Stock Incentive Plans

Employee Incentives

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’s overall stock-based compensation granting practice has not changed significantly year over year.

The Company issues authorized but previously unissued shares upon the exercise of stock options, the granting of restricted stock awards and the settlement of RSUs. There were no restricted stock awards outstanding during fiscal years 2014, 2013, and 2012. As of March 28, 2014, 18,010,857 shares of CSC common stock were available for the grant of future stock options, restricted stock or other stock-based incentives to employees.

The Company recognized stock-based compensation expense for fiscal 2014, fiscal 2013, and fiscal 2012 as follows:



	Twelve Months Ended
(Amounts in millions)	March 28, 2014		March 29, 2013		March 30, 2012
Cost of services	$	25	$	22	$	15
Selling, general and administrative	48		27		21
Total	$	73	$	49	$	36
Total, net of tax	$	46	$	31	$	23

The increase in the stock-based compensation expense during fiscal 2014 was primarily due to adjustments for actual and expected achievement of the specified performance criteria for certain performance-based RSUs that increased the expense by $21 million, and due to an increased number of RSUs granted during fiscal 2014 at a higher CSC stock price, which increased expense by $13 million. Included in the $13 million increase was an increase of $6 million due to RSUs granted to SMI employees (see Note 5). These increases in expense were partially offset by an adjustment to reflect actual forfeitures of stock options and RSUs during fiscal 2014 that reduced expense by $9 million. In addition, stock-based compensation for fiscal 2014, fiscal 2013 and fiscal 2012 included an adjustment of $4 million, $3 million and $5 million, respectively, to reflect the actual forfeiture experience for prior fiscal years.

The increase in fiscal 2013 stock-based compensation expense was primarily due to performance-based RSUs granted in fiscal 2013 that increased the expense by $15 million. This increase was partially offset by a $3 million reduction of expense as a result of adjustments for expected achievement of the specified performance criteria for performance-based RSUs granted in previous fiscal years. Fiscal 2012 stock-based compensation expense included a $12 million reduction to expense for expected achievement of the specified performance criteria for performance-based RSUs granted in previous fiscal years.

The Company uses the Black-Scholes-Merton model in determining the fair value of stock options granted. In determining the overall risk-free interest rate for fiscal 2014, a range of interest rates from 1.35% to 2.36% was applied depending on the expected life of the grant. The range of volatility used for fiscal 2014 was 33% to 39%. The dividend yield assumption was based on the respective fiscal year dividend payouts. Forfeitures are estimated based on historical experience and adjustments are made annually to reflect actual forfeiture experience.

The weighted average grant date fair values of stock options granted during fiscal 2014, fiscal 2013, and fiscal 2012 were $13.34, $7.37, and $10.17 per share, respectively. In calculating the compensation expense for its stock incentive plans, the Company used the following weighted average assumptions:



	Fiscal Year
	2014		2013		2012
Risk-free interest rate	1.32	%	1.15	%	1.80	%
Expected volatility	34	%	36	%	31	%
Expected term (in years)	6.48		6.59		6.11
Dividend yield	1.71	%	2.86	%	1.79	%

During fiscal 2014, fiscal 2013, and fiscal 2012, the Company's actual tax benefit realized for tax deductions from exercising stock options was of $26 million, $9 million, and $7 million, respectively, and an excess tax benefit of $8 million, $3 million, and $2 million, respectively, related to all of its stock incentive plans.

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 during fiscal 2014, fiscal 2013, and fiscal 2012 is as follows:



	Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In millions)
Outstanding as of April 1, 2011	17,060,193		$	47.00	5.54	$	69
Granted	2,457,509		38.18
Exercised	(428,844	)	35.95			5
Canceled/Forfeited	(579,069	)	41.75
Expired	(776,227	)	49.05
Outstanding as of March 30, 2012	17,733,562		46.13		5.08	1
Granted	3,707,172		27.46
Exercised	(1,497,686	)	39.27			10
Canceled/Forfeited	(1,113,422	)	35.36
Expired	(3,689,059	)	45.28
Outstanding as of March 29, 2013	15,140,567		43.23		5.45	113
Granted	2,199,369		45.20
Exercised	(5,015,849	)	44.10			53
Canceled/Forfeited	(1,247,511	)	33.89
Expired	(1,246,965	)	52.05
Outstanding as of March 28, 2014	9,829,611		43.30		5.73	167
Vested and expected to vest in the future as of March 28, 2014	9,690,851		43.32		5.69	164
Exercisable as of March 28, 2014	6,282,733		46.41		4.12	87



	March 28, 2014
	Options Outstanding				Options Exercisable
Range of Option Exercise Price	Number Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Number Exercisable	Weighted Average Exercise Price
$23.06 - $42.12	3,609,882	$	32.76	6.80	1,985,491	$	35.92
$42.25 - $48.22	3,323,488	45.79		6.74	1,519,534	47.02
$48.47 - $62.36	2,896,241	53.58		3.23	2,777,708	53.58
	9,829,611				6,282,733

The total grant date fair value of stock options vested during fiscal 2014, fiscal 2013, and fiscal 2012, was $14 million, $20 million, and $27 million, respectively. The cash received from stock options exercised during fiscal 2014, fiscal 2013, and fiscal 2012, was $214 million, $55 million, and $15 million, respectively.

As of March 28, 2014, there was $31 million of 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 1.84 years.

Restricted Stock Units

RSUs consist of equity awards with the right to receive one share of common stock of the Company issued at a price of $0. RSUs generally vest over periods of three to five years. Upon the settlement date, RSUs are settled in shares of CSC common stock and dividend equivalents. If, prior to the vesting of the RSU in full, 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 and dividend equivalents are forfeited.

Certain executives were awarded service-based RSUs for which the shares are redeemable over the ten anniversaries following the executive's separation from service as a full-time employee, provided the executive complies with certain non-competition covenants during the ten-year period following the executive's separation of service. For certain executives who joined the company in fiscal year 2013 and after, the awards vest at age 62, or 50% of the award vests at age 55 with 5 years service with an additional 10% vesting each additional year of service up to 10 years of service. Prior to fiscal year 2013, awards vested at age 65 or age 55 with 10 years of service.

The Company also grants performance-based restricted stock units (PSUs). PSUs, generally vest over period of three years. The number of performance-based RSUs that ultimately vest is dependent upon the Company’s achievement of certain specified financial performance criteria over a three-year period. Awards are settled 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 if the specified performance criteria is met. Beginning in fiscal 2013, performance-based RSU awards granted include the potential for accelerated vesting of 25% of the shares granted after the first and second fiscal years if certain company performance targets are met early. 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 first quarter of fiscal 2014, shares were settled due to meeting the company performance targets in fiscal year 2013. The probable achievement was also increased to the maximum payout based on management's expectation of meeting the performance criteria resulting in additional expense recognized. In the table below, such awards are reflected at the number of shares to be settled upon achievement of target performance measures.

Information concerning RSUs granted under the stock incentive plans during fiscal 2014, fiscal 2013, and fiscal 2012, is as follows:



	Number of Shares		Weighted Average Fair Value
Outstanding as of April 1, 2011	1,478,570		$	46.10
Granted	1,009,743		35.45
Settled	(419,351	)	48.21
Canceled/Forfeited	(328,037	)	41.44
Outstanding as of March 30, 2012	1,740,925		40.29
Granted	1,724,639		26.12
Settled	(423,321	)	33.17
Canceled/Forfeited	(778,971	)	38.27
Outstanding as of March 29, 2013	2,263,272		31.53
Granted	2,018,416		49.05
Settled	(464,293	)	33.06
Canceled/Forfeited	(629,654	)	38.11
Outstanding as of March 28, 2014	3,187,741		41.34

As of March 28, 2014, there was $107 million 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 2.23 years.

Non-employee Director Incentives

The Company has two stock incentive plans which authorize the issuance of stock options, restricted stock and other stock-based incentives to non-employee directors upon terms approved by the Company’s Board of Directors. As of March 28, 2014, 197,400 shares of CSC common stock remained available for the grant to nonemployee directors of future RSUs or other stock-based incentives.

RSU awards to non-employee directors are granted at a price of $0. For RSU awards granted in fiscal 2014, RSUs vest and settle at the earlier of (i) the one-year anniversary of the grant date, or (ii) the date of the Company's first Annual Meeting of the Stockholders held after the grant date. Alternatively, settlement of the RSU may be deferred per election of the non-employee director. For awards granted in fiscal 2013 and prior, vested RSUs are automatically settled for shares of CSC common stock and dividend equivalents when the non-employee director ceases to be a director of the Company.

The number of shares to be settled 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 settled (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.

Information concerning RSUs granted to non-employee directors during fiscal 2014, fiscal 2013, and fiscal 2012 is as follows:



	Number of Shares		Weighted Average Fair Value
Outstanding as of April 1, 2011	158,741		$	45.34
Granted	37,800		30.07
Settled	(180	)	42.69
Canceled/Forfeited	—		—
Outstanding as of March 30, 2012	196,361		42.81
Granted	42,800		30.30
Settled	(50,716	)	43.30
Canceled/Forfeited	—		—
Outstanding as of March 29, 2013	188,445		39.85
Granted	25,000		51.55
Settled	(29,299	)	35.81
Canceled/Forfeited	—		—
Outstanding as of March 28, 2014	184,146		42.07