8-K

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 23, 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))

Item 2.02  Results of Operations and Financial Condition

On February 23, 2006, Analysts International Corporation, a Minnesota corporation (the “Company”), reported earnings for its fourth quarter and fiscal year ended December 31, 2005. The full text of the press release issued in connection with the announcement is set forth in Exhibit 99.1 attached hereto and is incorporated in this Current Report as if fully set forth herein.

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 23, 2006, the Company is holding a conference call in which management will deliver prepared remarks concerning the Company’s financial results for the fourth quarter and fiscal year ended December 31, 2005. The full text of the prepared remarks to be delivered during the conference call is set forth in Exhibit 99.2 attached hereto and is incorporated in this Current Report as if fully set forth herein. Instructions for listening to the conference call or its replay are set forth in the Company’s press release issued on February 23, 2006 and attached hereto as Exhibit 99.1.

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 from the Company’s earnings conference call attached hereto as Exhibit 99.2 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 Transcript by the Company, its President and CEO, Jeffrey P. Baker, and/or its CFO, David J. Steichen, regarding:  (i) management’s belief that the Company will experience continued momentum, performance improvement (including but not limited to increasing billing rates or margin improvement), growth and profitability in fiscal year 2006; (ii) opportunities for revenue and/or profit growth due to business trends identified in the last half of fiscal year 2005; (iii) expected increases in revenue (direct and subsupplier) and other business activity and opportunity, including but not limited to

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services provided under the Company’s core supplier agreement with IBM; (iv) the impact of the expiration of purchase orders on headcount and revenue in the Company’s first quarter of fiscal year 2006; (v) return on investments in companies acquired by the Company during fiscal year 2005; (vi) growth in any of the Company’s service offerings including but not limited to IP telephony and storage solutions; (vii) the continuance of any client contract or specific project, including but not limited to state and local government engagements; (viii) consolidation or other merger and acquisition activity in the IT services industry in general or involving the Company in particular; (ix) continued benefits from the Company’s reorganization and cost reduction actions in the third quarter of fiscal year 2005, including but not limited to the ability to maintain or only slightly increase the Company’s SG&A expenses in fiscal year 2006; (x) expected benefits of the Company’s deferred tax assets; (xi) the adequacy of the Company’s credit facility; (xii) achievement or maintenance of a certain number of days outstanding of the Company’s accounts receivable; and (xiii) achievement of the revenue and profit levels expected in the first quarter of fiscal year 2006 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 factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: (i) the Company is not able to maintain current levels of cost reductions or other benefits of its reorganization; (ii) observed or predicted business trends or specific service offerings (including but not limited to IP telephony and storage solutions) fail to produce revenue growth and profitability; (iii) the Company is unable to raise or maintain billing rates; (iv) the Company loses one or more client contracts, resulting in adverse impact to its growth and profitability; (v) maintaining overhead staffing levels and other cost reductions after the Company’s reorganization adversely affects the Company’s competitiveness in the marketplace; (vi) the Michigan or any specific geographical economy adversely impacts the Company’s staffing and/or solutions practices; (vii) expected growth from the Company’s core supplier contract with IBM, its IP telephony and data storage solutions and other growth initiatives does not materialize; (viii) needs for additional working capital over and above the Company’s credit facility; (ix) inability to pursue an acceptable merger or acquisition strategy; (x) inability to maintain or reduce the number of days outstanding on the Company’s accounts receivable; and (xi) other economic, business, competitive and/or regulatory factors affecting the Company’s business generally, including those set forth in Analysts’ 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 the Transcript are based on information available to the Company on the date of the conference call at which the prepared remarks in the Transcript were delivered.  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 press release or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

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Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit Number	Description
99.1	Press release entitled “Analysts International Reports Results for 2005” issued by Analysts International Corporation on February 23, 2006.
99.2	Transcript of prepared remarks for Analysts International Corporation’s earnings conference call held February 23, 2006.

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 23, 2006	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 Results for 2005” issued by Analysts International Corporation on February 23, 2006.
99.2	Transcript of prepared remarks for Analysts International Corporation’s earnings conference call held February 23, 2006.

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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 2005

Quarter’s EPS Are at the High End of Recent Guidance

MINNEAPOLIS, February 23, 2006 - Analysts International Corporation (NASDAQ: ANLY) today reported the results for its fourth quarter ended December 31, 2005. Revenues totaled $85.9 million for the quarter, compared to $83.0 million for the comparable quarter a year ago and $78.2 million for the third quarter. For the quarter, the Company reported $1.0 million of net income, or $.04 per diluted share, compared to net income of $1.4 million or $.06 per share, for the fourth quarter of 2004. The quarter’s results are at the high end of the Company’s January 24, 2006 guidance with respect to earnings per share.

For the twelve months ended December 31, 2005, the Company reported revenues of $322.3 million, compared to $341.6 million in fiscal year 2004. The net loss for the period was $(17.7) million, or $(.72) per diluted share, compared to net income of $3.9 million in 2004, or $.16 per share. The twelve months ended December 31, 2005 includes merger related costs and other special charges totaling $14.9 million or $(.61) per diluted share. Excluding these charges, the Company lost $(2.8) million or $(.11) per diluted share for the year ended December 31, 2005. Analysts will host a conference call today at 9:30 a.m. (CST) to discuss these results in detail and answer questions participants may have. Interested parties may access the call by dialing 1-877-241-6895 or 1-973-339-3086 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 p.m. CT on February 23, 2006 to 10:59 a.m. CT on March 9, 2006, by calling 1-877-519-4471 and using access code 7033822. The Company will also file an 8-K with the Securities and Exchange Commission that will provide full transcript of the call.

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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.

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

This Press Release 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 this Press Release by the Company and its President, Jeffrey Baker regarding:  (i) increases in business activity and opportunity, including with IBM and another national client; (ii) continued development of its next generation staffing model (New Equities); (iii) growth of the Company’s IP telephony practice; (iv) the expected benefits from the Company’s reorganization and cost reduction actions; and (v) the Company’s anticipated growth in revenue and return to profitability 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 Analysts 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 factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: (i) the risk that Analysts’ reorganization and cost reduction actions will not produce revenue growth and profitability; (ii) the risk that Analysts will lose one or more contracts that adversely impact its growth and profitability; (iii) Analysts’ reorganization adversely affects its competitiveness in the marketplace; and (iv) other economic, business, competitive and/or regulatory factors affecting Analysts’ business generally, including those set forth in Analysts’ 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 Press Release are based on information available to Analysts on the date of the press release.  Analysts 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 press release or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

(Financials follow)

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Analysts International Corporation

Consolidated Statements of Operations

	Three Months Ended						Twelve Months Ended
	December 31,			January 1,			December 31,			January 1,
(in thousands except per share amounts)	2005			2005			2005			2005
Professional services revenue:
Provided directly	$	65,762		$	66,400		$	263,121		$	269,610
Provided through subsuppliers	11,556			12,360			34,431			55,806
Product sales	8,532			4,213			24,746			16,196
Total revenue	85,850			82,973			322,298			341,612
Expenses:
Salaries, contracted services and direct charges	62,880			61,640			240,100			261,005
Cost of product sales	7,819			3,876			22,550			14,964
Selling, administrative and other operating costs	13,657			15,865			61,053			61,015
Amortization of intangible assets	253			194			982			774
Restructuring and other severance related costs	10			—			3,914			—
Loss on asset disposal	8			—			1,825			—
Goodwill impairment				—			7,050			—
Merger related expenses	16			—			2,129			—
Operating income (loss)	1,207			1,398			(17,305		)	3,854
Non-operating income	24			22			50			39
Interest expense	(215		)	(12		)	(394		)	(41		)
Income (loss) before income taxes	1,016			1,408			(17,649		)	3,852
Income tax expense	50			—			50			—
Net income (loss)	$	966		$	1,408		$	(17,699	)	$	3,852
Per common share:
Basic income (loss)	$	.04		$	.06		$	(.72	)	$	.16
Diluted income (loss)	$	.04		$	.06		$	(.72	)	$	.16
Average common shares outstanding	24,597			24,212			24,495			24,212
Average common and common equivalent shares outstanding	24,826			24,651			24,495			24,398

(more)

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Analysts International Corporation

Consolidated Balance Sheets

(In thousands)	December 31, 2005		January 1, 2005
Assets
Current assets:
Cash and cash equivalents	$	64	$	7,889
Accounts receivable, less allowance for doubtful accounts	66,968		57,764
Other current assets	2,383		3,208
Total current assets	69,415		68,861
Property and equipment, net	4,056		5,658
Other assets	28,533		31,158
	$	102,004	$	105,677
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	24,581	$	16,366
Salaries and vacations	8,260		8,828
Line of credit	5,000
Deferred revenue	1,645		1,658
Restructuring accrual, current portion	971		251
Self-insured health care reserves and other amounts	2,242		1,759
Deferred compensation, short term	534		560
Total current liabilities	43,233		29,422
Non-current liabilities, primarily deferred compensation	1,878		3,570
Restructuring accrual — non-current	581		67
Shareholders’ equity	56,312		72,618
	$	102,004	$	105,677

Note:  Certain reclassifications have been made to the audited balance sheet at January 1, 2005 to conform to the December 31, 2005 presentation. Such reclassifications have no effect on previously reported net income (loss) or shareholders’ equity.

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Analysts International Corporation

Reconciliation of non-GAAP Financial Measures

(in thousands)

	Three Months Ended					Twelve Months Ended
	December 31, 2005		January 1, 2005			December 31, 2005			January 1, 2005
Net income (loss) as reported	$	966	$	1,408		$	(17,699	)	$	3,852
Plus:
Merger related costs	16		—			2,129			—
Restructuring and other severance related costs	10		—			3,914			—
Asset write-off	8		—			1,825			—
Goodwill impairment	—		—			7,050			—
Total special charges	34		—			14,918			—
Income (loss) before special charges	1,000		1,408			(2,781		)	3,852
Depreciation	679		730			2,763			2,918
Amortization	253		194			982			774
Net interest expense (income)	191		(10		)	344			2
Income tax expense	50		—			50			—
Adjusted EBITDA*	$	2,173	$	2,322		$	1,358		$	7,546

*To supplement our consolidated financial statements presented in accordance with GAAP, we use the non-GAAP financial measure of Adjusted EBITDA (earnings before special charges, interest, taxes, depreciation and amortization) and Income Before Special Charges which are adjusted from results based on GAAP to exclude certain items. We have excluded the special costs associated with the merger with Computer Horizons, restructuring charges relating to workforce reductions and lease obligations, the write-off of software development costs, and a goodwill impairment in accordance with FAS 142 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.

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EX-99.2

EXHIBIT 99.2

Fourth Quarter Conference Call

2/23/06

Jeff Baker:

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

As I mentioned at the beginning and conclusion of our last conference call, we had one immediate priority, which was returning the Company to profitability. We are pleased to report today that we’ve achieved that objective. For the fourth quarter, we reported net income of $1.0 million, or four cents per share on revenue of $89.5 million.

In addition, our balance sheet has improved over the third quarter and our revenue for the fourth quarter represents a 9.7% increase over the third quarter – our largest sequential growth since 1997. This growth was due in part to the continued transition of IBM business from displaced suppliers, as well as our Solutions business growing at 24% during the fourth quarter. We also showed strong growth in a number of our non-IBM staffing locations such as St. Louis and Seattle.

With this profitable fourth quarter, we believe we are positioned for a profitable year in 2006. While the first quarter is a challenging quarter for us, as purchase orders expire and budgets are being set for the next year, we believe that many of the trends we observed late in the third quarter and throughout the fourth quarter will continue through 2006.

And, with our restructuring behind us, we continue to focus on growing our business and improving our results through our performance improvement programs for both our staffing and solutions organizations. I’ll talk more about our operations later but now I want to turn it over to Dave to discuss our fourth quarter and 2005 performance…Dave.

David Steichen:

Thank you, Jeff.

As noted in our press release earlier today, we are pleased to announce that after three very difficult quarters our fourth quarter has yielded positive results.

Total revenue for the fourth quarter was $85.9 million, up 3.5% from the comparable quarter one year ago and up 9.7% from the third quarter.

Fourth quarter direct revenue of $65.8 million, excluding product and subsupplier revenue, was consistent with both the third quarter and the comparable quarter last year.

Product revenue during the fourth quarter was $8.5 million, up from $5.4 million in the third quarter and $4.2 million for the comparable quarter one year ago.

From a profitability standpoint our third quarter restructuring actions and continuing revenue growth during the fourth quarter resulted in net income of $1.0 million or $.04 per share. This compares to a loss of 9 cents per share reported in the third quarter before the effect of the third quarter special charges. We are pleased that we were able to return to profitability the first quarter following the termination of the merger agreement with Computer Horizons. As Jeff said in our third quarter call, following the termination of that merger agreement, we moved into the fourth quarter with building momentum. That momentum along with the cost reduction and performance improvement measures implemented as part of our third quarter restructuring enabled our rapid return to profitability.

As always, we continue to experience intense competition on average bill rates. In spite of that competition, by concentrating our efforts on the higher value transactions, we managed a slight increase in our average bill rates. As I have been indicating for some time, while we are encouraged by our ability to hold bill rates flat or even slightly increase them, pricing pressures from our clients, and  salary and benefit pressures continue to add up to tight margins. These pricing pressures make improving our average bill rates and gross margins very difficult.

At the end of the fourth quarter total company headcount was at 3095. We reduced our operations staff by 35, as part of our cost reduction and performance improvement plan. Technical headcount declined 55 during the fourth quarter. This decline occurred late in December as a result of client projects coming to a close at the end of the calendar year. As Jeff mentioned, we frequently see this around the end of the year. Billable headcount at quarter end represented 87% of our total staff. This ratio is an improvement from recent quarters.

Fourth quarter sub-supplier revenue of $11.6 million was up $3.8 million from the third quarter and down $800,000 from the comparable quarter last year. The increase in sub-supplier activity from the third quarter to the fourth is the result of increased sub-supplier activity late in the year under the new IBM contract. We expect this activity to continue to grow during 2006.

The gross margin on our direct business offerings, excluding product sales, was 21.2% for the fourth quarter, up from 20.2% in the third quarter but down from 24.9% in the comparable quarter last year. The fourth quarter 2004 gross margin was significantly enhanced by positive experience in the rate at which we accrued for healthcare insurance during that quarter. For the year, however, our gross margin on direct services declined approximately 1.8% from 2004. This decline was a result of many factors including: (i) lower utilization in our solutions business as we invest in growing our IP Communications and Storage Solutions practices, (ii) a shift in our revenue mix to larger national accounts where margins are lower, and (iii) pricing at IBM following our contract award in July. While we expect overall margins to improve slightly in 2006 as revenue from high margin solutions grow and we continue to focus on higher valued

services, the improvement will be tempered by our continued growth of IBM and other lower margin national accounts.

Our fourth quarter SG&A expenses amounted to $13.7 million or 15.9% of revenue. This was a decrease of $2.4 million from the third quarter, and $2.2 million from the comparable quarter one year ago. Holding our fourth quarter SG&A costs below 16% of revenue was a significant accomplishment. The decline in this category of expense reflects a reduction in SG&A headcount and other cost reduction measures implemented late in the third quarter. We are pleased to have been able to rapidly bring these costs back into line with our current revenue levels, and we continue to hold a very tight rein over these costs; however, we expect them to increase slightly from fourth quarter levels, to support our continued growth. We do not expect them to return to the level we saw during the third quarter.

For the quarter, we reported adjusted EBITDA and Free Cash Flow of $2.2 million. This is up from an Adjusted EBITDA loss of $1.2 million and Adjusted Free Cash Flow of negative $2.3 million reported last quarter.

During the fourth quarter, we recorded $50,000 of income tax expense related to subsidiaries where profitability was achieved and state taxes were due. We recorded no other income tax expense associated with our net income as we maintain large reserves against our deferred tax assets. As we generate profits we reverse these reserves to negate any tax expense which would otherwise be recorded.

As indicated, the fourth quarter produced net income of $1.0 million or $.04 cents per share compared with a net loss of $15.6 million posted in the third quarter and net income of $1.4 million posted for the comparable quarter last year.

For 2005 we recorded total revenue of $322 million and a net loss of $2.8 million, before special charges of $14.9 million. This compares to total revenue of $342 million and net income of $3.9 million recorded last year.

Receivables of $67.0 million at the end of the fourth quarter were up from $57.8 million reported at the end of 2004. Days sales outstanding of 69 days is down from 70 days at the end of the third quarter, but up from 63 days at the end of 2004. DSO’s are expected to remain in the high 60’s throughout 2006. The increase in accounts receivable is primarily a result of significant customers, including IBM, asking for and receiving longer payment terms. Working capital of $26.2 million was down $13.3 million from the end of 2004. This decline is due primarily to the purchases of Wirespeed and Redwood, the use of working capital to fund merger and severance-related costs, and our operating losses.

We ended the quarter with $5.0 million of debt on our balance sheet compared to $6.8 million at the end of the third quarter.

Our credit facility had total availability of $30 million at the end of the quarter against which only $5 million was drawn. The level of available borrowings under this facility continues to remain high as our receivables collateral base has increased. This line of credit, which we

recently extended through January, 2010, 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.

Obviously we are disappointed by the operating results posted for the full year. We are, however, pleased with the fourth quarter results. The cost reduction and performance improvement measures implemented during the third quarter and the momentum created in the third and fourth quarter made these results possible.

As we have seen in past years, during December and January, we experienced a decline in technical headcount. This decline, along with the reinstatement of certain costs cut during the fourth quarter, cause us to be cautious about the first quarter outlook. Our guidance for the first quarter places revenue between $85 and $88 million and breakeven operating results, plus or minus one cent.

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

Jeff:

Thanks Dave.

2005 was anything but a routine year. We were obviously disappointed the transaction didn’t go through but neither were we dependent on it for our success.

We continue to have a growing and viable business.

On the staffing side, we saw continuous improvement throughout the fourth quarter driven both by market conditions and efforts from our performance improvement programs. Earlier in the year, we saw a significant drop in headcount, stemming primarily from the loss of the Bank of America account at the end of 2004. And despite a number of distractions, we were able to successfully replace that headcount and finished the year with a headcount total of 2,223.

In addition to the IBM Core Supplier award, we acquired a number of new accounts. We were selected as one of seven prime suppliers to a major financial services client, who reduced their supplier list significantly and extended our relationship with one of our largest accounts for an additional 2 years.

Notwithstanding the improvements seen during the fourth quarter, by late December we saw a slowdown in our requirements following a particularly strong third quarter. This decline is similar to declines we’ve seen in past years. Nevertheless, it will have an impact on first quarter headcount and related revenue.

In our Solutions business we saw significant improvement in our profitability for the fourth quarter. We believe the investments we made and the markets we’ve consolidated around are beginning to pay off. We saw consistent improvement in our utilization across almost all of our practices, with the exception of December which was impacted by the holidays.

Overall Solutions revenue increased by 24% in the 4^th quarter with growth in both products and services. The two practice areas where we’ve made significant investments in training and certifications - IP Communications and our Cisco relationship and Storage Solutions focusing on EMC technology, had services revenue growth of 17% and 11% respectively. We received 2 additional Cisco authorizations. These helped to drive IP communications where we won large wireless, security, IP telephony and call center engagements nationwide. Wireless activity really picked up during the 4^th quarter particularly in the campus, warehouse, and distribution markets. In Storage Solutions, the VMWare opportunities continue to be a source of strong growth and just as we had anticipated, these server consolidation services have led to opportunities for our other solution service areas,   Our newly organized IT Outsourcing group, which includes helpdesk, field engineering, and server desktop, had their first significant win in the quarter with a $1 million/annual outsourcing engagement. This practice led the Solutions group in profitability.

The State and Local practice (our first focused vertical market) finished the year strong with a 45% increase in revenue over the 3^rd quarter, the majority of their work being with State governments. These engagements are continuing into 2006.

So overall we see our solutions efforts to partner with leading technology providers and our reorganized sales and delivery teams gaining momentum.

With our restructuring behind us, we will continue to focus on our performance improvement plan to find better ways to align our business with that of our clients both within staffing and solutions.

As I’ve said on all calls, longer term, we still believe industry consolidation is inevitable. The lack of scale on the staffing side precludes us from many opportunities and continues to put us at risk in the event of another significant client loss. Likewise, we are not in a hurry to rush back into another transaction until such time as we’ve demonstrated sustained profitability and improved the stock price considerably. Given the turnover in our shareholder base, we will also likely be going on the road shortly to reach out to new shareholders now that we have demonstrated the ability to return to profitability.

Finally thanks again to all the shareholders and employees that have been with us throughout this journey. We look forward to a prosperous and profitable year in 2006.

Now I’ll turn it over for questions.