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): February 24, 2005 (February 24, 2005)

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))

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ITEM 2.02 Results of Operations and Financial Condition

On February 24, 2005, Analysts International Corporation, a Minnesota corporation (the “Company”), reported earnings for its fourth quarter and fiscal year ended January 1, 2005. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1.

Also on February 24, 2005, the Company held a conference call in which management delivered prepared remarks concerning the Company’s financial results for the fourth quarter and fiscal year ended January 1, 2005 and future strategy. The full text of the prepared remarks delivered during the conference call is attached as Exhibit 99.2.

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 February 24, 2005, Analysts International Corporation, a Minnesota corporation (the “Company”), reported earnings for its fourth quarter and fiscal year ended January 1, 2005. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1.

Also on February 24, 2005, the Company held a conference call in which management delivered prepared remarks concerning the Company’s financial results for the fourth quarter and fiscal year ended January 1, 2005 and future strategy. The full text of the prepared remarks delivered during the conference call is attached as Exhibit 99.2.

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.

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ITEM 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit Number	Description
99.1	Press release entitled “Analysts International Reports Profitable Results for 2004 with Fourth Consecutive Quarter of Profitability Improvement and EPS at High End of Recently Updated Guidance” issued by Analysts International on February 24, 2005.
99.2	Transcript of prepared remarks for Company’s earnings conference call held February 24, 2005.

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:	February 24, 2005	ANALYSTS INTERNATIONAL CORPORATION
		/s/ Colleen M. Davenport
		Colleen M. Davenport
		Secretary and General Counsel

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release entitled “Analysts International Reports Profitable Results for 2004 with Fourth Consecutive Quarter of Profitability Improvement and EPS at High End of Recently Updated Guidance” issued by Analysts International on February 24, 2005.
99.2	Transcript of prepared remarks for Company’s earnings conference call held February 24, 2005.

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EX-99.1

EXHIBIT 99.1

MEDIA CONTACTS:

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

Analysts International Reports Profitable Results for 2004 with

Fourth Consecutive Quarter of Profitability Improvement and

EPS at High End of Recently Updated Guidance

MINNEAPOLIS, February 24, 2005 - Analysts International (NASDAQ: ANLY) today reported the results for its fourth quarter ended January 1, 2005. Revenues totaled $83.0 million for the quarter, compared to $83.2 million for the comparable quarter a year ago. For the quarter, the Company reported $1.4 million of net income, or $0.06 per diluted share, compared to a net loss of $(481,000), or $(.02) per share, for the fourth quarter of 2003. The quarter’s results are at the high end of the Company’s February 10, 2005 guidance with respect to earnings per share.

For the twelve months ended January 1, 2005, the Company reported revenues of $341.6 million, compared to $331.9 million last year. The net profit for the period was $3.9 million, or $.16 per diluted share, compared to a net loss of $(1.5) million in 2003, or $(.06) per share.

Jeff Baker, Company president, said, “2004 was a watershed year at Analysts International. We were profitable for each of the year’s four quarters and we reported year over year revenue growth for the first time in six years. The year also saw us meet our operating objectives: improving company-wide efficiency, making significant progress toward the implementation of our next generation staffing model and continuing to develop and enhance focused alliance-based solutions with several leading technology companies. The results of the year were due in large part to the continued hard work and dedication of our employees and management. And, as significant as 2004 was, we look forward to making greater progress as measured by growth and profitability in the year ahead.”

Baker noted the Company would provide guidance for the first quarter and fiscal year 2005 on the conference call scheduled for later today.

Analysts will host a conference call today at 9:30 a.m. (CST) to discuss these results. Interested parties may access the call by dialing 888-244-0473 a few minutes before the scheduled start and ask for the Analysts International call and leader Jeff Baker, or visit the Investor Relations section of the Company's Website at http://www.analysts.com to link to a live Webcast. A replay of the call will be available on the Company's Website and an encore will be available through March 10, 2005 by calling 800-642-1687 or 706-645-9291 and using the Conference ID number: 1823231.

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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; Business Solutions Services, which provides business solutions and network infrastructure services; and Outsourcing Services, which provides onshore and offshore strategic 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 http://www.analysts.com.

Statements contained herein, which are not strictly historical fact, are forward-looking statements. Words such as “believes,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the Company’s current expectations relating to future revenues, earnings, results of operations and future sales or growth. The Company’s actual results may vary materially from those projected due to certain risks and uncertainties such as the general state of the economy, volume of business activity, continued need for our services by current and prospective clients, client cancellations or re-bidding of work, the Company’s ability to control and improve profit margins, including our ability to control operating and labor costs and hourly rates for our services, the availability and utilization of qualified technical personnel and other similar factors. For more information concerning risks and uncertainties to the Company’s business refer to the discussion in the “Market Condition, Business Outlook and Risks to Our Business” section in the Company’s Annual Report for the year ended January 3, 2004, and the Company’s prior Annual Reports, 10-Ks, 10-Qs, other Securities and Exchange Commission filings and investor relations materials.

(Tables follow)

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Analysts International Corporation

Consolidated Statements of Operations

	Three Months Ended						Twelve Months Ended
	January 1,			January 3,			January 1,			January 3,
(in thousands except per share amounts)	2005			2004			2005			2004
Professional services revenue:
Provided directly	$	66,400		$	66,628		$	269,610		$	266,175
Provided through subsuppliers		12,360			12,366			55,806			50,543
Product sales		4,213			4,218			16,196			15,181
Total revenue		82,973			83,212			341,612			331,899
Expenses:
Salaries, contracted services and direct charges		61,640			63,492			261,005			256,643
Cost of product sales		3,876			4,112			14,964			14,562
Selling, administrative and other operating costs		15,865			15,849			61,015			61,511
Amortization of intangible assets		194			193			774			773
Operating income (loss)		1,398			(434	)		3,854			(1,590	)
Non-operating income		22			15			39			79
Interest expense		(12	)		(5	)		(41	)		(13	)
Income (loss) before income taxes		1,408			(424	)		3,852			(1,524	)
Income tax expense		--			57			--			--
Net income (loss)	$	1,408		$	(481	)	$	3,852		$	(1,524	)
Per common share:
Basic income (loss)	$	.06		$	(.02	)	$	.16		$	(.06	)
Diluted income (loss)	$	.06		$	(.02	)	$	.16		$	(.06	)
Average common shares outstanding		24,212			24,210			24,212			24,201
Average common and common equivalent shares outstanding		24,651			24,210			24,398			24,201

(more)

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Analysts International Corporation

Consolidated Balance Sheets

(In thousands)	January 1, 2005		January 3, 2004
Assets
Current assets:
Cash and cash equivalents	$	7,889	$	4,499
Accounts receivable, less allowance for doubtful accounts		57,764		55,623
Other current assets		4,029		4,737
Total current assets		69,682		64,859
Property and equipment, net		5,658		6,297
Other assets		30,337		30,739
	$	105,677	$	101,895
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	16,366	$	15,825
Salaries and vacations		8,828		7,774
Deferred revenue		1,658		2,766
Self-insured health care reserves and other amounts		2,010		2,829
Total current liabilities		28,862		29,194
Non-current liabilities, primarily deferred compensation		4,197		4,038
Shareholders’ equity		72,618		68,663
	$	105,677	$	101,895

# # #

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EX-99.2

EXHIBIT 99.2

Fourth Quarter Conference Call

2/24/05

Jeff Baker:

Good morning and welcome to the Analysts International Conference call. Joining me this morning are Mike LaVelle, Chairman and CEO, David Steichen, Chief Financial Officer and John Bamberger, Chief Operating Officer.

We’re delighted to report that we completed the fourth quarter with net income of $.06 per share and $.16 per share for the year. The end of 2004 marks our return to annual profitability for the first time since 2000 and sets the stage for what we believe to be an optimistic outlook for 2005. We will discuss our guidance for 2005 later in the call.

As I mentioned on last quarter’s call, we are transitioning from the “getting lean” to the “getting mean” phase. We are now in the implementation phase of a number of improvements around our key business processes that we believe will better align our business with the market needs and drive growth. We also completed the first of our acquisitions to strengthen our solutions offerings. As we reported in January, Analysts International acquired WireSpeed Networks, a small Cincinnati-based company specializing in IP-telephony and wireless networking that we’ve combined with our existing IP-tel business. And while it’s far too early to call, that business is performing very well and we hope it will exceed what were some pretty optimistic expectations.

We are also piloting our next generation staffing model and have recently received strong interest from one of our largest clients not only as a possible fit from an IT staffing standpoint but more broadly from an enterprise-wide human capital management tool. We believe this pilot is critical in our handling of the high volume, low margin accounts. This, together with what we are developing as a more adaptable delivery model, are key to being able to serve a broad and diverse client base more effectively, so you’ll be hearing more about this in coming months.

I’ll now turn it over to David Steichen to review the financial results after which John Bamberger will discuss current operations. I will then conclude our formal remarks and turn it over for questions.

David Steichen:

Thank you, Jeff.

As we noted in our press release earlier today, we are pleased to announce that our fourth quarter yielded positive results in terms of quarter over quarter profitability growth.

As indicated, total revenue for the fourth quarter was $83.0 million, essentially even with the comparable quarter one year ago, but down 3.9% from the third quarter. As our guidance had anticipated, this revenue is down slightly from the third quarter as the fourth quarter contained two fewer billable days, and was impacted by lower utilization. This lower utilization is typical during the holiday season.

Fourth quarter direct revenue of $66.4 million, excluding product sales, was down 2.7% from the third quarter and essentially even with the comparable quarter last year.

Product sales during the fourth quarter were $4.2 million, up from $3.8 million in the third quarter and essentially even with the comparable quarter one year ago. Historically, we have reported product sales as part of direct revenue. Our product sales consist of hardware and software products sold in conjunction with our infrastructure services. A significant component of our product revenue comes from the sale of Cisco products, which we sell as part of our IP telephony practice. Bolstered by our January acquisition of WireSpeed Networks, we are expecting our IP telephony practice to grow considerably in 2005. Along with that growth, we are expecting product sales to become a more significant component of our total revenue and are therefore beginning to separately disclose this number.

During each of the last three conference calls, I have had the pleasure of reporting profitable performance. Today, I can report not only that our fourth quarter was profitable, but also that it represented our fourth consecutive quarter of increasing profitability. Fourth quarter results exceeded our previously provided guidance, yielding a net profit of $1.4 million or 6 cents per share. This compares to 5 cents per share reported in the third quarter.

We are excited to report this continuing improvement. Our performance during the past four quarters has put Analysts International back on stable ground and positions us well to take advantage of improving market conditions.

Although we continued to experience intense competition on average bill rates throughout the fourth quarter, we managed to hold these rates relatively flat during that time. As I have been indicating all year, while we are encouraged by our ability to hold bill rates flat or even slightly increase them, pricing pressures from our clients, increases in medical and other fringe benefit costs and increasing salary pressures from our consultants are continuing to add up to extremely tight margins. These pricing pressures will make meaningful improvements to our average bill rates and our average gross margins very difficult to accomplish.

In spite of these pressures, as I will discuss in a minute, during the fourth quarter we experienced positive results in the rate at which we expense self-insured medical claims. These results enabled us to show significantly improved gross margin rates during the fourth quarter.

At the end of the fourth quarter total company headcount was at 3015, down slightly from the end of the third quarter. Historically, the fourth quarter has resulted in significant headcount reductions as client projects often come to a close at the end of the calendar year.

While we have seen an increase in the number of requirements coming from our clients and an increase in the number of placements we are making against those requirements, we are also seeing an increase in the number of consultants leaving Analysts International. We believe this is an indication that the market for IT services jobs continues to improve, and competition for available resources is intensifying.

Technical headcount at quarter end continues to represent 86% of our total staff.

Fourth quarter sub-supplier revenue of $12.4 million was down $2.0 million from the third quarter and essentially even with the comparable quarter last year. As we previously disclosed during the fourth quarter, we were notified by a large national account that we would no longer be a prime vendor. While the direct services we have provided to this client will continue through a sub-contracting relationship with another prime vendor, we will no longer be able to provide services to this client using our sales channel partners. During the fourth quarter, we provided $5.0 million in services to this client utilizing our sales channel partners. As a result of the loss of this contract, sub-supplier revenue is expected to decline significantly in the first quarter of 2005. Additionally, we are currently reviewing our contracts with other major clients where we provide services using our sales channel partners. While we want to continue to provide this service to our clients and our sales channel partners, where possible, we would like to provide the service in such a way that the accounting rules would allow us to recognize the service fees collected for this service on a net basis rather than grossing up the revenue and cost as we do today. As we work to accomplish this goal, we expect sub-supplier revenue to continue to decline throughout 2005.

For the fourth quarter our revenue mix included 56% staffing, 29% solutions, and 15% sub-supplier.

The gross margin on our direct business offerings, excluding product sales, was 24.9% for the fourth quarter, up from 22.7% in the third quarter and 22.6% in the comparable quarter last year.

As indicated, the most significant factor causing the improvement in gross margin over last quarter is the positive experience we had in the rate at which we accrued for healthcare insurance during the fourth quarter. This rate of accrual, however, is expected to go back up to historical levels in 2005.

Another factor causing improved gross margins during the fourth quarter was a slight shift in our business mix away from extremely low margin contracts into contracts where better margins are available to us. While our ability to effect this shift during the fourth quarter is encouraging, as I have mentioned, increasing pressures on bill rates and pay rates as well as the rate at which we are accruing for medical and other benefit related costs make continuation of this trend very challenging.

Our fourth quarter SG&A expenses amounted to $15.9 million or 19.1% of revenue. This was an increase of $1.0 million from the third quarter and was essentially even with the comparable quarter one year ago. The increase over the third quarter was the result of (i) increasing audit and compliance cost as a result of the Sarbanes Oxley legislation, (ii) the accrual of management incentive compensation resulting from the achievement of incentive targets, (iii) additional investments in sales and recruiting resources, and (iv) certain other year-end adjustments. As a percentage of revenue, our rate of expenditure increased from 17.3% of revenue last quarter and 19.0% of revenue in the comparable quarter last year. While the costs incurred during the fourth quarter are not expected to continue at the same level, during the first half of 2005, we expect this category of cost to increase slightly from recent historic levels as we invest in additional sales, recruiting and other activities to take advantage of the improving market conditions and our relative strength in the industry.

Beyond the first half of 2005, we will continue our focus on controlling this area of cost. We expect our investments in this area to pay dividends during the second half of 2005. As revenues increase, we expect to see significant economies of scale kick in, reducing our operating cost as a percentage of revenue during the second half of the year.

For the quarter, we reported EBITDA of $2.3 million, up from $2.2 million reported last quarter.

Free cash flow was very strong during the fourth quarter, coming in at $1.8 million compared to $1.9 million last quarter.

As was the case in the first three quarters, we have not recorded a provision for income taxes. We maintain large reserves against our deferred tax assets. As we generated profits throughout 2004 we reversed these reserves to negate any tax expense, which may otherwise have been recorded.

Absent the provision for taxes, this quarter produced a net profit of $1.4 million or 6 cents per share compared with a net profit of $1.3 million posted in the third quarter and a net loss of $481,000 for the comparable quarter last year.

For 2004 we recorded total revenue of $342 million and a net profit of $3.9 million compared to total revenue of $332 million and a net loss of $1.5 million recorded last year. We are thrilled to be reporting annual revenue growth for the first time since 1998 and annual profitability for the first time since 2000.

Our balance sheet continues to be strong. Receivables of $57.8 million at the end of the quarter were up from $55.6 million reported at the end of 2003. Working capital of $40.8 million was up $5.1 million from the end of 2003. And days sales outstanding of 63 days remain comparable to prior periods.

We ended the quarter with no debt on our balance sheet and a cash surplus of $7.9 million compared to $4.5 million at the end of 2003.

Our credit facility, with available borrowings of $29 million, was untapped at the end of the fourth quarter. The level of available borrowings under this facility continues to remain high as our receivables collateral base has increased.

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 cash reserves along with our unused credit facility can support the operating needs of our company.

I’m excited to be able to report our fourth consecutive quarter of profitability growth. Our 2004 results reflect the efforts of all of our employees to put Analysts International back on track. Improving results of operations throughout the year have positioned us to take full advantage of the opportunities we see in the marketplace. We are beginning to make investments to take advantage of these opportunities. As we begin to implement some of the strategies Jeff spoke of earlier we are making investments in additional sales and recruiting resources. We are also investing in the pursuit and integration of acquisitions. While we expect these transactions to be accretive to earnings, the cost of integration activities, along with our increased investment in sales and recruiting, are expected to cause a short term decline in profitability during the first half of 2005.

Our revenue guidance for the first quarter of 2005 reflects the expected decline in sub-supplier revenue discussed earlier and places total revenue between $80 and $83 million. From a profitability perspective, anticipating the investments we are making during the first quarter, we expect net income to be between 1 and 2 cents per share. As we have navigated through the difficult times of the past few years, we have not seen enough certainty in the future of our markets to provide guidance beyond the next fiscal quarter. We now believe the market has stabilized and our performance has been consistent enough to once again provide fiscal year guidance. Although we believe the first quarter profitability will be tempered by the investments we are making, for the year, we are expecting revenue to approach $390 million and net income to be between 25 and 31 cents per share. Both the quarterly and annual profitability numbers are based upon not recording a provision for income taxes.

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

Jeff Baker:

Thanks, Dave. Now, John Bamberger will discuss our current operations.

John Bamberger:

Thanks, Jeff.

During the fourth quarter, we continued to pursue our three distinct markets for growth:

§   The Fortune 500s;

§   Small and medium size businesses; and

§   Technology and product partners.

We continued to be successful pursuing this strategy. Following are some of the wins as a result of this focus.

In the Fortune 500 market:

·   We won a team staffing engagement at a Life and Health Insurance provider. We placed 26 people in connection with this win.

·   We won an engagement to provide a managed team for 18 months at a firm that provides analytical services for detecting exposure to radiation. Our service will focus on enhancing their application, development and maintenance of their revenue reporting systems.

·   At a financial services and credit card issuer, we became an approved vendor for staffing and have begun placing employees there.

·   We also began making placements at a new staffing customer that designs, develops and produces military machines.

·   The North American division of a manufacturing conglomerate re-bid their Master Professional Services Agreement for the medium tier supplier category for 2005. They reduced the number of approved suppliers from 10 to 1 prime and 1 alternate. Analysts was selected as the prime vendor.

Our second market is small and medium size businesses. Some of our wins in this market follow:

·   At a large school district in Michigan, we were awarded a contract to design and implement a wireless infrastructure that covers 45 buildings throughout the entire district.

·   We won a competitive bid to provide centralized criminal history information for state and local government organizations throughout a mid South state.

·   We continued to win new engagements with our IP/Telephony practice. One such win was for a Spa that has multiple locations. The project includes a 10 agent call center with a custom scheduling application. The system is integral to the customers plan to expand nationally.

Our third focus is to partner with hardware and software companies to sell and implement their products:

·   We partnered with Microsoft and we were selected to provide installation services for the Microsoft Customer Relationship Management Application at a regional. The Bank has 12 locations that will first implement the CRM package.

·   We replaced a competitor as the Cisco partner for a national advertising agency. We have begun providing Cisco hardware and related services.

·   An order fulfillment/distribution company selected Analysts to provide an EMC Storage Area Network. The SAN will allow the company to consolidate all their data in one location and simultaneously reduce their operating costs.

We had tremendous growth in IP telephony and wireless sector in 2004. To capitalize on this growth market and with help from our Cisco partnership, we acquired WireSpeed of Cincinnati, Ohio.

WireSpeed is a Cisco based IP Telephony and Wireless Company that gives us additional certified technicians and expanded geographical presence. They have contributed in 2005 already to our traction and growth in this sector.

These are just some of the wins this past quarter.

Our activity with new opportunities was great in 2004 and it appears to be growing as we move into 2005. I am optimistic about our business prospects and look forward to expanding our business.

Now, I’ll turn the call back to Jeff.

Jeff Baker:

Thank you, John. Analysts International has made significant progress towards positioning ourselves for continued profitability and capitalizing on the opportunities afforded by a changing industry.

We continue to be diligent in reducing costs where practical and we believe substantial efficiencies can be gained by better aligning our business processes around market needs. At the same time, I go back to the comments I made on my first conference call back in July. I believe in the long term, to be successful in the staffing business, we need much greater scale. Scale is important because more and more, clients are requiring it. It’s also important in order to achieve the operating leverage necessary to create competitive margins. We continue to look for those opportunities to build scale in an accretive manner. At the same time we will continue to look for opportunities to further strengthen our solutions practice but on a much smaller basis given our desire to avoid the use of our stock as an acquisition currency.

Dave has provided what we believe to be some aggressive, but reasonable and attainable, guidance, guidance with respect to revenue and earnings per share for 2005 and I want to add a few comments with respect to that guidance. We finished the year with a very strong fourth quarter and have now been able to recognize the benefits associated with the cost reduction efforts made over the past couple of years. Now we have a business that is ready to scale with little incremental cost. However, achieving those numbers is dependent on growing the top line. We believe the market has shown signs of improvement but we also believe the implementation of our re-engineering efforts will hopefully enable us to capture better than our share of that growth. As Dave also mentioned we have tempered our first quarter outlook given a number of investments we are making as well as some realignment of our revenue mix. In the long run however, we believe those investments will pay off well.

With that, I want to thank everyone for their patience while Analysts International struggled through some pretty tough times. We certainly hope those difficult times are behind us now and look forward to a much brighter future.

I will now conclude our formal remarks and open it up for questions.