Earnings Per Share From Continuing Operations Up 31%

EL SEGUNDO, Calif., Feb. 7 -- Computer Sciences Corporation (NYSE: CSC) today reported results for its fiscal 2006 third quarter, ended December 30, 2005. Net earnings per share (diluted) were $1.08, including $38.4 million after taxes from discontinued operations, or 20 cents per share. Earnings per share, diluted, from continuing operations were 88 cents, up 31.3%, compared with last year’s third quarter earnings per share (diluted) from continuing operations of 67 cents. Revenue was $3.58 billion, up 2.5% over last year’s third quarter.

The sources of revenue growth during the quarter were primarily CSC’s U.S. federal government and U.S. commercial operations. U.S. commercial revenue growth again resulted from recent outsourcing engagements and the continuing improvement in North American consulting and systems integration activities. The U.S. federal revenue growth was led by gains within the company’s Department of Defense (DoD)-related activities. The company’s Australia and Asia operations also contributed to the quarter’s revenue growth.

For the third quarter (ended Dec. 30):

• Revenue was $3.58 billion, up 2.5% (approximately 5% in constant currency);
  
• Net income was $203.5 million, or $1.08 per share (diluted), including an after-tax gain reported from discontinued operations of $38.4 million, or 20 cents per share, for resolution of the working capital adjustment on the sale of certain DynCorp activities;
  
• Earnings per share from continuing operations were 88 cents (diluted);
  
• and major business announcements were $3.1 billion.

For the nine months (ended Dec. 30):

• Revenue was $10.73 billion, up 5.4% over the comparable nine-month period of fiscal 2005 (approximately 6% in constant currency);
  
• Net income was $434.6 million, or $2.32 per share (diluted), including an after-tax gain of $61.3 million, or 33 cents per share, on sale of discontinued operations and the second quarter non-cash asset impairment after-tax special charge of $33.1 million, or 18 cents per share (diluted), related to the Nortel contract;
  
• Earnings per share from continuing operations, excluding the non-cash asset impairment special charge, were $2.17 (diluted);
  
• and major business awards totaled $9.3 billion.

“Our third quarter results further demonstrated strong operational progress,” said CSC Chairman and Chief Executive Officer Van B. Honeycutt. “We are pleased with fiscal 2006 results to date as we enter the last quarter. Principal contributors to both revenue growth and profitability improvement were our U.S. federal government and North American consulting and systems integration operations, and recent major new outsourcing activities. We continue to be encouraged by the strengthening demand in the U.S. for shorter-term project work, and we also saw improved market demand within the financial services vertical and within the Australian and Asia-Pacific markets. Increased volumes on existing engagements contributed to constant currency revenue growth in our European operations. Our pipelines for both commercial and U.S. federal government awards remain healthy and continue to provide a host of opportunities going forward.

“We have continued our disciplined focus around contract execution, cost management and opportunity qualification. Our improved profitability is a result of our operational emphasis on improving efficiency and execution to meet client demand as well as continued attention to the allocation of capital to opportunities which will result in appropriate returns. This quarter’s operating metrics reflect our progress.

“The market for U.S. federal government information technology (IT) services continues to demonstrate solid demand,” said Honeycutt. “Our strong competitive position and historical win rate have enabled us to continue to be a leader in providing IT services to this large and growing market.

“Over the next 14 months, through fiscal 2007, our U.S. federal pipeline of opportunities is approximately $28 billion, comprised of about 390 programs from a broad range of government agencies and departments.

“During the quarter, our North American consulting and systems integration activities delivered higher average headcount, utilization and billing rates, compared to the year-ago quarter,” continued Honeycutt. “The market for similar shorter-term activities in Europe continued to be impacted negatively by persistent soft demand in certain country-specific markets.

“Major business announcements for the third quarter were $3.1 billion, bringing our nine-month total to approximately $9.3 billion. The nine-month total is split about evenly between federal and commercial.

“For the fourth quarter, ending March 31, 2006, we anticipate revenue to be approximately $3.8 billion and earnings per share to be in the $1.10 to $1.14 range,” Honeycutt said. “Those estimates would bring our fiscal 2006 revenues to approximately $14.6 billion and earnings per share for the year in the range of $3.27 to $3.31. Our fourth quarter and fiscal year assumptions exclude the favorable impacts from the additional gain on the divestiture of certain DynCorp activities and the gain on the disposition of Health Plans Solutions recorded in discontinued operations, as well as any impairment charges related to previously disclosed outsourcing contract terminations and any cumulative effects of the adoption of new accounting pronouncements.”

BUSINESS RESULTS

Third quarter global commercial revenue was $2.35 billion, compared to $2.34 billion in the year-ago quarter. U.S. commercial revenue was $998.3 million, up 3.4%, compared with $965.6 million last year. European revenue was $1.02 billion, a decline of 4.6% (up approximately 3% in constant currency), from $1.07 billion for the third quarter last year. The contribution from recent outsourcing engagements resulted in the quarter’s U.S. commercial revenue growth. CSC's non-European international revenue was $334.9 million, up 8.3% (approximately 9% in constant currency), compared with last year’s $309.3 million.

For the third quarter, CSC’s U.S. federal government revenue increased 6.9% to $1.22 billion from $1.14 billion for the third quarter of fiscal 2005. Revenue derived from CSC’s DoD-related business was $820.1 million, up 12.0% from last year’s $732.2 million. This growth was the result of incremental revenue from a combination of existing engagements and recent new business awards, including Rapid Response, NAVSEA MACS and US Stratcom, among others. CSC’s civil agencies activities generated revenue of $366.3 million, down 3.3%, compared to $378.9 million last year. The decline was primarily attributable to the recent successful deployment of the Financial Management System associated with the IRS Modernization activity. Other federal sector revenue, comprised of state, local and foreign government as well as commercial contracts performed by the U.S. federal sector reporting segment, was $36.3 million, up from last year’s $32.7 million.

As announced in the company’s press release dated Jan. 10, 2006, a teleconference will be held today at 5:00 p.m. EST to discuss the third quarter results. This teleconference can be accessed from the CSC Web site at www.csc.com/investorrelations, in a listen-only mode.

Founded in 1959, Computer Sciences Corporation is a leading global IT services company. CSC’s mission is to provide customers in industry and government with solutions crafted to meet their specific challenges and enable them to profit from the advanced use of technology.

With approximately 80,000 employees supporting continuing operations, CSC provides innovative solutions for customers around the world by applying leading technologies and CSC’s own advanced capabilities. These include systems design and integration; IT and business process outsourcing; applications software development; Web and application hosting; and management consulting. Headquartered in El Segundo, Calif., CSC reported revenue of $14.6 billion for the 12 months ended Dec. 30, 2005. For more information, visit the company’s Web site at www.csc.com.

All statements in this press release 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 “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in CSC’s Form 10-Q for the quarter ended September 30, 2005. The Company disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent events or otherwise except as required by law.

Note to Analysts and Editors: Please see attached tables.