UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 2010
OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File No. 1-4850

COMPUTER SCIENCES CORPORATION (Exact name of registrant as specified in its charter)

Nevada	95-2043126
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
3170 Fairview Park Drive
Falls Church, Virginia	22042
(Address of Principal Executive Offices)	(Zip Code)
Registrant's Telephone Number, Including Area Code: (703) 876-1000
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x Yes  o  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) x Yes  o  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one). Large accelerated filer x      Accelerated filer o       Non-accelerated filer o     Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b of the Exchange Act).  o  Yes x  No
155,090,200 shares of Common Stock, $1.00 par value, were outstanding on January 28, 2011.

COMPUTER SCIENCES CORPORATION

TABLE OF CONTENTS TO FORM 10-Q

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Condensed Statements of Income for the Quarters and Nine Months Ended December 31, 2010, and January 1, 2010		1
	Consolidated Condensed Balance Sheets as of December 31, 2010, and April 2, 2010		2
	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended December 31, 2010, and January 1, 2010		3
	Consolidated Condensed Statements of Changes in Equity for the Nine Months Ended December 31, 2010, and January 1, 2010		4
	Notes to Consolidated Condensed Financial Statements		5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		39
Item 4.	Controls and Procedures		39
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 1A.	Risk Factors		40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 6.	Exhibits		47

i

PART I, ITEM 1.  FINANCIAL STATEMENTS

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)

	Quarter Ended						Nine Months Ended
(Amounts in millions except per-share amounts)	December 31, 2010			January 1, 2010			December 31, 2010			January 1, 2010
Revenues	$	4,008		$	3,953		$	11,925		$	11,892
Costs of services (excludes depreciation and amortization)		3,232			3,105			9,611			9,476
Selling, general and administrative		243			239			734			732
Depreciation and amortization		269			280			798			825
Interest expense		43			50			126			158
Interest income		(8	)		(6	)		(25	)		(20	)
Other income, net		(2	)		(6	)		(40	)		(15	)
Total costs and expenses		3,777			3,662			11,204			11,156
Income before taxes		231			291			721			736
Taxes on income		(12	)		75			137			166
Net income		243			216			584			570
Less: Net income attributable to noncontrolling interest, net of tax		1			5			15			12
Net income attributable to CSC common shareholders	$	242		$	211		$	569		$	558
Earnings per share:
Basic	$	1.57		$	1.38		$	3.69		$	3.67
Diluted	$	1.54		$	1.36		$	3.64		$	3.62
Cash dividend per common share	$	.20		$	-		$	.50		$	-

See accompanying notes.

1

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)

	As of
(Amounts in millions)	December 31, 2010			April 2, 2010
ASSETS
Cash and cash equivalents	$	1,629		$	2,784
Receivables, net of allowance for doubtful accounts of $47 (2011) and $47 (2010)		3,804			3,849
Prepaid expenses and other current assets		2,032			1,789
Total current assets		7,465			8,422
Property and equipment, net of accumulated depreciation of $3,879 (2011) and $3,731 (2010)		2,364			2,241
Outsourcing contract costs, net		629			642
Software, net		504			511
Goodwill		3,964			3,866
Other assets		830			773
Total assets	$	15,756		$	16,455
LIABILITIES
Short-term debt and current maturities of long-term debt	$	471		$	75
Accounts payable		390			409
Accrued payroll and related costs		709			821
Other accrued expenses		1,267			1,344
Deferred revenue		1,085			1,189
Income taxes payable and deferred income taxes		270			284
Total current liabilities		4,192			4,122
Long-term debt, net of current maturities		2,343			3,669
Income tax liabilities and deferred income taxes		533			550
Other long-term liabilities		1,466			1,606
EQUITY
CSC Stockholders’ Equity:
Common stock, par value $1 per share, authorized 750,000,000 shares, issued 163,020,141  (2011)   and 162,234,314 (2010)		163			162
Additional paid-in capital		2,078			2,006
Retained earnings		6,200			5,709
Accumulated other comprehensive loss		(891	)		(1,052	)
Less common stock in treasury, at cost, 8,365,844 shares (2011) and 8,284,771 shares (2010)		(383	)		(379	)
Total CSC stockholders’ equity		7,167			6,446
Noncontrolling interest in subsidiaries		55			62
Total equity		7,222			6,508
Total liabilities and equity	$	15,756		$	16,455

See accompanying notes.

2

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Cash flows from operating activities:
Net income	$	584		$	570
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization and other non-cash charges		857			878
Stock based compensation		46			49
Provision for losses on accounts receivable		7			17
Unrealized foreign currency exchange gain, net		(5	)		(44	)
Gain on dispositions		(33	)		(7	)
Changes in assets and liabilities, net of effects of acquisitions and      dispositions:
Increase in assets		(50	)		(173	)
Decrease in liabilities		(602	)		(883	)
Net cash provided by operating activities		804			407
Cash flows from investing activities:
Purchases of property and equipment		(513	)		(437	)
Outsourcing contracts		(79	)		(106	)
Business acquisitions, net of cash acquired		(158	)		(5	)
Business dispositions		54			14
Software purchased and developed		(127	)		(106	)
Other investing activities, net		88			126
Net cash used in investing activities		(735	)		(514	)
Cash flows from financing activities:
Net borrowing (repayments) of commercial paper		335			(1	)
Borrowings under lines of credit		47			101
Repayment of borrowings under lines of credit		(1,545	)		(43	)
Principal payments on long-term debt		(63	)		(27	)
Proceeds from stock options		26			79
Repurchase of common stock and acquisition of treasury stock		-			(2	)
Excess tax benefit from stock based compensation		2			7
Dividend payments		(46	)		-
Other financing activities, net		(19	)		-
Net cash (used in) provided by financing activities		(1,263	)		114
Effect of exchange rate changes on cash and cash equivalents		39			123
Net (decrease) increase in cash and cash equivalents		(1,155	)		130
Cash and cash equivalents at beginning of year		2,784			2,297
Cash and cash equivalents at end of period	$	1,629		$	2,427

See accompanying notes.

3

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY (unaudited)

(Amounts in millions except shares in thousands)	Common Stock				Additional Paid-in		Earnings Retained for Use in			Accumulated Other Comprehensive Income			Common Stock in			Total CSC			Non- Controlling			Total
	Shares		Amount		Capital		Business			(Loss)			Treasury			Equity			Interest			Equity
Balance at April 2, 2010		162,234	$	162	$	2,006	$	5,709		$	(1,052	)	$	(379	)	$	6,446		$	62		$	6,508
Comprehensive income:
Net income								569									569			15			584
Currency translation adjustment											83						83						83
Unfunded pension obligation											78						78						78
Comprehensive income																	730			15			745
Cash dividends declared								(77	)								(77	)					(77	)
Acquisition of treasury stock														(4	)		(4	)					(4	)
Stock based compensation expense and option exercises		786		1		72											73						73
Distributions and other								(1	)								(1	)		(22	)		(23	)
Balance at December 31,2010		163,020	$	163	$	2,078	$	6,200		$	(891	)	$	(383	)	$	7,167		$	55		$	7,222

(Amounts in millions except shares in thousands)	Common Stock				Additional Paid-in		Earnings Retained for Use in			Accumulated Other Comprehensive Income			Common Stock in			Total CSC			Non- Controlling			Total
	Shares		Amount		Capital		Business			(Loss)			Treasury			Equity			Interest			Equity
Balance at April 3, 2009		159,689	$	160	$	1,836	$	4,893		$	(1,004	)	$	(375	)	$	5,510		$	108		$	5,618
Comprehensive income:
Net income								558									558			12			570
Currency translation adjustment											374						374						374
Unfunded pension obligation											48						48						48
Comprehensive income																	980			12			992
Acquisition of treasury stock														(3	)		(3	)					(3	)
Stock based compensation expense and option exercises		2,069		2		133											135						135
Distributions and other								(1	)								(1	)		(61	)		(62	)
Balance at January 1, 2010		161,758	$	162	$	1,969	$	5,450		$	(582	)	$	(378	)	$	6,621		$	59		$	6,680

See accompanying notes

4

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 1 – Basis of Presentation

Computer Sciences Corporation (CSC or the Company) has prepared the unaudited consolidated condensed financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles for the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  It is recommended that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2010.  In the opinion of management, the unaudited consolidated condensed financial statements included herein reflect all adjustments necessary, including those of a normal recurring nature, to present fairly the financial position, the results of operations and the cash flows for such interim periods.  The results of operations for such interim periods are not necessarily indicative of the results for the full year.

Certain columns and rows within the financial tables in this Form 10-Q include rounded numbers for disclosure purposes. Certain percentages and ratios are calculated from whole-dollar amounts.

Contractual work in process balances at December 31, 2010, and April 2, 2010, of $1,193 million and $932 million, respectively, are included in prepaid expenses and other current assets.

Unbilled recoverable amounts under contracts in progress do not have an allowance for credit losses and any adjustments to unbilled recoverable amounts under contracts in progress related to credit quality, should they occur, would be accounted for as a reduction of revenue.

Unbilled recoverable amounts under contracts in progress resulting from sales primarily to the United States and other governments that are expected to be collected after one year totaled $478 million.

Depreciation expense was $174 million and $516 million for the quarter and nine months ended December 31, 2010, respectively, and $181 million and $543 million for the quarter and nine months ended January 1, 2010, respectively.

The components of accumulated other comprehensive loss are as follows:

	As of
(Amounts in millions)	December 31, 2010			April 2, 2010
Foreign currency translation adjustment	$	106		$	23
Unfunded pension obligation		(997	)		(1,075	)
Accumulated other comprehensive loss	$	(891	)	$	(1,052	)

The fiscal 2011 change in unfunded pension obligation is primarily attributable to the amendment of certain U.K. plans on April 7, 2010 (see Note 7).

5

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Managed Services Sector (MSS) Out of Period Adjustments

The Company’s MSS segment incurred various nonrecurring adjustments, primarily in Europe’s Nordic region, netting to approximately $18 million of pre-tax charges in the third quarter and $58 million through the first nine months of fiscal 2011 that should have been recorded in prior years.  The net adjustments, combined with offsetting associated income tax effects, as well as certain unrelated out of period income tax benefits further discussed in Note 8, were immaterial to both prior year and expected current year consolidated results and financial position.

The charges resulted from accounting irregularities in the Nordic region and to a lesser extent, from accounting errors and misapplication of U.S. GAAP in the Nordic region and other parts of MSS.  These errors affected principally revenue, prepaid accounts, outsourcing contract costs, and other long-term liabilities.  In the aggregate, the Nordic region charges totaled $23 million in the third quarter and $81 million for the first nine months of fiscal 2011 and were partially offset by net credit adjustments related to MSS operations outside of the Nordic region totaling $5 million in the third quarter and $23 million in the first nine months of fiscal 2011.  The Company attributes a majority of the Nordic region adjustments for the first nine months of fiscal 2011 to suspected intentional misconduct of certain former employees in our Danish subsidiaries.  The Company is continuing to review these matters and has initiated a forensic investigation.  In addition, a formal civil investigation is being conducted by the SEC, with which the Company is cooperating.  (See Part I, Item 4)

Note 2 – Recent Accounting Pronouncements

New Accounting Standards

In December 2009, the FASB issued ASU 2009-17, which formally codifies SFAS No. 167,  “Amendments to FASB Interpretation No. 46(R),” which is a revision to FIN 46 (R), and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance.  A reporting entity is required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements.  The statement became effective at the beginning of CSC’s fiscal 2011 and did not have a material effect on CSC’s financial statements.

Standards Issued But Not Yet Effective

In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements—A Consensus of the FASB Emerging Issues Task Force,” which amends Topic 605: Revenue Recognition. This Update addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The amendments in the Update establish a selling price hierarchy for determining the selling price of a deliverable and eliminate the residual method of allocation. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. Vendors will be required to determine their best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.  The amendments in the Update will become effective prospectively at the start of the Company’s fiscal 2012, April 2, 2011.  The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations and cash flows.

In October 2009, the FASB issued ASU 2009-14, “Certain Revenue Arrangements that include Software Elements—A Consensus of the FASB Emerging Issues Task Force,” which amends Topic 985: Software. This Update excludes from the scope all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality.  In addition, if the software contained in the tangible product is essential to the tangible product’s functionality, the software is excluded from the scope of the software revenue guidance. The amendments in the Update will become effective prospectively at the start of the Company’s fiscal 2012, April 2, 2011. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations and cash flows.

6

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

In April 2010, the FASB issued ASU 2010-17 “Milestone Method of Revenue Recognition—A Consensus of the FASB Emerging Issues Task Force.”  The Update establishes a revenue recognition model for contingent consideration that is payable upon achievement of an uncertain event, referred to as a milestone.  The statement (1) limits the scope of this Issue to research or development arrangements and (2) requires that certain guidance be met for an entity to apply the milestone method (i.e., record the milestone payment in its entirety in the period received).  The guidance in this Issue will apply to milestones in multiple deliverable arrangements involving research or development transactions.  The statement will become effective prospectively for fiscal years beginning at the start of the Company’s fiscal 2012, April 2, 2011.  The adoption of this statement is not expected to have a material effect on CSC’s consolidated financial statements.

Note 3 – Acquisitions and Divestitures

Acquisitions

During the first nine months of fiscal 2011, CSC acquired four privately-held companies; two during the second quarter for $61 million, and two during the third quarter for $95 million.

The purchase consideration for the acquisitions was allocated to the net assets acquired and liabilities assumed, based on their respective fair values at the date of acquisition. The total purchase consideration has been preliminarily allocated as $19 million to current assets, $18 million to software, $29 million to customer-related intangible assets, $2 million to property and equipment, $6 million to non-competition agreements, $3 million to other assets, $19 million to liabilities assumed, and $98 million to goodwill.  Of the total goodwill, $58 million is associated with CSC’s NPS segment and $40 million with the BSS segment.

During fiscal 2009, CSC acquired two separate privately-held companies for approximately $38 million cash plus additional consideration of up to $19million contingent on achievement of agreed revenue targets for future periods through the end of fiscal 2011. During the first quarter of fiscal 2011, $4 million of contingent consideration became due and was paid, and goodwill associated with the acquisition increased by the same amount.

Pro forma financial statements are not presented as the impact of these acquisitions is immaterial to CSC’s consolidated results.

Divestiture

During the second quarter of fiscal 2011, CSC completed the divestiture of an immaterial set of sub-contracts within its NPS segment whose ultimate customer is the US Federal Government, for consideration of approximately $56 million. The divestiture was driven by governmental Organizational Conflict of Interest concerns. Reflecting the divestiture, CSC derecognized net current assets of $18 million, net property and equipment of $1 million, and goodwill of $10 million, and incurred transaction costs of $1 million. The divestiture resulted in a pre-tax gain of $26 million recorded as other income. As of December 31, 2010, $54 million of the total consideration had been received as cash and the remaining $2 million is included in receivables.

7

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 4 – Earnings per Share

Basic and diluted earnings per share are calculated as follows:

	Quarter Ended
(Amounts in millions, except per share data)	December 31, 2010		January 1, 2010
Net income attributable to CSC common shareholders	$	242	$	211
Common share information:
Weighted average common shares outstanding      for basic EPS		154.526		152.784
Dilutive effect of stock options and equity awards      common stock equivalents		2.190		2.646
Shares for diluted EPS		156.716		155.430
Basic EPS	$	1.57	$	1.38
Diluted EPS	$	1.54	$	1.36

	Nine Months Ended
(Amounts in millions, except per share data)	December 31, 2010		January 1, 2010
Net income attributable to CSC common shareholders	$	569	$	558
Common share information:
Weighted average common shares outstanding      for basic EPS		154.378		152.052
Dilutive effect of stock options and equity awards      common stock equivalents		2.056		2.227
Shares for diluted EPS		156.434		154.279
Basic EPS	$	3.69	$	3.67
Diluted EPS	$	3.64	$	3.62

The computation of diluted EPS did not include stock options which were antidilutive, as their exercise price was greater than the average market price of the common stock of CSC during the periods presented.  The number of such options was 9,730,532 and 9,597,005 for the quarter and nine months ended December 31, 2010, respectively, and 5,969,792 and 10,257,633 for the quarter and nine months ended January 1, 2010, respectively.

8

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 5 – Fair Value

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2010, and April 2, 2010:

	As of
(Amounts in millions)	December 31, 2010		Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds	$	876	$	876	$	-	$	-
Time deposits		242		242		-		-
Short term investments		9		9		-		-
Derivative assets		3		-		3		-
Total assets	$	1,130	$	1,127	$	3	$	-
Liabilities:
Commercial paper	$	335	$	335	$	-	$	-
Total liabilities	$	335	$	335	$	-	$	-
	As of
(Amounts in millions)	April 2, 2010		Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,207	$	1,207	$	-	$	-
Time deposits		609		609		-		-
Derivative assets		1		-		1		-
Total assets	$	1,817	$	1,816	$	1	$	-
Liabilities:
Derivative liabilities	$	1	$	-	$	1	$	-
Total liabilities	$	1	$	-	$	1	$	-

The money market funds and time deposits are included and reported in cash and cash equivalents, derivative assets in prepaid expenses and other current assets, and the derivative liabilities in accrued expenses. Gains and losses from changes in the fair value of derivative assets and liabilities are included in earnings and reported in other income, net.

Financial Instruments

The Company issued commercial paper under the existing credit facility in the third quarter of fiscal 2011.  The commercial paper is included in short-term debt and carries a weighted average interest rate of 0.4262%.

The carrying amounts of the Company’s financial instruments with short term maturities are deemed to approximate their market values except for $379 million in receivables and $227 million of deferred costs included in prepaid expenses related to claims for which the values are subject to litigation.  For these current assets subject to litigation, it is not practicable to estimate fair value (see Note 13 for further discussion).

The carrying amount of the Company’s long-term debt was $2,343 million and $3,669 million and the estimated fair value was $2,547 million and $3,854 million as of December 31, 2010, and April 2, 2010, respectively. The fair value of long-term debt is estimated based on the current interest rates available to the Company for instruments with similar terms and remaining maturities.

9

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 6 – Foreign Currency Derivative Instruments

As a large global organization, the Company faces exposure to adverse movements in foreign currency exchange rates.  During the ordinary course of business, the Company enters into certain contracts denominated in foreign currency. Potential foreign currency exposures arising from these contracts are analyzed during the contract bidding process.  The Company generally manages these transactions by incurring costs to service contracts in the same currency in which revenue is received. Short-term contract financing requirements are met by borrowing in the same currency. By generally matching revenues, costs and borrowings to the same currency, the Company has been able to substantially mitigate foreign currency risk to earnings. However, as business practices evolve, the Company is increasing its use of offshore support and is therefore becoming more exposed to currency fluctuations.

The Company has policies and procedures to manage the exposure to fluctuations in foreign currency by using short-term foreign currency forwards and option contracts to hedge certain foreign currency assets and liabilities, including intercompany loans, and certain revenues denominated in non-functional currencies. The Company uses these instruments as economic hedges and not for speculative or trading purposes.  For accounting purposes, these foreign currency contracts are not designated as hedges, as defined under ASC 815 (previously FAS 133) and all changes in fair value are reported as part of other income, net.

The notional amount of the foreign currency forward contracts outstanding as of December 31, 2010, and April 2, 2010, was $361 million and $474 million, respectively. The notional amount of option contracts outstanding as of December 31, 2010, and April 2, 2010, was $121 million and $46 million, respectively.

The estimated fair values of the foreign currency derivative assets and liabilities were $3 million and $0 million, respectively, as of December 31, 2010, and $1 million and $1 million, respectively, as of April 2, 2010 (see Note 5).

As a result of the use of derivative instruments, the Company is subject to counterparty credit risks. To mitigate this risk, the Company enters into forward and option contracts with several financial institutions and regularly reviews its credit exposure and the creditworthiness of the counterparty.  As of December 31, 2010, there was a counterparty with concentration of credit risk and the maximum amount of loss, based on gross fair value of the foreign currency derivative instrument, that the Company would incur is $3 million.

10

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 7 – Pension and Other Benefit Plans

The Company and its subsidiaries offer a number of pension and postretirement healthcare and life insurance benefit plans.  The components of net periodic benefit cost for defined benefit pension plans are as follows:

	Quarter Ended
(Amounts in millions)	December 31, 2010						January 1, 2010
Pensions	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	2		$	7		$	2		$	9
Interest cost		41			31			42			27
Expected return on assets		(39	)		(32	)		(40	)		(23	)
Amortization of unrecognized net loss and other		6			4			1			6
Net periodic pension cost	$	10		$	10		$	5		$	19

	Nine Months Ended
(Amounts in millions)	December 31, 2010						January 1, 2010
Pensions	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	6		$	22		$	30		$	25
Interest cost		123			90			125			81
Expected return on assets		(117	)		(93	)		(118	)		(68	)
Amortization of unrecognized net loss and other		18			16			5			17
Pension curtailment		-			-			(13	)		-
Net periodic pension cost	$	30		$	35		$	29		$	55

On April 7, 2010, the Company announced an action to discontinue the accrual of future benefits for certain U.K. pension plans, effective July 1, 2010.  As a result of this plan amendment, the Company recognized a curtailment loss of $0.4 million in the fourth quarter of fiscal 2010.  In addition, the Company remeasured the amended U.K. plans’ pension expense for fiscal 2011 to reflect (a) a new discount rate of 5.6%, (b) the year-to-date increase in plan assets, and (c) the change in amortization basis to the expected average remaining life of plan participants.  The U.K. plans’ discount rate is derived from a published rate: Markit iBoxx GBP Corporates AA 15+ Years Index. This remeasurement resulted in a $75 million reduction to the pension benefit obligation.

For U.S. pension plans, the discount rate is derived from averaging two independent third-party sources: the Aon Yield Curve and the Citigroup Above Median Pension Discount Curve.  Both yield curves are constructed to parallel the bond portfolio that would be constructed for a plan similar in size and timing of payments to the Company’s U.S. plans.

The Company expects to contribute approximately $180 million to the defined benefit pension plans during fiscal 2011.  During the quarter ended December 31, 2010, the Company contributed $48 million to the defined benefit pension plans.  During the nine months ended December 31, 2010, the Company contributed $139 million to the defined benefit pension plans.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

The components of net periodic benefit cost for other postretirement benefit plans, on a global basis, are as follows:

	Quarter Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Other Postretirement Benefits
Service cost	$	1		$	-
Interest cost		4			3
Expected return on assets		(2	)		(1	)
Amortization of unrecognized net loss and other		3			2
Net provision for postretirement benefits	$	6		$	4

	Nine Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Other Postretirement Benefits
Service cost	$	3		$	-
Interest cost		11			9
Expected return on assets		(5	)		(3	)
Amortization of unrecognized net loss and other		9			6
Net provision for postretirement benefits	$	18		$	12

The Company expects to contribute approximately $22 million to the postretirement benefit plans during fiscal 2011.  During the quarter ended December 31, 2010, the Company contributed $8 million to the postretirement benefit plans.  During the nine months ended December 31, 2010, the Company contributed $13 million to the postretirement benefit plans.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 8 – Income Taxes

The effective tax rate for the third quarter and nine months ended December 31, 2010, was (5.2%) and 19.0%, respectively, and for the third quarter and nine months ended January 1, 2010, was 25.8% and 22.6%, respectively.  The decrease in the effective tax rate for the third quarter and nine months ended December 31, 2010, was primarily due to income tax benefits recognized related to research and development (“R&D”) credits of 27.9% and 9.0%, respectively.  The R&D credit benefits were primarily composed of new credits resulting from the passage of tax legislation, which extended the credits, and tentative agreements related to the current IRS exam cycle.  In addition, the Company generated greater U.S. foreign tax credits in the current fiscal year than in the prior fiscal year, which provided a benefit to the effective tax rate for the third quarter and nine months ended December 31, 2010, of 7.5% and 2.4%, respectively.  Additionally, the year-to-date rate benefited from the recognition of out of period adjustments of approximately $22 million of which $8 million was recorded in the third quarter of fiscal year 2011.

As of December 31, 2010, in accordance with ASC 740-10 (FASB Interpretation No. 48), the Company’s liability for uncertain tax positions was $452 million, which is included in non current liabilities on the Company’s balance sheet, including interest of $83 million and penalties of $28 million.  The Company’s liability for uncertain tax positions at December 31, 2010, includes $255 million related to amounts that, if recognized, would affect the effective tax rate (excluding related interest and penalties).

The liability for uncertain tax positions decreased by approximately $34 million during the current nine month period primarily due to tentative agreements with tax authorities during the current IRS exam cycle related to prior year R&D credits.  This amount is included in the income tax benefits for R&D credits referenced above.  There were no material changes to accrued interest and penalties as of the third quarter of fiscal 2011, as compared to the end of fiscal 2010.

Tax Examination Status

The Company is currently under examination in several tax jurisdictions.  A summary of the tax years that remain subject to examination in certain of the Company’s major tax jurisdictions are:

Jurisdiction	Tax Years that Remain Subject to Examination (Fiscal Year Ending)
United States – Federal	2005 and forward
United States – Various States	2001 and forward
Canada	2004 and forward
France	2005 and forward
Germany	2006 and forward
United Kingdom	2009 and forward

It is reasonably possible that during the next twelve months the Company’s liability for uncertain tax positions may change by a significant amount.  The IRS is examining the Company’s federal income tax returns for fiscal years 2005 through 2007, and the Company expects to reach a settlement during fiscal year 2012.  The nature of the significant items subject to examination includes depreciation, amortization, R&D credits, and U.S. related international tax issues.  In addition,the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily settle income tax positions in negotiated settlements for different amounts than the Company has accrued as uncertain tax positions.  The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more likely than not standard if such positions are not upheld.  Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued or extinguish a position through payment.  The Company believes the outcomes which are reasonably possible within the next twelve months may result in a reduction of the liability for uncertain tax positions of up to $225 million, excluding interest, penalties and tax carryforwards.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 9 – Stock Incentive Plans

As of December 31, 2010, the Company had outstanding stock option and equity awards issued pursuant to various shareholder-approved plans.  For the quarter and nine months ended December 31, 2010, and January 1, 2010, the Company recognized stock-based compensation expense as follows:

	Quarter Ended
(Amounts in millions)	December 31, 2010		January 1, 2010
Cost of services	$	3	$	3
Selling, general and administrative		13		12
Total	$	16	$	15
Total net of tax	$	10	$	9

	Nine Months Ended
(Amounts in millions)	December 31, 2010		January 1, 2010
Cost of services	$	9	$	11
Selling, general and administrative		37		38
Total	$	46	$	49
Total net of tax	$	28	$	30

The Company’s overall stock-based compensation granting practice has not changed year over year. During the nine months ended December 31, 2010, the Company modified certain underlying assumptions in the fair value calculations, as described below.  An adjustment to reflect actual forfeiture experience for fiscal 2010 decreased stock-based compensation expense recognized for the nine months ended December 31, 2010, by $6 million.

The Company uses the Black-Scholes-Merton model in determining the fair value of options granted. The expected term was calculated based on the Company’s historical experience with respect to its stock plan activity in combination with an estimate of when vested and unexercised option shares will be exercised.  The Company continued to base expected volatility on a blended approach using an equal weighting of implied volatility and historical volatility.  However, beginning with the first quarter of fiscal 2011, the historical volatility calculation was based on the Company’s seven-year historical daily closing price, rather than the ten-year historical used in prior periods, in order to bring this factor more closely into alignment with the expected term of the stock options.  The dividend yield assumption was added concurrent with the May 19, 2010, declaration of a cash dividend.

The weighted average grant date fair values of stock options granted during the nine months ended December 31, 2010, and January 1, 2010, were $12.96 and $15.15 per share, respectively.  In calculating the compensation expense for its stock incentive plans, the Company used the following weighted average assumptions:

	Nine Months Ended
	December 31, 2010	January 1, 2010
Risk-free interest rate	2.37%	2.20%
Expected volatility	28%	41%
Expected term	5.86 years	4.14 years
Dividend yield	1.17%	-

During the nine months ended December 31, 2010, and January 1, 2010, the Company realized income tax benefits related to all of its stock incentive plans of $5 million and $12 million, respectively.  An excess tax benefit of $2 million and $7 million was realized during the nine months ended December 31, 2010, and January 1, 2010, respectively.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Employee Incentive Plans

The Company has three stock incentive plans which authorize the issuance of stock options, restricted stock and other stock-based incentives to employees upon terms approved by the Compensation Committee of the Board of Directors.  The Company issues authorized but previously unissued shares upon the exercise of stock options, the granting of restricted stock and the redemption of restricted stock units (RSUs).  At December 31, 2010, 6,487,867 shares of CSC common stock were available for the grant of future stock options, equity awards or other stock-based incentives to employees.

Stock Options

The Company’s standard vesting schedule for stock options is one-third on each of the first three anniversaries of the grant date.  Stock options are generally granted for a term of ten years.  Information concerning stock options granted under stock incentive plans is as follows:

	As of December 31, 2010
	Number of Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (In millions)
Outstanding as of April 2, 2010		17,008,397		$	46.36		5.58	$	141
Granted		2,781,874			48.23
Exercised		(675,951	)		41.70
Canceled/forfeited		(219,741	)		46.04
Expired		(390,374	)		54.24
Outstanding as of December 31, 2010		18,504,205			46.65		5.57		84
Vested and expected to vest in the future as of December 31, 2010		18,232,983			46.64		5.51		83
Exercisable as of December 31, 2010		13,159,829			46.76		4.28		65

The total intrinsic value of options exercised during the nine months ended December 31, 2010, and January 1, 2010, was $6 million and $24 million, respectively.  The total intrinsic value of stock options is based on the difference between the fair market value of the Company’s common stock less the applicable exercise price.  The cash received from stock options exercised during the nine months ended December 31, 2010, and January 1, 2010, was $26 million and $79 million, respectively.

As of December 31, 2010, there was $49 million of total unrecognized compensation expense related to unvested stock options, net of expected forfeitures.  The cost is expected to be recognized over a weighted-average period of 1.83 years.

Other Equity Awards

Other Equity Awards, including restricted stock and RSUs, generally vest over periods of three to five years.  Restricted stock awards consist of shares of common stock of the Company issued at a price of $0.  Upon issuance to an employee, shares of restricted stock become outstanding, receive dividends and have voting rights. The shares are subject to forfeiture and to restrictions which limit the sale or transfer during the restriction period.  Upon the vesting date, RSUs are automatically redeemed for shares of CSC common stock and dividend equivalents.  If prior to the redemption in full of the RSU, the employee’s status as a full-time employee is terminated, then the RSU is automatically cancelled on the employment termination date and any unvested shares are forfeited.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

A portion of the Other Equity Awards granted during the nine months ended December 31, 2010, consisted of performance-based RSUs.  The number of units that ultimately vest pursuant to such awards is dependent upon the Company’s achievement of certain specified performance criteria over a two or three-year period.  Awards are redeemed for shares of CSC common stock and dividend equivalents upon the filing with the SEC of the Annual Report on Form 10-K for the last fiscal year of the performance period.  Compensation expense during the performance period is estimated at each reporting date using management’s expectation of the probable achievement of the specified performance criteria and is adjusted to the extent the expected achievement changes.  In the table below, such awards are reflected at the number of shares expected to be redeemed upon achievement of target performance measures.

During the nine months ended December 31, 2010, certain senior executives were awarded service-based RSUs for which the shares are redeemable over the ten anniversaries following the executive’s termination, provided the executive remains a full-time employee of the Company until reaching the earlier of age 65 or age 55 or over with at least ten years of service and after termination complies with certain non-competition covenants during the ten-year period.

Information concerning Other Equity Awards granted under stock incentive plans is as follows:

	As of December 31, 2010
	Number of Shares			Weighted Average Fair Value
Outstanding as of April 2, 2010		1,154,668		$	45.88
Granted		492,523			48.15
Released/Redeemed		(138,142	)		51.34
Forfeited/Canceled		(16,728	)		51.94
Outstanding as of December 31, 2010		1,492,321			46.05

As of December 31, 2010, there was $32 million of total unrecognized compensation expense related to unvested restricted stock awards and restricted stock units.  The cost is expected to be recognized over a weighted-average period of 1.96 years.

Nonemployee Director Incentives

The Company has two stock incentive plans which authorize the issuance of stock options, restricted stock and other stock-based incentives to nonemployee directors upon terms approved by the Company’s Board of Directors.  As of December 31, 2010, 154,700 shares of CSC common stock were available for the grant of future RSUs or other stock-based incentives.

Generally, RSU awards to nonemployee directors vest in full as of the next annual meeting of the Company’s stockholders following the date they are granted and are issued at a price of $0.  Information concerning RSUs granted to nonemployee directors is as follows:

	As of December 31, 2010
	Number of Shares			Weighted Average Fair Value
Outstanding as of April 2, 2010		133,221		$	46.47
Granted		24,000			42.25
Redeemed		(180	)		42.69
Forfeited/Canceled		-			-
Outstanding as of December 31, 2010		157,041			45.83

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

When a holder of RSUs ceases to be a director of the Company, the RSUs are automatically redeemed for shares of CSC common stock and dividend equivalents with respect to such shares.  The number of shares to be delivered upon redemption is equal to the number of RSUs that are vested at the time the holder ceases to be a director.  At the holder’s election, the RSUs may be redeemed (i) as an entirety, upon the day the holder ceases to be a director, or (ii) in substantially equal amounts upon the first five, ten or fifteen anniversaries of such termination of service.

Note 10 – Cash Flows—Supplemental Disclosures

Cash payments for interest were $97 million and $148 million for the nine months ended December 31, 2010, and January 1, 2010, respectively.  Cash payments for income taxes, net of refunds, were $182 million and $294 millionfor the nine months ended December 31, 2010, and January 1, 2010, respectively.

Non-cash investing activities include the following:

(Amounts in millions)	Nine Months Ended
	December 31, 2010		January 1, 2010
Capital expenditures in accounts payable and accrued expenses	$	42	$	37
Capital expenditures through capital lease obligations		167		38
Assets acquired under long-term financing		115		-

Non-cash financing activities included common share dividends declared but not yet paid of $31 million for the nine months ended December 31, 2010.

Note 11 – Segment Information

CSC provides information technology and business process outsourcing, consulting and systems integration services and other professional services to its customers.  The Company targets the delivery of these services within three broad service lines or sectors: North American Public Sector (NPS), Managed Services Sector (MSS), and Business Solutions and Services (BSS).

The Company’s reportable segments are as follows:

·   North American Public Sector (NPS) – The NPS segment operates principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies.

·   Managed Services Sector (MSS) – The MSS segment provides large-scale infrastructure and application outsourcing solutions offerings as well as midsize services delivery to customers globally.

·   Business Solutions & Services (BSS) – The BSS segment provides industry specific consulting and systems integration services, business process outsourcing, and intellectual property (IP) – based software solutions.  These service offerings and clientele overlap.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

The following tables summarize operating results by reportable segment:

	NPS		MSS		BSS		Corporate			Eliminations			Total
(Amounts in millions)
Fiscal 2011
Quarter Ended December 31, 2010
Revenues	$	1,482	$	1,653	$	899	$	5		$	(31	)	$	4,008
Operating income (loss)		117		110		85		(14	)		-			298
Depreciation and amortization		33		197		31		8			-			269
Fiscal 2010
Quarter Ended January 1, 2010
Revenues	$	1,477	$	1,618	$	887	$	4		$	(33	)	$	3,953
Operating income (loss)		140		175		81		(19	)		-			377
Depreciation and amortization		33		207		37		3			-			280

	NPS		MSS		BSS		Corporate			Eliminations			Total
(Amounts in millions)
Fiscal 2011
Nine Months Ended December 31, 2010
Revenues	$	4,583	$	4,832	$	2,589	$	12		$	(91	)	$	11,925
Operating income (loss)		405		306		225		(49	)		-			887
Depreciation and amortization		98		579		99		22			-			798
Fiscal 2010
Nine Months Ended January 1, 2010
Revenues	$	4,617	$	4,761	$	2,589	$	13		$	(88	)	$	11,892
Operating income (loss)		403		435		205		(60	)		(1	)		982
Depreciation and amortization		99		606		110		10			-			825

Operating income provides useful information to the Company’s management for assessment of the Company’s performance and results of operations.  Components of the measure are utilized to determine executive compensation along with other measures.

A reconciliation of consolidated operating income to income before taxes is as follows:

	Quarter Ended						Nine Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010			December 31, 2010			January 1, 2010
Operating income	$	298		$	377		$	887		$	982
Corporate G&A		(34	)		(48	)		(105	)		(123	)
Interest expense		(43	)		(50	)		(126	)		(158	)
Interest income		8			6			25			20
Other income, net		2			6			40			15
Income before taxes	$	231		$	291		$	721		$	736

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

Note 12 – Goodwill and Other Intangible Assets

The Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  A significant amount of judgment is involved in determining if an indicator of impairment has occurred between annual testing dates.  Such indicators include: a significant decline in expected future cash flows; a sustained, significant decline in market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and reductions in growth rates.  Management believes that there have been no events or circumstances in the third quarter of fiscal 2011 which would more likely than not reduce the fair value for its reporting units below their carrying value.

The following table summarizes the changes in the carrying amount of goodwill by segment for the nine months ended December 31, 2010:

(Amounts in millions)	NPS			MSS		BSS			Total
Goodwill gross	$	694		$	1,920	$	1,271		$	3,885
Accumulated impairment losses		-			-		(19	)		(19	)
Balance as of April 2, 2010, net		694			1,920		1,252			3,866
Additions		62			-		40			102
Deductions		(10	)		-		-			(10	)
Foreign currency translation		-			8		(2	)		6
Impairment losses		-			-		-			-
Goodwill gross		746			1,928		1,309			3,983
Accumulated impairment losses		-			-		(19	)		(19	)
Balance as of December 31, 2010, net	$	746		$	1,928	$	1,290		$	3,964

The addition to goodwill of $102 million consists of $98 million related to acquisitions of new businesses and $4 million of contingent consideration paid on a fiscal 2009 acquisition.  The reduction of $10 million relates to a divestiture of an immaterial set of NPS contracts (See Note 3).

The foreign currency translation amount relates to the impact of currency movements on non-U.S. dollar denominated goodwill balances.

A summary of amortizable intangible assets as of December 31, 2010, and April 2, 2010, is as follows:

	As of December 31, 2010
(Amounts in millions)	Gross Carrying Value		Accumulated Amortization		Net
Software	$	1,809	$	1,305	$	504
Outsourcing contract costs		2,017		1,388		629
Customer and other intangible assets		430		255		175
Total intangible assets	$	4,256	$	2,948	$	1,308

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

	As of April 2, 2010
(Amounts in millions)	Gross Carrying Value		Accumulated Amortization		Net
Software	$	1,716	$	1,205	$	511
Outsourcing contract costs		1,875		1,233		642
Customer and other intangible assets		397		234		163
Total intangible assets	$	3,988	$	2,672	$	1,316

Amortization related to intangible assets was $111 million and $116 million for the quarters ended December 31, 2010, and January 1, 2010, respectively, including reductions of revenue for outsourcing contract cost premiums amortization of $17 million in each of the respective quarters.  Amortization related to intangible assets was $326 million and $325 million for the nine months ended December 31, 2010, and January 1, 2010, respectively, including reductions of revenue for outsourcing contract cost premiums amortization of $51 million and $44 million in each of the respective nine month periods.  Estimated amortization expense related to intangible assets as of December 31, 2010, for fiscal 2011 through fiscal 2015, is as follows: $462 million,$329 million, $254 million, $184 millionand $126 million, respectively.

Amortization expense related to capitalized software was $42 million and $40 million for the quarters ended December 31, 2010, and January 1, 2010, respectively, and $130 million and $122 million for the nine months ended December 31, 2010, and January 1, 2010, respectively.

Note 13 – Commitments and Contingencies

Commitments

The primary financial instruments which potentially subject the Company to concentrations of credit risk are accounts receivable. The Company’s customer base includes Fortune 500 companies, the U.S. federal and other governments and other significant, well-known companies operating in North America, Europe and the Pacific Rim. Credit risk with respect to accounts receivable is minimized because of the nature and diversification of the Company’s customer base.  The Company's credit risk is also impacted by the risk of customers which become subject to bankruptcy proceedings; however, because most of these proceedings involve business reorganizations rather than liquidations and the nature of the Company's services are often considered essential to the operational continuity of these customers, the Company is generally able to avoid or mitigate significant adverse financial impact in these cases.  As of December 31, 2010, the Company had$12 million of accounts receivable and $7 million of allowance for doubtful accounts with customers involved in bankruptcy proceedings.

In the normal course of business, the Company provides certain clients, principally governmental entities, with financial performance guarantees, which are generally backed by standby letters of credit or surety bonds.  In general, the Company would be liable for the amounts of these guarantees only in the event that nonperformance by the Company permits termination of the related contract by the Company’s client.  As of December 31, 2010, the Company had $673 million of outstanding letters of credit and surety bonds relating to these performance guarantees. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and therefore there are no material obligations in connection with these guarantees as of December 31, 2010.

The Company uses standby letters of credit in lieu of cash to support various risk management insurance policies.  These letters of credit represent a contingent liability and the Company would only be liable if it defaults on its payment obligations towards these policies.  As of December 31, 2010, the Company had $87 million of outstanding standby letters of credit.  The Company also guarantees working capital credit lines for certain of its non-U.S. business units with local financial institutions.  Generally, guarantees have a one-year term and are renewed annually.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the expiration of the Company’s financial guarantees and standby letters of credit outstanding as of December 31, 2010:

(Amounts in millions)	Fiscal 2011		Fiscal 2012		Fiscal 2013 and thereafter		Total
Performance guarantees:
Surety bonds	$	3	$	28	$	-	$	31
Letters of credit		604		25		13		642
Standby letters of credit		36		48		3		87
Foreign subsidiary debt guarantees		3		621		-		624
Total	$	646	$	722	$	16	$	1,384

The Company generally indemnifies its software license customers from claims of infringement on a United States patent, copyright, or trade secret.  CSC’s indemnification covers costs to defend customers from claims, court awards or related settlements.  The Company maintains the right to modify or replace software in order to eliminate any infringement.  Historically, CSC has not incurred any significant costs related to customer software license indemnification, and management considers the likelihood of incurring future costs to be remote.

Contingencies

As of December 31, 2010, the Company had 14 claims totaling approximately $678 million, excluding interest, asserted against the U.S. federal government under a single contract pending before the Armed Services Board of Contracts Appeals (“ASBCA”).  These claims were filed under the Contract Disputes Act of 1978 (the “CDA”).

During the second quarter of fiscal 2007, the Company filed its 14 interest bearing claims (collectively the “CDA Claims”), then totaling approximately $858 million, with the government.  During the first quarter of fiscal 2008, the government denied the Company’s 14 CDA Claims and issued a $42 million counterclaim. The Company disagrees with the government’s denials both factually and contractually.  In contrast to the Company’s CDA Claims, all of which were properly certified under the CDA, the government’s counter-claim was submitted with no verifiable evidence, no citation to any supporting evidence and no explanation of its method for calculating value.  Because of these disputes, on September 11, 2007, the Company initiated litigation at the ASBCA, one of the two forums available for litigation of CDA claims.  Decisions of the ASBCA may be appealed to the Court of Appeals for the Federal Circuit and that court’s ruling may be appealed to the U.S. Supreme Court.

In accordance with accepted practice, the Company amended its CDA Claims twice to reflect adjustments to the total value of the CDA Claims.  During the third quarter of fiscal 2008, the Company and its litigation team undertook a standard review of the value of the CDA Claims.  On December 21, 2007, as a result of that review, the Company amended the complaint it filed with the ASBCA on September 11, 2007, and adjusted its value downward.  Most recently, on December 24, 2009, the Government made a partial payment of $35 million on one of the CDA Claims.  Thereafter, CSC filed a second amended complaint with the ASBCA reducing the value of its CDA Claims by $35 million for a total value of all CDA Claims now totaling approximately $678 million.

Included in receivables and prepaid expenses and other current assets are approximately $379 million of unbilled receivables, reflecting the third quarter fiscal 2010 payment of $35 million referenced above, and $227 million of deferred costs related to the CDA Claims, respectively.  The Company does not record any profit element when it defers costs associated with CDA claims.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

The Company believes it has valid bases for pursuing recovery of the CDA Claims supported by outside counsel’s evaluation of the facts and assistance in the preparation of the claims.  To verify its position, CSC requested that outside counsel analyze whether the first two conditions of Paragraph 31 of Accounting Standards Codification (“ASC”) 605-35-25 (previously referred to as Paragraph 65 of Statement of Position 81-1) were satisfied with respect to the Company’s assertions of Government breaches of the contract, Government-caused delays and disruption to the Company’s performance of the contract, and unanticipated additional work performed by the Company under the contract.  The outside counsel issued an opinion that the Company’s position met the criteria on April 22, 2005, and has reiterated that opinion as recently as May 18, 2010.  The Company remains committed to vigorous pursuit of its claimed entitlements and associated value, and continues to believe based on review of applicable law and other considerations that recovery of at least its net balance sheet position is probable.  However, the Company’s position is subject to the ongoing evaluation of new facts and information which may come to the Company’s attention during the discovery phase of the litigation.  Trial has been rescheduled from the fourth quarter of fiscal 2011 to the first quarter of fiscal 2012 but is subject to further change at the discretion of the ASBCA judge.

On November 19, 2010, the Government and the Company entered into a formal agreement to stay the CDA Claims litigation and engage in a non-binding alternate dispute resolution (“ADR”) process to resolve all outstanding CDA Claims and other issues associated with the contract.  This expedited process began on December 6, 2010, and is expected to conclude in the first quarter of Fiscal Year 2012.  If the parties do not reach settlement, the litigation will resume.  As part of the ADR process and in accordance with the terms of the ADR agreement, on November 22, 2010, the Company filed with the Government two requests for equitable adjustment (“REA”) totaling approximately $1.3 billion associated with the same contract under which the CDA Claims were brought.  REAs, unlike CDA Claims, are not interest bearing.  The matters covered by the REAs overlap with each other and, to some extent, with certain matters covered by the CDA claims, but the REAs seek recovery under other legal theories.  The aggregate amount of REAs and CDA Claims filed by the Company is not indicative of the amounts that would ultimately be recoverable by the Company.  However, were the Company to be successful with its REAs, the amount recovered could be greater than the total value of the CDA Claims.  There are no additional assets on the Company’s books that relate to the REAs described above.

Several additional claims that had been pending before the ASBCA under a separate contract were settled in the second quarter of fiscal 2010.  As a result of that settlement and other contractual arrangements, the Company expects the deferred costs related to those claims will be fully recovered.

Several shareholders of the Company have made demands on the Board of Directors of the Company or filed purported class or derivative actions against both the Company, as nominal defendant, as well as certain of CSC's executive officers and directors.  These actions, which are described below, generally allege that certain of the individual defendants breached their fiduciary duty to the Company by purportedly “backdating” stock options granted to CSC executives, improperly recording and accounting for allegedly backdated stock options, producing and disseminating disclosures that improperly recorded and accounted for the allegedly backdated options, engaging in acts of corporate waste, and committing violations of insider trading laws. They alleged that certain of the individual defendants were unjustly enriched and seek to require them to disgorge their profits.

On August 15, 2006, a federal ERISA class action alleging stock options backdating at the Company and miscellaneous violations of ERISA fiduciary duties with respect to CSC’s 401(k) plan was filed in the U.S. District Court in the Eastern District of New York entitled Quan, et al. v. CSC, et al., CV 06-3927.  On September 21, 2006, a related ERISA class action was filed in the same court entitled Gray, et al. v. CSC, et al., CV 06-5100.  The complaints named as defendants the Company, the Company’s Retirement and Employee Benefits Plans Committee and various directors and officers.  The ERISA actions were consolidated and, on February 28, 2007, plaintiffs filed an amended ERISA class action complaint.  On January 8, 2008, the District Court granted a motion to transfer the consolidated cases to the United States District Court in Los Angeles, California, where the cases were consolidated before the District Court judge in Case No. CV 08-2398-SJO.  Class certification was granted on December 29, 2008.  Defendants and plaintiffs each filed motions for summary judgment on May 4, 2009, and supplemental briefs thereafter.  On July 13, 2009, the District Court entered an Order granting summary judgment in favor of the Company and the other defendants.  On September 30, 2010, the Ninth Circuit Court of Appeals (the “Ninth Circuit”) affirmed the decision of the District Court in favor of the Company and the other defendants.

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COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

On October 21, 2010, plaintiffs petitioned the Ninth Circuit to rehear en banc the September 30, 2010 decision.  Rehearing was denied by the Ninth Circuit on December 2, 2010.  On January 26, 2011, an order terminating the case was issued by the District Court.

On May 29, 2009, a class action lawsuit entitled Shirley Morefield vs. Computer Sciences Corporation, et al., Case # A-09-591338-C, was brought in state court in Clark County, Nevada, against the Company and certain current and former officers and directors asserting claims for declarative and injunctive relief related to stock option backdating.  The alleged factual basis for the claims is the same as that which was alleged in a prior derivative case, In re CSC Shareholder Derivative Litigation, CV 06-5288, filed in U.S. District Court in Los Angeles, which was dismissed on August 9, 2007, by such court.  This dismissal was affirmed on appeal by the Ninth Circuit, which judgment is final. The defendants in the Morefield case deny the allegations in the complaint.  On June 30, 2009, the Company removed the case to the United States District Court for the District of Nevada, Case No. 2:09-cv-1176-KJD-GWF.  On motion made by the plaintiffs, the District Court remanded the case to state court on February 18, 2010.  Defendants filed a motion to dismiss on April 30, 2010, and plaintiffs filed their opposition on June 14, 2010.  A hearing took place on August 18, 2010.  A decision is pending.  It is not possible to make a reliable estimate of the amount or range of loss, if any, that could result from this matter at this time.

On September 24, 2007, a stockholder made a demand to the Board of Directors to cause the Company to pursue claims against certain individuals, including current and former officers and directors of CSC, with respect to alleged stock option backdating.  Action on this demand was deferred until the decision of the Ninth Circuit in the federal derivative case referred to above became final.  On March 2, 2009, the stockholder made a renewed demand to the Board.  On May 20, 2009, the Board formed a special committee comprised solely of independent directors not named in the stockholder demand to investigate and review the demand and recommend to the Board how to respond thereto.  On February 8, 2010, the special committee recommended that the Board decline to pursue the claims asserted in the stockholder demand, and the Board adopted that recommendation. The stockholder has been notified of the Board’s decision.

On January 28, 2011, the Company was notified by the SEC that the SEC has commenced a formal civil investigation relating to previously disclosed accounting adjustments in the MSS segment, primarily in Europe’s Nordic region.  The Company is cooperating with the Commission’s investigation.

In addition to the matters noted above, the Company is currently a party to a number of matters which involve or may involve litigation.  The Company consults with legal counsel and seeks input from other experts and advisors with respect to such matters in the ordinary course of business.  Whether any losses, damages or remedies ultimately resulting from such matters could reasonably have a material effect on the Company's business, financial condition, results of operation, or cash flows will depend on a number of variables, including, among other things,  the timing and amount of such losses or damages (if any) and the structure and type of any such remedies.  For these reasons, it is not possible to make accurate estimates of the amount or range of loss that could result from these other matters at this time.  Company management does not, however, presently expect any of such other matters to have a material impact on the consolidated financial statements of the Company.

Note 14 – Subsequent Event

On February 4, 2011, the U.K.'s National Health Service (NHS) formally notified the Company that it believes the Company's failure to achieve a key milestone related to the Pennine Care NHS Foundation Trust implementation by January 28, 2011, constitutes a breach of contract and the NHS is considering its position on termination of all or parts of the contract; however, the NHS has clarified that its notice was not intended to suggest that termination is the only option which it is considering and, in fact, the NHS is considering the full range of options it believes are available to the NHS.  The Company has disputed the alleged breach and both parties are continuing to work toward completion of the Pennine implementation.  Both the NHS and the Company have indicated their intent to continue discussions regarding modifications to the contract with the agreed mutual intent to reach agreement as soon as practicable on terms satisfactory to both parties.

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PART I, ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter and First Nine Months of Fiscal 2011 versus

Third Quarter and First Nine Months of Fiscal 2010

All statements and assumptions in this quarterly report on Form 10-Q and in the documents attached or incorporated by reference that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  These statements represent current expectations and beliefs of CSC, 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 the Company's financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, competitive positions, 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 the Company's control, which could cause actual results to differ materially from the results described in such statements.  These forward-looking statements should be read in conjunction with our Annual Report on Form 10-K.  The reader should specifically consider the various risks discussed in the Risk Factors section of our Annual Report on Form 10-K.

Forward-looking statements in this quarterly report on Form 10-Q speak only as of the date hereof, and forward-looking statements in documents attached or incorporated by reference speak only as to the date of those documents.  The Company does 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 hereof or to reflect the occurrence of unanticipated events, except as required by law.

General

The following discussion and analysis provides information management believes relevant to an assessment and understanding of the consolidated results of operations and financial condition of CSC.  The discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended April 2, 2010.  The following discussion relates to the Company's financial condition and results of operations as of and for the quarter and nine months ended December 31, 2010, and the comparable periods of the prior fiscal year.

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Third Quarter Overview

Key operating results for the third quarter include:

·   Third quarter revenues were up 1.4% to $4.0 billion and nine month revenues were up 0.3% to $11.9 billion compared to the prior year. On a constant currency basis(1), revenues were up 2.1% for the quarter and up 0.9% for the first nine months.

·   Income before taxes for the quarter decreased 20.6% to $231 million versus the fiscal 2010 third quarter and decreased 2.0% to $721 million versus the fiscal 2010 first nine months.

·   Operating income(2) for the quarter decreased 21.0% to $298 million versus the fiscal 2010 third quarter, and operating income margins decreased to 7.44% from 9.54% for the fiscal 2010 third quarter. For the first nine months, operating income decreased 9.7% to $887 million, and operating income margins decreased to 7.44% from 8.26%.

·   Net income attributable to CSC common shareholders for the third quarter was $242 million, an increase of 14.7%, or $31 million, as compared to the prior year.

·   Diluted earnings per share were $1.54 for the fiscal 2011 third quarter, an increase from $1.36 for the prior period.

·   Business awards(3) of $2.3 billion were announced for the third quarter 2011, compared to $6.8 billion in the prior fiscal year period. For the third quarter of fiscal 2011, NPS was awarded $0.5 billion, MSS was awarded $1.0 billion, and BSS was awarded $0.8 billion.  Total backlog(3) at the end of third quarter of fiscal 2011 was $37.4 billion, a decrease of $4.9 billion as compared to the backlog at the end of the third quarter of fiscal 2010 of $42.3 billion. Of the total $37.4 billion backlog, $3.1 billion is expected to be realized as revenue in the remainder of fiscal 2011.  Of the total backlog, $13.7 billion is not yet funded.

·   Days Sale Outstanding (DSO)(4) of 85 days compared to 88 days at the end of the third quarter of the prior fiscal year.

·   Debt-to-total capitalization ratio(5) at December 31, 2010 was 28.0% compared to 36.5% at fiscal year-end 2010.

·   Return on Investment (ROI)(6) for the four quarters ended December 31, 2010, was 9.6%, down from11.1% for the comparable prior period.

·   Cash provided by operatingactivities was $804 million for the nine months of fiscal 2011, compared to $407 million for the nine months of fiscal 2010.

·   Cash used in investing activities was $735 million for the nine months of fiscal 2011, compared to $514 million for the nine months of fiscal year 2010.

·   Cash used in financing activities was $1,263 million for the nine months of fiscal 2011, compared to cash provided of $114 million for the nine months of fiscal year 2010.

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·   Free cash flow(7) for the nine months of fiscal 2011 was $110 million inflow as compared to $140 million outflow for the nine months of fiscal 2010,an increase of $250 million.

(1)   Selected references are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period.  Financial results on a “constant currency basis” are calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates.  This approach is used for all results where the functional currency is not the U.S. dollar.

(2)   Operating income is a non-GAAP measure used by management to assess performance at the segments and on a consolidated basis.  The Company's definition of such measure may differ from other companies. We define operating income as revenue less costs of services, depreciation and amortization expenses, and segment G&A expense, excluding corporate G&A. Management compensates for the limitations of this non-GAAP measure by also reviewing income before taxes, which includes costs excluded from the operating income definition such as corporate G&A, interest and other income. A reconciliation of consolidated operating income to income before taxes is as follows:

	Quarter Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Operating income	$	298		$	377
Corporate G&A		(34	)		(48	)
Interest expense		(43	)		(50	)
Interest income		8			6
Other income, net		2			6
Income before taxes	$	231		$	291

	Nine Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Operating income	$	887		$	982
Corporate G&A		(105	)		(123	)
Interest expense		(126	)		(158	)
Interest income		25			20
Other income, net		40			15
Income before taxes	$	721		$	736

(3)   For NPS, announced award values for competitive indefinite delivery and indefinite quantity (IDIQ) awards represent the expected contract value at the time a task order is awarded under the contract. Announced values for non-competitive IDIQ awards represent management’s estimate at the award date. Business awards for MSS are estimated at the time of contract signing based on then existing projections of service volumes and currency exchange rates, and include option years. BSS award values are based on firm commitments.

Backlog represents total estimated contract value of predominantly long-term contracts, based on customer commitments that the Company believes to be firm. Backlog value is based on contract commitments, management’s judgment and assumptions about volume of services, availability of customer funding and other factors. Backlog estimates for government contracts include both the funded and unfunded portions, and all of the option periods. Value of competitive IDIQ awards is included in computation of backlog only when a task order is awarded. Value of non-competitive IDIQ awards included in computation of backlog represents management’s estimate at the award date.  Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.

(4)   DSO for the quarter is calculated as total receivables at quarter-end divided by revenue-per-day.  Revenue-per-day equals total quarterly revenues divided by the number of days in the quarter. Total receivables includes unbilled receivables but excludes tax receivables.

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(5)   Debt-to-total capitalization ratio is defined as total current and long-term debt divided by total debt and equity, including noncontrolling interest.

(6)   ROI is calculated by multiplying profit margin by the investment base turnover.  The profit margin used is a) the last four quarters’ adjusted net income available to CSC common shareholders (net income available to CSC common shareholders adjusted to exclude interest expense and special items, net of their corresponding tax effects), divided by b) the last four quarters’ revenues.  The tax effect is calculated by multiplying CSC’s last four quarters’ interest expense and special items by the corresponding effective tax rate. Investment base turnover equals the last four quarters’ revenues divided by average debt and equity during the last four quarters.  It should be noted that the adjusted net income figure available to CSC common shareholders is not identical to net income available to CSC common shareholders as determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and is therefore reconciled to the GAAP measure in the table below.  The Company’s calculation of ROI may not be comparable with other companies’ measures using the same or similar terms.  Management compensates for any limitations of this non-GAAP measure by reviewing a number of metrics, including GAAP measures such as EPS, operating and investing cash flows, and the debt-to-total capitalization ratio.

Adjusted Net Income Reconciliation	Twelve Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Adjusted Net Income	$	1,009		$	1,143
Less:
Interest expense		221			227
Special items		-			-
Tax effect of Interest Expense and Special Items		(38	)		(24	)
Net income attributable to CSC	$	826		$	940

(7)   Free cash flow is a non-GAAP measure and the Company's definition of such measure may differ from other companies. We define free cash flow as equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions, dispositions and purchase or sale of available for sale securities, and (3) payments on capital leases and other long-term asset financings.

However, CSC’s free cash flow measure does not distinguish operating cash flows from investing cash flows as they are required to be presented in accordance with GAAP, and should not be considered a substitute for operating and investing cash flows as determined in accordance with GAAP.  Free cash flow is one of the factors CSC management uses in reviewing the overall performance of the business.  Management compensates for the limitations of this non-GAAP measure by also reviewing the GAAP measures of operating, investing and financing cash flows as well as debt levels measured by the debt-to-total capitalization ratio.

The following is a reconciliation of free cash flow to the most directly comparable GAAP financial measure:

	Nine Months Ended
(Amount in millions)	December 31, 2010			January 1, 2010
Free cash flow	$	110		$	(140	)
Net cash used in investing activities		735			514
Acquisitions, net of cash acquired		(158	)		(5	)
Business dispositions		54			14
Payments on capital leases and other long-term asset financings		63			24
Net cash provided by operating activities	$	804		$	407
Net cash used in investing activities	$	(735	)	$	(514	)
Net cash (used in) provided by financing activities	$	(1,263	)	$	114

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Reportable Segments

CSC provides information technology and business process outsourcing, consulting and systems integration services and other professional services to its customers.  The Company targets the delivery of these services within three broad service lines or sectors:  North American Public Sector (NPS), Managed Services Sector (MSS), and Business Solutions and Services (BSS).

The Company’s reportable segments for fiscal 2011 and 2010 are as follows:

·   North American Public Sector– The NPS segment operates principally within a regulated environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies.

·   Managed Services Sector – The MSS segment provides large-scale infrastructure and application outsourcing solutions offerings as well as midsize services delivery to customers globally.

·   Business Solutions & Services – The BSS segment provides industry specific consulting and systems integration services, business process outsourcing, and intellectual property (IP) based software solutions.

Results of Operations

Revenues

	Quarter Ended
(Dollars in millions)	December 31, 2010			January 1, 2010			Change		Percent
NPS	$	1,482		$	1,477		$	5		0.3	%
MSS		1,653			1,618			35		2.2
BSS		899			887			12		1.4
Corporate		5			4			1
Subtotal		4,039			3,986			53		1.3
Eliminations		(31	)		(33	)		2
Total Revenue	$	4,008		$	3,953		$	55		1.4

	Nine Months Ended
(Dollars in millions)	December 31, 2010			January 1, 2010			Change			Percent
NPS	$	4,583		$	4,617		$	(34	)		(0.7	)%
MSS		4,832			4,761			71			1.5
BSS		2,589			2,589			-			-
Corporate		12			13			(1	)
Subtotal		12,016			11,980			36			0.3
Eliminations		(91	)		(88	)		(3	)
Total Revenue	$	11,925		$	11,892		$	33			0.3

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The factors affecting the percent change in revenues for the third quarter and nine months ended December 31, 2010, are as follows:

	Quarter Ended
	Acquisitions			Approximate Impact of Currency Fluctuations			Net Internal Growth			Total
NPS		0.3	%		-			-			0.3	%
MSS		-			(1.0	)%		3.2	%		2.2
BSS		0.3			(1.4	)		2.5			1.4
Cumulative Net Percentage		0.2			(0.7	)		1.9			1.4

	Nine Months Ended
	Acquisitions			Approximate Impact of Currency Fluctuations			Net Internal Growth			Total
NPS		0.1	%		-			(0.8	)%		(0.7	)%
MSS		-			(1.0	)%		2.5			1.5
BSS		0.9			(1.2	)		0.3			-
Cumulative Net Percentage		0.2			(0.6	)		0.7			0.3

North American Public Sector

The Company's North American Public Sector revenues were generated from the following sources:

	Quarter Ended
(Dollars in millions)	December 31, 2010		January 1, 2010		Change			Percent
Department of Defense	$	1,141	$	1,074		67			6.2	%
Civil Agencies		301		353		(52	)		(14.7	)
Other(1)		40		50		(10	)		(20.0	)
Total North American Public Sector	$	1,482	$	1,477	$	5			0.3

	Nine Months Ended
(Dollars in millions)	December 31, 2010		January 1, 2010		Change			Percent
Department of Defense	$	3,424	$	3,405		19			0.6	%
Civil Agencies		1,007		1,062		(55	)		(5.2	)
Other(1)		152		150		2			1.3
Total North American Public Sector	$	4,583	$	4,617	$	(34	)		(0.7	)

(1)   Other revenues consist of state, local and select foreign government as well as commercial contracts performed by the North American Public Sector reporting segment.

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NPS revenue increased $5 million, or 0.3%, for the fiscal 2011 third quarter as compared to the same period in the prior year, and decreased $34 million, or 0.7%, for the nine months. Excluding a small acquisition made in the second quarter of fiscal 2011, third quarter revenue was flat year over year. Increases in Department of Defense (DOD) revenue were offset by declines in Civil Agencies and Other NPS revenue. The Defense growth was primarily due to contracts with the Department of Homeland Security and a classified agency, and additional work on a contract with the U.S. Navy.  The growth from these contracts offset declines from two U.S. Army contracts on which the tasking is coming to completion. The decline in the Civil Agencies revenue was driven by reduced tasking on contracts with the EPA, NASA, the Department of Transportation and the Census Bureau. Other revenue declined due to a reduction in revenue recognized on certain state Medicaid projects.

Multiple factors contributed to the decline in revenue for the nine months.  Within DOD, higher revenue for the nine months on several programs exceeded the adverse effects from reduced activity on two U.S. Army contracts on which tasking is coming to completion and from a second quarter fiscal 2010 $65 million claim settlement that increased prior year revenue but did not repeat in fiscal 2011. Higher other DOD revenue was primarily driven by increased tasking on two U.S. Navy contracts and new work for a classified agency the total of which contributed approximately $100 million of additional revenue.  However, Civil declines drove the overall NPS total down for the year, and came primarily from contracts with the Department of Health and Human Services, the Department of Transportation and the EPA that either ended or experienced a reduction in customer spending. These declines were partly offset by higher year over year revenue on the US Census contract.

NPS won $0.5 billion of new awards during the third quarter ($4.6 billion for the nine months), compared to $0.8 billion and $5.7 billion in the prior year third quarter and first nine months, respectively. Overall, revenue growth and contract awards continued to be impacted by a slowdown in the U.S. federal procurement environment, driven primarily by delayed contract awards and a higher rate of award protests.

Managed Services Sector

MSS revenue increased $35 million, or 2.2%, for the fiscal 2011 third quarter as compared to the same period in the prior year, and increased $71 million, or 1.5%, for the nine months. In constant currency, revenue increased 3.2% for the quarter and 2.5% for the nine months, with adverse currency effects in Europe partially offset by currency benefits in Australia. The overall MSS growth was primarily from a combination of new client engagements won in fiscal 2010 and 2011 which generated approximately $152 million and $437 million revenue during fiscal 2011 third quarter and nine months, respectively, as well as growth on existing accounts. The increases were partially offset by contract conclusions and terminations of $88 million for the quarter and $243 million for the nine months, plus volume or scope reductions of $68 million for the quarter and $157 million for the nine months.

A new $2.9 billion ten-year contract with a major financial institution commenced in late fiscal 2010 and, combined with increased scope on existing engagements for the same client, contributed $104 million and $270 million of the third quarter and nine month growth, respectively.  A new contract with the UK government commenced in the first half of fiscal 2010 and contributed $44 million of the nine month growth.

During the third quarter of fiscal 2011, MSS had contract awards of $1.0 billion, compared to $5.2 billion in the comparable prior fiscal period, and $3.0 billion for the nine months versus $6.6 billion in the prior year. Third quarter awards included new contracts and successful recompetes.

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Business Solutions and Services

BSS revenue increased $12 million, or 1.4%, for the fiscal 2011 third quarter as compared to the same period in the prior year, and was flat for the nine months. In constant currency, revenue increased 2.8% for the quarter and 1.2% for the nine months, with adverse currency effects in Europe partially offset by currency benefits in Australia.

Third quarter revenue growth was primarily from increases in the BSS consulting business in financial services, which contributed an incremental $18 million in fiscal 2011 revenue. The financial services group benefited from increased business process outsourcing services as well as from higher software and project-related services. Other consulting businesses grew in the Americas and in Europe’s western region, primarily France, but declines throughout the rest of Europe offset the growth, including lower revenue on the U.K.’s National Health Service (“NHS”) contract due to timing between quarters of milestone deliverables. Growth in BSS’ Australian staffing business and Asia’s hardware resale business contributed an additional $12 million of year over year revenue. Healthcare-related consulting business in the Americas region was down $5 million, primarily from the completion of a major contract with a large insurance company. In addition, the business continued to experience delays as the US industry grapples with the uncertainty of healthcare reform. A small acquisition at the end of fiscal 2011’s third quarter is expected to extend the Company’s presence in the Life Sciences market sector providing end-to-end business solutions for electronic regulatory submissions.

For the nine months, year over year revenue contributions of $26 million from small acquisitions in the second quarters of fiscal 2010 and 2011 were more than offset by the fiscal 2010 divestiture of a small Hong Kong value-added reseller business, which provided $74 million of revenue in fiscal 2010 versus none in the current year. Excluding the impacts of currency and the acquisitions and divestiture, BSS’ revenue rose approximately $78 million and 3.0% in the first nine months of fiscal 2011.

The primary drivers for the $78 million change were increases in the BSS consulting business in financial services and on NHS. Financial services growth of $59 million for the nine months was a result of higher business process outsourcing services revenue as well as increased software and project related services. Growth on the NHS program contributed approximately $18 million for the nine months. Other consulting business saw pockets of improvement, particularly in Europe’s western region, primarily France. Healthcare-related consulting business in the Americas region declined $27 million for the first nine months as a result of a contract conclusion and the continued uncertainty in the U.S. marketplace.

Revenue growth in BSS continued to come from a combination of new customers and incremental project work at existing customers. During the third quarter of fiscal 2011, BSS had contract awards of $0.8 billion, compared to $0.8 billion in the comparable prior year fiscal period, and $2.4 billion for the nine months versus $2.6 billion in the prior year. Collaboration between CSC’s BSS and MSS segments generated several successful wins in the quarter.

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The Company’s contract with the NHS to deliver an integrated electronic patient records system with an announced value of approximately $5.4 billion is a large and complex contract. In 2010, the NHS requested that the Company consider a reduction in contract value as a result of the U.K. government’s national austerity program and, as a result, the Company held discussions with the customer on the NHS contract regarding potential modifications that are likely to reduce the scope of the work and total contract value. Total contract value, based on proposals submitted to the NHS, is currently estimated to be reduced between $800 to $950 million. The Company and the NHS are continuing in discussions; however, the parties have not reached final agreement as to any reduction in scope of the work or total contract value. On February 4, 2011, the NHS formally notified the Company that it believes the Company's failure to achieve a key milestone related to the Pennine Care NHS Foundation Trust implementation by January 28, 2011, constitutes a breach of contract and the NHS is considering its position on termination of all or parts of the contract; however, the NHS has clarified that its notice was not intended to suggest that termination is the only option which it is considering and, in fact, the NHS is considering the full range of options it believes are avaialble to the NHS.  The Company has disputed the alleged breach and both parties are continuing to work toward completion of the Pennine implementation.  Both the NHS and the Company have indicated their intent to continue discussions regarding modifications to the contract with the agreed mutual intent to reach agreement as soon as practicable on terms satisfactory to both parties.  These modifications, if agreed, could result in a further reduction to total contract value in addition to the reduction described above.  The contract is currently profitable and the Company expects to recover its investment.  Future events, including the results of the current negotiations between the parties, could result in a charge to reduce the contract profitability recognized to date, reduced future profitability and have an adverse impact on the Company's cash flows.  See further discussion in Note 14 - Subsequent Event in the Notes to Consolidated Condensed Financial Statements as well as in the Liquidity and Capital Resources section of this MD&A.

Costs and Expenses

The Company's costs and expenses were as follows:

	Quarter Ended
	Amount						Percentage of Revenue						Percentage Point Change
(Dollars in millions)	December 31, 2010			January 1, 2010			December 31, 2010			January 1, 2010
Cost of services (excludes depreciation and amortization)	$	3,232		$	3,105			80.6	%		78.5	%		2.1	%
Selling, general and administrative		243			239			6.1			6.0			0.1
Depreciation and amortization		269			280			6.7			7.1			(0.4	)
Interest expense, net		35			44			0.9			1.1			(0.2	)
Other income, net		(2	)		(6	)		(0.1	)		(0.2	)		0.1
Total	$	3,777		$	3,662			94.2	%		92.5	%		1.7	%

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	Nine Months Ended
	Amount						Percentage of Revenue						Percentage Point Change
(Dollars in millions)	December 31, 2010			January 1, 2010			December 31, 2010			January 1, 2010
Cost of services (excludes depreciation and amortization)	$	9,611		$	9,476			80.6	%		79.7	%		0.9	%
Selling, general and administrative		734			732			6.2			6.1			0.1
Depreciation and amortization		798			825			6.7			6.9			(0.2	)
Interest expense, net		101			138			0.8			1.2			(0.4	)
Other income, net		(40	)		(15	)		(0.3	)		(0.1	)		(0.2	)
Total	$	11,204		$	11,156			94.0	%		93.8	%		0.2	%

MSS Out of Period Adjustments

The Company’s MSS segment incurred various nonrecurring adjustments, primarily in Europe’s Nordic region, netting to approximately $18 million of pre-tax charges in the third quarter and $58 million through the first nine months of fiscal 2011 that should have been recorded in prior years.  The net adjustments, combined with offsetting associated income tax effects, as well as certain unrelated out of period income tax benefits further discussed in Note 8, were immaterial to both prior year and expected current year consolidated results and financial position.

The charges resulted from accounting irregularities in the Nordic region and to a lesser extent, from accounting errors and misapplication of U.S. GAAP in the Nordic region and other parts of MSS.  These errors affected principally revenue, prepaid accounts, outsourcing contract costs, and other long-term liabilities.  In the aggregate, the Nordic region charges totaled $23 million in the third quarter and $81 million for the first nine months of fiscal 2011 and were partially offset by net credit adjustments related to MSS operations outside of the Nordic region totaling $5 million in the third quarter and $23 million in the first nine months of fiscal 2011.  The Company attributes a majority of the Nordic region adjustments for the first nine months of fiscal 2011 to suspected intentional misconduct of certain former employees in our Danish subsidiaries.  The Company is continuing to review these matters and has initiated a forensic investigation.  In addition, a formal civil investigation is being conducted by the SEC, with which the Company is cooperating. (See Part I, Item 4)

Costs of Services

Costs of services (COS) as a percentage of revenue increased 2.1 percentage points for the third quarter and 0.9 percentage points for the first nine months of fiscal 2011 to 80.6% and 80.6%, respectively. Higher cost ratios at MSS and NPS drove the third quarter change, while the nine month change was a result of a higher MSS ratio partially offset by improvements at BSS and NPS.

MSS’ COS ratio for the third quarter and first nine months was adversely impacted by the out of period adjustments noted above. Additionally in the Nordic region, operational issues including excess staffing capacity, performance issues and lower revenue also increased the COS ratio for the third quarter and nine months. The Company is addressing the operational issues as well as the factors that led to the out of period adjustments. The MSS third quarter COS ratio was further adversely impacted by higher start-up and transition expenses on several contracts.

Cost control measures taken in fiscal 2010 and continuing in fiscal 2011 partially offset the MSS issues noted above and drove ratio improvements in BSS for the quarter and nine months. BSS measures included salary and headcount reductions, facilities reductions in space and cost, as well as reduction in other discretionary spending including travel costs. MSS cost control measures included a workforce realignment comprising reductions and shifting to low cost regions as well as ongoing focus on containing discretionary spending and adjustments to incentive compensation.

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A higher year over year NPS COS ratio for the third quarter primarily resulted from a favorable EAC adjustment in the prior year that did not repeat in fiscal 2011’s third quarter. The fiscal 2010 adjustment of $23 million was on a majority-owned contract, and so a portion of the benefit was offset by an increased noncontrolling interest adjustment to record the minority partner’s share of earnings. Similar favorable EAC adjustments were recorded in fiscal 2011’s first and second quarter, resulting in a net favorable COS ratio comparison for the nine months of fiscal 2011 versus the prior year.

An adverse impact to both the NPS and MSS COS ratios for the year-over-year nine month comparison was a fiscal 2010 first quarter pension-related benefit that did not repeat in fiscal 2011. CSC recorded a $13 million reversal of a prior service credit resulting from the Company’s decision to freeze future benefits relating to salary and service for most participants in the U.S.-based Computer Sciences Corporation Employee Pension Plan. Approximately $7 million of the curtailment credit was in NPS and $6 million in MSS.

Selling, General and Administrative

Selling, general and administrative (SG&A) expense as a percentage of revenue increased 0.1 percentage point for both the third quarter and the first nine months of fiscal 2011 as compared to the prior year. Lower overall Corporate G&A expenses in fiscal 2011’s third quarter and first nine months benefited the consolidated SG&A ratio, but were offset by higher ratios in MSS and BSS in the third quarter and a higher BSS ratio for the nine months.

MSS’ higher SG&A ratio in the third quarter primarily resulted from increased spending on bid and proposal projects as well as on increased pre-sales and market development activities in the MSS global applications market. The higher third quarter ratio offset improvements in prior quarters that resulted from ongoing cost control actions at MSS, including workforce realignments and discretionary spending. MSS continues to realign both its direct and indirect workforce, benefiting both SG&A and COS ratios, and now has low cost centers in over a dozen locations worldwide.

Ongoing cost control actions in BSS were more than offset by other drivers that pushed the BSS ratio higher for the third quarter and first nine months of fiscal 2011.  The drivers primarily related to higher fiscal 2011 costs resulting from two recent acquisitions, bonus and pension accruals as well as increased spending in support of the Company’s vertical strategy.

Depreciation and Amortization

Depreciation and amortization (D&A) as a percentage of revenue decreased by 0.4 percentage points for the third quarter and decreased 0.2 percentage points for the first nine months of fiscal 2011. Lower D&A expense across the Company, particularly at MSS and BSS, drove the improvements for the quarter and nine months. The Company’s ongoing program to reduce capital spending positively impacted the total dollar spend as well as the ratios. In particular, lower fiscal 2010 capital expenditures were the primary driver of the improvements. In addition, contract conclusions and terminations at MSS in fiscal 2011 resulted in the sale of assets back to customers, thus reducing ongoing deprecation. Partially offsetting the drivers toward lower D&A ratios were asset acquisitions and associated contract costs in fiscal 2011 for new contracts.

Interest Expense, Net

Interest expense, net of interest income, declined $9 million in the fiscal 2011 third quarter as compared to the same period in the prior year, and declined $37 million for the nine months. The decline is a combination of lower interest expense and higher interest income during both the third quarter and first nine months of fiscal 2011.

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The lower interest expense is primarily a result of a lower level of debt during the third quarter and the nine months of fiscal 2011 when compared to comparable periods of fiscal 2010, primarily due to repayment of the 7.375% $500 million term notes in the fourth quarter of fiscal 2010, and repayment of the $1.5 billion credit facility in the third quarter of fiscal 2011. Partially offsetting the lower interest expense on the term notes and the credit facility was higher interest expense due to increased borrowing on account of capital leases and other long-term asset financing during the third quarter and first nine months of fiscal 2011, as compared to the prior year.

Interest income is higher primarily as a result of increases in the non-US cash and cash equivalents balances at December 31, 2010 versus January 1, 2010.

Other Income, Net

Other income decreased $4 million for the third quarter of fiscal 2011 as compared to the same period in the prior year, and increased $25 million for the nine months.  The decrease in the third quarter is primarily due to the impact of changes in foreign currency exchange rates on the Company’s foreign currency denominated assets and liabilities and related hedges.  The increase in the nine months of fiscal 2011 was primarily a result of gains from sale of a set of sub-contracts within the NPS of $26 million, and sale of certain non-controlling interests in other businesses of $6 million, offset by reduced equity in earnings of unconsolidated affiliates and impact of foreign currency exchange rates.

Taxes

The effective tax rate for the fiscal 2011 third quarter and nine months was (5.2%) and 19.0%, respectively, as compared to 25.8% and 22.6% for the equivalent prior year periods.  The decrease in the effective tax rate for the third quarter and nine months ended December 31, 2010 was primarily due to income tax benefits recognized  related to research and development (“R&D”) credits of 27.9% and 9.0%, respectively.  The R&D credit benefits were primarily composed of new credits resulting from the passage of tax legislation, which extended the credits, and tentative agreements related to the current IRS exam cycle.  In addition, the Company generated greater US foreign tax credits in the current fiscal year than in the prior fiscal year, which provided a benefit to the effective tax rate for the third quarter and nine months ended December 31, 2010 of 7.5% and 2.4%, respectively.  Additionally, the year-to-date rate benefited from the recognition of out of period adjustments of approximately $22 million of which $8 million was recorded in the third quarter of fiscal year 2011.

As of December 31, 2010, in accordance with ASC 740-10 (FASB Interpretation No. 48), the Company’s liability for uncertain tax positions was $452 million, which is included in non current liabilities on the Company’s balance sheet, including interest of $83 million and penalties of $28 million.

The liability for uncertain tax positions decreased by approximately $34 million during the current nine month period primarily due to tentative agreements with tax authorities during the current IRS exam cycle related to prior year R&D credits.  This amount is included in the income tax benefits for R&D credits referenced above.  There were no material changes to accrued interest and penalties as of the third quarter of fiscal 2011, as compared to the end of fiscal 2010.

Interest expense on existing uncertain tax positions, included in the tax provision is expected to continue to accrue at approximately $2 million quarterly (net of tax benefit), before the effect of compounding or changes in interest rates, until payments are made or the underlying uncertain tax positions are resolved in the Company’s favor.  The Company is unable to predict when these events may occur.

Earnings per Share

Earnings per share on a diluted basis increased $0.18 and $0.02 for the third quarter and nine months in fiscal 2011 as compared to fiscal 2010. The increase is primarily due to the increase in net income attributable to CSC common shareholders by 14.7% for the third quarter and 2.0% for the nine month period. The impact of increase in net income was partially offset by an increase in the weighted average common shares and common stock equivalents during both the third quarter and the nine month period due to the year-over-year appreciation in the Company’s stock price.

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Net income attributable to CSC common stockholders increased $31 million and $11 million, for the third quarter and nine months in fiscal 2011 as compared to fiscal 2010, primarily due to income tax benefits from reduction of uncertain tax liabilities related to R&D credits, and creation of greater US foreign tax credits in the current fiscal year than in the prior fiscal year.

Financial Condition

Cash Flows

The Company’s cash flows were as follows:

	Nine Months Ended
(Amounts in millions)	December 31, 2010			January 1, 2010
Net cash provided by operating activities	$	804		$	407
Net cash used in investing activities		(735	)		(514	)
Net cash (used in) provided by financing activities		(1,263	)		114
Effect of exchange rate changes on cash and cash equivalents		39			123
Net (decrease) increase in cash and cash equivalents		(1,155	)		130
Cash and cash equivalents at beginning of year		2,784			2,297
Cash and cash equivalents at quarter end	$	1,629		$	2,427

Net cash provided by operations for the nine months of fiscal 2011 was $397 million higher than for the comparable period of fiscal 2010. The increase was primarily driven by lower vendor and supplier payments due to timing, increased collections from customers, reduced interest payments due to early retirement of the 7.375% $500 million term notes in the fourth quarter fiscal 2010 and repayment of the $1.5 billion credit facility in third quarter of fiscal 2011, and lower cash taxes paid.

Net cash used in investing activities for the nine months of fiscal 2011 was $221 million higher than for the comparable period of fiscal 2010. The increase was driven by payments for four business acquisitions partially offset by proceeds received from a divestiture, higher purchases of equipment and software for new and existing outsourcing contracts, and increased corporate assets.

Net cash used for financing activities for the nine months of fiscal 2011 was $1,263 million, a $1,377 million increase over the $114 million provided by financing activities for the comparable period of fiscal 2010. This increase was primarily due to repayment of the $1.5 billion credit facility partially offset by increased borrowings against commercial paper.  In addition, there were higher repayments on the Company’s long term capital leases and other long-term asset financing obligations.  The Company also commenced paying dividends to CSC common stockholders during fiscal 2011.

Foreign currency exchange rate movements, primarily in the British pound and Euro, adversely impacted the year over year comparison of the change in cash and cash equivalents by $84 million for the first nine months of fiscal 2011.

Free cash flow for the first nine months of fiscal 2011 was an inflow of $110 million as compared to an outflow of $140 million in the prior comparable period, an increase of $250 million. The improved free cash flow was due to higher operating cash flows offset by higher purchases of property and equipment and repayment of capital leases and other long-term asset financing obligations, as noted above.

Contractual Obligations

The Company has contractual obligations in respect of its long-term debt, capital and operating leases, minimum purchase contracts, bank debt and other liabilities, as summarized in the “Off Balance Sheet Arrangements and Contractual Obligations” section of the Company’s Annual Report on Form 10-K for the year ended April 2, 2010.  In addition, the Company has liabilities related to unrecognized tax benefits; however, the Company cannot reasonably estimate the timing or the amount of cash out flows for future tax settlements.

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Liquidity and Capital Resources

The balance of cash and cash equivalents was $1.6 billion at December 31, 2010, and $2.8 billion at April 2, 2010. The decreased balance is primarily a result of financing cash outflows of $1,263 million, partially offset by operating cash inflows of $804 million and investing cash outflows of $735 million during the nine month period of fiscal 2011.

Equity during the nine month period of fiscal 2011 increased $714 million, primarily from net income attributable to CSC shareholders of $569 million and the increase in accumulated other comprehensive income (AOCI) of $161 million. Increase in AOCI was due to an increase in foreign currency translation adjustments of $83 million and a reduction in the unfunded pension adjustment primarily related to the curtailment of U.K. pension plans of $78 million. The total increase in equity was partially offset by dividends declared of $77 million.

At the end of the first nine months of fiscal 2011, CSC’s ratio of debt to total capitalization was 28.0%, down from 36.5% at the end of fiscal year 2010. The following table summarizes the Company’s debt to total capitalization ratios as of the end of the third quarter of fiscal 2011 and as of fiscal year end 2010.

	As of
Dollars in millions	December 31, 2010			April 2, 2010
Debt	$	2,814		$	3,744
Equity		7,222			6,508
Total capitalization	$	10,036		$	10,252
Debt to total capitalization		28.0	%		36.5	%

At December 31, 2010, the Company had $471 million of short-term borrowings, primarily comprised of $335 million of short-term commercial paper and $112 million of current maturities of long-term debt. In addition, the Company had $2,343 million of long-term debt.

The Company’s contract with the U.K.’s National Health Service (“NHS”) to deliver an integrated electronic patient records system with an announced value of approximately $5.4 billion is a large and complex contract and is included in the BSS segment.  As of December 31, 2010, the Company had a net investment in the contract of approximately $894 million, or 582 million pounds sterling.  Contract assets consist principally of contract work in progress and unbilled receivables but also equipment, software and other assets.  In 2010, the NHS requested that the Company consider a reduction in contract value as a result of the U.K. government’s national austerity program and, as a result, the Company held discussions with the customer on the NHS contract regarding potential modifications that are likely to reduce the scope of the work and total contract value.  Total contract value, based on proposals submitted to the NHS, is currently estimated to be reduced between $800 to $950 million, or 500 to 600 million pounds sterling.  The Company and the NHS are continuing in discussions; however, the parties have not reached final agreement as to any reduction in scope of the work or total contract value.

Implementation of the software release known as Lorenzo Release 1.9 at the fourth early adopter, Pennine Care NHS Foundation Trust, has been delayed and is now expected to occur in the first quarter of fiscal year 2012.  On February 4, 2011, the NHS formally notified the Company that it believes the Company’s failure to achieve a key milestone related to the Pennine implementation by January 28, 2011, constitutes a breach of contract and the NHS is considering its position on termination of all or parts of the contract; however, the NHS has clarified that its notice was not intended to suggest that termination is the only option which it is considering and, in fact, the NHS is considering the full range of options it believes are available to the NHS.  The Company has disputed the alleged breach and both parties are continuing to work toward completion of the Pennine implementation.  Both the NHS and the Company have indicated their intent to continue discussions regarding modifications to the contract with the agreed mutual intent to reach agreement as soon as practicable on terms satisfactory to both parties.  These modifications, if agreed, could result in a further reduction to total contract value in addition to the reduction described above.  The contract is currently profitable and the Company expects to recover its investment.  Future events, including the results of the current negotiations between the parties, could result in a charge to reduce the contract profitability recognized to date, reduced future profitability and have an adverse impact on the Company’s cash flows.

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As previously disclosed, the Company’s board of directors approved a new share repurchase program authorizing up to $1.0 billion in share repurchases of the Company’s outstanding common stock.  The Company plans to use available cash to repurchase stock on the open market in compliance with SEC Rule 10b-18.  The timing, volume, and nature of share repurchases will be at the discretion of management, and may be suspended or discontinued at any time.  The Company’s board has not established an end date for the new repurchase program.

Continued global economic uncertainty could also pose a risk to the Company’s business as customers and suppliers may be unable to obtain financing to meet payment or delivery obligations to the Company. In addition, customers may decide to downsize, defer or cancel contracts which could negatively affect revenue.  The Company continues to actively monitor the financial markets. Although the condition of the capital markets continues to be volatile, the Company believes it will continue to have access to the capital markets if the need arises. However, the volatility in the financial markets could directly affect the cost and terms of any future financing.

It is management's opinion that the Company will be able to meet its liquidity and cash needs for the foreseeable future through a combination of cash flows from operating activities, cash balances, and other financing activities, including unused borrowing capacity, the issuance of debt and/or equity securities, and/or the exercise of the put option with Equifax described in the Company's Form 10-K.

Recent Accounting Pronouncements and Critical Accounting Estimates

Recent accounting pronouncements and the anticipated impact to the Company are described in the notes to the interim consolidated condensed financial statements included in this Form 10-Q as well as in the Company's Annual Report on Form 10-K for the year ended April 2, 2010.

The Company has identified several critical accounting estimates which are described in "Management's Discussion and Analysis" of the Company’s Annual Report on Form 10-K for fiscal 2010.  An accounting estimate is considered critical if both: (a) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimates and assumptions would have a material effect on the consolidated financial statements.  The Company's critical accounting estimates relate to: revenue recognition and cost estimation on long-term, fixed-price contracts; revenue recognition on software license sales that require significant customization; capitalization of outsourcing contract costs and software development costs; assumptions related to purchase accounting and goodwill; assumptions to determine retirement benefits costs and liabilities; and assumptions and estimates used to analyze legal and tax contingencies.  Modifications to contract scope, schedule, and price may be required on development contracts accounted for on a percentage-of-completion basis and other contracts with the U.S. federal government.  Accounting for such changes prior to formal contract modification requires evaluation of the characteristics and circumstances of the effort completed and assessment of probability of recovery.  If recovery is deemed probable, the Company may, as appropriate, either defer the costs until the parties have agreed on the contract change or recognize the costs and related revenue as current period contract performance.  The Company routinely negotiates such contract modifications.  For all these estimates, we caution that future events may not develop as forecast, and the best estimates routinely require adjustment.

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PART I, ITEM 3.  QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company's market risk associated with interest rates and foreign currencies as of December 31, 2010, see "Quantitative and Qualitative Disclosures about Market Risk" in the Part II, Item 7A, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2010. For the nine months ended December 31, 2010, there has been no significant change in related market risk factors.

PART I, ITEM 4.  CONTROLS AND PROCEDURES

“Disclosure controls and procedures” are the controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in its Exchange Act reports is accumulated and communicated to the issuer’s management, including its principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

Under the direction of the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated its disclosure controls and procedures as of December 31, 2010. As previously reported in the second quarter, we identified deficiencies that aggregated to a material weakness in our internal control over financial reporting. These deficiencies are related to a lack of appropriate tone at the top of the MSS Nordic business unit combined with inadequate MSS segment monitoring controls over the financial position and results of operations, and a deterioration of the effectiveness of certain account reconciliations.

These deficiencies were identified in a review of the Company’s MSS business and reviews of the Company’s monitoring controls during the second and third quarters. The review of the MSS Nordic business revealed accounting irregularities and errors resulting in adjustments that should have been recorded in prior years (refer to Management’s Discussion and Analysis “MSS Out-of-Period Adjustments”). As a result of this material weakness in the operating effectiveness of our controls, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2010.

Changes in Internal Controls

“Internal controls over financial reporting” is a process designed by, or under the supervision of, the issuer’s principal executive and financial officers, and effected by the issuer’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1)   pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

(2)   provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorization of management and directors of the issuer; and

(3)   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the consolidated financial statements.

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During the quarter ended October 1, 2010, we identified a material weakness in our internal control over financial reporting as mentioned above. The Company has developed a remediation plan and has initiated measures to address deficiencies associated with the material weakness. These measures include the replacement of certain managers and staff, strengthened controllership responsibilities, improved monitoring controls and oversight, and increased discipline associated with account reconciliations. During the second and third quarters, the Company has strengthened the financial organization through recruitment and replacement of personnel.  In addition to our ongoing Company-wide ethics and compliance programs, management has conducted focused training for MSS Nordic employees to emphasize the importance of adherence to CSC management principles, code of conduct and ethical policies and business practices in the conduct of our business.

During the third quarter, the Company improved controls over key processes in the Nordic business affected by the out of period adjustments described in Note 1 of Notes to Consolidated Condensed Financial Statements.  The Company has initiated remediation of MSS oversight and monitoring controls, including account reconciliations, is continuing its review of the MSS Nordic business, and has initiated a forensic investigation.

On January 28, 2011, the Company was notified by the SEC that the SEC has commenced a formal civil investigation relating to the accounting adjustments identified by the Company during the quarter ended October 1, 2010, and disclosed in the Form 10-Q filed on November 10, 2010.  The Company is cooperating with the SEC’s investigation.

Part II.  Other Information

Item 1. Legal Proceedings

The information required by this Item is set forth in Note 13, Commitments & Contingencies of the notes to the unaudited consolidated condensed financial statements under the caption “Contingencies”, contained in Part I - Item 1 of this filing.  Such information is incorporated herein by reference and made a part hereof.

Item 1A.  Risk Factors

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.

1.   Our business may be adversely impacted as a result of changes in demand, both globally and in individual market segments, for information technology outsourcing, business process outsourcing and consulting and systems integration services.

Economic and political uncertainty may adversely impact our customers’ demand for our services.  A general economic downturn, such as the current worldwide economic dislocation, has and may continue to adversely affect our customers’ demand for consulting and systems integration services.  Our NPS segment generated approximately 38% of our revenue for the first nine months of fiscal 2011.  While the pipeline for government projects continues to be generally less affected by economic downturns, the U.S. budget deficit, the cost of rebuilding infrastructure as a result of natural disasters, the cost of reconstruction in Iraq, the ongoing conflicts in Iraq and Afghanistan, and the financial industry liquidity crisis may reduce the U.S. federal government’s demand and available funds for information technology projects, adversely impacting our NPS segment and our business.

2.   Our ability to continue to develop and expand our service offerings to address emerging business demands and technological trends will impact our future growth.  If we are not successful in meeting these business challenges, our results of operations and cash flows will be materially and adversely affected.

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Our ability to implement solutions for our customers incorporating new developments and improvements in technology which translate into productivity improvements for our customers and to develop service offerings that meet the current and prospective customers’ needs are critical to our success.  The markets we serve are highly competitive.  Our competitors may develop solutions or services which make our offerings obsolete.  Our ability to develop and implement up to date solutions utilizing new technologies which meet evolving customer needs in consulting and systems integration and technology outsourcing markets will impact our future revenue growth and earnings.

3.   Our primary markets, technology outsourcing and consulting and systems integration, are highly competitive markets.  If we are unable to compete in these highly competitive markets, our results of operations will be materially and adversely affected.

Our competitors include large, technically competent and well capitalized companies.  As a result, the markets which we serve are highly competitive.  This competition may place downward pressure on operating margins in our industry, particularly for technology outsourcing contract extensions or renewals.  As a result, we may not be able to maintain our current operating margins for technology outsourcing contracts, extended or renewed in the future.

Any reductions in margins will require that we effectively manage our cost structure.  If we fail to effectively manage our cost structure during periods with declining margins, our results of operations will be adversely affected.

4.   Our ability to raise additional capital for future needs will impact our ability to compete in the markets we serve.

We may require additional capital to purchase assets, complete strategic acquisitions, or for general liquidity needs.  Declines in our credit rating or limits on our ability to sell additional shares may adversely affect our ability to raise additional capital at a reasonable cost and may adversely impact our revenue growth and the price of our stock.

5.   Our ability to consummate and integrate acquisitions may materially and adversely affect our profitability if we fail to achieve anticipated revenue improvements and cost reductions.

Our ability to successfully integrate the operations we acquire and leverage these operations to generate revenue and earnings growth will significantly impact future revenue and earnings as well as investor returns.  Integrating acquired operations is a significant challenge and there is no assurance that the Company will be able to manage the integrations successfully.  Failure to successfully integrate acquired operations may adversely affect our cost structure thereby reducing our margins and return on investment.

6.   We could suffer losses due to asset impairment charges.

We test our goodwill for impairment during the second quarter every year, and on an interim date should events or changes in circumstances indicate the carrying value of goodwill may not be recoverable in accordance with ASC 350 (SFAS No. 142, “Goodwill and Other Intangible Assets”). If the fair value of a reporting unit is revised downward due to declines in business performance or other factors, an impairment under ASC 350 could result and a non-cash charge could be required. This could materially affect our reported net earnings.

We also test certain deferred costs associated with contract acquisitions 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 the 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.  These impairments could materially affect our reported net earnings.

7.   Our customers may experience financial difficulties or may request out-of-scope work, and we may not be able to collect our receivables, materially and adversely affecting our profitability.

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Over the course of a long-term contract, our customers’ financial fortunes may change affecting their ability to pay their obligations and our ability to collect our fees for services rendered.  Additionally, we may perform work for the federal government, for 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 customers in support of their 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 success is not guaranteed.  Failure to collect our receivables or prevail on our claims would have an adverse affect on our profitability.

8.   If we are unable to accurately estimate the cost of services and the timeline for completion of contracts, the profitability of our contracts may be materially and adversely affected.

Our commercial and federal government contracts are typically awarded on a competitive basis.  Our bids are based upon, among other items, the cost to provide the services.  To generate an acceptable return on our investment in these contracts we must be able to accurately estimate our costs to provide the services required by the contract and to be able to complete the contracts in a timely manner.  If we fail to accurately estimate our costs or the time required to complete a contract, the profitability of our contracts may be materially and adversely affected.

9.   We are defendants in pending litigation which may have a material and adverse impact on our profitability.

As noted in Item 3, Legal Proceedings, 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 charges which may have a material and adverse impact on our liquidity and earnings.

We are engaged in providing services under contracts with the U.S. government.  These contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. government investigate whether our operations are being conducted in accordance with these requirements.  U.S. government investigations of us, whether related to the Company’s federal government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future U.S. government contracting.

10.   Our ability to provide our customers with competitive services is dependent on our ability to attract and retain qualified personnel.

Our ability to grow and provide our customers with competitive services is partially dependent on our ability to attract and retain highly motivated people with the skills to serve our customers.  As we noted above, the markets we serve are highly competitive and competition for skilled employees in the technology outsourcing and consulting and systems integration markets is intense for both on-shore and offshore locales.

In addition, services for some government clients require personnel with security clearances.  Qualified personnel with security clearances are in very high demand.

11.   Our international operations are exposed to risks, including fluctuations in exchange rates, which may be beyond our control.

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For fiscal 2010, approximately 37% of recognized revenues were denominated in currencies other than the U.S. dollar. As a result, we are exposed to various risks associated with operating in multiple countries including exposure to fluctuations in currency exchange rates. While this risk is partially mitigated by largely matching costs with revenues in a given currency, our exposure to fluctuations in other currencies against the U.S. dollar increases as revenue in currencies other than the U.S. dollar increase and as more of the services we provide are shifted to lower cost regions of the world. We believe that the percentage of our revenue denominated in currencies other than the U.S. dollar will continue to represent a significant portion of our revenue. Also, we believe that some of our ability to match revenue and expenses in a given currency will decrease as more work is performed at offshore locations.

We operate in approximately 90 countries and our operations in these countries are subject to the local legal and political environments. Our operations are subject to, among other things, employment, taxation, statutory reporting, trade restrictions and other regulations. Notwithstanding our best efforts, we may not be in compliance with all regulations around the world and may be subject to penalties and/or fines as a result. These penalties or fines may materially and adversely impact our profitability.

12.   Our ability to compete in certain markets we serve is dependent on our ability to continue to expand our capacity in certain offshore locations.  However, as our presence in these locations increases, we are exposed to risks inherent to these locations which may adversely impact our revenue and profitability.

A significant portion of our application outsourcing and software development activities have been shifted to India and we plan to continue to expand our presence there and in other lower cost locations.  As such, we are exposed to the risks inherent to operating in India including (1) a highly competitive labor market for skilled workers which may result in significant increases in labor costs as well as shortages of qualified workers in the future, (2) the possibility that the U.S. federal government or the European Union may enact legislation which may provide significant disincentives to customers to offshore certain of their operations which would reduce the demand for the services we provide in India and may adversely impact our cost structure and profitability.

13.   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.

The solutions we provide to our customers may inadvertently infringe on the intellectual property rights of third parties resulting in claims for damages against us or our customers.  Our contracts generally indemnify our clients from claims for intellectual property infringement for the services and equipment we provide under our contracts.  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.

14.   Generally our contracts contain provisions under which a customer may terminate the contract prior to completion.  Early contract terminations may materially and adversely affect our revenues and profitability.

Our contracts contain provisions by which customers may terminate the contract prior to completion of the term of the contract.  These contracts generally allow the customer to terminate the contract for convenience upon providing written notice.  In these cases, we seek, either by defined contract schedules or through negotiations, recovery of our property, plant, equipment, outsourcing costs, investments, and other intangibles.  There is no assurance we will be able to fully recover our investments.

We may not be able to replace the revenue and earnings from these contracts in the short-term.  In the long-term, our reputation may be harmed by the publicity generated from contract terminations.

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15.   We have identified a material weakness in our internal control over financial reporting.

We are required under the Sarbanes-Oxley Act of 2002 to provide a report from management to our shareholders on our internal control over financial reporting including an assessment of the effectiveness of these controls to provide reasonable assurance a material misstatement will not occur in our financial statements.  The failure of our controls to provide reasonable assurance that a material misstatement does not exist or to detect a material misstatement may cause us to be unable to meet our filing requirements and the resulting negative publicity may adversely affect our business, and our stock price may be materially and adversely affected.

In the second quarter of fiscal 2011, we identified a material weakness in our internal control over financial reporting as further described in Part I, Item 4, “Controls and Procedures.”  As of December 31, 2010, we concluded that internal control over financial reporting was not effective.  Inability to maintain effective internal control over financial reporting could adversely affect our financial results, the market price of our common stock, and our operations.

16.   Our largest customer, the U.S. federal government, accounts for a significant portion of our revenue and earnings.  Inherent in the government contracting process are various risks which may materially and adversely affect our business and profitability.

Our exposure to the risks inherent in the government contracting process is material.  These risks include government audits of billable contract costs and reimbursable expenses, project funding and requests for equitable adjustment, compliance with government reporting requirements as well as the consequences if improper or illegal activities are discovered.

If any of these should occur, our reputation may be adversely impacted and our relationship with the government agencies we work with may be damaged, resulting in a material and adverse effect on our profitability.

17.   Our performance on contracts, including those on which we have partnered with third parties, may be adversely affected if we or the third parties fail to deliver on commitments.

Our contracts are increasingly complex, and in some instances, require that we partner with other parties including software and hardware vendors to provide the complex solutions required by our customers.  Our ability to deliver the solutions and provide the services required by our customers is dependent on our and our partners' ability to meet or customers' delivery schedules.  If we or our partners fail to deliver services or products on time, our ability to complete the contract may be adversely affected, which may have a material and adverse impact on our revenue and profitability.

If we are the primary contractor and our partners fail to perform as agreed, we may be liable to our customers for penalties or lost profits.  These penalties or payments for lost profits may have a material adverse effect on our profitability.

18.   Our inability to protect client information could impair our reputation, and we could suffer significant financial loss.

As one of the larger companies in the IT and professional services industry, we are subject to potentially adverse impacts if sensitive client information is unintentionally lost, stolen, or compromised.  We are responsible for substantial amounts of sensitive client information which often includes confidential, private, and financial records.  Failure to protect our clients could result in reparation costs and loss of business that may negatively impact our reputation and earnings.

19.   Changes in the Company’s tax rates could affect its future results.

The Company’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or by changes in tax laws or their interpretation.  The Company is subject to the continuous examination of its income tax returns by the U.S. Internal Revenue Service and other tax authorities.  The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for taxes.  There can be no assurance that the outcomes from these examinations will not have a material adverse effect on the Company’s financial condition and operating results.

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The Company’s effective tax rate is reduced because certain earnings are treated as being permanently reinvested outside the U.S.  The provision that we currently rely on to defer U.S. taxation on certain passive earnings has currently expired, but we believe that this provision will be extended through fiscal year 2011.  In the event that the provision is not extended after fiscal year 2010, the U.S. tax imposed could adversely impact our effective tax rate.  There are a number of legislative revenue proposals pending that contain international tax provisions which may adversely affect our results, should they be enacted.

20.   We may be adversely affected by disruptions in the credit markets, including reduced access to credit and higher costs of obtaining credit.

The credit markets have historically been volatile and therefore it is not possible for the Company to predict the ability of its clients and customers 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 the Company’s business as customers and suppliers may be unable to obtain financing to meet payment or delivery obligations to the Company.  In addition, customers may decide to downsize, defer or cancel contracts which could negatively affect revenue.

21.   Our foreign currency hedging program is subject to counterparty default risk.

The Company enters into numerous types of financing arrangements with a wide array of counterparties related to foreign currency forward contracts and purchased options.  As of December 31, 2010, the Company had outstanding foreign currency forward contracts with a notional value of $361 million and outstanding purchased option contracts with a notional value of $121 million. The terms of these contracts are often customized and complex.  As a result, the Company is subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract.  During this current global economic downturn, the counterparty’s financial condition may deteriorate rapidly and with little notice and we may be unable to take action to protect our exposure.  In the event of a counterparty default, we could incur significant losses, which may harm our business and financial condition.  In the event that one or more of our counterparties becomes insolvent or files for bankruptcy, our ability to eventually recover any losses suffered as a result of that counterparty’s default may be limited by the liquidity of the counterparty.

22.   We derive significant revenue and profit from contracts awarded through a competitive bidding process, which can impose substantial costs on us, and we will not achieve revenue and profit objectives if we fail to compete effectively.

We derive significant revenue and profit from contracts that are awarded through a competitive bidding process. We expect that most of the government business we seek in the foreseeable future will be awarded through competitive bidding. Competitive bidding imposes substantial costs and presents a number of risks, including:

·   the substantial cost and managerial time and effort that we spend to prepare bids and proposals for contracts that may or may not be awarded to us;

·   the need to estimate accurately the resources and costs that will be required to service any contracts we are awarded, sometimes in advance of the final determination of their full scope; 

·   the expense and delay that may arise if our competitors protest or challenge awards made to us pursuant to competitive bidding, and the risk that such protests or challenges could result in the requirement to resubmit bids, and in the termination, reduction, or modification of the awarded contracts; and

·   the opportunity cost of not bidding on and winning other contracts we might otherwise pursue.

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23.   Catastrophic events or climate conditions may disrupt CSC’s business.

The Company and its customers are subject to various federal, state, local and foreign government requirements relating to the protection of the environment. Our revenues and results of operations may be adversely affected by the passage of climate change and other environmental legislation and regulations.  For example, new legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent that such requirements increase prices charged to us by vendors because of increased compliance costs.  At this point, we are unable to determine the impact that climate change and other environmental legislation and regulations could have on our overall business.

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

(a) None

(b) None

(c) Purchases of Equity Securities

The following table provides information on a monthly basis for the quarter ended December 31, 2010, with respect to the Company’s purchase of equity securities:

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
October 2, 2010 to October 29, 2010		-	$	-		-	$	-
October 30, 2010 to November 26, 2010		-	$	-		-	$	-
November 27, 2010 to December 31, 2010		3,401	$	48.49		-			(2)

(1)   The Company accepted 2,224 shares of its common stock in the quarter ended December 31, 2010, from employees in lieu of cash due to the Company in connection with the release of shares of common stock.  Such shares of common stock are stated at cost and held as treasury shares to be used for general corporate purposes.

The Company accepted 1,177 shares of its common stock in the quarter ended December 31, 2010, from employees in lieu of cash due to the Company in connection with the exercise of stock options.  Such shares of common stock are stated at cost and held as treasury shares to be used for general corporate purposes.

(2)   On December 13, 2010, the Company publicly announced that its board of directors approved a new share repurchase program authorizing up to $1 billion in share repurchases of the Company’s outstanding common stock.  CSC expects to implement the program through purchases made in open market transactions in compliance with Securities and Exchange Commission Rule 10b-18, subject to market conditions, and applicable state and federal legal requirements.  Share repurchases will be funded with available cash.  The timing, volume, and nature of share repurchases will be at the discretion of management, and may be suspended or discontinued at any time.  CSC’s Board has not established an end date for the new repurchase program.

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Item 6.  Exhibits

Exhibit Number		Description of Exhibit
	3.1	Amended and Restated Articles of Incorporation filed with the Nevada Secretary of State on August 9, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal Quarter ended July 2, 2010)
	3.2	Amended and Restated Bylaws, effective December 12, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated December 12, 2010)
	4.1	Indenture dated as of March 3, 2008, for the 5.50% senior notes due 2013 and the 6.50% senior notes due 2018 (incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K dated September 15, 2008)
	10.1	1998 Stock Incentive Plan(1) (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 1998)
	10.2	2001 Stock Incentive Plan(1) (incorporated by reference to Appendix B to the Company's Proxy Statement for the Annual Meeting of Stockholders held on August 13, 2001)
	10.3	Schedule to the 2001 Stock Incentive Plan for United Kingdom personnel(1) (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2004)
	10.4	2004 Incentive Plan(1) (incorporated by reference to Appendix B to the Company's Proxy Statement for the Annual Meeting of Stockholders held on August 9, 2004)
	10.5	2007 Employee Incentive Plan(1)  (incorporated by reference to Appendix B to the Company Proxy Statement for the Annual Meeting of Stockholders held on July 30, 2007)
	10.6	Form of Award Agreement for Employees(1)
	10.7	Form of Stock Option Agreement for Employees(1)
	10.8	Form of International Stock Option Agreement for Employees(1)
	10.9	Form of Restricted Stock Agreements for Employees(1) (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2005)

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Exhibit Number		Description of Exhibit
	10.10	Form of Service-Based Restricted Stock Unit Agreement for Employees(1)
	10.11	Form of Performance-Based Restricted Stock Unit Agreement for Employees(1)
	10.12	Form of Career Shares Restricted Stock Unit Agreement for Employees(1)
	10.13	Form of Senior Management and Key Employee Severance Agreement, as amended and restated effective May 20, 2009(1) (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the fiscal year ended April 3, 2009)
	10.14	Supplemental Executive Retirement Plan, amended and restated effective December 3, 2007(1) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 4, 2007)
	10.15	Supplemental Executive Retirement Plan No. 2, effective December 3, 2007(1) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 4, 2007)
	10.16	Excess Plan, effective December 3, 2007(1) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated December 4, 2007)
	10.17	Deferred Compensation Plan, amended and restated effective December 3, 2007(1) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated December 4, 2007)
	10.18	Severance Plan for Senior Management and Key Employees, amended and restated effective October 28, 2007(1) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated November 1, 2007)
	10.19	Amended and Restated Management Agreement with Michael W. Laphen, effective December 20, 2010(1)
	10.20	Senior Management and Key Employee Severance Agreement dated August 11, 2003, with Michael W. Laphen(1) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 12, 2007)

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Exhibit Number		Description of Exhibit
	10.21	Amendment No. 1 to Senior Management and Key Employee Severance Agreement dated December 10, 2007, with Michael W. Laphen(1) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 12, 2007)
	10.22	Form of Indemnification Agreement for directors and officers (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 18, 2010)
	10.23	2010 Non-Employee Director Incentive Plan (incorporated by reference to Exhibit E to the Company’s Definitive Proxy Statement, dated June 25, 2010, for the Annual Meeting of Stockholders held on August 9, 2010)
	10.24	1997 Nonemployee Director Stock Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on August 11, 1997)
	10.25	2006 Nonemployee Director Incentive Plan (incorporated by reference to Appendix B to the Company’s Proxy Statement for the Annual Meeting of Stockholders held on July 31, 2006)
	10.26	Form of Restricted Stock Unit Agreement for directors (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2005)
	10.27	Form of Amendment to Restricted Stock Unit Agreement with directors (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated December 6, 2005)
	10.28	Credit Agreement dated as of July 12, 2007  (incorporated by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K dated September 5, 2007)
	10.29	Form of Performance-Based Restricted Stock Unit Agreement (Replacement Grant) (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2009)

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Exhibit Number		Description of Exhibit
	31.1	Section 302 Certification of the Chief Executive Officer
	31.2	Section 302 Certification of the Chief Financial Officer
	32.1	Section 906 Certification of the Chief Executive Officer
	32.2	Section 906 Certification of the Chief Financial Officer
	99.1	Revised Financial Information Disclosure as a result of the Company’s restructuring (incorporated by reference to exhibits 99.01, 99.02 and 99.03 to the Company’s Current Report on Form 8-K filed December 16, 2008.)
101.INS		XBRL Instance (2)
101.SCH		XBRL Taxonomy Extension Schema (2)
101.CAL		XBRL Taxonomy Extension Calculation (2)
101.LAB		XBRL Taxonomy Extension Labels (2)
101.PRE		XBRL Taxonomy Extension Presentation (2)
		(1)  Management contract or compensatory plan or agreement
		(2)  Furnished, not filed.

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SIGNATURE

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

Date:  February 9, 2011	By:	/s/ Donald G. DeBuck
		Donald G. DeBuck
		Vice President and Controller
		(Principal Accounting Officer)

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