Stock Incentive Plans

As of September 28, 2012, the Company had outstanding stock-based incentive awards issued pursuant to various shareholder-approved plans. For the quarter and six months ended September 28, 2012 and September 30, 2011, the Company recognized stock-based compensation expense as follows:



	Quarter Ended
(Amounts in millions)	September 28, 2012		September 30, 2011
Cost of services	$	3	$	3
Selling, general and administrative	10		14
Total	$	13	$	17
Total, net of tax	$	9	$	11



	Six Months Ended
(Amounts in millions)	September 28, 2012		September 30, 2011
Cost of services	$	6	$	5
Selling, general and administrative	14		17
Total	$	20	$	22
Total, net of tax	$	13	$	14

The Company’s overall stock-based compensation granting practice has not changed year over year, except that starting 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 six months ended September 28, 2012 by $3 million, which is predominantly represented by participants in selling, general and administrative positions. An adjustment to reflect actual forfeiture experience for the prior fiscal year decreased stock-based compensation expense recognized for the six months ended September 28, 2012 and September 30, 2011 by $3 million and $5 million, respectively.

The Company uses the Black-Scholes-Merton model in determining the fair value of stock options granted. The weighted average grant date fair values of stock options granted during the quarters ended September 28, 2012 and September 30, 2011 were $7.21, and $10.23 per share, respectively. In calculating the compensation expense for its stock incentive plans, the Company used the following weighted average assumptions:



	Six Months Ended
	September 28, 2012		September 30, 2011
Risk-free interest rate	1.14	%	1.82	%
Expected volatility	36	%	31	%
Expected term (in years)	6.59		6.12
Dividend yield	2.90	%	1.77	%

During the six months ended September 28, 2012 and September 30, 2011, the Company's actual tax benefit realized for tax deductions from exercising stock options and RSU releases was $2 million and $6 million, respectively, and an excess tax benefit of $0 million and $2 million, respectively, related to all of its stock incentive plans.

Employee Incentives

The Company has three stock incentive plans that 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 RSUs. As of September 28, 2012, 10,493,053 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 of the total stock option award on each of the first three anniversaries of the grant date. Stock options are generally exercisable for a term of ten years from the grant date. Information concerning stock options granted under stock incentive plans is as follows:



	As of September 28, 2012
	Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (millions)
Outstanding as of March 30, 2012	17,733,562		$	46.13	5.08	$	1
Granted	3,530,863		26.93
Exercised	(44,987	)	23.54
Canceled/Forfeited	(411,284	)	38.47
Expired	(2,931,926	)	44.47
Outstanding as of September 28, 2012	17,876,228		42.84		5.92	19
Vested and expected to vest in the future as of September 28, 2012	17,484,059		43.14		5.84	17
Exercisable as of September 28, 2012	12,585,047		47.35		4.54	—

The total intrinsic value of options exercised during the six months ended September 28, 2012 and September 30, 2011, was less than $1 million and $5 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 quarters ended September 28, 2012 and September 30, 2011 was $1 million and $15 million, respectively.

As of September 28, 2012, there was $38 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 2.09 years.

Other Equity Awards

Other Equity Awards include RSUs that generally vest over periods of three to five years. RSUs consist of shares of common stock of the Company issued at a price of $0. 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 canceled on the employment termination date and any unvested shares are forfeited.

A portion of the Other Equity Awards granted during the quarter ended September 28, 2012 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 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 to be redeemed upon achievement of target performance measures.

During the six months ended September 28, 2012, certain executives were awarded service-based RSUs for which the shares are redeemable over the ten anniversaries following the executive’s termination, provided the executive (i) remains a full-time employee of the Company until reaching the earlier of (a) age 65 or (b) age 55 or over with at least ten years of service and (ii) 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 September 28, 2012
	Number of Shares		Weighted Average Fair Value per share
Outstanding as of March 30, 2012	1,740,925		$	40.29
Granted	1,608,522		26.69
Released/Issued	(190,166	)	44.89
Canceled/Forfeited	(490,038	)	40.81
Outstanding as of September 28, 2012	2,669,243		31.18

As of September 28, 2012, there was $49 million of total unrecognized compensation expense related to unvested RSUs, net of expected forfeitures. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.43 years.

Nonemployee Director Incentives

The Company has two stock incentive plans that 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 September 28, 2012, 72,400 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 September 28, 2012
	Number of Shares		Weighted Average Fair Value per share
Outstanding as of March 30, 2012	196,361		$	42.81
Granted	42,800		30.30
Released/Issued	(50,716	)	43.30
Canceled/Forfeited	—		—
Outstanding as of September 28, 2012	188,445		39.85

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.