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This Supplement to the Prospectus
dated
May 2, 1995 is filed pursuant to
Rule 424(c)
promulgated under the Securities Act
of 1933, as amended.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
THE FOLLOWING SUPPLEMENT TO THE PROSPECTUS IS BEING
PROVIDED PURSUANT TO REQUIREMENTS SET FORTH BY THE
SECURITIES DIVISION OF THE STATE OF INDIANA AND THE
SECURITIES DIVISION OF THE STATE OF MARYLAND FOR RESIDENTS
OF THOSE TWO STATES. THE COMPANY HAS DECIDED TO PROVIDE
THIS PROSPECTUS SUPPLEMENT TO OFFEREES IN ALL STATES.
Defined terms used herein shall have the same
meaning as such terms have in the Prospectus
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RISK FACTORS
PRIOR TO PURCHASING THE CLASS A COMMON STOCK OFFERED IN THE PROSPECTUS,
PURCHASERS SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION CONTAINED IN THE
PROSPECTUS AND IN PARTICULAR SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS:
CONCENTRATION OF REVENUE/DEPENDENCE ON GOVERNMENT CONTRACTS
Revenues generated from the sale of Technical Services and Products to the
U.S. Government as a prime contractor or subcontractor accounted for 86%, 88%
and 88% of revenues in fiscal years 1995, 1994 and 1993, respectively. Although
the Company has made some progress in its efforts to diversify into
non-governmental business, it is still heavily dependent upon business with the
U.S. Government. See "The Company."
EARLY TERMINATION OF GOVERNMENT CONTRACTS
Many of the U.S. Government programs in which the Company participates as a
contractor or subcontractor may extend for several years; however, such programs
are normally funded on an annual basis. All U.S. Government contracts and
subcontracts may be modified, curtailed or terminated at the convenience of the
government if program requirements or budgetary constraints change. Termination
or curtailment of major programs or contracts of the Company could have a
material adverse effect on the results of the Company's operations. Although
such contract and program terminations have not had a material adverse effect on
the Company in the past, no assurance can be given that curtailments or
terminations of U.S. Government programs or contracts will not have a material
adverse effect on the Company in the future. See "Government Contracts."
AUDITS FOR GOVERNMENT CONTRACTS
Contract costs for services or products supplied to the U.S. Government,
including allocated indirect costs, are subject to audit and adjustments by
negotiations between the Company and U.S. Government representatives. The
majority of the Company's indirect contract costs have been agreed upon through
the fiscal year ended January 31, 1991 and substantially all of the Company's
indirect costs have been agreed upon through the fiscal year ended January 31,
1990. Contract revenues for subsequent years have been recorded in amounts which
are expected to be realized upon final settlement. However, no assurance can be
given that audits and adjustments for subsequent years will not result in
decreased revenues or profits for those years. See "Government Contracts."
FIXED PRICE CONTRACT EXPOSURE
During the fiscal years ended January 31, 1995, 1994 and 1993, approximately
13%, 12% and 16%, respectively, of the Technical Services revenues were from
firm fixed-price type contracts, while the majority of Products revenues in
these three years were derived from such contracts. Because the Company assumes
the risk of performing a firm fixed-price contract at the stipulated price, the
failure to accurately estimate ultimate costs or to control costs during
performance of the work could result, and in some instances has resulted, in
losses. See "Government Contracts."
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AT RISK COSTS
Any costs incurred by the Company prior to the execution of a contract or
contract amendment are incurred at the Company's risk, and it is possible that
such costs will not be reimbursed by the customer. Unbilled receivables in this
category which were included in Technical Services and Products revenues at
January 31, 1995 were $13,393,000 and $383,000, respectively. Although the
Company expects to recover substantially all such costs, no assurance can be
given that the contracts or contract amendments will be received or that the
related costs will be recovered. See "Government Contracts."
LEGAL PROCEEDING
The Company is involved in a lawsuit in which the U.S. Government is
investigating whether the Company made false statements and false claims to the
Department of Defense, as well as conspiracy to commit such offenses, in
connection with three contracts being performed by the SAIT operating unit of
the Company. At this stage of the proceedings, the Company is unable to assess
the impact, if any, of this investigation and lawsuit on its consolidated
financial position, results of operations or ability to conduct business. See
"Government Contracts."
ABSENCE OF A PUBLIC MARKET
There is no public market for the Common Stock. The Company and the trustees
of the Company's employee benefit plans are currently authorized, but not
obligated, to purchase shares of Class A Common Stock in the Limited Market on
any Trade Date, but only if and to the extent that they, in their discretion,
determine to make such purchases. To the extent that purchases by the trustees
of the Company's employee benefit plans or by the Company are not sufficient,
the ability of stockholders to resell their shares in the Limited Market will
likely be adversely affected. No assurance can be given that a stockholder
desiring to sell all or a portion of his or her shares of the Company's Class A
Common Stock in any trade will be able to do so. See "Market Information -- The
Limited Market."
FORMULA PRICE
The offering price and the price at which the Class A Common Stock trades in
the Limited Market are, and subsequent prices will be, determined by means of a
formula and valuation process as described in the Prospectus. See "Market
Information -- Price Range of Class A Common Stock and Class B Common Stock."
NO CASH DIVIDENDS
The Company has never declared or paid any cash dividends on its capital
stock and no cash dividends on the Class A Common Stock or Class B Common Stock
are contemplated in the foreseeable future. The Company's present intention is
to retain any future earnings for use in its business. See "Dividend Policy."
RESTRICTIONS ON CLASS A COMMON STOCK
All of the shares of Class A Common Stock presently outstanding are, and all
shares of Class A Common Stock offered hereby will be, subject to certain
restrictions (including restrictions on their transferability) set forth in the
Company's Certificate of Incorporation. See "Description of Capital Stock --
Common Stock -- Restrictions on Class A Common Stock."
ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may discourage, delay, or prevent attempts to acquire control of the Company
that are not negotiated with the Company's Board of Directors. The provisions
may, individually or collectively, have the effect of discouraging takeover
attempts that some stockholders might deem to be in their best interests,
including tender offers in which stockholders might receive a premium for their
shares over the Formula Price available in the Limited Market, as well as making
it more difficult for individual stockholders or a group of stockholders to
elect directors. However, the Board of Directors believes that these provisions
are in the best interests of the Company and its stockholders, because such
provisions may encourage potential acquirors to negotiate directly with the
Board of Directors, which is in the best position to act on behalf of all
stockholders. See "Description of Capital Stock -- Anti-Takeover Effects."
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