Note 11-Stock Incentive Plans

As of December 30, 2011, the Company had outstanding stock-based incentive awards issued pursuant to various shareholder-approved plans. For the quarter and nine months ended December 30, 2011, and December 31, 2010, the Company recognized stock-based compensation expense as follows:

	Quarter Ended
(Amounts in millions)	December 30, 2011		December 31, 2010
Cost of services	$	3	$	3
Selling, general and administrative		11		13
Total	$	14	$	16
Total net of tax	$	9	$	10

	Nine Months Ended
(Amounts in millions)	December 30, 2011		December 31, 2010
Cost of services	$	8	$	9
Selling, general and administrative		28		37
Total	$	36	$	46
Total net of tax	$	22	$	28

The Company's overall stock-based compensation granting practice has not changed year over year, except that with fiscal 2012's long-term incentive program, restricted stock units (RSUs) represent a larger portion of total stock-based compensation awards than in the past. Adjustments for actual and expected achievement of the specified performance criteria for certain performance-based RSUs decreased stock-based compensation expense recognized for the nine months ended December 30, 2011, by $7 million, which is predominantly represented by participants in selling, general and administrative positions. The changes in the underlying assumptions did not have a material impact on the fair value calculations. However, there was a significant decrease in the grant date fair market value for the Company's annual award of stock-based compensation, granted in the quarter ended July 1, 2011, which further reduced the stock-based compensation expense for the nine months ended December 30, 2011, in comparison to the same period of the prior year. An adjustment to reflect actual forfeiture experience for the prior fiscal year decreased stock-based compensation expense recognized for the nine months ended December 30, 2011, and December 31, 2010, by $5 million and $6 million, respectively. Total stock-based compensation expense for the quarter and nine months ended December 30, 2011 includes $4 million of accelerated expense associated with the Company's CEO whose announced retirement is expected to be effective on or before October 31, 2012.

The Company uses the Black-Scholes-Merton model in determining the fair value of options granted. The weighted average grant date fair values of stock options granted during the nine months ended December 30, 2011, and December 31, 2010, were $10.18 and $12.96 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 30, 2011			December 31, 2010
Risk-free interest rate		1.80	%		2.37	%
Expected volatility		31	%		28	%
Expected term	6.11 years			5.86 years
Dividend yield		1.79	%		1.17	%

During the nine months ended December 30, 2011, and December 31, 2010, the Company realized income tax benefits related to all of its stock incentive plans of $6 million and $5 million, respectively. An excess tax benefit of $2 million was realized during both the nine months ended December 30, 2011, and December 31, 2010.

Employee Incentive Plans

The Company has three stock incentive plans which authorize the issuance of stock options, restricted stock units 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 RSUs. At December 30, 2011, 14,267,030 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 30, 2011
	Number of Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (millions)
Outstanding as of April 1, 2011		17,060,193		$	47.00		5.54	$	69
Granted		2,444,909			38.25
Exercised		(428,844	)		35.95
Canceled/forfeited		(240,557	)		44.24
Expired		(600,364	)		49.42
Outstanding as of December 30, 2011		18,235,337			46.04		5.48		-

Vested and expected to vest in the future as of December 30, 2011		18,126,035			46.00		5.45		-
Exercisable as of December 30, 2011		13,326,504			47.31		4.29		-

The total intrinsic value of options exercised during the nine months ended December 30, 2011, and December 31, 2010, was $5 million and $6 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 30, 2011, and December 31, 2010, was $15 million and $26 million, respectively.

As of December 30, 2011, there was $36 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 1.76 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 is terminated, then the RSU is automatically cancelled on the employment termination date and any unvested shares are forfeited.

A portion of the Other Equity Awards granted during the nine months ended December 30, 2011, 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, while still outstanding, are reflected at the number of shares to be redeemed upon achievement of target performance measures. During the nine months ended December 30, 2011, performance-based RSUs representing 141,353 shares were cancelled due to the Company's performance over the relevant two-year performance period. Compensation expense was adjusted accordingly, as discussed above.

During the nine months ended December 30, 2011, certain senior executives were awarded service-based RSUs for which the shares are redeemable over the ten anniversaries following their termination, provided they (i) remain full-time employees of the Company until reaching the earlier of age 65 or age 55 or over with at least ten years of service and (ii) after termination comply 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 30, 2011
	Number of Shares			Weighted Average Fair Value
Outstanding as of April 1, 2011		1,478,570		$	46.10
Granted		1,007,643			35.47
Released/Redeemed		(267,871	)		50.21
Forfeited/Canceled		(207,439	)		42.75
Outstanding as of December 30, 2011		2,010,903			40.57

As of December 30, 2011, there was $36 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 2.35 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 30, 2011, 115,200 shares of CSC common stock remained available for the grant to nonemployee directors 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 30, 2011
	Number of Shares			Weighted Average Fair Value
Outstanding as of April 1, 2011		158,741		$	45.34
Granted		37,800			30.07
Redeemed		(180	)		42.69
Outstanding as of December 30, 2011		196,361			42.81

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) in their 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.