Good day, everyone, and welcome to the CSC Fiscal Year 2012 Third Quarter Earnings Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Bryan Brady, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Well, good morning, ladies and gentlemen, and welcome to CSC's earnings call for the third quarter of our fiscal year 2012. We issued our financial results earlier this morning, so hopefully you've had a good opportunity to review them. With me today are Mike Laphen, our Chairman and Chief Executive Officer; and Mike Mancuso, our Chief Financial Officer. As usual, this call is being webcast at csc.com, and we've also posted slides to our website to accompany our discussion. So moving to Slide 2. You'll see a reminder that statements made during 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. Additional information concerning these risks and uncertainties is contained in the company's filings with the SEC. And copies of these filings are available from the SEC, also from our website and from our Investor Relations department. On Slide 3, you'll see our acknowledgment that CSC's presentation includes certain non-GAAP financial measures. And so in accordance with SEC rules, a reconciliation of these metrics to GAAP metrics is included in the tables of the earnings release and in the appendix to our slides. Both documents are available for you to review at the Investor Relations section of the CSC website. Finally, I'd like to remind our listeners that CSC assumes no obligation to update the information presented on this conference call, except, of course, as required by law. Now if you'll kindly move to Slide #4, I'm pleased to turn the call over to Mike Laphen.

Thank you, Bryan. Good morning, ladies and gentlemen, and thank you for joining us today. First, I'd like to extend my personal welcome to Mike Lawrie as CSC's next President and CEO. I and the entire management team will do all we can to ensure a smooth, efficient transition, and we look forward to the company's future success under his leadership. Now turning to the NHS program. We remain in discussions with U.K. government officials to reach a satisfactory way forward. Once these discussions conclude, with or without agreement, we will issue an 8-K announcement with appropriate disclosure. As indicated in this morning's press announcement, our third quarter results include the charge to the NHS program disclosed in our 8-K announcement of 27 December, 2011. Turning to new business. We continued to see strong improvement year-over-year in our new business performance. For the third quarter, TCV bookings totaled $4.1 billion. Year-to-date, through the first 3 quarters, we have recorded $13 billion of bookings, a 26% increase over the same period in fiscal year '11. Currently, we have a total of $12 billion in submitted proposals awaiting decisions, of which $8 billion are for opportunities scheduled for award in our fiscal year '12. While some of these opportunities will undoubtedly slip into fiscal year '13, we expect a continuation of our solid bookings performance in the fourth quarter and for the full fiscal year. Our North American Public Sector's fiscal year '12 third quarter top line results continue to reflect the ongoing uncertainty in government budgets and the day-to-day difficulties our clients are facing in awarding new initiatives. While Congress has enacted an appropriations bill for government fiscal year 2012, eliminating the possibility of a government shutdown through the first half of our fiscal year '13, the super committee empowered by…

Thanks, Mike, and good morning, ladies and gentlemen. The essence of this quarter's performance and positioning centers around the items noted on my first chart. In your case, Chart 7. I'll highlight our bookings, the NHS accounting, margin performance and cash flow. We feel good about the $4 billion in new business bookings and the fact that we have achieved $13 billion year-to-date through December. As you can see from Chart 8, quarter-over-quarter and year-over-year, we are well ahead of last year, particularly in our commercial business and principally in MSS. Visibility into our fourth quarter pipeline suggests the potential for a comparable outcome in the fourth quarter. Chart 9 lays out selected P&L data for the quarter, showing our actual results but then separating out the NHS write-down and the goodwill write-off in BSS healthcare to reflect how the basic business performed. The specified contract charge is the NHS program, and the $204 million revenue reduction arises from the write-off of billed and unbilled NHS receivables. The $1.485 billion OI reduction is just about the entire balance sheet investment in the NHS program as we identified in our 8-K of December 27. Also, during the quarter, the BSS-Health reporting unit experienced a loss of a significant customer through a merger and did not win some anticipated new business, thus reducing forecasted earnings considered a triggering event for our goodwill impairment test. The net result of the analysis resulted in a write-off of the remaining BSS healthcare goodwill of $60 million, all of which is described in detail in our 10-Q. While not noted on the chart, the tax rate for the quarter is dynamically affected by current and prior period write-offs and is not representative of what might be expected in future periods. Chart 10 displays revenue by line…

Thank you very much, Mike. Well, ladies and gentlemen, we are ready to move into our Q&A session. Operator, could you please pass your instructions to our guests?

[Operator Instructions] And it looks like our first question will come from the site of David Grossman with Stifel, Nicolaus. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Just a couple of just follow-up details in the quarter. I guess the first thing is, Mike, you mentioned a benefit from a receivable settlement in the quarter. Can you give us an idea of how much that amounted to and how that impacted free cash flow?

Yes, David. If you reflect back earlier in the year where we settled the government contract dispute, we had a billed receivable recorded in the second quarter of roughly $275 million that was a product of that settlement agreement. So it was sitting in receivables at the end of the second quarter of this year, and we collected it in the third quarter of this year. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: And was that a pretax or an after-tax number, the $275 million?

$277 million would have been pretax to the extent there was earnings associated with it. But if you recall, on the contract settlement, we also wrote off something like $270 million or so of costs associated with it. So I guess, roundabout, you could think about it as being after-tax. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then in terms of NHS, should we -- was there any free cash flow outflow on that contract as a result of the inability to reach an agreement? And is there anything we should think about in terms of the impact on free cash flow generation going forward now that the contract is likely to be rescoped?

David, we have an existing contract. We have an installed base. We are conducting operating and maintenance activities on what has already been installed out there. So we are incurring cost and recording revenue accordingly, and we'll do so for future periods. Relative to the development work on the contract, that's rapidly coming to a close. We have to complete our obligations under the contract. So there is cost being incurred as we speak. Not huge sums, but there is cost being incurred as we conclude the development activities under the contract. So there is an outflow, and it's not significant. And it's dictated by our obligations under the existing contract. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: But is the $150 million of maintenance revenue -- I think in round numbers -- I think, Mike Laphen, that's a number you've referenced in the past. Is that still a good number to think about in terms of revenue from the maintenance settlements of the contract?

Yes. Sans any incremental development/fielding deployments, that's a good number. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just one other financial question is I know the tax rate is a moving target here. But I guess, first, do we have any visibility on what the GAAP tax rate should be for next year? And will there be any material difference, at least where we sit now, between what the GAAP and the cash tax rate would be for next year?

David, to be perfectly honest with you, our visibility is a little bit clouded, not understanding at this point what may or may not develop out of the NHS contract discussions. So if you're looking for a guide, I'd tell you that you should think in terms of, as I've said in the past, low 30%. As we sit now, I'm not aware of any dynamic large settlements, activities, et cetera, et cetera, that are going to have a dramatic effect on the tax rate. But as I said, we're not prepared to give out guidance for next year. And a lot of the NHS activities, et cetera, will have some impact on the tax rate, among other things. So I'd say keep your powder dry at this point in time, David. If you're thinking in terms of your model, I'd say be patient. We're not there yet. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And if I can just ask one other question just about the -- Mike Lawrie's appointment. Can you share with us just the -- perhaps the company's thinking in terms of what they saw in him and his background that made him the right candidate for this job?

Well, David, I'd point you to the press release and Irv Bailey's comments in that regarding his in-depth experience. He has experience with IBM more than 25 years. Global experience, a recent CEO. So I think he brings the depth and breadth that we were looking for to move into this slot.

Our next question will come from the site of Bryan Keane with Deutsche Bank.

Mike Mancuso, I guess just looking at last quarter's slides, you were talking about $0.62 pro forma for earnings and for 3Q and then $1.40 for 4Q. I guess, putting the NHS contract aside, how do the results in 3Q compare to that? And then how about for the $1.40 expectation for Q4?

Well, let me take the latter first. Q4, we're not going to stick our necks out on Q4 right now, Bryan, for all the reasons I mentioned before. Relative to the, call it, pro forma guidance of last quarter and $1.50 something, we've reported this quarter something like $1.35 EPS. There's $0.80-plus of benefit in that $1.35 from the tax effect of prior-quarter and current-quarter write-downs, et cetera. So I think in terms of trying to do an apples-and-apples comparison, we'd probably come out on a comparable basis somewhere plus $0.50, $0.55 this quarter relative to the $0.64 or $0.68 or whatever our guidance was for the quarter a year ago -- or a quarter ago. And the principal difference in that are the write-offs that I referred to, contract write-offs in our NPS segment. As you read the Q, there's over $50 million of charges on 2 particular contracts in NPS that diluted our earnings and on a comparable basis would have accounted for the impact in EPS from our pro forma.

Okay, just one quick follow-up. In the last 10-Q, I think there was a mention of the audit committee looking into POC accounting inside of North America. Any update on that? And can you give us an idea of how much POC accounting accounts for CSC's financials?

Again, on the latter, I don't have a number to throw out on how much is POC. I think your question more or less really vectors in on what is the status of the SEC investigation. So let me address that now and for everybody, so we don't get into further questions in this regard. Look, it's an ongoing investigation. It will be over when it's over. We can't predict when that end will come. As we disclosed last quarter, besides the Nordic region and Australia, the investigators are looking at our market outsourcing organization and certain percentage of completion contracts across the corporation, including the NHS contract. The adjustment schedules that you'll see in our 10-Q have been updated to reflect a handful of immaterial unintentional accounting errors surfaced in the third quarter that should have been recorded in the first and second quarter of 2012. At this moment, we are not aware of any new material issues or any expansion of the investigation. And beyond that, that's really all I can say about it, Bryan.

Our next question comes from the site of Nathan Rozof with Morgan Stanley.

You addressed the go-forward revenues related to NHS from the maintenance business. I was wondering if you could give us some insight into what impact the development revenues had in this fiscal year, i.e., how much revenue you incurred this fiscal year related to development for NHS?

Yes, I can't give you a specific number, Nathan. But in the past, we have said that NHS revenue approximated 2% to 3% of our annual revenue. So if you take that gross number and you back out the $150 million, that would give you an approximation of development. But keep in mind, that development is now perturbated by the discussions and the charge we took and whatever happens in the fourth quarter. So you're going to have a difficult time, as we would have a difficult time, trying to articulate a development revenue for the contract until there's a conclusion of discussions one way or another.

Okay. And then how should we think about the margin and free cash flow outlook for the firm ex NHS, just based on the assumption that NHS would have likely been higher-than-average profitability and because of the fact that you've taken a write-down of the assets on the balance sheet that would have, I guess, theoretically converted to cash over the remainder of the contract?

Nathan, again, it gets in the area of guidance, and we're not in a position to offer guidance at this point. We're doing our budgeting this quarter. Late February, March time frame, we will have our hands around numbers. Generally speaking, as we have in the past, we expect to be cash positive, have respectable cash flows going forward. But beyond that, we can't quantify until we know where we are in the large contract situation.

Okay. Well, let me just ask maybe one that isn't NHS-related, just for clarification. You talked about the opportunities for margin expansion in the fourth quarter. I was just wondering if you could give us any more insight into what's going to drive that margin expansion and then potentially if there could be any impact to NPS profitability if we do hit that sequestration scenario that you pointed to. I appreciate the clarity.

The sequestration impacts will probably affect more FY '13 right now. We're seeing whatever effects it may have in FY '12. Margin expansion in the fourth quarter is the result of our focus and the new team in MSS’ focus on the performance issues inside MSS. So things aren't going to be fixed overnight, but things are being fixed as we go along. And we expect that some of the problems of the past will not repeat themselves.

And our next question will come from the site of Darrin Peller with Barclays Capital.

Just 2 questions. First just on the government business overall. Can you give us a little color on what you're actually seeing now? I mean, there's obviously been a lot of headlines around budget deficits and the like and trying to improve that from the federal U.S. government side. So any thoughts there? And maybe if you have any color on Europe as well, it would be helpful. And then I just have one follow-up on the model.

Well, with respect to the federal business, I tried to give you a little bit of color on that in my opening comments. It continues to be a dynamic environment. There's obviously pressures on the defense budget. I think as you look at the industry in general and those reporting their numbers for the past quarter, you tend to see low- to mid-single-digit reductions. And I think, for us, on a sequential basis, we probably will be fairly stable from third quarter to fourth quarter. But I think we still expect to see some erosion next year. I think that's just the likely outcome with all the ongoing pressures. Europe, we have seen some slowdown in our BSS work, our project work, particularly in the financial services market, in the banking in particular. We're not overly exposed to that. Our financial services is more driven by the insurance industry as opposed to the banking. But in Germany, we have a reasonable banking business and also in France. So on the continent, we're seeing somewhat of an impact of the instability in the banking world on the continent.

Okay. Just quick one, one quick follow-up on the G&A, maybe for Mike Mancuso. The corporate G&A number obviously had a nice decent sequential drop to around the mid-$40 million range this quarter. Is that what we should be -- I mean, I know a lot of that was spent on the legal issues you've been going through, and it jumped a lot the quarter before to the $60 million-plus range. So is the $40 million range now more appropriate?

Probably, Darrin. We still have investigation costs that are perturbating the G&A. So I'd anticipate perhaps an increase in the fourth quarter, relative to next year. Again, too early to say what the status is going to be. The timing of billings, et cetera, have a lot to do with the pattern of G&A spending.

Our next question will come from the site of Keith Bachman with Bank of Montréal.

I had a couple, if I could. Could you speak to what the -- any anticipated charges are that would be incremental for the upcoming quarter or even if you wanted to mention longer term? But really, in the upcoming quarter, how should we be thinking about incremental charges from what you just announced?

Keith, not sure we totally understand your question. Incremental charges on the NHS program? What are you referring to?

More broadly than that. There's a number of different charges on contracts and the NHS program. Is there just anything, headcount reductions, anything that we should be thinking about more broadly than just NHS as we look at the upcoming quarter?

Not at this juncture. We're not prepared to make any projections relative to -- all the bookkeeping that needs to be done on the contracts in question has been done. We're not anticipating, but it's a dynamic environment with hundreds of contracts. So...

Okay. All right. Then if I could follow up, is there -- with the new executive appointment, is there any -- a broader question, but is there any restrictions associated with his coming on board? And more specifically, many times, when new leadership comes on board, for instance, there's changes at the board of directors level. Is there any restrictions that we should be aware of associated with his coming on board?

Not that I'm aware of. No.

No.

Our next question will come from the site of Jason Kupferberg with Jefferies. Jason Kupferberg - Jefferies & Company, Inc., Research Division: Just a follow-up on NHS. I know it's been very difficult to pinpoint timing of certain milestones and obviously trying to get the MOU done. But I'm guessing, at this point, you guys must have some rough general sense of when you think this might get resolved. So any insight you can provide there? And maybe as part of that answer, just talk a little bit about what you guys see as being the drivers of some of the delays here, which obviously have dragged on a bit longer than anyone would have anticipated, understanding that a lot of this has really been outside of your control.

Well, I guess what I'd say is that we've been engaged in the discussions, as you know, for some time. But recently, with the officials from the NHS, as well as representatives from other relevant government departments, and I'd say these discussions have evolved into a potential go-forward framework that is currently in the government's review process. We'd love to be able to give you a reliable time line but haven't been able to do that in the past. So I think all I can say is that it's in the review process, and that as soon as we have something back from them, we will issue an 8-K and move from there. So I'd like to give you more certainty than that, but that's about what I can give you at this point in time. Jason Kupferberg - Jefferies & Company, Inc., Research Division: And then just a follow-up. I think you had mentioned in BSS, there was a lost customer or maybe 2. I'm not sure if I caught the prepared remarks properly on that. But can you give us some sense of how big these customers were in the context of the overall BSS business? Because I know it did trigger the goodwill write-down.

It wasn't astronomical by any stretch, Jason. But it was meaningful, and it really affected our forecast of future revenues and cash flows and how that would filter through a goodwill impairment analysis. So you shouldn't think of it as a huge impact. But BSS healthcare is not a small business unit, but it's not very large either in that regard. So I wouldn't think of it as a staggering impact to the corporation going forward. Jason Kupferberg - Jefferies & Company, Inc., Research Division: More of an incremental headwind? Okay.

We'll go next to the site of Ashwin Shirvaikar of Citi.

A couple of questions. One is the decrease in DSO. While it's a good step, is it sustainable? And why, is my first question. And then the second one was on -- you said NPS margin recovery, and I'm kind of wondering is that margin recovery more related to any, especially cost cuts you're doing? Or what's it related to? Why should we expect that?

Just to clarify, Ashwin, your second comment is around NPS?

NPS, yes.

Okay. Relative to the receivables, I'd refer you to the chart that shows you the absolute trend in receivables. Historically, we had been carrying a significant claim receivable on the government settlement that was inflating our days receivable and pushing us into the high 80s, low 90s. That is behind us now. Then we had the impact of the NHS contract and delays in collecting introduced through the negotiations in the MOU process. I think, and this is opinion going forward, assuming our mix of business stays relatively constant the way we are in mix of contracts, our receivables should be in the low 70s, high 60s. Now that -- obviously, we're right now in the -- somewhere in the mid-70s so to speak. I think there's room for improvement, and I think we can get there. But as you can see, it's going to be a function of time. As far as NPS is concerned, they were one-off charges on major contracts, unique circumstances around each one. Don't anticipate them repeating. Yes, NPS is involved constantly in cost controls, cost reduction, et cetera, et cetera. As the uncertainty around the defense budget continues relative to next year, we will be positioned to take action on the cost side of the equation to size the business proper with the revenue stream that we anticipate. So I would look for activities on our part constantly to improve the NPS margins. I would also add that a portion of NPS's business, not insignificant, is cost reimbursable. So reducing cost makes us more competitive, but it doesn't drop the reduction to the bottom line. So again, you got to filter all that through the equation. But cost performance and cost competitiveness is on the forefront of our focus in NPS.

Our next question will come from Tien-Tsin Huang with JPMorgan. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: It's Tien-Tsin. Just wanted to ask about the guidance and how you're thinking about the timing on issuing the guidance. Will you update it? Will you basically update it in conjunction with the 8-K around NHS? Or are you going to wait beyond that, for the new CEO, or the quarter or the 10-K? I'm just trying to understand the timing of when we might expect that in relation to the NHS.

Well, it may come in 2 parts. Well, our first 8-K will be to inform our investors relative to the status of the discussions on the NHS contract. Second part of that will be to factor in, as best we can, what the financial impact of those discussions are. So without making a commitment, it could come in 2 parts. It frankly depends on the clarity we receive relative to our current discussions. But certainly, our end date for guidance for next year obviously would be our May earnings call. If we can do anything before that to help clarify the situation, we will. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Okay, so 2 stages. Makes sense, Mike. Makes sense. I guess I'll ask another NHS question, just around iSOFT and that acquisition. Anything in the charge related to the iSOFT deal? And what's the outlook on iSOFT in isolation here?

No. Nothing related to iSOFT, I believe. Right? Go ahead, Mike.

There was a small piece of -- when we acquired iSOFT, a small portion of the iSOFT goodwill was allocated to the BSS-Health care reporting unit. So that got wrapped up in the goodwill and amortization charge in the BSS-Health care. The goodwill associated with the iSOFT reporting business, the acquisition, if you will, is not affected by the goodwill charge.

And the iSOFT entity is overachieving against our acquisition model. So we're pleased with where it is right now. The integration is going well.

And there's a discussion of that, Tien-Tsin, in our 10-Q.

Our next question comes from the site of Joe Foresi with Janney Montgomery.

I was wondering if you guys could give a little bit more color on what's in the bookings number for this quarter. We've heard a lot of commentary about decisions being slow in the commercial sector. And then obviously, we've talked at length about the public sector. What is the speed at which those contracts are being signed? And are you hearing of any delays? And just what is in that number?

In the Q3 number, it was primarily driven by MSS or our outsourcing business. So that was $2.4 billion of our $4.1 billion. The NPS was at $800 million. And then our BSS was $900 million. So we would've expected the NPS to be a bit higher than it is, and it's being impacted by the environmental issues that we referred to that are industry-wide. So the big driver was the commercial outsourcing. And as I said, we're quite pleased with the continuing success we're having there.

Okay. I mean, maybe just within that commercial, are you seeing more stuff on the maintenance side? Are these first-time adopters? Are they recompetes? I'm just trying to get a sense because it's pretty much slow for a lot of your competitors in that region.

Yes. I guess we're a bit fortunate because we're doing well. On the Q3 within that -- overall, it's 93% new business, so only think 9% recompete.

Okay. And then just the last question for me. Maybe you could talk a little bit about your conversations with any clients, if you had them, regarding management's departure. How are they taking it? Maybe any staff numbers on the attrition side too?

Well, first of all, I wouldn't comment on any discussions with customers. I think that's proprietary, and so I wouldn't be comfortable with that. But in terms of the staff, no. The staff has been stable, the executive staff, on down. So it's been a very stable management environment.

We will go to Moshe Katri with Cowen.

This question is for Mike Mancuso. Can you talk a bit about the way you've been accounting for some of the large megadeals during the past few years? And we're getting a lot of those questions from investors that just want to get some more color. Has CSC been using percentage of completion accounting? And anything on -- in terms of color on that, that'll be very helpful.

Well, Moshe, the obvious statement is it depends whether it's a percentage of completion contract or not. If it's multi-year generally with a development phase to it, more often than not, it qualifies for percentage of completion accounting, which is the proper treatment. If it's a vanilla, and I'll call it vanilla outsourcing transaction where we're providing service, then it's cost incurred in monthly billing against a billing schedule. So more or less, in the outsourcing arena, the contracts are not percentage of completion. More or less, on the large project with a development phase aspect to it, they would tend to be percentage of completion treatment. NHS multi-year development phase kind of a contract falls into the POC view. A large outsourcing engagement, for example, with Zurich Financial Services, would be a straightforward cost incurred and billing kind of a contract without a percentage in completion aspect to it. So that's about as best I can give you in guidance kind of thing.

Understood. And so far, are you comfortable that CSC has used conservatism in its percentage of completion accounting policies, i.e., on certain contracts have been conservative on -- your discretion in terms of achieving milestones or recognizing profits?

Moshe, our accounting treatment, our analysis, our process for doing estimates of completion, et cetera, et cetera, is very sophisticated and detailed. We pore over it on a quarterly basis to make sure we get it right. Our outside accounting firm also needs to be satisfied that the bookkeeping is correct. So the answer is yes, we are comfortable.

Well, operator, I think that's -- we're out of time right now. Thank you, everybody, and I'd like to hand the call back to Mike Laphen for his closing remarks, please.

Thank you, Bryan. As this will be my last earnings call with CSC, I would like to thank you for your participation over the last 5 years. I would also like to publicly thank the CSC team who have so ably supported these calls and extend my personal gratitude to Mike Mancuso for his partnership over the last several years. CSC has had challenges recently, but we have an outstanding core business consisting of world-class customers, supported by a premier dedicated staff. I'm confident that the challenges will evolve into successes under Mike Lawrie's leadership. Again, thank you, and farewell.

Thank you, operator.

And this does conclude today's teleconference. Thank you for your participation. You may disconnect at any time.