations may be adversely affected.
We have no recent operating history as an independent publicly-traded company, and our historical financial information is not necessarily representative of the results we would have achieved as an independent publicly traded company and may not be a reliable indicator of our future results.
We derived the Computer Sciences GS historical financial information included in this Information Statement from CSC’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent publicly-traded company during the periods presented, or those that we will achieve in the future. This is primarily because of the following factors:

Prior to the Spin-Off, we operated as part of CSC’s broader corporate organization and CSC performed various corporate functions for us, including IT, tax administration, treasury activities, technical accounting, benefits administration, procurement, legal and ethics and compliance program administration. Our historical financial information reflects allocations of corporate expenses from CSC for these and similar functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent publicly-traded company.

We will enter into transactions with CSC that did not exist prior to the Spin-Off, such as CSC’s provision of transition services, which will cause us to incur new costs.

Our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from CSC, including changes in our cost structure, personnel needs, tax profile, financing and business operations. As part of CSC, we enjoyed certain benefits from CSC’s operating diversity, size, purchasing power, borrowing leverage and available capital for investments, and we will lose these benefits after the Spin-Off. As an independent entity, we may be unable to purchase goods, services and technologies, such as insurance and health care benefits and computer software licenses, or access capital markets on terms as favorable to us as those we obtained as part of CSC prior to the Spin-Off.
Following the Spin-Off, we will also be responsible for the additional costs associated with being an independent publicly-traded company, including costs related to corporate governance, investor and public relations and public reporting. Therefore, our financial statements may not be indicative of our future performance as an independent publicly-traded company. While we have been profitable as part of CSC, we cannot assure you that our profits will continue at a similar level when we are an independent publicly-traded company. For additional


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information about our past financial performance and the basis of presentation of our financial statements, see “Selected Historical Combined Financial Data for Computer Sciences GS,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Computer Sciences GS” and our historical financial statements and the notes thereto included elsewhere in this Information Statement.
Our and SRA’s historical and pro forma financial data are not necessarily representative of the results the combined company would have achieved and may not be a reliable indicator of the combined company’s future results.
Our and SRA’s historical and pro forma financial data included in this Information Statement may not reflect what our or SRA’s results of operations and financial position would have been had we been a combined company, and publicly traded, during the periods presented, or what the combined company’s results of operations, financial condition and cash flows will be in the future. In addition, the pro forma financial data we have included in this Information Statement are based in part upon a number of estimates and assumptions. These estimates and assumptions may prove not to be accurate, and accordingly, our pro forma financial data should not be assumed to be indicative of what our financial condition or results of operations actually would have been as a combined company and may not be a reliable indicator of what our financial condition or results of operations actually may be in the future.
Negative stockholders’ equity may harm our reputation and adversely affect our business.
Prior to giving effect to the Mergers, but after giving effect to the Special Dividend and the Distribution, we will initially report a substantial deficit in our stockholders’ equity balance at the time of the Distribution, in an amount estimated to be approximately $553 million. The substantial funding deficit attributable to our defined benefit pension plans and other retirement benefit plans has the effect of reducing stockholders’ equity at the time of separation. In addition, our accounting policy of immediate recognition of fair value adjustments for actuarial gains and losses can cause significant volatility in our equity account as those actuarial gains or losses are reported through our income statement. As a result, despite our historical profitability, our stockholders’ equity deficit balance could create a negative perception of our financial well being, harm our reputation, adversely affect our ability to recruit employees, adversely impact our dealings with our vendors or our customers, or otherwise adversely affect our business, results of operations and financial condition.
Some of the contracts to be transferred or assigned to us contain provisions requiring the consent of third parties in connection with the transactions contemplated by the Internal Reorganization and Distribution. If these consents are not obtained, we may be unable to enjoy the benefit of these contracts in the future.
Some of the contracts to be transferred or assigned to us in connection with the Internal Reorganization and Distribution contain provisions that require the consent of third parties to the Internal Reorganization, the Distribution or both. Failure to obtain such consents on commercially reasonable and satisfactory terms may impair our entitlement to the benefit of these contracts in the future.
We expect to enter into a Change of Name agreement with the U.S. federal government to effect the transfer of our federal contracts from CSC to one of our operating subsidiaries. We are in the process of completing the administrative tasks relating to completion of the change of name process for those contracts and contract vehicles. While we do not expect the completion of the process to delay payments to us in any material respect on contracts transferred to us by CSC, we may experience protest by competitors of new awards of contracts to us on grounds relating to the Spin-Off.
We may have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with CSC that are based on the costs historically allocated to us by CSC.
We will enter into agreements with CSC related to our separation from CSC, including the Master Separation and Distribution Agreement, Transition Services Agreement, Tax Matters Agreement, Employee Matters Agreement, Intellectual Property Matters Agreement, Real Estate Matters Agreement and Non-U.S. Agency Agreement and any


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other agreements, while we are still part of CSC that are based on the costs historically allocated to us by CSC. Accordingly, these agreements may not reflect terms that would have resulted from arms-length negotiations among unaffiliated third parties. Among other things, pursuant to the Intellectual Property Matters Agreement, CSC will retain ownership of all proprietary intellectual property (other than certain restricted intellectual property developed by us, which CSC will assign to us) and license certain rights we require for use solely in connection with U.S. federal and certain U.S. state and local government customers, on a perpetual, royalty-free, non-assignable basis. In addition, we will pay an annual net maintenance fee to CSC of $30 million for each of the five years following the Distribution plus certain additional maintenance fees if we exceed certain revenue thresholds in order to receive certain maintenance services including the right to updates, patches and new versions that are made generally available to CSC customers during that period that relate to the software products and workflow and design methodologies that are covered by the license. Under U.S. federal government cost accounting rules, it is possible that a portion of the annual maintenance fee we will pay to CSC may not be an allowable and/or allocable cost. The terms of these agreements will relate to, among other things, allocations of assets, liabilities, rights, indemnifications and other obligations between CSC and us. We may have received better terms from third parties because third parties may have competed with each other to win our business. See “The Master Separation and Distribution Agreement and Ancillary Agreements” and “Certain Relationships and Related Party Transactions.”
After the Spin-Off, certain of our directors and officers may have actual or potential conflicts of interest because of their previous or continuing positions at CSC.
Because of their current or former positions with CSC, certain of our expected directors and officers own CSC common stock and equity awards. Following the Spin-Off, even though our board of directors will consist of a majority of directors who are independent, some of our directors will continue to have a financial interest in CSC common stock and equity awards. In addition, it is expected that Mr. Lawrie, who will be Chairman of our board of directors, will continue serving on the board of directors of CSC and as its Chief Executive Officer. Continuing ownership of CSC common stock and equity awards, or service as a director at both companies could create, or appear to create, potential conflicts of interest if we have disagreements with CSC about the contracts between us that continue or face decisions that could have different implications for us and CSC.
The integration of the Computer Sciences GS Business with the SRA business following the Transactions may present significant challenges.
After consummation of the Mergers, we will have significantly more sales, assets and employees than the Computer Sciences GS Business has prior to the consummation of the Mergers.  Our management will be required to devote a significant amount of time and attention to the process of integrating the operations of Computer Sciences GS and SRA.  A significant degree of difficulty and management involvement is inherent in that process.  These difficulties include, but are not limited to:
the challenge of integrating the Computer Sciences GS and SRA businesses and carrying on the ongoing operations of each business;
the challenge of integrating the business cultures of each company;
the challenge of creating uniform standards, controls, procedures and policies and controlling the costs associated with these matters;
the challenge and costs of integrating the IT, purchasing, accounting, finance, sales, billing, payroll and regulatory compliance systems and processes of each company; and
the potential difficulty in retaining key employees and sales personnel of Computer Sciences GS and SRA.
The difficulty and management involvement, including the factors described above, may be more challenging because they will come as CSRA is operating as an independent company for the first time. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the


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businesses of Computer Sciences GS or SRA and may require us to incur substantial out-of-pocket costs. Members of our senior management may be required to devote considerable amounts of time and attention to this integration process, which will decrease the time they will have to manage our businesses, service existing customers, attract new customers and develop new services or strategies. If senior management is not able to effectively manage the integration process, or if any significant business activities, including activities associated with the establishment of CSRA as an independent company, are interrupted as a result of the integration process, the businesses of Computer Sciences GS and SRA could suffer. We cannot assure you that CSRA will successfully or cost-effectively integrate the Computer Sciences GS Business and SRA business. The failure to do so could have a material adverse effect on the financial condition and results of operations of CSRA.
The Transactions are subject to certain conditions, and therefore the Transactions may not be consummated on the terms or timeline currently contemplated or at all.
The consummation of the Transactions remain subject to the satisfaction or waiver (to the extent permitted by applicable law) of certain conditions. See “The Merger Agreement-Conditions to Consummation of the Mergers.” In addition, the consummation of the Mergers is subject to the Internal Reorganization and Distribution having occurred pursuant to the terms of the Master Separation and Distribution Agreement.
In addition, the parties to the Merger Agreement have the right to terminate the Merger Agreement under certain circumstances. See “The Merger Agreement-Termination of the Merger Agreement; Termination Fees.” Neither we nor SRA Parent can assure you that the Transactions will be consummated on the terms or timeline currently contemplated.
We have and will continue to expend a significant amount of capital and management’s time and resources on the Transactions, and a failure to consummate the Transactions as currently contemplated could have a material adverse effect on our business and results of operations.
Risks Relating to Our Common Stock and the Securities Market
No market for our common stock currently exists and an active trading market may not develop or be sustained after the Spin-Off. Following the Spin-Off our stock price may fluctuate significantly.
There is currently no public market for our common stock. We intend to apply to list our common stock on the New York Stock Exchange. We anticipate that before the Distribution Date, trading of shares of our common stock will begin on a “when-issued” basis and this trading will continue up to and including the Distribution Date. However, an active trading market for our common stock may not develop as a result of the Spin-Off or may not be sustained in the future. The lack of an active market may make it more difficult for stockholders to sell our shares and could lead to our share price being depressed or volatile.
We cannot predict the prices at which our common stock may trade after the Spin-Off. The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:

actual or anticipated fluctuations in our operating results due to factors related to our business;

success or failure of our business strategies;

our quarterly or annual earnings, or those of other companies in our industry;

our ability to obtain financing as needed;

announcements by us or our competitors of significant acquisitions or dispositions;

changes in accounting standards, policies, guidance, interpretations or principles;


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the failure of securities analysts to cover our common stock after the Spin-Off;

changes in earnings estimates by securities analysts or our ability to meet those estimates;

the operating and stock price performance of other comparable companies;

investor perception of our company and the IT services industry;

overall market fluctuations;

results from any material litigation or government investigation;

changes in laws and regulations (including tax laws and regulations) affecting our business;

changes in capital gains taxes and taxes on dividends affecting stockholders; and

general economic conditions and other external factors.
Furthermore, our business profile and market capitalization may not fit the investment objectives of some CSC stockholders and, as a result, these CSC stockholders may sell their shares of our common stock after the Distribution. See “Substantial sales of our common stock may occur in connection with the Spin-Off, which could cause our stock price to decline.” Low trading volume for our stock, which may occur if an active trading market does not develop, among other reasons, would amplify the effect of the above factors on our stock price volatility.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.
There can be no assurance that, following the Distribution and the Special Dividend, the combined trading prices of CSC common stock and our common stock will equal or exceed what the trading price of CSC common stock would have been in the absence of the Spin-Off.
We expect the trading price of shares of CSC common stock immediately following the Distribution to be lower than the “regular-way” trading price of such shares immediately prior to the Distribution because the trading price will no longer reflect the value of the Computer Sciences GS Business and the Special Dividend. Furthermore, until the market has fully analyzed the value of CSC without the Computer Sciences GS Business, the trading price of shares of CSC common stock may fluctuate. There can be no assurance that, following the Distribution, the combined trading prices of CSC common stock and our common stock will equal or exceed what the trading price of CSC common stock would have been in the absence of the Spin-Off, including due to payment of the Special Dividend. It is possible that after the Spin-Off, the combined market value of the equity of CSC and CSRA will be less than CSC’s equity value before the Spin-Off even after adjusting for the effect of the Special Dividend. If you sell CSC common stock in the “regular-way” market up to and including the Distribution Date, you will be selling your right to receive shares of CSRA common stock in the
Distribution and the Special Dividend.
Substantial sales of our common stock may occur in connection with the Spin-Off, which could cause our stock price to decline.
CSC stockholders receiving shares of our common stock in the Distribution generally may sell those shares immediately in the public market. Although we have no actual knowledge of any plan or intention of any significant CSC stockholder to sell our common stock following the Spin-Off, it is likely that some CSC stockholders, possibly including some of its larger stockholders, will sell their shares of our common stock received in the Distribution if, for reasons such as our business profile or market capitalization as an independent company, we do not fit their


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investment objectives or, in the case of index funds, we are not a participant in the index in which they are investing. Following the Mergers, approximately 15.32% of our outstanding shares of common stock will be owned by the former stockholders of SRA Parent. Pursuant to the Registration Rights Agreement, all of these shares will be eligible to be registered, subject to certain limitations, following the consummation of the Mergers. See “The Master Separation and Distribution Agreement and Ancillary Agreements—Registration Rights Agreement”. These shares will also be eligible for resale in the public market without registration subject to volume, manner of sale and holding period limitations under Rule 144 under the Securities Act. The sales of significant amounts of our common stock or the perception in the market that this will occur may decrease the market price of our common stock.
We cannot assure you that we will pay dividends on our common stock, and our indebtedness may limit our ability to pay dividends on our common stock.
Following the Spin-Off, the timing, declaration, amount and payment of future dividends to stockholders will fall within the discretion of our Board. Our Board’s decisions regarding the payment of future dividends will depend on many factors, including our financial condition, earnings, capital requirements of our business and covenants associated with debt obligations, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. For more information, see “Dividend Policy.” There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends, and there can be no assurance that, in the future, the combined annual dividends paid on CSC common stock, if any, and our common stock, if any, after the Spin-Off will equal the annual dividends on CSC common stock prior to the Spin-Off.
Your percentage ownership in CSRA may be diluted in the future.
Your percentage ownership in CSRA may be diluted in the future because of equity awards that we expect to grant to our directors, officers and other employees. Prior to completion of the Spin-Off, we expect to approve an incentive plan that will provide for the grant of common stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments that we may make in the future or as necessary to finance our ongoing operations.
Provisions in our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws and of Nevada law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.
Several provisions of our Amended and Restated Articles of Incorporation, Amended and Restated Bylaws and Nevada law may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. These include provisions that:
permit us to issue blank check preferred stock as more fully described under “Description of Our Capital Stock-Antitakeover Effects of Various Provisions of Nevada Law and Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws”;
preclude stockholders from calling special meetings except where such special meetings are requested by stockholders representing 75% of the capital stock entitled to vote. Our Amended and Restated Bylaws prevent stockholder action by written consent for the election of directors and require the written consent of 90% of the capital stock entitled to vote for any other stockholder actions by written consent; and
limit our ability to enter into business combination transactions with certain stockholders.
These and other provisions of our Amended and Restated Articles of Incorporation, Amended and Restated Bylaws and Nevada law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of CSRA, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price. See “Description of Our Capital Stock-Anti-Takeover Effects of Various Provisions of Nevada Law and Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws” for more information.



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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
All statements and assumptions contained in this Information Statement and in the documents attached or incorporated by reference that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. These statements represent our current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved.
Forward-looking information contained in these statements include, among other things, statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, plans and objectives of management and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results described in such statements. These factors include without limitation those set forth under “Risk Factors.”
Forward-looking statements in this Information Statement speak only as of the date of this Information Statement, and forward-looking statements in documents attached or incorporated by reference speak only as to the date of those documents. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Information Statement or to reflect the occurrence of unanticipated events, except as required by law.


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THE TRANSACTIONS
Background
On May 19, 2015, CSC announced plans for the complete legal and structural separation of the Computer Sciences GS Business and certain related assets and liabilities from CSC. In connection with this announcement, CSC highlighted that CSC began its turnaround three years ago, among other things, implementing a common operating model and streamlining its cost structure. CSC indicated that as its turnaround progressed, its focus should shift to positioning the business for long-term growth and leadership. With a view to accelerating the transformation, CSC determined to split into two businesses, each uniquely positioned to focus on the needs of its clients. This pure-play strategy is aimed at enhancing innovation and improving delivery in ways that are consistent with the rate and pace of the markets in which we operate.
At the same time, CSC explained that the markets in which we operate evolved, with diverging opportunities and challenges. We believe that in the U.S. public sector, technology demands are increasing and government customers are increasingly looking for information technology service providers with a strong, focused vision to address the unique challenges and resource needs of the U.S. federal government. Evolving business conditions within the government IT and services marketplace have recently driven several major peer competitors to either complete separations (SAIC/Leidos and Booz Allen Hamilton) or announce separations (Lockheed Martin and Hewlett Packard) in order to position their separating business units to capitalize on these market trends.
With the CSC’s turnaround successfully completed over the last three years, CSC has improved its market position. At the same time, markets have evolved rapidly, with diverging opportunities and challenges. On the commercial side, clients seek partners with a deep understanding of their business who can help lead their digital transformations. In the U.S. public sector, technology demands are increasing, and clients want providers with specific experience in government-focused innovation. CSC is now well positioned at this particular time to take advantage of this confluence of factors to maximize benefits to our stockholders, customers and employees. By separating, each business will have the scale as well as the focus to meet unique customer needs and market requirements.
We believe that the Spin-Off will allow us to focus on, and more effectively pursue, our own distinct operating priorities and strategies, and will enable our management to concentrate efforts on the unique needs of our business. We also believe that the number of successful, stand-alone U.S. government focused IT service providers has reduced the benefits perceived by U.S. federal government customers of IT service providers operating as part of a larger organization. See also “Reasons for the Spin-Off and Mergers—Spin-Off”.
To effect the separation, CSC is undertaking the Internal Reorganization described under “The Master Separation and Distribution Agreement and Ancillary Agreements.” After giving effect to the Internal Reorganization, CSRA, CSC’s wholly-owned subsidiary, will hold the shares of the legal entities operating the Computer Sciences GS Business.
Following the Internal Reorganization, CSC will distribute all of its equity interest in us, consisting of all of the outstanding shares of our common stock, to CSC’s stockholders on a pro rata basis. We refer to the payment promptly following the Distribution of a cash dividend of approximately $350 million by CSC and a cash dividend of approximately $1.15 billion by us as the “Special Dividend.” The Special Dividend will total approximately $1.5 billion in cash (or an aggregate of approximately $10.50 per CSC share entitled to participate in the Distribution).
Following the Spin-Off, CSC will not own any equity interest in us, and we will operate independently from CSC. No approval of CSC’s stockholders is required in connection with the Spin-Off, and CSC’s stockholders will not have any appraisal rights in connection with the Spin-Off.
Completion of the Spin-Off is subject to the satisfaction, or the CSC Board’s waiver, of a number of conditions. In addition, CSC has the right not to complete the Spin-Off, subject to the termination of the Merger Agreement and payment of the termination fee thereunder (See “The Merger Agreement—Termination of the Merger Agreement; Termination Fees”), if, at any time, the CSC Board determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of CSC or its stockholders or is otherwise not advisable. For a more detailed description, see “Conditions to the Spin-Off.”
On August 31, 2015, CSC announced that it had entered into a definitive agreement to combine Computer Sciences GS and SRA. Under the Merger Agreement and in accordance with Delaware law, in the First Merger, Merger Sub Inc. will merge with and into SRA Parent, with SRA Parent surviving the First Merger, and immediately after the


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First Merger, in the Second Merger, SRA Parent will merge with and into Merger Sub LLC, with Merger Sub LLC surviving the Second Merger. As a result of the Mergers, SRA will become an indirect wholly-owned subsidiary of CSRA. For details of the structure of the transaction, see “The Merger Agreement.”
Reasons for the Spin-Off and Mergers
Spin-Off
The CSC Board regularly conducts strategic reviews of its businesses. In reaching the decision to pursue the Spin-Off, the CSC Board considered a range of potential strategic alternatives for CSC, including the continuation of CSC’s current operating strategy as well as potential acquisition and divestiture transactions. In evaluating these alternatives, the CSC Board considered a number of factors, including the strategic focus and flexibility for CSC and CSRA after the Spin-Off, the ability of CSC and CSRA to operate efficiently and effectively (including CSRA’s ability to retain and attract management talent) after the Spin-Off, the financial profile of CSC and CSRA, the potential reaction of customers, employees and investors and the probability of successful execution of the various strategic alternatives and the risks associated with those alternatives.
As a result of this evaluation, the CSC Board determined that proceeding with the Spin-Off would be in the best interests of CSC and its stockholders. The CSC Board considered the following potential benefits of this approach:

Strategic Focus and Flexibility. Following the Spin-Off, CSC and CSRA will each have a more focused business and be better able to dedicate financial resources to pursue appropriate growth opportunities and execute strategic plans best suited to its respective business. The Spin-Off will also allow each of CSC and CSRA to enhance its strategic flexibility to respond to industry dynamics. In the U.S. public sector, technology demands are increasing, and clients want service providers with specific experience in government-focused innovation. By separating, our business will have the scale as well as the focus to meet unique customer needs and industry requirements.

Focused Management. The Spin-Off will allow the management of each of CSC and CSRA to devote its time and attention to the development and implementation of corporate strategies and policies that are based primarily on the specific business characteristics of their respective companies.

Management Incentives. The Spin-Off will enable CSRA to create incentives for its management and employees that are more closely tied to its business performance and stockholder expectations. CSRA equity-based compensation arrangements will more closely align the interests of CSRA’s management and employees with the interests of its stockholders and should increase CSRA’s ability to attract and retain personnel.

Capital Structure and Stockholder Flexibility. The segments in which CSC and CSRA expect to operate have historically had different growth profiles and cash flow dynamics. The Spin-Off will allow CSC and CSRA to separately manage their capital strategies and cost structures and will allow investors to make independent investment decisions with respect to CSC and CSRA, including the ability for CSRA to achieve alignment with a more natural stockholder base. Investment in one or the other company may appeal to investors with different goals, interests and concerns.

Focused Investments. While operating as part of CSC, internal investments were often directed according to CSC’s strategic interests as a whole. The Spin-Off will allow us to focus our investments on projects that optimize returns for our own businesses.
In determining whether to effect the Spin-Off, the CSC Board considered the costs and risks associated with the Spin-Off, including the costs associated with preparing CSRA to become an independent, publicly-traded company, the risk of volatility in our stock price immediately following the Spin-Off due to sales by CSC’s stockholders whose investment objectives may not be met by our common stock, the time it may take for us to attract our optimal stockholder base, the possibility of disruptions in our business as a result of the Spin-Off, the risk that the combined trading prices of our common stock and CSC’s common stock after the Spin-Off may drop below the trading price of CSC’s common stock before the Spin-Off and the loss of synergies and scale from operating as one company. Notwithstanding these costs and risks, taking into account the factors discussed above, the CSC Board determined that the Spin-Off was the best alternative to achieve the above benefits and enhance stockholder value.


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Mergers
CSC highlighted certain aspects of its strategic rationale for the Mergers, including:

Expanded Expertise. CSC highlighted the opportunity for Computer Sciences GS and SRA, on a combined basis, to become the largest pure-play IT services provider serving the U.S. government sector, with pro forma combined revenues of approximately $5.5 billion in fiscal 2015 and nearly 19,000 employees on a combined basis.

Strategic Positioning in Consolidating Industry. CSC also highlighted that the combination of Computer Sciences GS and SRA is a strategic move to position the combined company as the government IT Services industry consolidates. Computer Sciences GS’s next-generation software platforms and solutions – together with SRA’s go-to-market capabilities and customer intimacy – offer potential to deliver benefits to U.S. government clients, open new opportunities for employees of both companies and create value for stockholders. The combination of Computer Sciences GS and SRA is expected to provide opportunities for the combined company to leverage its scope and scale to capitalize on future growth opportunities.

Complementary Businesses. CSC further highlighted that the combined company will bring together highly complementary IT capabilities, with approximately three-quarters of revenues generated from cybersecurity, software development, cloud and IT infrastructure, and additional revenues anticipated from domain-specific professional services, including intelligence analysis, bioinformatics and health sciences, energy and environmental consulting, and enterprise planning and resource management. Computer Sciences GS’s depth in defense and national security will complement SRA’s expertise in the health and civil markets. Together the companies will be diversified across their customers with the combination providing a complementary contract base. Computer Sciences GS has an established portfolio of over 1,250 contracts and task orders with 25 large contracts generating 65% of its revenue. SRA brings a complementary mix of approximately 900 smaller contracts and task orders with no contract representing more than 5% of its revenue. We expect the combination to reduce risk of individual market or contract disruptions.

Synergies. We expect the combination of Computer Sciences GS and SRA to provide opportunities for cost savings and other operating synergies, which we currently estimate at $80 million in annual cost savings within six to 18 months following the Mergers through the consolidation of account management costs, corporate overhead costs, improved facility efficiencies, lower equipment vendor costs, and reductions in associated fringe benefits. We believe our one-time costs to realize these recurring annual cost savings will be approximately $30 million.  The size of these expected cost synergies is partly a function of the significant steps both CSC and SRA have already taken over the past three years to become cost-competitive, with a focus on next generation IT services and solutions. We believe these further cost reductions and operating efficiencies will better position us to compete for U.S. federal government contracts as a portion of these savings should result in lower costs for our customers on cost-plus contracts. As a result of these cost savings passed on to some of our customers on cost-plus contracts, we expect the estimated $80 million in annual costs savings, once fully realized, will reduce our revenue by approximately $30 million annually, but to result in approximately $50 million in net synergies per year.
In assessing and approving the Mergers, CSC considered that the expected value to CSC and its stockholders from pursuing the Mergers was greater than the value to CSC and its stockholders of the stand-alone Spin-Off. In addition to the factors noted above, CSC considered SRA’s business and prospects, after giving effect to the proposed acquisition by Computer Sciences GS, including expected synergies to be realized as a result of the Mergers. The CSC Board also considered the potential risks and countervailing factors associated with the Mergers, including that the anticipated benefits of the Mergers might not be realized.
After consideration of the above factors and based on information furnished by SRA to CSC and the terms of the Merger Agreement and related agreements as finally negotiated by CSC, CSC concluded that the expected value to CSC and its stockholders from pursuing the Transactions was greater than the value to CSC and its stockholders of the stand-alone Spin-Off.
When and How You Will Receive CSRA Shares
CSC will distribute to its stockholders, as a pro rata dividend, one share of our common stock for every one share of CSC common stock outstanding as of November 18, 2015, the Record Date of the Distribution.


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Prior to the Spin-Off, CSC will deliver all of the issued and outstanding shares of our common stock to the distribution agent. Computershare Trust Company, N.A. will serve as distribution agent in connection with the Distribution and as transfer agent and registrar for our common stock.
If you own CSC common stock as of the close of business on November 18, 2015, the shares of our common stock that you are entitled to receive in the Distribution will be issued to your account as follows:

Registered stockholders. If you own your shares of CSC common stock directly through CSC’s transfer agent, Computershare, you are a registered stockholder. In this case, the distribution agent will credit the shares of our common stock you receive in the Distribution by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as is the case in the Distribution. You will be able to access information regarding your book-entry account holding the CSRA shares at www.computershare.com/investor or by calling Computershare Trust Company, N.A. at 800-522-6645 or +1 201-680-6578 (for international callers).
Commencing on or shortly after the Distribution Date, the distribution agent will mail to you an account statement that indicates the number of shares of our common stock that have been registered in book-entry form in your name. We expect it will take the distribution agent up to two weeks after the Distribution Date to complete the distribution of the shares of our common stock and mail statements of holding to all registered stockholders. Trading of our common stock will not be affected by this delay in issuance by the distribution agent.

“Street name” or beneficial stockholders. Most CSC stockholders own their shares of CSC common stock beneficially through a bank, broker or other nominee. In these cases, the bank, broker or other nominee holds the shares in “street name” and records your ownership on its books. If you own your shares of CSC common stock through a bank, broker or other nominee, your bank, broker or other nominee will credit your account with the shares of our common stock that you receive in the Distribution on or shortly after the Distribution Date. We encourage you to contact your bank, broker or other nominee if you have any questions concerning the mechanics of having shares held in “street name.”
If you sell any of your shares of CSC common stock on or before the Distribution Date, the buyer of those shares may in some circumstances be entitled to receive the shares of our common stock to be distributed in respect of the CSC shares you sold. See “Trading Prior to the Distribution Date” for more information.
We are not asking CSC stockholders to take any action in connection with the Spin-Off. No stockholder approval of the Spin-Off is required. We are not asking you for a proxy and request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your shares of CSC common stock for shares of our common stock. The number of outstanding shares of CSC common stock will not change as a result of the Spin-Off.
Number of Shares You Will Receive
On the Distribution Date, we will distribute one share of our common stock for every one share of CSC common stock..
Material U.S. Federal Income Tax Consequences of the Spin-Off
Consequences to U.S. Holders of CSC Common Stock
The following is a summary of the material U.S. federal income tax consequences to “U.S. Holders” (as defined below) of CSC common stock in connection with the Distribution. This summary is based on the Code, the Treasury Regulations promulgated under the Code and judicial and administrative interpretations of those laws, in each case as in effect as of the date of this Information Statement and all of which are subject to differing interpretation and change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below.
This summary is limited to holders of CSC common stock that are U.S. Holders, as defined immediately below, that hold their CSC common stock as a capital asset. A “U.S. Holder” is a beneficial owner of CSC common stock that is, for U.S. federal income tax purposes:

an individual who is a citizen or a resident of the U.S.;


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a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the U.S. or any state thereof or the District of Columbia;

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

a trust if (1) a court within the U.S. is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (2) in the case of a trust that was treated as a domestic trust under law in effect before 1997, a valid election is in place under applicable Treasury Regulations.
This summary does not discuss all tax considerations that may be relevant to stockholders in light of their particular circumstances, nor does it address the consequences to stockholders subject to special treatment under the U.S. federal income tax laws, such as:

dealers or traders in securities or currencies;

tax-exempt entities;

banks, financial institutions or insurance companies;

real estate investment trusts, regulated investment companies or grantor trusts;

persons who acquired CSC common stock pursuant to the exercise of employee stock options or otherwise as compensation;

stockholders who own, or are deemed to own, 10% or more, by voting power or value, of CSC equity;

stockholders owning CSC common stock as part of a position in a straddle or as part of a hedging, conversion or other risk reduction transaction for U.S. federal income tax purposes;

certain former citizens or long-term residents of the U.S.;

stockholders who are subject to the alternative minimum tax; or

persons who own CSC common stock through partnerships or other pass-through entities.
This summary does not address any U.S. state or local or foreign tax consequences or any estate, gift or other non-income tax consequences.
If a partnership, or any other entity treated as a partnership for U.S. federal income tax purposes, holds CSC common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to its tax consequences.
THE FOLLOWING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO YOU, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
General
It is a condition to the Distribution that CSC receive a written opinion from its outside tax advisor that is in form and substance reasonably acceptable to CSC regarding the qualification of the Distribution as tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. Assuming the Distribution so qualifies:

no gain or loss will be recognized by, or be includible in the income of, a U.S. Holder as a result of the Distribution;



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the aggregate tax basis of the CSC common stock and our common stock held by each U.S. Holder immediately after the Distribution (and immediately prior to the Special Dividend) will be the same as the aggregate tax basis of the CSC common stock held by the U.S. Holder immediately before the Distribution, allocated between the CSC common stock and our common stock in proportion to their relative fair market values on the date of the Distribution; and

the holding period of our common stock received by each U.S. Holder will include the holding period of their CSC common stock, provided that such CSC common stock is held as a capital asset on the date of the Distribution.
U.S. Holders that have acquired different blocks of CSC common stock at different times or at different prices should consult their tax advisors regarding the allocation of their aggregate adjusted tax basis among, and the holding period of, shares of our common stock distributed with respect to such blocks of CSC common stock.
The opinion of counsel does not address any U.S. state or local or foreign tax consequences of the Spin-Off. The opinion assumes that the Spin-Off will be completed according to the terms of the Master Separation and Distribution Agreement and relies on the facts as stated in the Master Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this Information Statement and a number of other documents. In addition, the opinion is based on certain representations as to factual matters from, and certain covenants by, CSC and us. The opinion cannot be relied on if any of the assumptions, representations or covenants are incorrect, incomplete or inaccurate or are violated in any material respect.
The opinion of counsel is not binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. CSC has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. federal income tax consequences of the Spin-Off.
If the Distribution were determined not to qualify for tax-free treatment, the above consequences would not apply and U.S. Holders could be subject to tax. In this case, e