**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For the quarterly period ended April 2, 2011**

 

**or**

 

**o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For the transition period from             to            **

 

**Commission File Number: 1-33981**

 

**ANALYSTS INTERNATIONAL CORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Minnesota**                            | ** ** | **41-0905408**                    |
|------------------------------------------|------------|-----------------------------------|
| (State of Incorporation)                 |       | (IRS Employer Identification No.) |
|                                     |       |                              |
| **3601 West 76th Street**           |       |                              |
| **Minneapolis, MN**                      | ** ** | **55435**                         |
| (Address of Principal Executive Offices) |       | (Zip Code)                        |

 

Registrant’s telephone number, including area code: **(952) 835-5900**

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o |   | Accelerated Filer o         |
|---------------------------|--------|-----------------------------|
|                      |   |                        |
| Non-accelerated Filer o   |   | Smaller Reporting Company x |

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

As of May 3, 2010, 5,012,385 shares of the registrant’s common stock were outstanding.

 

 

 

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**ANALYSTS INTERNATIONAL CORPORATION**

 

**INDEX**

 
| **Part I.**   | **FINANCIAL   INFORMATION.**                                                                                   | 3      |
|--------------------|----------------------------------------------------------------------------------------------------------------|--------|
|               |                                                                                                           |   |
| Item 1.            | Financial Statements (Unaudited)                                                                               | 3      |
|               |                                                                                                           |   |
|               | Consolidated   Balance Sheets as of April 2, 2011 and January 1, 2011                                | 3      |
|               |                                                                                                           |   |
|               | Consolidated   Statements of Operations for the Three Months Ended April 2, 2011 and   April 3, 2010 | 4      |
|               |                                                                                                           |   |
|               | Consolidated   Statements of Cash Flows for the Three Months Ended April 2, 2011 and   April 3, 2010 | 5      |
|               |                                                                                                           |   |
|               | Notes   to Consolidated Financial Statements                                                                   | 6      |
|               |                                                                                                           |   |
| Item 2.            | Management’s   Discussion and Analysis of Financial Condition and Results of Operations                   | 9      |
|               |                                                                                                           |   |
| Item 3.            | Quantitative   and Qualitative Disclosures About Market Risk                                                   | 14     |
|               |                                                                                                           |   |
| Item 4T.           | Controls and   Procedures                                                                                      | 14     |
|               |                                                                                                           |   |
| **Part II.**  | **OTHER   INFORMATION**                                                                                        | 15     |
|               |                                                                                                           |   |
| Item 1.            | Legal Proceedings                                                                                              | 15     |
|               |                                                                                                           |   |
| Item 1A.           | Risk Factors                                                                                                   | 15     |
|               |                                                                                                           |   |
| Item 2.            | Unregistered   Sales of Equity Securities and Use of Proceeds                                                  | 15     |
|               |                                                                                                           |   |
| Item 3.            | Defaults   Upon Senior Securities                                                                              | 15     |
|               |                                                                                                           |   |
| Item 4.            | Remove and Reserved                                                                                            | 15     |
|               |                                                                                                           |   |
| Item 5.            | Other Information                                                                                              | 15     |
|               |                                                                                                           |   |
| Item 6.            | Exhibits                                                                                                       | 16     |
|               |                                                                                                           |   |
| Signatures         |                                                                                                           | 17     |
|               |                                                                                                           |   |
| Exhibit Index |                                                                                                           | 18     |

 

2

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**PART I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

**Analysts International Corporation**

**Consolidated Balance Sheets**

**(Unaudited)**

 
| ** **                                                                                                                            | ** ** | **April 2,** | ** ** | **January 1,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|---------------------|------------|
| **(In thousands, except share and per share amounts)**                                             | ** ** | **2011**          | ** ** | **2011**            | ** ** |
|                                                                                                                                  |       |              |       |                |       |
| **ASSETS**                                                                                                                            |       |              |       |                |       |
|                                                                                                                                  |       |              |       |                |       |
| Current assets:                                                                                                                       |       |              |       |                |       |
| Cash and cash equivalents                                                                                                             |       | $                 | 4,339      |                | $          | 4,328 |   |
| Accounts receivable, less allowance for doubtful   accounts of $789 and $713, respectively                                            |       | 17,964            |       | 17,425              |       |
| Prepaid expenses and other current assets                                                                                             |       | 836               |       | 643                 |       |
| Total current assets                                                                                                                  |       | 23,139            |       | 22,396              |       |
|                                                                                                                                  |       |              |       |                |       |
| Property and equipment, net of accumulated depreciation   of $8,459 and $8,290, respectively                                          |       | 649               |       | 784                 |       |
| Other assets                                                                                                                          |       | 1,030             |       | 432                 |       |
| Total assets                                                                                                                          |       | $                 | 24,818     |                | $          | 23,612 |   |
|                                                                                                                                  |       |              |       |                |       |
| **LIABILITIES AND SHAREHOLDERS’   EQUITY**                                                                                       |       |              |       |                |       |
|                                                                                                                                  |       |              |       |                |       |
| Current liabilities:                                                                                                                  |       |              |       |                |       |
| Accounts payable                                                                                                                      |       | $                 | 4,263      |                | $          | 4,261 |   |
| Line of credit                                                                                                                        |       | —            |       | —              |       |
| Salaries and benefits                                                                                                                 |       | 3,361             |       | 2,189               |       |
| Deferred revenue                                                                                                                      |       | 282               |       | 359                 |       |
| Deferred compensation                                                                                                                 |       | 139               |       | 181                 |       |
| Restructuring accrual                                                                                                                 |       | 302               |       | 339                 |       |
| Other current liabilities                                                                                                             |       | 588               |       | 694                 |       |
| Total current liabilities                                                                                                             |       | 8,935             |       | 8,023               |       |
|                                                                                                                                  |       |              |       |                |       |
| Non-current liabilities:                                                                                                              |       |              |       |                |       |
| Deferred compensation                                                                                                                 |       | 826               |       | 901                 |       |
| Restructuring accrual                                                                                                                 |       | 93                |       | 167                 |       |
| Other long-term liabilities                                                                                                           |       | 57                |       | 52                  |       |
| Total non-current liabilities                                                                                                         |       | 976               |       | 1,120               |       |
|                                                                                                                                  |       |              |       |                |       |
| Shareholders’ equity:                                                                                                            |       |              |       |                |       |
| Common stock, par value $0.10 a share; authorized   24,000,000 shares; issued and outstanding 5,012,385 and 4,985,874,   respectively |       | 501               |       | 498                 |       |
| Additional capital                                                                                                                    |       | 25,832            |       | 25,599              |       |
| Accumulated deficit                                                                                                                   |       | (11,426           | )          | (11,628             | )          |
| Total shareholders’ equity                                                                                                       |       | 14,907            |       | 14,469              |       |
| Total liabilities and shareholders’ equity                                                                                       |       | $                 | 24,818     |                | $          | 23,612 |   |

 

See notes to consolidated financial statements.

 

3

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**Analysts International Corporation**

**Consolidated Statements of Operations**

**(Unaudited)**

 
| ** **                                                            | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                            | ** ** | **April 2,**                | ** ** | **April 3,** | ** ** |
| **(In thousands, except per share amounts)** | ** ** | **2011**                         | ** ** | **2010** | ** ** |
|                                                                  |       |                             |       |   |   |
| Revenues                                                              |       | $                                | 26,312     |   | $ | 28,452 |   |
| Cost of revenues                                                      |       | 20,053                           |       | 22,461 |   |
| Gross profit                                                          |       | 6,259                            |       | 5,991 |   |
|                                                                  |       |                             |       |   |   |
| Selling, administrative and other operating costs                     |       | 6,050                            |       | 6,973 |   |
| Restructuring costs and other severance related   costs               |       | —                           |       | 174 |   |
| Total operating expenses                                              |       | 6,050                            |       | 7,147 |   |
|                                                                  |       |                             |       |   |   |
| Operating income (loss)                                               |       | 209                              |       | (1,156 | ) |
|                                                                  |       |                             |       |   |   |
| Non-operating income                                                  |       | —                           |       | 5 |   |
| Interest expense                                                      |       | —                           |       | (3 | ) |
|                                                                  |       |                             |       |   |   |
| Income (loss) before income taxes                                     |       | 209                              |       | (1,154 | ) |
|                                                                  |       |                             |       |   |   |
| Income tax expense                                                    |       | 7                                |       | 11 |   |
|                                                                  |       |                             |       |   |   |
| Net income (loss)                                                     |       | $                                | 202        |   | $ | (1,165 | ) |
|                                                                  |       |                             |       |   |   |
| Per common share (basic):                                             |       |                             |       |   |   |
| Net income (loss)                                                     |       | $                                | 0.04       |   | $ | (0.23 | ) |
|                                                                  |       |                             |       |   |   |
| Per common share (diluted):                                           |       |                             |       |   |   |
| Net income (loss)                                                     |       | $                                | 0.04       |   | $ | (0.23 | ) |
|                                                                  |       |                             |       |   |   |
| Weighted-average shares outstanding:                                  |       |                             |       |   |   |
| Basic                                                                 |       | 4,995                            |       | 4,986 |   |
| Diluted                                                               |       | 5,007                            |       | 4,986 |   |

 

See notes to consolidated financial statements.

 

4

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**Analysts International Corporation**

**Consolidated Statements of Cash Flows**

**(Unaudited)**

 
| ** **                                             | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                             | ** ** | **April 2,**                | ** ** | **April 3,** | ** ** |
| **(In thousands)**                                | ** ** | **2011**                         | ** ** | **2010** | ** ** |
| ** **                                             | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Cash flows from operating activities:                  |       |                             |       |   |   |
| Net income (loss)                                      |       | $                                | 202        |   | $ | (1,165 | ) |
|                                                   |       |                             |       |   |   |
| Adjustments to net income (loss):                      |       |                             |       |   |   |
| Loss on asset sale                                     |       | —                           |       | 49 |   |
| Depreciation                                           |       | 190                              |       | 241 |   |
| Share based compensation                               |       | 236                              |       | (58 | ) |
|                                                   |       |                             |       |   |   |
| Changes in:                                            |       |                             |       |   |   |
| Accounts receivable                                    |       | (539                             | )          | 876 |   |
| Prepaid expenses and other assets                      |       | (305                             | )          | 211 |   |
| Accounts payable                                       |       | (16                              | )          | (1,088 | ) |
| Salaries and benefits                                  |       | 1,172                            |       | 1,332 |   |
| Deferred revenue                                       |       | (77                              | )          | 184 |   |
| Deferred compensation                                  |       | (117                             | )          | (149 | ) |
| Restructuring accrual                                  |       | (111                             | )          | (543 | ) |
| Other accrued liabilities                              |       | (56                              | )          | (6 | ) |
| Net cash provided by (used in) operating   activities  |       | 579                              |       | (116 | ) |
|                                                   |       |                             |       |   |   |
| Cash flows from investing activities:                  |       |                             |       |   |   |
| Expended for property and equipment additions          |       | (37                              | )          | (59 | ) |
| Proceeds from asset sale                               |       | —                           |       | 168 |   |
| Net cash (used in) provided by investing   activities  |       | (37                              | )          | 109 |   |
|                                                   |       |                             |       |   |   |
| Cash flows from financing activities:                  |       |                             |       |   |   |
| Net change in line of credit                           |       | —                           |       | — |   |
| Payment of insurance policy loan                       |       | (486                             | )          | — |   |
| Payment of capital lease obligation                    |       | (45                              | )          | (45 | ) |
| Net cash used in financing activities                  |       | (531                             | )          | (45 | ) |
|                                                   |       |                             |       |   |   |
| Net increase (decrease) in cash and cash   equivalents |       | 11                               |       | (52 | ) |
|                                                   |       |                             |       |   |   |
| Cash and cash equivalents at beginning of period       |       | 4,328                            |       | 3,818 |   |
|                                                   |       |                             |       |   |   |
| Cash and cash equivalents at end of period             |       | $                                | 4,339      |   | $ | 3,766 |   |

 

See notes to consolidated financial statements.

 

5

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**Analysts International Corporation**

**Notes to Consolidated Financial Statements**

**(Unaudited)**

 

**1. ****Organization and Nature of Business**

 

Analysts International Corporation (“AIC,” “Company,” “we,” “us,” or “our”) is an information technology (“IT”) services company. We employ approximately 900 IT professionals, management and administrative staff and are focused on serving the IT needs of mid-market to Fortune 500 companies and government agencies across North America. AIC was incorporated in Minnesota in 1966 and our corporate headquarters is located in Minneapolis, Minnesota. For a more complete description of our Company, please refer to our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

 

We operate on a fiscal year ending on the Saturday closest to December 31. Accordingly, fiscal 2011 will end on Saturday, December 31, 2011. The first quarter of fiscal 2011 ended on April 2, 2011 and the first quarter of fiscal 2010 ended on April 3, 2010.

 

**2.  Summary of Significant Accounting Policies**

 

*Basis of Consolidation*

 

The accompanying unaudited Consolidated Financial Statements of AIC have been prepared on the accrual basis of accounting and in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. As permitted under these rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States (“U.S. GAAP”) can be condensed or omitted. The Consolidated Financial Statements included in this document reflect, in the opinion of our management, all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the Notes to Consolidated Financial Statements) necessary for fair presentation of the results of operations for the interim periods presented. The following notes should be read in conjunction with the accounting policies and other disclosures in the Notes to the Consolidated Financial Statements incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011. Revenues, expenses, cash flows, assets and liabilities can and do vary during the year. Therefore, interim results are not necessarily indicative of the results to be expected for the full fiscal year.

 

*Estimates*

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

*Changes to Consolidated Statements of Operations*

 

Beginning with this Form 10-Q, we have changed the format of our Consolidated Statements of Operations for reporting revenues and cost of revenues. The change in format combines Professional services provided directly and Professional services provided through subsuppliers for both revenues and cost of revenues. Professional services provided through subsuppliers is immaterial to our current and historical operations for the periods presented and we believe this change in format will better assist in the understanding of our business.

 

**3.   Sale of Assets**

 

*Sale of Customer Contracts*

 

On March 3, 2010, we sold certain client contracts, property and equipment and sublet a facility. In consideration for the assets sold and the liabilities transferred, we received $0.2 million in cash. We recorded a loss on the sale of approximately $50,000 which is included within Selling, administrative and other operating costs (“SG&A”) in our Consolidated Statement of Operations.

 

**4. ** **Financing Agreement**

 

*Revolving Credit Facility*

 

On February 23, 2011, we entered into the First Amendment to Credit and Security Agreement (“Amended Credit Facility”) with Wells Fargo 

 

6

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Bank, National Association (“Wells Fargo”), pursuant to which the interest rate on future borrowings and the unused line fee were reduced, the maturity date was extended until September 30, 2014 and certain covenants were made less restrictive.

 

Under the Amended Credit Facility, Wells Fargo will continue to advance up to $15.0 million to us for working capital purposes and to facilitate the issuance of letters of credit. The total amount available for borrowing under the Amended Credit Facility will fluctuate based on our level of eligible accounts receivable.

 

The Amended Credit Facility carries an interest rate equal to the three-month LIBOR rate plus 1.50% - 2.50% depending on our operating results. The Credit Facility had a one-time origination fee of $150,000, the balance of which is being amortized over the new term of the Amended Credit Facility. The annual unused line fee varies between 0.25% - 0.375%, depending on our operating results, and is based on the daily average unused amount. The Amended Credit Facility may be terminated or reduced by us on 90 days notice in exchange for a termination fee of 1.0% of the maximum line amount through September 30, 2011, 0.50% of such amount thereafter until September 30, 2012, 0.25% of such amount thereafter until September 30, 2013 and no fee in the final year. Borrowings under the Amended Credit Facility are secured by all of our assets.

 

The Amended Credit Facility requires us to meet certain levels of year-to-date earnings before taxes. The Amended Credit Facility limits our annual capital expenditures to $2.0 million and contains customary affirmative covenants, including covenants regarding annual, quarterly and projected financial reporting requirements, collateral and insurance maintenance, and compliance with applicable laws and regulations. Further, the facility contains customary negative covenants limiting our ability to grant liens, incur indebtedness, make investments, repurchase our stock, create new subsidiaries, sell assets or engage in any change of control transaction without the consent of Wells Fargo.

 

Upon an event of default, Wells Fargo may terminate the facility or declare the entire amount outstanding under the facility to be immediately due and payable and exercise other rights under the agreement. The events of default under the facility include, among other things, payment defaults, breaches of covenants, a change in control of the Company and bankruptcy events.

 

As of April 2, 2011, we were in compliance with all the requirements and had no borrowings under the Amended Credit Facility. Total availability of the Amended Credit Facility, which fluctuates based on our level of eligible accounts receivable, was $7.3 million as of April 2, 2011.

 

**5.   Restructuring Costs and Other Severance Related Costs**

 

A summary of the restructuring charges and subsequent activity in the restructuring accrual for the three months ended April 2, 2011 is as follows:

 
| ** **                         | ** ** | **Workforce** | ** ** | **Office Closure/** | ** ** | ** ** | ** ** |
|------------------------------------|------------|---------------|------------|--------------------------|------------|------------|------------|
| **(In thousands)**            | ** ** | **Reduction** | ** ** | **Consolidation**        | ** ** | **Total**  | ** ** |
| Balance as of January 1, 2011 |       | $             | 22         |                     | $          | 484        |       | $ | 506 |   |
| Additional restructuring charges   |       | —        |       | —                   |       | —     |       |
| Cash expenditures                  |       | (22           | )          | (89                      | )          | (111       | )          |
| Balance as of April 2, 2011   |       | $             | —     |                     | $          | 395        |       | $ | 395 |   |

 

During the first quarter of fiscal 2010, we recorded workforce reduction charges of $0.2 million, all of which related to severance and related costs.

 

7

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**6.  Shareholders’ Equity**

 
| ** **                                                   | ** ** | ** **      | ** ** | ** ** | ** ** | ** **     | ** ** | ** **      | ** ** | **Total**              | ** ** |
|--------------------------------------------------------------|------------|-----------------|------------|------------|------------|----------------|------------|-----------------|------------|------------------------|------------|
| ** **                                                   | ** ** | **Outstanding** | ** ** | **Common** | ** ** | **Additional** | ** ** | **Accumulated** | ** ** | **Shareholders’** | ** ** |
| **(In thousands, except share amounts)** | ** ** | **Shares**      | ** ** | **Stock**  | ** ** | **Capital**    | ** ** | **Deficit**     | ** ** | **Equity**             | ** ** |
|                                                         |       |            |       |       |       |           |       |            |       |                   |       |
| Balances as of January 1, 2011                          |       | 4,985,874       |       | $          | 498        |           | $          | 25,599          |       | $                      | (11,628    | ) | $ | 14,469 |   |
| Common stock issued                                          |       | 26,511          |       | 3          |       | 112            |       | —          |       | 115                    |       |
| Share based compensation expense                             |       | —          |       | —     |       | 121            |       | —          |       | 121                    |       |
| Net income                                                   |       | —          |       | —     |       | —         |       | 202             |       | 202                    |       |
| Balance as of April 2, 2011                             |       | 5,012,385       |       | $          | 501        |           | $          | 25,832          |       | $                      | (11,426    | ) | $ | 14,907 |   |

 

**7.** **Share Based Compensation**

 

Total share based compensation expense for the first quarters of fiscal 2011 and fiscal 2010 was approximately $0.2 million and ($0.1) million, respectively, and includes compensation expense related to both stock options and stock awards. The tax benefit recorded for the first quarter of fiscal 2011 was $13,000 and the reduction of the tax benefit recorded for the first quarter of fiscal 2010 was $10,000. The tax benefit is offset against our valuation allowance for our deferred tax asset.

 

No stock options were exercised during the periods ended April 2, 2011 and April 3, 2010. As of April 2, 2011, there was approximately $0.5 million of unrecognized share based compensation expense related to unvested stock options and awards that are expected to vest over a weighted-average period of 1.6 years. Options to purchase 403,730 and 623,044 shares of common stock were outstanding at April 2, 2011 and April 3, 2010, respectively.

 

During the three month periods ended April 2, 2011 and April 3, 2010, we granted equity compensation awards as follows:

 
| ** **    | ** ** | **Three Months Ended** | ** ** |
|---------------|------------|----------------------------------|------------|
| ** **    | ** ** | **April 2, 2011**      | ** ** | **April 3, 2010** | ** ** |
| ** **    | ** ** | **Grants**                       | ** ** | **Weighted-Average   Grant Date Fair   Value** | ** ** | **Grants** | ** ** | **Weighted-Average   Grant Date Fair   Value** | ** ** |
| ** **    | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Stock Options |       | 110,050                          |       | $ | 2.74 |   | 86,800 |   | $ | 1.73 |   |
| Stock Awards  |       | 102,450                          |       | $ | 4.40 |   | 1,200 |   | $ | 3.36 |   |

 

**8.  Net Income (Loss) Per Share**

 

Basic and diluted income (loss) per share is presented in accordance with ASC Topic 260, *Earnings Per Share*. Basic income (loss) per share excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted income per share includes dilutive potential common shares outstanding and is computed by dividing income available to common stockholders by the weighted-average number of common and common equivalent shares outstanding for the period.

 

For the three-month period ended April 2, 2011, 260,352 anti-dilutive weighted average shares were excluded from the calculation of weighted average number of common equivalent shares outstanding. For the three-month period ended April 3, 2010, all potential common shares outstanding were considered anti-dilutive and excluded from the calculation of weighted average number of common and common equivalent shares outstanding because we reported a net loss. The computation of basic and diluted income (loss) per share for the three months ended April 2, 2011 and April 3, 2010, is as follows:

 
| ** **                                                                   | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                   | ** ** | **April 2,**                | ** ** | **April 3,** | ** ** |
| **(In thousands except per share amounts)**         | ** ** | **2011**                         | ** ** | **2010** | ** ** |
|                                                                         |       |                             |       |   |   |
| Net income (loss)                                                            |       | $                                | 202        |   | $ | (1,165 | ) |
| Weighted-average number of common shares   outstanding                       |       | 4,995                            |       | 4,986 |   |
| Dilutive effect of potential common shares   outstanding                     |       | 12                               |       | — |   |
| Weighted-average number of common and common   equivalent shares outstanding |       | 5,007                            |       | 4,986 |   |
|                                                                         |       |                             |       |   |   |
| Net income (loss) per share:                                                 |       |                             |       |   |   |
| Basic                                                                        |       | $                                | 0.04       |   | $ | (0.23 | ) |
| Diluted                                                                      |       | $                                | 0.04       |   | $ | (0.23 | ) |

 

8

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

 

The following discussion should be read in conjunction with our consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q, including the “Risk Factors” described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

 

***A.******                ******Our Business***

 

Analysts International Corporation (“AIC,” “Company,” “we,” “us,” or “our”) is an information technology (“IT”) services company. We employ approximately 900 IT professionals, management and administrative staff and are focused on serving the IT needs of mid-market to Fortune 500 companies and government agencies across North America. AIC was incorporated in Minnesota in 1966 and our corporate headquarters is located in Minneapolis, Minnesota.

 

***B.******                ******Fiscal 2011 Strategic Plan***

 

Our primary goals for fiscal 2011 are to deliver profitability while making the investments required to position us for long term growth and return AIC to a leading IT services company. Our strategy emphasizes:

 

·                  Building on our strong brand;

 

·                  Leveraging our longstanding client relationships; and

 

·                  Investing in core markets where we believe we can become a market leader in either presence or specialty.

 

Our fiscal 2011 objectives in support of our strategy are as follows:

 

·                  **Build a platform for growth**

 

We expect to increase our sales and recruiting capacity by more than 40% from the beginning of fiscal 2011. We have added approximately one-third of our targeted increase in sales and recruiting capacity by the end of the first quarter of fiscal 2011. Based on the time we believe it takes an account executive and a recruiter to reach full productivity, we believe there will be a positive impact of this investment on fiscal 2011 revenues; however, we expect a greater impact on future period revenues.

 

Our acquisition strategy is to identify IT staffing firms located in our core markets that complement our existing IT staffing business. We evaluate potential future acquisitions based on the size of the firm, capabilities of their sales force and recruiter personnel and cultural fit as well as other relevant criteria.

 

·                  **Improve gross margin rates**

 

We anticipate further gross margin rate improvement from the 22.3% we achieved in fiscal 2010 as we continue to change our mix of business and focus on our core markets.

 

In the first quarter of fiscal 2011, we generated a gross margin rate of 23.8%, a 270 basis point improvement over the prior year first quarter and a 150 basis point improvement over our full year fiscal 2010 gross margin rate. The improvement in gross margin rates is due to lower benefit costs and our focus on delivering on higher margin business opportunities.

 

·                  **Generate profitability in fiscal 2011**

 

We plan to make investments in our sales and recruiting operations, however, we believe improvements in our gross margin rate and continued focus on controlling our administrative and other operating costs will allow us to generate profitability in fiscal 2011.

 

For the first quarter of fiscal 2011, we generated net income of $0.2 million. In the second quarter of fiscal 2011, we expect to incur charges of approximately $0.8 million related to the relocation of our corporate headquarters and severance charges related to changes in our senior executive officers. We anticipate the relocation of our corporate headquarters will reduce our annualized operating expenses by approximately $0.3 million. We believe we will be profitable in fiscal 2011.

 

9

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***C.******                ******Business Developments***

 

*Leadership*

 

On February 22, 2011, our Board of Directors appointed Brittany B. McKinney as our President and Chief Executive Officer and a nominee for Director of our Company. Ms. McKinney served as our Interim President and Chief Executive Officer since September 2010. Previously, Ms. McKinney was our Vice President of Corporate Development and the Senior Vice President of the Central Region.

 

*Revolving Credit Facility*

 

On February 23, 2011, we entered into the First Amendment to the Credit and Security Agreement (“Amended Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”), which amended the terms of the Credit Facility and extended the maturity date to September 30, 2014. Under the Amended Credit Facility, Wells Fargo will continue to advance up to $15.0 million to us for working capital purposes and to facilitate the issuance of letters of credit.

 

*Sale of Customer Contracts*

 

On March 3, 2010, AIC sold certain customer contracts, property and equipment and sublet a facility lease. In consideration for the assets sold and the liabilities transferred, the Company received $0.2 million in cash. The Company recorded a loss on the sale of approximately $50,000 which is included within Selling, administrative and other operating costs (“SG&A”) in our Consolidated Statement of Operations. For the preceding 12 months before the sale date, the customer contracts generated revenues of approximately $3.2 million and had an unfavorable contribution margin of approximately $0.7 million.

 

***D.******                ******Overview of First Quarter Fiscal 2011 Operations***

 

Our revenues decreased $2.1 million, or 7.5%, from the first quarter of fiscal 2010 primarily due to a reduction in volume at lower margin accounts (5.7%) and from our planned exit from a non-core line of business (1.8%).

 

The gross margin rate increased 270 basis points primarily due to lower benefit costs and more favorable customer billing rates.

 

SG&A expenses declined $0.9 million, or 13.2%, in first quarter 2011 over the prior year quarter as a result of personnel, benefit and non-personnel cost reductions.

 

We generated cash from operations of $0.6 million during the first quarter of fiscal 2011. As of April 2, 2011, we had a cash balance of $4.3 million and no borrowings under our revolving line of credit.

 

10

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**RESULTS OF OPERATIONS - THREE MONTHS ENDED APRIL 2, 2011 VS. APRIL 3, 2010**

 

The following table illustrates the relationship between revenue and expense categories along with a count of employees and technical consultants as of April 2, 2011 and April 3, 2010.

 
| ** **                                              | ** ** | **Three Months Ended** | ** ** | **Three Months Ended** | ** ** | ** ** | ** ** | ** **    | ** ** |
|---------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|------------|------------|---------------|------------|
| ** **                                              | ** ** | **April 2, 2011**      | ** ** | **April 3, 2010**      | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | ** **                       | ** ** | **% of**                    | ** ** | ** ** | ** ** | **% of** | ** ** | **Increase (Decrease)** | ** ** |
| **(Dollars in thousands)**                    | ** ** | **Amount**                       | ** ** | **Revenue**                      | ** ** | **Amount** | ** ** | **Revenue**   | ** ** | **Amount** | ** ** | **%** | ** ** |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Revenues                                                |       | $                                | 26,312     |                             | 100.0      | %          | $          | 28,452        |       | 100.0 | % | $ | (2,140 | ) | (7.5 | )% |
| Cost of revenues                                        |       | 20,053                           |       | 76.2                             |       | 22,461     |       | 78.9          |       | (2,408 | ) | (10.7 | ) |
| Gross profit                                            |       | 6,259                            |       | 23.8                             |       | 5,991      |       | 21.1          |       | 268 |   | 4.5 |   |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Selling, administrative and other operating costs       |       | 6,050                            |       | 23.0                             |       | 6,973      |       | 24.5          |       | (923 | ) | (13.2 | ) |
| Restructuring costs and other severance related   costs |       | —                           |       | 0.0                              |       | 174        |       | 0.7           |       | (174 | ) | (100.0 | ) |
| Total operating expenses                                |       | 6,050                            |       | 23.0                             |       | 7,147      |       | 25.2          |       | (1,097 | ) | (15.3 | ) |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Operating income (loss)                                 |       | 209                              |       | 0.8                              |       | (1,156     | )          | (4.1          | )          | 1,365 |   | 118.1 |   |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Non-operating income                                    |       | —                           |       | 0.0                              |       | 5          |       | 0.0           |       | (5 | ) | (100.0 | ) |
| Interest expense                                        |       | —                           |       | 0.0                              |       | (3         | )          | (0.0          | )          | (3 | ) | (100.0 | ) |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Income (loss) before income taxes                       |       | 209                              |       | 0.8                              |       | (1,154     | )          | (4.1          | )          | 1,363 |   | 118.1 |   |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Income tax expense                                      |       | 7                                |       | 0.0                              |       | 11         |       | 0.0           |       | (4 | ) | (36.4 | ) |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Net income (loss)                                       |       | $                                | 202        |                             | 0.8        | %          | $          | (1,165        | )          | (4.1 | )% | $ | 1,367 |   | 117.3 | % |
|                                                    |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Personnel:                                              |       |                             |       |                             |       |       |       |          |       |   |   |   |   |
| Management and Administrative                           |       | 116                              |       |                             |       | 111        |       |          |       | 5 |   | 4.5 | % |
| Consultants                                             |       | 803                              |       |                             |       | 825        |       |          |       | (22 | ) | (2.7 | )% |

 

*Revenues*

 

Revenues declined $2.1 million, or 7.5%, from the comparable period a year ago due to a reduction in volume at lower margin accounts (5.7%) and from our planned exit from a non-core line of business (1.8%). After adjusting for the planned exit a from non-core line of business, the number of billable hours for the first quarter of fiscal 2011 declined 6.7% from the prior year period as a result of fewer consultants serving lower margin business. The decline in billable hours was partially offset by a 1.7% increase in overall billing rates over the prior year period.

 

*Cost of Revenues*

 

Cost of revenues represents our payroll and benefit costs associated with our billable consultants and our cost of using sub-contractors. This category of expense as a percentage of revenues decreased 270 basis points to 76.2%, in the first quarter of fiscal 2011 compared to the prior year period primarily due to a decrease in our benefit costs and more favorable customer billing rates.

 

*Selling, Administrative and Other Operating Costs*

 

SG&A costs include management and administrative salaries, salaries and commissions paid to account executives and recruiters, benefits, location costs, and other administrative costs.  This category of costs decreased approximately $0.9 million from the comparable period in 2010 and represented 23.0% of revenue for the first quarter of fiscal 2011 compared to 24.5% in fiscal 2010. In the first quarter of fiscal 2011, SG&A expenses decreased as a result of personnel and related cost reductions, lower benefit costs, lower compensation expense as a result of lower business volumes and the implementation of general expense reductions.

 

*Restructuring Costs and Other Severance Related Costs*

 

During the first quarter of fiscal 2010, we recorded restructuring and severance related expenses of $0.2 million, all of which related to workforce reductions and severance.

 

11

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*Non-operating Income*

 

We had no non-operating income in the first quarter of fiscal 2011.

 

*Interest Expense*

 

We had no borrowing outstanding in the first quarter of fiscal 2011 or 2010 under our revolving credit facility.

 

*Income Taxes*

 

Our income tax expense reflects the utilization of net operating loss carryforwards to offset taxable income. We currently have approximately $25.5 million of operating loss carryforwards available to offset federal and state taxes. For both the first quarters of fiscal 2011 and fiscal 2010, we recorded accruals for amounts due for certain state income taxes and changes in our reserves for tax obligations. We recorded no additional income tax expense or benefit associated with our net operating income or loss because any tax expense or benefit that would otherwise have been recorded has been negated by adjusting the valuation allowance against our deferred tax asset.  If, however, we successfully return to profitability to a point where future realization of deferred tax assets, which are currently reserved, becomes “more likely than not,” we may be required to reverse the existing valuation allowance to realize the benefit of these assets.

 

*Personnel*

 

Our IT professional staff levels, which includes sub-contractors, finished the first quarter of fiscal 2011 at 803, a 2.7% decrease against the comparable period last year.  The decrease in IT professional staff levels is primarily due to the reduction of IT professional staff serving lower margin business. The increase in management and administrative personnel is due to our focus on increasing the number of account executives and recruiters that are necessary to increase revenues.

 

*Certain Information Concerning Off-Balance Sheet Arrangements*

 

As of April 2, 2011, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

 

12

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**Liquidity and Capital Resources**

 

The following table provides information relative to the liquidity of our business.

 
| ** **                                | ** ** | ** **        | ** ** | ** **          | ** ** | ** **     | ** ** | **Percentage** | ** ** |
|-------------------------------------------|------------|-------------------|------------|---------------------|------------|----------------|------------|----------------|------------|
| ** **                                | ** ** | **April 2,** | ** ** | **January 1,** | ** ** | **Increase**   | ** ** | **Increase**   | ** ** |
| **(In thousands)**                   | ** ** | **2011**          | ** ** | **2011**            | ** ** | **(Decrease)** | ** ** | **(Decrease)** | ** ** |
|                                      |       |              |       |                |       |           |       |           |       |
| Cash and cash equivalents                 |       | $                 | 4,339      |                | $          | 4,328          |       | $              | 11         |   | 0.3 | % |
| Accounts receivable                       |       | 17,964            |       | 17,425              |       | 539            |       | 3.1            |       |
| Prepaid expenses and other current assets |       | 836               |       | 643                 |       | 193            |       | 30.0           |       |
| Total current assets                      |       | $                 | 23,139     |                | $          | 22,396         |       | $              | 743        |   | 3.3 | % |
|                                      |       |              |       |                |       |           |       |           |       |
| Accounts payable                          |       | $                 | 4,263      |                | $          | 4,261          |       | $              | 2          |   | 0.0 | % |
| Line of credit                            |       | —            |       | —              |       | —         |       | NM             |       |
| Salaries and benefits                     |       | 3,361             |       | 2,189               |       | 1,172          |       | 53.5           |       |
| Deferred revenue                          |       | 282               |       | 359                 |       | (77            | )          | (21.4          | )          |
| Deferred compensation                     |       | 139               |       | 181                 |       | (42            | )          | (23.2          | )          |
| Restructuring accrual                     |       | 302               |       | 339                 |       | (37            | )          | (10.9          | )          |
| Other current liabilities                 |       | 588               |       | 694                 |       | (106           | )          | (15.3          | )          |
| Total current liabilities                 |       | $                 | 8,935      |                | $          | 8,023          |       | $              | 912        |   | 11.4 | % |
|                                      |       |              |       |                |       |           |       |           |       |
| Working capital                           |       | $                 | 14,204     |                | $          | 14,373         |       | $              | (169       | ) | (1.2 | )% |
| Current ratio                             |       | 2.59              |       | 2.79                |       | (0.20          | )          | (7.2           | )%         |
|                                      |       |              |       |                |       |           |       |           |       |
| Total shareholders’ equity           |       | $                 | 14,907     |                | $          | 14,469         |       | $              | 438        |   | 3.0 | % |

 

NM = not meaningful

 

*Change in Working Capital*

 

Working capital was $14.2 million at April 2, 2011, down approximately $0.2 million from January 1, 2011. The ratio of current assets to current liabilities decreased 0.20 to 2.59 at April 2, 2011 compared to 2.79 at January 1, 2011.

 

Our total current assets increased approximately $0.7 million at April 2, 2011 compared to the end of fiscal 2010 primarily as a result of increased accounts receivable balances. Our accounts receivable balance increased 3.1% as a result of higher revenues during the quarter and our days sales outstanding declined from 63 at the end of fiscal 2010 to 60 at April 2, 2011.

 

Our total current liabilities increased by approximately $0.9 million at April 2, 2011 compared to the end of fiscal 2010. The timing of our payroll periods from our fiscal year end to the first quarter of fiscal 2011 caused our salaries and benefits payable balance to increase approximately $1.2 million.

 

We believe our existing working capital and availability under our Amended Credit Facility with Wells Fargo will be sufficient to support the cash flow needs of our business in fiscal 2011. We expect to be able to comply with the requirements of our credit agreement; however, failure to do so could affect our ability to obtain necessary working capital and could have a material adverse effect on our business.

 

*Sources and Uses of Cash/Credit Facility*

 

Cash and cash equivalents remained relatively flat from January 1, 2011 to April 2, 2011. Our primary need for working capital is to support accounts receivable and to fund the time lag between payroll and vendor disbursements and receipt of amounts billed to clients. Historically, we have been able to support internal growth in our business with internally generated funds and through the use of our credit facility.

 

On February 23, 2011, we entered into the Amended Credit Facility, which amended the terms of the Credit Facility and extended the maturity date to September 30, 2014. Under the Amended Credit Facility, Wells Fargo will continue to advance up to $15.0 million to us for working capital purposes and to facilitate the issuance of letters of credit. The total amount available for borrowing under the Amended Credit Facility will fluctuate based on our level of eligible accounts receivable.

 

The Amended Credit Facility carries an interest rate equal to the three-month LIBOR rate plus 1.50% - 2.50%, depending on our operating results. The Credit Facility had a one-time origination fee of $150,000, the balance of which is being amortized over the new term of the Amended Credit Facility. The annual unused line fee varies between 0.25% - 0.375%, depending on our operating results, on the daily 

 

13

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average unused amount. The Amended Credit Facility may be terminated or reduced by us on 90 days notice in exchange for a termination fee of 1.0% of the maximum line amount through September 30, 2011, 0.50% thereafter until September 30, 2012, 0.25% thereafter until September 30, 2013 and no fee in the final year. Borrowings under the Amended Credit Facility are secured by all of our assets.

 

The Amended Credit Facility requires us to meet certain levels of year-to-date earnings before taxes. Additionally, the Amended Credit Facility limits our annual capital expenditures to $2.0 million and contains customary affirmative covenants, including covenants regarding annual, quarterly and projected financial reporting requirements, collateral and insurance maintenance, and compliance with applicable laws and regulations. Further, the facility contains customary negative covenants limiting our ability to grant liens, incur indebtedness, make investments, repurchase our stock, create new subsidiaries, sell assets or engage in any change of control transaction without the consent of Wells Fargo.

 

Upon an event of default, Wells Fargo may terminate the facility or declare the entire amount outstanding under the facility to be immediately due and payable and exercise other rights under the agreement. The events of default under the facility include, among other things, payment defaults, breaches of covenants, a change in control and bankruptcy events.

 

As of April 2, 2011, we were in compliance with all the requirements and had no borrowing under the Amended Credit Facility. Total availability under the Amended Credit Facility, which fluctuates based on our level of eligible accounts receivable, was $7.3 million as of April 2, 2011.

 

On March 3, 2010, we closed on an asset sale agreement for certain client contracts. In consideration for the assets sold and the liabilities transferred, we received $0.2 million in cash.

 

During each of the first quarters of fiscal 2011 and fiscal 2010, we made capital expenditures of approximately $37,000 and $59,000, respectively.

 

During the first quarter of fiscal 2011, we paid off a loan on a Company owned life insurance policy of approximately $0.5 million. The Company owned life insurance policy is reported in Other assets in our Consolidated Balance Sheets.

 

**Forward-Looking Statements**

 

This Form 10-Q contains forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) about: (i) our strategic plans, the objectives of those strategic plans and our ability to successfully implement our strategic plans, including our goal of profitability during fiscal 2011, (ii) our expectations with respect to the demand for our services and continuing pressure from clients to request lower cost offerings for IT staffing services, (iii) our expectations with respect to competition in our industry and our ability to compete, and (iv) our expectations with respect to our financial results and operating performance. You can identify these statements by the use of words such as anticipate, estimate, expect, should, project, forecast, intend, plan, believe, will and other words and terms of similar meaning or import, or variations thereof, and in connection with any discussion of future operating or financial performance.

 

Among the factors that could cause our estimates and assumptions as to future performance, and our actual results to differ materially, are: (i) our inability, in whole or in part, to implement or execute our strategic plans, (ii) our inability to successfully recruit and hire qualified technical personnel, (iii) our inability to successfully compete on a local and national basis with other companies in our industry or with new competitors who face limited barriers to entry in the markets we serve, (iv) our inability to maintain key client relationships or to attract new clients, (v) our inability to attract, retain or motivate key personnel, (vi) our inability to continue to reduce or leverage our operating costs, (vii) the possibility that we may incur liability for the errors or omissions of our consultants providing IT services for clients or the risk that we may be subject to claims for indemnification under contracts with our clients, (viii) our inability to comply with the requirements in our line of credit or to obtain a replacement line of credit on commercially reasonable terms, and (ix) as well as other economic, business, competitive and/or regulatory factors affecting our business generally, including those set forth in this Quarterly Report on Form 10-Q for fiscal year 2011 (especially in the Management’s Discussion and Analysis and Risk Factors section thereof) and our Current Reports on Form 8-K. All forward-looking statements included in this Form 10-Q are based on information available to us as of the date hereof and largely reflect estimates and assumptions made by our management, which may be difficult to predict and beyond our control. We undertake no obligation (and expressly disclaim any such obligation) to update forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to update reasons why actual results would differ from those anticipated in any such forward-looking statements, other than as required by law.

 

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

 

Not applicable.

 

**Item 4T. Controls and Procedures.**

 

(a)                       Evaluation of Disclosure Controls and Procedures

 

We maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which 

 

14

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is required to be disclosed timely, is accumulated and communicated to management in a timely fashion. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Disclosure Controls”) was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, Brittany B. McKinney and Chief Financial Officer, Randy W. Strobel. Based upon that evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that these Disclosure Controls are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

(b)                      Changes in Internal Controls

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

**PART II. OTHER INFORMATION**

 

**Item 1.****                                                ****Legal Proceedings**

 

There are no pending legal proceedings to which we are a party or to which any of our property is subject, other than routine litigation incidental to the business.

 

**Item 1A.****                                       ****Risk Factors**

 

There were no material changes in the Company’s risk factors from those previously disclosed in the Company’s Form 10-K for the period ended January 1, 2011.

 

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

 

None.

 

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

 

None.

 

**Item 4.****                                                ****Removed and Reserved**

 

None.

 

**Item 5.****                                                ****Other Information.**

 

None.

 

15

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**Item 6.****                                                ****Exhibits.**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                 |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                                                                                            |
| ^   3.1              |       | Articles   of Incorporation, as amended (Exhibit 3-a to Annual Report on   Form 10-K for fiscal year 1988, Commission File No. 0-4090,   incorporated by reference).                                                                                                                                             |
| ^   3.2              |       | Restated   Bylaws (Exhibit 3-b to Annual Report on Form 10-K for fiscal year   2000, Commission File No. 0-4090, incorporated by reference).                                                                                                                                                                     |
| ^   3.3              |       | Amendment   to Articles of Incorporation to increase authorized shares to 40 million   (Exhibit A to Definitive Proxy Statement dated September 5, 1996,   Commission File No. 0-4090, incorporated by reference).                                                                                               |
| ^   3.4              |       | Amendment   to Articles of Incorporation to increase authorized shares to 60 million   (Exhibit 3-d to Annual Report on Form 10-K for fiscal year 1998,   Commission File No. 0-4090, incorporated by reference).                                                                                                |
| ^   3.5              |       | Amendment   to Articles of Incorporation to increase authorized shares to 120 million   (Exhibit A to Definitive Proxy Statement dated September 8, 1998,   Commission File No. 0-4090, incorporated by reference).                                                                                              |
| ^3.6                 |       | Amendment   to Articles of Incorporation to reduce authorized shares to 24 million.                                                                                                                                                                                                                                             |
| ^3.7                 |       | Amendment   No. 1 to Restated Bylaws of Analysts International Corporation   (Exhibit 3.1 to the Registrant’s Form 8-K filed May 25, 2010,   Commission File No. 0-4090, incorporated by reference).                                                                                              |
| ^3.8                 |       | Articles   of Incorporation, as amended (Exhibit 3.1 to the Registrant’s   Form 8-K filed December 17, 2010, Commission File No. 1-33981,   incorporated by reference).                                                                                                                                |
| ^3.9                 |       | Amendment   to Bylaws of Analysts International Corporation (Exhibit 3.2 to the   Registrant’s Form 8-K filed December 17, 2010, Commission File   No. 1-33981, incorporated by reference).                                                                                                            |
| ^   4.1              |       | Specimen   Common Stock Certificate (Exhibit 4(a) to Annual Report on   Form 10-K for fiscal year 1989, Commission File No. 0-4090,   incorporated by reference).                                                                                                                                           |
| ^   4.2              |       | Amended   and Restated Rights Agreement dated as of February 27, 2008 between the   Company and Wells Fargo Bank N.A. and Form of Right Certificate   (Exhibit 4.1 to the Registrant’s Form 8-A12B dated   February 27, 2008, Commission File No. 0-4090, incorporated by   reference).      |
| ^   4.3              |       | Amendment   No. 1 to Amended and Restated Rights Agreement dated as of May 25,   2010 by and between Analysts International Corporation and Wells Fargo Bank,   N.A. (Exhibit 4.1 to the Registrant’s Form 8-K filed May 25,   2010, Commission File No. 0-4090, incorporated by reference). |
| ^10.65               |       | First   Amendment to Credit & Security Agreement with Wells Fargo Bank,   National Association, dated February 23, 2011 (Exhibit 10.1 to   Current Report on Form 8-K, filed February 24, 2010, Commission   File No. 1-33981, incorporated by reference).                                    |
| ^10.66               |       | Employment   Agreement together with Exhibits A and B, between the Company and   Brittany B. McKinney, dated as of March 1, 2011 (Exhibit 10.1   to the Registrant’s Form 8-K filed February 24, 2010, Commission   File No. 1-33981, incorporated by reference).                       |
| ^10.67               |       | Change   in Control Severance Pay Plan, adopted February 22, 2011, dated   March 1, 2011 (Exhibit 10.1 to Current Report on Form 8-K,   filed February 28, 2011, Commission File No. 1-33981, incorporated   by reference).                                                                       |
| +   31.1             |       | Certification   of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                          |
| +   31.2             |       | Certification   of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                          |
| ++   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   an exhibit previously filed with the Securities and Exchange Commission and   incorporated herein by reference.                                                                                                                                                                                                       |
| +                    |       | Filed   herewith.                                                                                                                                                                                                                                                                                                               |
| ++                   |       | Furnished   herewith.                                                                                                                                                                                                                                                                                                           |

 

16

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**SIGNATURES**

 

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 there unto duly authorized.

 

 
|                     |   | ANALYSTS INTERNATIONAL CORPORATION               |
|--------------------------|--------|--------------------------------------------------|
|                     |   | (Registrant)                                     |
|                     |   |                                             |
|                     |   |                                             |
| Date:   May 5, 2011 | By:    | /s/   Brittany B. McKinney                       |
|                     |   | Brittany B. McKinney                             |
|                     |   | President and Chief Executive Officer            |
|                     |   | (Principal Executive Officer)                    |
|                     |   |                                             |
|                     |   |                                             |
| Date:   May 5, 2011 | By:    | /s/   Randy W. Strobel                           |
|                     |   | Randy   W. Strobel                               |
|                     |   | Senior   Vice President, Chief Financial Officer |
|                     |   | (Principal   Financial and Accounting Officer)   |

 

17

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**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                 |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                                                                                            |
| ^   3.1              |       | Articles   of Incorporation, as amended (Exhibit 3-a to Annual Report on   Form 10-K for fiscal year 1988, Commission File No. 0-4090,   incorporated by reference).                                                                                                                                             |
| ^   3.2              |       | Restated   Bylaws (Exhibit 3-b to Annual Report on Form 10-K for fiscal year   2000, Commission File No. 0-4090, incorporated by reference).                                                                                                                                                                     |
| ^   3.3              |       | Amendment   to Articles of Incorporation to increase authorized shares to 40 million (Exhibit A   to Definitive Proxy Statement dated September 5, 1996, Commission File   No. 0-4090, incorporated by reference).                                                                                               |
| ^   3.4              |       | Amendment   to Articles of Incorporation to increase authorized shares to 60 million   (Exhibit 3-d to Annual Report on Form 10-K for fiscal year 1998,   Commission File No. 0-4090, incorporated by reference).                                                                                                |
| ^   3.5              |       | Amendment   to Articles of Incorporation to increase authorized shares to 120 million   (Exhibit A to Definitive Proxy Statement dated September 8, 1998,   Commission File No. 0-4090, incorporated by reference).                                                                                              |
| ^3.6                 |       | Amendment   to Articles of Incorporation to reduce authorized shares to 24 million.                                                                                                                                                                                                                                             |
| ^3.7                 |       | Amendment   No. 1 to Restated Bylaws of Analysts International Corporation   (Exhibit 3.1 to the Registrant’s Form 8-K filed May 25, 2010,   Commission File No. 0-4090, incorporated by reference).                                                                                              |
| ^3.8                 |       | Articles   of Incorporation, as amended (Exhibit 3.1 to the Registrant’s   Form 8-K filed December 17, 2010, Commission File No. 1-33981,   incorporated by reference).                                                                                                                                |
| ^3.9                 |       | Amendment   to Bylaws of Analysts International Corporation (Exhibit 3.2 to the   Registrant’s Form 8-K filed December 17, 2010, Commission File   No. 1-33981, incorporated by reference).                                                                                                            |
| ^   4.1              |       | Specimen   Common Stock Certificate (Exhibit 4(a) to Annual Report on   Form 10-K for fiscal year 1989, Commission File No. 0-4090,   incorporated by reference).                                                                                                                                           |
| ^   4.2              |       | Amended   and Restated Rights Agreement dated as of February 27, 2008 between the   Company and Wells Fargo Bank N.A. and Form of Right Certificate   (Exhibit 4.1 to the Registrant’s Form 8-A12B dated   February 27, 2008, Commission File No. 0-4090, incorporated by   reference).      |
| ^   4.3              |       | Amendment   No. 1 to Amended and Restated Rights Agreement dated as of May 25,   2010 by and between Analysts International Corporation and Wells Fargo Bank,   N.A. (Exhibit 4.1 to the Registrant’s Form 8-K filed May 25,   2010, Commission File No. 0-4090, incorporated by reference). |
| ^10.65               |       | First   Amendment to Credit & Security Agreement with Wells Fargo Bank,   National Association, dated February 23, 2011 (Exhibit 10.1 to   Current Report on Form 8-K, filed February 24, 2010, Commission   File No. 1-33981, incorporated by reference).                                    |
| ^10.66               |       | Employment   Agreement together with Exhibits A and B, between the Company and   Brittany B. McKinney, dated as of March 1, 2011 (Exhibit 10.1   to the Registrant’s Form 8-K filed February 24, 2010, Commission   File No. 1-33981, incorporated by reference).                       |
| ^10.67               |       | Change   in Control Severance Pay Plan, adopted February 22, 2011, dated   March 1, 2011 (Exhibit 10.1 to Current Report on Form 8-K,   filed February 28, 2011, Commission File No. 1-33981, incorporated   by reference).                                                                       |
| +   31.1             |       | Certification   of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                          |
| +   31.2             |       | Certification   of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                          |
| ++   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   an exhibit previously filed with the Securities and Exchange Commission and   incorporated herein by reference.                                                                                                                                                                                                       |
| +                    |       | Filed   herewith.                                                                                                                                                                                                                                                                                                               |
| ++                   |       | Furnished   herewith.                                                                                                                                                                                                                                                                                                           |
|                 |       |                                                                                                                                                                                                                                                                                                                            |

 

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