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 the Company. This discussion should be read in conjunction with the Company's consolidated financial statements and associated notes as of and for the year ended March 30, 2012.

There are three primary objectives of this discussion:

1. Provide a narrative on the consolidated financial statements, as presented through the eyes of management;

2. Enhance the disclosures in the consolidated financial statements and footnotes by providing context within which the consolidated financial statements should be analyzed; and

3. Provide information to assist the reader in ascertaining the predictive value of the reported financial results.

To achieve these objectives, the management discussion and analysis is presented in the following sections:

Overview - includes a description of the Company's business, how it earns revenue and generates cash, as well as a discussion of the economic and industry factors, key business drivers, key performance indicators and fiscal 2012 highlights.

Results of Operations - discusses year-over-year changes to operating results for fiscal 2010 to 2012, describing the factors affecting revenue on a consolidated and reportable segment basis, including new contracts, acquisitions and divestitures and currency impacts, and also by describing the factors affecting changes in the major cost and expense categories.

Financial Condition - discusses causes of changes in cash flows and describes the Company's liquidity and available capital resources.

Critical Accounting Estimates - discusses the significant accounting policies that require critical judgments and estimates.

Overview

CSC provides information technology and business process outsourcing, consulting, systems integration and other information technology services to its customers. The Company targets the delivery of these services within three broad lines of business or sectors: North American Public Sector (NPS), Managed Services Sector (MSS), and Business Solutions and Services (BSS).

The Company's reportable segments are as follows:

• The NPS segment provides services to the U.S. federal government and its agencies, civil departments and branches of military, and 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 MSS segment provides large-scale infrastructure and application outsourcing solutions offerings as well as mid-size services delivery to customers globally.

• The BSS segment provides industry-specific consulting and systems integration services, business process outsourcing, and intellectual property-based software solutions.

For additional information regarding our business segments, see Note 15 of the Consolidated Financial Statements.

Economic and Industry Factors

The Company's results of operations are impacted by economic conditions generally, including macroeconomic conditions. We are monitoring current macroeconomic and credit market conditions and levels of business confidence and their potential effect on our clients and on us. A severe and/or prolonged economic downturn could adversely affect our clients' financial condition and the levels of business activities in the industries and geographies in which we operate. This may reduce demand for our services or depress pricing of those services and have a material adverse effect on our new contract bookings and results of operations. Particularly in light of recent economic uncertainty, we continue to monitor our costs closely in order to respond to changing conditions and to manage any impact to our results of operations.

Our results of operations are also affected by levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level of technology spending by our clients. The ability to identify and capitalize on these market and technological changes early in their cycles is a key driver of our performance.

Revenues are driven by our ability to secure new contracts and to deliver solutions and services that add value to our clients. Our ability to add value to clients, and therefore generate revenues, depends in part on our ability to deliver market-leading service offerings and to deploy skilled teams of professionals quickly and on a global basis.

The BSS and MSS segment markets are affected by various economic and industry factors. The economic environment in the regions CSC serves will impact customers' decisions for discretionary spending on information technology (IT) projects. CSC is in a highly competitive industry which exerts downward pressure on pricing and requires companies to continually seek ways to differentiate themselves through several factors, including service offerings and flexibility. Management monitors industry factors including relative market shares, growth rates, billing rates, staff utilization rates and margins as well as macroeconomic indicators such as interest rates, inflation rates and foreign currency rates.

Outsourcing contracts are typically long-term relationships. Long-term, complex outsourcing contracts, including their consulting components, require ongoing review of the terms and scope of work, in order to meet clients' evolving business needs and our performance expectations.

More recently, the Company has implemented a strategy of promoting and selling defined solutions that require less customization and benefit from leveraged delivery at scale. Such solutions include our portfolio of Cloud-based Infrastructure-as-a-Service offerings, managed applications services and a range of discrete offerings for computing, storage, mobility and networking services.

The NPS segment market is also highly competitive and has unique characteristics. All U.S. government contracts and subcontracts may be modified, curtailed or terminated at the convenience of the government if program requirements or budgetary constraints change. In the event that a contract is terminated for convenience, the Company generally is reimbursed for its allowable costs through the date of termination and is paid a proportionate amount of the stipulated profit or fee attributable to the work performed. Shifting priorities of the U.S. government can also impact the future of projects. Management monitors government priorities and industry factors through numerous industry and government publications and forecasts, legislative activity, budgeting and appropriation processes and by participating in industry professional associations.

Business Drivers

Revenue in all three lines of business is generated by providing services on a variety of contract types lasting from less than six months to ten years or more. Factors affecting revenue include the Company's ability to successfully:

• bid on and win new contract awards,

• satisfy existing customers and obtain add-on business and win contract re-competes,

• compete on services offered, delivery models offered, technical ability and innovation, quality, flexibility, global reach, experience, and results created, and

• identify and integrate acquisitions and leverage them to generate new revenues.

Earnings are impacted by the above revenue factors and, in addition, the Company's ability to:

• control costs, particularly labor costs, subcontractor expenses and overhead costs including healthcare, pension

and general and administrative costs,
• anticipate headcount needs to avoid staff shortages or excesses,

• accurately estimate various factors incorporated in contract bids and proposals,

• develop offshore capabilities and migrate compatible service offerings offshore, and

• manage foreign currency fluctuations related to international operations.

Cash flows are affected by the above earnings factors and, in addition, by the following factors:

• timely management of receivables and payables,

• investment opportunities available, particularly related to business acquisitions, dispositions and large outsourcing contracts, and

• the ability to efficiently manage capital including debt and equity instruments.

Key Performance Indicators

The Company manages and assesses the performance of its business through various means, with the primary financial measures including new contract wins, revenue growth, margins, and cash flow.

New contract wins: In addition to being a primary driver of future revenue, new contract wins also provide management an assessment of the Company's ability to compete. The total level of wins tends to fluctuate from year to year depending on the timing of new or re-competed contracts, as well as numerous external factors.

Revenue growth: Year-over-year revenues tend to vary less than new contract wins, and reflect performance on both new and existing contracts. With a wide array of services offered, the Company is able to pursue additional work from existing customers. In addition, incremental increases in revenue will not necessarily result in linear increases in costs, particularly overhead and other indirect costs, thus potentially improving profit margins. Foreign currency fluctuations also impact revenue growth.

Margins: Margins reflect the Company's performance on contracts and ability to control costs. While the ratios of various cost elements as a percentage of revenue can shift as a result of changes in the mix of businesses with different cost profiles, a focus on maintaining and improving overall margins leads to improved efficiencies and profitability. Although the majority of the Company's costs are denominated in the same currency as revenues, increased use of offshore support also exposes CSC to additional margin fluctuations.

Cash flow: Primary drivers of the Company's cash flow are earnings provided by the Company's operations and the use of capital to generate those earnings. Also contributing to short term cash flow results are movements in current asset and liability balances. The Company also regularly reviews the U.S. Generally Accepted Accounting Principles (GAAP) cash flow measurements of operating, investing and financing cash flows, as well as the non-GAAP measure free cash flow.

Fiscal 2012 Highlights

Fiscal 2012 results were adversely impacted by certain large adjustments that
reduced revenue and increased costs. These significant adjustments are listed
below and described in detail later in this section and also in the Results of
Operations section.
                                                                 Impact of Adjustment
(Amounts in millions)                                           Favorable/(Unfavorable)
                                                                                Loss from continuing
                                                  Revenues         Costs       operations before taxes
Specified contract charge                       $      (204 )   $   (1,281 )   $         (1,485 )
Settlement charge                                       (42 )         (227 )               (269 )
Restructuring costs                                       -           (140 )               (140 )
Goodwill impairment                                       -         (2,745 )             (2,745 )
Asset impairments                                         -           (156 )               (156 )
Net adjustments on contracts accounted for
under the percentage of completion method               (83 )         (148 )               (231 )
Legal and other fees on SEC and Audit
Committee investigations                                  -            (67 )                (67 )
Transaction and transition costs associated
with acquisition of iSOFT                                 -            (23 )                (23 )

The key operating results for fiscal 2012 include:

• Revenues decreased $165 million or 1.0%, and decreased 2.9% on a constant currency basis(1). Of the 2.9% constant currency decrease, 1.5% was due to the reduction in revenue resulting from the charge associated with a U.K.'s National Health Service (NHS) contract and the settlement of claims associated with a U.S. Government contract. The revenue decrease was partially offset by an increase in revenue of 1.7% from the fiscal 2012 and fiscal 2011 acquisitions.

• Loss from continuing operations before taxes was $4,347 million, compared to income from continuing operations before taxes of $968 million in fiscal 2011, a decrease of $5,315 million, or 549.1%.

• Operating income(2) decreased 202.8% to a loss of $1,251 million as compared to operating income of $1,217 million in fiscal 2011, and operating income margins decreased to (7.9)% from 7.6% in the fiscal 2011.

• Net loss attributable to CSC common shareholders was $4,242 million, a decrease of $4,982 million, or 673.2%, as compared to the prior year.

• Diluted earnings (loss) per share (EPS) was $(27.37) for fiscal 2012, a decrease of $32.10 as compared to the prior year. For fiscal 2012, diluted EPS was comprised of $(27.38) from continuing operations and $0.01 from discontinued operations, as compared to $4.51 and $0.22, respectively, in the prior year.

• During the second quarter, the Company reached a definitive settlement agreement with the U.S. government in its contract claims asserted under the Contract Disputes Act of 1978 (CDA), and recorded a pre-tax charge of $269 million, which included a $42 million reduction of revenue. The charge reflected the write-down of claim related assets (unbilled receivables and deferred costs), offset by cash received of $277 million and the estimated fair value of a contract extension of $45 million.

• During the third quarter, the Company recorded a charge associated with the U.K. NHS contract of $1,485 million, which included a $204 million reduction of revenue.

• The Company recorded a goodwill impairment charge of $2,745 million during fiscal 2012. In the second quarter, the Company recorded an estimated goodwill impairment charge of $2,685 million, of which $2,074 million related to the MSS segment and $611 million related to the BSS segment. During the third quarter, the Company recorded a $60 million goodwill impairment, all of which related to the BSS segment.

• During the fourth quarter, the Company recorded restructuring costs of $140 million, of which $108 million is related to the MSS segment, $31 million is related to the BSS segment, and $1 million is related to the NPS segment.

• During fiscal 2012, the Company recorded $231 million of net adverse adjustments on long-term contracts accounted for under the percentage-of-completion method and $156 million of impairments of assets related primarily to outsourcing contracts with service delivery issues.

• The Company announced contract awards of $19.3 billion, including new MSS segment awards of $9.5 billion, NPS segment awards of $6.0 billion, and BSS segment awards of $3.8 billion. Total backlog(3) at the end of fiscal 2012 was $36.4 billion, an increase of $0.4 billion as compared to the backlog at the end of fiscal 2011 of $36.0 billion. Of the total $36.4 billion backlog, $10.2 billion is expected to be realized as revenue in fiscal 2013. Of the total $36.4 billion, $12.3 billion is not yet funded.

• Days Sales Outstanding (DSO)(4) was 70 days at March 30, 2012, an improvement from 79 days at April 1, 2011.

• Debt-to-total capitalization ratio(5) was 49.2% at year-end, an increase of 23.8% points from 25.4% at fiscal 2011 year end, reflecting the current year net loss attributable to CSC common shareholders of $4,242 million with corresponding impact on CSC stockholders' equity.

• Cash provided by operating activities was $1,176 million, as compared to $1,564 million during fiscal 2011.

• Cash used in investing activities was $1,308 million, as compared to $892 million during fiscal 2011.

• Cash used in financing activities was $581 million, as compared to $1,676 million during fiscal 2011.

• Free cash flow(6) of $59 million in fiscal 2012 was down from $629 million in fiscal 2011, driven primarily by the Company's operating performance and net cash outflows associated with a U.K. NHS contract, partially offset by cash received from the U.S. government upon settlement of contract claims.

(1) Selected references are made on a "constant currency basis" so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a "constant currency basis" are calculated by translating current period activity into U.S. dollars using the comparable prior period's currency conversion rates. This approach is used for all results where the functional currency is not the U.S. dollar.

(2) Operating income is a non-U.S. Generally Accepted Accounting Principle (GAAP) measure used by management to assess performance at the segments and on a consolidated basis. The Company's definition of such measure may differ from other companies. We define operating income as revenue less costs of services, depreciation and amortization expense, and segment general and administrative (G&A) expense, excluding corporate G&A. Management compensates for the limitations of this non-GAAP measure by also reviewing income (loss) from continuing operations before taxes, which includes costs excluded from the operating income definition such as goodwill impairment, corporate G&A, interest and other income. A reconciliation of consolidated operating (loss) income to (loss) income from continuing operations before taxes is as follows:

                                                               Twelve Months Ended
(Amounts in millions)                           March 30, 2012     April 1, 2011     April 2, 2010
Operating (loss) income                        $       (1,251 )   $       1,217     $       1,395
Corporate G&A                                            (219 )            (138 )            (168 )
Interest expense                                         (176 )            (168 )            (252 )
Interest Income                                            38                37                27
Goodwill impairment                                    (2,745 )               -                 -
Other income (expense), net                                 6                20                20
(Loss) income from continuing operations
before taxes                                   $       (4,347 )   $         968     $       1,022

(3) Backlog represents total estimated contract value of predominantly long-term contracts, based on customer commitments that the Company believes to be firm. Backlog value is based on contract commitments, management's judgment and assumptions about volume of services, availability of customer funding and other factors. Backlog estimates for government contracts include both the funded and unfunded portions

and all of the option periods. Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.

For NPS, announced award values for competitive indefinite delivery and indefinite quantity (IDIQ) awards represent the expected contract value at the time a task order is awarded under the contract. Announced values for non-competitive IDIQ awards represent management's estimate at the award date. Business awards for MSS are estimated at the time of contract signing based on then existing projections of service volumes and currency exchange rates, and include option years. BSS award values are based on firm commitments. Beginning in fiscal 2012, we revised our estimation of BSS awards to account for larger business solution and service awards. Prior period awards and backlog have been revised to conform to the current year presentation.

(4) DSO is calculated as total receivables at the fiscal period end divided by revenue-per-day. Revenue-per-day equals total revenues divided by the number of days in the fiscal period. Total receivables includes unbilled receivables but excludes tax receivables and long-term receivables.

(5) Debt-to-total capitalization ratio is defined as total current and long-term debt divided by total debt and equity, including noncontrolling interest.

(6) Free cash flow is a non-GAAP measure and the Company's definition of such measure may differ from that of other companies. We define free cash flow as equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions, dispositions and investments (including short-term investments and purchase or sale of available for sale securities) and (3) payments on capital leases and other long-term asset financings.

CSC's free cash flow measure does not distinguish operating cash flows from investing cash flows as they are required to be presented in accordance with GAAP, and should not be considered a substitute for operating and investing cash flows as determined in accordance with GAAP. Free cash flow is one of the factors CSC management uses in reviewing the overall performance of the business. Management compensates for the limitations of this non-GAAP measure by also reviewing the GAAP measures of operating, investing and financing cash flows as well as debt levels measured by the debt-to-total capitalization ratio.

A reconciliation of free cash flow to the most directly comparable GAAP financial measure is presented below:

                                                               Twelve Months Ended
(Amounts in millions)                           March 30, 2012     April 1, 2011     April 2, 2010
Free cash flow                                 $           59     $         629     $         811
Net cash used in investing activities                   1,308               892               790
Acquisitions, net of cash acquired                       (374 )            (158 )              (5 )
Business dispositions                                       2               119                14
Short-term investments                                      4                (9 )               -
Payments on capital leases and other                      177                91                33
long-term asset financings
Net cash provided by operating activities      $        1,176     $       1,564     $       1,643
Net cash used in investing activities          $       (1,308 )   $        (892 )   $        (790 )
Net cash used in provided by financing         $         (581 )   $      (1,676 )   $        (487 )
activities

The Company has developed a broad, long-term revenue base which includes customers spread across multiple industries and geographic regions as well as service lines. A significant amount of CSC's revenue is derived from long-term contracts including information technology outsourcing, build and maintain engagements and U.S. federal government engagements. This provides the Company with a base of revenue during periods when contract awards may slow or the market for certain services softens.

The Company's significant wins and scope extensions during fiscal 2012 included the following:

NPS:
• U.S. Army ($1.0 billion)

• State of Maryland ($297 million)

• U.S. Citizenship and Immigration Services ($291 million)

MSS:
• BAE Systems ($800 million)

• Educational Testing Service (over $200 million)

BSS:
• Financial services industry clients ($1.6 billion)

• Technology and consumer services industry clients ($863 million)

• Health services industry clients ($497 million)

Cash and cash equivalents at March 30, 2012, was approximately $1.1 billion, down from $1.8 billion at April 1, 2011, a $744 million decrease. The decrease was a result of financing and investing cash outflows of $581 million and $1,308 million, respectively, during fiscal 2012, offset by operating cash inflows of $1,176 million. Net loss adjusted for non-cash charges drove the operating cash inflows, higher purchases of property and equipment and business acquisitions drove the investing cash outflows, and a repayment on the Company's credit facility drove the financing outflows.

Cash and cash equivalents at April 1, 2011, was approximately $1.8 billion, down from $2.8 billion at April 2, 2010, a $947 million decrease. The decrease was a result of financing and investing cash outflows of $1.7 billion cash and $892 million, respectively, during fiscal 2011, offset by operating cash inflows of $1.6 billion. Net income drove the operating cash inflows, higher purchases of property and equipment and business acquisitions drove the investing cash outflows, and a repayment on the Company's credit facility drove the financing outflows.

Results of Operations

Revenues

Revenues for the NPS, MSS, and BSS segments for fiscal 2012, fiscal 2011, and
fiscal 2010 are as follows:

                                              Twelve Months Ended
                           March 30, 2012           April 1, 2011        April 2, 2010
                                     Percent                 Percent
(Amounts in millions)     Amount      Change      Amount      Change        Amount
NPS                     $  5,703      (5.0 )%   $  6,002      (1.5 )%   $       6,095
MSS                        6,618       0.5         6,583       2.0              6,451
BSS                        3,677       3.0         3,570       2.5              3,483
Corporate                     13                      14                           17
Subtotal                  16,011      (1.0 )      16,169       0.8             16,046
Eliminations                (134 )                  (127 )                       (125 )
Total Revenue           $ 15,877      (1.0 )%   $ 16,042       0.8  %   $      15,921

The major factors affecting the percent change in revenues are presented as follows:

                                                            Approximate
                                                             Impact of
Twelve Months Ended                                           Currency          Net Internal
March 30, 2012 vs. April 1, 2011       Acquisitions         Fluctuations           Growth          Total
NPS                                          0.6 %                  -               (5.6 )%         (5.0 )%
MSS                                          0.9                  2.7  %            (3.1 )           0.5
BSS                                          4.8                  3.5               (5.3 )           3.0
Cumulative Net Percentage                    1.7 %                1.9  %            (4.6 )%         (1.0 )%

                                                            Approximate
Twelve Months Ended                                          Impact of          Net Internal
. . .