Good day everyone and welcome to the CSC fiscal year 2009 second quarterly earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Bill Lackey, Director of Investor Relations. Please go ahead, sir.

Thank you, Operator and good afternoon everyone. Welcome to CSC's second quarter fiscal 2009 earnings conference call. We hope you've had a chance to review our financial results issued earlier this afternoon. With me this afternoon are Mike Laphen, Chairman and Chief Executive Officer, who will begin with some opening remarks, and then Don DeBuck, Interim Chief Financial Officer will review the quarters’ financials. As usual, this call is being webcast live at csc.com, and we also welcome those joining us via that process. Additionally we have slides posted on csc.com, which accompany our presentation today. As always, I must caution everybody that any statements on this call that are not historical facts may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by these statements. Additional information concerning these risks and uncertainties is contained in the company's filings with the SEC. Copies of these filings are available from SEC's, from CSC's website at www.csc.com or from us at Investor Relations. Our presentation today includes certain non-GAAP financial measures. In an effort to provide additional information to investors, all non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find a reconciliation of these measures included in the tables attached to the earnings press release, and they also will be posted on the Investor Relations section of CSC's website. Finally, we assume no obligation to update the information present on this conference call except as required by law. Now, if you’ll please turn to slide number five, I will turn the call over to Mike.

Thank you Bill, and good afternoon everyone. I'm again pleased to have the opportunity to speak with you about CSC's current business position, as well as our second quarter financial results. As shown on Slide 5, highlights for the quarter include revenue of $4.2 billion, up 5.5%; EPS of $2.95, including the positive impact of the resolution of the IRS examination for tax years 2000 through 2004. Operating cash flow of $401 million as reported; free cash flow performance improvement of $181 million over last year's second quarter; new bookings in the quarter of $4.6 billion, which is a 12% increase over Q2 last year. Resolution of the IRS examination for tax years 2000 through 2004 was a significant event for CSC. Over and above its impact on EPS, this resolution had positive impacts on both the balance sheet and ROI. Improving CSC's cash flow has been a major focus for the management team, and one that is doubly important in today's economic environment. Accordingly, I'm pleased to note our continued improvement in free cash performance and the 11 day reduction in DSO compared to last year. This quarter also witnessed an important milestone in our NHS program, with the launch of Lorenzo and two earlier adopter sites. The CEO of University Hospitals of Morgan Bay has publicly expressed his support and confidence for the program, given the extensive testing and planning performed before deployment, and the immense benefit that will be available to medical personnel and patients through the system. We are also actively engaged with the NHS in the south of the UK, which was previously managed by Fujitsu, and are encouraged by the level of interest in the NHS to have greater CSC involvement in that region. In October, the commercial paper market became increasingly dysfunctional. So…

Thank you, Mike and let me thank you especially for those kind words. It’s been a privilege to support you and the company in the Interim CFO overall for these past months. And I along with the rest of my finance colleagues look forward to supporting Mike. So I'd also like to thank everyone for joining the conference call today. So let's start with the financial highlights on Slide 12 for the second quarter of the fiscal year 2009. Second quarter revenues grew 5.5% to $4.2 billion, with increases across all three of our lines of business. In constant currency revenues grew by 4.4%. Operating income or OI was $282 million, resulting in 6.7% OI margin, compared to 6.8% last year, and was up 30 basis points sequentially. We’ll talk more about Q2 operating results in a few minutes, but our second quarter OI margin includes the impact of increased efforts around new business pursuits, a bit weaker financial services verticals than the comparable period last year, and some actions in our global outsourcing line of business. Earnings per share of $2.95 includes $2.27 of net tax benefits in the tax line, along with $0.04 negative impact from IRS resolution advisory cost and adverse foreign exchange rate movements from our previous guidance. We will talk more about these in a minute. We had free cash inflow of a $166 million, an improvement of $181 million compared to the same period last year. On a year-to-date basis, it's an improvement of $513 million comparing to last year first half. The free cash flow performance does include some capital expenditure timing benefit compliance. DSO decreased to 91 days in the second quarter, an improvement of 11 days from the same period last year. We've been working hard on DSO and are encouraged…

Thank you, Don. Operator, we're now ready to take questions please thank you.

(Operator Instructions). And our first question today is from Rod Bourgeois from Bernstein.

Thanks for the continued improvement in the disclosure here and the slides, it's all very helpful. I wanted a little more detail on the free cash flow outlook. You've got the year-over-year improvement in free cash flow, but it looks like you're leaving your full year guidance intact? Have you created more buffer for yourself in this second half of the year on your free cash flow guidance, that you are just leaving it in place to be conservative, or are you expecting different headwinds in the second half that weren't anticipated prior to your upside in the quarter that you just reported?

Rod, it's Don. Listen, thanks for those comments about the disclosure. Thank you very much for that. I think as I commented that we've got certainly some of the capital expenditure, we view as timing and so, I think some of that's going to come back the other way. We're very pleased with our DSO performance. We are not satisfied yet. We're going to continue to work that. So, I think we are leaving the guidance where it is for right now, but I'm emphasizing we will continue to work very, very hard.

Can you specify what your DSO assumption is embedded in your cash flow guidance? I was assuming maybe a five day improvement for the year was already embedded in the guidance, and you seem to be exceeding that assumption on the DSO front. Do you have a new DSO assumption for your free cash flow?

You are right, five days was about what we talked about at the Investor Day for improvement, we're certainly tracking more favorable to that. I would like to just let the results speak for themselves, as we come through that without getting into the specifics.

But should we assume if you keep your DSO's at the current level that you are in a position to exceed your free cash flow target for the year, or is there an offsetting item that would preclude the free cash flow guidance from being exceeded?

Again I would say there is timing, there is projected timing on the capital expenditure profiles that are having us leave our guidance where it was.

Okay, great.

Okay.

Thanks, Rod. Next question please, Operator.

Our next question is from Adam Frisch with UBS.

Thanks. Surprised Rod didn't ask about the pension. I do want to offer my thanks for all the color there. A quick housekeeping item; was the guidance change just based on FX or was there also a change in business fundamentals?

I think as we have laid out for you on the translation rates on the left part of that slide on 25, the original guidance, we have tightened it by $0.10.

Right.

So I would say that there is a bunch of moving parts, but we would absent these changes in the currency rates, , we would be with the original guidance.

That's perfect. On the bookings front, the trailing 12 month year-over-year comps were positive again for the second quarter in a row. That’s usually a good omen for some revenue acceleration and ultimately some margin expansion a few quarters later. Can you talk a little bit about your pipeline and what you think you’re going to do in the back half for the year and whether or not you think the trailing 12 will remain positive?

Adam this is Mike. We are pleased with the pipeline. We gave you some color on the pipeline. I think both in the NPS sector and in the outsourcing sector, we would expect to see some upward movement there with the activity that’s going on. We are seeing some robust activity in the outsourcing market, I think some of it as a result of the macroeconomic conditions. But as you said, that lags a bit, and I think that's more towards a six month window. I guess what we are being a bit cautious on is the discretionary spend in our Business Solutions and Services. So we are trying to balance the impact of those two and incorporate that as well as we can in the guidance that we are giving right now.

Okay, thanks. And then just one follow-up on NHS; touched on it in your comments. We are hearing some delays, some postponements out there. All the things that we are hearing about in the media and I think with this contract you can't always believe what you read, but the kinds of delays that we are hearing about, are those incorporated in your guidance and we should not expect an adverse impact if we continue to see these kinds of developments with NHS.

People tend to sometimes focus on some of the negative press that comes out of the UK. There is also a lot of positive press that comes out, and particularly from the NHS. Our confidence continues to build on the program. We are pleased with our progress. Where we are today is incorporated into the guidance. So the user response has been very positive at the early adopter sites. So it's a matter of making sure that everybody is absolutely comfortable with turning the switch all live, and I think we are getting very close to that. But where we are today in terms of schedules is built into our guidance.

Great. Thanks. Good job. UBS: Great. Thanks. Good job.

Thank you, Adam. Next question please operator?

Our next question comes from Bryan Keane with Credit Suisse.

Hi. Just to follow-up on that. I guess my understanding from talking to people in the UK is that the implementation or rollouts are behind schedule from kind of the original plan, and that the schedule to go life has been postponed. I know it’s in your guidance, but can you talk about kind of what was the original plan to where you are now? Credit Suisse: Hi. Just to follow-up on that. I guess my understanding from talking to people in the UK is that the implementation or rollouts are behind schedule from kind of the original plan, and that the schedule to go life has been postponed. I know it’s in your guidance, but can you talk about kind of what was the original plan to where you are now?

The original go live was I believe -- I don't want to speak for the NHS. But I think it was around the September timeframe. We’re obviously past that. We don't expect to be much further past that. I think it’s just a matter of the customer getting completely comfortable with the software. Again, I think, if you speak to the hospital sites where we have deployed it with the earlier adopters, there's very positive feedback. As I mentioned in my comments, the CEO of the Morgan Bay Hospital, which is the acute care hospital, major hospital has spoken very positively about the functionality in the program. So the NHS has taken the position that that they want to absolutely ensure that they have patient care, patient safety is the number one objective and if that takes a little bit longer, then that's the path we're going to go down and we're supporting them on that.

So for the whole operation to go live, it's probably going to take some time and I assume it will be stagnated going forward. How is that going to impact kind of the financials, kind of what you had original thought to where it is going to look like now? Credit Suisse: So for the whole operation to go live, it's probably going to take some time and I assume it will be stagnated going forward. How is that going to impact kind of the financials, kind of what you had original thought to where it is going to look like now?

Everything is incorporated into the guidance as to where we are exactly right now. As I said, our confidence continues to build in the program.

And the new live time frame is scheduled for this quarter at some point? Credit Suisse: And the new live time frame is scheduled for this quarter at some point?

I don't think the NHS has struck a specific date on that. I think it's simply when they feel they are ready to turn that switch and we think it will be sooner rather than later. But I don't want to speak for them as to, explicitly when that is. They have not set a specific date.

Okay. One last question, Don. I didn't catch, I know there is some acquisitions and there the organic growth in the quarter? Credit Suisse: Okay. One last question, Don. I didn't catch, I know there is some acquisitions and there the organic growth in the quarter?

We talked about the first consulting group was the acquisition and I gave to reference to how much it is within BS&S, particularly the Financial Services. Our Q has now been filed up there and you can get the specific how that lays out for the composite, for the company or the individual slices from the segment if you want from the 10-Q.

You don't have it handy, the organic growth? Credit Suisse: You don't have it handy, the organic growth?

I'm flipping, right now is 1.7 % of the total.

1.7. Okay. Thank you very much. Credit Suisse: 1.7. Okay. Thank you very much.

Okay.

Thanks, Bryan. Next question please?

Our next question comes from Moshe Katri with Cowen & Company. Moshe Katri - Cowen & Company: Hi, thanks. NPS, I think you said grew about 3% for the quarter. The pipeline is strong, and I guess the real question here is what do we do to get growth to accelerate in that part of the operation given the fact that it should be defensive in the current environment? Thanks.

Yes, Moshe. As we said, we had some contract close downs that negatively impacted the number for this quarter. We're projecting 6% for the next quarter, given some of the recent wins we have had. We continue to have a good pipeline there. I think Don gave a full year growth number of 5% to 7% for NPS. I think that's a reasonable projection at this point in time based on what we see and what we feel out there. Moshe Katri - Cowen & Company: Is there anything that we should be aware of in terms of policy changes given the new administration looking at the public sector side of the business?

Well, I think it's a little too early to project that. I think we would all probably assume that there's going to be some level of shift from defense to citizen services. I think it's probably going to take up to a year to really see that reflected in the budgets themselves and in the programs themselves because it takes that long to get people in place and the opportunity to review things. From our standpoint, and given our footprint in both the civilian agencies and the defense, I think we're extremely well positioned. I don't think IT spending is going to go down across government in general. And I think there's still, I know the wave of retirements of current civil servants is, that wave is still coming and I don't think there is going to be any choice but to continue to contract out for IT service support. So I think the general consensus around here in Washington is that we're not going to see a significant change at least for a year out. Moshe Katri - Cowen & Company: And last question, can you make any comments on the integration of the acquisition in India? Are we done with the integration efforts, where are we at?

India is integrated. It's all under Raj Vattikuti front to back. So the CSC legacy and the Covance's resources are totally integrated into one business unit. Moshe Katri - Cowen & Company: Thanks.

Thank you, Moshe. Next question please operator?

Our next question comes from George Price with Stifel Nicolaus.

Hi, thanks for taking a couple of questions. And I very much appreciate, Don, the historical segment data.

You're welcome. Thank you.

The first question goes back to the original guidance. You tightened it down $0.10. So obviously there is some sort of change implied in that. Is that driven by discretionary? Just as you see the macro environment evolving as it is. Is there something else in there?

I think it's fair to say that it's our caution around the macro environment. I think as we looked at it and looked as we gave you the range of 4.20 to 4.40, we thought there was more downside risk than upside potential given what we see in the macro picture. So we thought it best to tighten it up a little bit.

Okay. Now totally understandable, I want to make sure that was what we were talking about. Just on the free cash flow, you mentioned some timing benefits for CapEx, it sounds like you expect to come back in the second half. Can you be a little bit more specific about what those are? Given your focus on cash in the near term, did you just defer some CapEx?

No. It’s really more customer driven and customer timing than it is internal CapEx. So it may just be the timing of working with customer programs, as where we may have a capital refresh requirement et cetera, those kinds of things.

Okay. And then I guess, last thing, just stepping back, I wondered maybe get your thoughts. Mike, I know you talked about this, just on the valuation of the stock and the company. Obviously everything has been hit incredibly hard, nobody likes looking at the screen and 401(k) at this point. But arguably the stock price is almost entirely attributable to the potential value of your very strong federal business. Any thoughts at this point on that?

No. I think the stock price just reflects the craziness in the market. And so I don't think it reflects a specific business unit or element of the business. From my perspective, it’s an irrational market at this point in time and it reflects an irrational price.

Okay. Quickly for Don, what was the pro forma tax rate?

It’s about 40...

44?

I was going to say about 43, I think.

Okay. Thanks.

Excluding the net IRS items.

Okay.

You know the items….

Yeah. Thanks very much.

Thanks, George. Next question, Operator?

Our next question comes from Julio Quinteros from Goldman Sachs.

Hi, thanks. This is Vincent Lin sitting in for Julio. I guess the first question is in terms of the demanding environment, I just wondering if you can provide a little bit more color in terms of the demand environments here, US versus the rest of the world, specifically in Europe for your commercial business.

Can you say it again?

I was wondering if you can provide more details and commentary in terms of how you see the demand environment shaping up here in the US versus the rest of the world, specifically in Europe given your exposure there?

Well, I don’t think we're seeing all of that much difference between the US and Europe. What we're seeing I think, what most our industry are seeing is a slowdown in the decision process on a discretion spend. We've been incorporated that I mean to a numbers. We're fortunate that, we have a large public sector business both in the US and in Europe. So that keeps us well balanced and we are seeing active interest in out sourcing in both US and Europe. So I think like everybody else, we are seeing some softness in the discretionary spend, particularly in I would say in financial services and automotive.

Understood. And related to that for financial services, I'm just wondering into the month of October and so far in November, have you seen that vertical has stabilized, or is the trend to continue to worsen for that vertical specifically?

Well, we are not seeing any major differences. But you have to take into consideration that a significant portion of our financial services work is in the insurance side of financial services as opposed to banking. So again, I think we're a little less exposed and seeing a little less of the impact than what some of our competitors might see who are involved significantly in the capital markets and also the retail banking.

Got it. And lastly, I think we know the answer just given the timing. But for the incoming CFO, just wanted to confirm that he wasn't involved in the planning process as far as the revised that guidance is concerned?

No, he has not been involved in any of the financials.

Okay. Great. Thanks.

Thanks. Next question please operator?

Our next question is from David Grossman with Thomas Weisel.

Thanks very much. Don, a quick question getting back to your guidance: Can you give us a sense for what kind of assumptions you're making going forward in the second half of the year or what the constant currency revenue growth we should think about in terms of the guidance for the third and fourth quarter?

Well, again, for the calculations that we did, we went and used the six month forward projections for the key currency as we noted there on the bottom of the slide. From a constant currency perspective, it would look like for the full year, we'd be at about 7.50% to 8% on a full year basis constant currency. Is that what you were looking for?

Yes, exactly. And then in terms hedging -- I assume that you do hedge. Do those hedging gains and losses show up in other income on a net basis?

Yes.

Okay. And can you just tell us what those were in the quarter?

They balanced out basically nothing between the cost of the hedging and any gains we got, basically just was so small to not even bother putting it on the slide; under 200,0000.

And that includes the balance sheet translation adjustment as well?

Not the translation adjustment. The hedging cost for the balance sheet foreseeables would be in that, but the translation adjustment appears on the other comprehensive income as an adjustment.

Okay. Mike, going back to the NHS, I know there have been a couple of questions about this already. Could you remind us of what the milestones are, as the major milestones in the contract?

We've got two major milestones in the second half. One is the final sign-off on Primary Care Solution that supports the general practitioners, and the second one is the sign-off on release one that is out on the early adopters. So those are the two that we need to make happen in this half and we are feeling reasonably comfortable that we’re going to accomplish those.

So the things that have been referenced in the press are primarily the release one, as the early adopters, is that right?

Yes, you've got to remember that things in the press aren't just about CSC. There is another provider out there working on the NHS program, and some times there is no distinction made between the two providers. So again, I would direct you to the specific hospitals or the specific centers where we are working and check that feedback. And I think you will get very positive feedback.

Mike, was it sounds like release one, you've got the three adopters that have to sign off. On the GP side, how does that approval process work? Is there a centralized… Thomas Weisel: Mike, was it sounds like release one, you've got the three adopters that have to sign off. On the GP side, how does that approval process work? Is there a centralized…

Yes, that’s a centralized one. As I understand it, it’s a single instance that supports all the GPs and there is a single sign-off on that.

Okay. And has that… Thomas Weisel: Okay. And has that…

You are taking me a little deep here. We will get you more details if you need it.

Okay. And just last thing on the NHS then. In terms of the milestones, are we talking just about cash flow milestones for fiscal ‘09 with the implications of earnings in fiscal '010 as it rolls out, or they are earnings and cash flow implications for the milestones in fiscal ‘09? Thomas Weisel: Okay. And just last thing on the NHS then. In terms of the milestones, are we talking just about cash flow milestones for fiscal ‘09 with the implications of earnings in fiscal '010 as it rolls out, or they are earnings and cash flow implications for the milestones in fiscal ‘09?

Yeah, there are both. Achievement of the milestones brings certain revenue recognition milestones as things come out of work-in-process and have revenue and recognized and associated with the margin and then the cash as well.

Okay. Just to close that out, can you give us any sense at least in ranges, just what kind of exposures we have if you know for some reason it does get pushed in fiscal '010 in terms of the implications to either cash flows earnings in fiscal ‘09? Thomas Weisel: Okay. Just to close that out, can you give us any sense at least in ranges, just what kind of exposures we have if you know for some reason it does get pushed in fiscal '010 in terms of the implications to either cash flows earnings in fiscal ‘09?

Look, we think we’ve calculated all of that within our guidance, and I would like to leave that at that.

Okay. Great. Thanks very much. Thomas Weisel: Okay. Great. Thanks very much.

Okay.

Thank you, David. Operator we have time for one final question please.

And our last question comes from Greg Smith with Merrill Lynch.

Yes. I was little confused on what you said about offshore headcount. I thought I heard there were some reductions but also some incremental shifts. Can you just kind of clear up what went on with regards to your offshore headcount? Merrill Lynch: Yes. I was little confused on what you said about offshore headcount. I thought I heard there were some reductions but also some incremental shifts. Can you just kind of clear up what went on with regards to your offshore headcount?

Sure. We have taken significant reductions in headcount in higher locations if you will, and a lot of that primarily within the US, in the Americas. So what I was trying to say in around numbers it's about 2300 reductions globally but the bulk of those in the Americas. But at the same time, we have hired about 3000 people in India. And it is not necessarily one-for-one of this job was reduced and a corresponding job was hired in India. They may be completely different in terms of what functions they perform and how available they are.

I am just trying to give a sense of, there is clearly a mix happening of, the balance of CSC's employee population is decreasing relatively in the higher cost locations and increasing in the lower cost locations.

Okay. And so all those the reductions all ran through the P&L, any severance ran through the P&L this quarter? Merrill Lynch: Okay. And so all those the reductions all ran through the P&L, any severance ran through the P&L this quarter?

That's right. And that's the point that I tried to make that, two plus years ago we had the formal announced restructuring program, where those costs appeared in the special items line. And as we said at the investor day, we wouldn't do that anymore. We weren't going to have those formal restructuring programs. We would be doing this, as the situation arose and therefore we flow through normal operations.

Okay, perfect. Then only debt you have coming due well within the next couple years is in '09, you have a couple $100 million and then nothing else till 2011 or 2012 I think? Merrill Lynch: Okay, perfect. Then only debt you have coming due well within the next couple years is in '09, you have a couple $100 million and then nothing else till 2011 or 2012 I think?

That's right.

I am sorry go ahead. Merrill Lynch: I am sorry go ahead.

No, I was going to say the $200 million that's due at the end of our fiscal year here and then nothing next fiscal year.

Yes. The cash we see on the balance sheet, the $742 million, how much of that is in the US and then is that all freely available to you? Merrill Lynch: Yes. The cash we see on the balance sheet, the $742 million, how much of that is in the US and then is that all freely available to you?

Are you talking about with the drawdown of the credit facility or for just what's on the balance sheet there?

What's on the balance sheet today, I mean because that represents already drawing down the credit facility, does it not? Merrill Lynch: What's on the balance sheet today, I mean because that represents already drawing down the credit facility, does it not?

No, again that's very important to understand. That's an October 3rd balance sheet and we didn't drawdown the credit facility to mid-October.

Got it. Okay. Merrill Lynch: Got it. Okay.

So it does reflect the drawdown of the credit facility. It does reflect that we had started to build incremental cash because we started to see the commercial paper market not working very well and I must say it has worked for us for many, many years and we had dealers who were pre-approved to sell CSC paper. And with the acquisition we did have commenced last year. We initially did that with commercial paper. So it was a market that worked for us very well for a long number of years. But as we came through the end of September, it just became an increasingly troubled market. Those who buy commercial paper think of money market funds who could not predict the redemptions that they were going to see the next day started going for very short maturities. One day rather than the previous much longer-term maturities we were able to sell in the commercial paper market. So as past maturities began to mature and they were rolling over into more and more was rolling over to one day, we had more and more of our CP paper that we have to go on and sell in any given day. And we just got to the point in mid-October where we said this is just, we are spending far too much time talking with the dealers about what used to be an easy thing to do about selling our commercial paper, about how they were going to sell it [that day]. And we just decided to pull the credit facility.

Yeah, okay. And then just, I don't believe you said what tax rate is assumed in your guidance for 3Q and 4Q?

I did. I can repeat it here for you. Give me one second here. Again, adjusting for the net tax benefit from the IRS resolution increased provisions for the international tax audits. It's mid to upper 30% with Q3 at nearly 40% and Q4 at mid 30%.

Okay, great. Thank you.

Okay.

Yeah. Thank you, Greg, and Operator, let's conclude our call. We want to thank everyone who dialed in and we will talk to you next quarter. Thank you very much.

We thank you for your participation on today’s call and have a wonderful day.