CSC Reports Third Quarter Results

News Release -- February 09, 2011

Increased EPS and Free Cash Flow

FALLS CHURCH, Va., Feb. 9 – CSC (NYSE: CSC) today reported third quarter fiscal 2011 revenue of $4.01 billion and fully diluted earnings per share (EPS) of $1.54 compared to third quarter fiscal 2010 revenue of $3.95 billion and EPS of $1.36. The year to date revenue was $11.93 billion and EPS was $3.64 compared to the year to date fiscal 2010 revenue of $11.89 billion and EPS of $3.62.

Operating cash flow was $462 million for the quarter, as compared to $131 million from the previous year. For the year to date, operating cash flow was $804 million compared to $407 million from the previous year.

Free Cash Flow was $253 million for the quarter, as compared to -$107 million from the previous year. For the year to date, free cash flow was $110 million compared to -$140 million from the previous year.

Commenting on the results, CSC Chairman and Chief Executive Officer Michael W. Laphen said, “Our revenue growth of 1.4% (2.1% constant currency) reflects year over year growth within all of our business sectors. Sequentially, our Public Sector revenue continues to be impacted by award decision delays by the federal government while our Commercial segments continue on their growth trajectory. Operating results were primarily impacted by a trailing effect from the previously disclosed Nordics Region issue, offset by a lower tax rate, resulting in a year over year increase in EPS. I am pleased to see the positive results from our continued focus on cash management and the corresponding contribution to our balance sheet strength.

New Business Awards

Across the three lines of business, new business awards for the quarter were $2.3 billion. North American Public Sector (NPS) contributed approximately $0.5 billion, Business Solutions & Services (BSS) reported $0.8 billion and Managed Services Sector (MSS) closed $1.0 billion of new business.

Revenue by Line of Business

For the quarter, NPS revenue was $1.48 billion (up 0.3% from the third quarter last year), MSS revenue was $1.65 billion (up 2.2% from the third quarter last year) and BSS revenue was $899 million (up 1.4% from the third quarter last year).

Business Outlook

“The acquisitions we announced during the quarter further demonstrated the progress we are making in the expansion of our capabilities in Cybersecurity and Healthcare,” continued Laphen. “We have also cloud-enabled more of our data centers and we are experiencing more demand for these services. Although the sluggish pace of new business awards in NPS is impacting the rate of our revenue growth, we remain confident our businesses will grow in line with our longer term projections and our Commercial businesses, which are already growing at a steady pace, will continue to benefit from the opportunities arising from Cloud, Cyber and Healthcare.”

Guidance

As a consequence of the above, the company modified its Fiscal Year 2011 guidance as follows:

New Business	~ $16 billion
Revenue	~ $16.2 billion
Operating Income Margin	8% – 8.5%
EPS	~ $5.20
Free Cash Flow	Greater than 90% of net income attributable to CSC common shareholders.

Conference Call and Webcast

CSC senior management will host a conference call and Webcast at 11:00 a.m. EST today. The conference call dial-in number for domestic callers is 888-312-3046. International callers will need to dial +1 719-325-2282. The pass code for all participants is 6914748. The Webcast and presentation slides can be accessed at www.csc.com/investor_relations.

Non-GAAP Measures

In an effort to provide investors with additional information regarding the Company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release non-GAAP information which management believes provides useful information to investors, including: operating income, operating margin, free cash flow and free cash flow as a percentage of net income attributable to CSC common shareholders. A reconciliation of the adjustments to GAAP results for this quarter and prior periods, as well as the rationale for management’s use of non-GAAP measures, is included in the tables below.

About CSC

CSC is a global leader in providing technology-enabled solutions and services through three primary lines of business. These include Business Solutions and Services, the Managed Services Sector and the North American Public Sector. CSC’s advanced capabilities include system design and integration, information technology and business process outsourcing, applications software development, Web and application hosting, mission support and management consulting. The company has been recognized as a leader in the industry, including being named by FORTUNE Magazine as one of the World’s Most Admired Companies for Information Technology Services (2010). Headquartered in Falls Church, Va., CSC has approximately 93,000 employees and reported revenue of $16.2 billion for the 12 months ended December 31, 2010. For more information, visit the company’s website at www.csc.com.

All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent the Company’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, many of which are outside the Company’s control. These factors could cause actual results to differ materially from such forward-looking statements. For a written description of these factors, see the section titled “Risk Factors” in CSC’s Form 10-K for the fiscal year ended April 2, 2010 and any updating information in subsequent SEC filings. The Company disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise, except as required by law.

Note to Analysts and Editors: Please see attached PDF for print (418 KB).