Computer Sciences 10Q 2008 Q4 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM 10-Q
(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended December 28, 2007

OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission File No. 1-4850

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

Nevada			95-2043126
(State or Other Jurisdiction of			(I.R.S. Employer
Incorporation or Organization)			Identification No.)

2100 East Grand Avenue
El Segundo, California			90245
(Address of Principal Executive Offices)			(Zip Code)

Registrant's Telephone Number, Including Area Code: (310) 615-0311

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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]

158,698,789 shares of Common Stock, $1.00 par value, were outstanding on January 25, 2008.

COMPUTER SCIENCES CORPORATION

INDEX TO FORM 10-Q

		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Condensed Statements of Income, Third Quarter and Nine Months Ended December 28, 2007 and December 29, 2006	1

	Consolidated Condensed Balance Sheets December 28, 2007 and March 30, 2007	2

	Consolidated Condensed Statements of Cash Flows, Nine Months Ended December 28, 2007 and December 29, 2006, as restated	3

	Notes to Consolidated Condensed Financial Statements	4

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52

Item 4.	Controls and Procedures	53

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	58

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 6.	Exhibits	59

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)	Dec. 28, 2007			Dec. 29, 2006			Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)						As Restated (1)

Revenues	$	4,160.0		$	3,640.6		$	12,015.1		$	10,810.8

Costs of services (excludes depreciation and amortization)		3,301.6			2,901.0			9,653.5			8,674.0
Selling, general and administrative		240.2			227.9			721.9			682.0
Depreciation and amortization		307.1			262.0			878.3			789.2
Interest expense		51.1			56.3			129.1			160.2
Interest income		(7.5	)		(8.3	)		(25.8	)		(41.8	)
Special items		17.5			42.0			92.4			279.9
Other income		(16.3	)		(14.5	)		(41.9	)		(27.2	)
Total costs and expenses		3,893.7			3,466.4			11,407.5			10,516.3

Income before taxes		266.3			174.2			607.6			294.5
Taxes on income		87.3			60.7			244.7			151.4
Net income	$	179.0		$	113.5		$	362.9		$	143.1

Earnings per share:
Basic	$	1.07		$	0.66		$	2.12		$	0.81

Diluted	$	1.05		$	0.65		$	2.08		$	0.79

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

See accompanying notes.

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)

(In millions except shares)	Dec. 28, 2007			March 30, 2007

ASSETS
Cash and cash equivalents	$	589.1		$	1,050.1
Receivables, net		4,608.4			4,187.4
Prepaid expenses and other current assets		1,793.6			1,464.0
Total current assets		6,991.1			6,701.5
Property and equipment, net		2,656.7			2,539.1
Outsourcing contract costs, net		941.5			1,029.5
Software, net		527.0			513.3
Goodwill		3,697.4			2,500.1
Other assets		547.8			456.7
Total assets	$	15,361.5		$	13,740.2

LIABILITIES
Short-term debt and current maturities of long-term debt	$	571.4		$	93.7
Accounts payable		659.1			855.7
Accrued payroll and related costs		820.7			732.5
Other accrued expenses		1,759.3			2,014.1
Deferred revenue		1,025.7			1,025.5
Income taxes payable and deferred income taxes		210.2			934.6
Total current liabilities		5,046.4			5,656.1

Long-term debt, net		2,515.1			1,412.2
Income tax liabilities and deferred income taxes		1,127.4
Other long-term liabilities		1,121.4			1,131.9

STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized 750,000,000 shares; issued 171,739,768 (2008) and 181,105,129 (2007)		171.7			181.1
Additional paid-in capital		1,892.0			1,876.3
Earnings retained for use in business		4,008.6			4,140.9
Accumulated other comprehensive income (loss)		(150.3	)		(304.3	)
		5,922.0			5,894.0
Less common stock in treasury, at cost, 8,101,652 shares (2008) and 7,787,140 shares (2007)		(370.8	)		(354.0	)
Total stockholders' equity		5,551.2			5,540.0
Total liabilities and stockholders' equity	$	15,361.5		$	13,740.2

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

See accompanying notes.

COMPUTER SCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended
(In millions)	Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)
Cash flows from operating activities:
Net income	$	362.9		$	143.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash charges		994.3			908.1
Gain on disposition		(6.3	)		(20.7	)
Changes in assets and liabilities, net of effects of acquisitions:
Increase in assets		(639.1	)		(488.8	)
Decrease in liabilities		(213.3	)		(4.5	)
Net cash provided by operating activities		498.5			537.2
Investing activities:
Purchases of property and equipment		(644.2	)		(550.6	)
Acquisitions, net of cash acquired		(1,315.6	)		(131.3	)
Outsourcing contracts		(87.7	)		(69.4	)
Software		(129.6	)		(114.1	)
Other investing cash flows		18.0			227.1
Net cash used in investing activities		(2,159.1	)		(638.3	)
Financing activities:
Borrowings of commercial paper, net		205.1			497.4
Borrowings under lines of credit		456.6			440.7
Repayments on lines of credit		(472.2	)		(452.1	)
Principal payments on capital leases and long-term debt		(29.3	)		(25.8	)
Proceeds from debt issuance		1,400.0
Proceeds from stock option and other common stock transactions		82.4			72.6
Excess tax benefit from stock-based compensation		10.6			3.1
Repurchase of common stock, net of settlement		(474.9	)		(1,000.0	)
Other financing cash flows		1.8			(2.3	)
Net cash provided by (used in) financing activities		1,180.1			(466.4	)

Effect of exchange rate changes on cash and cash equivalents		19.5			2.8

Net decrease in cash and cash equivalents		(461.0	)		(564.7	)
Cash and cash equivalents at beginning of year		1,050.1			1,290.7
Cash and cash equivalents at end of period	$	589.1		$	726.0

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

See accompanying notes.

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/A for the fiscal year ended March 30, 2007. 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. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

Restatement of Unaudited Consolidated Condensed Financial Statements

The Company has restated the accompanying consolidated condensed statements of income and cash flows for the three and nine months ended December 29, 2006. The restatement relates to 1) the correction of errors relating to the accounting for income taxes, 2) the recognition of revenue for the sale of licenses for a software product, 3) the correction of errors related to the accounting for foreign currency translation on certain intracompany balances and 4) the correction of miscellaneous immaterial errors and the reclassification of foreign currency gains and losses and losses on the disposal of certain assets to other income. These adjustments increased the reported income before taxes by $2.3 for the quarter ended December 29, 2006 and decreased reported income before taxes $4.6 for the nine months ended December 29, 2006. These adjustments decreased net income by $1.3 and $9.9 for the three and nine months ended December 29, 2006, respectively.

Income Taxes

The Company identified errors related to the accounting for income taxes in prior periods. The errors affecting income tax expense for the three and nine months ended December 29, 2006 were related to the accounting for U.S. income tax liabilities related to foreign operations, income tax errors related to foreign operations, accounting for uncertain tax positions, the reporting of certain general and administrative costs in the Company’s U.S. federal tax return and other miscellaneous income tax accounting errors. The Company also identified a number of other errors related to income taxes which did not affect income tax expense but did result in the accrual of interest and penalties which had not been previously recorded for the first, second, and third quarters of fiscal 2007. As a result, the Company has restated the accompanying consolidated condensed financial statements for the quarter and nine months ended December 29, 2006 to record additional penalties, interest and income tax expense.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 1 – Basis of Presentation (continued)

Revenue Recognition

The Company determined that it did not correctly apply the provisions of Statement of Position 97-2, “Software Revenue Recognition” with respect to the sale of licenses for a software product. As a result, the Company overstated revenue and unbilled receivables and understated deferred revenue related to this product in fiscal years prior to 2005 and understated revenue for subsequent periods. The Company has restated the accompanying consolidated condensed financial statements for the quarter and nine months ended December 29, 2006 to record additional revenue and the related tax effects.

Foreign Currency

The Company identified errors in accounting for the effect of foreign currency exchange rate movements on intracompany balances. These errors include improperly recording foreign currency gains and losses in the cumulative translation adjustment account. These foreign currency gains and losses were primarily from long-term intracompany notes and should have been recorded in income. The Company has restated the accompanying consolidated condensed financial statements for the quarter and nine months ended December 29, 2006 to record foreign currency gains and losses on intracompany balances.

Other

The Company identified errors related to non-income tax related state taxes in prior periods. In addition, the Company has reclassified immaterial gains and losses from the disposition of immaterial businesses, the disposition of non-operating assets and investment securities, as well as foreign currency gains and losses, from cost of services to other income.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 1 – Basis of Presentation (continued)

Summary of Adjustments to the Consolidated Condensed Financial Statements

The following tables present the effects of the restatement adjustments on the Company’s previously reported consolidated condensed statements of income for the three and nine months ended December 29, 2006:

	Three Months Ended December 29, 2006
				Adjustments
	As Reported			Revenue Recognition		Income Tax			Foreign Currency			Other			As Restated
Revenues	$	3,636.9		$	3.7										$	3,640.6

Costs of services (excludes depreciation and amortization)		2,903.1										$	(2.1	)		2,901.0
Selling, general and administrative		227.9														227.9
Depreciation and amortization		262.0														262.0
Interest expense		38.4				$	17.9									56.3
Interest income		(8.4	)				.1									(8.3	)
Special items		42.0														42.0
Other (income)/expense									$	(16.4	)		1.9			(14.5	)
Total costs and expenses		3,465.0					18.0			(16.4	)		(0.2	)		3,466.4

(Loss) income before taxes		171.9			3.7		(18.0	)		16.4			0.2			174.2
Taxes on income		57.1			1.5		(4.3	)		6.4						60.7
Net (loss) income	$	114.8		$	2.2	$	(13.7	)	$	10.0		$	0.2		$	113.5
Earnings per share:
Basic	$	0.67		$	0.01	$	(0.08	)	$	0.06					$	0.66
Diluted*	$	0.65		$	0.01	$	(0.08	)	$	0.06					$	0.65

	Nine Months Ended December 29, 2006
				Adjustments
	As Reported			Revenue Recognition		Income Tax			Foreign Currency			Other			As Restated
Revenues	$	10,798.3		$	12.5										$	10,810.8

Costs of services (excludes depreciation and amortization)		8,682.5										$	(8.5	)		8,674.0
Selling, general and administrative		682.0														682.0
Depreciation and amortization		789.2														789.2
Interest expense		107.4				$	52.8									160.2
Interest income		(41.8	)													(41.8	)
Special items		279.9														279.9
Other (income)/expense									$	(35.6	)		8.4			(27.2	)
Total costs and expenses		10,499.2					52.8			(35.6	)		(0.1	)		10,516.3

(Loss) income before taxes		299.1			12.5		(52.8	)		35.6			0.1			294.5
Taxes on income		146.1			4.9		(13.6	)		14.0						151.4
Net (loss) income	$	153.0		$	7.6	$	(39.2	)	$	21.6		$	0.1		$	143.1
Earnings per share:
Basic	$	0.86		$	0.04	$	(0.22	)	$	0.12					$	0.81
Diluted*	$	0.85		$	0.04	$	(0.22	)	$	0.12					$	0.79

*Amounts may not add due to rounding

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 1 – Basis of Presentation (continued)

The following table presents the effects of the restatement adjustments to the consolidated condensed statement of cash flow for the nine months ended December 29, 2006:

	Nine Months Ended December 29, 2006
	As Reported			Adjustments			As Restated

Cash flows from operating activities:
Net income	$	153.0		$	(9.9	)	$	143.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization and other non-cash charges		906.6			1.5			908.1
Gain on dispositions, net of tax		(20.7	)					(20.7	)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Increase in assets		(439.3	)		(49.5	)		(488.8	)
Decrease in liabilities		(62.4	)		57.9			(4.5	)
Net cash provided by operating activities	$	537.2					$	537.2

Note 2 – Earnings Per Share

Basic and diluted earnings per share are calculated as follows:

	Third Quarter Ended
	Dec. 28, 2007		Dec. 29, 2006
			As Restated (1)
Net income	$	179.0	$	113.5

Common share information:
Average common shares outstanding for basic EPS		166.826		172.362
Dilutive effect of common stock equivalents		2.967		3.384
Shares for diluted EPS		169.793		175.746

Basic EPS	$	1.07	$	0.66

Diluted EPS	$	1.05	$	0.65

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 2 – Earnings Per Share (continued)

	Nine Months Ended
	Dec. 28, 2007		Dec. 29, 2006
			As Restated (1)
Net income	$	362.9	$	143.1

Common share information:
Average common shares outstanding for basic EPS		170.907		177.330
Dilutive effect of common stock equivalents		3.333		3.543
Shares for diluted EPS		174.240		180.873

Basic EPS	$	2.12	$	0.81

Diluted EPS	$	2.08	$	0.79

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 7,616,398 and 5,620,453 for the three months and 6,380,246 and 5,092,140 for the nine months ended December 28, 2007 and December 29, 2006, respectively.

Note 3 – Income Taxes

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109," effective March 31, 2007. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. FIN 48 also provides guidance on the accounting for and disclosure of liabilities for uncertain tax positions, interest and penalties.

As a result of the implementation of FIN 48, the Company adjusted the estimated value of its uncertain tax positions by recognizing additional liabilities totaling $171.4 as a reduction to earnings retained for use in business and $1.5 as an adjustment to additional paid-in-capital. Upon the adoption of FIN 48, the estimated value of the Company’s uncertain tax positions was a liability of $1,415 resulting from unrecognized net tax benefits including interest and penalties of $370 and net of $126 of related tax carryforwards. Of the $1,415 liability for uncertain tax positions, $346 was recorded in current liabilities as income taxes payable and deferred income taxes, and approximately $1,069 was recorded in non-current liabilities as income tax liabilities and deferred income taxes in the consolidated condensed balance sheet. If the Company’s positions are sustained by the taxing authority in favor of the Company, approximately $515 (excluding interest and penalties) of uncertain tax position liabilities would favorably impact the Company’s effective tax rate.

Prior to the adoption of FIN 48, the Company’s policy was to classify penalties as an operating expense, and interest on tax overpayments and underpayments as interest in arriving at pretax income. Upon adoption of FIN 48, the Company elected to change its accounting policy and classify interest expense on overpayments and underpayments and uncertain tax positions and penalties in the income tax provision. As of the date of adoption of FIN 48 the Company had accrued $211 of interest and $159 of penalties related to income tax matters. The Company accrued an additional $21.3 ($13.3 net of tax) of interest and penalties and $69.4 ($43.3 net of tax) of interest and penalties in the third quarter and nine months year to date ended December 28, 2007 increasing its income tax provision and the liability for uncertain tax positions. During the third quarter and nine months ended December 28, 2007, the Company reduced income tax expense and the liability for uncertain tax positions by $23.0 ($18.6 net of tax) and $53.9 ($39.7 net of tax), respectively . Of this amount, $30.7 ($21.1 net of tax) results from the reversal of accrued penalties and interest as a result of filing applications for changes in accounting methods with the Internal Revenue Service (IRS), which precludes the IRS from making assessments related to the associated unrecognized tax benefits. The remaining amount of $23.0 ($18.6, net of tax) primarily relates to the remeasurement of tax and interest for various IRS matters for fiscal years 1995 to 1999.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 3 – Income Taxes (continued)

Tax Examination Status

During the next 12 months, it is reasonably possible the Company’s liability for uncertain tax positions may change by a significant amount as a result of the following:

The Company completed its settlement discussions with the IRS subject to administrative review with respect to the examination of fiscal years 1995 through 1999. The statute of limitations is expected to close on these years in the second quarter of fiscal 2009. The nature of the significant items subject to examination includes bad debt deductions, property transactions, and credits.

The Company’s U.S. federal income tax returns for fiscal years 2000 and beyond remain subject to examination by the IRS. The IRS commenced an examination of fiscal years 2000 through 2004 federal income tax returns beginning in fiscal year 2007, and the Company expects to reach a settlement by December 31, 2008. Accordingly, the Company has agreed to extend the statute of limitations for these tax years through December 31, 2008. The nature of the significant items subject to examination include accounting methods, depreciation and amortization, research credits, and international tax issues.

·	In the first quarter of fiscal year 2009 the Company may file applications for changes in accounting methods with the IRS associated with certain unrecognized tax benefits, which could result in a reduction of the associated liabilities.

The Company’s significant foreign jurisdictions including the United Kingdom, Australia, Germany and Canada are subject to examination for various years beginning in fiscal year 2001. The Company is currently under examination in Canada, UK, and Germany.

Conclusion of the above matters could result in settlements for different amounts than the Company has accrued as uncertain tax benefits. If a position for which the Company concluded was more likely than not and was subsequently not upheld, then the Company would 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 12 months range from no change to a reduction of the liability for unrecognized tax benefits of approximately $520, before the impact of penalties and interest.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 4 – Debt

The Company issued approximately $1,400 of commercial paper to finance the acquisition of Covansys Corporation. The outstanding commercial paper was classified as long-term as the Company intends and has the ability to refinance the commercial paper long-term utilizing the long-term credit agreement described below. The weighted average interest rate on the commercial paper was 5.37% and 5.55% for the quarter and nine months ended December 28, 2007, respectively.

On June 25, 2007, the Company entered into a credit agreement for $1,000 with Bank of America, N.A., Barclays Bank PLC, and Merrill Lynch Capital Corporation. This agreement expires June 24, 2008. On July 12, 2007, the Company entered into a long-term credit agreement for a $1,500 commercial paper backup which replaced the existing $1,000 line of credit entered into on August 26, 2006. The long-term line of credit was used by the Company as a commercial paper backup for the Covansys acquisition financing.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 5 – Stock Incentive Plans

The Company has various stock incentive plans which are more fully described in Note 14 of the Company’s 2007 Annual Report filed on Form 10-K/A. For the three and nine months ended December 28, 2007 and December 29, 2006, the Company recognized stock-based compensation expense as follows:

	Three Months Ended
	Dec. 28, 2007		Dec. 29, 2006
Cost of services	$	3.7	$	3.4
Selling, general and administrative		8.6		10.8
Total	$	12.3	$	14.2
Total net of tax	$	7.7	$	9.4

	Nine Months Ended
	Dec. 28, 2007		Dec. 29, 2006
Cost of services	$	10.7	$	10.9
Selling, general and administrative		26.6		36.0
Special items		10.4
Total	$	47.7	$	46.9
Total net of tax	$	29.7	$	31.0

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 13, Special Items.

The Company uses the Black-Scholes-Merton model in determining the fair value of options granted. The weighted average fair values of stock options granted during the nine months ended December 28, 2007 and December 29, 2006 were $17.88 and $16.66 per share, respectively. In calculating the actual and pro forma compensation expense for its stock incentive plans, the Company used the following weighted average assumptions:

	Nine Months Ended
	Dec. 28, 2007			Dec. 29, 2006
Risk-free interest rate		4.66	%		4.84	%
Expected volatility		32	%		28	%
Expected lives	4.14 years			4.08 years

Employee Incentive Plans

The Company has four 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). The Company’s standard vesting schedule for stock options and stock awards (restricted stock and RSUs) is one third on each of the first three anniversaries of the grant date, except for certain stock awards where one third of the shares vest on each of the third, fourth and fifth anniversaries of the grant date. Stock options are generally granted for a term of ten years. At December 28, 2007, 14,150,078 shares of CSC common stock were available for the grant of future stock options, stock awards or other stock-based incentives to employees.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 5 – Stock Incentive Plans (continued)

Stock Options

Information concerning stock options granted under stock incentive plans is as follows:

	Nine Months Ended December 28, 2007
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value

Outstanding at March 30, 2007		17,060,082		$	45.23		5.86	$	140.2
Granted		3,421,966			55.21
Exercised		(2,046,336	)		40.26
Canceled/Forfeited		(414,273	)		52.38
Expired		(137,498	)		55.43
Outstanding at December 28, 2007		17,883,941			47.43		5.99		92.1
Vested and expected to vest in the future at December 28, 2007		17,581,010			47.30		5.99		92.0
Exercisable at December 28, 2007		12,280,048			44.51		4.66		88.2

The total intrinsic value of options exercised during the nine months ended December 28, 2007 and December 29, 2006 was $34.4 and $33.5, respectively. The total intrinsic value of stock options is based on the difference between the fair market value of our common stock at December 28, 2007 (for options outstanding), or date of exercise, less the applicable exercise price.

The cash received from stock options exercised during the nine months ended December 28, 2007 and December 29, 2006, was $82.4 and $72.6, respectively. During the nine months ended December 28, 2007 and December 29, 2006, the Company realized income tax benefits of $24.9 and $10.9, respectively, and an excess tax benefit of $10.6 and $3.1, respectively, related to the exercise of these stock options.

As of December 28, 2007, there was $67.8 of total unrecognized compensation expense related to unvested stock options, net of expected forfeitures. The cost is expected to be recognized over a weighted-average period of 2.16 years.

Stock Awards

Stock awards consist of restricted stock and restricted stock units (RSUs). 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. The restrictions on shares of CSC restricted stock normally lapse on the first, second and third anniversaries of the date of issuance for awards issued in lieu of cash bonuses, and on the third, fourth and fifth anniversaries for all others.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 5 – Stock Incentive Plans (continued)

The RSUs vest on the first, second and third anniversaries of the date of issuance for those issued in lieu of cash bonuses, and on the third, fourth and fifth anniversaries for all others. Upon the vesting date, the RSUs are automatically redeemed for shares of CSC common stock and dividend equivalents.

Information concerning stock awards granted under stock incentive plans is as follows:

	Nine Months Ended December 28, 2007
	Number of Shares			Weighted Average Fair Value
Outstanding at March 30, 2007		1,143,017		$	48.30
Granted		193,212			54.99
Released/Redeemed		(594,025	)		47.69
Forfeited/Canceled		(44,206	)		49.95
Outstanding at December 28, 2007		697,998			50.57

As of December 28, 2007, there was $25.6 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 3.03 years.

Nonemployee Director Incentives

The Company has two stock incentive plans which authorize the issuance of stock options, restricted stock and other stock-based incentives to nonemployee directors upon terms approved by the Company’s Board of Directors. At December 28, 2007, 71,100 shares of CSC common stock remained available for the grant to nonemployee directors of future RSUs or other stock-based incentives.

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

	Nine Months Ended December 28, 2007
	Number of Shares			Weighted Average Fair Value
Outstanding at March 30, 2007		73,321		$	44.44
Granted		19,300			50.61
Redeemed		(600	)		37.81
Forfeited/Canceled
Outstanding at December 28, 2007		92,021			45.78

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 5 – Stock Incentive Plans (continued)

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, which must be made within 30 days after the date of the award, 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 December 28, 2007, there was $1.0 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 4, 2008.

Note 6 – Other Income

For the three and nine months ended December 28, 2007 and December 29, 2006, the components of other income were as follows:

	Third Quarter Ended
	Dec. 28, 2007			Dec. 29, 2006
Foreign exchange gain	$	(11.7	)	$	(16.3	)
Other		(4.6	)		1.8
Total	$	(16.3	)	$	(14.5	)

	Nine Months Ended
	Dec. 28, 2007			Dec. 29, 2006
Foreign exchange gain	$	(37.3	)	$	(35.6	)
Other		(4.6	)		8.4
Total	$	(41.9	)	$	(27.2	)

The Company offsets, to the extent possible, remeasurement gains and losses on certain non-functional currency monetary assets and liabilities, with forward contracts denominated in the same currency as the exposure from the asset or liability. The Company does not enter into forward contracts for speculative or trading purposes. Gains and losses from settlement and remeasurement of the forward contracts are recorded in Other income. As of December 28, 2007, the notional amount of forward contracts outstanding was approximately $1,380.

Note 7 – Depreciation

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

		Dec. 28, 2007				Mar. 30, 2007
Property and equipment		$	3,517.7			$	3,073.8

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 8 – Dividends

No dividends were paid during the periods presented. At December 28, 2007 and March 30, 2007, there were 171,739,768 and 181,105,129 shares, respectively, of $1.00 par value common stock issued. The Company had 8,101,652 and 7,787,140 shares of treasury stock as of December 28, 2007 and March 30, 2007, respectively.

Note 9 - Cash Flows

Cash payments for interest on indebtedness were $127.8 and $113.8 for the nine months ended December 28, 2007 and December 29, 2006, respectively. Cash payments for taxes on income were $336.8 and $202.0, net of refunds, for the nine months ended December 28, 2007 and December 29, 2006, respectively.

Note 10 - Comprehensive Income

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

	Third Quarter Ended
	Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)
Net income	$	179.0		$	113.5
Foreign currency translation adjustment		9.8			46.3
Unrealized gain on available for sale securities		.1			1.3
Reclassification adjustment for gains realized in net income		(2.2	)		-
Comprehensive income	$	186.7		$	161.1

	Nine Months Ended
	Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)
Net income	$	362.9		$	143.1
Foreign currency translation adjustment		151.2			163.2
Unfunded pension adjustment		4.5			(1.2	)
Unrealized gain on available for sale securities		.5			1.5
Reclassification adjustment for gains realized in net income		(2.2	)		(6.9	)
Comprehensive income	$	516.9		$	299.7

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

(1)	See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 11 – Segment Information

CSC provides information technology outsourcing, consulting and systems integration services and other professional services. Based on the criteria of SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” CSC aggregates operating segments into two reportable segments, North American Public Sector and Global Commercial. 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 December 29, 2006 reportable segments have been restated to reflect a change in the composition of the Global Commercial and North American Public Sector segments as a result of realigning certain consulting and systems integration business lines.

Information on reportable segments is as follows:

	Global Commercial		North American Public Sector		Corporate			Total
Third Quarter Ended, December 28, 2007
Revenues	$	2,725.0	$	1,435.0				$	4,160.0
Earnings (loss) before special items, other income, interest and taxes		223.8		101.7	$	(14.4	)		311.1
Assets		11,214.2		3,643.9		503.4			15,361.5

Third Quarter Ended, December 29, 2006 - As Restated (1)
Revenues		2,319.8		1,320.8					3,640.6
Earnings (loss) before special items, other income, interest and taxes (2)		183.1		89.3		(22.7	)		249.7
Assets		8,725.8		3,657.5		780.7			13,164.0

	Global Commercial		North American Public Sector		Corporate			Total
Nine Months Ended, December 28, 2007
Revenues	$	7,709.4	$	4,305.7				$	12,015.1
Earnings (loss) before special items, other income, interest and taxes		541.5		263.2	$	(43.3	)		761.4

Nine Months Ended, December 29, 2006 - As Restated (1)
Revenues		6,823.2		3,987.6					10,810.8
Earnings (loss) before special items, other income, interest and taxes (2)		439.8		278.2		(52.4	)		665.6

(1)	See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

(2)	Prior period Earnings (loss) before special items, interest and taxes has been reclassified to exclude other income (expense) related to certain items in conformance with the current quarter presentation.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 11 – Segment Information (continued)

A reconciliation of earnings before special items, other income, interest and taxes to income before taxes is as follows:

	Third Quarter Ended
	Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)

Earnings before special items, other income, interest and taxes	$	311.1		$	249.7
Interest expense		(51.1	)		(56.3	)
Interest income		7.5			8.3
Special items		(17.5	)		(42.0	)
Other income		16.3			14.5
Income before taxes	$	266.3		$	174.2

	Nine Months Ended
	Dec. 28, 2007			Dec. 29, 2006
				As Restated (1)

Earnings before special items, other income, interest and taxes	$	761.4		$	665.6
Interest expense		(129.1	)		(160.2	)
Interest income		25.8			41.8
Special items		(92.4	)		(279.9	)
Other income		41.9			27.2
Income before taxes	$	607.6		$	294.5

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 12 – Goodwill and Other Intangible Assets

A summary of the changes in the carrying amount of goodwill by segment for the nine months ended December 28, 2007 is as follows:

	Global Commercial			North American Public Sector			Total
Balance as of March 30, 2007, As Restated (1)	$	1,854.3		$	645.8		$	2,500.1
Additions (Adjustments)		1,129.8			(.3	)		1,129.5
Foreign currency translation		67.8						67.8
Transfers		(33.7	)		33.7
Balance as of December 28, 2007	$	3,018.2		$	679.2		$	3,697.4

(1) See Note 1, "Basis of Presentation," in Notes to Consolidated Condensed Financial Statements.

The addition to goodwill for the period relates to the acquisition of Covansys Corporation. See footnote 15 for further details. 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 December 28, 2007 and March 30, 2007 is as follows:

	December 28, 2007
	Gross Carrying Value		Accumulated Amortization		Net
Software	$	1,478.0	$	951.0	$	527.0
Outsourcing contract costs		2,083.8		1,142.3		941.5
Other intangible assets		355.8		136.1		219.7
Total intangible assets	$	3,917.6	$	2,229.4	$	1,688.2

	March 30, 2007
	Gross Carrying Value		Accumulated Amortization		Net
Software	$	1,343.6	$	830.3	$	513.3
Outsourcing contract costs		2,197.4		1,167.9		1,029.5
Other intangible assets		189.1		108.0		81.1
Total intangible assets	$	3,730.1	$	2,106.2	$	1,623.9

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 12 – Goodwill and Other Intangible Assets (continued)

Amortization related to intangible assets was $110.7 and $106.0 for the three months and $338.0 and $323.9 for the nine months ended December 28, 2007 and December 29, 2006, respectively. Estimated amortization expense related to intangible assets as of March 30, 2007, adjusted for the acquisition of Covansys, for each of the subsequent five years, fiscal 2008 through fiscal 2012, is as follows: $459, $439, $329, $243, and $103, respectively.

Note 13 – Special Items

Special items totaling $17.5 and $92.4 were recorded during the quarter and nine months ended December 28, 2007, respectively. 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. During fiscal 2007, special items totaling $42.0 and $279.9 were recorded for the third quarter and nine months ended December 29, 2006, respectively. For the third quarter and nine months ended December 29, 2006, special items consisted of: (1) a $42.0 and $297.2 restructuring charge for the third quarter and nine months year to date, respectively, (see discussion below), (2) a year to date $1.0 true-up of an estimate related to the fiscal 2006 Nortel impairment charge and (3) an $18.3 gain from the redemption of DynCorp International preferred stock recorded during the first quarter of fiscal 2007.

As previously announced in a Form 8-K filed on May 25, 2007, 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 will receive, 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 ($13.6 net of tax or 8 cents per share).

Restructuring

In April 2006, the Company announced a restructuring plan to be carried out during fiscal 2007 and 2008. The objectives of the plan are to 1) streamline CSC’s worldwide operations and 2) leverage the increased use of lower cost global resources. Restructuring charges consist predominantly of severance and related employee payments resulting from terminations. During the third quarter of fiscal 2007 the Company evaluated facility consolidation opportunities and other areas where operations could be streamlined and costs reduced consistent with the plan objectives, resulting in additional lease termination, asset impairment and other charges.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 13 – Special Items (continued)

Workforce reductions, including some voluntary terminations, in the first nine months of fiscal 2008 and 2007 were approximately 730 and 4,000, respectively. Total headcount increased by 50 employees in the third quarter of fiscal 2008 as workforce reductions were offset by new hires, compared to a reduction of approximately 1,100 employees in the third quarter of fiscal 2007.

Termination-related charges of $12.7 and $53.0 were recorded in the third quarter and nine months ended of 2008, respectively, compared to termination-related charges of $24.1 and $274.8 in 2007, respectively. Other costs, which were primarily related to vacant space, of $4.8 and $17.0 were also recorded during the third quarter and nine months ended of 2008, respectively, compared to other costs of $17.7 and $22.3 in 2007, respectively. All of the restructuring charge in the third quarter of 2008 was incurred in the Global Commercial reporting segment. Additional restructuring charges of approximately $56.0 are expected to be incurred in the remainder of fiscal 2008, however, higher than anticipated voluntary termination may reduce the charge. Restructuring charges of $333.4 were recorded in fiscal year 2007.

A majority of the planned headcount reductions were scheduled to take place in Europe. For the third quarter of fiscal 2008, European headcount had a net increase of approximately 130 employees as workforce reductions were offset by new hires. Approximately 500 European reductions have taken place in the first nine months against a plan of approximately 1,000 for the full fiscal year 2008. Approximately 60 and 170 reductions were made in North America in the third quarter and nine months ended of fiscal 2008, respectively, against a plan of 300 for the full fiscal year 2008. The balance of the reductions is planned in Australia and Asia.

Restructuring-related pre-tax cash payments of approximately $33.6 were made in the third quarter of fiscal 2008 ($121.9 year to date). Restructuring-related pre-tax cash payments of approximately $44.3 were recorded in the third quarter of fiscal 2007 ($151.6 year to date). 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.

See the following table for a summary of fiscal 2008 third quarter and year to date activity (in millions):

Three months ended December 28, 2007:

	Liability as of Sept. 28, 2007		Total pre-tax charges recorded 3rd quarter fiscal 2008		Less Payments			Other(1)			Restructuring liability as of Dec. 28, 2007
Workforce reductions	$	63.8	$	12.7	$	(26.5	)	$	.6		$	50.6
Other		38.3		4.8		(7.1	)		(2.5	)		33.5
Total	$	102.1	$	17.5	$	(33.6	)	$	(1.9	)	$	84.1

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 13 – Special Items (continued)

Nine months ended December 28, 2007:

	Liability as of March 30, 2007		Total pre-tax charges recorded year-to-date fiscal 2008		Less Payments			Other(1)		Restructuring liability as of Dec. 28, 2007
Workforce reductions	$	93.5	$	53.0	$	(99.5	)	$	3.6	$	50.6
Other	$	38.8		17.0		(22.4	)		.1		33.5
Total	$	132.3	$	70.0	$	(121.9	)	$	3.7	$	84.1

(1)	Primarily foreign currency translation adjustments.

Note 14 – 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.

Note 15 – Acquisitions

On July 2, 2007, CSC acquired all the outstanding shares of Covansys Corporation (Covansys), a publicly held U.S. global consulting and technology services company headquartered in Farmington Hills, Michigan, for a cash purchase price of approximately $1.3 billion net of acquired cash. The acquisition extends CSC’s ability to offer strategic outsourcing and technology solutions in the healthcare, financial services, retail and distribution, manufacturing, telecommunications and high-tech industries. The acquisition of Covansys will increase the Company’s delivery capabilities in India and accelerate development of strategic offshore offerings.

The acquisition was accounted for under the purchase method and, accordingly, Covansys’ 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 preliminary estimates of fair values at the date of acquisition and are subject to future adjustments. The preliminary value estimates for intangible and fixed assets will be finalized no later than the end of the first quarter of fiscal 2009. Based on the preliminary estimates of fair value, approximately $168 was allocated to identifiable intangible assets and approximately $1.1 billion was allocated to goodwill. The amount of goodwill is primarily attributable to the increased delivery capabilities and penetration of certain industry segments anticipated to be provided by the acquisition as described above.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 15 – Acquisitions (continued)

The following unaudited pro forma information presents consolidated results of operations as if the Covansys acquisition occurred at the beginning of each period presented. Pro forma results include adjustments related to interest expense and depreciation and amortization resulting from the acquisition. Covansys’ proforma results for the first three months of the nine months ended December 28, 2007 include nonrecurring costs of $4.0 related to acquisition activities and 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 Covansys 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 forma
(In millions except per-share amounts)	Third Quarter Ended				Third Quarter Ended
	December 28, 2007		December 29, 2006		December 28, 2007		December 29, 2006
Revenue	$	4,160.0	$	3,640.6	$	4,160.0	$	3,757.5

Net Income	$	179.0	$	113.5	$	179.6	$	105.2

Basic Earnings Per Share	$	1.07	$	0.66	$	1.07	$	0.61

Fully Diluted Earnings Per Share	$	1.05	$	0.65	$	1.05	$	0.60

	As Reported				Pro forma
(In millions except per-share amounts)	Nine Months Ended				Nine Months Ended
	December 28, 2007		December 29, 2006		December 28, 2007		December 29, 2006
Revenue	$	12,015.1	$	10,810.7	$	12,134.7	$	11,156.4

Net Income	$	362.9	$	143.1	$	343.6	$	117.5

Basic Earnings Per Share	$	2.12	$	0.81	$	2.01	$	0.67

Fully Diluted Earnings Per Share	$	2.08	$	0.79	$	1.97	$	0.65

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 37 Covansys employees. As of December 28, 2007, 15 employees had been terminated. Consolidation and integration plans are still being finalized in the various geographies where Covansys operates; therefore, the estimated integration liabilities are subject to change as plans become finalized. The components of the estimated acquisition integration liabilities included in the purchase price allocation for Covansys are presented in the following table.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 15 – Acquisitions (continued)

	Acquisition Integration Liabilities		Paid as of December 28, 2007			Balance Remaining at December 28, 2007
Facility consolidations	$	4.4	$	(0.6	)	$	3.8
Severance payments		4.9		(1.7	)		3.2
Other		0.1					0.1
Total	$	9.4	$	(2.3	)	$	7.1

The Company is currently reviewing the preliminary fair value estimates of assets acquired and liabilities assumed, including valuations associated with identified intangible assets, exit and facility consolidation activities, litigation, assets and liabilities related to taxes and long-term contracts, and other matters unresolved at the time of acquisition. Litigation issues include two pre-acquisition contingencies for which the Company is awaiting additional information to determine fair value at the acquisition date. For one matter, CSC will evaluate employee job title mapping and classification after a review of labor and payroll detail records. The second matter will require further review of compliance of regulatory filings in India. Approximately $2 of liability has been preliminarily estimated for these two matters pending further review. The Company is also in the process of evaluating accounting treatment for conformance. Adjustments to the purchase price allocation are expected to be finalized no later than the first quarter of fiscal 2009. There can be no assurance that such adjustments will not be material.

On December 22, 2006, CSC acquired all the outstanding shares of Datatrac Information Services, Inc. (Datatrac), a privately held U.S. government services and solutions provider headquartered in Richardson, Texas for an initial purchase price of $123. The acquisition extends CSC's ability to offer comprehensive solutions in identity management and credentialing, a market segment of strategic importance to CSC's North American Public Sector operation. It also expands the Company's capabilities in offering customer contact solutions to clients across the broad U.S. federal market and strengthens CSC’s ability to compete for work within the U.S. Department of Homeland Security and other government agencies.

Datatrac’s results of operations have been included with the Company’s from the date of acquisition, December 22, 2006. The purchase price of the acquisition was allocated to the net assets acquired based on estimates of the fair values at the date of the acquisition. There were no material purchase accounting adjustments to Datatrac’s assets and liabilities during the nine months ended December 28, 2007. The pro forma impact on net income and earnings per share have not been disclosed for the current or comparable prior periods, as the amounts were immaterial to the financial statements as a whole.

The Datatrac stock purchase agreement contains an earn-out provision with additional consideration based on the Company’s success in winning the recompete for its Service Center Operation Team contract with the U.S. federal government. However, the Company was not awarded this contract and as a result no consideration will be payable under the earn-out provision.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 15 – Acquisitions (continued)

As a result of the Datatrac acquisition on December 21, 2006, the Company incurred costs to consolidate facilities and other costs to integrate Datatrac into the Company. The facility consolidations related to the abandonment and sublease of Datatrac facilities. The components of the final acquisition integration liabilities included in the purchase price allocation for Datatrac are presented in the following table.

	Acquisition Integration Liabilities		Paid as of December 28, 2007		Balance Remaining at December 28, 2007
Facility consolidations	$	6.0	$	.1	$	5.9
Other		.1				.1
Total	$	6.1	$	.1	$	6.0

As a result of the DynCorp acquisition on March 7, 2003, the Company incurred costs to exit and consolidate activities, involuntarily terminate employees, and other costs to integrate DynCorp into the Company. The facility consolidations related to the abandonment and sublease of DynCorp facilities. The components of the final acquisition integration liabilities included in the purchase price allocation for DynCorp are presented in the following table.

	Acquisition Integration Liabilities		Paid as of December 28, 2007		Balance Remaining at December 28, 2007
Severance payments	$	7.1	$	7.1
Facility consolidations		66.7		59.9	$	6.8
Other		6.1		3.5		2.6
Total	$	79.9	$	70.5	$	9.4

Note 16 – Share Repurchase Program

On June 29, 2006, the Company’s Board of Directors authorized a share repurchase program of up to $2,000. In connection with the share repurchase program the Company entered into an accelerated share repurchase agreement and a collared accelerated share repurchase agreement on June 29, 2006 for a combined $1,000. The Company received a $28.7 payment on July 6, 2007 as final settlement of the accelerated share repurchase agreement and approximately 2.7 million shares during July, 2007 as final settlement of the collared accelerated share repurchase agreement.

The Company also entered into a purchase agreement with Goldman, Sachs & Co to acquire up to an additional $1,000 in market value of outstanding common stock through open market repurchase transactions under a Rule 10b5-1 plan. This share repurchase program is expected to be completed during fiscal 2009, but may be completed sooner depending upon market conditions. During the third quarter and nine months year to date ended December 28, 2007, the Company acquired and retired approximately 5.9 million and 9.0 million outstanding shares for $320.1 and $488.9, respectively, under this plan.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 17 – Commitments and Contingencies

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 $683.8 of such working capital lines; as of December 28, 2007, the amount of the maximum potential payment is $38.9, the amount of the related outstanding subsidiary debt. The $38.9 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.

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. During 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 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.

Litigation is inherently uncertain and it is not possible to predict the ultimate outcome of the matters discussed above. Considering the early stage of the Hensley case, the complicated issues presented by that matter, and the fact that no class has been certified, it is not possible at this time to make meaningful estimates of the amount or range of loss that could result from this matter. 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.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 17 – Commitments and Contingencies (continued)

As reflected by Form 8-K filings made by Sears Holdings Corporation (SHC) on May 13, 2005 (following merger with K-Mart Holding Corporation), and by the Company on May 16, 2005, SHC’s subsidiary, Sears, Roebuck and Co. (Sears), and the Company were in dispute over amounts due and owing following Sears’ termination of its Master Services Agreement (Agreement) with the Company on May 11, 2005. The dispute has been settled as reflected in an 8-K filed October 25, 2007. The settlement provides for Sears paying to the Company $75, which was received by the Company on January 8, 2008, as scheduled, and provides for the recovery of the Company’s net asset position, with no material impact to income.

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.

The Company has converted the 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. Included in current assets on the Company's balance sheet are approximately $438 ($414 of which is subject to the claims) of unbilled receivables and $407 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.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 17 – Commitments and Contingencies (continued)

With respect to the larger set of claims, 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 to the amount of damages claimed and does not affect the amounts recorded in the Company’s balance sheet.

With respect to the second set of claims, the Government issued its denial on November 15, 2007. The Company is analyzing the decision and has until February 12, 2008, to initiate litigation in the ASBCA or until November 15, 2008, to initiate litigation in the U.S. Court of Federal Claims. The Company intends to pursue collection of its claims through either the ASBCA or the U.S. Court of Federal Claims.

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. 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. At this time it is not possible to make reliable estimates of the amount or range of loss that could result from these actions.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 17 – Commitments and Contingencies (continued)

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:

	Three Months Ended
	December 28, 2007						December 29, 2006
Pensions	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	29.9		$	21.9		$	32.1		$	23.3
Interest cost		32.5			30.9			29.1			25.8
Expected return on assets		(38.2	)		(36.7	)		(33.4	)		(31.1	)
Amortization of transition obligation					.3						.3
Amortization of prior service costs		(.2	)		.1			.8			.1
Amortization of unrecognized net loss		3.7			5.5			4.1			3.4
SFAS No. 88 settlement/curtailment		.1			.2
Special termination benefit recognized											(.2	)
Net periodic pension cost	$	27.8		$	22.2		$	32.7		$	21.6

	Nine Months Ended
	December 28, 2007						December 29, 2006
Pensions	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	89.7		$	62.2		$	96.3		$	69.8
Interest cost		97.5			90.9			87.3			75.7
Expected return on assets		(114.6	)		(108.2	)		(100.2	)		(89.0	)
Amortization of transition obligation					.9						.9
Amortization of prior service costs		.2			.3			2.4			.4
Amortization of unrecognized net loss		11.1			16.2			12.3			12.0
SFAS No. 88 settlement/curtailment		.1			.6						.7
Special termination benefit recognized											6.5
Net periodic pension cost	$	84.0		$	62.9		$	98.1		$	77.0

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 Ended
	December 28, 2007					December 29, 2006
Other Postretirement Benefits	U.S. Plans			Non-U.S. Plans		U.S. Plans			Non-U.S. Plans
Service cost	$	.6		$	.1	$	.6		$	.1
Interest cost		2.5			.2		2.2			.1
Expected return on assets		(1.7	)				(1.6	)
Amortization of transition obligation		.4					.4
Amortization of prior service costs		.2					.2
Amortization of unrecognized net loss		1.0					.9
Net provision for postretirement benefits	$	3.0		$	.3	$	2.7		$	.2

	Nine Months Ended
	December 28, 2007					December 29, 2006
Other Postretirement Benefits	U.S. Plans			Non-U.S. Plans		U.S. Plans			Non-U.S. Plans
Service cost	$	1.9		$	.3	$	1.8		$	.3
Interest cost		7.4			.4		6.6			.3
Expected return on assets		(5.1	)				(4.8	)
Amortization of transition obligation		1.2					1.2
Amortization of prior service costs		.5					.6
Amortization of unrecognized net loss		3.1					2.7
Net provision for postretirement benefits	$	9.0		$	.7	$	8.1		$	.6

Due largely to the decline of the U.S. dollar, the Company expects to contribute $250 to its defined benefit pension and postretirement benefit plans during fiscal 2008 instead of $240 as reported in the Form 10-K/A for the year ended March 30, 2007. During the first nine months of fiscal 2008, the Company contributed $193 to its defined benefit pension plans.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

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 Statement is effective for CSC’s fiscal 2009. At this time the Company does not believe the adoption of SFAS No. 157 will 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 Company does not believe the adoption of SFAS No. 159 will 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.

COMPUTER SCIENCES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)

(Dollars in millions except per-share amounts)

Note 19 – Recent Accounting Pronouncements (continued)

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

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.

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 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.

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.

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 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.

Note 20 – Subsequent Events

On January 14, 2008, CSC acquired all outstanding shares of First Consulting Group (FCG) in an all-cash transaction for $13.00 per share, or approximately $365. FCG is an industry-leading professional services firm focused on healthcare and technology. FCG clients include healthcare providers, health plans, government healthcare, pharmaceutical, life sciences organizations, independent software vendors and others clients both within healthcare and in other industries. The acquisition of FCG will increase the Company’s healthcare capabilities, offerings, and healthcare presence in the United States, Europe and Asia.

From December 28, 2007 through January 25, 2008, the Company purchased from Goldman, Sachs & Co. under rule 10b5-1, 4.9 million shares of outstanding common stock for the combined market value of $204.1.

On January 28, 2008, the Company’s Board of Directors approved a decision to relocate its Corporate headquarters to Falls Church, Virginia, from El Segundo, California. The Company has not yet determined the impact to income of this relocation.

As described in a Form 8-K filing dated January 31, 2008, the Company’s Vice President and Chief Financial Officer, Michael E. Keane, resigned January 30, 2008 as Chief Financial Officer of the Company. The Company has not yet determined if there will be a charge to income as a result of this resignation. The Company’s Vice President and Controller, Donald G. DeBuck, was appointed interim Chief Financial Officer by the Company’s board of directors.

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

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter and First Nine Months of Fiscal 2008 versus

Third Quarter and First Nine Months of Fiscal 2007

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/A. The reader should specifically consider the various risks discussed in the Risk Factors section of our Annual Report on Form 10-K/A.

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/A for the year ended March 30, 2007. The following discusses the Company's results of operations and financial condition as of and for the nine months ended December 28, 2007, and the comparable period for the prior fiscal year as restated. 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 multiplying profit margin times investment base turnover. The profit margin used is profit before interest and after tax divided by revenues. Investment base turnover equals revenues divided by average debt and equity. For a discussion of these measures, please refer to the Company's Annual Report on Form 10-K/A for the year ended March 30, 2007.

Third Quarter Overview

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

·	Third quarter revenues as reported rose 14.3%, and 9.8% on a constant currency basis.

·	Nine months year-to-date revenue as reported increased 11.1%, and 7.7% on a constant currency basis.

The Company recorded a special pretax restructuring charge of $17.5 million ($9.9 million after tax or 6 cents per share) during the third quarter of fiscal 2008 and a $42.0 million ($35.6 million after tax or 20 cents per share) special pretax restructuring charge during the third quarter of fiscal 2007.

For the nine months year to date of fiscal 2008, the Company recorded a special pretax restructuring charge of $70.0 million ($49.1 million after tax or 28 cents per share) and a $22.4 million ($13.6 million after tax or 8 cents per share) special pretax charge related to the retirement of its Chairman and Chief Executive Officer July 30, 2007. For the nine months year to date of fiscal 2007, the Company recorded a special pretax restructuring charge of $297.2 million ($247.4 million after tax or $1.37 per share) and a gain of $18.3 million ($11.2 million after tax or 6 cents per share).

·	Net income was $179.0 million compared to $113.5 million for the prior year third quarter and $362.9 million compared to $143.1 million for the prior year nine months year to date.

·	Earnings per share were $1.05 cents and $2.08 compared to 65 cents and 79 cents for the third quarter and nine months year to date for fiscal 2008 and 2007, respectively.

·	Business awards of $2.3 billion and $10.8 billion were announced for the quarter and year-to-date, respectively.

·	DSO of 100 days was up 1 day compared to the third quarter of fiscal 2007 and decreased 2 days compared to the second quarter of fiscal 2008.

During the third quarter and nine months year to date of fiscal 2008 the Company acquired and retired approximately 5.9 million and 9.0 million shares for approximately $320 million and $489 million, respectively, through plan 10b5-1 share repurchases. During the nine months year to date of fiscal 2008 the Company also received and retired approximately 2.7 million shares as final settlement of the collared accelerated share repurchase agreement entered into during July 2006.

·	Debt-to-total capitalization ratio at quarter-end increased to 35.7% from 21.4% at fiscal 2007 year-end.

·	ROI for the last twelve months ended December 28, 2007 was approximately 10.4%.

Cash provided by operating activities was $498.5 million for the nine months year to date of fiscal 2008 versus cash provided of $537.2 million for the fiscal 2007 comparable period. Cash used in investing activities was $2.2 billion for the first nine months of fiscal 2008 compared to $638.3 million for fiscal 2007 comparable period. Free cash outflow for the nine months year to date was ($374.2) million for fiscal 2008 compared to $(121.1) million for the fiscal 2007 comparable period.(1)

(1)	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)	Dec. 28, 2007			Dec. 29, 2006
Free cash flow	$	(374.2	)	$	(121.1	)
Net cash used in investing activities		2,159.1			638.3
Proceeds from redemption of preferred stock					126.5
Acquisitions		(1,315.6	)		(131.3	)
Capital lease payments		29.2			24.8
Net cash provided by (used in) operating activities	$	498.5		$	537.2

The Company’s announced new business awards of $2.3 billion for the third fiscal quarter include the following:

Defense Information Systems Agency ($613 million)

TrygVesta ($192 million)

National Aeronautics and Space Administration ($113 million)

Other U.S. Federal contracts not separately identified ($765 million)

These multi-year awards represent the estimated value at contract signing. However, they cannot be considered firm orders due to their variable attributes, including demand-driven usage, modifications in scope of work due to changing customer requirements, and annual funding constraints and indefinite delivery and volume characteristics of major portions of the Company’s U.S. Federal activities.

Revenue increased 14.3% during the third quarter of fiscal 2008 on a year over year basis as a result of growth in Europe, which benefited from the impact of new contracts, growth in consulting and systems implementation work and favorable currency movements. The Company’s North American Public Sector also contributed to the revenue growth with new contracts and the acquisition of Datatrac contributing to revenue growth. The Company’s revenue was also favorably impacted by the completion of the acquisition of Covansys Corporation during the second quarter of fiscal 2008. This growth in revenue was partially offset by the impact of the conclusion or unsuccessful recompete efforts for certain contracts as well as the impact of negotiated price reductions, reductions in service offerings and reductions in discretionary project work for certain contracts in the Company’s U.S. commercial operations. For the nine months year to date, the revenue trend was similar to the trend for the third quarter.

ROI from continuing operations, before special items, for the twelve months ended December 28, 2007 was approximately 10.4%, an increase of 1.4 percentage points over the prior year as a result of a 0.7% point improvement in the margin and reduced equity as a result of the share buyback, the adoption of FASB No. 158 “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statement No. 87, 88, 106 and 132(R)” and the adoption of FIN 48. This is a measure management continues to place a high priority on as a driver of increased shareholder value and as an effective decision tool.

Lower cash flow generated from operating activities during the nine months year-to-date of fiscal 2008 versus nine months year-to-date of fiscal 2007 was the result of an increase in receivables, as demonstrated by the year over year increase in DSO, partially offset by the increase in revenues. The increase in the outflow of cash for investing activities and the inflow of cash provided by financing activities was primarily a result of the acquisition of Covansys Corporation and the financing of that transaction.

Results of Operations

Revenues

	Third Quarter
(Dollars in millions)	2008		2007		Change		Percent
			As Restated
U.S. Commercial	$	1,031.3	$	924.8	$	106.5		11.5	%
Europe		1,239.3		1,026.9		212.4		20.7
Other International		454.4		368.1		86.3		23.4
Global Commercial		2,725.0		2,319.8		405.2		17.5
North American Public Sector		1,435.0		1,320.8		114.2		8.6
Total	$	4,160.0	$	3,640.6	$	519.4		14.3	%

	Nine Months Year-to-Date
(Dollars in millions)	2008		2007		Change		Percent
			As Restated
U.S. Commercial	$	2,977.1	$	2,813.0	$	164.1		5.8	%
Europe		3,441.0		2,911.6		529.4		18.2
Other International		1,291.3		1,098.6		192.7		17.5
Global Commercial		7,709.4		6,823.2		886.2		13.0
North American Public Sector		4,305.7		3,987.6		318.1		8.0
Total	$	12,015.1	$	10,810.8	$	1,204.3		11.1	%

The factors affecting the percent change in revenues for the third quarter and nine months year-to-date of fiscal 2008 are as follows:

	Constant Currency Growth			Approximate Impact of Currency Fluctuations		Total
Third Quarter
U.S. Commercial		11.5	%				11.5	%
Europe		9.9			10.8		20.7
Other International		9.6			13.8		23.4
Global Commercial		10.5			7.0		17.5
North American Public Sector		8.6					8.6
Total		9.8			4.5		14.3	%

	Constant Currency Growth			Approximate Impact of Currency Fluctuations		Total
Nine Months Year-to-Date
U.S. Commercial		5.8	%				5.8	%
Europe		9.2			9.0		18.2
Other International		7.1			10.4		17.5
Global Commercial		7.5			5.5		13.0
North American Public Sector		8.0					8.0
Total		7.7			3.4		11.1	%

Revenue, as reported, for the third quarter of fiscal 2008 increased compared to the prior year period. Growth from both Global Commercial operations and the North American Public Sector contributed to revenue growth for the third quarter and nine months year to date for fiscal 2008. Global Commercial’s revenue growth was from operations in Europe and Other International and also benefited from the acquisition of Covansys Corporation during the second quarter of fiscal 2008. Foreign currency movements favorably impacted Global Commercial revenue for the third quarter and nine months year to date. North American Public Sector experienced growth from Department of Defense contracts and a new contract in Other (see page 41) and benefited from the acquisition of Datatrac at the end of the third quarter of the prior fiscal year.

Global Commercial

The increase in the Company's commercial revenues for the third quarter compared to the prior year period was the result of the acquisition of Covansys Corporation on July 2, 2007, new business and growth on existing contracts in Europe as well as improved performance for consulting and systems integration services in Europe and growth in Australia and Asia. This growth was partially offset by lower levels of outsourcing activity, primarily in the United States. As in the third quarter of fiscal 2007, U.S. outsourcing activity was adversely impacted during the third quarter of fiscal 2008 by contracts completed during the past twelve months. Demand for consulting and systems integration services in Europe continued to experience growth during the third quarter of fiscal 2008 while the consulting and systems integration business in the United States continued to experience softness in demand in selected service lines. Revenue growth from international operations also benefited from foreign currency fluctuations. The Company’s announced awards during the third quarter of fiscal 2008 for the Global Commercial business, while somewhat improved compared to the second quarter of fiscal 2008 and only slightly below the prior year period, were below the historical trend for the third quarter.

Revenue growth for U.S. commercial operations was the result of revenue from the acquisition of Covansys Corporation, which provided approximately $128 million of revenue in the third quarter of fiscal 2008, primarily from U.S. operations, and growth in financial services software and business process outsourcing related services. Revenue from U.S. outsourcing operations continued to be adversely impacted by the terminations and unsuccessful recompete efforts on outsourcing engagements. These included unsuccessful recompete efforts on a hospital and local government contract and the conclusion of a hospital contract. Combined these adversely impacted revenue by $18 million during the third quarter of fiscal 2008 and $53 million for the nine months year to date. Revenue from U.S. outsourcing operations was also adversely impacted by negotiated price reductions and reductions in service offerings on certain contracts as well as reductions in discretionary project work which combined, adversely impacted revenue on a year-over-year basis by $20 million during the third quarter of fiscal 2008 and $71 million for the nine months year to date. Partially offsetting the revenue declines noted above were new outsourcing engagements with an auto parts manufacturer, a natural resources company, a pharmaceutical company and a private university which provided approximately $25 million during the third quarter of fiscal 2008 and $46 million for the nine months year to date. U.S. based consulting and systems integration operations continued to experience softness in demand for certain service lines.

In European operations, new awards for public sector services, for an investment banking firm, an auto parts manufacturer, a media company, a natural resources company and a transportation company contributed $45 million in revenue growth during the third quarter compared to the prior year. For the nine months year to date, new awards contributed approximately $171 million in revenue growth compared to the prior year. Increases in volume on certain existing engagements offset volume reductions on other existing engagements contributing net revenue growth of $45 million during the third quarter of fiscal 2008 and exceeded volume reductions for the nine months year to date by $47 million. Consulting and systems integration operations contributed approximately $12 million and $37 million to revenue growth in Europe for the third quarter and nine months year to date for fiscal 2008, respectively, as utilization improved and billable hours increased. Sales of software licenses declined for the third quarter but contributed to revenue growth for the nine months year to date of fiscal 2008. As noted in the accompanying table, foreign currency fluctuations contributed to the revenue growth for the third quarter and nine months year to date.

Other International operations revenue growth was led by Australia operations with revenue growth of $48 million during the third quarter and $124 million for the nine months year to date. Growth from a recruitment business and increased volume on certain existing outsourcing contracts exceeded volume reductions and combined contributed $16 million and $60 million in revenue growth for Australia for the third quarter and nine months year to date for fiscal 2008. Asia operations contributed $17 million and $50 million for the third quarter and nine months year to date, respectively, on growth from new and existing contracts. As noted in the accompanying table, foreign currency fluctuations contributed to the revenue growth for the third quarter and nine months year to date.

North American Public Sector

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

	Third Quarter
(Dollars in millions)	2008		2007		Change			Percent

Department of Defense	$	970.1	$	881.3	$	88.8			10.1	%
Civil agencies		419.6		393.8		25.8			6.6
Other (1)		45.3		45.7		(.4	)		(.9	)
Total North American Public Sector	$	1,435.0	$	1,320.8	$	114.2			8.6	%

	Nine Months Year-to-Date
(Dollars in millions)	2008		2007		Change		Percent

Department of Defense	$	2,882.1	$	2,643.9	$	238.2		9.0	%
Civil agencies		1,292.3		1,225.3		67.0		5.5
Other (1)		131.3		118.4		12.9		10.9
Total North American Public Sector	$	4,305.7	$	3,987.6	$	318.1		8.0	%

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

North American Public Sector revenue increases of 8.6% and 8.0% for the third quarter and nine months year to date, respectively, resulted from new contracts and growth on existing Department of Defense (DoD) and the acquisition of Datatrac, which is included in Civil agencies. Partially offsetting the growth was the end of certain government programs and reduced volumes or reduced funding on certain other government programs.

Department of Defense growth contributors for the third quarter and nine months year to date included new contracts with the U.S. Army for equipment procurement and installation services and a new contract with the U.S. Air Force to provide support services for the transformation of its global supply chain which combined for $45 million and $148 million of revenue growth for the third quarter and nine months year to date, respectively. Existing programs contributing to growth in DoD revenues included increased scope and new tasking on logistics support for the U.S. Army and other DoD customers, additional tasking for engineering services in support of the U.S. Army and Navy and programs to provide training for the Army and operations and management support to the Air Force. These programs contributed $73 million and $199 million for the third quarter and nine months year to date. These gains were partially offset by the end of certain programs as well as funding cuts to a program providing aircraft maintenance and base operations services. These programs provided approximately $42 million and $89 million of revenue in the prior year quarter and nine months year to date, respectively.

Civil agencies revenue increased for the third quarter and nine months year to date as a result of the acquisition of Datatrac which provided $29 million and $99 million of revenue for the third quarter and nine months year to date, respectively. Revenue from existing programs to provide telecommunications services, systems integration services and various tasking declined $9 million for the third quarter and $36 million for the nine months year to date, which included a decline on a Medicare contract during the first quarter of fiscal 2008. These declines were the result of the timing of revenue recognition milestones, reductions in task orders and declines in equipment purchases.

Revenue from other North American Public Sector activities during the third quarter of fiscal 2008 benefited from a new contract to provide data center services to an international aid organization and additional tasking on a state contract partially offset by the timing of revenue recognition milestones on a contract to provide services to a foreign government.

During the third quarter of fiscal 2008, the Company announced federal contract awards with a total value of $1.6 billion, compared to $0.7 billion announced during the comparable period for fiscal 2007.

Costs and Expenses

The Company's costs and expenses were as follows:

	Third Quarter
(Dollars in millions)	Dollar Amount						Percent of Revenue						Percentage Point Change
	2008			2007			2008			2007			Percentage Point Change
				As Restated (1)						As Restated (1)

Cost of services(2)	$	3,301.6		$	2,901.0			79.4	%		79.7	%		(.3	)%
Selling, general & administrative		240.2			227.9			5.8			6.2			(.4	)
Depreciation and amortization		307.1			262.0			7.4			7.2			.2
Special items		17.5			42.0			0.4			1.2			(.8	)
Interest expense, net		43.6			48.0			1.0			1.3			(.3	)
Other (income)/expense		(16.3	)		(14.5	)		(.4	)		(.4	)
Total	$	3,893.7		$	3,466.4			93.6	%		95.2	%		(1.6	)%

	Nine Months Year-to-Date
(Dollars in millions)	Dollar Amount						Percent of Revenue						Percentage Point Change
	2008			2007			2008			2007			Percentage Point Change
				As Restated (1)						As Restated (1)

Cost of services(2)	$	9,653.5		$	8,674.0			80.3	%		80.2	%		.1	%
Selling, general & administrative		721.9			682.0			6.0			6.3			(.3	)
Depreciation and amortization		878.3			789.2			7.3			7.3
Special items		92.4			279.9			.8			2.6			(1.8	)
Interest expense, net		103.3			118.4			.9			1.1			(.2	)
Other (income)/expense		(41.9	)		(27.2	)		(.4	)		(.2	)		(.2	)
Total	$	11,407.5		$	10,516.3			94.9	%		97.3	%		(2.4	)%

(1)	See Note 1, "Restatement of Consolidated Condensed Financial Statements," in Notes to Consolidated Condensed Financial Statements.

(2)	Excludes depreciation and amortization.

Comparing the third quarter of fiscal 2008 and 2007, costs and expenses, as a percentage of revenue, for the third quarter decreased or were unchanged for all categories with the exception of depreciation and amortization. For the nine months year to date costs and expenses decreased or were unchanged with the exception of cost of services which was impacted by a program charge as discussed in Note 14 in the notes to the consolidated condensed financial statements during the second quarter. For the third quarter and nine months year to date the majority of the decrease in the cost base was from decreases in special items.

The Company substantially matches revenues and costs in the same currencies. The gains from foreign currency movements during the third quarter and nine months year to date reported in other income resulted from intracompany balances denominated in non-functional currencies.

On March 31, 2007, the Company adopted Financial Accounting Standards Board Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes” which resulted in the classification of interest and penalties related to income tax items on the income tax line. Previously these items were included in interest expense and selling, general and administrative expense, respectively. Prior periods have not been adjusted.

Cost of Services

Cost of services (COS) as a percentage of revenue for the third quarter of fiscal 2008 decreased .3% points to 79.4% from the year earlier period. The decrease in the ratio was primarily the result of the impact of restructuring activities and cost management initiatives in Europe, the impact of which was magnified by one time adverse charges recorded by Europe in the prior year period related to certain outsourcing engagements. Combined these factors reduced the cost ratio 0.6% points during the third quarter of fiscal 2008. These factors were partially offset by an increase in the cost ratio in Other International where margin declines and growth in lower margin business in Australia and Asia increased the ratio. U.S. Commercial’s ratio increased as well, primarily as a result of costs incurred on new outsourcing engagements.

Cost of services, as a percentage of revenue, increased by .1% point to 80.3% for the nine months ended December 28, 2007 versus the comparable period for fiscal 2007. The increase in the ratio was primarily the result of the charge related to the amendment of the IRS contract as discussed in Note 14 to the condensed consolidated financial statements. This charge was partially offset by restructuring benefits in U.S. Commercial, Europe and Asia operations as well as the termination in the prior year of outsourcing contracts with lower margins.

Selling, General and Administrative

Selling, general and administrative (SG&A) expense decreased as a percentage of revenue by .4% points and .3% points to 5.8% and 6.0% for the third quarter and nine months year to date of fiscal 2008, respectively. The improvement in the ratio was a result of the impact of restructuring activities in the Global Commercial segment, primarily Europe, where the ratio improved by one percentage point and lower bid and proposal costs in Australia which had a number of contracts up for recompete in the prior year period, and the acquisition of Covansys Corporation during the second quarter, which has a selling, general and administrative expense ratio that is lower than the Company’s previously existing businesses. These improvements were partially offset by increases in the ratio for U.S. Commercial operations as a result of expenses incurred related to claims related to terminated contracts. The North American Public Sector ratio was essentially unchanged from the prior year period.

For the nine months year to date, the trends and factors contributing to the increase were the same as discussed above with the exception of the acquisition of Covansys Corporation.

Depreciation and Amortization

The depreciation and amortization (D&A) ratio increased 0.2% points to 7.4% for the third quarter and was unchanged for the nine months year to date of fiscal 2008, respectively, compared to the prior year periods. This increase in the ratio was primarily the result of investment in equipment for new outsourcing engagements in Europe.

Interest Expense, Net

Net interest expense decreased $4.4 million for the third quarter of fiscal 2008 and decreased $15.1 million for the nine months year to date as compared to the prior year comparable periods. As a result, the ratio decreased as a percentage of revenue for the third quarter by .3% points to 1.0% and .2% points to 0.9% for the nine months year to date. The decrease in net interest expense during the third quarter was due primarily to the classification of approximately $10.5 million of interest expense related to income tax items in income tax expense during the third quarter of fiscal 2008 as a result of the adoption of FIN 48. The prior year periods have not been adjusted to reflect this change in classification and included tax related interest of $20.6 million and $57.1 million for the third quarter and nine months year to date. For the nine months year to date of fiscal 2008, approximately $34.1 million of tax related interest was included in income tax expense. Partially offsetting this classification change was interest on $1.4 billion of commercial paper issued to finance the acquisition of Covansys Corporation. The issuance of the commercial paper resulted in additional interest expense of approximately $13.0 million for the third quarter and $26.7 million for the nine months year to date. Interest income decreased slightly for the third quarter and decreased approximately $16 million for the nine months year to date as a result of a decline in cash balances and income from securities redeemed in the prior year first quarter.

Special Items

Special items totaling $17.5 million and $92.4 million were recorded during the third quarter and nine months ended December 28, 2007, respectively. For the third quarter and nine months ended December 28, 2007 special items consisted of: (1) a $17.5 million and $70.0 million restructuring charge, respectively, (see discussion below), and (2) a $22.4 million charge related to the retirement of the Company’s chairman and chief executive officer recorded during the first quarter of fiscal 2008. During fiscal 2007, special items totaling $42.0 million and $279.9 million were recorded for the third quarter and nine months ended December 29, 2006, respectively. For the third quarter and nine months ended December 29, 2006, special items consisted of: (1) a $42.0 million and $297.2 million restructuring charge for the third quarter and nine months year to date, respectively, (see discussion below), (2) a year to date $1.0 million true-up of an estimate related to the fiscal 2006 Nortel impairment charge and (3) an $18.3 million gain from the redemption of DynCorp International preferred stock recorded during the first quarter of fiscal 2007.

As previously announced in a Form 8-K filed on May 25, 2007, 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 million 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 million, of which $10.4 million was recorded in Special Items and $1.8 million 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 million ($13.6 million net of tax or 8 cents per share).

Restructuring

Termination-related charges of $12.7 million and $53.0 million were recorded in the third quarter and nine months ended of fiscal 2008, respectively, compared to termination-related charges of $24.1 and $274.8 million in fiscal 2007, respectively. Other costs, which were primarily related to vacant space, of $4.8 and $17.0 million were also recorded during the third quarter and nine months ended of fiscal 2008, respectively, compared to other costs of $17.7 and $22.3 million in fiscal 2007, respectively. All of the restructuring charge in the third quarter of fiscal 2008 was incurred in the Global Commercial reporting segment. Additional restructuring charges of approximately $56.0 million are expected to be incurred in the remainder of fiscal 2008, however, higher than anticipated voluntary terminations may reduce the charge. Restructuring charges of $333.4 million were recorded in fiscal year 2007.

The restructuring plan generated savings of approximately $104 and $278 million in the third quarter and nine months ended of 2008, respectively, against a plan of $380 million for the full fiscal year 2008, and compares to $61 and $108 million in the third quarter and nine months ended of fiscal 2007, respectively. Approximately 92% of the savings come from reduced cost of services, while the remainder will be predominantly from lower selling, general and administrative costs. Savings are net of new or increased recurring costs, primarily the costs anticipated for an increasing offshore workforce. Savings will also be impacted by certain transitional costs as new offshore staff are trained while outgoing staff are still on the payroll. Such transitional costs were $.3 and $3.9 million for the nine months of fiscal 2008 and 2007, respectively.

Restructuring-related pre-tax cash payments of approximately $33.6 were made in the third quarter of fiscal 2008 ($121.9 million year to date). Restructuring-related pre-tax cash payments of approximately $44.3 million were recorded in the third quarter of fiscal 2007 ($151.6 million year to date). 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.

See the following table for a summary of fiscal 2008 third quarter and year to date activity (in millions):

Three months ended December 28, 2007:

	Liability as of Sept. 28, 2007		Total pre-tax charges recorded 3rd quarter fiscal 2008		Less Payments			Other(1)			Restructuring liability as of Dec. 28, 2007
Workforce reductions	$	63.8	$	12.7	$	(26.5	)	$	.6		$	50.6
Other		38.3		4.8		(7.1	)		(2.5	)		33.5
Total	$	102.1	$	17.5	$	(33.6	)	$	(1.9	)	$	84.1

Nine months ended December 28, 2007:

	Liability as of March 30, 2007		Total pre-tax charges recorded year-to-date fiscal 2008		Less Payments			Other(1)		Restructuring liability as of Dec. 28, 2007
Workforce reductions	$	93.5	$	53.0	$	(99.5	)	$	3.6	$	50.6
Other	$	38.8		17.0		(22.4	)		.1		33.5
Total	$	132.3	$	70.0	$	(121.9	)	$	3.7	$	84.1

(1)	Primarily foreign currency translation adjustments.

Other Income

Other income increased $1.8 million and $14.7 million for the third quarter and nine months year to date, respectively, compared to the prior year comparable periods. Other income includes foreign exchange gains and losses including gains and losses on currency forward contracts utilized to manage foreign exchange income statement volatility and other miscellaneous gains and losses from the sale of non-operating assets and the sale of immaterial businesses or operations. For the third quarter and nine months year to date of fiscal 2008, other income consists of net foreign currency gains, primarily on intracompany balances and foreign currency forward contracts, and the gain on disposal of investment securities.

Taxes

The Company’s tax rates as reported for third quarter and nine month year to date were 32.8% and 40.3% for fiscal 2008 and 34.8% and 51.4% for fiscal 2007. The decrease in the effective rate as reported for the third quarter and nine months year to date of fiscal 2008 is primarily due to the restructuring charges without tax benefit in fiscal 2007 and the tax benefit recorded for the tax remeasurement of tax matters relating to fiscal years 1995 to 1999. This decrease was partially offset by the classification of tax related interest and penalties in income tax expense as a result of the adoption of FIN 48 on March 31, 2007.

The remeasurement of tax and interest for tax matters relating to fiscal years 1995 to 1999 resulted in a decrease to tax expense of $23.0 million ($18.6 million net of tax) in the third quarter and nine months year to date of fiscal 2008. Tax expense was increased by including $21.3 million ($13.3 million net of tax) and $69.4 million ($43.3 million net of tax) of tax related interest and penalties in income tax expense for the third quarter and nine months year to date, respectively. The tax related interest and penalties are net of reductions to income tax expense as a result of the reversal during the first quarter of interest and penalties of $30.7 million ($21.1 million, net of tax) resulting from the filing of applications for changes in accounting method as discussed in Note 3 to the Consolidated condensed financial statements.

The net impact of including tax related interest and penalties in income tax expense and the remeasurement of fiscal 1995 to 1999 tax matters was a decrease of 2.0 and an increase of 0.6 percentage points to the tax rate for the third quarter and nine months year to date for fiscal 2008. Tax interest for the first nine months of fiscal 2008 of $67.9 million ($41.8 million net of tax), before tax benefit and interest reversals related to changes in accounting methods filed with the Internal Revenue Service and the remeasurement of various IRS matters for fiscal years 1995 to 1999, will continue to accrue at approximately the same rate, plus the effect of compounding, until payments are made or the underlying uncertain tax positions are resolved. The Company is unable to predict when these events may occur.

Earnings per Share

Earnings per share increased $0.40 and $1.29 for the third quarter and nine months year to date, respectively, for fiscal 2008 compared to the prior year period. Earnings per share for the third quarter and nine months ended December 28, 2007 included $0.06 per share and $0.36 per share charge for special items, respectively, versus $0.20 per share and $1.31 per share charge, respectively, for the comparable periods in the prior year. The share base decreased 6.0 million and 6.6 million shares for the third quarter and nine months year date of fiscal 2008 compared to the prior year comparable periods. These decreases were the result of an accelerated share repurchase transaction and a collared accelerated share repurchase transaction entered into during fiscal 2007 which resulted in the acquisition and retirement of 16.4 million shares during the first nine months of fiscal 2007. The collared accelerated share repurchase transaction settled in July, 2007 and the Company received an additional 2.7 million shares. The Company also acquired and retired an additional 5.9 million and 9.0 million shares through plan 10b5-1 acquisitions during the third quarter nine months year to date of fiscal 2008. See footnote 16 to the consolidated condensed financial statements for further discussion of these transactions. These reductions in the share base were partially offset by the exercise of employee stock options during the past twelve months.

Financial Condition

Cash Flows

The Company's cash flows were as follows:

	Nine Months Year-to-Date
(In millions)	Fiscal 2008			Fiscal 2007
Net cash provided by operations	$	498.5		$	537.2
Net cash used in investing		(2,159.1	)		(638.3	)
Net cash (used in) provided by financing		1,180.1			(466.4	)
Effect of exchange rate changes on cash and cash equivalents		19.5			2.8
Net decrease in cash and cash equivalents		(461.0	)		(564.7	)
Cash and cash equivalents at beginning of year		1,050.1			1,290.7
Cash and cash equivalents at quarter end	$	589.1		$	726.0

Net cash provided by operations of $498.5 million for the first nine months of fiscal 2008 represents a decline in net cash provided by operations compared to net cash provided by operations for the prior year comparable period of $537.2 million. Net cash provided by operations for fiscal 2008 reflects the impact of several factors on working capital:

·	Cash payments under the restructuring plan were $121.8 million during the first nine months of fiscal 2008 compared to payments of $121 million; net of $26 million from the sale of assets related to the restructuring, for the prior year period.

·	Net cash payments for taxes of $336.8 million during the first nine months of fiscal 2008 compared to payments of $202.0 million for the prior year period.

·	Receivables, prepaid expenses and other current assets combined increased $750.6 million (includes $122.4 million from Covansys) for the nine months year to date for fiscal 2008 compared to increases of $444.7 million in the prior year period.

Accounts payable, accrued expenses and accrued payroll decreased $363.2 million for the nine months year to date of fiscal 2008 compared to an increase of $106.0 million for the prior year period. Fiscal 2008 changes include $72.1 million of additions to accounts payable, accrued expenses and accrued payroll from Covansys.

·	Advanced payments were unchanged for the nine months year to date of fiscal 2008.

Cash flow is also affected by deferred costs related to expected contract modifications with the U.S. federal government. Milestone billings on contracts may be impacted by modifications to contract scope, schedule, and price. The Company routinely negotiates such contract modifications in both the North American Public Sector and Global Commercial segments.

Net cash outflow for investing activities increased approximately $1.5 billion during the nine months of fiscal 2008 as compared to fiscal 2007 as a result of the acquisition of Covansys Corporation for approximately $1.3 billion net, increased investment in equipment, outsourcing contract assets and software of approximately $127 million and the cash inflow in the prior year period from the redemption of preferred stock issued by the parent of DynCorp International, the sale of a datacenter and the sale of equipment to Sears. The Company received approximately $145 million from the redemption of the preferred stock issued by the parent of DynCorp International plus accumulated dividends of approximately $24 million. For the datacenter the Company received approximately $26 million.

Cash provided by financing activities for the nine months year to date of fiscal 2008 reflects the proceeds from the issuance of approximately $1.4 billion of commercial paper to fund the acquisition of Covansys Corporation, additional commercial paper issuance of approximately $205 million and proceeds from the exercise of employee stock options of $82 million. These inflows were partially offset by repurchases of shares outstanding under the 10b5-1 repurchase plan, principal payments on long-term debt, primarily capital leases and net repayments on lines of credit. The use of cash in financing activities for the first nine months of the prior fiscal year was primarily for the acquisition and retirement of outstanding common stock. During the first nine months of fiscal 2007, the Company acquired and retired approximately 16.4 million shares of common stock for approximately $1 billion. The share acquisition was funded with cash on hand and the issuance of approximately $600 million of commercial paper.

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/A for the year ended March 30, 2007. The Company issued approximately $1.4 billion of commercial paper during June 2007 to finance the acquisition of Covansys Corporation and intends to pay down the commercial paper by issuing long-term notes. There have been no other material changes to the Company’s contractual obligations, except for the Company’s liability for unrecognized tax benefits. As noted in Note 3 in the notes to the consolidated condensed financial statements, the Company adopted FIN 48 as of March 31, 2007. As of March 31, 2007, the Company had a liability for unrecognized tax benefits of $1,415 million including interest and penalties and net of related tax carryforwards. During the next 12 months, it is reasonably possible the Company’s liability for uncertain tax positions may change by a significant amount as a result of the following:

The Company completed its settlement discussions with the IRS subject to administrative review in December 2007 with respect to the examination of fiscal years 1995 through 1999. The statute of limitations is expected to close on these years in the second quarter of fiscal 2009. The nature of the significant items subject to examination includes bad debt deductions, property transactions and credits.

The Company’s U.S. federal income tax returns for fiscal years 2000 and beyond remain subject to examination by the IRS. The IRS commenced an examination of fiscal years 2000 through 2004 federal income tax returns beginning in fiscal year 2007 and the Company expects to reach a settlement by December 31, 2008. Accordingly, the Company has agreed to extend the statute of limitations for these tax years through December 31, 2008. The nature of the significant items, subject to examination, include accounting methods, depreciation and amortization, research credits, and international tax issues.

·	In the first quarter of fiscal 2009 the Company may file applications for changes in accounting methods with the IRS associated with certain unrecognized tax benefits, which could result in a reduction of the associated liabilities.

The Company’s significant foreign jurisdictions including the United Kingdom, Australia, Germany and Canada, are subject to examination for various years beginning in fiscal year 2001. The Company is currently under exam in Canada, UK, and Germany.

Liquidity and Capital Resources

The balance of cash and cash equivalents was $589.1 million at December 28, 2007 and $1,050.1 million at March 30, 2007. Equity increased by $11.2 million during the nine months ended December 28, 2007 as net income of $362.9 million, the exercise of employee stock options of $82.4 million and the favorable impact of currency fluctuations were offset by a reduction of earnings retained for use in business of approximately $171.4 million and a reduction of additional paid in capital of approximately $1.5 million as a result of recording liabilities for unrecognized tax benefits and the associated interest and penalties due to the adoption of FIN 48 as of the beginning of the first quarter of fiscal 2008. See Note 3 in the notes to the consolidated condensed financial statements. Equity was also reduced by approximately $488.9 million as a result of the repurchase and retirement of approximately 9.0 million shares under the 10b5-1 share repurchase plan. See Note 16 of the notes to consolidated financial statements.

The majority of our foreign currency revenues are offset by expenses in the same currency. However, we do have non-functional currency monetary assets and liabilities, primarily intracompany, which give rise to foreign exchange gains and/or losses as a result of remeasuring these balance sheet items to the current month-end foreign exchange rates. We offset these remeasurement gains and losses, to the extent possible, with forward contracts denominated in the same currency as the balance sheet exposure that is being remeasured. As the exposure being hedged is marked to current month-end balance sheets rates, the offsetting hedges are marked to current month-end balance sheet rates. As such, an increase or decline in the fair value of the hedging instrument is generally offset by an increase or decline in the value of the underlying exposure. We do not enter into forward contracts for speculative or trading purposes. The current carrying amount of the forward contracts approximate fair market value due to the short maturity of the hedging instruments outstanding. As of December 28, 2007, the notional amount of forward contracts outstanding was approximately $1.38 billion.

Historically, the Company's primary sources of liquidity include cash flows from operations, the issuance of commercial paper and short-term borrowings. If the Company were unable to sell commercial paper, or if the Company determined it was too costly to do so, the Company has the ability to borrow under a syndicated backstop credit facility. The Company issued approximately $1.4 billion of commercial paper during the period from June 19, 2007 through June 28, 2007 to fund the acquisition of Covansys Corporation. To provide additional borrowing capacity, the Company entered into a credit agreement for an additional $1 billion of borrowing capacity on June 25, 2007. This facility augments the existing syndicated backstop credit facility of $1.5 billion. As of December 28, 2007, the Company's total liquidity was approximately $1.5 billion, which included cash and cash equivalents of $589.1 million and availability under the backstop credit facilities. As of December 28, 2007, the Company had approximately $1.6 billion of outstanding commercial paper.

On July 12, 2007, the Company replaced its existing $1.0 billion credit facility with a new five year $1.5 billion facility.

The Company’s 3.5% term notes with a face value of $300 million are due in April, 2008. The Company currently plans to refinance these notes.

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 $5.4 billion is a large and complex contract. As of December 28, 2007, the Company had a net investment in the contract of approximately $.7 billion. Contract assets were $1.3 billion, principally contract work in progress 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.

It is management's opinion that the Company will be able to meet its liquidity and cash needs for the foreseeable future through a combination of cash flows from operating activities, cash balances, unused borrowing capacity 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/A.

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/A for the year ended March 30, 2007.

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/A for fiscal 2007. 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 both the U.S. Federal and Global Commercial segments. For all these estimates, we caution that future events may not develop as forecast, and the best estimates routinely require adjustment.

Federal Contracts

The Company is 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 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.

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 30, 2007, 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/A for the fiscal year then ended. For the nine months ended December 28, 2007, there has been no significant change in related market risk factors.

PART I, ITEM 4. CONTROLS AND PROCEDURES

"Disclosure controls and procedures" are the controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended (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 December 28, 2007.

We had previously identified the following material weaknesses in our internal control over financial reporting: (i) 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; and (ii) the Company's procedures are not sufficient to ensure gains and losses on remeasurement of foreign currency denominated intracompany loans are appropriately recognized in accordance with SFAS No. 52, "Foreign Currency Translation".

These material weaknesses had not yet been remediated as of December 28, 2007. (These material weaknesses are further discussed in the Management Report on Internal Control over Financial Reporting included in the Company’s Annual Report on Form 10-K/A for the year ended March 30, 2007.)

As a result of these material weaknesses, the Company has concluded that its disclosure controls and procedures were not effective as of December 28, 2007.

"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.

Changes in Internal Control

During the fiscal quarter ended December 28, 2007, 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.

The Company has initiated remediation measures to address the material weakness over the accounting for income taxes. These measures include appointment of executive tax personnel, recruitment of additional experienced tax personnel, re-evaluation of the overall organization structure and reassignment of responsibilities within the function and improvement in the tax provision process and the underlying procedures and internal controls. The Company has also initiated remediation measures to address controls and procedures over accounting for remeasurement of foreign currency denominated intracompany loans. These measures include reassignment of responsibilities for oversight of intracompany loans, improvements in the process and underlying procedures for issuance and settlement of intracompany loans as well as improvements to the process and underlying procedures for the calculation and recording of foreign currency gains and losses on intracompany loans.

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. During 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 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.

As reflected by Form 8-K filings made by Sears Holdings Corporation (SHC) on May 13, 2005 (following merger with K-Mart Holding Corporation), and by the Company on May 16, 2005, SHC’s subsidiary, Sears, Roebuck and Co. (Sears), and the Company were in dispute over amounts due and owing following Sears’ termination of its Master Services Agreement (Agreement) with the Company on May 11, 2005. The dispute has been settled as reflected in an 8-K filed October 25, 2007. The settlement provides for Sears paying to the Company $75 million, which was received by the Company on January 8, 2008, as scheduled, and provides for the recovery of the Company’s net asset position, with no material impact to income.

The Company has converted the 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. Included in current assets on the Company's balance sheet are approximately $438 (of which $414 is subject to the claims) million of unbilled receivables and $407 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.

With respect to the larger set of claims, 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 to the amount of damages claimed and does not affect the amounts recorded in the Company’s balance sheet.

Item 1A. Risk Factors

For a discussion of the Company’s risk factors please refer to the risk factors sections of the Company’s Annual Report on Form 10-K/A for the year ended March 30, 2007.

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 December 28, 2007 with respect to the Company’s purchase of equity securities:

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
September 29, 2007 to October 26, 2007	1,398,726	$57.30	1,395,993	$779,984,808
October 27, 2007 to November 23, 2007	1,763,854	$53.55	1,742,844	$686,450,447
November 24, 2007 to December 28, 2007	2,889,605	$51.66	2,830,587	$539,859,404

(1)

The Company accepted 26,018 shares of its common stock in the second quarter ended December 28, 2007 from employees in lieu of cash due to the Company in connection with the exercise of stock options. Such shares of common stock are stated at cost and held as treasury shares to be used for general corporate purposes.

The Company accepted 6,673 shares of its common stock in the quarter ended December 28, 2007 from employees in lieu of cash due to the Company in connection with the release of shares of common stock. Also, the Company purchased 50,070 shares during this period to cancel restricted shares of common stock due to employee terminations. Such shares of common stock are stated at cost and held as treasury shares to be used for general corporate purposes.

Under the Securities Exchange Commission Rule 10b5-1 open-market repurchase program, the Company purchased a total of 5,969,424 shares in the quarter ended December 28, 2007. Such shares of common stock are stated at cost. These shares were retired and will not be used for general corporate purposes.

Item 6. Exhibits

Exhibit Number	Description of Exhibit

2.1	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 November 1, 2007 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2007)

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)

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 Restricted Stock Unit Agreements for employees(1) (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2005)

10.9	Annual Management Incentive Plan, effective April 2, 1983(1) (incorporated by reference to Exhibit X(i) to the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 1984)

10.10	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)

10.11	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)

10.12	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)

10.13	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)

10.14	Deferred Compensation Plan, amended and restated effective December 3, 2007(1) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated December 4, 2007)

10.15	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)

10.16	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)

10.17	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)

10.18	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)

10.19	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)

10.20	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)

10.21	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)

10.22	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)

10.23	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)

10.24	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 Reprt on Form 8-K dated January 31, 2008)

10.25	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)

10.26	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)

10.27	1997 Nonemployee Director Stock Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on August 11, 1997)

10.28	2006 Nonemployee Director Incentive Plan (incorporated by reference to Appendix B to the Company’s Proxy Statement for the Annual Meeting of Stockholders held on July 31, 2006

10.29	Form of Restricted Stock Unit Agreement for directors (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2005)

10.30	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)

10.31	Rights Agreement dated February 18, 1998, as amended and restated effective August 4, 2006 (incorporated by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006)

10.32	Credit Agreement dated as of June 25, 2007 (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K dated September 5, 2007)

10.33	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)


10.34	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)
10.35	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)

31.1	Section 302 Certification of the Chief Executive Officer

31.2	Section 302 Certification of the Chief Financial Officer

32.1	Section 906 Certification of the Chief Executive Officer

32.2	Section 906 Certification of the Chief Financial Officer


	(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.

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 CORPORATION


Date: February 6, 2008	By:	/s/Donald G. DeBuck
		Donald G. DeBuck
		Vice President and Chief Financial Officer

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Computer Sciences (CSC) Inactive 10-Q2008 Q4 Quarterly report

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