UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWashington,
      D.C. 20549_________________FORM
      10-Q(Mark
      One)[X]
                  QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarter ended January 2, 2009OR[   ]
                  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      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.
      EmployerIncorporation
      or Organization)
                    Identification
      No.)3170
      Fairview Park DriveFalls
      Church, Virginia
                    22042(Address
      of Principal Executive Offices)
                    (Zip
      Code)Registrant's
      Telephone Number, Including Area Code: (703) 896-1000Indicate
      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.   Yes [X
      ]   No [  ]Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  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
      [   ]                              Non-accelerated
      filer [   ]Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12-b of the Exchange
      Act).  Yes [   ]   No [X]151,499,950
      shares of Common Stock, $1.00 par value, were outstanding on January 30,
      2009.





COMPUTER
SCIENCES CORPORATION


INDEX
TO FORM 10-Q





PAGEPART
      I.
            FINANCIAL
      INFORMATIONItem
      1.
            Financial
      StatementsConsolidated
      Condensed Statements of Income, Third Quarter and
              Nine
      Months Ended January 2, 2009 and December 28, 2007
            1Consolidated
      Condensed Balance Sheets
              January
      2, 2009, and March 28, 2008
            2Consolidated
      Condensed Statements of Cash Flows,
              Nine
      Months Ended January 2, 2009, and December 28, 2007,
              as
      restated
            3Notes
      to Consolidated Condensed Financial Statements
            4Item
      2.
            Management's
      Discussion and Analysis of
              Financial
      Condition and Results of Operations
            38Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            52Item
      4.
            Controls
      and Procedures
            53PART
      II.
            OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            55Item
      1A.
            Risk
      Factors
            59Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            66Item
      6.
            Exhibits
            67









































i








PART
I, ITEM 1. FINANCIAL STATEMENTS


COMPUTER
SCIENCES CORPORATION


CONSOLIDATED CONDENSED STATEMENTS OF
INCOME(unaudited)





Third
      Quarter Ended
                
                
                Nine
      Months Ended(In
      millions except per-share amounts)
                
                Jan.
      2, 2009
                
                
                Dec.
      28, 2007
                
                
                Jan.
      2, 2009
                
                
                Dec.
      28, 2007Revenues
                
                $
                3,952.4
                
                
                $
                4,160.0
                
                
                $
                12,628.2
                
                
                $
                12,015.1Costs
      of services (excludes depreciation and amortization)
                
                
                3,083.4
                
                
                
                3,301.6
                
                
                
                10,091.4
                
                
                
                9,653.5Selling,
      general and administrative
                
                
                261.2
                
                
                
                240.2
                
                
                
                824.0
                
                
                
                721.9Depreciation
      and amortization
                
                
                282.2
                
                
                
                307.1
                
                
                
                911.5
                
                
                
                878.3Interest
      expense
                
                
                68.7
                
                
                
                51.1
                
                
                
                191.4
                
                
                
                129.1Interest
      income
                
                
                (12.1
                )
                
                
                (7.5
                )
                
                
                (30.7
                )
                
                
                (25.8
                )Special
      items
                
                
                
                
                
                
                17.5
                
                
                
                
                
                
                
                92.4Other
      expense/(income)
                
                
                8.9
                
                
                
                (16.3
                )
                
                
                22.0
                
                
                
                (41.9
                )Total
      costs and expenses
                
                
                3,692.3
                
                
                
                3,893.7
                
                
                
                12,009.6
                
                
                
                11,407.5Income
      before taxes
                
                
                260.1
                
                
                
                266.3
                
                
                
                618.6
                
                
                
                607.6Taxes
      on income (benefit)
                
                
                99.5
                
                
                
                87.3
                
                
                
                (114.3
                )
                
                
                244.7Net
      income
                
                $
                160.6
                
                
                $
                179.0
                
                
                $
                732.9
                
                
                $
                362.9Earnings
      per share:Basic
                
                $
                1.06
                
                
                $
                1.07
                
                
                $
                4.84
                
                
                $
                2.12Diluted
                
                $
                1.06
                
                
                $
                1.05
                
                
                $
                4.80
                
                
                $
                2.08








See
accompanying notes.


1


COMPUTER
SCIENCES CORPORATION


CONSOLIDATED
CONDENSED BALANCE SHEETS (unaudited)





(In
      millions except shares)
                
                Jan.
      2, 2009
                
                
                March
      28, 2008ASSETSCash
      and cash equivalents
                
                $
                1,673.1
                
                
                $
                698.9Receivables
                
                
                4,061.3
                
                
                
                4,564.7Prepaid
      expenses and other current assets
                
                
                1,677.0
                
                
                
                1,764.5Assets
      held for sale
                
                
                10.5Total
      current assets
                
                
                7,421.9
                
                
                
                7,028.1Property
      and equipment, net
                
                
                2,419.2
                
                
                
                2,764.6Outsourcing
      contract costs, net
                
                
                727.8
                
                
                
                925.4Software,
      net
                
                
                480.5
                
                
                
                527.4Goodwill
                
                
                3,852.4
                
                
                
                3,975.2Other
      assets
                
                
                551.4
                
                
                
                659.0Total
      assets
                
                $
                15,453.2
                
                
                $
                15,879.7LIABILITIESShort-term
      debt and current maturities of long-term debt
                
                $
                257.6
                
                
                $
                838.4Accounts
      payable
                
                
                415.9
                
                
                
                798.1Accrued
      payroll and related costs
                
                
                747.7
                
                
                
                926.6Other
      accrued expenses
                
                
                1,420.2
                
                
                
                1,638.7Deferred
      revenue
                
                
                830.6
                
                
                
                1,078.5Income
      taxes payable and deferred income taxes
                
                
                330.4
                
                
                
                414.9Total
      current liabilities
                
                
                4,002.4
                
                
                
                5,695.2Long-term
      debt, net
                
                
                4,158.0
                
                
                
                2,635.3Income
      tax liabilities and deferred income taxes
                
                
                846.7
                
                
                
                1,235.6Other
      long-term liabilities
                
                
                770.9
                
                
                
                851.8STOCKHOLDERS'
      EQUITYCommon
      stock, par value $1.00 per share; authorized 750,000,000 shares; issued
      159,680,403 (2009) and 159,218,613 (2008)
                
                
                159.7
                
                
                
                159.2Additional
      paid-in capital
                
                
                1,829.7
                
                
                
                1,770.9Earnings
      retained for use in business
                
                
                4,510.1
                
                
                
                3,801.9Accumulated
      other comprehensive (loss) income
                
                
                (449.9
                )
                
                
                100.66,049.6
                
                
                
                5,832.6Less
      common stock in treasury, at cost, 8,184,287 shares (2009) and 8,101,652
      shares (2008)
                
                
                (374.4
                )
                
                
                (370.8
                )Total
      stockholders' equity
                
                
                5,675.2
                
                
                
                5,461.8Total
      liabilities and stockholders' equity
                
                $
                15,453.2
                
                
                $
                15,879.7









See
accompanying notes.


2


COMPUTER
SCIENCES CORPORATION


CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)





Nine
      Months Ended(In
      millions)
                
                Jan.
      2, 2009
                
                
                Dec.
      28, 2007Cash
      flows from operating activities:Net
      income
                
                $
                732.9
                
                
                $
                362.9Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation,
      amortization and other non-cash charges
                
                
                986.9
                
                
                
                964.4Stock-based
      compensation
                
                
                47.2
                
                
                
                47.7Provision
      for losses on accounts receivable
                
                
                20.3
                
                
                
                2.0Foreign
      currency exchange loss (gain)
                
                
                93.0
                
                
                
                (19.8
                )Gain
      on dispositions, net of taxes
                
                
                (2.0
                )
                
                
                (6.3
                )Changes
      in assets and liabilities, net of effects of acquisitions:Increase
      in assets
                
                
                (124.7
                )
                
                
                (639.1
                )Decrease
      in liabilities
                
                
                (825.2
                )
                
                
                (213.3
                )Net
      cash provided by operating activities
                
                
                928.4
                
                
                
                498.5Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                (556.7
                )
                
                
                (644.2
                )Outsourcing
      contracts
                
                
                (114.2
                )
                
                
                (87.7
                )Acquisitions
                
                
                (100.3
                )
                
                
                (1,315.6
                )Software
                
                
                (129.2
                )
                
                
                (129.6
                )Other
      investing cash flows
                
                
                62.1
                
                
                
                18.0Net
      cash used in investing activities
                
                
                (838.3
                )
                
                
                (2,159.1
                )Cash
      flows from financing activities:Net
      (repayments) borrowings of commercial paper
                
                
                (263.4
                )
                
                
                205.1Borrowings
      under lines of credit
                
                
                1,646.8
                
                
                
                456.6Repayments
      on lines of credit
                
                
                (119.4
                )
                
                
                (472.2
                )Principal
      payments on long-term debt
                
                
                (323.7
                )
                
                
                (29.3
                )Proceeds
      from debt issuance
                
                
                
                
                
                
                1,400.0Proceeds
      from stock option and other common stock transactions
                
                
                12.4
                
                
                
                82.4Repurchase
      of common stock, net of settlement
                
                
                (3.6
                )
                
                
                (474.9
                )Excess
      tax benefit from stock-based compensation
                
                
                1.3
                
                
                
                10.6Other
      financing cash flows
                
                
                2.2
                
                
                
                1.8Net
      cash provided by financing activities
                
                
                952.6
                
                
                
                1,180.1Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (68.5
                )
                
                
                19.5Net
      increase (decrease) in cash and cash equivalents
                
                
                974.2
                
                
                
                (461.0
                )Cash
      and cash equivalents at beginning of year
                
                
                698.9
                
                
                
                1,050.1Cash
      and cash equivalents at end of period
                
                $
                1,673.1
                
                
                $
                589.1





See
accompanying notes.


3


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





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 have been condensed or omitted
pursuant to such rules and regulations.  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 March 28, 2008, as well as the Company’s Current
report on Form 8-K filed December 16, 2008.  In the opinion of the
Company, the unaudited consolidated condensed financial statements included
herein reflect all adjustments necessary to present fairly the financial
position, the results of operations and the cash flows for such interim
periods.  All such adjustments are of normal recurring nature. The
results of operations for such interim periods are not necessarily indicative of
the results for the full year.





Note
2 – Accounting Change





The
Company adopted Statement of Financial Accounting Standards ("SFAS”) No. 157,
“Fair Value Measurements,” effective March 28, 2008, for its financial assets
and liabilities.  This standard defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements.  The FASB has deferred the provisions of SFAS No. 157
for non-financial assets and liabilities.  Such assets and
liabilities, which include the Company’s non-current assets, long-term debt,
minority interest and other long-term liabilities, will be subject to the
provision of SFAS No. 157 effective for fiscal year 2010.





SFAS No.
157 specifies a hierarchy of the following valuation techniques with three
levels of inputs:





·
            Level
      1—quoted prices unadjusted for identical assets or liabilities in an
      active market;


·
            Level
      2—inputs other than quoted prices that are observable, either directly or
      indirectly, for similar assets or liabilities;
  and


·
            Level
      3—inputs that are unobservable.  Unobservable inputs reflect the
      entity’s own assumptions about the assumptions that market participants
      would use in pricing the asset or
liability.





The
Company’s derivative financial instruments include foreign currency forward
contracts and purchased option contracts.  The fair value of the
Company’s forward contracts is based on quoted prices for similar but not
identical derivative financial instruments; as such, the inputs are considered
Level 2 inputs for forward contracts.  Our option contract valuation
inputs are based on quoted pricing intervals from external valuation models and
do not involve management judgment.  The inputs used to value the
option contracts are considered Level 2 inputs.


4


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
2 – Accounting Change (continued)





The
following table presents the Company’s assets and liabilities that are measured
at fair value on a recurring basis at January 2, 2009:





January
      2, 2009
                
                
                Fair
      Value HierarchyFair
      Value
                
                
                Level
      1
                
                
                Level
      2
                
                
                Level
      3Money
      Market Funds
                
                $
                924.1
                
                
                $
                924.1
                
                
                
                -
                
                
                
                -Derivative
      assets
                
                
                15.8
                
                
                
                -
                
                
                $
                15.8
                
                
                
                -Total
                
                $
                939.9
                
                
                $
                924.1
                
                
                $
                15.8
                
                
                
                -





The
Company did not have any assets or liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level
3).  Gains and losses included in earnings are reported in other
expense/(income) (See Note 7).





SFAS No.
158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans—An amendment of FASB Statements No. 87, 88, 106 and 132R,” requires,
beginning with fiscal 2009, that plan assets and benefit obligations be measured
as of the date of the employer’s fiscal year end.  The statement
provides two approaches for an employer to transition to a fiscal year-end
measurement date.  In the first approach, an employer remeasures plan
assets and benefit obligations as of the beginning of the fiscal year that the
measurement date provisions are applied.  In the second approach, an
employer continues to use the measurements determined for the prior fiscal
year-end reporting to estimate the effects of the change.  CSC has
chosen to use the second approach.





Under
this approach, generally known as the “15-month approach,” net periodic benefit
cost for the period between the earlier measurement date and the end of the
fiscal year that the measurement date provisions are applied, exclusive of any
curtailment or settlement gain or loss, should be allocated proportionately
between amounts to be recognized as an adjustment of retained earnings and net
period benefit cost for the fiscal year that the measurement date provisions are
applied.  For the “gap period” between measurement date and end of
fiscal year, the adjustment to retained earnings, net of taxes, at the beginning
of 2009 was $24.7.


5


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
3 – Earnings Per Share





Basic and
diluted earnings per share are calculated as follows:





Third
      Quarter EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Net
      income
                
                $
                160.6
                
                
                $
                179.0Common
      share information:Average
      common shares outstanding for basic EPS
                
                
                151.485
                
                
                
                166.826Dilutive
      effect of common stock equivalents
                
                
                .372
                
                
                
                2.967Shares
      for diluted EPS
                
                
                151.857
                
                
                
                169.793Basic
      EPS
                
                $
                1.06
                
                
                $
                1.07Diluted
      EPS
                
                $
                1.06
                
                
                $
                1.05





Nine
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Net
      income
                
                $
                732.9
                
                
                $
                362.9Common
      share information:Average
      common shares outstanding for basic EPS
                
                
                151.352
                
                
                
                170.907Dilutive
      effect of common stock equivalents
                
                
                1.267
                
                
                
                3.333Shares
      for diluted EPS
                
                
                152.619
                
                
                
                174.240Basic
      EPS
                
                $
                4.84
                
                
                $
                2.12Diluted
      EPS
                
                $
                4.80
                
                
                $
                2.08





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 numbers
of such options were 18,013,187 and 7,616,398 for the three months and
14,312,953 and 6,380,246 for the nine months ended January 2, 2009, and December
28, 2007, respectively.


6


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
4 – Income Taxes





The
effective tax rate on income from continuing operations for the third
quarter  ended and nine months ended was 38.28% and (18.47%) for
fiscal year 2009, and 32.8% and 40.3% for fiscal year 2008, respectively. The
decrease in the year to date fiscal year 2009 rate was primarily attributable to
a $370.5 reduction in uncertain tax positions, including interest and penalties,
due to settlements with the U.S. Internal Revenue Service (“IRS”) and the filing
of accounting method changes during the second quarter.





Income
tax related assets are included in the accompanying balance sheets as
follows.  Prepaid expenses and other current assets include the
current portion of deferred income taxes of $17.3 and $10.5 as of January 2,
2009, and March 28, 2008, respectively. Receivables include income taxes
receivable of $43.7 and $104.9 as of January 2, 2009, and March 28, 2008,
respectively. Other assets include non-current deferred income tax assets of
$54.2 and $126.5 as of January 2, 2009, and March 28, 2008, respectively.
Receivables at March 28, 2008, reflect a reclassification of income taxes
receivable of $104.9 which was previously included in income taxes payable and
deferred income taxes.





Income
tax related liabilities are included in the accompanying balance sheets as
follows.  Income taxes payable and deferred income taxes consist of
the current portion of deferred tax liabilities of $305.9 and $213.2 as of
January 2, 2009, and March 28, 2008, respectively, the current portion of income
taxes payable of $24.5 and $0.0 as of January 2, 2009, and March 28, 2008,
respectively, and liability for uncertain tax positions of $0.0 and $201.7 as of
January 2, 2009, and March 28, 2008, respectively. Income tax liabilities and
deferred income taxes included in non-current liabilities consist of non-current
deferred income tax liabilities of $259.1 and $0.0 as of January 2, 2009, and
March 28, 2008, respectively, and non-current liability for uncertain tax
positions of $587.6 and $1,235.6 as of January 2, 2009, and March 28, 2008,
respectively.





As of
January 2, 2009, in accordance with FASB Interpretation No. 48 (“FIN 48”), the
Company’s liability for uncertain tax positions was $587.6, including interest
of $107.1, penalties of $40.6 and net of tax carryforwards of $250.0. The
Company’s liability for uncertain tax positions includes $600.1 related to
amounts that, if recognized, would affect the effective tax rate, excluding
related interest, penalties and tax carryforwards.





There are
no material changes to the uncertain tax positions in the third quarter of
fiscal year 2009. During the third quarter of fiscal year 2009, the Company
recorded an increase (net of tax benefit) of $4.9 of interest on uncertain tax
positions and a net reduction of $3.0 of related penalties in income tax
expense.





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:


7


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)




Note 4 - Income Taxes (continued)





Jurisdiction:
            Tax
      Years Subject to Examination (Fiscal Year Ending):United
      States – Federal
            2005
      and forwardUnited
      States – Various States
            2001
      and forwardCanada
            2004
      and forwardFrance
            2005
      and forwardGermany
            2001
      and forwardUnited
      Kingdom
            2007
      and forward





It is
reasonably possible that during the next 12 months the Company may settle
certain tax examinations, have lapses in statues of limitations, or voluntarily
settle income tax positions in negotiated settlements for different amounts than
the Company has accrued as uncertain tax positions. If a position which the
Company concluded was more likely than not was subsequently not upheld, the
Company may need to accrue and ultimately pay an additional amount. 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 changes in the liability for uncertain tax positions
ranging from a decrease of $82.0 to an increase of $51.0, excluding interest,
penalties and tax carryforwards.





Note
5 – Debt





On
October 22, 2008, the Company borrowed $1,500 under its $1,500 committed
revolving credit facility which expires July 12, 2012 and carries an all-in rate
of 4.05%. The primary use of the proceeds was to repay maturing commercial paper
and term debt and fund working capital needs.





There was
no commercial paper outstanding on January 2, 2009.  All commercial
paper issued prior to October 22, 2008 matured on or before December 12,
2008.  The weighted average interest on the commercial paper was 5.84%
for the three months and 3.42% nine months ended January 2, 2009.





Note
6 – Stock Incentive Plans





The
Company has various stock incentive plans which are more fully described in Note
13 of the Company’s 2008 Annual Report filed on Form 10-K.  For the
three and nine months ended January 2, 2009 and December 28, 2007, the Company
recognized stock-based compensation expense as follows:





Three
      Months EndedJan.
      2, 2009
                        
                        
                        Dec.
      28, 2007Cost of
      services
                        
                        $
                        3.0
                        
                        
                        $
                        3.7Selling,
      general and administrative
                        
                        
                        10.4
                        
                        
                        
                        8.6Total
                        
                        $
                        13.4
                        
                        
                        $
                        12.3Total
      net of tax
                        
                        $
                        8.3
                        
                        
                        $
                        7.7





Nine
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Cost of
      services
                
                $
                11.1
                
                
                $
                10.7Selling,
      general and administrative
                
                
                36.1
                
                
                
                26.6Special
      items
                
                
                
                
                
                
                10.4Total
                
                $
                47.2
                
                
                $
                47.7Total
      net of tax
                
                $
                29.1
                
                
                $
                29.7




8


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
6 – Stock Incentive Plans (continued)





The
charge to special items of $10.4 ($6.3 net of tax) for the nine months ended
December 28, 2007, relates to accelerated expense associated with the Company’s
former CEO whose retirement was effective July 30, 2007.  See Note
14.





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 January 2, 2009 and December 28,
2007, were $15.86 and $17.88 per share, respectively.  In calculating
the compensation expense for its stock incentive plans, the Company used the
following weighted average assumptions:





Nine
      Months EndedJan.
      2, 2009
            
            Dec.
      28, 2007Risk-free
      interest rate
            
            3.21%
            
            4.66%Expected
      volatility
            
            36%
            
            32%Expected
      lives
            
            4.07
      years
            
            4.14
      years





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 January 2, 2009,
11,903,452 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.


9


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
6 – Stock Incentive Plans (continued)





Nine
      Months Ended January 2, 2009Number
      of
                  Shares
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Life
                
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
      at March 28, 2008
                
                
                17,755,014
                
                
                $
                47.38
                
                
                
                5.79
                
                
                $
                27.8Granted
                
                
                2,509,639
                
                
                $
                48.08Exercised
                
                
                (359,753
                )
                
                $
                34.55Canceled/Forfeited
                
                
                (408,035
                )
                
                $
                53.35Expired
                
                
                (1,080,611
                )
                
                $
                53.52Outstanding
      at January 2, 2009
                
                
                18,416,254
                
                
                $
                47.23
                
                
                
                5.77
                
                
                $
                12.9Vested
      and expected to vest in the future at January 2, 2009
                
                
                18,151,478
                
                
                $
                47.18
                
                
                
                5.77
                
                
                $
                12.5Exercisable
      at January 2, 2009
                
                
                13,211,406
                
                
                $
                45.54
                
                
                
                4.59
                
                
                $
                12.6





The total
intrinsic value of options exercised during the nine months ended January 2,
2009 and December 28, 2007 was $4.3 and $34.4, respectively.  The
total intrinsic value of stock options is based on the difference between the
fair market value of the Company’s common stock at January 2, 2009 (for options
outstanding), or date of exercise, less the applicable exercise
price.





The cash
received from stock options exercised during the nine months ended January 2,
2009 and December 28, 2007, was $12.4 and $82.4, respectively.  During
the nine months ended January 2, 2009 and December 28, 2007, the Company
realized income tax benefits of $6.1 and $24.9, respectively, and an excess tax
benefit of $1.3 and $10.6, respectively, related to the exercise of these stock
options.





As of
January 2, 2009, there was $60.7 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 1.88
years.





Equity
Awards





Equity
awards (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.


10


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
6 – Stock Incentive Plans (continued)





A portion
of the equity awards granted during the nine months ended January 2, 2009
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
ending April 1, 2011.  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 nine months ended January 2, 2009, seven 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 equity awards granted under stock incentive plans is as
follows:





Nine
      Months Ended January 2, 2009Number
      of
                  Shares
                
                
                Weighted
      Average
                  Fair
      ValueOutstanding
      at March 28, 2008
                
                
                739,248
                
                
                $
                50.03Granted
                
                
                393,798
                
                
                $
                48.46Released/Redeemed
                
                
                (258,738
                )
                
                $
                47.50Forfeited/Canceled
                
                
                ( 25,786
                )
                
                $
                55.29Outstanding
      at January 2, 2009
                
                
                848,522
                
                
                $
                49.91





As of
January 2, 2009, there was $30.4 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 2.57 years.





Nonemployee
Director Incentives





The
Company has one stock incentive plan which authorizes 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. At January 2,
2009, 49,500 shares of CSC common stock remained available for 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:


11


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
6 – Stock Incentive Plans (continued)





Nine
      Months Ended January 2, 2009Number
      of
                          Shares
                        
                        
                        Weighted
      Average
                          Fair
      ValueOutstanding
      at March 28, 2008
                        
                        
                        92,021
                        
                        
                        $
                        45.78Granted
                        
                        
                        21,600
                        
                        
                        $
                        46.52Released/Redeemed
                        
                        
                        (600
                        )
                        
                        $
                        37.81Forfeited/CanceledOutstanding
      at January 2, 2009
                        
                        
                        113,021
                        
                        
                        $
                        45.96





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.





As of
January 2, 2009 there was $.6 of total unrecognized compensation expense related
to unvested nonemployee director RSUs.  The cost is expected to be
fully recognized as of the annual stockholders’ meeting on August 3,
2009.





Note
7 – Other Income/Expense





For the
quarter and nine months ended January 2, 2009, and December 28, 2007, the
components of other expense/(income) were as follows:





Three
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Foreign
      exchange losses/(gains)
                
                $
                10.3
                
                
                $
                (11.7
                )Gain
      on sale of non-operating assets
                
                
                (1.4
                )
                
                
                (4.6
                )Total
      Other Expense/(Income)
                
                $
                8.9
                
                
                $
                (16.3
                )





Nine
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Foreign
      exchange losses/(gain)
                
                $
                23.8
                
                
                $
                (37.3
                )Gain
      on sale of non-operating assets
                
                
                (1.8
                )
                
                
                (4.6
                )Total
      Other Expense/(Income)
                
                $
                22.0
                
                
                $
                (41.9
                )





Other
expense/(income) includes foreign currency gains and losses on intercompany and
foreign currency balances, gains and losses on foreign exchange forward
contracts and purchased options, and gains and losses from the sale of
non-operating assets or immaterial businesses.


12


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
7 – Other Income/Expense (continued)





The
Company offsets, to the extent possible, remeasurement gains and losses on
certain non-functional currency monetary assets and liabilities, with derivative
contracts denominated in the same currency as the exposure from the asset or
liability.  The Company does not enter into derivative contracts for
speculative or trading purposes.  For accounting purposes, these
foreign currency contracts do not qualify as cash flow hedges and all changes in
fair value are reported in net earnings as part of other
expense/(income).  As of January 2, 2009, the notional amount of
forward contracts outstanding was approximately $1,167 and the notional amount
of purchased option contracts outstanding was approximately $66.





As a
result of the use of derivative instruments, the Company is subject to
counterparty credit risks.  The Company enters into numerous types of
financing arrangements with a wide array of counterparties, including foreign
currency forward contracts and purchased options.  To monitor this
risk the Company enters into contracts with only large financial institutions
and regularly reviews its credit exposure balances and the creditworthiness of
the counterparty.  As of January 2, 2009, the Company is not aware of
any significant changes related to the counterparty credit risk noted
above.





Note
8 – Depreciation





Included
in the consolidated condensed balance sheets are the following accumulated
depreciation amounts:





Jan.
      2, 2009
                
                
                Mar.
      28, 2008Property
      and equipment
                
                $
                3,585.7
                
                
                $
                3,495.4





Note
9 – Dividends





No
dividends were paid during the periods presented. At January 2, 2009, and March
28, 2008, there were 159,680,403 and 159,218,613 shares, respectively, of $1.00
par value common stock issued.  The Company had 8,184,287 and
8,101,652 shares of treasury stock as of January 2, 2009, and March 28, 2008,
respectively.





Note
10 - Cash Flows





Cash
payments for interest on indebtedness were $159.2 and $127.8 for the nine months
ended January 2, 2009, and December 28, 2007, respectively.  Net cash
payments for taxes on income were $222.5 and $336.8 for the nine months ended
January 2, 2009, and December 28, 2007, respectively.  Noncash
investing activities included capital lease obligations of $43.4 and $12.3 for
the nine months ended January 2, 2009, and December 28, 2007,
respectively.


13


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
11 - Comprehensive Income




The
components of comprehensive income, net of tax, are as follows:





Third
      Quarter EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Net
      income
                
                $
                160.6
                
                
                $
                179.0Foreign
      currency translation adjustment
                
                
                (236.4
                )
                
                
                9.8Unrealized
      gain on available for sale securities
                
                
                
                
                
                
                .1Reclassification
      adjustment for gains realized in net income
                
                
                
                
                
                
                (2.2
                )Comprehensive
      (loss) income
                
                $
                (75.8
                )
                
                $
                186.7





Nine
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007Net
      income
                
                $
                732.9
                
                
                $
                362.9Foreign
      currency translation adjustment
                
                
                (551.4
                )
                
                
                151.2Unfunded
      pension adjustment
                
                
                .9
                
                
                
                4.5Unrealized
      gain on available for sale securities
                
                
                
                
                
                
                .5Reclassification
      adjustment for gains realized in net income
                
                
                
                
                
                
                (2.2
                )Comprehensive
      income
                
                $
                182.4
                
                
                $
                516.9





Accumulated
other comprehensive income presented on the accompanying consolidated condensed
balance sheets consists of accumulated foreign currency translation adjustments,
unamortized benefit plan costs, and net unrealized gain on available for sale
securities.


14


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
12 – Segment Information




CSC
provides information technology and business process outsourcing, consulting and
systems integration services and other professional services to its
customers.  As a result of the Company’s comprehensive new growth
strategy, known as Project Accelerate, the Company targets the delivery of its
services within three broad service lines: North American Public Sector (NPS),
Global Outsourcing Services (GOS) and Business Services and Solutions
(BS&S).  Also as a part of Project Accelerate, the Company has
restructured the management and reporting structure and certain related
operating segments.  These changes have resulted in changes to the
Company’s reportable segments pursuant to SFAS No. 131, “Disclosure about
Segments of an Enterprise and Related Information.”  The Company’s
North American Public Sector, Global Outsourcing Services, and Financial
Services Sector operating segments each represent separate reportable segments
under the Company’s new operating structure.  The Company organizes
BS&S – Consulting operating segments by geographies and vertical
operations.  The BS&S – Consulting operating segments provide
outsourcing, systems integration, consulting, and professional services within
their assigned target geographic or vertical markets.  Further, the
service offerings and clientele overlap and the Company draws on multiple
operating segments within BS&S – Consulting to serve clients.  As
a result, the aggregated operating segments have similar economic
characteristics, products, services, customers and methods of
operations.  The Company’s remaining operating segments do not meet
the quantitative thresholds for separate disclosure and do not meet the
aggregation criteria as indicated in SFAS No. 131.  As a result, these
operating segments are reported as “other” as indicated by SFAS
131.  Because each of these other operating segments are within the
Company’s BS&S service line, the Company has labeled this group of operating
segments as BS&S - Other.  The NPS and GOS lines of business are
each entirely comprised of the reportable segments of the same name while the
BS&S service line is comprised of the BS&S – Consulting, Financial
Services Sector reportable segments and BS&S – Other.




The North
American Public Sector 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.  The Global Outsourcing Services
segment provides large-scale outsourcing solution offerings as well as midsize
services delivery to customers globally.  The BS&S - Consulting
segment enables the Company to provide industry specific consulting and systems
integration services, business process outsourcing, and intellectual property
(IP)-based software solutions.  The Financial Services Sector segment
primarily provides information technology and business process outsourcing
services to financial services companies globally.  The operating
segments comprising BS&S - Other include the Company’s non-GOS operations in
Australia and Asia and the Company’s India operations.


15


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
12 – Segment Information (continued)







Business
      Services and SolutionsNorth
                  American
                  Public
                  Sector
                
                
                Global
                  Outsourcing
                  Services
                
                
                Consulting
                
                
                Financial
                  Services
                  Sector
                
                
                Other
                
                
                Corporate
                
                
                Eliminations
                
                
                TotalThree
      Months Ended
                  Jan.
      2, 2009Revenues
                
                $
                1,476.1
                
                
                $
                1,487.2
                
                
                $
                457.3
                
                
                $
                237.0
                
                
                $
                318.7
                
                
                $
                
                
                $
                (23.9
                )
                
                $
                3,952.4Operating
      Income (loss)
                
                
                117.8
                
                
                
                156.2
                
                
                
                27.2
                
                
                
                48.3
                
                
                
                30.6
                
                
                
                (10.1
                )
                
                
                1.0
                
                
                
                371.0Three
      Months Ended
                  Dec.
      28, 2007Revenues
                
                
                1,435.0
                
                
                
                1,718.1
                
                
                
                444.1
                
                
                
                248.0
                
                
                
                340.4
                
                
                
                
                
                
                
                (25.6
                )
                
                
                4,160.0Operating
      Income (loss)
                
                
                113.5
                
                
                
                159.9
                
                
                
                21.8
                
                
                
                43.3
                
                
                
                18.0
                
                
                
                (14.8
                )
                
                
                3.3
                
                
                
                345.0





Business
      Services and SolutionsNorth
                  American
                  Public
                  Sector
                
                
                Global
                  Outsourcing
                  Services
                
                
                Consulting
                
                
                Financial
                  Services
                  Sector
                
                
                Other
                
                
                Corporate
                
                
                Eliminations
                
                
                TotalNine
      Months Ended
                  Jan.
      2, 2009Revenues
                
                $
                4,463.7
                
                
                $
                4,969.1
                
                
                $
                1,477.0
                
                
                $
                746.5
                
                
                $
                1,049.9
                
                
                $
                
                
                $
                (78.0
                )
                
                $
                12,628.2Operating
      Income (loss)
                
                
                344.1
                
                
                
                344.7
                
                
                
                76.1
                
                
                
                126.7
                
                
                
                87.3
                
                
                
                (41.1
                )
                
                
                (2.7
                )
                
                
                935.1Nine
      Months Ended
                  Dec.
      28, 2007Revenues
                
                
                4,305.7
                
                
                
                4,908.6
                
                
                
                1,243.8
                
                
                
                760.4
                
                
                
                874.4
                
                
                
                
                
                
                
                (77.8
                )
                
                
                12,015.1Operating
      Income (loss)
                
                
                301.0
                
                
                
                374.9
                
                
                
                48.6
                
                
                
                139.0
                
                
                
                47.0
                
                
                
                (43.0
                )
                
                
                
                
                
                
                867.5


16


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
12 – Segment Information (continued)





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





Third
      Quarter Ended
                
                
                Nine
      Months EndedJan.
      2, 2009
                
                
                Dec.
      28, 2007
                
                
                Jan.
      2, 2009
                
                
                Dec.
      28, 2007Operating
      income
                
                $
                371.0
                
                
                $
                345.0
                
                
                $
                935.1
                
                
                $
                867.5Minority
      interest expense
                
                
                (1.8
                )
                
                
                (3.4
                )
                
                
                (7.1
                )
                
                
                (10.1
                )Equity
      earnings
                
                
                3.1
                
                
                
                4.1
                
                
                
                12.8
                
                
                
                12.6Corporate
      G&A
                
                
                (46.7
                )
                
                
                (34.6
                )
                
                
                (139.5
                )
                
                
                (108.6
                )Interest
      expense
                
                
                (68.7
                )
                
                
                (51.1
                )
                
                
                (191.4
                )
                
                
                (129.1
                )Interest
      income
                
                
                12.1
                
                
                
                7.5
                
                
                
                30.7
                
                
                
                25.8Special
      items
                
                
                
                
                
                
                (17.5
                )
                
                
                
                
                
                
                (92.4
                )Other
      (expense)/income
                
                
                (8.9
                )
                
                
                16.3
                
                
                
                (22.0
                )
                
                
                41.9Income
      before taxes
                
                $
                260.1
                
                
                $
                266.3
                
                
                $
                618.6
                
                
                $
                607.6





Note
13 – Goodwill and Other Intangible Assets





SFAS No.
142, “Goodwill and Other Intangible Assets,” requires the Company to assess the
carrying value of Goodwill at least annually or as circumstances
require.  Goodwill and other purchased intangible assets are included
in the identifiable assets of the segment to which they have been
assigned.  The annual validation test for all reporting units was
performed for the second quarter ended October 3, 2008, with no indication of
impairment.





SFAS No.
142 requires that goodwill be tested for impairment 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.  Since
September 2008, the Company began to experience a significant decline in its
market capitalization, in conjunction with a decline in the value of the overall
stock market.  During the third quarter, the Company’s market
capitalization was less than its net book value. Subsequent to third quarter
end, the Company’s market capitalization has fluctuated, increasing above its
net book value on several occasions. The Company has evaluated if the decrease
in its market value is the result of factors which would indicate a potential
impairment of goodwill.  The factors considered included, among other
things, the Company’s performance against plan and the outlook for the Company’s
businesses and industry in general.  Based on that evaluation, the
Company believes that overall stock market volatility has been the primary cause
of the reduction in its market capitalization rather than factors specifically
attributable to the Company, and therefore the decline in market capitalization
is not an indication of impairment.  However, if the Company’s market
capitalization is subject to additional sustained decreases, or if the Company’s
outlook for the Company’s businesses and industry in general is subject to a
significant adverse change, the Company may be required to perform an interim
goodwill impairment test in accordance with SFAS 142.





A summary
of the changes in the carrying amount of goodwill by segment for the nine months
ended January 2, 2009 is as follows:


17


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
13 – Goodwill and Other Intangible Assets (continued)





Business
      Solutions and ServicesNorth
                            America
                            Public
                            Sector
                          
                          Global
                            Outsourcing
                            Services
                          
                          Consulting
                          
                          Financial
                            Services
                            Sector
                          
                          Other
                          
                          TotalBalance
      as of March 28,
                            2008
      (1)
                          
                          $674.8
                          
                          $1,388.1
                          
                          $670.9
                          
                          $493.8
                          
                          $747.6
                          
                          $3,975.2Additions
                          
                          20.0
                          
                          15.2
                          
                          4.3
                          
                          11.0
                          
                          8.3
                          
                          58.8Foreign
      currency translation
                          
                          
                          
                          (122.0)
                          
                          (45.7)
                          
                          (2.9)
                          
                          (11.0)
                          
                          (181.6)Balance
      as of January 2, 2009
                          
                          $694.8
                          
                          $1,281.3
                          
                          $629.5
                          
                          $501.9
                          
                          $744.9
                          
                          $3,852.4





(1)
            During
      the first quarter of fiscal 2009, the Company revised its segment
      reporting structure as discussed in Note 12.  As a result of
      this revision, the March 28, 2008, balances and the adjustments have been
      modified to reflect this change.





The
addition to goodwill of $58.8 consisted of approximately $31.5 related to the
acquisitions of two privately held entities in the third quarter of fiscal 2009,
and purchase accounting adjustments related to Computer Systems Advisers (M)
Berhad (CSAM) and Mynd Corporation, of $18.7 and $10.9, respectively, as well as
other insignificant adjustments totaling $(2.3).  See Note 16 for
further details regarding recent acquisitions.  The foreign currency
translation amount relates to the impact of foreign currency adjustments in
accordance with SFAS No. 52, “Foreign Currency Translation.”





A summary
of amortizable intangible assets as of January 2, 2009, and March 28, 2008, is
as follows:





January
      2, 2009Gross
                  Carrying
      Value
                
                
                Accumulated
                  Amortization
                
                
                NetSoftware
                
                $
                1,554.0
                
                
                $
                1,073.5
                
                
                $
                480.5Outsourcing
      contract costs
                
                
                1,965.7
                
                
                
                1,237.9
                
                
                
                727.8Other
      intangible assets
                
                
                418.8
                
                
                
                187.2
                
                
                
                231.6Total
      intangible assets
                
                $
                3,938.5
                
                
                $
                2,498.6
                
                
                $
                1,439.9





March
      28, 2008Gross
                  Carrying
      Value
                
                
                Accumulated
                  Amortization
                
                
                NetSoftware
                
                $
                1,532.6
                
                
                $
                1,005.2
                
                
                $
                527.4Outsourcing
      contract costs
                
                
                2,144.4
                
                
                
                1,219.0
                
                
                
                925.4Other
      intangible assets
                
                
                387.5
                
                
                
                147.9
                
                
                
                239.6Total
      intangible assets
                
                $
                4,064.5
                
                
                $
                2,372.1
                
                
                $
                1,692.4


18


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
13 – Goodwill and Other Intangible Assets (continued)





Amortization
related to intangible assets was $120.2 and $110.7 for the three months and
$387.2 and $338.0 for the nine months ended January 2, 2009, and December 28,
2007, respectively.  Estimated amortization expense related to
intangible assets as of March 28, 2008, for each of the subsequent five years,
fiscal 2009 through fiscal 2013, is as follows: $362.3, $323.5, $245.9, $194.0,
and $146.5, respectively.





Note
14 – Special Items





The
Company did not record any charges related to special items during the quarter
and nine months ended January 2, 2009.  Special items totaling $17.5
and $92.4 were recorded during the quarter and nine months ended December 28,
2007.  For the third quarter and nine months ended December 28, 2007,
special items consisted of: (1) a $17.5 and $70.0 restructuring charge,
respectively (see discussion below), and (2), a $22.4 charge related to the
retirement of the Company’s Chairman and Chief Executive Officer recorded during
the first quarter of fiscal 2008.





The
Company and its former Chairman and Chief Executive Officer, Van B. Honeycutt,
entered into a retirement agreement pursuant to which Mr. Honeycutt resigned as
Chief Executive Officer effective May 21, 2007, and as Chairman July 30, 2007,
and received, as a separation benefit, a lump sum cash payment of $11.2 on
January 31, 2008, as well as certain other benefits through December 3,
2009.  As a result of Mr. Honeycutt’s retirement, recognition of the
expense associated with his unvested stock-based compensation was accelerated
resulting in stock-based compensation of $12.2, of which $10.4 was recorded in
special items and $1.8 was recorded as additional paid-in
capital.  The total pre-tax charge recorded in special items,
including the lump sum cash payment and other benefits and the charge for
accelerated vesting of employee stock-based compensation, was
$22.4.





Restructuring





In April
2006, the Company announced a restructuring plan to be carried out during fiscal
2007 and 2008.  The objectives of the plan were to (1) streamline
CSC’s worldwide operations, and (2) leverage the increased use of lower cost
global resources.  Restructuring charges consisted predominantly of
severance and related employee payments resulting from
terminations.





The
Company did not record any termination-related restructuring charges as special
items in the third quarter of fiscal 2009 compared to $12.7 in the third quarter
of fiscal 2008.  Other costs, which were primarily related to vacant
space, of $4.8 were also recorded during the third quarter of fiscal
2008.





Restructuring-related
pre-tax cash payments during the third quarter of fiscal 2009 were $12.7
compared to $33.6 in the third quarter of fiscal 2008.  Included in
the restructuring charges are pension benefit augmentations that are due to
certain employees in accordance with legal or contractual obligations, which
will be paid out over several years as part of normal pension
distributions.  Such liabilities are included in the consolidated
pension liability account.


19


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
14 – Special Items (continued)





See the
following table for a summary of fiscal 2009 year to date
activity:





Three
months ended January 2, 2009:





Liability
      as of
                Oct.
      3, 2008
              
              
              Less
                payments
              
              
              Other(1)
              
              
              Restructuring
                Liability
      as of
                Jan.
      2, 2009Workforce
      Reductions
              
              $
              17.7
              
              
              $
              (7.4
              )
              
              $
              .5
              
              
              $
              10.8Other
              
              
              24.4
              
              
              
              (5.3
              )
              
              
              (2.1
              )
              
              
              17.0Total
              
              $
              42.1
              
              
              $
              (12.7
              )
              
              $
              (1.6
              )
              
              $
              27.8





Nine
months ended January 2, 2009:





Liability
      as of
                March
      28, 2008
              
              
              Less
                payments
              
              
              Other(1)
              
              
              Restructuring
                Liability
      as of
                Jan.
      2, 2009Workforce
      Reductions
              
              $
              61.3
              
              
              $
              (49.0
              )
              
              $
              (1.5
              )
              
              $
              10.8Other
              
              
              32.8
              
              
              
              (11.0
              )
              
              
              (4.8
              )
              
              
              17.0Total
              
              $
              94.1
              
              
              $
              (60.0
              )
              
              $
              (6.3
              )
              
              $
              27.8





(1)
            Foreign
      currency translation adjustments.





Note
15 – Contracts with the U.S. Federal Government





During
the second quarter of fiscal 2008, the Company amended a contract with the IRS
in connection with a long-term systems modernization effort resulting in a
forward loss of approximately $8.1.  In addition, the Company recorded
a charge of approximately $33.9, to reduce precontract costs by approximately
half to an amount which is probable of recovery for a combined charge of $42
which is included in cost of services.


20


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
16 – Acquisitions





During
the third quarter of fiscal 2009, CSC acquired two separate privately held
entities for approximately $37.5 cash, plus additional consideration of up to
$19 contingent on achievement of agreed revenue targets for calendar years 2009
and 2010.  When the contingency is resolved and consideration is
distributable, the Company will record the fair value of the consideration as an
additional cost of the acquisitions.  The acquisitions were accounted
for using the purchase method of accounting and, accordingly, the results of
operations have been included with the Company’s from the date of
acquisition.  The purchase price of the acquisitions was allocated to
the net assets acquired based on preliminary estimates of fair values at the
date of acquisition and are subject to future adjustments. Based on preliminary
estimates, approximately $31.5 has been allocated to goodwill.  The
preliminary values will be finalized no later than the third quarter of fiscal
2010.  The  pro  forma  impact  on  net
income  and  earnings  per  share  for  the  acquisitions
has not been disclosed for the current or comparable prior periods, as the
acquisitions are immaterial both individually and in the aggregate to the
financial statements as a whole.





During
the first quarter of fiscal 2009, the Company finalized a scheme of arrangement
to acquire the 49% of Computer Systems Advisers (M) Berhad (CSAM) not owned by
the Company’s wholly-owned subsidiary, CSA Holding, Ltd.  The
arrangement allows for better integration of similar business between CSAM and
CSC’s other operations.  The purchase price of the remaining interest
was $197 Malaysian dollars (approximately $63).  The acquisition was
accounted for under the purchase method.  Revenue from the acquired
interest has been reflected in the consolidated statements of income given the
Company’s previous majority ownership.  The Company’s purchase of the
remaining interest of CSAM resulted in approximately $18.7 allocated to goodwill
during the second quarter of fiscal 2009.  The goodwill was allocated
to Global Outsourcing Services, and BS&S – Other
segments.  Adjustments to the purchase price allocation are expected
to be finalized no later than the last quarter of fiscal 2009.  There
can be no assurance that such adjustments will not be material.  The
pro forma impact on the net income and earnings per share has not been disclosed
for the current comparable prior periods, as the amounts were immaterial to the
financial statements as a whole.





On
January 11, 2008, CSC acquired all outstanding shares of First Consulting Group
(FCG), a publicly-held U.S. corporation, in an all-cash transaction for $13.00
per share, or approximately $275 net of acquired cash.  FCG is a
professional services firm focused on healthcare and technology.  FCG
clients include healthcare providers, health plans, government healthcare,
pharmaceutical companies, life sciences organizations, independent software
vendors and other clients both within healthcare and in other
industries.  The acquisition of FCG will increase the Company’s
healthcare capabilities, offerings, and presence in the United States, Europe
and Asia.


21


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
16 – Acquisitions (continued)





The
acquisition was accounted for using the purchase method and, accordingly, FCG’s
results of operations have been included with the Company’s from the date of
acquisition.  The purchase price of the acquisition was allocated to
the net assets acquired based on fair values at the date of
acquisition.  Based on the estimates of fair value, $27 was allocated
to identifiable intangible assets and $221 was allocated to
goodwill.  Of the $27 allocated to identifiable intangible assets, $3
was assigned to internally developed software (estimated useful life of five
years), and $24 allocated to customer related intangibles (estimated useful life
of three years).  The amount of goodwill is primarily attributable to
the increased delivery capabilities and penetration of certain industry
segments, particularly healthcare, anticipated to be provided by the acquisition
as described above.  Of the $221 goodwill recognized, $154 was
assigned to the BS&S Consulting segment and $67 was assigned to Global
Outsourcing Services segment.  None of the goodwill is deductible for
tax purposes.





The
following unaudited pro forma information presents consolidated results of
operations as if the FCG acquisition occurred at the beginning of each period
presented.  Pro forma results include adjustments related to interest
and depreciation and amortization resulting from the acquisition.





Results
for both years include costs of being a standalone public company prior to the
acquisition by CSC.  The pro forma information may not necessarily be
indicative of the results of operations had the FCG acquisition actually taken
place at the beginning of each period presented.  Further, the pro
forma information may not be indicative of future performance.





As
      Reported
                
                
                Pro
      formaThird
      Quarter Ended
                
                
                Third
      Quarter EndedJanuary
      2, 2009
                
                
                December
      28, 2007
                
                
                January
      2, 2009
                
                
                December
      28, 2007Revenue
                
                $
                3,952.4
                
                
                $
                4,160.0
                
                
                $
                3,952.4
                
                
                $
                4,229.5Net
      Income
                
                $
                160.6
                
                
                $
                179.0
                
                
                $
                160.6
                
                
                $
                176.5Basic
      Earnings Per Share
                
                $
                1.06
                
                
                $
                1.07
                
                
                $
                1.06
                
                
                $
                1.06Fully
      Diluted Earnings Per Share
                
                $
                1.06
                
                
                $
                1.05
                
                
                $
                1.06
                
                
                $
                1.04





As
      Reported
                
                
                Pro
      formaNine
      Months Ended
                
                
                Nine
      Months EndedJanuary
      2, 2009
                
                
                December
      28, 2007
                
                
                January
      2, 2009
                
                
                December
      28, 2007Revenue
                
                $
                12,628.2
                
                
                $
                12,015.1
                
                
                $
                12,628.2
                
                
                $
                12,228.1Net
      Income
                
                $
                732.9
                
                
                $
                362.9
                
                
                $
                732.9
                
                
                $
                364.5Basic
      Earnings Per Share
                
                $
                4.84
                
                
                $
                2.12
                
                
                $
                4.84
                
                
                $
                2.13Fully
      Diluted Earnings Per Share
                
                $
                4.80
                
                
                $
                2.08
                
                
                $
                4.80
                
                
                $
                2.09





22


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
16 – Acquisitions (continued)





As a
result of the FCG acquisition on January 11, 2008, the Company has incurred and
will continue to incur future costs to consolidate facilities, involuntarily
terminate employees and other costs to integrate FCG into the
Company.  Generally accepted accounting principles require that these
costs, which are not associated with the generation of future revenues and have
no future economic benefit, be reflected as assumed liabilities in the
allocation of the purchase price to the net assets acquired.  The
facility consolidations relate to the rationalization of FCG office and data
center space in the U.S. where space will be vacated and subleased if
possible.  Involuntary terminations relate to approximately 68 FCG
employees.  As of January 2, 2009, 62 employees have been
terminated.  The components of the acquisition integration liabilities
included in the purchase price allocation for FCG are presented in the following
table.





Acquisition
      Integration Liabilities
              
              
              Paid
      as of January 2, 2009
              
              
              Balance
      Remaining at January 2, 2009Facility
      consolidations
              
              $
              3.4
              
              
              
              
              
              $
              3.4Severance
      payments
              
              
              4.6
              
              
              $
              4.4
              
              
              
              .2Total
              
              $
              8.0
              
              
              $
              4.4
              
              
              $
              3.6





As a
result of the Covansys acquisition on July 2, 2007, the Company has incurred and
will incur future costs to consolidate facilities, involuntarily terminate
employees and other costs to integrate Covansys into the
Company.  Generally accepted accounting principles require that these
costs, which are not associated with the generation of future revenues and have
no future economic benefit, be reflected as assumed liabilities in the
allocation of the purchase price to the net assets acquired.  The
facility consolidations relate to the rationalization of Covansys office space
in the U.S. and internationally where space will be vacated and subleased if
possible.  Involuntary terminations relate to approximately 29
Covansys employees.  As of January 2, 2009, 29 employees had been
terminated.  The components of the acquisition integration liabilities
included in the purchase price allocation for Covansys are presented in the
following table.








Acquisition
                  Integration
                  Liabilities
                
                
                Paid
      as of
                  January
      2, 2009
                
                
                Other
                
                
                Balance
                  Remaining
      at
                  January
      2, 2009Facility
      consolidations
                
                $
                4.4
                
                
                $
                (1.7
                )
                
                $
                (.1
                )
                
                $
                2.6Severance
      payments
                
                
                4.9
                
                
                
                (3.9
                )
                
                
                (1.0
                )Other
                
                
                0.1
                
                
                
                (0.1
                )Total
                
                $
                9.4
                
                
                $
                (5.7
                )
                
                $
                (1.1
                )
                
                $
                2.6





23


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies





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.
Furthermore, the Company continuously reviews its accounts receivables and
records provisions for doubtful accounts as needed.  The recent global
financial instability has resulted in a tightening of U.S. commercial paper and
credit markets, decreased liquidity in many financial markets, and uncertainty
in global economic conditions.The company recently responded to the
dislocation in the commercial paper market by drawing down $1.5 billion under
its committed revolving credit facility.  Given the volatility of the
credit markets at this time, it is not possible to predict when credit
conditions will ease and short term financing will become more readily
available.  Continued uncertainty in the global economic conditions
and the liquidity crisis 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 defer or cancel contract decisions which could negatively affect
revenue.





In the
normal course of business, the Company may provide 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 only be liable for the
amounts of these guarantees in the event that nonperformance by the Company
permits termination of the related contract by the Company’s client, which the
Company believes is remote.  At January 2, 2009, the Company had
$370.8 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 the ultimate liability, if any, incurred in
connection with these guarantees will not have a material adverse affect on its
consolidated results of operations or financial position.





The
Company guarantees working capital credit lines established with local financial
institutions for its non-U.S. business units.  Generally, guarantees
have one-year terms and are renewed annually.  CSC guarantees up to
$642.4 of such working capital lines; as of January 2, 2009, the amount of the
maximum potential payment is $31.9, the amount of the related outstanding
subsidiary debt. The $31.9 outstanding debt is reflected in the Company’s
consolidated financial statements.





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.  Management considers the likelihood of incurring
future costs to be remote.  Accordingly, the Company has not recorded
a related liability.


24


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies (continued)





In the
course of business, discrepancies or claims may arise as to the use or
reliability of various software products Trovided by the Company for its
customers.  On February 7, 2005, the Company was named, along with
other vendors to the insurance industry and dozens of insurance companies in
Hensley, et al. vs. Computer Sciences Corporation, et al., filed as a putative
nationwide class action in state court in the Circuit Court of Miller County,
Arkansas shortly before President Bush signed the Class Action Fairness Act into
law.  The plaintiffs allege the defendants conspired to wrongfully use
software products licensed by the Company and the other software vendors to
reduce the amount paid to the licensees' insured for bodily injury
claims.  Plaintiffs also allege wrongful concealment of the manner in
which these software programs evaluate claims and wrongful concealment of
information about alleged inherent errors and flaws in the
software.  Plaintiffs seek injunctive and monetary relief of less than
$.075 for each class member, as well as attorney's fees and
costs.  The Company is vigorously defending itself against the
allegations.  On June 11, 2008 the court granted plaintiffs’ motion to
sever certain defendants, including the Company, from the Hensley
litigation.  As a result, the Company continues as a defendant in the
Hensley litigation and is also now a defendant in a separate putative class
action pending in the Circuit Court of Miller  County, Arkansas
(styled Basham, et al. vs. Computer Sciences Corporation, et al.), along with
certain insurance companies previously named as defendants in the Hensley
litigation.  During the second, third and fourth quarters of fiscal
2009 the Company, along with certain other defendants in the Hensley and Basham
litigation, engaged in settlement discussions with legal counsel representing
the putative class members through mediation proceedings
facilitated by an independent mediator.   In February 2009,
the Company and the class representatives in the Hensley and Basham litigation
agreed to a settlement of the pending litigation and the parties are in the
process of filing the settlement agreement with the court for
approval.  As part of the settlement, the Company has agreed to
certain injunctive relief, primarily involving the publication of information
regarding the use of the Company’s software by its licensees in adjusting bodily
injury claims, and to the payment of legal fees to legal counsel representing
the classes in the litigation.  The Company’s net payment obligation
in the settlement is not material to the Company’s financial condition nor will
the settlement have a material adverse effect on the Company’s
operations.





Litigation
is inherently uncertain and it is not possible to predict the ultimate outcome
of the matters discussed above.  It is possible that the Company's
business, financial condition, results of operations, or cash flows could be
affected by the resolution of this matter.  Whether any losses,
damages or remedies ultimately resulting from this proceeding could reasonably
have a material effect on the Company's business, financial condition, results
of operations, or cash flows will depend on a number of variables, including,
for example, the timing and amount of such losses or damages, if any, and the
structure and type of any such remedies.  Depending on the ultimate
resolution of these matters, some may be material to the Company's operating
results for a particular period if an unfavorable outcome results, although such
a material unfavorable result is not presently expected, and all other
litigation, in the aggregate, is not expected to result in a material adverse
impact to the consolidated condensed financial statements.


25


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies (continued)





CSC is
engaged in providing services under contracts with the U.S.
Government.  The contracts are subject to extensive legal and
regulatory requirements and, from time to time, agencies of the U.S. Government
investigate whether the Company's operations are being conducted in accordance
with these requirements.  U.S. Government investigations of the
Company, 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 the
Company, or could lead to suspension or debarment from future U.S. Government
contracting.  The Company believes it has adequately reserved for any
losses which may be experienced from these investigations.





In
accordance with prescribed federal regulations, the Company converted 16
submitted Requests for Equitable Adjustment (REAs) to interest bearing claims
under the Contract Disputes Act (CDA) totaling approximately $900 on two U.S.
Federal contracts in order to initiate the claims litigation process and trigger
the statutory interest provision of the CDA.





Included
in current assets on the Company's balance sheet are approximately $446 ($414 of
which is subject to the claims) of unbilled receivables and $394 of deferred
costs related to the claims associated with the two contracts.  The
Company does not record any profit element when it defers costs associated with
such REAs/claims.  CSC has requested payment for customer-caused
delays and certain related out-of-scope work directed or caused by the customers
in support of their critical missions. Notwithstanding the Government’s
breaches and delays, CSC was obligated under applicable federal acquisition law
to continue performance as directed by the Government; otherwise, refusal to
perform would have placed CSC at risk for a termination for default under the
applicable provisions of the Federal Acquisition Regulations.  The
Company believes it has valid bases for pursuing recovery of these REAs/claims
supported by outside counsel’s evaluation of the facts and assistance in the
preparation  of the claims.  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.


26


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies (continued)





During
the first quarter of fiscal 2008, the U.S. federal contracting officer for the
contract with the larger set of claims denied the claims and issued a $42.3
counterclaim.  The Company disagrees with the Government’s denials
both factually and contractually.  In contrast to the Company’s
claims’ submission, 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, the
Company initiated litigation at the Armed Services Board of Contract Appeals
(ASBCA), one of the two forums available for litigation of CDA claims, on
September 11, 2007, with regard to the larger of the two sets of claims and the
counterclaim.  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.  During the third quarter of fiscal 2008, the
Company and its litigation team undertook a standard review of the value of the
claims associated with this contract.  Value is subject to periodic,
routine adjustment as new facts are uncovered, because of contract modifications
and funding changes, ordinary rate adjustments, and/or estimated cost data being
replaced with actual costs.  On December 21, 2007, as a result of the
review, the Company amended the complaint it filed with the ASBCA on September
11, 2007, and adjusted its value downward, with such reduction reflected in the
approximately $900 total value for both sets of claims noted
above.  This adjustment is solely due to the amount of damages claimed
and does not affect the amounts recorded in the Company’s balance sheet. The
discovery phase of this litigation began in the first half of fiscal year
2009.  Discovery in the litigation will continue through fiscal year
2010 and trial is tentatively scheduled to begin in the second quarter of fiscal
year 2011. With respect to the second set of claims, the Government issued its
denial on November 15, 2007.  As with the larger set of claims, the
Company disagrees with the Government’s denial both factually and contractually
and initiated litigation at the Armed Services Board of Contract Appeals on
February 12, 2008.  The discovery phase of this litigation is expected
to begin during the fourth quarter of fiscal year 2009 and could continue for a
year or more.





Interest
on the claims is accruing but will only be recognized in the financial
statements when paid.  Resolution of the REA claims/amounts depends on
individual circumstances, negotiations by the parties and prosecution of the
claims.  The Company will pursue appeals as necessary and is unable to
predict the timing of resolution of recovery of these claims; however,
resolution of the claims may take years.





Several
shareholders of the Company have made demands on the Board of Directors of the
Company or filed purported derivative actions against both the Company, as
nominal defendant, as well as certain of CSC's executive officers and
directors.  These actions 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 allege that
certain of the defendants were unjustly enriched and seek to require them to
disgorge their profits.  These actions have been filed in both federal
and state court in Los Angeles as follows.


27


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies (continued)





On June
1, 2006, a shareholder derivative complaint was filed in Los Angeles County
Superior Court naming Computer Sciences Corporation ("CSC") as a nominal
defendant and various current and former CSC officers and directors as
individual defendants.  The complaint was titled Allbright v. Bailey et al,
Case No. BC353316 and alleged the backdating of stock option grants to various
senior executives at CSC.  Thereafter, two additional related
shareholder derivative complaints were filed in Los Angeles Superior Court,
Jones v. Bailey et al.,
Case No. BC354686, and Laborers' InternationalUnionv. Bailey et al., Case No.
BC356675.  The Laborers'action was
subsequently voluntarily dismissed without prejudice, and in September 2006
Joneswas consolidated
with Allbright.  In July
2008, following a dismissal based on failure to adequately allege that a
pre-suit "demand" on the Board was excused and a subsequent amended complaint,
Superior Court Judge Carl West sustained  a second demurrer based on
demand pleadings and dismissed the consolidated case with
prejudice.    The statutory time for filing a notice of
appeal has passed and plaintiffs in the state court case have not appealed the
court’s granting of the Company’s demurrer and dismissal.





On August
23, 2006, Laborers'
International Union v. Bailey, et al., CV 06-5288, a shareholder
derivative action, was filed in U.S. District Court in Los
Angeles.  This complaint made similar allegations  of
 backdating of  stock option grants to various senior executives at
CSC and  named CSC as a nominal defendant and various current and
former directors and officers as individual defendants.  On August 25,
2006, another derivative suit containing nearly identical allegations was filed
in the same court, entitled LocalUnionand District Council v. Bailey, et
al., CV 06-5356.   The derivative complaints brought state
law claims for breach of fiduciary duty and other claims, as well as a federal
securities claim.  A third derivative complaint, Huffman v. Honeycutt, et al.,
CV 06-6512, filed in the same court, also brought state and federal claims based
on backdating allegations.  All three federal derivative actions were
ultimately consolidated into one action entitled In re CSC Shareholder Derivative
Litigation, CV 06-5288, before U.S. District Judge Mariana
Pfaelzer.  On July 24, 2007, following the grant of an initial motion
to dismiss and a subsequent amended complaint, Judge Pfaelzer granted a
second motion to dismiss based on demand futility and dismissed the amended
complaint with prejudice.  Following an ex parte application by
defendants, Judge Pfaelzer issued a corrected order dated August 9, 2007
reflecting the same ruling.  Plaintiffs subsequently filed a notice of
appeal to the Ninth Circuit. Arguments were heard on December 9,
2008.  On January 23, 2009, the Ninth Circuit affirmed the District
Court’s decision dismissing the case.


28


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
17 – Commitments and Contingencies (continued)





The
Company and certain directors and other individuals have also been sued in a
class action proceeding alleging violations of the ERISA statute related to
claims of alleged backdating of stock options.  On August 15, 2006, a
federal ERISA class action involving allegations of backdating at CSC was filed
in 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 CSC, the CSC
Retirement and Employee Benefits Plans Committee, and various directors and
officers, and alleged various violations of the ERISA statute.  The
two ERISA actions have been 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
federal district court in Los Angeles, California.  Upon arrival in
the Central District of California, the two cases  were  consolidated
 before U.S. District Judge James Otero in Case No. CV
08-2398-SJO.  Defendants  filed a motion to dismiss and
plaintiffs filed their memorandum in opposition to the
motion.  Plaintiffs also filed a motion for class certification, and
Defendants  filed  their memorandum in opposition to the
motion on August 11, 2008.  On September 2, 2008, Judge Otero issued
orders denying defendants’ motion to dismiss, and also denying plaintiffs’
motion for class certification.  Defendants have since answered the
complaint and discovery is currently proceeding.  On November 13,
2008, plaintiffs filed a new motion for class certification and the defendants
filed a memorandum in opposition on December 8, 2008.  On December 29,
2008, Judge Otero granted plaintiffs motion for class
certification.  On January 13, 2009, defendants filed a  a
petition with the Ninth Circuit pursuant to Rule 23(f) of the Federal Rules,
requesting that the court of appeals accept their appeal from the order granting
class certification. Plaintiffs filed their opposition on January 23, 2009. At
this time it is not possible to make reliable estimates of the amount or range
of loss that could result from any of these actions.





In
addition to the matters noted above, the Company is currently party to a number
of disputes which involve or may involve litigation.  The Company
consults with legal counsel on those issues related to litigation 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,  for example,
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 reliable 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
18 – 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 and postretirement benefit
plans are as follows:




29


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)







Note
18 – Pension and Other Benefit Plans (continued)







Three
      Months EndedJanuary
      2, 2009
                
                
                December
      28, 2007Pensions
                
                U.S.
      Plans
                
                
                Non-US
      Plans
                
                
                U.S.
      Plans
                
                
                Non-US
      PlansService
      cost
                
                $
                28.9
                
                
                $
                10.8
                
                
                $
                29.9
                
                
                $
                21.9Interest
      cost
                
                
                37.2
                
                
                
                24.4
                
                
                
                32.5
                
                
                
                30.9Expected
      return on assets
                
                
                (42.8
                )
                
                
                (27.4
                )
                
                
                (38.2
                )
                
                
                (36.7
                )Amortization
      of transition obligation
                
                
                
                
                
                
                .3
                
                
                
                
                
                
                
                .3Amortization
      of prior service costs
                
                
                .2
                
                
                
                .2
                
                
                
                (.2
                )
                
                
                .1Amortization
      of unrecognized net loss
                
                
                .8
                
                
                
                3.1
                
                
                
                3.7
                
                
                
                5.5SFAS
      No. 88 settlement/curtailment
                
                
                
                
                
                
                
                
                
                
                0.1
                
                
                
                .2Net
      periodic pension cost
                
                $
                24.3
                
                
                $
                11.4
                
                
                $
                27.8
                
                
                $
                22.2





Nine
      Months EndedJanuary
      2, 2009
                
                
                December
      28, 2007Pensions
                
                U.S.
      Plans
                
                
                Non-US
      Plans
                
                
                U.S.
      Plans
                
                
                Non-US
      PlansService
      cost
                
                $
                86.7
                
                
                $
                35.4
                
                
                $
                89.7
                
                
                $
                62.2Interest
      cost
                
                
                111.6
                
                
                
                84.0
                
                
                
                97.5
                
                
                
                90.9Expected
      return on assets
                
                
                (128.4
                )
                
                
                (94.2
                )
                
                
                (114.6
                )
                
                
                (108.2
                )Amortization
      of transition obligation
                
                
                
                
                
                
                .9
                
                
                
                
                
                
                
                .9Amortization
      of prior service costs
                
                
                .6
                
                
                
                .6
                
                
                
                .2
                
                
                
                .3Amortization
      of unrecognized net loss
                
                
                2.4
                
                
                
                9.0
                
                
                
                11.1
                
                
                
                16.2SFAS
      No. 88 settlement/curtailment
                
                
                
                
                
                
                
                
                
                
                .1
                
                
                
                .6Net
      periodic pension cost
                
                $
                72.9
                
                
                $
                35.7
                
                
                $
                84.0
                
                
                $
                62.9





30


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
18 – Pension and Other Benefit Plans (continued)





Three
      Months EndedJanuary
      2, 2009
                
                
                December
      28, 2007Other
      Postretirement Benefits
                
                U.S.
      Plans
                
                
                Non-US
      Plans
                
                
                U.S.
      Plans
                
                
                Non-US
      PlansService
      cost
                
                $
                .6
                
                
                $
                .1
                
                
                $
                .6
                
                
                $
                .1Interest
      cost
                
                
                2.6
                
                
                
                .1
                
                
                
                2.5
                
                
                
                .2Expected
      return on assets
                
                
                (1.8
                )
                
                
                
                
                
                
                (1.7
                )Amortization
      of transition obligation
                
                
                .4
                
                
                
                
                
                
                
                .4Amortization
      of prior service costs
                
                
                .1
                
                
                
                
                
                
                
                .2Amortization
      of unrecognized net loss
                
                
                .8
                
                
                
                
                
                
                
                1.0Net
      provision for postretirement benefits
                
                $
                2.7
                
                
                $
                .2
                
                
                $
                3.0
                
                
                $
                .3








Nine
      Months EndedJanuary
      2, 2009
                
                
                December
      28, 2007Other
      Postretirement Benefits
                
                U.S.
      Plans
                
                
                Non-US
      Plans
                
                
                U.S.
      Plans
                
                
                Non-US
      PlansService
      cost
                
                $
                1.8
                
                
                $
                .3
                
                
                $
                1.9
                
                
                $
                .3Interest
      cost
                
                
                7.8
                
                
                
                .5
                
                
                
                7.4
                
                
                
                .4Expected
      return on assets
                
                
                (5.4
                )
                
                
                
                
                
                
                (5.1
                )Amortization
      of transition obligation
                
                
                1.2
                
                
                
                
                
                
                
                1.2Amortization
      of prior service costs
                
                
                .3
                
                
                
                
                
                
                
                .5Amortization
      of unrecognized net loss
                
                
                2.4
                
                
                
                
                
                
                
                3.1Net
      provision for postretirement benefits
                
                $
                8.1
                
                
                $
                .8
                
                
                $
                9.0
                
                
                $
                .7








The
Company expects to contribute approximately $200 to its defined benefit pension
and $10 to its postretirement benefit plans during fiscal
2009.  During the first nine months of fiscal 2009, the Company
contributed $142.5 to its defined benefit pension plans.





Note
19 – Recent Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.”  The Statement defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles and expands disclosures about fair value
measurements.  This Statement applies under other accounting
pronouncements that require or permit fair value measurements.  The
Statement does not require any new fair value measurements.  The
portion of this statement related to the measurement of financial assets and
liabilities was adopted by the Company at the beginning of fiscal 2009 and did
not have a material impact on the Company’s results of operations or financial
position.  The portion of this statement related to
non-financial





31


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
19 – Recent Accounting Pronouncements (continued)





assets
and liabilities is effective for the Company’s fiscal 2010 and the Company
believes that adoption will not have a material impact on the Company’s results
of operations or financial position.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115,”  This Statement permits entities to choose to
measure many financial instruments and certain other items at fair value at
specified election dates.  If the fair value option is elected, a
business entity shall report unrealized gains and losses on elected items in
earnings at each subsequent reporting date.  Upon initial adoption of
this Statement, an entity is permitted to elect the fair value option for
available-for-sale and held-to-maturity securities previously accounted for
under statement 115.  The effect of reclassifying those securities
into the trading category should be included in a cumulative-effect adjustment
of retained earnings and not in current-period earnings and should be separately
disclosed.  This Statement is effective for CSC’s fiscal
2009.  The adoption of SFAS No. 159 did not have a material impact on
the Company’s results of operations or financial position.





In
December 2007, the FASB issued SFAS No. 160 (SFAS 160), “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51.”  SFAS No. 160 affects entities that have an outstanding
noncontrolling interest in one or more subsidiaries.  The significant
provisions of SFAS 160 are summarized below.





·
            SFAS
      160 requires that minority interests be reported as part of the equity
      section in the consolidated financial statements versus the current
      presentation as a liability or in the mezzanine section between
      liabilities and equity.





·
            SFAS
      160 also requires that the consolidated income statement include net
      income of both the parent and the noncontrolling interest and that the net
      income amounts related to both the parent and the noncontrolling interest
      be disclosed on the face of the consolidated income
      statement.  Currently noncontrolling interest net income is
      reported as an expense or other deduction to arrive at consolidated net
      income.  SFAS No. 128, “Earnings per Share,”
      will be amended to clarify that earnings-per-share data will continue to
      be calculated based on amounts attributable to the
  parent.





·
            SFAS
      160 establishes a single method of accounting for changes in a parent’s
      ownership interest by clarifying that the following transactions are
      equity transactions if the parent’s controlling interest is
      maintained:  the parent purchases additional ownership interests
      in its subsidiary; the parent sells ownership interests in its subsidiary;
      the subsidiary reacquires some of its ownership interests; and if the
      subsidiary issues additional ownership interests.  Previous
      practice allowed parent ownership changes to be either accounted for as
      equity transactions or as transactions with gain or loss recognition in
      the income statement.





·
            SFAS
      160 eliminates the requirement to apply purchase accounting to a parent’s
      acquisition of noncontrolling
interests.




32


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
19 – Recent Accounting Pronouncements (continued)





·
            When
      a parent deconsolidates a subsidiary due to loss of controlling financial
      interest, SFAS 160 requires that the parent recognize a gain or loss in
      net income.  Additionally, if a parent retains a noncontrolling
      equity investment that investment is measured at fair market value and
      used in the calculation of the gain or loss.  Previous to this
      Statement any retained investments were not remeasured before use in
      calculating the gain or loss.





SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008.  The Company has not yet
evaluated the impact, if any, the adoption of this Statement will have on the
Company’s consolidated financial position or results of operations.





In
December 2007, the FASB issued SFAS No. 141 (SFAS 141R) (revised 2007), “Business
Combinations.”  This Statement applies to all transactions in
which an entity obtains control of one or more businesses, including true
mergers/mergers of equals and combinations achieved without the transfer of
consideration.  The previous SFAS No. 141 was narrower in its
application in that it only applied to business combinations in which control
was obtained by transferring consideration.


The
significant provisions of SFAS 141R are summarized below:





·
            SFAS
      141R defines the acquirer as the entity that obtains control of one or
      more businesses in the business combination and establishes the
      acquisition date as the date the acquirer obtains
  control.





·
            SFAS
      141R requires the recognition of the assets acquired, liabilities assumed
      and any noncontrolling interests in the acquiree at the acquisition date,
      be measured at their fair values, replacing the cost allocation process
      under the previous SFAS No. 141 whereby the cost of the acquisition was
      allocated to the assets and liabilities based on their estimated fair
      market values.





·
            Acquisition
      related costs which were once included in the purchase price of the
      combination and included in the cost allocation mentioned above will now
      under SFAS No. 141(R) be recognized separately from the business
      combination.





·
            Restructuring
      costs will also be required to be recognized separately from the business
      combination, versus the old method of recording them as a liability at the
      time of the acquisition.





·
            SFAS
      141R requires assets, liabilities and noncontrolling interests acquired in
      stages (step acquisition) to be recognized at the full amounts of the fair
      market values.  Under the old method the acquirer identified the
      cost of each investment, the fair value of the underlying identifiable net
      assets acquired, and the goodwill on each step which resulted in measuring
      the assets and liabilities at a blend of historical costs and fair values
      which provided less relevant and comparable
  information.


33


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
19 – Recent Accounting Pronouncements (continued)





·
            SFAS
      141R requires an acquirer to recognize assets acquired and liabilities
      assumed arising from contractual contingencies as of the acquisition date,
      measured at their acquisition date fair values.  SFAS No. 141
      permitted deferred recognition of preacquisition contingencies under the
      recognition criteria for SFAS No. 5, “Accounting for
      Contingencies.”





·
            Noncontractual
      contingencies should be treated the same way only if it is more likely
      than not that they meet the definition of an asset or liability in FASB
      Concepts Statement No. 6, “Elements of Financial
      Statements.”  If this criterion is not met at the
      acquisition date, the acquirer would account for the contingency using
      other applicable GAAP.





·
            Subsequent
      accounting for assets and liabilities arising from contingencies acquired
      includes keeping that asset or liability at the acquisition date fair
      market value until new information becomes available, at which time the
      new information will be evaluated and the liability will be
      measured at the higher of its acquisition date fair value or the amount
      that would be recognized if applying SFAS No. 5 and the asset would be measured
      at the lower of its acquisition date fair value or the best estimate of
      its future settlement amount.





·
            Goodwill
      will be measured as a residual and recognized as of the acquisition date.
      Goodwill will usually equal the excess of the consideration transferred
      plus the fair value of the noncontrolling interest less the fair values
      allocated to the identifiable assets and liabilities
    acquired.





·
            SFAS
      141R improves the measurement of goodwill in that it requires the
      recognition of contingent consideration at the acquisition date, measured
      at fair value versus the old method of recognizing contingent
      consideration when the contingency was resolved and consideration was
      issued or became issuable.





·
            SFAS
      141R requires the excess of the fair value of the identifiable net assets
      acquired over the consideration transferred plus noncontrolling interest
      in the acquiree to be recognized in earnings as a
      gain.  Currently, negative goodwill is allocated as a pro rata
      reduction of the amounts that otherwise would have been assigned to
      particular assets acquired.





This
      Statement makes numerous other changes to existing accounting
      pronouncements.





SFAS 141R
is effective for all acquisitions dated on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008.  The
Company will adopt this Statement for all acquisitions dated within fiscal year
2010.


34


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per-share amounts)





Note
19 – Recent Accounting Pronouncements (continued)





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities.”  This Statement changes the disclosure
requirements for derivative instruments and hedging
activities.   Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. The Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, and early adoption is allowed. This Statement does not require
comparative disclosures for earlier periods at initial adoption.  The
Company will adopt this Statement and provide the necessary enhanced disclosure
information by the effective date.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles,” to move the GAAP hierarchy from the auditing literature
to the accounting literature.  The purpose of the new standard is to
improve financial reporting by providing a consistent framework for determining
what accounting principles an entity should use when preparing U.S. GAAP
financial statements.  The Board adopted the GAAP hierarchy contained
in Statement on Auditing Standards No. 69, with minor modifications, because it
was directed to auditors, not entities, which are ultimately responsible for
preparing U.S. GAAP financial statements.  Statement 162 is not
expected to result in a change to current practice.  SFAS 162 became
effective on November 15, 2008.





In  December
2008, the FASB issued FSP FAS 140-4 and FIN 46(R), “Disclosures by Public
Entities (Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities,” which requires public companies to provide
disclosures similar to those proposed in the pending amendments to SFAS 140 and
FASB Interpretation 46(R).  The FSP requires additional disclosures
about transfers of financial assets and an enterprise’s involvement with
variable interest entities, in including
qualified  special  purpose  entities  when
a  transferor has  continuing  involvement in the financial
assets transferred.  These disclosures include requirements for
collateral either pledged or accepted, a description of in-substance defeasance
of debt transactions and the amount of debt considered extinguished, the
carrying amount and classification of assets and associated liabilities for
transfers accounted for as secured borrowings.  In addition the FSP
requires certain disclosures regarding servicing assets and
liabilities.  This FSP is effective for the quarter ending January 2,
2009. The Company believes the adoption will not have a material impact on the
Company’s results of operations or financial position.


35


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
19 – Recent Accounting Pronouncements (continued)





In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets,” which amends the list of factors an entity should consider
in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS 142.  The new guidance
applies to intangible assets acquired in both business combinations and asset
acquisitions.  FSP FAS 142-3 removes the requirement of paragraph 11
of SFAS 142 for an entity to consider whether an intangible asset can be renewed
without substantial cost or material modifications to the existing terms and
conditions.  The FSP replaces the previous useful-life assessment
criteria with a requirement that an entity consider its own experience in
renewing similar arrangements.  Removing the substantial cost and
material modification assessments will lead to greater consistency between the
useful life of recognized intangible assets under SFAS 142 and the period of
expected cash flows used to measure the fair value of such assets under SFAS 141
and other U.S. GAAP.  This FSP is effective for financial statements
issued for CSC’s fiscal year beginning 2010.  The Company believes the
adoption will not have a material impact on the Company’s results of operations
or financial position.





In
December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets,” which amends SFAS 132(R) to require more
detailed disclosures about employers’ plan assets, including employers’
investment strategies, major categories of plan assets, concentrations of risk
within plan assets, and valuation techniques used to measure the fair value of
plan assets.  The required disclosures must be provided in financial
statements for fiscal years ending after December 15, 2009.





The FASB
ratified  EITF Issue No. 08-6, “Equity Method Investment Accounting
Considerations,” at it November 2008 meeting, which affects entities that
acquire or hold investments accounted for under the equity method of
accounting.  The Task Force reached a consensus that:





·
            An
      entity should determine the initial carrying value of an equity investment
      by applying the cost accumulation model described in paragraphs D3-D7 of
      Statement 141(R).





·
            An
      entity should use the other-than-temporary impairment model of APB 18, not
      some other method that disaggregates the investment into the individual
      assets of the investee, when testing equity method investments for
      impairment.  However, investors should adjust any impairments
      recorded by an investee for existing differences between the investor’s
      basis and the underlying investee’s basis in such
  assets.





·
            Share
      issuances by the investee should be accounted for as if the equity method
      investor had sold a proportionate share of its investment (i.e., any gain
      or loss is recognizes in earnings).





·
            When
      an investment is no longer within the scope of equity method accounting
      and instead is within the scope of cost method accounting or SFAS 115, the
      investor should prospectively apply the provisions of APB 18 or SFAS 115
      and use the current carrying amount of the investment as it initial
      cost.


36


COMPUTER
SCIENCES CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(Dollars
in millions except per share amount)





Note
19 – Recent Accounting Pronouncements (continued)





The
consensus is effective for transactions occurring in fiscal years beginning
after December 15, 2008.  The Company has not yet evaluated the
impact, if any, the adoption of this consensus will have on the Company’s
consolidated financial position or results of operations.


37


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


OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Third
Quarter and First Nine Months of Fiscal 2009 versus


Third
Quarter and First Nine Months of Fiscal 2008





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 is
relevant to an assessment and understanding of the consolidated results of
operations and financial condition of Computer Sciences Corporation (CSC or the
Company).  The discussion should be read in conjunction with the
interim consolidated condensed financial statements and notes thereto and the
Company's Annual Report on Form 10-K for the year ended March 28, 2008 as well
as the Company’s Current Report on Form 8-K filed December 16,
2008.  The following discusses the Company's results of operations and
financial condition as of and for the nine months ended January 2, 2009, and the
comparable period for the prior fiscal year.  See Note 1 to the
consolidated condensed financial statements.





The
reader should note Days Sales Outstanding (DSO), Free Cash Flow, Return on
Investment (ROI), and Debt-to-total capitalization are not measures defined by
Generally Accepted Accounting Principles in the United States (U.S. GAAP), and
the Company's definition of these measures may differ from other companies. ROI
is calculated by dividing the trailing 12 month (TTM) profits before special
items and interest expense and after tax expenses (PBIAT) by the average capital
of the past five quarters.  For a discussion of these measures, please
refer to the Company's Annual Report on Form 10-K for the year ended March 28,
2008.


38


Third
Quarter Overview




Key
highlights of the third quarter and year-to-date include:





·
            Third
      quarter revenues decreased 5% as reported, and increased 1.6% on a
      constant currency basis.


·
            Nine
      months year-to-date revenue as reported increased 5.1%, and 5.8% on a
      constant currency basis.


·
            Net
      income was $160.6 million compared to $179.0 million for the prior year
      third quarter and $732.9 million compared to $362.9 million for the prior
      year nine months year to date.


·
            Earnings
      per share were $1.06 and $4.80 compared to $1.05 and $2.08 for the third
      quarter and nine months year to date for fiscal 2009 and 2008,
      respectively.


·
            Business
      awards of $2.7 billion and $12.7 billion were announced for the quarter
      and year-to-date, respectively.


·
            DSO of 94 days improved 6 days
      compared to the third quarter of fiscal 2008.(1)


·
            Debt-to-total
      capitalization ratio at quarter-end increased to 43.8% from 38.9% at
      fiscal 2008 year-end.


·
            ROI
      for the last twelve months ended January 2, 2009 was approximately
      12.9%.


·
            Cash
      provided by operating activities was $928.4 million for the nine months
      year to date of fiscal 2009 versus $498.5 million for the fiscal 2008
      comparable period.  Cash used in investing activities was $838.3
      million for the first nine months of fiscal 2009 versus $2.2 billion for
      the fiscal 2008 comparable period.  Free cash flow for the nine
      months year to date was $170.2 million inflow for fiscal 2009 compared to
      a $374.2 million used in the fiscal 2008 comparable period.(2)











(1)
            DSO
      for the quarter is calculated as total receivables at quarter-end divided
      by revenue-per-day.  Revenue-per-day equals total revenues for
      the quarter divided by the number of days in the fiscal
      quarter.


(2)
            The
      following is a reconciliation of free cash flow to the most directly
      comparable Generally Accepted Accounting Principle (GAAP) financial
      measure:





Nine
      Months Ended(In
      millions)
                
                Jan.
      2, 2009
                
                
                Dec.
      28, 2007Free
      cash flow
                
                $
                170.2
                
                
                $
                (374.2
                )Net
      cash used in investing activities
                
                
                838.3
                
                
                
                2,159.1Acquisitions
                
                
                (100.3
                )
                
                
                (1,315.6
                )Capital
      lease payments
                
                
                20.2
                
                
                
                29.2Net
      cash provided by operating activities
                
                $
                928.4
                
                
                $
                498.5Net
      cash used in investing activities
                
                $
                (838.3
                )
                
                $
                (2,159.1
                )Net
      cash provided by financing activities
                
                $
                952.6
                
                
                $
                1,180.1





The
Company’s announced new business awards of $2.7 billion for the third quarter of
fiscal 2009, with $1.2 billion each awarded to the North American Public Sector
and Business Solutions & Services lines of business, and $.3 billion awarded
to the Global Outsourcing line of business.


39





Beginning
in the first quarter of fiscal 2009 the Company announced awards for each of the
three lines of business.  The Company has also changed its method of
determining the announced value for certain new awards.  In the past
for North American Public Sector ID/IQ contracts, the Company announced the
value of estimated task order amounts upon the signing of an ID/IQ
contract.  Going forward, for ID/IQ contracts, the Company will
announce as award value the expected contract value at the time a task order is
awarded under the contract.  There has been no change in the
methodology for determining the announced value of multi-year outsourcing
contracts.  Previously the Company did not announce values for
Business Solutions and Services awards.  Going forward the Company
will announce these awards with the value based on firm
commitments.





Lines
of Business and Reportable Segments





Under of
the Company’s comprehensive growth strategy, known as Project Accelerate, the
Company targets the delivery of its services within three broad service lines:
North American Public Sector (NPS), Global Outsourcing Services (GOS) and
Business Solutions and Services (BS&S).  Also as a part of Project
Accelerate, the Company has restructured the management and reporting structure
and certain related operating segments.  These changes have resulted
in changes to the Company’s reportable segments.  The Company’s North
American Public Sector, Global Outsourcing Services, and Financial Services
Sector operating segments each represent separate reportable segments under the
Company’s new operating structure.  The Company organizes Business
Solutions and Services-Consulting operating segments by geographies and vertical
operations.  The BS&S—Consulting operating segments provide
business process outsourcing, systems integration, consulting, and professional
services within their assigned target geographic or vertical
markets.  Further, the service offerings and clientele overlap and the
Company draws on multiple operating segments within BS&S-Consulting to serve
clients.  As a result, the aggregated operating segments have similar
economic characteristics, products, services, customers and methods of
operations.  The Company’s remaining operating segments do not meet
the quantitative thresholds for separate disclosure and do not meet the
aggregation criteria as indicated in SFAS No. 131.  As a result, these
operating segments are reported as “other.”  Because each of these
other operating segments are within the Company’s BS&S service line, the
Company has labeled this group of operating segments as Business Solutions and
Services—Other.  The NPS and GOS lines of business are each entirely
comprised of the reportable segments of the same name while the BS&S service
line is comprised of the Business Solutions and Services—Consulting, Financial
Services Sector reportable segments and Business Solutions and
Services—Other.





The North
American Public Sector 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.  The Global Outsourcing Services
segment provides large-scale outsourcing solutions offerings as well as midsize
services delivery to customers globally.  The Business Solutions and
Services-Consulting segment enables the Company to provide industry specific
consulting and systems integration services. The Financial Services Sector
segment primarily provides information technology and business process
outsourcing services and intellectual property (IP)-based software solutions to
financial services companies globally.


40





Lines
      of Business
            
            Reportable
      SegmentsNorth
      American Public Sector (NPS)
            
            North
      American Public SectorGlobal
      Outsourcing Services (GOS)
            
            Global
      Outsourcing ServicesBusiness
      Solutions and Services (BS&S)
            
            BS&S
      – ConsultingBS&S
      – Financial Services SectorBS&S
      – Other





BS&S-Other
includes the Company’s non-outsourcing related services in Australia and Asia
and the Company’s India operations.  In addition, corporate entity and
eliminations will be reported under the segment disclosure.  See Note
12 to the consolidated condensed financial statements.





Overview





Revenue
decreased 5% during the third quarter of fiscal 2009 on a year over year basis
as a result of declines in the European and Australian GOS and BS&S
businesses, which were impacted by changes in currency translation
rates.  Financial Services had slight declines due to reduced license
sales.  Certain US Commercial contracts were affected by negotiated
price reductions, reductions in service offerings and reductions in
discretionary project work.  These reductions were partially offset by
growth in the NPS sector, driven by increases with Department of Defense
customers. For the nine months year to date, the revenue trend was similar to
the trend for the third quarter.





ROI from
continuing operations, for the twelve months ended January 2, 2009 was
approximately 12.9%, an increase of 2.6 percentage points over the prior year
10.3%. The increase was a result of improved operating margin, the favorable
impact of settlement with the U.S. Internal Revenue Service of tax audits for
fiscal 2000 through 2004, and the Company’s now concluded share repurchase
program.


41





Results
of Operations





Revenues





Third
      Quarter EndedDollars
      in millions
                      
                      2009
                      
                      
                      2008
                      
                      
                      Change
                      
                      
                      PercentBS&S
      – Consulting
                      
                      $
                      457.3
                      
                      
                      $
                      444.1
                      
                      
                      $
                      13.2
                      
                      
                      
                      3.0
                      %BS&S
      – Financial Services Sector
                      
                      
                      237.0
                      
                      
                      
                      248.0
                      
                      
                      
                      (11.0
                      )
                      
                      
                      (4.4
                      )BS&S
      – Other
                      
                      
                      318.7
                      
                      
                      
                      340.4
                      
                      
                      
                      (21.7
                      )
                      
                      
                      (6.4
                      )Business
      Services & Solutions
                      
                      
                      1,013.0
                      
                      
                      
                      1,032.5
                      
                      
                      
                      (19.5
                      )
                      
                      
                      (1.9
                      )Global
      Outsourcing Services
                      
                      
                      1,487.2
                      
                      
                      
                      1,718.1
                      
                      
                      
                      (230.9
                      )
                      
                      
                      (13.4
                      )North
      American Public Sector
                      
                      
                      1,476.1
                      
                      
                      
                      1,435.0
                      
                      
                      
                      41.1
                      
                      
                      
                      2.9Subtotal
                      
                      
                      3,976.3
                      
                      
                      
                      4,185.6
                      
                      
                      
                      209.3
                      
                      
                      
                      (5.0
                      )Eliminations
                      
                      
                      (23.9
                      )
                      
                      
                      (25.6
                      )
                      
                      
                      1.7Total
      Revenue
                      
                      $
                      3,952.4
                      
                      
                      $
                      4,160.0
                      
                      
                      $
                      (207.6
                      )
                      
                      
                      (5.0
                      )%Nine
      Months Year-to-DateDollars
      in millions
                      
                      2009
                      
                      
                      2008
                      
                      
                      Change
                      
                      
                      PercentBS&S
      – Consulting
                      
                      $
                      1,477.0
                      
                      
                      $
                      1,243.8
                      
                      
                      $
                      233.2
                      
                      
                      
                      18.8
                      %BS&S
      – Financial Services Sector
                      
                      
                      746.5
                      
                      
                      
                      760.4
                      
                      
                      
                      (13.9
                      )
                      
                      
                      (1.8
                      )BS&S
      – Other
                      
                      
                      1,049.9
                      
                      
                      
                      874.4
                      
                      
                      
                      175.5
                      
                      
                      
                      20.1Business
      Services & Solutions
                      
                      
                      3,273.4
                      
                      
                      
                      2,878.6
                      
                      
                      
                      394.8
                      
                      
                      
                      13.7Global
      Outsourcing Services
                      
                      
                      4,969.1
                      
                      
                      
                      4,908.6
                      
                      
                      
                      60.5
                      
                      
                      
                      1.2North
      American Public Sector
                      
                      
                      4,463.7
                      
                      
                      
                      4,305.7
                      
                      
                      
                      158.0
                      
                      
                      
                      3.7Subtotal
                      
                      
                      12,706.2
                      
                      
                      
                      12,092.9
                      
                      
                      
                      613.3
                      
                      
                      
                      5.1Eliminations
                      
                      
                      (78.0
                      )
                      
                      
                      (77.8
                      )
                      
                      
                      (0.
      2
                      )Total
      Revenue
                      
                      $
                      12,628.2
                      
                      
                      $
                      12,015.1
                      
                      
                      $
                      613.1
                      
                      
                      
                      5.1
                      %





The
factors affecting the percent change in revenues for the third quarter and nine
months year-to-date of fiscal 2009 are as follows:





Acquisitions
              
              
              Approximate
      Impact of Currency Fluctuations
              
              
              Net
      Internal Growth
              
              
              TotalThird
      QuarterBS&S
      – Consulting
              
              
              9.1
              %
              
              
              (11.7
              )%
              
              
              5.6
              %
              
              
              3.0
              %BS&S
      – Financial Services Sector
              
              
              
              
              
              
              (3.0
              )
              
              
              (1.4
              )
              
              
              (4.4
              )BS&S
      – Other
              
              
              
              
              
              
              (8.3
              )
              
              
              2.0
              
              
              
              (6.4
              )Business
      Services & Solutions
              
              
              3.9
              
              
              
              (8.5
              )
              
              
              2.7
              
              
              
              (1.9
              )Global
      Outsourcing Services
              
              
              .7
              
              
              
              (10.8
              )
              
              
              (3.3
              )
              
              
              (13.4
              )North
      American Public Sector
              
              
              .1
              
              
              
              
              
              
              
              2.8
              
              
              
              2.9Eliminations/Other
      Corporate
              
              
              
              
              
              
              
              
              
              
              (6.2
              )
              
              
              (6.2
              )Total
              
              
              1.3
              %
              
              
              (6.5
              )%
              
              
              .2
              %
              
              
              (5.0
              )
      %





42





Acquisitions
              
              
              Approximate
      Impact of Currency Fluctuations
              
              
              Net
      Internal Growth
              
              
              TotalNine
      Months Year-to-DateBS&S
      – Consulting
              
              
              11.9
              %
              
              
              .3
              %
              
              
              6.6
              %
              
              
              18.8
              %BS&S
      – Financial Services Sector
              
              
              
              
              
              
              (.4
              )
              
              
              (1.4
              )
              
              
              (1.8
              )BS&S
      – Other
              
              
              15.2
              
              
              
              .2
              
              
              
              4.6
              
              
              
              20.1Business
      Services & Solutions
              
              
              9.8
              
              
              
              .1
              
              
              
              3.8
              
              
              
              13.7Global
      Outsourcing Services
              
              
              .9
              
              
              
              (1.6
              )
              
              
              1.9
              
              
              
              1.2North
      American Public Sector
              
              
              .1
              
              
              
              
              
              
              
              3.6
              
              
              
              3.7Eliminations
              
              
              
              
              
              
              
              
              
              
              .3
              
              
              
              .3Total
              
              
              2.7
              %
              
              
              (.6
              )%
              
              
              3.0
              %
              
              
              5.1
              %











Business
Solutions and Services





The
Business Solutions and Services line of business revenue showed a small net
decline, as reported, with the negative currency translation impact, but
increased 6.6% on a constant currency basis due in part to an acquisition in the
prior year.  For the nine months year to date, BS&S Consulting and
BS&S Other reported net internal revenue growth while BS&S Financial
Services Sector reported a revenue decline.





BS&S
Consulting revenue growth for the third quarter resulted largely from the
acquisition of First Consulting Group but was significantly offset by a negative
currency impact. For the quarter to date and nine months year to date, the
acquisition of First Consulting Group contributed approximately $40 million and
$148 million of revenue, respectively.





Financial
Services Sector revenue declined $11 million during the third quarter of fiscal
2009 versus prior year comparable period, due partly to a decrease in software
license sales in both the United States and Europe.





BS&S
Other, which includes the Company’s Australia, Asia and India businesses,
reported a combined revenue decline of 6.4% for the third quarter of fiscal
2009.  This decline was primarily as a result of negative currency
impact and changing market conditions for a professional staffing augmentation
business in Australia. Asia experienced modest growth from expanded or new
contracts.





Global
Outsourcing Services





Global
Outsourcing Services revenue declined for the third quarter of fiscal 2009
versus fiscal 2008 by 13.4% but increased for the nine months year to date by
1.2%.  Foreign currency fluctuations adversely impacted revenue growth
by approximately 10.8% and 1.6% for the quarter and nine months,
respectively.  Revenue for the quarter was also adversely impacted by
$41 million or 2.4% from two contract terminations in North
America.  The remainder of the decline was a result of lower volumes,
scope reductions and decreases in project demand that slightly outweighed new
business and scope increases on several other projects as well as the impact of
a fiscal 2008 acquisition.


43





North
American Public Sector





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





Third
      Quarter(Dollars
      in millions)
                
                2009
                
                
                2008
                
                
                Change
                
                
                PercentDepartment
      of Defense
                
                $
                1,069.1
                
                
                $
                970.1
                
                
                $
                99.0
                
                
                
                10.2
                %Civil
      agencies
                
                
                373.3
                
                
                
                419.6
                
                
                
                (46.3
                )
                
                
                (11.03
                )Other
      (1)
                
                
                33.7
                
                
                
                45.3
                
                
                
                (12.0
                )
                
                
                (26.3
                )Total
      North American Public Sector
                
                $
                1,476.1
                
                
                $
                1,435.0
                
                
                $
                41.1
                
                
                
                2.9
                %





Nine
      Months Year-to-Date(Dollars
      in millions)
                
                2009
                
                
                2008
                
                
                Change
                
                
                PercentDepartment
      of Defense
                
                $
                3,130.3
                
                
                $
                2,882.1
                
                
                $
                248.2
                
                
                
                8.6
                %Civil
      agencies
                
                
                1,217.0
                
                
                
                1,292.3
                
                
                
                (75.3
                )
                
                
                (5.8
                )Other
      (1)
                
                
                116.4
                
                
                
                131.3
                
                
                
                (14.9
                )
                
                
                (11.0
                )Total
      North American Public Sector
                
                $
                4,463.7
                
                
                $
                4,305.7
                
                
                $
                158.0
                
                
                
                3.7
                %





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





Revenues
from the North American Public Sector increased 2.9% and 3.7% for the third
quarter and nine months year to date, respectively, as a result of growth on new
and existing programs with the Department of Defense (DoD).  DoD
contributors to revenue growth for the quarter included additional tasking on
systems integration programs with the Army and Air Force which contributed $20
million, procurement programs with the Army which provided an additional $47
million, and other programs to provide engineering support, business process
outsourcing and logistics support which provided $60 million of additional
revenue compared to third quarter fiscal year 2008.  These increases
more than offset the impact of the conclusion of a classified program which
reduced revenue approximately $30 million for the quarter.





Revenue
from Civil agencies declined $42.7 million as a cumulative result of lower
existing contract funding levels and program completions.  Other
revenue for the quarter declined as the development phase of a project with a
foreign government was completed which reduced revenue $3.5 million and a $6
million project reduction for other contracts.





During
the third quarter of fiscal 2009, the Company announced federal, state, and
defense contract awards with a total value of $1.2 billion, compared to $1.9
billion announced during the comparable period for fiscal 2008.


44







Costs
and Expenses




The
Company's costs and expenses were as follows:




Third
      Quarter(Dollars
      in millions)
                
                Dollar
      Amount
                
                
                Percent
      of Revenue
                
                
                Percentage
      Point Change2009
                
                
                2008
                
                
                2009
                
                
                2008Cost
      of services(1)
                
                $
                3,083.4
                
                
                $
                3,301.6
                
                
                
                78.0
                %
                
                
                79.4
                %
                
                
                (1.4
                )%Selling,
      general &    administrative
                
                
                261.2
                
                
                
                240.2
                
                
                
                6.6
                
                
                
                5.8
                
                
                
                0.8Depreciation
      and    amortization
                
                
                282.2
                
                
                
                307.1
                
                
                
                7.1
                
                
                
                7.4
                
                
                
                (0.3
                )Special
      items
                
                
                
                
                
                
                17.5
                
                
                
                
                
                
                
                0.4
                
                
                
                (0.4
                )Interest
      expense, net
                
                
                56.6
                
                
                
                43.6
                
                
                
                1.4
                
                
                
                1.0
                
                
                
                0.4Other
      expense/(income)
                
                
                8.9
                
                
                
                (16.3
                )
                
                
                0.2
                
                
                
                (0.4
                )
                
                
                0.6Total
                
                $
                3,892.3
                
                
                $
                3,893.7
                
                
                
                93.3
                %
                
                
                93.6
                %
                
                
                (0.3
                )%





Nine
      Months Year-to-Date(Dollars
      in millions)
                
                Dollar
      Amount
                
                
                Percent
      of Revenue
                
                
                Percentage
      Point Change2009
                
                
                2008
                
                
                2009
                
                
                2008Cost
      of services(1)
                
                
                10,091.4
                
                
                $
                9,653.5
                
                
                
                80.0
                %
                
                
                80.3
                %
                
                
                (0.3
                )%Selling,
      general &    administrative
                
                
                824.0
                
                
                
                721.9
                
                
                
                6.5
                
                
                
                6.0
                
                
                
                0.5Depreciation
      and    amortization
                
                
                911.5
                
                
                
                878.3
                
                
                
                7.2
                
                
                
                7.3
                
                
                
                (0.1
                )Special
      items
                
                
                
                
                
                
                92.4
                
                
                
                
                
                
                
                0.8
                
                
                
                (0.8
                )Interest
      expense, net
                
                
                160.7
                
                
                
                103.3
                
                
                
                1.3
                
                
                
                0.9
                
                
                
                0.4Other
      expense/(income)
                
                
                22.0
                
                
                
                (41.9
                )
                
                
                0.2
                
                
                
                (0.4
                )
                
                
                (0.6
                )Total
                
                $
                12,009.7
                
                
                $
                11,407.5
                
                
                
                95.2
                %
                
                
                94.9
                %
                
                
                0.3
                %





(1)
            Excludes
      depreciation and amortization.





Comparing
the third quarter and nine months year to date of fiscal 2009 and 2008, total
costs and expenses as a percentage of revenue for the third quarter improved 30
basis points on a year over year basis with a decrease in cost of services,
special items, and depreciation and amortization during fiscal 2009 offsetting
increases in selling, general and administrative expense, net interest expense
and other expense/(income).  For the nine months year to date the
trends were similar.


45





Cost
of Services





Cost of
services (COS) declined $218 million for the quarter driven by reduced volume
and demand for new projects. As a percentage of revenue, COS decreased 1.4
percentage points to 78% from the year earlier period. For the quarter, the
improvement in the ratio was largely attributable to GOS as a result of lower
labor costs including the impact of headcount reductions. Additionally,
improvement in the ratio was seen at the BS&S-Other and Financial Services
segments as a result of improved performance and tighter control of
discretionary expenses. For the nine months year to date, the ratio improved by
..3 percentage points relative to the comparable period for fiscal 2008.
Approximately two-thirds of this improvement is due to GOS labor cost savings
and one-third due to BS&S Other savings as described above.





Selling,
General and Administrative





Selling,
general and administrative (SG&A) expense increased as a percentage of
revenue by .8 percentage points and .5 percentage points to 6.6% and 6.5% for
the third quarter and nine months year to date of fiscal 2009, respectively. For
the quarter, the most significant factor was an increase in the ratio for GOS,
driven by increased business development expenses, increased personnel costs
related to managing customer relationships and costs incurred to roll out of the
new CSC brand in Europe. The Company’s ratio was also higher due to Corporate
costs related to the roll out of the new CSC brand and costs incurred to
relocate the Company’s headquarters, as well as increased legal fees for
BS&S-Financial Services segment. The increases were slightly offset by an
improved ratio for the BS&S-Consulting segment. Trends were similar for the
year-to-date.





Depreciation
and Amortization





The
depreciation and amortization (D&A) ratio decreased 0.3 percentage points to
7.1 for the third quarter and decreased 0.1 percentage points to 7.2 for the
nine months, respectively, compared to the prior year periods.  For
the quarter, the most significant factor in the decline was the favorable mix
impact of the decline in revenue volume for GOS, which has the Company’s highest
ratio of D&A as a percent of revenue. Also contributing to the ratio decline
for the Company was lower royalty amortization expenses in the
BS&S–Financial Services segment and improvement in the ratio at NPS,
including the completion of amortization of deferred costs on a significant
program.  Trends were similar for the year-to-date.


46





Interest
Expense, Net





Net
interest expense increased $13.1 million for the third quarter of fiscal 2009
and increased $57.5 million for the nine months year to date as compared to the
prior year comparable periods.  As a result, the ratio increased as a
percentage of revenue for the third quarter by 0.4% points to 1.4% and 0.4%
points to 1.3% for the nine months year to date.  This increase in
interest expense was primarily a result of the issuance of the 6.5% and 5.5%
senior notes for a combined $1.7 billion in fiscal 2008 to finance the
acquisition of Covansys Corporation and First Consulting
Group.  Interest on these notes was approximately $25.9 million for
the third quarter of fiscal 2009 and $78.1 million for the nine months year to
date.  The remainder of the increase was from the $1.5 billion draw
down on the credit facility used to repay maturing commercial paper and term
debt on October 22, 2008.  Interest on the credit line for the third
quarter and the nine months year to date was approximately $11.8
million.  In addition, higher borrowings in Europe to fund working
capital requirements and additional capital leases in NPS contributed to
interest expense.  Interest income increased approximately $4.5
million and $4.9 million for the third quarter and nine months year to date
respectively as a result of an increase in cash balances from the drawdown of
the credit facility as well as cash and cash equivalents in India.





Other
Expense/(Income)





Other
expense/(income) includes foreign exchange gains and losses including gains and
losses on currency forwards, hedging costs, and other miscellaneous
operations.  Other income decreased $25.3 million and $64.0 million
for the third quarter and the nine months year to date, respectively, compared
to the prior year comparable periods.  The change was due to (1) Other
income in fiscal 2008 which was the result of remeasurement gains from
intercompany foreign currency balances that were unhedged (the Company has
addressed this foreign currency exchange rate volatility risk and for fiscal
2009, these balances were hedged), (2) Miscellaneous foreign currency losses on
unhedged intercompany balances during fiscal year 2009, and (3) costs to hedge
intercompany exposure to foreign currency risks.





Taxes





The
effective tax rate on income from continuing operations for the third quarter
ended and nine months ended was 38.28% and (18.47%) for fiscal year 2009, and
32.8% and 40.3% for fiscal year 2008, respectively. The decrease in the year to
date fiscal year 2009 rate was primarily attributable to a $370.5 reduction in
uncertain tax positions, including interest and penalties, due to settlements
with the U.S. Internal Revenue Service (“IRS”) and the filing of accounting
method changes during the second quarter.





During
the second quarter of fiscal year 2009, the IRS concluded its examination of the
Company’s consolidated U.S. tax returns for the fiscal years 2000 through 2004.
The nature of the significant items subject to examination included depreciation
and amortization, research credits and international tax issues. During the
second quarter of fiscal year 2009, the Company also filed various accounting
method changes with the IRS.


47





As of
January 2, 2009, the Company’s liability for uncertain tax positions was $587.6,
including interest of $107.1, penalties of $40.6 and net of tax carryforwards of
$250.0. There were no material changes to the uncertain tax positions in the
third quarter of fiscal year 2009. During the third quarter of fiscal year 2009,
the Company recorded an increase (net of tax benefit) of $4.9 of interest on
uncertain tax positions and a net reduction of $3.0 of related penalties in
income tax expense. This interest amount includes the effect of new uncertain
tax positions recognized in the third quarter of fiscal year 2009. Interest
expense is expected to continue to accrue at approximately $6 million quarterly
(net of tax benefit) on existing uncertain tax positions, before the effect of
compounding or changes in interest rates, until payments are made or the
underlying uncertain tax positions are resolved in CSC’s favor. The Company is
unable to predict when these events may occur.





Earnings
per Share





Earnings
per share increased $.01 and $2.73 for the third quarter and nine months year to
date, respectively, for fiscal 2009 compared to the prior period.  The
slight increase in earnings per share for the third quarter of fiscal 2009 was
primarily a result of a decrease in the share base of 10.6%, more than
offsetting the lower net income. The increase in earnings per share for the nine
months year to date of fiscal 2009 was due primarily to a significant tax
benefit  recorded in the second quarter as a result of resolution with
the U.S. Internal Revenue Service for tax years 2000 through 2004.





Financial
Condition





Cash
Flows





The
Company's cash flows were as follows:


Nine
      Months Year-to-Date(In
      millions)
                
                Fiscal
      2009
                
                
                Fiscal
      2008Net
      cash provided by operations
                
                $
                928.4
                
                
                $
                498.5Net
      cash used in investing activities
                
                
                (838.3
                )
                
                
                (2,159.1
                )Net
      cash provided by financing
                
                
                952.6
                
                
                
                1,180.1Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (68.5
                )
                
                
                19.5Net
      increase (decrease) in cash and cash equivalents
                
                
                974.2
                
                
                
                (461.0
                )Cash
      and cash equivalents at beginning of year
                
                
                698.9
                
                
                
                1,050.1Cash
      and cash equivalents at quarter end
                
                $
                1,673.1
                
                
                $
                589.1





Net cash
provided by operations of $928.4 million for the first nine months of fiscal
2009 represents an increase of $429.9 million compared to $498.5 million net
cash provided by operations for the prior year comparable period.





The
operating cash flow impact from changes in the company’s accounts receivable was
a $42 million source of cash, compared to a $254 million use of cash for the
prior year period.  The key driver of this change was improved
collections in the Global Outsourcing Services and BS&S Consulting
segments.


48


Net
income for the fiscal 2009 nine months year-to-date is $370 million higher than
the prior-year period, however a factor in this increase is the second quarter
settlement with the IRS, which was largely non-cash.  For cash flow
purposes, therefore, the net income increase is partially offset by a decrease
in tax liabilities.




Cash
flows from operating activities include a $93.0 million year-to-date
add-back of net non-cash foreign currency exchange losses in order to reconcile
net income to net cash provided by operating activities.  This amount
is primarily associated with intercompany balances, and is substantially offset
in the income statement by realized foreign currency gains, primarily due to
hedging activities.
 Other
decreases in current liabilities, including accounts payable and accrued
liabilities also partially offset the increase in operating cash
flow.





Net cash
used in investing activities decreased approximately $1.3 billion during the
nine months year-to-date of fiscal 2009 as compared to fiscal 2008 primarily as
a result of approximately $1.3 billion used in the acquisition of Covansys
Corporation in the prior year period.





Cash
provided by financing activities for the nine months year-to-date of fiscal 2009
includes the draw-down of a $1.5 billion line of credit during October 2008 due
to the liquidity uncertainties in the broader financial market.  This
cash inflow was partially offset by a combined total of $587 million of
repayment for commercial paper and credit facilities, including principal
payments on long-term debt.  The prior year financing cash flows
included the issuance of approximately $1.4 billion of commercial paper to
finance the acquisition of Covansys Corporation.  Partially offsetting
the year over year decrease in debt financing was a decrease in expenditures for
stock repurchases to $3.6 million from $474.9 million for the prior year
period.





Contractual
Obligations





The
Company has contractual obligations for long-term debt, capital lease
obligations, operating lease obligations, minimum purchase obligations, bank
debt and other obligations 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 March 28, 2008, as well as the Company’s current report on
Form 8-K filed December 16, 2008.  In addition the Company has
liabilities related to unrecognized tax benefits; however, the Company cannot
reasonably estimate the timing and amount of cash out flows for future tax
settlements.





Liquidity
and Capital Resources





The
balance of cash and cash equivalents was $1,673.1 million at January 2, 2009 and
$698.9 million at March 28, 2008.  The increased balance is primarily
the result of an October 2008 drawdown on a line of credit as further discussed
below.  Equity increased by $213.4 million during the nine months
ended January 2, 2009 as a result of net income of $732.9 million and the
exercise of stock options, which were significantly offset by a charge in the
cumulative translation adjustment account of $551.4 million and the impact of
the change to a fiscal year-end measurement date for pension plans, as required
by SFAS 158, of $24.7 million in the first quarter of fiscal
2009.


49





On July
12, 2007 the Company entered into a new committed line of credit providing $1.5
billion of long-term commercial paper backup.  The line of credit
expires on July 12, 2012.  On October 22, 2008, the Company borrowed
$1.5 billion under the line of credit.  The proceeds from the drawdown
of the line of credit were used primarily to repay maturing commercial paper.
Additionally, the Company will also pay $200 million of maturing term debt to
increase the Company’s liquidity position and reduce the reliance on the capital
markets during the difficult global economic environment.  The Company
discontinued its issuance of commercial paper after October 22,
2008.  As of January 2, 2009, the Company had no commercial paper
outstanding.  This line requires the Company to (1) limit liens placed
on our assets to $100 million and to liens incurred in the ordinary course of
business; (2) maintain a minimum interest coverage ratio of consolidated
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) to
consolidated interest expense for the period of four consecutive fiscal quarters
ending on or immediately prior to such period not to be less than 3.00 to 1.00;
the Company is in full compliance with these requirements and (3) not permit at
the end of any quarterly financial reporting period the ratio of consolidated
total debt to consolidated EBITDA for the period of four consecutive fiscal
quarters ending on or immediately prior to such date, to exceed 3.00 to
1.00.  The Company is in full compliance with these
requirements.  For further details on this agreement please see the
Company’s Form 10-K.





As of
January 2, 2009, the Company’s total liquidity was approximately $1.67 billion
which included cash and cash equivalents and marketable securities.





In
addition, the Company redeemed the 3.5% term notes with a face value of $300
million due April 2008 during the first quarter of fiscal 2009.  The
Company’s 6.25% term notes with a face value of $200 million are due in March
2009.  The Company currently plans to settle these notes with cash on
hand.





The
Company’s contract with the United Kingdom’s National Health Service to deliver
an integrated electronic patient records system with an announced value of
approximately $5.4 billion is a large and complex contract.  As of
January 2, 2009, the Company had a net investment in the contract of
approximately $.6 billion.  Contract assets were $1.1 billion,
principally contract work in progress and billed and unbilled receivables but
also equipment, software and other assets.  The contract is currently
profitable and the Company expects to recover its investment; however,
unforeseen future events could potentially adversely impact such recovery and
the Company’s liquidity.  The Company is expecting the NHS cash
advances to require guarantees as they have in the past.  To date, the
Company has been able to collateralize the majority of the cash advances with
letters of credit, without the requirement of putting up any cash deposits at
the counterparty banks.  Due to the current credit environment, the
potential to have some cash on deposit with banks as collateral for issuing the
letters of credit is a possibility.





Continued
uncertainty in the global economic conditions and the liquidity crisis 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.





During
this current global economic downturn, 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
bank financing.


50





It is
management’s opinion that the Company will be able to meet its future liquidity
and cash needs through a combination of cash flows from operating activities,
cash balances, and other financing activities, including the issuance of debt
and/or equity securities, and/or the exercise of the put option 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 March 28, 2008.





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 2009. 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 in its various
segments.  For all these estimates, we caution that future events may
not develop as forecast, and the best estimates routinely require
adjustment.


51


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 March 28, 2008, see “Quantitative and Qualitative
Disclosures about Market Risk” in 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 then ended.  For the
nine months ended January 2, 2009, there has been no significant change in
related market risk factors.  However, the recent global financial
crisis has resulted in a tightening of credit markets, including the US
commercial paper market, resulting in decreased liquidity in many financial
markets and uncertainty in global economic conditions.  The Company
recently responded to the dislocation in the commercial paper market by drawing
down $1.5 billion under its committed revolving credit
facility.  Given the volatility of the credit markets at this time, it
is not possible to predict when credit conditions will ease and short term
financing will become more readily available.  Continued uncertainty
in the global economic conditions and the liquidity crises 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 defer or cancel contract decisions which would
negatively affect revenue.





52


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 (the 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 the Company’s disclosure controls and procedures as of
January 2, 2009.





In the
course of the Company’s assessment, it has identified the following material
weakness in internal control over financial reporting:  there are
insufficient knowledgeable and competent personnel in certain key positions
within the tax function and processes and procedures over accounting for income
taxes are not adequate for the Company’s size and complexity.





As a
result of this material weakness, the Company’s Chief Executive Officer and
Chief Financial Officer have concluded that its disclosure controls and
procedures were not effective as of January 2, 2009.





"Internal
control 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 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 financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the issuer
      are being made only in accordance with authorizations 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 financial
  statements.





53


Changes
in Internal Control





During
the fiscal quarter ended January 2, 2009, there was no change in the Company's
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.





Although
the Company has made substantial progress in its remediation measures, it has
not yet completed all of its actions necessary to remediate the material
weakness over the accounting for income taxes.  Remedial measures
undertaken include recruitment of executive tax personnel, re-evaluation of the
overall organization structure and reassignment of responsibilities within the
function, recruitment of additional staff personnel with tax, accounting and
financial reporting expertise and improvement in the tax provision process and
the underlying procedures and internal controls.  As previously
stated, the Company will continue to address these areas and other remediation
activities of a longer term nature, such as further process improvement,
realignment of financial reporting systems and chart of accounts to better
capture tax/legal entity information and implementation of tax applications
systems to further automate the year-end tax provision, compliance activities
and management of tax audits and settlement activity.  During the
first three quarters of FY 2009, the Company has completed the recruitment of
all director level tax positions and the majority of the tax staff in connection
with the relocation of its Corporate Offices to Falls Church, Virginia
(including personnel with extensive FAS 109 and FIN 48 expertise); implemented
enhanced tax account reconciliation procedures; implemented detailed compliance
checklists for use in the determination and review of the quarterly tax
provision; and begun to implement tax provision software.  As
announced in the second quarter, the Company has also settled open tax years
relating to its filings for 2000-2004 with the Internal Revenue Service and has
adopted changes in certain tax accounting methods which have significantly
reduced the Company’s accrual for uncertain tax positions under FIN No. 48,
including associated interest and penalties.  The internal remediation
efforts are progressing and continuing significant improvements are anticipated
throughout the year.


54


PART
II. OTHER INFORMATION





Item
1.  Legal Proceedings





In the
course of business, discrepancies or claims may arise as to the use or
reliability of various software products provided by the Company for its
customers.  On February 7, 2005, the Company was named, along with
other vendors to the insurance industry and dozens of insurance companies in
Hensley, et al. vs.  Computer  Sciences Corporation, et al.,
filed as a putative nationwide
class  action  in  state  court  in  the
Circuit Court of Miller County, Arkansas shortly before
President  Bush  signed  the  Class  Action  Fairness  Act  into  law.  The
plaintiffs  allege  the  defendants  conspired  to  wrongfully
use software products  licensed  by the Company and the
other software vendors to reduce
the  amount  paid  to  the  licensees'  insured  for  bodily
injury claims.  Plaintiffs also allege wrongful concealment of the
manner in which these software programs evaluate claims and wrongful concealment
of information about alleged inherent errors and flaws in the
software.  Plaintiffs seek injunctive and monetary relief of less than
$75,000  for each class member, as well as attorney's fees and
costs.  The Company is vigorously defending itself against the
allegations.  On June 11, 2008 the court granted plaintiffs’ motion to
sever certain defendants, including the Company, from the Hensley
litigation.   As a result, the Company continues as a defendant
in the Hensley litigation and is also now a defendant in a separate putative
class action pending in the Circuit Court of
Miller  County,  Arkansas (styled Basham, et al. vs.
Computer Sciences Corporation,  et  al.), along with certain
insurance companies previously
named  as  defendants  in  the  Hensley
litigation.  During the second, third, and fourth quarters of fiscal
2009 the Company, along with certain other defendants in the Hensley and Basham
litigation, engaged in settlement discussions with legal counsel representing
the putative class members through mediation proceedings facilitated by an
independent mediator.  In February 2009, the Company and the class
representatives in the Hensley and Basham litigation agreed to a settlement of
the pending litigation and the parties are in the process of filing the
settlement agreement with the court for approval.  As part of the
settlement, the Company has agreed to certain injunctive relief, primarily
involving the publication of information regarding the use of the Company’s
software by its licensees in adjusting bodily injury claims, and to the payment
of legal fees to legal counsel representing the classes in the
litigation.  The Company’s net payment obligation in the settlement is
not material to the Company’s financial condition nor will the settlement have a
material adverse effect on the Company’s operations.





Litigation
is inherently uncertain and it is not possible to predict the ultimate outcome
of the matters discussed above.  It is possible that the Company's
business, financial condition, results of operations, or cash flows could be
affected by the resolution of this matter.  Whether any losses,
damages or remedies ultimately resulting from this proceeding could reasonably
have a material effect on the Company's business, financial condition, results
of operations, or cash flows will depend on a number of variables, including,
for example, the timing and amount of such losses or damages, if any, and the
structure and type of any such remedies.  Depending on the ultimate
resolution of these matters, some may be material to the Company's operating
results for a particular period if an unfavorable outcome results, although such
a material unfavorable result is not presently
expected, and all other litigation, in the aggregate, is not expected to result
in a material adverse impact to the consolidated condensed financial
statements.


55





CSC is
engaged in providing services under contracts with the U.S.
Government.  The contracts are subject to extensive legal and
regulatory requirements and, from time to time, agencies of the U.S. Government
investigate whether the Company's operations are being conducted in accordance
with these requirements.  U.S. Government investigations of the
Company, 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 the
Company, or could lead to suspension or debarment from future U.S. Government
contracting.  The Company believes it has adequately reserved for any
losses which may be experienced from these investigations.





In
accordance with prescribed federal regulations, the Company converted 16
submitted Requests for Equitable Adjustment (REAs) to interest bearing claims
under the Contract Disputes Act (CDA) totaling approximately $900 million on two
U.S. Federal contracts in order to initiate the claims litigation process and
trigger the statutory interest provision of the CDA.  Included in
current assets on the Company's balance sheet are approximately $446 million
($414 of which is subject to the claims) of unbilled receivables and $394
million of deferred costs related to the claims associated with the two
contracts.  The Company does not record any profit element when it
defers costs associated with such REAs/claims.  CSC has requested
payment for customer-caused delays and certain related out-of-scope work
directed or caused by the customers in support of their critical missions.
Notwithstanding the Government’s breaches and delays, CSC was obligated under
applicable federal acquisition law to continue performance as directed by the
Government; otherwise, refusal to perform would have placed CSC at risk for a
termination for default under the applicable provisions of the Federal
Acquisition Regulations.  The Company believes it has valid bases for
pursuing recovery of these REAs/claims supported by outside counsel’s evaluation
of the facts and assistance in the preparation of the claims.  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.


56





During
the first quarter of fiscal 2008, the U.S. federal contracting officer for the
contract with the larger set of claims denied the claims and issued a $42.3
million counterclaim.  The Company disagrees with the Government’s
denials both factually and contractually.  In contrast to the
Company’s claims’ submission, 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, the Company initiated litigation at the Armed Services Board of
Contract Appeals (ASBCA), one of the two forums available for litigation of CDA
claims, on September 11, 2007, with regard to the larger of the two sets of
claims and the counterclaim.  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.  During the third quarter of
fiscal 2008, the Company and its litigation team undertook a standard review of
the value of the claims associated with this contract.  Value is
subject to periodic, routine adjustment as new facts are uncovered, because of
contract modifications and funding changes, ordinary rate adjustments, and/or
estimated cost data being replaced with actual costs.  On December 21,
2007, as a result of the review, the Company amended the complaint it filed with
the ASBCA on September 11, 2007, and adjusted its value downward, with such
reduction reflected in the approximately $900  million total value for
both sets of claims noted above.  This adjustment is solely due to the
amount of damages claimed and does not affect the amounts recorded in the
Company’s balance sheet. The discovery phase of this litigation began in the
first half of fiscal year 2009.  Discovery in the litigation will
continue through fiscal year 2010 and trial is tentatively scheduled to begin in
the second quarter of fiscal year 2011.  With respect to the second
set of claims, the Government issued its denial on November 15,
2007.   As with the larger set of claims, the Company disagrees
with the Government’s denial both factually and contractually and initiated
litigation at the Armed Services Board of Contract Appeals on February 12,
2008.  The discovery phase of this litigation is expected to begin
during the fourth quarter of fiscal year 2009 and could continue for a year or
more.





Interest
on the claims is accruing but will only be recognized in the financial
statements when paid.  Resolution of the REA claims/amounts depends on
individual circumstances, negotiations by the parties and prosecution of the
claims.  The Company will pursue appeals as necessary and is unable to
predict the timing of resolution of recovery of these claims; however,
resolution of the claims may take years.





Several
shareholders of the Company have made demands on the Board of Directors of the
Company or filed purported derivative actions against both the Company, as
nominal defendant, as well as certain of CSC's executive officers and
directors.  These actions 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 allege that certain of the
defendants were unjustly enriched and seek to require them to disgorge their
profits.  These actions have been filed in both federal and state
court in Los Angeles as follows.


57





On June
1, 2006, a shareholder derivative complaint was filed in Los Angeles County
Superior Court naming Computer Sciences Corporation ("CSC") as a nominal
defendant and various current and former CSC officers and directors as
individual defendants.  The complaint was titled Allbright v. Bailey et al,
Case No. BC353316 and alleged the backdating of stock option grants to various
senior executives at CSC.  Thereafter, two additional related
shareholder derivative complaints were filed in Los Angeles Superior Court,
Jones v. Bailey et al.,
Case No. BC354686, and Laborers' International Union v.
Bailey et al., Case No. BC356675.  The Laborers'action was
subsequently voluntarily dismissed without prejudice, and in September 2006
Joneswas consolidated
with Allbright.  In July
2008, following a dismissal based on failure to adequately allege that a
pre-suit "demand" on the Board was excused and a subsequent amended complaint,
Superior Court Judge Carl West sustained  a second demurrer based on
demand pleadings and dismissed the consolidated case with
prejudice.    The statutory time for filing a notice of
appeal has passed and plaintiffs in the state court case have not appealed the
court’s granting of the Company’s demurrer and dismissal.





On August
23, 2006, Laborers'
International Union v. Bailey, et al., CV 06-5288, a shareholder
derivative action, was filed in U.S. District Court in Los
Angeles.  This complaint made similar allegations of backdating of
stock option grants to various senior executives at CSC and named CSC as a
nominal defendant and various current and former directors and officers as
individual defendants.  On August 25, 2006, another derivative suit
containing nearly identical allegations was filed in the same court, entitled
Local Union and District
Council v. Bailey, et al., CV 06-5356.   The derivative
complaints brought state law claims for breach of fiduciary duty and other
claims, as well as a federal securities claim.  A third derivative
complaint, Huffman v.
Honeycutt, et al., CV 06-6512, filed in the same court, also brought
state and federal claims based on backdating allegations.  All three
federal derivative actions were ultimately consolidated into one action entitled
In re CSC Shareholder
Derivative Litigation, CV 06-5288, before U.S. District Judge Mariana
Pfaelzer.  On July 24, 2007, following the grant of an initial motion
to dismiss and a subsequent amended complaint, Judge Pfaelzer granted a second
motion to dismiss based on demand futility and dismissed the amended complaint
with prejudice.  Following an ex parte application by defendants,
Judge Pfaelzer issued a corrected order dated August 9, 2007 reflecting the same
ruling.  Plaintiffs subsequently filed a notice of appeal to the Ninth
Circuit. Arguments were heard on December 9, 2008 and a decision is
pending.


58





The
Company and certain directors and other individuals have also been sued in a
class action proceeding alleging violations of the ERISA statute related to
claims of alleged backdating of stock options.  On August 15, 2006, a
federal ERISA class action involving allegations of backdating at CSC was filed
in 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 CSC, the CSC
Retirement and Employee Benefits Plans Committee, and various directors and
officers, and alleged various violations of the ERISA statute.  The
two ERISA actions have been 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
federal district court in Los Angeles, California.  Upon arrival in
the Central District of California, the two cases were consolidated before U.S.
District Judge James Otero in Case No. CV
08-2398-SJO.  Defendants  filed a motion to dismiss and
plaintiffs filed their memorandum in opposition to the
motion.  Plaintiffs also filed a motion for class certification, and
Defendants  filed  their memorandum in opposition to the
motion on August 11, 2008.  On September 2, 2008, Judge Otero issued
orders denying defendants’ motion to dismiss, and also denying plaintiffs’
motion for class certification.  Defendants have since answered the
complaint and discovery is currently proceeding.  On November 13,
2008, plaintiffs filed a new motion for class certification and the defendants
filed a memorandum in opposition on December 8, 2008.  On December 29,
2008, Judge Otero granted plaintiffs motion for class
certification.  On January 13, 2009, defendants filed a petition with
the Ninth Circuit pursuant to Rule 23(f) of the Federal Rules, requesting that
the court of appeals accept their appeal from the order granting class
certification. Plaintiffs filed their opposition on January 23, 2009. At this
time it is not possible to make reliable estimates of the amount or range of
loss that could result from any of these actions.





In
addition to the matters noted above, the Company is currently party to a number
of disputes which involve or may involve litigation.  The Company
consults with legal counsel on those issues related to litigation 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, for example, 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 reliable
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.





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.


59





Economic
and political uncertainty may adversely impact our customers’ demand for our
services.  A general economic downturn may adversely impact our
customers’ demand for consulting and systems integration
services.  Our federal government segment generated approximately 34%
of our revenue for fiscal 2008.  While the pipeline for government
projects continues to be robust, the 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 federal government’s demand and available funds
for information technology projects, adversely impacting our federal government
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.





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,
repurchase shares on the open market 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 may adversely impact our revenue growth and the price of
our stock.


60





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.
            Our
      customers may experience financial difficulties and we may not be able to
      collect our receivables, materially and adversely affecting our
      profitability.





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.





7.
            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 area 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.





8.
            We
      are defendants in pending litigation which may have a material and adverse
      impact on our profitability.





As noted
in Part II. Item 1, Legal Proceedings, of this Form 10-Q 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 will incur charges which
may have a material and adverse impact on our liquidity and
earnings.


61





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.





9.
            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.





10.
            Our
      international operations are exposed to risks, including fluctuations in
      exchange rates, which may be beyond our
control.





For
fiscal 2008, we earned approximately 40% of revenues 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 project 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 project 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 55 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. In spite of 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.





11.
            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.


62





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.  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 tax holiday granted by
certain tax jurisdictions in India to the Company, which currently extends
through 2010, may not be extended or may be revoked resulting in an increase in
income tax expense, (3) 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.





12.
            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.





13.
            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 investments in the
contracts.  There is no assurance we will be able to fully recover our
investments.





We may
not 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.





14.
            We
      may be exposed to negative publicity and other potential risks if we are
      unable to maintain effective internal
controls.





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 did 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.


63








15.
            We
      have identified a material weakness related to accounting for income
      taxes, and concluded that our internal control over financial reporting
      was not effective as of March 28, 2008.  Inability to maintain
      effective internal control over financial reporting could adversely affect
      our financial results, the market price of our common stock or our
      operations.





The
Company has identified a material weakness related to accounting for income
taxes and, as a result, has concluded that our internal control over financial
reporting as of March 28, 2008, was not effective.  Remediation of the
material weaknesses may be costly and time consuming.  Inability to
maintain effective internal control over financial reporting could adversely
affect our financial results, the market price of our common stock or our
operations.  See Part I. Item 4, Controls and Procedures in this Form
10-Q for further discussion.





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.





A
significant portion of our revenue for the quarter, approximately 36.5%, is
derived from contracts with the U.S. federal government.  As a result,
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 on which we have partnered with third parties may
      be adversely affected if the third parties fail to deliver on their
      commitments.





Our
contracts are increasingly complex and require that we partner with parties
including software and hardware vendors to provide the complex solutions
required by our customers.  Our ability to deliver the solution and
provide the services required by our customers is dependent on the ability of
our partners to meet their delivery schedules.  If our partners fail
to deliver their 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 and adverse effect on
our profitability.





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


64





As one of
the larger companies in the information technology (I/T) 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 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.





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





Given the
volatility of the credit markets at this time, it is not possible to predict
when credit conditions will ease and short term financing will become more
readily available.  Continued uncertainty in the global economic
conditions and the liquidity crisis 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.  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.


65





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





(a)
            None




(b)
      Purchases of Equity Securities







The
following table provides information on a monthly basis for the quarter ending
January 2, 2009,  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 ProgramsOctober
      4, 2008 to October 31,2008
            8,870
            $28.98November
      1, 2008 to November 28, 2008November
      29, 2008 to January 2, 2009
            4,922
            $31.75





(1)
            The
      Company accepted 10,038 shares of its common stock in the third quarter
      ended January 2, 2009, 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 3,754 shares of its common stock in the quarter ended January
2, 2009, from employees in lieu of cash due to the Company in connection with
the exercise of stock options.  Also, the Company purchased 3,754
shares during this period to cancel restricted shares of common stock due to
employee terminations.


66





Item
      6. ExhibitsExhibit
              Number
            Description of Exhibit2.1
            Agreement
      and Plan of Merger, dated as of April 25, 2007, by and among Computer
      Sciences Corporation, Surfside Acquisition Corp. and Covansys Corporation
      (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K dated April 30, 2007)3.1
            Restated
      Articles of Incorporation filed with the Nevada Secretary of State on June
      11, 2003 (incorporated by reference to Exhibit 3.1 to the Company's Annual
      Report on Form 10-K for the fiscal year ended March 28,
    2003)3.2
            Certificate
      of Amendment of Certificate of Designations of Series A Junior
      Participating Preferred Stock (incorporated by reference to Exhibit 3.2 to
      the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
      October 3, 2003)3.3
            Bylaws,
      amended and restated effective October 17, 2008 (incorporated by reference
      to Exhibit 3.2 to the Company's Current Report on Form 8-K dated October
      17, 2008)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 Stock Option Agreement for employees(1)
      (incorporated by reference to Exhibit 10.5 to the Company's Quarterly
      Report on Form 10-Q for the fiscal quarter ended July 1,
    2005)


67





10.7
            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)10.8
            Form
      of Service-Based Restricted Unit Agreement for Employees(1)(incorporated by reference to Exhibit 10.8 to the Company’s Annual
      Report on Form 10-K for the fiscal year ended March 28,
    2008)10.9
            Form
      of Performance-Based Restricted Stock Unit Agreement for Employees(1)(incorporated by reference to Exhibit 10.9 to the Company’s Annual
      Report on Form 10-K for the fiscal year ended March 28,
    2008)10.10
            Form
      of Career Shares Restricted Stock Unit Agreement for Employees(1)(incorporated by reference to Exhibit 10.10 to the Company’s Annual
      Report on Form 10-K for the fiscal year ended March 28,
    2008)10.11
            Form
      FY2006 Annual Management Incentive Plan 1 Worksheet(1)
      (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly
      Report on Form 10-Q for the fiscal quarter ended July 1,
    2005)10.12
            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)10.13
            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)10.14
            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)10.15
            Deferred
      Compensation Plan, amended and restated 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
            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)10.17
            Severance
      Agreement with Van B. Honeycutt, effective February 2, 1998(1)
      (incorporated by reference to Exhibit 10.14 to the Company’s Quarterly
      Report on Form 10-Q for the fiscal quarter ended December 26,
      1997)10.18
            Employment
      Agreement with Van B. Honeycutt, effective May 1, 1999(1)
      (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended April 2,
  1999)


68





10.19
            Amendment
      of Employment Agreement with Van B. Honeycutt, effective February 3,
      2003(1)
      (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended December 27,
    2002)10.20
            Amendment
      No. 2 to Employment Agreement with Van B. Honeycutt, effective December 5,
      2005(1)
      (incorporated by reference to Exhibit 10.4 to the Company’s Current Report
      on Form 8-K dated December 6, 2005)10.21
            Retirement
      Agreement with Van B. Honeycutt, effective May 21, 2007(1)
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K dated May 25, 2007)10.22
            Management
      Agreement with Michael W. Laphen, effective September 10, 2007(1)
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K dated September 10, 2007)10.23
            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)10.24
            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)10.25
            General
      Release of Claims, effective January 30, 2008, with Michael E. Keane(1)
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K dated January 31, 2008)10.26
            Form
      of Indemnification Agreement for officers (incorporated by reference to
      Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 1995)10.27
            Form
      of Indemnification Agreement for directors (incorporated by reference to
      Exhibit X(xxvi)
      to the Company’s Annual Report on Form 10-K for the fiscal year ended
      April 1, 1988)10.28
            1997
      Nonemployee Director Stock Incentive Plan (incorporated by reference to
      Appendix A to the Company’s Proxy Statement for the Annual Meeting of
      Stockholde3rs held on August 11, 1997)10.29
            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, 200610.30
            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)


69





10.31
            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)10.32
            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)10.33
            Accelerated
      Share Repurchase Transaction – VWAP Pricing Agreement and Supplemental
      confirmation dated June 29, 2006 between Goldman, Sachs & Co. and the
      Company(2)
      (incorporated by reference to Exhibit 10.24 to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended June 30,
2006)10.34
            Collared
      Accelerated Share Repurchase Transaction Agreement and Supplemental
      confirmation dated June 29, 2006 between Goldman, Sachs & Co. and the
      Company(2)
      (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended June 30,
2006)21
            Significant
      Active Subsidiaries and Affiliates of the
  Registrant





31.1
            Section
      302 Certification of the Chief Executive Officer31.2
            Section
      302 Certification of the Chief Financial Officer32.1
            Section
      906 Certification of the Chief Executive Officer32.2
            Section
      906 Certification of the Chief Financial Officer99.1
            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.)(1)Management
      contract or compensatory plan or agreement(2)Confidential
      treatment has been requested pursuant to Rule 24b-2 under the Securities
      Exchange Act of 1934, as amended, for portions of this exhibit that
      contain confidential commercial and financial
  information.


70


SIGNATURES





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.





COMPUTER
      SCIENCES CORPORATIONDate:  February
      11, 2009
            By:
            /s/
      DONALD G. DeBUCKDonald
      G. DeBuckVice
      President and ControllerChief
      Accounting Officer








71