8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 26, 2006

Analysts International Corporation
(Exact name of registrant as specified in its charter)
Minnesota	0-4090		41-0905408
(State or other jurisdiction of Incorporation)	(Commission File Number)		(IRS Employer Identification Number)
3601 West 76th Street, Minneapolis, Minnesota		55435-3000
(Address for principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (952) 835-5900

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-4(c))

1

Item 2.02 Results of Operations and Financial Condition

On October 26, 2006, Analysts International Corporation (the “Company”) reported earnings for its third quarter ended on September 30, 2006. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report.

The information in this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 7.01 Regulation FD Disclosure

On October 26, 2006, the Company is holding a conference call in which management will deliver prepared remarks concerning the Company’s financial results for the third quarter ended on September 30, 2006. The full text of the prepared remarks to be delivered during the conference call is furnished as Exhibit 99.2 to this Current Report. Instructions for listening to the conference call or its replay are set forth in the Company’s press release issued on October 26, 2006 and furnished as Exhibit 99.1 to this Current Report.

The information in this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Cautionary Statement for the Purpose of Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The Transcript of the prepared remarks for the Company’s October 26, 2006 earnings conference call contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions.  Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.  Such forward-looking statements are based upon current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.  Statements made in the prepared remarks for the conference call by the Company, its President and CEO, Jeffrey P. Baker, and its CFO, David J. Steichen, regarding: (i) the addition of a major new client and the Company’s ability to compete for a significant percentage of the new client’s annual contractor spend, which is expected to exceed $60 million, (ii) the Company’s return to meaningful revenue and earnings growth in the fourth quarter, (iii) management’s expectations regarding a sizeable new managed services project and the Company’s ability to attract and retain new business, and (iv) management’s expectations for producing fourth quarter revenue of $88 to $90 million and operating results at or slightly below break even and annual revenue approaching $350 million are forward-looking statements. These statements are not guarantees of future performance, involve certain risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate.  Therefore, actual outcomes and results may differ materially from what is expressed herein.  In any forward-looking statement in which the Company, Mr. Baker or Mr. Steichen expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement or expectation or belief will result or be achieved or accomplished.  The following specific factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: (i) our ability to execute and successfully compete with other companies for the new client’s estimated $60 million annual contractor spend, (ii) our ability to hire and retain seasoned IT personnel, (iii) the negative state of the Detroit economy as it relates to our business there, (iv) our ability to execute and deliver on contracts we receive, and (v) our ability to react to increasing margin decline and rebate impact. Additionally, other factors such as pricing pressures, labor costs and other economic, business, competitive and/or regulatory factors affecting the Company’s business generally, including those set forth in the Company’s filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year, especially in the Management’s Discussion and Analysis section, its most recent Quarterly Report on Form 10-Q and its Current Reports on Form 8-K, could cause actual results to differ materially from those described in the forward-looking statements.  All forward-looking statements included in the conference call are based on information available to the Company on the date of the earnings conference call. The Company undertakes no obligation (and expressly disclaims any such obligation) to update forward-looking statements made in the conference call to reflect events or circumstances after the date of the conference call or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit Number	Description
99.1	Press release entitled “Analysts International Reports Results for Third Quarter 2006” issued by Analysts International Corporation on October 26, 2006.
99.2	Transcript of prepared remarks for Analysts International Corporation’s earnings conference call held on October 26, 2006.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:	October 26, 2006	ANALYSTS INTERNATIONAL CORPORATION
		/s/ Colleen M. Davenport
		Colleen M. Davenport
		Secretary and General Counsel

3

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release entitled “Analysts International Reports Results for Third Quarter 2006” issued by Analysts International Corporation on October 26, 2006.
99.2	Transcript of prepared remarks for Analysts International’s earnings conference call held on October 26, 2006.

4

EX-99.1

EXHIBIT 99.1

Media Contacts:
Jeff Baker	Bill Bartkowski
President and CEO	Partner
Analysts International	MeritViewPartners
Phone: (952) 835-5900	Phone: (612) 605-8616
jpbaker@analysts.com	bartkowski@meritviewpartners.com

Analysts International Reports Results for Third Quarter 2006

MINNEAPOLIS — October 26, 2006— Analysts International (NASDAQ: ANLY) reported its financial results for the three and nine-month periods ended September 30, 2006. Revenues totaled $85.5 million for the third quarter, compared to $78.2 million for the comparable quarter a year ago and $87.9 million for the second quarter. These results are consistent with the preliminary results the Company announced on October 16, 2006 and below the Company’s previously issued third quarter guidance of $88 million to $90 million of revenue. For the quarter, the Company reported a net loss of $(522,000), or $(.02) per diluted share, compared to a net loss of $(15.6) million or $(.63) per diluted share for the third quarter of 2005, which included $13.3 million or $(.54) per diluted share of special charges.

For the nine months ended September 30, 2006, the Company reported revenues of $260.2 million compared to $236.4 million for the comparable period last year. The net loss for the period was $(526,000), or $(.02) per diluted share, compared to a net loss of $(18.7) million, or $(.76) per diluted share for the comparable period of 2005, including merger-related costs and other special charges totaling $14.9 million or $(.61) per diluted share.

Analysts will host a conference call today at 9:30 a.m. CT to discuss these results in detail and answer questions participants may have. Interested parties may access the call by dialing 1-888-694-4767 or 1-973-582-2751 for international participants a few minutes before the scheduled start and ask for the Analysts International conference call moderated by Company President and CEO, Jeff Baker. The call may also be accessed via the internet at www.analysts.com, where it will be archived. Interested parties can also hear a replay of the call from 11:30 a.m. CT on October 26, 2006 until 10:59 p.m. CT on November 2, 2006, by calling 1-877-519-4471 and using access code 7959349. The Company will also file an 8-K with the Securities and Exchange Commission that will provide a full transcript of the prepared remarks delivered on the call.

About Analysts International

Headquartered in Minneapolis, Analysts International is a diversified IT services company. In business since 1966, the company has sales and customer support offices in the United States and Canada. Lines of business include Full Service Staffing, which provides high demand resources for supporting a client's IT staffing needs; Solutions Services, which provides business solutions and network infrastructure services; Managed IT Services and Government Solutions. The company partners with best-in-class IT organizations, allowing access to a wide range of expertise, resources and expansive geographical reach. For more information, visit www.analysts.com.

(Financials follow)

Analysts International Corporation

Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Nine Months Ended
(in thousands except per share amounts)		September 30, 2006			October 1, 2005			September 30, 2006			October 1, 2005
Revenue:
Provided directly	$	65,655		$	65,042		$	196,969		$	197,359
Provided through subsuppliers		12,470			7,757			40,194			22,874
Product sales		7,355			5,445			23,064			16,214
Total revenue		85,480			78,244			260,227			236,447
Expenses:
Salaries, contracted services and direct charges		64,333			59,261			195,443			177,220
Cost of product sales		6,450			4,820			20,202			14,731
Selling, administrative and other operating costs		14,876			16,031			44,200			47,395
Merger related costs		(83	)		1,225			(327	)		2,113
Restructuring and other severance related costs		(39	)		3,161			(54	)		3,904
Asset write-off		--			1,817			--			1,817
Goodwill impairment		--			7,050			--			7,050
Amortization of intangible assets		266			342			786			729
Operating loss		(323	)		(15,463	)		(23	)		(18,512	)
Non-operating income		5			4			114			26
Interest expense		194			125			586			179
Loss before income taxes		(512	)		(15,584	)		(495	)		(18,665	)
Income tax expense		10			--			31			--
Net loss	$	(522	)	$	(15,584	)	$	(526	)	$	(18,665	)
Per common share:
Basic loss	$	(.02	)	$	(.63	)	$	(.02	)	$	(.76	)
Diluted loss	$	(.02	)	$	(.63	)	$	(.02	)	$	(.76	)
Average common shares outstanding		24,662			24,565			24,631			24,462
Average common and common equivalent shares outstanding		24,662			24,565			24,631			24,462

Analysts International Corporation

Consolidated Balance Sheets

(in thousands)	September 30, 2006 (unaudited)		December 31, 2005
Assets
Current assets:
Cash and cash equivalents	$	143	$	64
Accounts receivable, less allowance for doubtful accounts		71,566		66,968
Other current assets		2,347		2,383
Total current assets		74,056		69,415
Property and equipment, net		3,413		4,056
Intangible assets		11,512		12,298
Goodwill		11,799		11,799
Other assets		3,628		4,436
Total assets	$	104,408	$	102,004
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	23,295	$	24,581
Salaries and vacations		5,679		8,260
Line of credit		11,422		5,000
Deferred revenue		1,078		1,645
Restructuring accrual, current portion		535		971
Self-insured health care reserves and other amounts		3,591		2,242
Deferred compensation		172		534
Total current liabilities		45,772		43,233
Non-current liabilities:
Deferred compensation		2,274		1,878
Restructuring accrual		203		581
Shareholders’ equity		56,159		56,312
	$	104,408	$	102,004

Analysts International Corporation

Reconciliation of non-GAAP Financial Measures

(in thousands)

	Three Months Ended						Nine Months Ended
	September 30, 2006			October 1, 2005			September 30, 2006			October 1, 2005
Net loss as reported	$	(522	)	$	(15,584	)	$	(526	)	$	(18,665	)
Plus:
Depreciation		629			699			1,809			2,084
Amortization		266			342			786			729
Interest expense		194			125			586			179
Merger related costs		(83	)		1,225			(327	)		2,113
Restructuring and severance related costs		(39	)		3,161			(54	)		3,904
Asset write-off		--			1,817			--			1,817
Goodwill impairment		--			7,050			--			7,050
Income tax expense		10			--			31			--
Less:
Interest income		(5	)		(4	)		(15	)		(26	)
Adjusted EBITDA*	$	450		$	(1,169	)	$	2,290		$	(815	)

*To supplement our consolidated financial statements presented in accordance with GAAP, we use the non-GAAP financial measure of Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) which is adjusted from results based on GAAP to exclude certain items. We have excluded the special costs associated with our attempted merger with Computer Horizons, our restructuring and severance-related costs, asset write-off, and goodwill impairment to provide a meaningful comparison between current results and prior reported results. This non-GAAP financial measure is provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. This measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The non-GAAP financial measure included in this press release has been reconciled to the nearest GAAP measure.

# # #

EX-99.2

EXHIBIT 99.2

ANALYSTS INTERNATIONAL

Moderator: Jeff Baker

October 26, 2006

9:30 am CT

Operator:  Good morning. My name is Janelle and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Analysts International Third Quarter conference call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key.

This conference call will contain forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by words such as believe, expect, anticipate, plan, potential, continue, or similar expressions. Forward-looking statements also include the assumptions underlying any of these statements.

Such forward-looking statements are based upon current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the statements. For more information concerning economic, business, competitive and/or regulatory factors affecting the Company’s business generally, refer to the Company’s filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year, especially in the Management’s Discussion and Analysis section, its most recent Quarterly Report on Form 10-Q and its Current Reports on Form 8-K. All forward-looking statements included in this conference call are based on information available to the Company on the date of the earnings conference call. The Company undertakes no obligation (and expressly disclaims any such obligation) to update forward-looking statements made in this transcript to reflect events or circumstances after the date of this conference call or to update reasons why actual results would differ from those anticipated in such forward-looking statements. In addition, in this call, management will review financial measures such as EBITDA that do not conform to Generally Accepted Accounting Principles.

For a reconciliation of these measures and the Generally Accepted Accounting Principles, participants are directed to the company’s press release which is posted on its website at www.analysts.com.

Thank you. I will now turn the conference over to Jeff Baker, President and CEO of Analysts International. Please go ahead, sir.

Jeff Baker:  Good morning and welcome to the Analysts International conference call. Joining me this morning is David Steichen, our Chief Financial Officer.

 Today, we reported revenue of $85.5 million compared to $87.9 million in the second quarter and up just over 9% from the same quarter a year ago. And a net loss of $.02 per share compared to a net loss of $.01 per share in the second quarter and a net loss before special charges of $.09 during the same quarter a year ago. We are a little disappointed to report a lower quarter in terms of revenue after showing three consecutive quarters of revenue growth. Our third quarter revenue was short of our estimated target largely because of the delayed start of a new managed service contract. We anticipated that project to start around the first of September but, in fact it did not begin until the first week of October. In addition, we had a sizable IPContact Center deal where the customer opted at the last minute, to use a different vendor to purchase the equipment. We did retain the more profitable services business but nonetheless, resulted in a miss on our revenue. 

 On the positive side, we added another major client with annual contractor spend expected to exceed $60 million on the staffing side and secured a number of very attractive solutions engagements.

 We continue to be optimistic that we can achieve meaningful revenue growth in the fourth quarter - particularly now that the managed services contract is underway. This, combined with the new staffing clients brought in over the last six months and a stronger solutions pipe-line than we had last year at this time, gives us reason to believe we can achieve meaningful revenue growth for the fourth quarter. Increasing our headcount and growing the revenue during the fourth quarter is especially important given the seasonal turnover which occurs in late December and early January. Failure to do so will result in a challenging first quarter.

 I'll talk more about each of these later, but now I want to turn it over to Dave Steichen to discuss our third quarter performance. Dave?

Dave Steichen:  Thank you, Jeff.

 As stated in our press release earlier today, total revenue for the third quarter was $85.5 million, up 9.2% from the comparable period one year ago but down 2.8% from the second quarter.

 From a profitability standpoint, our third quarter resulted in net loss of $(522,000) or $.02 per share. This compared to a net loss of $.01 per share reported in the second quarter, and a net loss, before special charges, of $.09 per share in the comparable period last year.

 Third quarter direct revenue, which excludes product and subsupplier revenue was $65.7 million, consistent with the second quarter and slightly greater than the comparable quarter last year.

 During the third quarter we managed a slight increase in our average bill rates. At the same time, the average gross margin on our direct business offerings, excluding product sales, increased from 20.0% in the second quarter of 2006, to 20.4% in the third quarter. This gross margin improvement was achieved through increased overall utilization in the solutions practices and by paying closer attention to our pricing practices and the mix of business in our staffing group.

 While we are encouraged by the trends of increasing average bill rates and gross margins, and we expect to continue our focus on the drivers of these results, competition is intense, and there can be no assurance these trends will continue.

 Product revenue during the third quarter was $7.4 million, compared to $8.4 million in the second quarter and up from $5.4 million in the comparable quarter one year ago. During the third quarter, we experienced one very significant IP Contact Center transaction where the customer opted to utilize a different vendor to purchase the equipment, although they are utilizing our services to install the products. While this customer’s decision caused us to miss our product revenue goals for the quarter, we are encouraged by the fact that our reputation for providing IP Contact Center services still afforded us the opportunity to provide the services component of this transaction.

 Third quarter subsupplier revenue was $12.5 million, compared to $14.1 million for the second quarter of 2006, and up $4.8 million from the comparable quarter last year. The increase over the 2005 period is the result of increased subsupplier activity in our national accounts, while the decline from the second quarter reflects a decrease in our reliance on subsuppliers to service our IBM relationship. A delay in bringing on a significant Managed Services customer during the third quarter, caused us to miss our subsupplier revenue goals for the quarter. Subsequent to quarter-end, the Managed Services customer has come on line, and vendors will continue to be transitioned to us throughout the fourth quarter.

 At the end of the third quarter total company headcount was 3,054. Billable technical headcount was essentially unchanged during the third quarter and continues to represent 86% of our total staff.

 Our third quarter SG&A expense amounted to $14.9 million or 17.4% of total revenue. This expense amount is consistent with the second quarter and down $1.2 million from the comparable quarter one year ago. As discussed in our previous calls, we continue to make calculated investments where we believe they will result in long-term revenue growth.

 During the third quarter we recorded a credit of $122,000 to adjust previously recorded merger and restructuring related accruals.

 For the quarter we reported adjusted EBITDA of $450,000. This compared to adjusted EBITDA of $535,000 reported last quarter.

 During the third quarter we recorded $10,000 of income tax expense related to subsidiaries where profitability was achieved and state taxes were due. We recorded no income tax benefit associated with our losses. As we experience losses we add to our tax reserves to negate any tax benefit which would otherwise be recorded.

 From a balance sheet perspective, our Accounts Receivable balance of $71.6 million at the end of the third quarter was up slightly compared to $70.2 million reported at the end of the second quarter. This increase was largely due to timing issues as we saw significant receipts during the first days of October.

 Days sales outstanding of 74 days compared to 71 days at the end of the second quarter and 72 days in the comparable period last year. DSO’s are expected to remain in the high 60’s to low 70’s as a result of significant customers asking for and receiving longer payment terms.

 Working capital of $28.3 million was up from $28.1 million at the end of the second quarter.

 We finished the quarter with $11.4 million of outstanding debt, up from $5.5 million at the end of the second quarter primarily due to the timing of our bi-weekly payroll and other significant payables. Our credit facility had total availability of $41.4 million at the end of the quarter, leaving us with unused capacity of $30 million. The level of available borrowings under this facility continues to remain high as our receivables collateral base remains high. This line of credit is available for our use as continued growth and other business opportunities call for working capital and other investments. We believe our unused credit facility can support the operating needs of our company.

 As I mentioned, delays in client start-ups and changes in the deal structure of one of our solutions projects caused us to fall short of our third quarter product and subsupplier revenue goals. Also, as Jeff will discuss in greater detail, the weak economic condition of the Michigan marketplace continues to affect our solutions business. As we move into the fourth quarter, we foresee modest revenue growth, and expect revenue for the quarter between $88 and $90 million. From a profitability perspective, we continue to expect operating results at, or slightly below, breakeven as we expect to continue to reinvest wherever we find growth opportunities.

 With that I’ll turn the call back over to Jeff.

Jeff Baker:  Thanks, Dave. I want to touch briefly on our operations and add some concluding remarks.

 First on the solutions side. Overall, we experienced a slight increase in service revenues with overall increases in average billable headcount and bill rate. Product revenue was down over 12% for the quarter. The IP Call Center deal I referred to at the beginning of the call accounted for most of that decline.

 Our IP Communications business saw the greatest improvement with services revenue increasing over 44% from the prior quarter and a significant increase in margin. Our average utilization improved significantly during the third quarter, as expected. As well, our average bill rate increased over 15% for the third quarter. We expect to see even further improvement during the fourth quarter. This is a substantial improvement and a positive sign that IP Communications investment is starting to show returns.

 Our Lawson practice also continues to do well. Utilization returned to normal levels during the third quarter after being unfavorably impacted during the second quarter because of the annual Lawson user conference. We’re still seeing a general increase in demand for our Lawson services and it looks like this practice will finish with a strong fourth quarter.

 Managed IT Services had a tough quarter. One of our largest clients was forced to significantly downsize the scope and nature of our managed IT services arrangement. Unfortunately, we have a number of sizable clients in the Detroit area that are very dependent on the automobile industry and this is a case where their financial difficulties have impacted our business. We have taken remediation actions within this practice to minimize the impact. We also continue to actively pursue other business - outside of Detroit when possible - to replace the lost business.

 Our storage business was also down for the quarter, largely due to lower headcount and a drop in the average bill rate.

 And finally, our Government Solutions practice performance level remains good and was relatively flat compared to the second quarter.

 While we were disappointed with the downturn in the Managed IT Services practice, it was largely contained within one account. And, for the quarter, we were able to more than offset the downturn in Managed IT Services with our other practices. Yet, over time, we will continue to be vulnerable to the Michigan economy where much of our solutions business is based. And there can be no assurance that we will be able to offset further decline in this market with improvement elsewhere.

 Now on staffing. Our staffing direct headcount remained relatively flat during the third quarter while our sub-supplier headcount decreased slightly. And, our average bill rate increased slightly.

 We did add a major new staffing account as I mentioned earlier. The anticipated annual contractor spend for this account is over $60 million and we will be one of 12 suppliers providing staffing services. This, combined with the two accounts announced on our previous call alone, have added somewhere in the neighborhood of $700 million in new contractor spend opportunity that we are now competing for. We continue to invest in these new accounts and have just opened a new office in McLean, Virginia to service the largest of these accounts. The challenge before us is to execute well within these accounts and gain traction as soon as possible in order to minimize the amount of upfront investment.

 And, while we have talked much about the large accounts we’ve added recently, it is important to point out that our middle market accounts - accounts we classify based on their buying characteristics, not the size of the client - increased profit production by over 12% during the third quarter.

 Much of that middle market improvement was offset by margin decline and rebate impact in some of our larger accounts. These accounts continue to be a challenge for us as clients continue to squeeze margins through better leveraging their spend.

 We also continue to transition towards a larger presence in the high-end/white-collar segment of the IT workforce. In Minneapolis alone, we have close to 70 pre-qualified Business Analysts staff in our BA community with almost 50% currently billing on our behalf.

 Finally, as we announced last quarter, we landed a sizable managed services project. We are pleased to announce that the implementation is now complete and we are up and running. The initial phase of the program was completed and billing began in the first week of October - about a month later than expected.

 On balance, we continue to be cautiously optimistic on the outlook for the remainder of the year and 2007. But again, achieving our fourth quarter growth and headcount increase is critical given the seasonal turnover that occurs in December and early January. We continue to be successful in landing large accounts as well as sizeable managed service contracts. Both require up front investments which we have been making. The key for us is execution and delivery. At the same time we continue to be at risk from the continued pressure of the Michigan economy and the impact that it will have on our solutions business. Yet if all goes to plan we will end the year with annual revenue approaching $350 million. This is a substantial improvement over 2005. More importantly, we believe we have invested in areas and secured accounts that will lead to continued growth and meaningful profitability.

 And as always we continue to have dialogue with others in the industry around the need for consolidation. But again we do so with a measured pace given our stock price and near-term opportunities that we believe should significantly enhance the underlying value of the company.

 Now we’ll open it up for questions.