##### 



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  FORM 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED
    DECEMBER 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
    FROMTO   Commission File Number:
    000-51748
  AVANADE INC.
 (Exact name of Registrant as
    specified in its charter)
  Washington

91-2032865(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   2211 Elliott Avenue, Suite 200
 Seattle, Washington 98121
 (Address of principal executive
    offices)
  (206) 239-5600
 (Registrants telephone
    number, including area code)
   þ o
  Rule 12b-2
  o o þ
  Rule 12b-2 o þ




---



##### 



AVANADE
    INC.
  INDEX
  PagePart I.


Financial InformationItem 1.


Financial Statements


3Consolidated Balance Sheets as of
    December 31, 2006 (unaudited) and September 30, 2006


3Consolidated Income Statements
    (unaudited) for the three months ended December 31, 2006
    and 2005


4Consolidated Stockholders
    Equity and Comprehensive Income Statements (unaudited) for the
    three months ended December 31, 2006


5Consolidated Cash Flows Statements
    (unaudited) for the three months ended December 31, 2006
    and 2005


6Notes to Consolidated Financial
    Statements (unaudited)


7Item 2.


Managements Discussion and
    Analysis of Financial Condition and Results of Operations


13Item 3.


Quantitative and Qualitative
    Disclosures About Market Risk


22Item 4.


Controls and Procedures


22Part II.


Other Information


22Item 1.


Legal Proceedings


22Item 1A.


Risk Factors


23Item 2.


Unregistered Sales of Equity
    Securities and Use of Proceeds; Issuer Purchases of Equity
    Securities


23Item 3.


Defaults upon Senior Securities


23Item 4.


Submission of Matters to a Vote of
    Security Holders


23Item 5.


Other Information


23Item 6.


Exhibits


24Signatures


25  2




---



##### 



PART I 
    FINANCIAL INFORMATION ITEM 1.
    FINANCIAL STATEMENTS  AVANADE
    INC.
 CONSOLIDATED
    BALANCE SHEETS

December 31, 2006 and September 30, 2006

(In thousands of U.S. dollars, except share and per
    share amounts) December 31,


September 30,2006


2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
68,848


$
72,898Receivables from clients, net of
    allowances of $394 and $1,303, respectively


28,804



21,253Due from related parties


61,747



55,426Unbilled services to clients


15,419



21,256Unbilled services to related parties


35,559



32,101Deferred income taxes, net


6,842



1,394Other current assets


4,154



6,116Total current assets


221,373



210,444NON-CURRENT ASSETS:Restricted cash equivalents


227



222Property and equipment, net of
    accumulated depreciation of $37,349 and $36,487, respectively


9,610



10,004Goodwill


10,630



11,975Other intangible assets, net of
    accumulated amortization of $4,497 and $4,250, respectively


1,034



1,281Deferred income taxes, net


45,877



5,556Other non-current assets


1,655



1,375Total non-current assets


69,033



30,413TOTAL ASSETS

$
290,406


$
240,857LIABILITIES AND
    SHAREHOLDERS EQUITYCURRENT LIABILITIES:Due to related parties

$
10,461


$
9,999Accounts payable


14,080



14,204Deferred revenues


4,499



3,009Accrued payroll and related benefits


36,160



39,890Accrued expenses


13,931



12,747Income taxes payable


7,961



8,251Other accrued liabilities


3,877



1,282Total current liabilities


90,969



89,382NON-CURRENT
    LIABILITIES


2,075



1,884COMMITMENTS AND
    CONTINGENCIESREDEEMABLE COMMON STOCK AND
    EMPLOYEE STOCK OPTIONS


119,885



123,964SHAREHOLDERS
    EQUITY:Convertible Series A preferred
    stock, par value of $0.0001 per share (aggregate
    liquidation preference of $587,329 as of December 31, 2006
    and September 30, 2006, respectively),
    105,000,000 shares authorized,74,750,903 shares issued
    and outstanding as of December 31, 2006 and
    September 30, 2006, respectively


7



7Common stock, par value
    $0.0001 per share, 150,000,000 shares authorized,
    3,801,706 and 4,244,536 shares outstanding as of
    December 31, 2006 and September 30, 2006, respectively






Additional
    paid-in-capital


175,556



178,128Notes receivable from exercise of
    stock options






(653
)Accumulated deficit


(98,184
)


(154,363
)Accumulated other comprehensive
    income


98



2,508Total shareholders equity


77,477



25,627TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
290,406


$
240,857    3




---



##### 



AVANADE
    INC.
 CONSOLIDATED
    INCOME STATEMENTSFor the Three Months Ended December 31, 2006 and
    2005

(In thousands of U.S. dollars)

(Unaudited) 2006


2005REVENUES:Revenues before reimbursements:Related parties

$
101,998


$
75,732Other


35,970



27,464137,968



103,196Reimbursements:Related parties


5,391



4,410Other


4,190



3,0719,581



7,481Revenues


147,549



110,677OPERATING EXPENSES:Cost of services:Cost of services before
    reimbursable expenses


95,379



77,368Reimbursable expenses


9,581



7,481Cost of services


104,960



84,849Selling, general and
    administrative costs


28,629



22,604Total operating expenses


133,589



107,453OPERATING INCOME


13,960



3,224Interest income


721



380Interest expense


(8
)


(1
)Other income (expense)


137



(253
)INCOME BEFORE INCOME
    TAXES


14,810



3,350(Benefit) provision for income
    taxes


(41,369
)


879NET INCOME

$
56,179


$
2,471    4




---



##### 



AVANADE
    INC.
 CONSOLIDATED
    STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
    STATEMENTS

For the Three Months Ended December 31, 2006

(In thousands of U.S. dollars, except share amounts)

(Unaudited) NotesReceivableConvertible











from





AccumulatedSeries A








Additional


Exercise of





Other


TotalPreferred Stock


Common Stock


Paid-In


Stock


Accumulated


Comprehensive


ShareholdersAmount


No. Shares


Amount


No. Shares


Capital


Options


Deficit


Income


EquityBalance as of September 30,
    2006

$
7



74,750,903


$




4,244,536


$
178,128


$
(653
)

$
(154,363
)

$
2,508


$
25,627Comprehensive income:Net income


























56,179







56,179Foreign currency translation
    adjustments






























(2,410
)


(2,410
)Comprehensive income


































53,769Income tax benefit on share-based
    compensation plans


















91















91Change in redeemable common stock


















4,079















4,079Share-based compensation expense


















753















753Issuances of common stock related
    to employee share programs














738,252



1,850















1,850Purchases of common stock














(1,181,082
)


(9,345
)


662











(8,683
)Repayment of employee notes
    receivable






















1











1Interest on notes received from
    exercise of stock options






















(10
)










(10
)Balance as of December 31, 2006

$
7



74,750,903


$




3,801,706


$
175,556


$



$
(98,184
)

$
98


$
77,477    5




---



##### 



AVANADE
    INC.
 CONSOLIDATED
    CASH FLOWS STATEMENTSFor the Three Months Ended December 31, 2006 and
    2005

(In thousands of U.S. dollars)

(Unaudited) 2006


2005CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income

$
56,179


$
2,471Adjustments to reconcile Net income
    to Net cash provided by (used in) operating
    activities Depreciation and amortization


1,680



1,950Unrealized foreign currency (gain)
    loss on intercompany notes


(4,929
)


2,641Loss on disposal of property and
    equipment, net


19



1Deferred income tax (benefit)
    expense


(44,284
)


125Share-based compensation expense


753



2,048Change in assets and liabilities,
    net of acquisitions Receivables from clients, net


(6,516
)


(3,765
)Due from related parties


(4,995
)


(5,109
)Unbilled services to clients


6,066



1,449Unbilled services to related parties


(2,781
)


(7,884
)Other current assets


2,038



(2,386
)Other non-current assets


(61
)


(334
)Due to related parties


401



2,467Accounts payable


(1,197
)


(871
)Deferred revenues


1,398



2,964Accrued payroll and related benefits


(4,149
)


(2,772
)Accrued expenses


850



(418
)Income taxes payable


(386
)


(2,835
)Other current liabilities


2,445



114Net cash provided by (used in)
    operating activities


2,531



(10,144
)CASH FLOWS FROM INVESTING
    ACTIVITIES:Proceeds from sales of property and
    equipment






1Purchases of property and equipment


(917
)


(1,740
)Transfer from restricted cash
    equivalents


(2
)


52Net cash used in investing
    activities


(919
)


(1,687
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Purchases of common shares


(8,423
)


(1,211
)Proceeds from the exercise of stock
    options


1,590



1,122Repayments of employee notes
    receivable


1



Payment of capital lease obligations






(4
)Capital contribution from Accenture






5Excess tax benefits from
    share-based payment arrangements


61



137Net cash (used in) provided by
    financing activities


(6,771
)


49Effect of exchange rate changes on
    cash and cash equivalents


1,109



(921
)NET DECREASE IN CASH AND CASH
    EQUIVALENTS


(4,050
)


(12,703
)CASH AND CASH EQUIVALENTS,beginning of period


72,898



55,256CASH AND CASH EQUIVALENTS,end of period

$
68,848


$
42,553    6




---



##### 



AVANADE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis of
    Presentation
  Form 10-Q Form 10-K Form 10-K).
  2.
    ACCUMULATED
    OTHER COMPREHENSIVE INCOME      December 31,2006

2005Three months ended

$
53,769


$
3,998   3.
    MATERIAL
    TRANSACTIONS AFFECTING SHAREHOLDERS EQUITY    30-day
   7




---



##### 



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
      December 31,


September 30,2006


2006Vested common stock subject to put
    rights

$
30,719


$
33,785Intrinsic value of stock options


89,166



90,179$
119,885


$
123,964     Shares


AmountShares acquired pursuant to
    exercise of put/call rights(1)


1,056,584


$
8,410Other purchases(2)(3)


124,498



9351,181,082



9,345Less:Amounts withheld for employee loan
    repayments(4)






662Non-cash amounts related to
    stock-swaps(3)






260Net cash outlay





$
8,423     (1)
    
    During the 30-day period following
    the Semi-annual Valuation approved by the Board effective
    November 8, 2006, the Company exercised its call rights to
    purchase certain shares and certain employee holders of the
    Companys common stock exercised their put rights. This
    resulted in the repurchase, effective December 13, 2006, of
    an aggregate of 1,056,584 shares of the Companys
    common stock at a price of $7.96 per share.(2)
    
    During the three months ended
    December 31, 2006, as authorized under its option plans,
    the Company acquired 91,756 shares of its common stock via
    share withholdings for payroll tax obligations due from
    employees in connection with the delivery of the Companys
    common shares under the option plans.(3)
    
    During the three months ended
    December 31, 2006, as authorized under its option plans,
    the Company acquired 32,742 shares of its common stock as a
    result of shares surrendered to the Company to pay the exercise
    price in connection with so-called stock-swap
    exercises of employee stock options.(4)
    
    The Company withheld $662 of the
    proceeds for repayment of loans, plus accrued interest,
    previously provided to certain employee shareholders for costs
    to exercise the underlying options of employee shares held. As
    of December 31, 2006, no amounts remained outstanding for
    the Company sponsored loans and related accrued interest.  Form 10-K.
  4.
    INCOME
    TAXES   8




---



##### 



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
      non-U.S. tax
  5.
    COMMITMENTS
    AND CONTINGENCIES  Guarantees
  and/or
  Legal
    Contingencies
   9




---



##### 



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
   6.
    RELATED-PARTY
    BALANCES AND TRANSACTIONS      Three Months EndedDecember 31,2006


2005Related-party revenues before
    reimbursements:Accenture

$
93,394


$
70,877Microsoft


8,604



4,855Total

$
101,998


$
75,732Related-party reimbursements:Accenture

$
4,076


$
3,984Microsoft


1,315



426Total

$
5,391


$
4,410Related-party expenses:Accenture

$
10,071


$
5,892Microsoft


954



746Total

$
11,025


$
6,638  10




---



##### 



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
    December 31,


September 30,2006


2006Due from related parties:Accenture

$
56,399


$
52,170Microsoft


5,348



3,256Total

$
61,747


$
55,426Unbilled services to related
    parties:Accenture

$
32,739


$
28,294Microsoft


2,820



3,807Total

$
35,559


$
32,101Due to related parties:Accenture

$
10,142


$
9,154Microsoft


319



845Total

$
10,461


$
9,999Deferred revenue:Accenture

$
517


$
1,036Microsoft


938



1,013Total

$
1,455


$
2,049   month-to-month
    7.
    SEGMENT
    REPORTING  Disclosures about Segments of an Enterprise and Related
    Information
     11




---



##### 



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
      Three Months EndedDecember 31,2006


2005Revenues before reimbursements:Americas

$
66,637


$
54,742Europe


59,409



42,150Asia Pacific


11,692



7,115Corporate and eliminations


230



(811
)Total

$
137,968


$
103,196Operating income (loss):Americas

$
12,342


$
6,705Europe


7,636



3,961Asia Pacific


588



(899
)Corporate and eliminations


(6,606
)


(6,543
)Total

$
13,960


$
3,224   8.
    NEWLY
    ISSUED ACCOUNTING STANDARDS  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
  Considering the Effects
    of Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements
  Fair Value
    Measurements
 12




---



##### 



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read in
    conjunction with our Consolidated Financial Statements and
    related Notes included elsewhere in this Quarterly Report on
    Form 10-Q
    and in our Annual Report on
    Form 10-K
    for the year ended September 30, 2006, and with the
    information under the heading Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations in our Annual Report on
    Form 10-K
    for the year ended September 30, 2006.
  We use the terms Avanade, we,
    our Company, our and us in
    this report to refer to Avanade Inc. and its subsidiaries. We
    use the term Accenture to refer to our majority
    shareholder, which is a subsidiary of Accenture Ltd, and its
    affiliates. We use the term Microsoft to refer to
    Microsoft Corporation, a minority shareholder, and its
    affiliates. All references to years, unless otherwise noted,
    refer to our fiscal year, which ends on September 30. For
    example, a reference to fiscal 2006 or fiscal
    year 2006 means the
    12-month
    period that ended on September 30, 2006. All references to
    quarters, unless otherwise noted, refer to the quarters of our
    fiscal year. All amounts expressed in dollars are in thousands
    of dollars unless otherwise indicated. For example, a reference
    to $40,800 means $40.8 million.
  Disclosure
    Regarding Forward-Looking Statements
  Form 10-Q
  
    Our results of operations could be negatively affected if we
    cannot expand and develop our services and solutions in response
    to changes in technology and client demand.
    The consulting and systems integration and technology markets
    are highly competitive, and we might not be able to compete
    effectively.
    Our business could be adversely affected if our clients are not
    satisfied with our services.
    Our results of operations may be affected by the rate of growth
    in the use of technology in business and the type and level of
    technology spending by our clients.
    If we are unable to attract, retain and motivate employees or
    efficiently utilize their skills, we might not be able to
    compete effectively and will not be able to grow our business.
    Our results of operations could be affected by economic and
    political conditions in the markets in which we operate and the
    effects of these conditions on our clients businesses and
    levels of business activity.
    Our profitability could suffer if we are not able to maintain
    favorable pricing rates.
    Our profitability could suffer if we are not able to maintain
    favorable utilization rates.
    Our profitability could suffer if we are not able to control our
    costs.
    Our work with government clients exposes us to additional risks
    inherent in the government contracting process.
    Our global operations are subject to complex risks, some of
    which might be beyond our control. 13




---



##### 




    If we are unable to manage the organizational challenges
    associated with the expansion of our company, we might be unable
    to achieve our business objectives.
    Our business could be negatively affected if we incur legal
    liability in connection with providing our solutions and
    services.
    If our pricing structures do not accurately anticipate the cost
    and complexity of performing our work, then our contracts could
    be unprofitable.
    Our results of operations could be adversely affected if our
    clients terminate their contracts with us on short notice.
    If we are unable to collect our receivables our results of
    operations could be adversely affected.
    We could be subject to liabilities if our subcontractors or the
    third parties with whom we partner cannot deliver their project
    contributions on time or at all.
    We have only a limited ability to protect our intellectual
    property rights, which are important to our success.
    Our services or solutions could infringe upon the intellectual
    property rights of others, which could result in legal
    liability, reduced operating income
    and/or have
    a materially adverse affect on our ability to operate in the
    future.
    There will not be a consistent pattern in our financial results
    from quarter to quarter, which may result in increased
    volatility of the value of our stock.
    Loss of our significant corporate relationships could reduce our
    revenue and growth prospects.
    Because we are controlled by Accenture, we have limited ability
    to set our own independent strategies, and our business strategy
    and direction may be dictated by Accentures overall
    business strategy.
    We rely on Accenture as a primary source of our liquidity and
    the loss of that liquidity could have a material adverse impact
    on our ability to fund our cash needs.
    We rely on Accenture for the majority of our revenue. The loss
    of that revenue would have a significant adverse impact on our
    results of operations and may affect our ability to continue to
    operate.
    Our global delivery network relies on Accenture, and the loss of
    that network would increase our operating expenses.
    Microsoft has certain minority rights, and may exercise those
    rights to protect its own interests which may not align with our
    own.
    We are committed to using Microsoft-related technologies, and
    our inability to use those technologies would adversely impact
    our results of operations.
    All stock issued pursuant to awards granted under our stock
    option plans is subject to certain put rights, which, if
    exercised, could have a materially adverse impact on our
    liquidity.  Form 10-K
  Overview
   14




---



##### 



out-of-pocket
      Three Months EndedDecember 31,2006


2005Related-party revenues before
    reimbursements:Accenture


68
%


69
%Microsoft


6
%


5
%          15




---



##### 



Critical
    Accounting Policies and Estimates
  Form 10-K
  Revenues
    by Segment/Geographic Business Area
   16




---



##### 



Percent ofTotal RevenuesPercent


BeforeThree Months Ended


Percent


Increase


Reimbursements for the ThreeDecember 31,


Increase


Local


Months Ended December 31,2006


2005


US$


Currency


2006


2005SEGMENTAmericas

$
66,637


$
54,742



22
%


21
%


48
%


53
%Europe


59,409



42,150



41
%


28
%


43
%


41
%Asia Pacific


11,692



7,115



64
%


57
%


9
%


6
%Corporate and
    eliminations(1)


230



(811
)


n/m



n/m







TOTAL Revenues Before
    Reimbursements


137,968



103,196



34
%


28
%


100
%


100
%Reimbursements


9,581



7,481



28
%


24
%TOTAL Revenues

$
147,549


$
110,677



33
%


28
%       (1)
    
    Corporate and eliminations include
    inter-company eliminations and other revenues not directly
    attributable to the segments.  Three
    Months Ended December 31, 2006 Compared to Three Months
    Ended December 31, 2005
  Revenues
       17




---



##### 



Operating
    Expenses
    Cost
    of Services
    Selling,
    General and Administrative Costs
    Operating
    Income (loss)
    Three Months Ended December 31,Increase2006


2005


(Decrease)Operating income (loss):Americas

$
12,342


$
6,705


$
5,637Europe


7,636



3,961



3,675Asia Pacific


588



(899
)


1,487Corporate and eliminations


(6,606
)


(6,543
)


(63
)$
13,960


$
3,224


$
10,736  18




---



##### 




    Americas operating income increased primarily due to strong
    revenue growth, improved gross margin, a reduction in
    payroll-related costs as a percentage of revenues before
    reimbursements and a reduction in contract losses.
    Europe operating income increased primarily due to a 41%
    increase in revenues before reimbursements, improved gross
    margin derived from global delivery network resources and a
    decrease in management and royalty fees as a percentage of
    revenues before reimbursements.
    Asia Pacific operating income increased primarily due to a 64%
    increase in revenues before reimbursements and improved gross
    margins in Singapore, Japan and Australia and a decrease in
    management and royalty fees as a percentage of revenues before
    reimbursements.
    Corporate and eliminations operating loss increased primarily
    due to higher payroll-related costs and annual bonus accruals,
    partially offset by a decrease in share-based compensation
    expense.  Interest
    Income
    Other
    Income (expense)
    Provision
    for Income Taxes
  non-U.S. deferred
  Liquidity
    and Capital Resources
   19




---



##### 



Three Months Ended December 31,Increase2006


2005


(Decrease)Net cash provided by (used in):Operating activities

$
2,531


$
(10,144
)

$
12,675Investing activities


(919
)


(1,687
)


768Financing activities


(6,771
)


49



(6,820
)Effect of exchange rate changes on
    cash and cash equivalents


1,109



(921
)


2,030Net decrease in cash and cash
    equivalents

$
(4,050
)

$
(12,703
)

$
8,653   Operating activities:
  Investing activities:
  Financing activities:
  Foreign
    Exchange Instruments
  Accounting for Derivative Instruments
    and Hedging Activities.
  Redeemable
    Common Stock and Employee Put Rights
  30-day
   20




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##### 



Off-Balance
    Sheet Arrangements
  and/or
  Newly
    Issued Accounting Standards
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
  Considering the Effects
    of Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements
  Fair Value
    Measurements
 21




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##### 



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign
    Currency Risk
  and/or
    Interest
    Rate Risk
    ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Form 10-Q, Rule 13a-15(e) 15d-15(e)
  Changes
    in Internal Control Over Financial Reporting
   PART II  OTHER
    INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS   22




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##### 



ITEM 1A.
    RISK
    FACTORS  Form 10-K. Form 10-K.
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS; ISSUER PURCHASES
    OF EQUITY SECURITIES  Purchases
    of Common Shares
    ApproximateTotal Number of


Dollar Value ofShares


Shares that MayPurchased as


Yet BePart of Publicly


Purchased UnderTotal Number


Average


Announced


Publiclyof Shares


Price Paid


Plans or


Announced PlansPeriod

Purchased(1)


per Share


Programs


or ProgramsOctober 1, 2006 
    October 31, 2006


49,947


$
6.91







November 1, 2006 
    November 30, 2006


17,555



7.96







December 1, 2006 
    December 31, 2006


1,113,580



7.96







Total


1,181,082


$
7.91







     (1)
    
    During the first quarter of fiscal
    2007, the Company purchased 1,181,082 of its common shares in
    transactions unrelated to publicly announced share plans or
    programs. These transactions included the acquisition of
    124,498 shares of the Companys common stock via share
    withholding for payroll for obligations due from employees in
    connection with the delivery of shares of the Company common
    stock under the Companys various equity share plans in
    addition to shares surrendered to the Company to pay the
    exercise price in connection with so-called
    stock-swap exercises of employee stock options.
    1,056,584 of these shares were purchased by the Company as a
    result of the Company exercising its right to call shares, or
    the shareholder exercising his or her right to put shares, under
    the Companys equity share plans.  ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 5.
    OTHER
    INFORMATION     23




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##### 



ITEM 6.
    EXHIBITS    ExhibitNumber

Description of Document3
.1

Restated Articles of Incorporation
    of the Company, dated as of December 3, 2003 (incorporated
    by reference to Exhibit 3.1 to the Companys
    Form 10, filed January 20, 2006)3
.2

Amended and Restated By-laws of
    the Company, dated as of February 29, 2003 (incorporated by
    reference to Exhibit 3.2 to the Companys
    Form 10, filed January 20, 2006)31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of the Chief
    Executive Officer and the Chief Financial Officer pursuant to 18
    U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002  24




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##### 



SIGNATURES       By:
    /s/  Dennis K. Knapp    Title:
    Chief Financial Officer   25