**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**FORM        10-Q**

**(x)        Quarterly Report Pursuant to Section 13 or 15(d) of**

**the        Securities Exchange Act of 1934**

**(        ) Transition Report Pursuant to Section 13 or 15(d) of**

**the        Securities Exchange Act of 1934**

| **ANALYSTS                  INTERNATIONAL CORPORATION**                                                        |
|----------------------------------------------------------------------------------------------------------------|
| (Exact                  name of registrant as specified in its charter)                                        |
|                                                                                                           |
| **Minnesota**                                                                                                  | **41-0905408** |
| (State                  of Incorporation)                                                                      | (IRS                  Employer Identification No.) |
|                                                                                                           |   |
| **3601                  West 76****th****Street**                                                              |   |
| **Minneapolis,                  MN**                                                                           | **55435** |
| (Address                  of Principal Executive Offices)                                                      | (Zip                  Code) |
|                                                                                                           |   |
| Registrant’s                  telephone number, including area code: **(952)                  835-5900** |

----

**ANALYSTS        INTERNATIONAL CORPORATION**

**INDEX**

|                           |                                                                                                                          |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------|
| **Part                  I.**   | **FINANCIAL                  INFORMATION**                                                                                    |
|                           |                                                                                                                          |
| Item                  1.       | Financial                  Statements                                                                                         |
|                           |                                                                                                                          |
|                           | Condensed                  Consolidated Balance                  Sheets                                                       |
|                           | July                  1, 2006 (Unaudited) and December 31, 2005                                                               |
|                           |                                                                                                                          |
|                           | Condensed                  Consolidated Statements of                  Operations                                             |
|                           | Three                  and six months ended July 1, 2006 and July 2, 2005                  (Unaudited)                        |
|                           |                                                                                                                          |
|                           | Condensed                  Consolidated Statements of Cash                  Flows                                             |
|                           | Six                  months ended July 1, 2006 and July 2, 2005 (Unaudited)                                                   |
|                           |                                                                                                                          |
|                           | Notes                  to Condensed Consolidated Financial                  Statements (Unaudited)                            |
|                           |                                                                                                                          |
| Item                  2.       | Management’s                  Discussion and Analysis of Financial Condition                  and Results of Operations |
|                           |                                                                                                                          |
| Item                  3.       | Quantitative                  and Qualitative Disclosures                  About Market Risk                                  |
|                           |                                                                                                                          |
| Item                  4.       | Controls                  and Procedures                                                                                      |
|                           |                                                                                                                          |
| **Part                  II.**  | **OTHER                  INFORMATION**                                                                                        |
|                           |                                                                                                                          |
| Item                  1.       | Legal                  Proceedings                                                                                            |
|                           |                                                                                                                          |
| Item                  1A.      | Risk                  Factors                                                                                                 |
|                           |                                                                                                                          |
| Item                  2.       | Unregistered                  Sales of Equity Securities and                  Use of Proceeds                                 |
|                           |                                                                                                                          |
| Item                  3.       | Defaults                  Upon Senior                  Securities                                                             |
|                           |                                                                                                                          |
| Item                  4.       | Submission                  of Matters to a Vote of Security                  Holders                                         |
|                           |                                                                                                                          |
| Item                  5.       | Other                  Information                                                                                            |
|                           |                                                                                                                          |
| Item                  6.       | Exhibits                                                                                                                      |
|                           |                                                                                                                          |
| Signatures                     |
|                           |                                                                                                                          |
| Exhibit                  Index |

----

**PART        I. FINANCIAL INFORMATION**

**Item        1. Financial Statements**

**Analysts        International Corporation**

**Condensed        Consolidated Balance        Sheets**

|                                                                       |   |                         |    |                              |   |
|----------------------------------------------------------------------------|--------|------------------------------|---------|-----------------------------------|--------|
|                                                                       |   | **July                  1,** |    | **December                  31,** |   |
| ***(In                  thousands)***                                      |   | **2006**                     |    | **2005**                          |   |
|                                                                       |   | ***(Unaudited)***            |    |                              |   |
|                                                                       |   |                         |    |                              |   |   |   |
| **ASSETS**                                                                 |   |                         |    |                              |   |   |   |
| Current                  assets:                                           |   |                         |    |                              |   |   |   |
| Cash                  and Cash Equivalents                                 |   | $                            | 362     |                              | $      | 64 |   |
| Accounts                  receivable, less allowance for doubtful accounts |   |                         | 70,227  |                              |   | 66,968 |   |
| Prepaid                  expenses and other current assets                 |   |                         | 2,846   |                              |   | 2,383 |   |
| Total                  current assets                                      |   |                         | 73,435  |                              |   | 69,415 |   |
|                                                                       |   |                         |    |                              |   |   |   |
| Property                  and equipment, net                               |   |                         | 3,637   |                              |   | 4,056 |   |
| Intangible                  assets                                         |   |                         | 11,778  |                              |   | 12,298 |   |
| Goodwill                                                                   |   |                         | 11,799  |                              |   | 11,799 |   |
| Other                  assets                                              |   |                         | 3,661   |                              |   | 4,436 |   |
|                                                                       |   | $                            | 104,310 |                              | $      | 102,004 |   |
|                                                                       |   |                         |    |                              |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**                  |   |                         |    |                              |   |   |   |
| Current                  liabilities:                                      |   |                         |    |                              |   |   |   |
| Accounts                  payable                                          |   | $                            | 27,007  |                              | $      | 24,581 |   |
| Salaries                  and vacations                                    |   |                         | 8,775   |                              |   | 8,260 |   |
| Line                  of credit                                            |   |                         | 5,526   |                              |   | 5,000 |   |
| Deferred                  revenue                                          |   |                         | 1,223   |                              |   | 1,645 |   |
| Restructuring                  accrual                                     |   |                         | 747     |                              |   | 971 |   |
| Health                  care reserves and other                            |   |                         | 1,840   |                              |   | 2,242 |   |
| Deferred                  compensation                                     |   |                         | 172     |                              |   | 534 |   |
| Total                  current liabilities                                 |   |                         | 45,290  |                              |   | 43,233 |   |
|                                                                       |   |                         |    |                              |   |   |   |
| Non-current                  liabilities:                                  |   |                         |    |                              |   |   |   |
| Deferred                  compensation                                     |   |                         | 2,168   |                              |   | 1,878 |   |
| Restructuring                  accrual                                     |   |                         | 274     |                              |   | 581 |   |
|                                                                       |   |                         |    |                              |   |   |   |
| Shareholders'                  equity                                      |   |                         | 56,578  |                              |   | 56,312 |   |
|                                                                       |   | $                            | 104,310 |                              | $      | 102,004 |   |

----

**Analysts        International Corporation**

**Condensed        Consolidated Statements of        Operations**

*(Unaudited)*

|                                                                     |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|                                                                     |   | **July                  1,**            |   | **July                  2,**          |   | **July                  1,** |   | **July                  2,** |   |
| ***(In                  thousands except per share amounts)***           |   | **2006**                                |   | **2005**                              |   | **2006** |   | **2005** |   |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Revenue:                                                                 |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Professional                  services provided directly                 |   | $                                       | 65,375 |                                  | $      | 66,267 |   | $ | 130,834 |   | $ | 132,317 |   |
| Professional                  services provided through subsuppliers     |   |                                    | 14,127 |                                  |   | 7,520 |   |   | 28,204 |   |   | 15,117 |   |
| Product                  sales                                           |   |                                    | 8,404  |                                  |   | 5,317 |   |   | 15,709 |   |   | 10,769 |   |
| Total                  revenue                                           |   |                                    | 87,906 |                                  |   | 79,104 |   |   | 174,747 |   |   | 158,203 |   |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Salaries,                  contracted services and direct charges        |   |                                    | 65,915 |                                  |   | 58,892 |   |   | 131,110 |   |   | 117,959 |   |
| Cost                  of product sales                                   |   |                                    | 7,308  |                                  |   | 4,804 |   |   | 13,752 |   |   | 9,911 |   |
| Selling,                  administrative and other operating costs       |   |                                    | 14,821 |                                  |   | 15,910 |   |   | 29,309 |   |   | 31,364 |   |
| Merger                  and severance related costs                      |   |                                    | (248   | )                                     |   | 1,631 |   |   | (244 | ) |   | 1,631 |   |
| Amortization                  of intangible assets                       |   |                                    | 266    |                                  |   | 194 |   |   | 520 |   |   | 387 |   |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Operating                  (loss) income                                 |   |                                    | (156   | )                                     |   | (2,327 | ) |   | 300 |   |   | (3,049 | ) |
| Non-operating                  income                                    |   |                                    | 105    |                                  |   | 1 |   |   | 109 |   |   | 22 |   |
| Interest                  expense                                        |   |                                    | (199   | )                                     |   | (49 | ) |   | (392 | ) |   | (54 | ) |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| (Loss)                  income before income taxes                       |   |                                    | (250   | )                                     |   | (2,375 | ) |   | 17 |   |   | (3,081 | ) |
| Income                  tax expense                                      |   |                                    | 8      |                                  |   | -- |   |   | 21 |   |   | -- |   |
| Net                  loss                                                |   | $                                       | (258   | )                                     | $      | (2,375 | ) | $ | (4 | ) | $ | (3,081 | ) |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Per                  common share:                                       |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Basic                  loss                                              |   | $                                       | (.01   | )                                     | $      | (.10 | ) | $ | (.00 | ) | $ | (.13 | ) |
| Diluted                  loss                                            |   | $                                       | (.01   | )                                     | $      | (.10 | ) | $ | (.00 | ) | $ | (.13 | ) |
|                                                                     |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Average                  common shares outstanding                       |   |                                    | 24,620 |                                  |   | 24,504 |   |   | 24,616 |   |   | 24,410 |   |
| Average                  common and common equivalent shares outstanding |   |                                    | 24,620 |                                  |   | 24,504 |   |   | 24,616 |   |   | 24,410 |   |

----

**Analysts        International Corporation**

**Condensed        Consolidated Statements of Cash        Flows**

*(Unaudited)*

|                                                                  |   | **Six                  Months Ended** |   |
|-----------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                  |   | **July                  1,**          |   | **July                  2,** |   |
| ***(In                  thousands)***                                 |   | **2006**                              |   | **2005** |   |
|                                                                  |   |                                  |   |   |   |   |   |
| Net                  cash provided by (used in) operating activities  |   | $                                     | 535    |   | $ | (4,538 | ) |
|                                                                  |   |                                  |   |   |   |   |   |
| Cash                  flows from investing activities:                |   |                                  |   |   |   |   |   |
| Property                  and equipment additions                     |   |                                  | (774   | ) |   | (1,813 | ) |
| Proceed                  from property and equipment sales            |   |                                  | 11     |   |   | 4 |   |
| Payments                  for acquisitions, net of cash acquired      |   |                                  | --     |   |   | (5,033 | ) |
| Net                  cash used in investing activities                |   |                                  | (763   | ) |   | (6,842 | ) |
|                                                                  |   |                                  |   |   |   |   |   |
| Cash                  flows from financing activities:                |   |                                  |   |   |   |   |   |
| Net                  change in line of credit                         |   |                                  | 526    |   |   | 3,580 |   |
| Proceeds                  from exercise of stock options              |   |                                  | --     |   |   | 67 |   |
| Net                  cash provided by financing activities            |   |                                  | 526    |   |   | 3,647 |   |
|                                                                       |   |                                  |   |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents |   |                                  | 298    |   |   | (7,733 | ) |
|                                                                  |   |                                  |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period     |   |                                  | 64     |   |   | 7,889 |   |
|                                                                  |   |                                  |   |   |   |   |   |
| Cash                  and cash equivalents at end of period           |   | $                                     | 362    |   | $ | 156 |   |
|                                                                  |   |                                  |   |   |   |   |   |
| **Non-cash                  activities:**                             |   |                                  |   |   |   |   |   |
| Value                  of common stock issued for acquisitions        |   | $                                     | --     |   | $ | 1,000 |   |
| Value                  of common stock issued for stock awards        |   | $                                     | 20     |   | $ | 28 |   |

----

**Analysts        International Corporation**

**Notes        to Condensed Consolidated Financial        Statements**

**1.**
**Summary        of Significant Accounting Policies**

*Goodwill        and Intangible Assets*

|                                              |   | **July                  1, 2006** |   | **December                  31, 2005** |   |
|---------------------------------------------------|--------|-----------------------------------|--------|----------------------------------------|--------|
|   ***(In                  thousands)*** |   | **Gross****Carrying****Amount**   |   | **Accumulated****Amortization**        |   | **Other                  Intangibles,****Net** |   | **Gross****Carrying****Amount** |   | **Accumulated****Amortization** |   | **Other                  Intangibles,****Net** |   |
|                                              |   |                              |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Customer                  list                    |   | $                                 | 15,075 |                                   | $      | (4,884 | ) | $ | 10,191 |   | $ | 15,075 |   | $ | (4,364 | ) | $ | 10,711 |   |
| Tradename                                         |   |                              | 1,720  |                                   |   | (133 | ) |   | 1,587 |   |   | 1,720 |   |   | (133 | ) |   | 1,587 |   |
|                                              |   | $                                 | 16,795 |                                   | $      | (5,017 | ) | $ | 11,778 |   | $ | 16,795 |   | $ | (4,497 | ) | $ | 12,298 |   |

----

*Equity        Compensation*
*Plans*

*Accounting        for Stock Issued to *

| a)   | Compensation                expense for all stock-based compensation awards granted prior to                December                31, 2005, which were not fully vested as of December 31, 2005, based                on                the grant date fair value estimated in accordance with the original                provisions of SFAS No. 123, *Accounting                for Stock-Based Compensation;*                and |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| b)   | Compensation                expense for all stock-based compensation awards granted subsequent                to                December 31, 2005, based on the grant-date fair value estimated in                accordance with the provisions of SFAS No. 123R. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*(in        thousands)*

|                                                                                                                           |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                           |   | **July                  2, 2005**       |   | **July                  2, 2005**     |   |
|                                                                                                                           |   |                                    |   |                                  |   |   |   |
| Net                  loss, as reported                                                                                         |   | $                                       | (2,375 | )                                     | $      | (3,081 | ) |
| Deduct:                  Stock-based compensation expense determined under fairValue                  method for all awards(1) |   |                                    | (95    | )                                     |   | (237 | ) |
|                                                                                                                           |   |                                    |   |                                  |   |   |   |
| Net                  earnings, pro forma                                                                                       |   | $                                       | (2,470 | )                                     | $      | (3,318 | ) |
|                                                                                                                           |   |                                    |   |                                  |   |   |   |
| Earnings                  per share:                                                                                           |   |                                    |   |                                  |   |   |   |
| Basic                  - as reported                                                                                           |   | $                                       | (.10   | )                                     | $      | (.13 | ) |
| Basic                  - pro forma                                                                                             |   | $                                       | (.10   | )                                     | $      | (.14 | ) |
|                                                                                                                           |   |                                    |   |                                  |   |   |   |
| Diluted                  - as reported                                                                                         |   | $                                       | (.10   | )                                     | $      | (.13 | ) |
| Diluted                  - pro forma                                                                                           |   | $                                       | (.10   | )                                     | $      | (.14 | ) |

|                                              |   |      **Options** |      |  **Weighted****Average****Exercise****Price****Per                  Share** |   | **Weighted****Average****Remaining****Contractual****Term****(in                  years)** |   |    **Aggregate****Intrinsic****Value** |   |
|---------------------------------------------------|--------|-------------------------------------------|-----------|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                              |   |                                      |      |                                                                             |   |                                                                                       |   |                                                  |   |   |   |   |   |
| Outstanding                  on December 31, 2005 |   |                                      | 2,348,781 |                                                                             | $      | 6.36                                                                                       |   |                                                  | 6.38   |   | $ | 25,250 |   |
| Granted                                           |   |                                      | 164,000   |                                                                             |   | 2.44                                                                                       |   |                                                  |   |   |   |   |   |
| Exercised                                         |   |                                      | 00        |                                                                             |   | 00                                                                                         |   |                                                  |   |   |   |   |   |
| Forfeited/Canceled                                |   |                                      | 250,949   |                                                                             |   | 7.84                                                                                       |   |                                                  |   |   |   |   |   |
|                                              |   |                                      |      |                                                                             |   |                                                                                       |   |                                                  |   |   |   |   |   |
| Outstanding                  on July 1, 2006      |   |                                      | 2,261,832 |                                                                             | $      | 5.92                                                                                       |   |                                                  | 6.26   |   | $ | 0 |   |
| Exercisable                  on July 1, 2006      |   |                                      | 1,713,832 |                                                                             | $      | 6.85                                                                                       |   |                                                  | 5.53   |   | $ | 0 |   |

----

|                                                                           |   | **The                    Period Ended** |                         |
|--------------------------------------------------------------------------------|--------|-----------------------------------------|------------------------------|
|  **Black-Scholes                    Option Valuation Assumptions****(1)** |   | **July                    1,****2006**  |                         | **July                    2,****2005** |   |
|                                                                           |   |                                    |                         |   |   |   |   |
| Risk-free                    interest rate(2)                                  |   |                                    | 5.1                    - 5.2 | % |   | 3.4                    - 4.1 | % |
| Expected                    dividend yield                                     |   |                                    | 0.0                          | % |   | 0.0 | % |
| Expected                    stock price volatility(3)                          |   |                                    | 41%                    - 71  | % |   | 48%                    - 80 | % |
| Expected                    life of stock options (in years)(4)                |   |                                    | 6.3                          |   |   | 6.8 |   |

|                                          |   |    **Shares** |    | **Weighted****Average****Grant                  Date****Fair                  Value** |   |
|-----------------------------------------------|--------|------------------------------|---------|---------------------------------------------------------------------------------------|--------|
| Non-vested                  December 31, 2005 |   |                         | 217,000 |                                                                                  |   | 3.12 |   |
| Granted                                       |   |                         | 258,000 |                                                                                  |   | 2.43 |   |
| Vested                                        |   |                         | 58,000  |                                                                                  |   | 2.74 |   |
| Forfeited                                     |   |                         | 0       |                                                                                  |   |   |   |
| Non-vested                  at July 1, 2006   |   |                         | 417,000 |                                                                                  |   | 2.45 |   |

----

**2.**
**Line        of Credit**

**3.**
**Shareholders'        Equity**

|                                                       |   | **Six                      Months Ended** |   |
|------------------------------------------------------------|--------|-------------------------------------------|--------|
| ***(In                      thousands)***                  |   | **July                      1, 2006**     |   |
|                                                       |   |                                      |   |   |
| Balance                      at beginning of period        |   | $                                         | 56,312 |   |
|                                                       |   |                                      |   |   |
| Issuance                      of common stock              |   |                                      | 20     |   |
| Amortization                      of deferred compensation |   |                                      | 174    |   |
| FAS                      123 R stock option expense        |   |                                      | 76     |   |
| Net                      Loss                              |   |                                      | (4     | ) |
|                                                       |   |                                      |   |   |
| Balance                      at end of period              |   | $                                         | 56,578 |   |

**4.**
**Earnings        Per Share**

|                                                                                        |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|  ***(In                  thousands, except per share amounts)***                       |   | **July                  1,****2006**    |   | **July                  2,****2005**  |   | **July                  1,****2006** |   | **July                  2,****2005** |   |
|                                                                                        |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Net                  income (loss)                                                          |   | $                                       | (258   | )                                     | $      | (2,375 | ) | $ | (4 | ) | $ | (3,081 | ) |
|                                                                                        |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Weighted-average                  number of common shares outstanding                       |   |                                    | 24,620 |                                  |   | 24,504 |   |   | 24,616 |   |   | 24,410 |   |
| Dilutive                  effect of equity compensation plan awards                         |   |                                    | --     |                                  |   | -- |   |   | -- |   |   | -- |   |
| Weighted-average                  number of common and common equivalent shares outstanding |   |                                    | 24,620 |                                  |   | 24,504 |   |   | 24,616 |   |   | 24,410 |   |
|                                                                                        |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Net                  income (loss) per share:                                               |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Basic                                                                                       |   | $                                       | (.01   | )                                     | $      | (.10 | ) | $ | (.00 | ) | $ | (.13 | ) |
| Diluted                                                                                     |   | $                                       | (.01   | )                                     | $      | (.10 | ) | $ | (.00 | ) | $ | (.13 | ) |

----

**5.**
**Restructuring**

|                                            |   | **Workforce** |   | **Office                    Closure/** |   |      |   |
|-------------------------------------------------|--------|---------------|--------|----------------------------------------|--------|-----------|--------|
| ***(In                    thousands)***         |   | **Reduction** |   | **Consolidation**                      |   | **Total** |   |
|                                            |   |          |   |                                   |   |      |   |   |   |   |
| Balance                    at December 31, 2005 |   | $             | 44     |                                   | $      | 1,508     |   | $ | 1,552 |   |
| Cash                    expenditures            |   |          | (44    | )                                      |   | (467      | )      |   | (511 | ) |
| Non-cash                    charges             |   |          | --     |                                   |   | (20       | )      |   | (20 | ) |
| Balance                    at July 1, 2006      |   | $             | 0      |                                   | $      | 1,021     |   | $ | 1,021 |   |

----

**Item        2. Management's Discussion and Analysis of Financial Condition and        Results of Operations**

*Forward-Looking        Statements*

*Introduction        and Overview of Second Quarter 2006 Events*

----

*Market        Conditions and Economics of Our Business*

*Strategy*

| §   | IP                Communications which includes Wireless, IP Telecommunications, Call                Center                and Security Services |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | Storage                Solutions which includes storage product support and VMware                services |
|--------------------|------------------------------------------------------------------------------------------------------------|
| §   | Lawson                Services which includes integration, customization, and administration                of                Lawson Software applications |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | Managed                IT Services which includes Application Outsourcing, Help Desk, Hosting,                and Field Engineering services |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

----

*Other        Factors*

*Overview        of Results of Second Quarter 2006 Operations*

----

*Estimates        of Future Operating Results*

*Allowance        for Doubtful Accounts*

*Accrual        of Unreported Medical Claims*

*Revenue        Recognition*

----

*Subsupplier        Revenue*

*Goodwill        and Other Intangible Impairment*

*Deferred        Taxes*

*Restructuring        and other severance related costs*

*Stock-Based        Compensation*

----

**RESULTS        OF OPERATIONS, THREE- AND SIX-MONTH PERIODS ENDED JULY 1, 2006 VS. JULY 2,        2005**

|                                                                   |   | ThreeMonths                    Ended |   | ThreeMonths                    Ended |   |                                   |   |   |   |   |   |
|------------------------------------------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|----------------------------------------|--------|--------|--------|--------|--------|
|                                                                   |   | July                    1, 2006      |   | July                    2, 2005      |   | Increase                    (Decrease) |   |
|                                                                   |   |                                 |   |                                 |   | %                    of           |   |   |   |   |   | %                    of |   |   |  |  |   | %  |   |   | As                    % of |   |
| *(dollars                    in thousands)*                            |   |                                 | Amount |                                 |   | Revenue                                |   |   | Amount |   |   | Revenue |   |   | Amount |   |   | Inc                    (Dec | ) |   | Revenue |   |
| Revenue:                                                               |   |                                 |   |                                 |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional                    services provided directly             |   | $                                    | 65,375 |                                 |   | 74.4                                   | %      | $      | 66,267 |   |   | 83.8 | % | $ | (892 | ) |   | (1.3 | )% |   | (9.4 | )% |
| Professional                    services provided through subsuppliers |   |                                 | 14,127 |                                 |   | 16.1                                   |   |   | 7,520  |   |   | 9.5 |   |   | 6,607 |   |   | 87.9 |   |   | 6.6 |   |
| Product                    sales                                       |   |                                 | 8,404  |                                 |   | 9.5                                    |   |   | 5,317  |   |   | 6.7 |   |   | 3,087 |   |   | 58.1 |   |   | 2.8 |   |
| Total                    revenue                                       |   |                                 | 87,906 |                                 |   | 100.0                                  |   |   | 79,104 |   |   | 100.0 |   |   | 8,802 |   |   | 11.1 |   |   | 0.0 |   |
| Salaries,                    contracted services and direct charges    |   |                                 | 65,915 |                                 |   | 75.0                                   |   |   | 58,892 |   |   | 74.4 |   |   | 7,023 |   |   | 11.9 |   |   | .6 |   |
| Cost                    of product sales                               |   |                                 | 7,308  |                                 |   | 8.3                                    |   |   | 4,804  |   |   | 6.1 |   |   | 2,504 |   |   | 52.1 |   |   | 2.2 |   |
| Selling,                    administrative and other operating costs   |   |                                 | 14,821 |                                 |   | 16.9                                   |   |   | 15,910 |   |   | 20.1 |   |   | (1,089 | ) |   | (6.8 | ) |   | (3.2 | ) |
| Merger                    and severance related costs                  |   |                                 | (248   | )                                    |   | (.3                                    | )      |   | 1,631  |   |   | 2.1 |   |   | (1,879 | ) |   | (115.2 | ) |   | (2.4 | ) |
| Amortization                    of intangible assets                   |   |                                 | 266    |                                 |   | .3                                     |   |   | 194    |   |   | .2 |   |   | 72 |   |   | 37.1 |   |   | .1 |   |
| Non-operating                    income                                |   |                                 | (105   | )                                    |   | (.1                                    | )      |   | (1     | )      |   | (.0 | ) |   | (104 | ) |   | 10,400.0 |   |   | (.1 | ) |
| Interest                    expense                                    |   |                                 | 199    |                                 |   | .2                                     |   |   | 49     |   |   | .1 |   |   | 150 |   |   | 306.1 |   |   | .1 |   |
|                                                                   |   |                                 |   |                                 |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)                    Income before income taxes                   |   |                                 | (250   | )                                    |   | (.3                                    | )      |   | (2,375 | )      |   | (3.0 | ) |   | 2,125 |   |   | 89.5 |   |   | 2.7 |   |
| Income                    tax expense                                  |   |                                 | 8      |                                 |   | 0.0                                    |   |   | --     |   |   | .0 |   |   | 8 |   |   | -- |   |   | 0 |   |
|                                                                   |   |                                 |   |                                 |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    (loss) income                                   |   | $                                    | (258   | )                                    |   | (.3                                    | )%     | $      | (2,375 | )      |   | (3.0 | )% | $ | 2,117 |   |   | 89.1 | % |   | 2.7 | % |

|                                                                   |   | SixMonths                    Ended |    | Six                    Months                    Ended |   |                                   |   |   |    |   |   |
|------------------------------------------------------------------------|--------|------------------------------------|---------|--------------------------------------------------------|--------|----------------------------------------|--------|--------|---------|--------|--------|
|                                                                   |   | July                    1, 2006    |    | July                    2, 2005                        |   | Increase                    (Decrease) |   |
|                                                                        |   |                               |    |                                                   |   | %                    of           |   |   |    |   |   | %                    of |   |   |  |  |   | %   |   |   | As                    % of |   |
| *(dollars                    in thousands)*                            |   |                               | Amount  |                                                   |   | Revenue                                |   |   | Amount  |   |   | Revenue |   |   | Amount |   |   | Inc                    (Dec | ) |   | Revenue |   |
| Revenue:                                                               |   |                               |    |                                                   |   |                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional                    services provided directly             |   | $                                  | 130,834 |                                                   |   | 74.9                                   | %      | $      | 132,317 |   |   | 83.6 | % | $ | (1,483 | ) |   | (1.1 | )% |   | (8.7 | )% |
| Professional                    services provided through subsuppliers |   |                               | 28,204  |                                                   |   | 16.1                                   |   |   | 15,117  |   |   | 9.6 |   |   | 13,087 |   |   | 86.6 |   |   | 6.5 |   |
| Product                    sales                                       |   |                               | 15,709  |                                                   |   | 9.0                                    |   |   | 10,769  |   |   | 6.8 |   |   | 4,940 |   |   | 45.9 |   |   | 2.2 |   |
| Total                    revenue                                       |   |                               | 174,747 |                                                   |   | 100.0                                  |   |   | 158,203 |   |   | 100.0 |   |   | 16,544 |   |   | 10.5 |   |   | 0.0 |   |
| Salaries,                    contracted services and direct charges    |   |                               | 131,110 |                                                   |   | 75.0                                   |   |   | 117,959 |   |   | 74.6 |   |   | 13,151 |   |   | 11.1 |   |   | .4 |   |
| Cost                    of product sales                               |   |                               | 13,752  |                                                   |   | 7.9                                    |   |   | 9,911   |   |   | 6.3 |   |   | 3,841 |   |   | 38.8 |   |   | 1.6 |   |
| Selling,                    administrative and other operating costs   |   |                               | 29,309  |                                                   |   | 16.8                                   |   |   | 31,364  |   |   | 19.8 |   |   | (2,055 | ) |   | (6.6 | ) |   | (3.0 | ) |
| Merger                    and severance related costs                  |   |                               | (244    | )                                                      |   | (.1                                    | )      |   | 1,631   |   |   | 1.0 |   |   | (1,875 | ) |   | (115.0 | ) |   | (1.1 | ) |
| Amortization                    of intangible assets                   |   |                               | 520     |                                                   |   | .3                                     |   |   | 387     |   |   | .2 |   |   | 133 |   |   | 34.4 |   |   | .1 |   |
| Non-operating                    income                                |   |                               | (109    | )                                                      |   | (.1                                    | )      |   | (22     | )      |   | (.0 | ) |   | (87 | ) |   | 395.5 |   |   | (.1 | ) |
| Interest                    expense                                    |   |                               | 392     |                                                   |   | .2                                     |   |   | 54      |   |   | .0 |   |   | 338 |   |   | 625.9 |   |   | .2 |   |
|                                                                   |   |                               |    |                                                   |   |                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                    (loss) before income taxes                   |   |                               | 17      |                                                   |   | .0                                     |   |   | (3,081  | )      |   | (1.9 | ) |   | 3,098 |   |   | 100.6 |   |   | 1.9 |   |
| Income                    tax expense                                  |   |                               | 21      |                                                   |   | .0                                     |   |   | --      |   |   | .0 |   |   | 21 |   |   | -- |   |   | -- |   |
|                                                                   |   |                               |    |                                                   |   |                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    (loss) income                                   |   | $                                  | (4      | )                                                      |   | .0                                     | %      | $      | (3,081  | )      |   | (1.9 | )% | $ | (3,077 | ) |   | 99.9 | % |   | 1.9 | % |
|                                                                   |   |                               |    |                                                   |   |                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personnel:                                                             |   |                               |    |                                                   |   |                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Management                    and administrative                       |   |                               | 435     |                                                   |   |                                   |   |   | 450     |   |   |   |   |   | (15 | ) |   | (3.3 | ) |   |   |   |
| Technical                    consultants                               |   |                               | 2,385   |                                                   |   |                                   |   |   | 2,415   |   |   |   |   |   | (30 | ) |   | (1.2 | ) |   |   |   |

----

*Revenue*

*Salaries,        Contracted Services and Direct Charges*

*Cost        of Product Sales*

*Selling,        Administrative and Other Operating Costs*

*Merger        and Severance Related Costs*

*Non-Operating        Income*

----

*Interest        Expense*

*Income        Taxes*

*Personnel*

|                                                     |   |                         |   |                              |   |           |   | **Percentage** |   |
|----------------------------------------------------------|--------|------------------------------|--------|-----------------------------------|--------|----------------|--------|----------------|--------|
|                                                     |   | **July                  1,** |   | **December                  31,** |   | **Increase**   |   | **Increase**   |   |
| ***(In                  thousands except percentages)*** |   | **2006**                     |   | **2005**                          |   | **(Decrease)** |   | **(Decrease)** |   |
|                                                     |   |                         |   |                              |   |           |   |           |   |   |   |   |   |
| Cash                  and Cash Equivalents               |   | $                            | 362    |                              | $      | 64             |   | $              | 298    |   |   | 465.6 | % |
| Accounts                  Receivable                     |   |                         | 70,227 |                              |   | 66,968         |   |           | 3,259  |   |   | 4.9 |   |
| Other                  Current Assets                    |   |                         | 2,846  |                              |   | 2,383          |   |           | 463    |   |   | 19.4 |   |
| Total                  Current Assets                    |   | $                            | 73,435 |                              | $      | 69,415         |   | $              | 4,020  |   |   | 5.8 | % |
|                                                     |   |                         |   |                              |   |           |   |           |   |   |   |   |   |
| Accounts                  Payable                        |   |                         | 27,007 |                              | $      | 24,581         |   | $              | 2,426  |   |   | 9.9 | % |
| Salaries                  and Vacations                  |   |                         | 8,775  |                              |   | 8,260          |   |           | 515    |   |   | 6.2 |   |
| Line                  of Credit                          |   |                         | 5,526  |                              |   | 5,000          |   |           | 526    |   |   | 10.5 |   |
| Restructuring                  Accruals Current          |   |                         | 747    |                              |   | 971            |   |           | (224   | ) |   | (23.1 | ) |
| Other                  Current Liabilities               |   |                         | 3,235  |                              |   | 4,421          |   |           | (1,186 | ) |   | (26.8 | ) |
| Total                  Current Liabilities               |   | $                            | 45,290 |                              | $      | 43,233         |   | $              | 2,057  |   |   | 4.8 | % |
|                                                     |   |                         |   |                              |   |           |   |           |   |   |   |   |   |
| Working                  Capital                         |   |                         | 28,145 |                              | $      | 26,182         |   |           | 1,963  |   |   | 7.5 | % |
| Current                  Ratio                           |   |                         | 1.62   |                              |   | 1.61           |   |           | .01    |   |   | .6 |   |
|                                                     |   |                         |   |                              |   |           |   |           |   |   |   |   |   |
| Total                  Shareholders’ Equity        |   | $                            | 56,578 |                              | $      | 56,312         |   | $              | 266    |   |   | .5 | % |

*Cash        Requirements*

----

*    Sources        and        Uses of Cash/Credit Facility*

|  ***(in                  thousands)*** |   |  **1                  Year** |   |  **2-3                  Years** |   |  **4-5                  Years** |   | **Over                  5****Years** |   |  **Total** |   |
|---------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|-----------------|--------|
|                                        |   |                              |   |                                 |   |                                 |   |                                 |   |            |   |   |   |   |   |   |
| Line                  of Credit             |   | $                                 | --     |                                 | $      | --                                   |   | $                                    | 5,526  |            | $      | -- |   | $ | 5,526 |   |
|                                        |   |                              |   |                                 |   |                                 |   |                                 |   |            |   |   |   |   |   |   |
| Operating                  Leases           |   |                              | 4,427  |                                 |   | 5,762                                |   |                                 | 3,479  |            |   | 1,508 |   |   | 15,176 |   |
|                                        |   |                              |   |                                 |   |                                 |   |                                 |   |            |   |   |   |   |   |   |
| Deferred                  Compensation      |   |                              | 178    |                                 |   | 969                                  |   |                                 | 270    |            |   | 923 |   |   | 2,340 |   |
|                                        |   |                              |   |                                 |   |                                 |   |                                 |   |            |   |   |   |   |   |   |
| Total                                       |   | $                                 | 4,605  |                                 | $      | 6,731                                |   | $                                    | 9,275  |            | $      | 2,431 |   | $ | 23,042 |   |

----

* *

*        Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement        No. 109,*
*        Accounting for Income Taxes.*

----

**Item        3. Quantitative and Qualitative Disclosures        About Market Risk**

**Item        4. Controls and        Procedures**

----

**PART        II. OTHER INFORMATION**

**Item        1. Legal Proceedings**

**Item        1A. Risk Factors**

**Item        2. Unregistered Sales of Equity Securities and Use        of Proceeds**

**Item        3.**  **Defaults Upon Senior Securities**

**Item        4. Submission of Matters to a Vote of Security        Holders**

| **Nominee**                            | **Votes                  For** | **Authority                  Withheld** |
|----------------------------------------|--------------------------------|-----------------------------------------|
| Brigid                  A. Bonner      | 20,331,689                     | 827,487                                 |
| Willard                  W. Brittain   | 20,231,260                     | 927,916                                 |
| Krzysztof                  K. Burhardt | 20,238,413                     | 920,763                                 |
| Michael                  B. Esstman    | 19,855,930                     | 1,303,246                               |
| Michael                  J. LaVelle    | 19,877,759                     | 1,281,417                               |
| Margaret                  A. Loftus    | 19,761,595                     | 1,397,581                               |
| Robb                  L Prince         | 19,880,647                     | 1,278,529                               |

| In                  favor | 20,490,759 |
|---------------------------|------------|
| Against                   | 616,470    |
| Abstain                   | 51,947     |

| In                  Favor        | 11,426,904 |
|----------------------------------|------------|
| Against                          | 2,716,443  |
| Abstain                          | 198,150    |
| Broker                  Non-vote | 6,817,679  |

----

**Item        5. Other Information**

**Item        6. Exhibits**

| *+Exhibit                  10.1  |   | Analysts                  International Corporation 2004 Equity Incentive Plan (as amended                  through                  May 25, 2006).                                                        |
|----------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *+                  Exhibit 10.2 |   | Form                  of 2006 Management Incentive Compensation Plan and target incentive                  levels                  for named executive officers.                                           |
| +                  Exhibit 31.1  |   | Certification                  of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002.                                                                                          |
| +                  Exhibit 31.2  |   | Certification                  of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002.                                                                                          |
| ++                  Exhibit 32   |   | Certification                  of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant                  to                  Section 906 of the Sarbanes Oxley Act of                  2002. |

| *  |   | Denotes                  a management contract or compensatory plan or arrangement required                  to be                  filed as an exhibit to this Quarterly Report pursuant to Item 6                  of Form                  10-Q. |
|----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ^  |   | Denotes                  an exhibit previously filed with the Securities and Exchange Commission                  and incorporated herein by reference.                                                                                             |
| +  |   | Filed                  herewith                                                                                                                                                                                                                     |
| ++ |   | Furnished                  herewith                                                                                                                                                                                                                 |

----

**SIGNATURES**

|                                                   | ANALYSTS                  INTERNATIONAL CORPORATION |
|--------------------------------------------------------|-----------------------------------------------------|
|                                                   | (Registrant)                                        |
|                                                   |                                                |   |
|                                                   |                                                |   |
|                                                   |                                                |   |
| Date:                  August 9,                  2006 | By:                                                 | /s/                  Jeffrey P. Baker |
|                                                   |                                                | Jeffrey                  P. Baker |
|                                                   |                                                | Chief                  Executive Officer |
|                                                   |                                                | (Principal                Executive Officer) |
|                                                   |                                                |   |
|                                                   |                                                |   |
| Date:                  August 9,                  2006 | By:                                                 | /s/ David                  J. Steichen |
|                                                   |                                                | David                  J. Steichen |
|                                                   |                                                | Chief                  Financial Officer |
|                                                   |                                                | (Principal                  Financial and Accounting Officer) |

----

**EXHIBIT        INDEX**

| Exhibit                  10.1 |   | Analysts                  International Corporation 2004 Equity Incentive Plan (as amended                  through                  May 25, 2006).                                                        |
|-------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit                  10.2 |   | Form                  of 2006 Management Incentive Compensation Plan and target incentive                  levels                  for named executive officers.                                           |
| Exhibit                  31.1 |   | Certification                  of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002.                                                                                          |
| Exhibit                  31.2 |   | Certification                  of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of                  2002.                                                                                          |
| Exhibit                  32   |   | Certification                  of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant                  to                  section 906 of the Sarbanes Oxley Act of                  2002. |