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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006.
 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 000-27792
 
 COMSYS IT PARTNERS, INC.
 (Exact name of Registrant as specified in its charter)
 Delaware
    
    56-1930691(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)
 4400 Post Oak Parkway, Suite 1800
Houston, TX 77027
(Address, including zip code, of
principal executive offices)
 (713) 386-1400
(Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock $0.01 Par Value per Share
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
  o þ
 o þ
 þ o
 þ
  o þ o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PageCautionary Note Regarding Forward-Looking Statements
    
    
    1PART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    10Item 1B.
    
    Unresolved Staff Comments
    
    
    17Item 2.
    
    Properties
    
    
    17Item 3.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    18Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 8.
    
    Financial Statements and Supplementary Data
    
    
    34Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    34Item 9A.
    
    Controls and Procedures
    
    
    34Item 9B.
    
    Other Information
    
    
    35PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    36Item 11.
    
    Executive Compensation
    
    
    36Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    36Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    36Item 14.
    
    Principal Accounting Fees and Services
    
    
    36PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    36Signatures
    
    
    S-1Index to Consolidated Financial Statements
    
    
    F-1EX-21.1EX-23.1EX-31.1EX-31.2EX-32




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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    our success in attracting, training, retaining and motivating billable consultants
and key officers and employees;
    
    our ability to shift a larger percentage of our business mix into IT solutions and
project management and, if successful, our ability to manage those types of business
profitably;
    
    changes in levels of unemployment and other economic conditions in the United States,
or in particular regions or industries;
    
    weakness or reductions in corporate information technology spending levels;
    
    our ability to maintain existing client relationships and attract new clients in the
context of changing economic or competitive conditions;
    
    the impact of competitive pressures on our ability to maintain or improve our
operating margins, including any change in the demand for our services;
    
    the entry of new competitors into the U.S. staffing services market due to the
limited barriers to entry or the expansion of existing competitors in that market;
    
    increases in employment-related costs such as healthcare and unemployment taxes;
    
    the possibility of our incurring liability for the activities of our billable
consultants or for events impacting our billable consultants on clients premises;
    
    the risk that we may be subject to claims for indemnification under our customer
contracts;
    
    the risk in an uncertain economic environment of increased incidences of employment
disputes, employment litigation and workers compensation claims;
    
    the risk that further cost cutting or restructuring activities could cause an adverse
impact on certain of our operations;
    
    economic declines that affect our business, including our profitability, liquidity or
the ability to comply with our loan covenants;
    
    adverse changes in credit and capital markets conditions that may affect our ability
to obtain financing or refinancing on favorable terms;
    
    adverse changes to managements periodic estimates of future cash flows that may
affect our assessment of our ability to fully recover our goodwill; and
    
    whether governments will amend existing regulations or impose additional regulations
or licensing requirements in such a manner as to increase our costs of doing business.
  1




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PART I
 
 ITEM 1. BUSINESS
  Company Overview
  
    
    our extensive recruiting channels, providing our clients ready access to highly
skilled and specialized IT professionals, often within 48 hours of submitting a placement
request;
    
    access to a flexible workforce, allowing our clients to manage their labor costs more
effectively without compromising their IT goals; and
    
    our knowledge of the market for IT resources, providing our clients with qualified
candidates at competitive prices.
   
    
    vendor management, in which we assist our clients in quantifying, consolidating,
rationalizing and monitoring their procurement of temporary staffing and other services
from multiple suppliers;
    
    project solutions, including custom software development and maintenance, packaged
software development and network design and management; and
    
    recruitment and permanent placement of IT professionals.
    2




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Our History
    Services
  IT Staffing Services
    Vendor Management Services
  3




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SM SM
 Project Solutions
  Permanent Placement
  Industry Overview
    4




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Competitive Strengths
  Proven Track Record with a National Footprint.
 Focus on IT Staffing Services
 Diversified Revenue Base With Long-Term Customer Relationships.
 Extensive Recruiting Channels and Effective Hiring Process.
 Complementary Service Offerings.
 Scalable Infrastructure.
 Business Strategy
  5




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Expand Our Services to Our Existing Client Base.
 Increase Our Customer Base within Our Existing Markets.
 Expand Our Geographic Presence.
 Focus on Managed Solutions and Higher-Skills Staffing Opportunities.
 Attract and Retain Highly Skilled Consultants.
 Further Improve Operating Efficiency.
 Capitalize on Strategic Acquisition Opportunities.
 Sales and Marketing
  
    
    centralized proposals and contract services departments;
    
    a strategic accounts group;
    
    a candidate sourcing operation for larger, high-volume clients that obtain contract
IT professionals primarily through procurement departments;
    
    a centralized outbound call center for scheduling sales appointments with key contacts at prospective clients;
 6




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
    
    a project solutions sales force;
    
    a vendor management sales force; and
    
    national recruiting centers for sourcing IT professionals located in the United States.
     Employees and Consultants
     7




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Competition
   Regulation
  Trademarks
 ® SM
 Seasonality
  Available Information
  8




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EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionLarry L. Enterline
    
    
    54
    
    
    Chief Executive OfficerMichael H. Barker
    
    
    52
    
    
    Executive Vice President and Chief Operating OfficerKen R. Bramlett, Jr.
    
    
    47
    
    
    Senior Vice President, General Counsel and Corporate SecretaryDavid L. Kerr
    
    
    54
    
    
    Senior Vice PresidentCorporate DevelopmentJoseph C. Tusa, Jr.
    
    
    48
    
    
    Senior Vice President, Chief Financial Officer and Assistant Secretary
 Larry L. Enterline.
 Michael H. Barker.
 Ken R. Bramlett, Jr.
 David L. Kerr.
 Joseph C. Tusa, Jr.
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##### Table of Contents



ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 We compete in a highly competitive market with limited barriers to entry and significant pricing
pressures. There can be no assurance that we will continue to successfully compete.
  Any economic downturn, or the perception that such a downturn is possible, may cause our revenues
to decline and may adversely affect our results of operations, cash flows and financial condition.
  Our profitability will suffer if we are not able to maintain current levels of billable hours and
bill rates and control our costs.
   
    
    our clients perception of our ability to add value through our services;
    
    competition, including pricing policies of our competitors; and
    
    general economic conditions.
  
    
    the demand for IT staffing services;
    
    the number of billing days in any period;
    
    the quality and scope of our services;
    
    seasonal trends, primarily as a result of holidays, vacations and inclement weather;
    
    our ability to recruit new consultants to fill open orders;
    
    our ability to transition consultants from completed assignments to new engagements;
    
    our ability to forecast demand for our services and thereby maintain an appropriately
balanced and sized workforce; and
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
    
    our ability to manage consultant turnover.
   We may be unable to attract and retain qualified billable consultants, which could have an adverse
effect on our business, financial condition and results of operations.
  We depend on key personnel, and the loss of the services of one or more of our senior management or
a significant portion of our local management personnel could weaken our management team and our
ability to deliver quality services and could adversely affect our business.
  Our dependence on large customers and the risks we assume under our contracts with them could have
a material adverse effect on our revenues and results of operations.
  Our failure to achieve our strategic goal of shifting more of our business into the IT solutions
area could adversely impact our growth rate and profitability.
  11




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Factors beyond our control may affect our ability to successfully execute our acquisition strategy,
which may have an adverse impact on our growth strategy.
   
    
    potential loss of key employees or clients of acquired companies;
    
    difficulties integrating acquired personnel and distinct cultures into a single business;
    
    diversion of management attention from existing operations; and
    
    assumption of liabilities and exposure to unforeseen liabilities of acquired companies.
  We may suffer losses due to the conduct of our employees or our clients employees during staffing
assignments.
  Additional government regulation and rising health care and unemployment insurance costs and taxes
could have a material adverse effect on our business, operating results and financial condition.
   We are subject to the requirements of Section 404 of the Sarbanes-Oxley Act. If the costs related
to compliance are significant, our profitability, stock price and results of operations and
financial condition could be materially adversely affected.
  12




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Due to inherent limitations, there can be no assurance that our system of disclosure and internal
controls and procedures will be successful in preventing all errors and fraud, or in making all
material information known in a timely manner to management.
   Our strategic decision not to pursue a broadbased offshore strategy may adversely impact our
revenue growth and profitability.
  We have substantial intangible assets, have incurred significant impairment charges in the past and
may incur further charges if there are significant adverse changes to our operating results or
outlook.
  Goodwill and
Other Intangible Assets
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Adverse results in tax audits could require significant cash expenditures or expose us to
unforeseen liabilities.
  We may be subject to lawsuits and claims, which could have a material adverse effect on our
financial condition and results of operations.
  Concentration of services in metropolitan areas may adversely affect our revenues in the event of
extraordinary events.
  We depend on the proper functioning of our information systems.
  Risks Related to our Indebtedness
 We have substantial debt obligations that could restrict our operations and adversely affect our
business and financial condition.
   
    
    increasing our vulnerability to adverse economic and industry conditions;
    
    limiting our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate; and
    
    limiting our ability to borrow additional funds.
  Restrictive financing covenants limit the discretion of our management and may inhibit our
operating flexibility.
  
    
    incur additional indebtedness;
    
    repurchase shares;
    
    declare or pay dividends and other distributions;
    
    incur liens;
    
    make capital expenditures;
    
    make certain investments or acquisitions;
    
    repay debt; and
    
    dispose of property.
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We will require a significant amount of cash to service our indebtedness and satisfy our other
liquidity needs. Our ability to generate cash depends on many factors beyond our control.
   If we default on our obligations to pay our indebtedness, or fail to comply with the covenants and
restrictions contained in the agreements governing our indebtedness, our financial condition may be
adversely affected by the consequences of any such default.
    Risks Related to Investment in Our Common Stock
 Shares of our common stock have been thinly traded in the past and the prices at which our common
stock will trade in the future could fluctuate significantly.
  15




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Future sales of shares may adversely affect the market price of our shares.
  The market price and marketability of our shares may from time to time be significantly affected by
numerous factors beyond our control, which may adversely affect our ability to raise capital
through future equity financings.
  
    
    general price and volume fluctuations in the stock markets;
    
    changes in our earnings or variations in operating results;
    
    any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts;
    
    changes in regulatory policies or tax laws;
    
    operating performance of companies comparable to us;
    
    general economic trends and other external factors; and
    
    loss of a major funding source.
 Ownership of our common stock is concentrated among a small number of major stockholders that have
the ability to exercise significant control over us, and whose interests may differ from the
interests of other stockholders.
  Concentrated ownership of large blocks of our common stock may affect the value of shares held by
others and our ability to access public equity markets.
   
    
    restrict growth, both internally and through acquisitions;
    
    inhibit our ability to invest in technology and other products and services that we may need; and
    
    adversely affect our ability to compete in our markets.
 We do not intend to pay cash dividends on our common stock in the foreseeable future, and therefore
only appreciation of the price of our common stock will provide a return to our stockholders.
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Our certificate of incorporation contains certain provisions that could discourage an acquisition
or change in control of COMSYS.
   
    
    special approvals for certain related-party transactions until September 30, 2007;
    
    special approvals for certain fundamental corporate transactions or to amend our
charter or certain provisions of our bylaws until September 30, 2007; and
    
    requiring stockholder action to be at a stockholders meeting and not by written
consent of the stockholders.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  17




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 Price Range of Common Stock
   High
    
    Low2005First Quarter
    
    $
    17.24
    
    
    $
    10.00Second Quarter
    
    
    20.25
    
    
    
    11.43Third Quarter
    
    
    21.14
    
    
    
    10.02Fourth Quarter
    
    
    15.18
    
    
    
    9.202006First Quarter
    
    
    12.50
    
    
    
    10.05Second Quarter
    
    
    15.64
    
    
    
    9.82Third Quarter
    
    
    19.25
    
    
    
    12.82Fourth Quarter
    
    
    21.85
    
    
    
    16.81
  Dividend Policy
   
 ITEM 6. SELECTED FINANCIAL DATA
   18




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Year EndedDecember 31,
    
    January 1,
    
    January 2,
    
    December 31,
    
    December 31,2006(1)
    
    2006(1)
    
    2005(1)
    
    2003
    
    2002(In thousands, except per share data)Consolidated Statements of Operations Data:Revenues from services
    
    $
    736,645
    
    
    $
    661,657
    
    
    $
    437,013
    
    
    $
    332,850
    
    
    $
    386,947Cost of services
    
    
    557,598
    
    
    
    505,233
    
    
    
    331,474
    
    
    
    251,501
    
    
    
    292,266Gross profit
    
    
    179,047
    
    
    
    156,424
    
    
    
    105,539
    
    
    
    81,349
    
    
    
    94,681Operating costs and expenses:Selling, general and administrative
    
    
    135,651
    
    
    
    120,357
    
    
    
    86,376
    
    
    
    63,881
    
    
    
    69,858Restructuring and integration costs
    
    
    
    
    
    
    4,780
    
    
    
    10,322
    
    
    
    854
    
    
    
    875Goodwill impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,200Depreciation and amortization
    
    
    8,717
    
    
    
    9,067
    
    
    
    14,564
    
    
    
    15,870
    
    
    
    14,580144,368
    
    
    
    134,204
    
    
    
    111,262
    
    
    
    80,605
    
    
    
    96,513Operating income (loss)
    
    
    34,679
    
    
    
    22,220
    
    
    
    (5,723
    )
    
    
    744
    
    
    
    (1,832
    )Interest expense and other expenses, net(2)
    
    
    15,208
    
    
    
    17,061
    
    
    
    51,848
    
    
    
    37,234
    
    
    
    14,634Loss on early extinguishment of debt
    
    
    3,191
    
    
    
    2,227
    
    
    
    2,986
    
    
    
    
    
    
    
    Income tax expense (benefit)
    
    
    (4,767
    )
    
    
    783
    
    
    
    (5,402
    )
    
    
    760
    
    
    
    Cumulative effect of accounting change:goodwill impairment(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,500Net income (loss) before dividends
    
    
    21,047
    
    
    
    2,149
    
    
    
    (55,155
    )
    
    
    (37,250
    )
    
    
    (157,966
    )Preferred stock dividends and accretion(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,240
    )
    
    
    (34,737
    )Net income (loss)
    
    $
    21,047
    
    
    $
    2,149
    
    
    $
    (55,155
    )
    
    $
    (56,490
    )
    
    $
    (192,703
    )Basic and diluted earnings (loss) per common share(4)
    
    $
    1.10
    
    
    $
    0.14
    
    
    $
    (14.20
    )
    
    $
    (23,153.48
    )
    
    $
    (78,975.10
    )Weighted average basic and diluted shares outstanding(4):Basic
    
    
    18,449
    
    
    
    15,492
    
    
    
    3,884
    
    
    
    2.4
    
    
    
    2.4Diluted
    
    
    19,137
    
    
    
    15,809
    
    
    
    3,884
    
    
    
    2.4
    
    
    
    2.4
 Year EndedDecember 31,
    
    January 1,
    
    January 2,
    
    December 31,
    
    December 31,2006(1)
    
    2006(1)
    
    2005(1)
    
    2003
    
    2002(In thousands)Consolidated Balance Sheets Data:Total assets(2)
    
    $
    375,034
    
    
    $
    366,921
    
    
    $
    322,481
    
    
    $
    168,119
    
    
    $
    183,953Mandatorily redeemable preferred stock, redeemable
common stock and warrant liability(2)
    
    
    
    
    
    
    
    
    
    
    23,314
    
    
    
    360,721
    
    
    
    315,509Other debt, including current maturities
    
    
    98,542
    
    
    
    142,273
    
    
    
    140,123
    
    
    
    111,706
    
    
    
    141,353Stockholders equity (deficit)(2)
    
    
    94,770
    
    
    
    71,096
    
    
    
    36,025
    
    
    
    (373,180
    )
    
    
    (318,986
    )
 
 (1)
    
    Historically, Old COMSYS fiscal year ended on December 31st, while Venturis
fiscal year ended on the Sunday closest to December 31st. In connection with the
merger, we adopted Venturis fiscal year-end. Accordingly, our fiscal year-end for 2006, 2005
and 2004 was December 31, 2006, January 1, 2006 and January 2, 2005, respectively.(2)
    
    Effective July 1, 2003, Old COMSYS adopted SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity(SFAS 150), which resulted
in the reclassification of Old COMSYS mandatorily redeemable preferred stock and accrued
dividends of $337.7 million and $1.4 million of common stock, to noncurrent liabilities.
Stockholder notes receivable for the purchase of redeemable securities were reclassified out
of equity and recorded as noncurrent assets. Additionally, Old COMSYS reclassified $3.7
million of unamortized issuance costs associated with the mandatorily redeemable preferred
stock to other assets. Old COMSYS also began to recognize dividends declared and the
amortization of the deferred issuance costs associated with the mandatorily redeemable 19




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preferred stock as interest expense. See Note 2 to the audited consolidated financial
statements included elsewhere in this report.(3)
    
    Effective January 1, 2002, Old COMSYS adopted SFAS 142 and, as a result of its initial
impairment test, incurred a goodwill impairment loss that was recorded as the cumulative
effect of a change in accounting principle.(4)
    
    The loss per share data and weighted average number of shares outstanding for periods prior
to the merger have been retroactively restated to reflect the exchange ratio of 0.0001 of a
share of our common stock for each share of Old COMSYS stock outstanding immediately prior to
the merger as if such exchange had occurred at the beginning of each of the periods presented. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes appearing elsewhere in this report. This discussion contains
forward-looking statements reflecting our current expectations and estimates and assumptions
concerning events and financial trends that may affect our future operating results or financial
position. Actual results and the timing of events may differ materially from those contained in
these forward-looking statements due to a number of factors, including those discussed in the
section entitled Risk Factors, Cautionary Note Regarding Forward-Looking Statements and
elsewhere in this report. For accounting purposes, the merger of Old COMSYS with Venturi was
treated as a reverse merger in which Old COMSYS was deemed to be the acquirer. The financial data
and discussion and analysis set forth below relating to all periods prior to the merger on
September 30, 2004 reflect the historical results of Old COMSYS. The financial data and discussion
and analysis set forth below relating to periods subsequent to September 30, 2004 reflect financial
results of COMSYS after giving effect to the merger and include Venturis results of operations
from the effective date of the merger. The historical data presented below is not indicative of
future results.
 Our Business
   
    
    rate of technological change;
    
    rate of growth in corporate IT budgets;
    
    penetration of IT staffing in the general workforce;
    
    outsourcing of the IT workforce; and
    
    consolidation of supplier bases.
    20




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st st
 Overview of 2006 Results
     Share-Based Payment
 21




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Liquidity and Capital Resources.
  2007 Outlook
   The Merger
  22




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Results of Operations
  Fiscal Year EndedDecember 31,
    
    January 1,
    
    January 2,2006
    
    2006
    
    2005Revenues from services
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of services
    
    
    75.7
    
    
    
    76.4
    
    
    
    75.8Gross profit
    
    
    24.3
    
    
    
    23.6
    
    
    
    24.2Operating costs and expenses:Selling, general and administrative
    
    
    18.4
    
    
    
    18.1
    
    
    
    19.8Restructuring and integration costs
    
    
    0.0
    
    
    
    0.7
    
    
    
    2.4Depreciation and amortization
    
    
    1.2
    
    
    
    1.4
    
    
    
    3.319.6
    
    
    
    20.2
    
    
    
    25.5Operating income (loss)
    
    
    4.7
    
    
    
    3.4
    
    
    
    (1.3
    )Interest expense, net
    
    
    2.1
    
    
    
    2.7
    
    
    
    11.6Loss on early extinguishment of debt
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.7Other income, net
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.2Income (loss) before income taxes
    
    
    2.2
    
    
    
    0.4
    
    
    
    (13.8
    )Income tax expense (benefit)
    
    
    (0.7
    )
    
    
    0.1
    
    
    
    (1.2
    )Net income (loss)
    
    
    2.9
    %
    
    
    0.3
    %
    
    
    (12.6
    )%Billable headcount at end of period
    
    
    4,996
    
    
    
    5,002
    
    
    
    4,888
 Year Ended December 31, 2006 Versus Year Ended January 1, 2006
 Overview of 2006 Results
 Revenues.
 Cost
of Services .
 Selling, General and Administrative Expenses .
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Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Restructuring and Integration Costs .
  Employee
    
    Leaseseverance
    
    costs
    
    TotalBalance as of January 1, 2006
    
    $
    512
    
    
    $
    2,463
    
    
    $
    2,975Adjustments
    
    
    
    
    
    
    (626
    )
    
    
    (626
    )Charges
    
    
    
    
    
    
    
    
    
    
    Cash payments
    
    
    (512
    )
    
    
    (760
    )
    
    
    (1,272
    )Balance as of December 31, 2006
    
    $
    
    
    
    $
    1,077
    
    
    $
    1,077
 Depreciation and Amortization .
 Interest Expense.
 Liquidity and
Capital Resources.
 Provision for Income Taxes .
 24




---



##### Table of Contents



Year Ended January 1, 2006 Versus Year Ended January 2, 2005
 Interest
Expense.
 Revenues.
 Cost of Services .
 Selling, General and Administrative Expenses .
  25




---



##### Table of Contents



Restructuring and Integration Costs .
  Employee
    
    Lease
    
    Professionalseverance
    
    costs
    
    fees
    
    TotalBalance, January 2, 2005
    
    $
    2,234
    
    
    $
    7,986
    
    
    $
    48
    
    
    $
    10,268Adjustments
    
    
    
    
    
    
    (1,617
    )
    
    
    
    
    
    
    (1,617
    )Charges
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    750Cash payments
    
    
    (2,472
    )
    
    
    (3,906
    )
    
    
    (48
    )
    
    
    (6,426
    )Balance, January 1, 2006
    
    $
    512
    
    
    $
    2,463
    
    
    $
    
    
    
    $
    2,975
  Depreciation and Amortization .
 Interest Expense.
 Liquidity and Capital ResourcesOverview.
 Provision for Income Taxes .
 Liquidity and Capital Resources
 Overview
 Cash Flows
 26




---



##### Table of Contents



Overview of 2006 Results
 Credit Agreements and Related Covenants
        27




---



##### Table of Contents



Debt Compliance
   Interest Rate Swap and Cap
  28




---



##### Table of Contents



Equity Offering
  Secondary Offering on Behalf of Selling Stockholders
  Cash Flows
  Year endedDecember 31,
    
    January 1,
    
    January 2,2006
    
    2006
    
    2005Net cash provided by (used in) operating activities
    
    $
    46,474
    
    
    $
    14,832
    
    
    ($
    13,667
    )Net cash used in investing activities
    
    
    (4,030
    )
    
    
    (16,440
    )
    
    
    (3,883
    )Net cash provided by (used in) financing activities
    
    
    (44,093
    )
    
    
    4,091
    
    
    
    18,260Effect of exchange rates on cash
    
    
    155
    
    
    
    (94
    )
    
    
    Net increase (decrease) in cash
    
    ($
    1,494
    )
    
    $
    2,389
    
    
    $
    710
   29




---



##### Table of Contents



Contractual and Commercial Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    One Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsShort- and long-term debt
    
    $
    98,542
    
    
    $
    5,000
    
    
    $
    5,000
    
    
    $
    88,542
    
    
    $
    Interest payments on short- and long-term debt
    
    
    830
    
    
    
    598
    
    
    
    232
    
    
    
    
    
    
    
    Operating leases
    
    
    33,985
    
    
    
    7,730
    
    
    
    11,510
    
    
    
    4,110
    
    
    
    10,635Total contractual cash obligations
    
    $
    133,357
    
    
    $
    13,328
    
    
    $
    16,742
    
    
    $
    92,652
    
    
    $
    10,635
 Commitment Expiration per PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanOther Commercial Commitments
    
    Total
    
    One Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsLetters of Credit (1)
    
    $
    3,622
    
    
    $
    3,622
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Letters of credit secure certain office leases and insurance programs.  30




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Revenue Recognition
    Recoverability of Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets,
  31




---



##### Table of Contents



Collectibility of Accounts Receivable
  Stock-Based Compensation
  Self-Insurance
  Accrued Bonuses
  32




---



##### Table of Contents



Income Tax Assets and Liabilities
 Accounting for Income Taxes
    Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 Fair
Value Measurements
 Topic 1N, Financial
Statements, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
 33




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##### Table of Contents



The
Fair Value Option for Financial Assets and Financial Liabilities
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risks
  Foreign Currency Risks
  Equity Market Risks
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  34




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
  Internal ControlIntegrated Framework Internal ControlIntegrated Framework,
 /s/ Larry L. Enterline
    
    
    
    /s/ Joseph C. Tusa, Jr.Larry L. Enterline
    
    
    
    Joseph C. Tusa, Jr.Chief Executive Officer
    
    
    
    Senior Vice President and Chief Financial OfficerMarch 12, 2007
    
    
    
    March 12, 2007
 
 ITEM 9B. OTHER INFORMATION
  Election of Directors
 Name of Nominee
    
    For
    
    WithheldLarry L. Enterline
    
    
    14,799,337
    
    
    
    13,450Frederick W. Eubank II
    
    
    14,801,061
    
    
    
    11,726Robert Fotsch
    
    
    14,801,137
    
    
    
    11,650Victor E. Mandel
    
    
    14,801,039
    
    
    
    11,748Courtney R. McCarthy
    
    
    14,801,094
    
    
    
    11,693Kevin M. McNamara
    
    
    14,801,061
    
    
    
    11,726Elias J. Sabo
    
    
    14,800,933
    
    
    
    11,854
 35




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##### Table of Contents



Ratification of Appointment of Ernst & Young LLP as Our Independent Auditor
 For
    
    Against
    
    
    
    Abstain14,811,505
    
    1,057
    
    
    
    225
 
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    The following documents are filed as part of this Annual Report on Form 10-K:
 1.
    
    Financial Statements. The financial statements listed in the accompanying Index to
Consolidated Financial Statements.2.
    
    Financial Statement Schedules. The following financial statement schedule is filed as
part of this report:Schedule IIValuation and Qualifying Accounts and ReservesAccounts Receivable.Schedule IIValuation and Qualifying Accounts and ReservesTax Valuation Allowance.All other schedules have been omitted because the information is insignificant or
inapplicable.3.
    
    Exhibits. The exhibits identified in the accompanying Exhibit Index are filed with
this report or incorporated herein by reference. Exhibits designated with an ** are
attached. Exhibits designated with a + are identified as management contracts or
compensatory plans or arrangements. Exhibits previously filed as indicated below are
incorporated by reference.
 36




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##### Table of Contents



SIGNATURES
  Date: March 12, 2007
    
    COMSYS IT PARTNERS, INC.By:
    
    /s/ Joseph C. Tusa, Jr.Name:
    
    Joseph C. Tusa, Jr.Title:
    
    Senior Vice President and Chief Financial Officer
 POWER OF ATTORNEY
   /s/ Larry L. Enterline
    
    
    
    Chief Executive Officer and DirectorLarry L. Enterline
    
    
    
    (principal
executive officer)/s/ Joseph C. Tusa, Jr.
    
    
    
    Senior Vice President and Chief Financial OfficerJoseph C. Tusa, Jr.
    
    
    
    (principal
financial and accounting officer)/s/ Frederick W. Eubank II
    
    
    
    DirectorFrederick W. Eubank II/s/ Courtney R. McCarthy
    
    
    
    DirectorCourtney R. McCarthy/s/ Victor E. Mandel
    
    
    
    DirectorVictor E. Mandel/s/ Robert Z. Hensley
    
    
    
    DirectorRobert Z. Hensley/s/ Robert Fotsch
    
    
    
    DirectorRobert Fotsch/s/ Elias J. Sabo
    
    
    
    DirectorElias J. Sabo
 S-1




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##### Table of Contents



Balance at
    
    Additions
    
    
    
    
    
    Balance atbeginning
    
    Charged (credited)
    
    
    
    
    
    
    
    
    
    end of(in thousands)
    
    of period
    
    to costs and expenses
    
    Other (1)
    
    Deductions(2)
    
    periodAccounts receivable:January 2, 2005
    
    $
    4,755
    
    
    
    ($1,295
    )
    
    $
    1,805
    
    
    
    ($1,942
    )
    
    $
    3,323January 1, 2006
    
    
    3,323
    
    
    
    1,827
    
    
    
    
    
    
    
    (723
    )
    
    
    4,427December 31, 2006
    
    
    4,427
    
    
    
    1,860
    
    
    
    
    
    
    
    (2,813
    )
    
    
    3,474
 
 (1)
    
    Additions from acquisition.(2)
    
    Accounts written-off, net of recoveries 
 Balance at
    
    
    
    
    
    
    
    
    
    Balance atbeginning
    
    
    
    
    
    
    
    
    
    end of(in thousands)
    
    of period
    
    Additions
    
    Deductions(1)
    
    periodTax valuation allowance:January 2, 2005
    
    $
    87,036
    
    
    $
    
    
    
    $
    (4,818
    )
    
    $
    82,218January 1, 2006
    
    
    82,218
    
    
    
    2,165
    
    
    
    
    
    
    
    84,383December 31, 2006
    
    
    84,383
    
    
    
    
    
    
    
    (12,002
    )
    
    
    72,381
 
 (1)
    
    Reduction from recovery of previously reserved deferred tax assets. S-2




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    F-2Report of Independent Registered Public Accounting Firm
    
    F-3Consolidated Balance Sheets as of December 31, 2006 and January 1, 2006
    
    F-4Consolidated Statements of Operations for the Years Ended December 31, 2006,
January 1, 2006 and January 2, 2005
    
    F-5Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2006,
January 1, 2006 and January 2, 2005
    
    F-6Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2006,
January 1, 2006 and January 2, 2005
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, January 1, 2006
and January 2, 2005
    
    F-8Notes to Consolidated Financial Statements
    
    F-9
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/ Ernst & Young LLP 
 F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based Payment
 Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year
Financial Statements
  /s/ ERNST & YOUNG LLP 
 F-3




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##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
 December 31,
    
    January 1,(In thousands, except share and par value amounts)
    
    2006
    
    2006AssetsCurrent assets:Cash
    
    $
    1,605
    
    
    $
    3,099Accounts receivable, net of allowance of $3,474 and $4,427, respectively
    
    
    189,610
    
    
    
    170,321Prepaid expenses and other
    
    
    3,741
    
    
    
    3,729Total current assets
    
    
    194,956
    
    
    
    177,149Fixed assets, net
    
    
    9,214
    
    
    
    13,074Goodwill
    
    
    154,984
    
    
    
    156,224Other intangible assets, net
    
    
    9,142
    
    
    
    11,262Deferred financing costs, net
    
    
    2,926
    
    
    
    4,655Restricted cash
    
    
    2,794
    
    
    
    2,939Other assets
    
    
    1,018
    
    
    
    1,618Total assets
    
    $
    375,034
    
    
    $
    366,921Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    131,535
    
    
    $
    108,432Payroll and related taxes
    
    
    32,204
    
    
    
    22,600Current maturities of long-term debt
    
    
    5,000
    
    
    
    5,000Interest payable
    
    
    654
    
    
    
    933Other current liabilities
    
    
    13,506
    
    
    
    15,667Total current liabilities
    
    
    182,899
    
    
    
    152,632Long-term debt
    
    
    93,542
    
    
    
    137,273Other noncurrent liabilities
    
    
    3,823
    
    
    
    5,920Total liabilities
    
    
    280,264
    
    
    
    295,825Commitments and contingenciesStockholders equity:Common stock, par value $.01; 95,000,000 shares authorized and 19,278,607 shares outstanding
in 2006; 95,000,000 shares authorized and 18,737,937 shares outstanding in 2005
    
    
    191
    
    
    
    187Common stock warrants
    
    
    1,734
    
    
    
    2,815Deferred stock compensation
    
    
    
    
    
    
    (1,749
    )Accumulated other comprehensive loss
    
    
    (12
    )
    
    
    (65
    )Additional paid-in capital
    
    
    206,740
    
    
    
    201,993Accumulated deficit
    
    
    (113,883
    )
    
    
    (132,085
    )Total stockholders equity
    
    
    94,770
    
    
    
    71,096Total liabilities and stockholders equity
    
    $
    375,034
    
    
    $
    366,921
 See notes to consolidated financial statements
 F-4




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##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Consolidated Statements of Operations
 Year endedDecember 31,
    
    January 1,
    
    January 2,(In thousands, except per share amounts)
    
    2006
    
    2006
    
    2005Revenues from services
    
    $
    736,645
    
    
    $
    661,657
    
    
    $
    437,013Cost of services
    
    
    557,598
    
    
    
    505,233
    
    
    
    331,474Gross profit
    
    
    179,047
    
    
    
    156,424
    
    
    
    105,539Operating costs and expenses:Selling, general and administrative
    
    
    135,651
    
    
    
    120,357
    
    
    
    86,376Restructuring and integration costs
    
    
    
    
    
    
    4,780
    
    
    
    10,322Depreciation and amortization
    
    
    8,717
    
    
    
    9,067
    
    
    
    14,564144,368
    
    
    
    134,204
    
    
    
    111,262Operating income (loss)
    
    
    34,679
    
    
    
    22,220
    
    
    
    (5,723
    )Interest expense, net
    
    
    15,518
    
    
    
    17,262
    
    
    
    50,823Loss on early extinguishment of debt
    
    
    3,191
    
    
    
    2,227
    
    
    
    2,986Other (income) expense, net
    
    
    (310
    )
    
    
    (201
    )
    
    
    1,025Income (loss) before income taxes
    
    
    16,280
    
    
    
    2,932
    
    
    
    (60,557
    )Income tax expense (benefit)
    
    
    (4,767
    )
    
    
    783
    
    
    
    (5,402
    )Net income (loss)
    
    $
    21,047
    
    
    $
    2,149
    
    
    $
    (55,155
    )Basic earnings (loss) per common share
    
    $
    1.10
    
    
    $
    0.14
    
    
    $
    (14.20
    )Diluted earnings (loss) per common share
    
    $
    1.10
    
    
    $
    0.14
    
    
    $
    (14.20
    )Weighted average basic and diluted shares outstanding:Basic
    
    
    18,449
    
    
    
    15,492
    
    
    
    3,884Diluted
    
    
    19,137
    
    
    
    15,809
    
    
    
    3,884
 See notes to consolidated financial statements
 F-5




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##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Consolidated Statements of Comprehensive Income (Loss)
 Year EndedDecember 31,
    
    January 1,
    
    January 2,(In thousands)
    
    2006
    
    2006
    
    2005Net income (loss)
    
    $
    21,047
    
    
    $
    2,149
    
    
    $
    (55,155
    )Foreign currency translation adjustments
    
    
    53
    
    
    
    (65
    )
    
    
    Total comprehensive income (loss)
    
    $
    21,100
    
    
    $
    2,084
    
    
    $
    (55,155
    )
 See notes to consolidated financial statements
 F-6




---



##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Consolidated Statements of Stockholders Equity
 AccumulatedCommon
    
    Deferred
    
    Other
    
    Additional
    
    
    
    
    
    TotalCommon
    
    Treasury
    
    Stock
    
    Stock
    
    Comprehensive
    
    Paid-in
    
    Accumulated
    
    Stockholders(In thousands, except share data)
    
    Stock
    
    Stock
    
    Warrants
    
    Compensation
    
    Loss
    
    Capital
    
    Deficit
    
    Equity (Deficit)Balance as of December 31, 2003
    
    $
    
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (373,164
    )
    
    $
    (373,180
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,155
    )
    
    
    (55,155
    )Redemption of 2,093 shares of COMSYS Holding, Inc. common stock in the merger
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    Redemption of mandatorily redeemable preferred stock in the merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294,101
    
    
    
    294,101Acquisition of 6,089,938 shares of Venturi Partners, Inc. common stock and
warrant outstanding at the merger date
    
    
    61
    
    
    
    
    
    
    
    5,361
    
    
    
    
    
    
    
    
    
    
    
    68,146
    
    
    
    
    
    
    
    73,568Issuance of 9,372,317 shares of COMSYS IT Partners, Inc. common stock in the merger
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    (10,497
    )
    
    
    
    
    
    
    99,628
    
    
    
    
    
    
    
    89,225Options exercised for 52,900 shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    468
    
    
    
    
    
    
    
    468Amortization of deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,998Balance as of January 2, 2005
    
    
    155
    
    
    
    
    
    
    
    5,361
    
    
    
    (3,499
    )
    
    
    
    
    
    
    168,242
    
    
    
    (134,234
    )
    
    
    36,025Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,149
    
    
    
    2,149Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    
    
    
    
    (65
    )Issuance of 3,000,000 shares of common stock
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,680
    
    
    
    
    
    
    
    30,710Exercise of 365,274 warrants for 164,289 shares of common stock
    
    
    1
    
    
    
    
    
    
    
    (2,546
    )
    
    
    
    
    
    
    
    
    
    
    2,545
    
    
    
    
    
    
    
    Options exercised for 58,493 shares of common stock
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    526
    
    
    
    
    
    
    
    527Amortization of deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,750Balance as of January 1, 2006
    
    
    187
    
    
    
    
    
    
    
    2,815
    
    
    
    (1,749
    )
    
    
    (65
    )
    
    
    201,993
    
    
    
    (132,085
    )
    
    
    71,096Cumulative effect of adjustments resulting from the adoption of SAB 108, net of $0
for taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,845
    )
    
    
    (2,845
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,047
    
    
    
    21,047Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53Issuance of 214,000 shares of common stock
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Exercise of 155,069 warrants for 119,052 shares of common stock
    
    
    
    
    
    
    
    
    
    
    (1,081
    )
    
    
    
    
    
    
    
    
    
    
    1,685
    
    
    
    
    
    
    
    604Options exercised for 207,618 shares of common stock
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,701
    
    
    
    
    
    
    
    1,703Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (159
    )
    
    
    
    
    
    
    (159
    )Amortization of unearned stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,269
    
    
    
    
    
    
    
    3,269Reclassification upon adoption of SFAS 123(R)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,749
    
    
    
    
    
    
    
    (1,749
    )
    
    
    
    
    
    
    Balance as of December 31, 2006
    
    $
    191
    
    
    $
    
    
    
    $
    1,734
    
    
    $
    
    
    
    $
    (12
    )
    
    $
    206,740
    
    
    $
    (113,883
    )
    
    $
    94,770
 See notes to consolidated financial statements
 F-7




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##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Year endedDecember 31,
    
    January 1,
    
    January 2,(In thousands)
    
    2006
    
    2006
    
    2005Cash flows from operating activitiesNet income (loss)
    
    $
    21,047
    
    
    $
    2,149
    
    
    $
    (55,155
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    8,717
    
    
    
    9,067
    
    
    
    14,564Provision for doubtful accounts
    
    
    1,860
    
    
    
    1,827
    
    
    
    (1,295
    )Amortization of deferred stock compensation
    
    
    3,269
    
    
    
    1,750
    
    
    
    6,998Deferred income taxes
    
    
    917
    
    
    
    561
    
    
    
    Loss (gain) on asset disposal
    
    
    (60
    )
    
    
    46
    
    
    
    1,181Amortization of deferred financing costs
    
    
    1,049
    
    
    
    1,106
    
    
    
    1,722Noncash interest expense, net
    
    
    501
    
    
    
    2,959
    
    
    
    33,787Loss on early extinguishment of debt
    
    
    3,191
    
    
    
    2,227
    
    
    
    2,986Changes in operating assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (20,706
    )
    
    
    (36,676
    )
    
    
    (13,587
    )Prepaid expenses and other
    
    
    1,188
    
    
    
    3,388
    
    
    
    (1,381
    )Accounts payable
    
    
    22,871
    
    
    
    36,016
    
    
    
    17,570Payroll and related taxes
    
    
    6,276
    
    
    
    (6,256
    )
    
    
    (751
    )Other
    
    
    (3,646
    )
    
    
    (3,332
    )
    
    
    (20,306
    )Net cash provided by (used in) operating activities
    
    
    46,474
    
    
    
    14,832
    
    
    
    (13,667
    )Cash flows from investing activitiesCapital expenditures
    
    
    (2,780
    )
    
    
    (7,584
    )
    
    
    (2,131
    )Cash paid for acquisitions
    
    
    (1,250
    )
    
    
    (8,631
    )
    
    
    (1,076
    )Cash paid for other noncurrent assets
    
    
    
    
    
    
    (225
    )
    
    
    (676
    )Net cash used in investing activities
    
    
    (4,030
    )
    
    
    (16,440
    )
    
    
    (3,883
    )Cash flows from financing activitiesBorrowings under revolving credit facility, net
    
    
    64,213
    
    
    
    156,146
    
    
    
    428,731Repayments of long-term debt
    
    
    (107,944
    )
    
    
    (153,996
    )
    
    
    (401,814
    )Exercise of stock options and warrants
    
    
    2,307
    
    
    
    527
    
    
    
    468Proceeds from issuance of common stock, net of issuance costs
    
    
    (159
    )
    
    
    30,967
    
    
    
    Cash paid for financing costs
    
    
    (2,335
    )
    
    
    (2,766
    )
    
    
    (6,852
    )Cash paid for shelf registration
    
    
    (175
    )
    
    
    
    
    
    
    Redemption of preferred stock
    
    
    
    
    
    
    (26,787
    )
    
    
    (1,210
    )Advances to stockholders
    
    
    
    
    
    
    
    
    
    
    (1,063
    )Net cash provided by (used for) financing activities
    
    
    (44,093
    )
    
    
    4,091
    
    
    
    18,260Effect of exchange rates on cash
    
    
    155
    
    
    
    (94
    )
    
    
    Net increase (decrease) in cash
    
    
    (1,494
    )
    
    
    2,389
    
    
    
    710Cash, beginning of period
    
    
    3,099
    
    
    
    710
    
    
    
    Cash, end of period
    
    $
    1,605
    
    
    $
    3,099
    
    
    $
    710Supplemental cash flow informationInterest paid
    
    $
    14,300
    
    
    $
    13,559
    
    
    $
    26,049Income tax payments (refunds)
    
    $
    (5,658
    )
    
    $
    81
    
    
    $
    (5,402
    )
 See notes to consolidated financial statements
 F-8




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##### Table of Contents



COMSYS IT Partners, Inc. and Subsidiaries
 
 Notes to the Consolidated Financial Statements
 1. Description of Business
     Disclosures
About Segments of an Enterprise and Related Information
 2. Summary of Significant Accounting Policies
 Basis of Presentation
  st
  Cash and Cash Equivalents
  F-9




---



##### Table of Contents



Fixed Assets
  Estimated
    
    December 31,
    
    January 1,Useful Life
    
    2006
    
    2006(In years)
    
    (In thousands)Computer hardware and software
    
    
    3 - 5
    
    
    $
    46,102
    
    
    $
    50,310Furniture and equipment
    
    
    5 - 7
    
    
    
    7,839
    
    
    
    7,987Leasehold improvements
    
    
    5 - 15
    
    
    
    1,927
    
    
    
    2,56655,868
    
    
    
    60,863Less accumulated depreciation and amortization
    
    
    
    
    
    
    (46,654
    )
    
    
    (47,789
    )Fixed assets, net
    
    
    
    
    
    $
    9,214
    
    
    $
    13,074
  Leases
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  Long-Lived Assets
  F-10




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##### Table of Contents



Deferred Financing Costs
  Revenue Recognition
 Revenue
Recognition in Financial Statements.
 
    
    Persuasive evidence of an arrangement exists;
    
    Ownership has transferred to the customer;
    
    The price to the customer is fixed or determinable; and
    
    Collectibility is reasonably assured
    Collectibility of Accounts Receivable
  Interest Expense
 Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
 F-11




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##### Table of Contents



Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Share-Based Payment
   Year EndedJanuary 1,
    
    January 2,(In thousands, except per share data)
    
    2006
    
    2005Net income (loss) as reported
    
    $
    2,149
    
    
    $
    (55,155
    )Add stock-based compensation included in reported net income (loss), net of tax effect
    
    
    1,750
    
    
    
    6,998Deduct stock-based compensation determined under fair value based method for
all awards, net of tax effect
    
    
    (2,468
    )
    
    
    (7,369
    )Pro forma net income (loss)
    
    $
    1,431
    
    
    $
    (55,526
    )Basic and diluted net income (loss) per share, as reported
    
    $
    0.14
    
    
    $
    (14.20
    )Basic and diluted pro forma net income (loss) per share
    
    $
    0.09
    
    
    $
    (14.30
    )
 Income Taxes
   F-12




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##### Table of Contents



Presentation of Governmental Taxes other than Income Taxes
  Earnings (Loss) Per Share
      Year endedDecember 31,
    
    January 1,
    
    January 2,2006
    
    2006
    
    2005Net income (loss) attributable to common stockholders  basic
    
    $
    20,354
    
    
    $
    2,104
    
    
    $
    (55,155
    )Net income attributable to unvested restricted stock holders
    
    
    420
    
    
    
    
    
    
    
    Net income attributable to warrant holders
    
    
    273
    
    
    
    45
    
    
    
    Total net income (loss)
    
    $
    21,047
    
    
    $
    2,149
    
    
    $
    (55,155
    )Weighted average common shares outstanding  basic
    
    
    18,449
    
    
    
    15,492
    
    
    
    3,884Add: dilutive restricted stock, stock options and warrants
    
    
    688
    
    
    
    317
    
    
    
    Diluted weighted average common shares outstanding
    
    
    19,137
    
    
    
    15,809
    
    
    
    3,884Basic earnings (loss) per common share
    
    $
    1.10
    
    
    $
    0.14
    
    
    $
    (14.20
    )Diluted earnings (loss) per common share
    
    $
    1.10
    
    
    $
    0.14
    
    
    $
    (14.20
    )
  Use of Estimates
  F-13




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##### Table of Contents



Fair Value of Financial Instruments
  
    
    Accounts receivable and accounts payableThe carrying amounts of accounts
receivable and accounts payable approximate fair value due to the short-term maturity
of these instruments.
    
    Revolving credit facility and term loansThe carrying value of borrowings under the
Senior Credit Agreement and Term Loan Credit Agreement approximate fair value because
the interest rates are variable and based on current market rates.
    
    Mandatorily redeemable preferred stockThe Company estimated that the carrying
amount of this instrument approximated fair value at January 2, 2005.
 Reclassifications
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 Fair Value Measurements
 Topic 1N, Financial Statements, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Merger with Venturi
  F-14




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##### Table of Contents



(In thousands)Cash
    
    $
    1,819Accounts receivable, net
    
    
    50,189Prepaid expenses and other assets
    
    
    5,329Fixed assets, net
    
    
    5,907Other noncurrent assets
    
    
    337Customer base intangible
    
    
    6,407Goodwill
    
    
    83,994Total assets acquired
    
    $
    153,982Accounts payable
    
    $
    10,543Other current liabilities
    
    
    42,400Mandatorily redeemable preferred stock
    
    
    22,471Other noncurrent liabilities
    
    
    5,000Total liabilities assumed
    
    
    80,414Net assets acquired
    
    
    73,568Less value of Venturi outstanding warrants
    
    
    (5,361
    )Total purchase price paid in stock
    
    $
    68,207
   F-15




---



##### Table of Contents



(In thousands, except per share amounts)
    
    2004Revenues
    
    $
    639,387Loss from operations
    
    
    (6,948
    )Loss before income taxes
    
    
    (26,096
    )Net loss
    
    
    (20,694
    )Basic and diluted loss per common share
    
    $
    (1.35
    )Weighted average sharesbasic and diluted
    
    
    15,276
  4. Restructuring and Other Charges
 Recognition of Liabilities in Connection with a Purchase Business Combination
   Employee
    
    
    
    
    
    Professionalseverance
    
    Lease costs
    
    fees
    
    TotalBalance as of December 31, 2003
    
    $
    360
    
    
    $
    
    
    
    $
    
    
    
    $
    360Purchase price allocation
    
    
    4,241
    
    
    
    5,973
    
    
    
    1,782
    
    
    
    11,996Charges
    
    
    1,838
    
    
    
    2,819
    
    
    
    70
    
    
    
    4,727Cash payments
    
    
    (4,205
    )
    
    
    (806
    )
    
    
    (1,804
    )
    
    
    (6,815
    )Balance as of January 2, 2005
    
    
    2,234
    
    
    
    7,986
    
    
    
    48
    
    
    
    10,268Adjustments
    
    
    
    
    
    
    (1,617
    )
    
    
    
    
    
    
    (1,617
    )Charges
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    750Cash payments
    
    
    (2,472
    )
    
    
    (3,906
    )
    
    
    (48
    )
    
    
    (6,426
    )Balance as of January 1, 2006
    
    
    512
    
    
    
    2,463
    
    
    
    
    
    
    
    2,975Adjustments
    
    
    
    
    
    
    (626
    )
    
    
    
    
    
    
    (626
    )Charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash payments
    
    
    (512
    )
    
    
    (760
    )
    
    
    
    
    
    
    (1,272
    )Balance as of December 31, 2006
    
    $
    
    
    
    $
    1,077
    
    
    $
    
    
    
    $
    1,077
  F-16




---



##### Table of Contents



5. Goodwill and Other Intangible Assets
 Goodwill
 Goodwill and Other Intangible Assets
  Balance as of December 31, 2003
    
    $
    71,585Goodwill acquired in the merger (Note 3)
    
    
    83,994Balance as of December 31, 2004
    
    
    155,579Adjustments to previously reported purchase price
    
    
    645Balance as of January 1, 2006
    
    
    156,224Adjustments to previously reported purchase price
    
    
    (1,240
    )Balance as of December 31, 2006
    
    $
    154,984
  Other Intangibles
  Estimated
    
    Gross Carrying
    
    AccumulatedUseful Life
    
    Amount
    
    Amortization
    
    Net Balance(In years)
    
    (In thousands)Customer baseVenturi
    
    
    5
    
    
    $
    6,407
    
    
    $
    2,877
    
    
    $
    3,530Customer basePure Solutions
    
    
    8
    
    
    
    6,571
    
    
    
    959
    
    
    
    5,612Total
    
    
    
    
    
    $
    12,978
    
    
    $
    3,836
    
    
    $
    9,142
  Estimated
    
    Gross Carrying
    
    AccumulatedUseful Life
    
    Amount
    
    Amortization
    
    Net Balance(In years)
    
    (In thousands)Customer baseVenturi
    
    
    5
    
    
    $
    6,407
    
    
    $
    1,602
    
    
    $
    4,805Customer basePure Solutions
    
    
    8
    
    
    
    6,571
    
    
    
    114
    
    
    
    6,457Total
    
    
    
    
    
    $
    12,978
    
    
    $
    1,716
    
    
    $
    11,262
  F-17




---



##### Table of Contents



2007
    
    $
    2,1032008
    
    
    2,1032009
    
    
    1,7822010
    
    
    8212011
    
    
    821$
    7,630
 6. Long-Term Debt
  December 31,
    
    January 1,2006
    
    2006Debt outstanding under credit facilities:Senior credit facilityrevolver
    
    $
    88,542
    
    
    $
    32,273Senior credit facilitysenior term loan
    
    
    10,000
    
    
    
    10,000Second lien term loan
    
    
    
    
    
    
    100,00098,542
    
    
    
    142,273Less current maturities
    
    
    5,000
    
    
    
    5,000Long-term obligations, excluding current maturities
    
    $
    93,542
    
    
    $
    137,273
 Credit Facilities
     F-18




---



##### Table of Contents



F-19




---



##### Table of Contents



2007
    
    $
    5,0002008
    
    
    5,0002009
    
    
    2010
    
    
    88,5422011
    
    
    Thereafter
    
    
    Total long-term debt
    
    $
    98,542
 7. Income Taxes
  Year EndedDecember 31,
    
    January 1,
    
    Janaury 2,2006
    
    2006
    
    2005Current:Federal
    
    $
    (5,799
    )
    
    $
    
    
    
    $
    (5,402
    )State
    
    
    12
    
    
    
    37
    
    
    
    Foreign
    
    
    103
    
    
    
    185
    
    
    
    (5,684
    )
    
    
    222
    
    
    
    (5,402
    )Deferred:Federal
    
    
    1,103
    
    
    
    564
    
    
    
    State
    
    
    (186
    )
    
    
    (3
    )
    
    
    917
    
    
    
    561
    
    
    
    $
    (4,767
    )
    
    $
    783
    
    
    $
    (5,402
    )
 F-20




---



##### Table of Contents



Year EndedDecember 31,
    
    January 1,
    
    January 2,2006
    
    2006
    
    2005Income tax expense (benefit) computed at the federal statutory income tax rate
    
    $
    5,698
    
    
    $
    1,026
    
    
    $
    (21,195
    )State income tax expense (benefit) net of federal benefit
    
    
    (174
    )
    
    
    427
    
    
    
    (899
    )Foreign
income tax at higher (lower) rates
    
    
    (15
    )
    
    
    185
    
    
    
    Effect of preferred dividends and other permanent differences
    
    
    818
    
    
    
    2,290
    
    
    
    16,984Tax benefit allocated to goodwill
    
    
    1,103
    
    
    
    564
    
    
    
    Effect of decrease in valuation allowance
    
    
    (12,002
    )
    
    
    (3,709
    )
    
    
    (292
    )Other
    
    
    (195
    )
    
    
    
    
    
    
    Provision (benefit) for income taxes
    
    $
    (4,767
    )
    
    $
    783
    
    
    $
    (5,402
    )
    December 31,
    
    January 1,2006
    
    2006Net current asset
    
    $
    
    
    
    $
    Net noncurrent asset
    
    
    189
    
    
    
    3Net noncurrent liability
    
    
    
    
    
    
    Net asset
    
    $
    189
    
    
    $
    3
  December 31,
    
    January 1,2006
    
    2006Deferred tax assets:Goodwill and other intangibles
    
    $
    14,640
    
    
    $
    22,081Accrued expenses and other reserves
    
    
    6,219
    
    
    
    5,613Bad debt allowances
    
    
    1,384
    
    
    
    1,551Accrued benefits
    
    
    1,757
    
    
    
    987Net operating loss carryforwards
    
    
    50,495
    
    
    
    54,765Other
    
    
    607
    
    
    
    1,820Total deferred tax assets
    
    
    75,102
    
    
    
    86,817Valuation allowance
    
    
    (72,381
    )
    
    
    (84,383
    )Net deferred tax assets
    
    
    2,721
    
    
    
    2,434Deferred tax liabilities:Depreciation expense and property basis differences
    
    
    (2,532
    )
    
    
    (2,431
    )Total deferred tax liabilities
    
    
    (2,532
    )
    
    
    (2,431
    )Net deferred tax asset
    
    $
    189
    
    
    $
    3
 F-21




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##### Table of Contents



8. Commitments and Contingencies
   F-22




---



##### Table of Contents



Year ending:2007
    
    $
    7,7302008
    
    
    6,0492009
    
    
    5,4612010
    
    
    4,1102011 & thereafter
    
    
    10,63533,985Sublease income
    
    
    (1,659
    )$
    32,326
    9. Defined Contribution Plan
   10. Stockholders Equity
 Common Stock
    F-23




---



##### Table of Contents



Warrants
  Mandatorily Redeemable Preferred Stock
  Class C Preferred Stock
  Class B Preferred Stock
  Class A Preferred Stock
  Preferred Stock Issued and Redeemed in the Merger
    F-24




---



##### Table of Contents



Class E Preferred Stock
  Class D Preferred Stock
   11. Credit Risk
   12. Stock Compensation Plans
   F-25




---



##### Table of Contents



Number
    
    
    Weighted-Averageof Shares
    
    
    Exercise PriceOutstanding at December 31, 2003
    
    
    90
    
    
    $
    20,000.00Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    (23
    )
    
    
    20,000.00Outstanding at January 2, 2005
    
    
    67
    
    
    
    20,000.00Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    (11
    )
    
    
    20,000.00Outstanding at January 1, 2006
    
    
    56
    
    
    
    20,000.00Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    (14
    )
    
    
    20,000.00Outstanding at December 31, 2006
    
    
    42
    
    
    
    20,000.00Exercisable at December 31, 2006
    
    
    42
    
    
    
    20,000.00Available for issuance at December 31, 2006
    
    
    
   Weighted-AverageNumber of Shares
    
    
    Exercise PriceOutstanding at September 30, 2004
    
    
    676,100
    
    
    $
    9.06Granted
    
    
    100,000
    
    
    
    8.55Exercised
    
    
    (52,900
    )
    
    
    8.84Forfeited
    
    
    (16,900
    )
    
    
    11.19Outstanding at January 2, 2005
    
    
    706,300
    
    
    
    8.95Granted
    
    
    Exercised
    
    
    (48,500
    )
    
    
    9.11Forfeited
    
    
    (14,400
    )
    
    
    8.80Outstanding at January 1, 2006
    
    
    643,400
    
    
    
    8.96Granted
    
    
    Exercised
    
    
    (100,202
    )
    
    
    8.11Forfeited
    
    
    (3,000
    )
    
    
    8.88Outstanding at December 31, 2006
    
    
    540,198
    
    
    
    9.10Exercisable at December 31, 2006
    
    
    506,865
    
    
    
    9.70Available for issuance at December 31, 2006
    
    
    53,035
 F-26




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##### Table of Contents



Weighted-AverageNumber of Shares
    
    
    Exercise PriceOutstanding at September 30, 2004
    
    
    
    
    
    $
    Granted
    
    
    420,000
    
    
    
    8.55Exercised
    
    
    Forfeited
    
    
    Outstanding at January 2, 2005
    
    
    420,000
    
    
    
    8.55Granted
    
    
    Exercised
    
    
    (9,993
    )
    
    
    8.55Forfeited
    
    
    (75,500
    )
    
    
    8.55Outstanding at January 1, 2006
    
    
    334,507
    
    
    
    8.54Granted
    
    
    256,000
    
    
    
    11.07Exercised
    
    
    (107,416
    )
    
    
    8.53Forfeited
    
    
    (47,507
    )
    
    
    9.29Outstanding at December 31, 2006
    
    
    435,584
    
    
    
    9.95Exercisable at December 31, 2006
    
    
    101,913
    
    
    
    8.55Available for issuance as stock options or restricted stock at December 31, 2006
    
    
    392,676
  December 31,2006Expected life (in years)
    
    
    6.0Risk-free interest rate
    
    
    4.375
    %Expected volatility
    
    
    45.0
    %Dividend yield
    
    
    0.0
    %Weighted average fair value of options granted
    
    $
    5.47
    F-27




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##### Table of Contents



WeightedAverageGrant DateShares
    
    
    Fair ValueNonvested balance at January 1, 2006
    
    
    312,410
    
    
    $
    11.20Granted
    
    
    578,659
    
    
    
    10.44Vested
    
    
    (279,468
    )
    
    
    4.13Forfeited
    
    
    (258,051
    )
    
    
    4.64Nonvested balance at December 31, 2006
    
    
    353,550
    
    
    
    15.56
     F-28




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##### Table of Contents



13. Staff Accounting Bulletin No. 108
  14. Related Party Transactions
 Executive Stock Holdings
    Stockholders Notes Receivable
  Related Party Accounts Receivable
 F-29




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##### Table of Contents



15. Executive Officer Resignations
    16. Subsequent Event
  F-30




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##### Table of Contents



17. Summary of Quarterly Financial Information (Unaudited)
  2006First
    
    Second
    
    Third
    
    FourthRevenues from services
    
    $
    178,592
    
    
    $
    187,609
    
    
    $
    185,734
    
    
    $
    184,710Costs of services
    
    
    136,520
    
    
    
    141,736
    
    
    
    139,991
    
    
    
    139,351Gross profit
    
    
    42,072
    
    
    
    45,873
    
    
    
    45,743
    
    
    
    45,359Operating costs and expensesSelling, general and administrative expenses
    
    
    34,238
    
    
    
    34,283
    
    
    
    33,074
    
    
    
    34,056Restructuring and integration costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    2,172
    
    
    
    2,167
    
    
    
    2,198
    
    
    
    2,18036,410
    
    
    
    36,450
    
    
    
    35,272
    
    
    
    36,236Income from operations
    
    
    5,662
    
    
    
    9,423
    
    
    
    10,471
    
    
    
    9,123Interest expense, net
    
    
    3,957
    
    
    
    3,573
    
    
    
    4,851
    
    
    
    3,137Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    2,468
    
    
    
    723Other (income) expense, net
    
    
    (124
    )
    
    
    (170
    )
    
    
    22
    
    
    
    (38
    )Income before income taxes
    
    
    1,829
    
    
    
    6,020
    
    
    
    3,130
    
    
    
    5,301Income tax expense (benefit)
    
    
    150
    
    
    
    (5,342
    )
    
    
    274
    
    
    
    151Net income
    
    $
    1,679
    
    
    $
    11,362
    
    
    $
    2,856
    
    
    $
    5,150Basic net income per share
    
    $
    0.09
    
    
    $
    0.60
    
    
    $
    0.15
    
    
    $
    0.27Diluted net income per share
    
    $
    0.09
    
    
    $
    0.60
    
    
    $
    0.15
    
    
    $
    0.26Basic weighted average shares outstanding
    
    
    18,550
    
    
    
    18,562
    
    
    
    18,698
    
    
    
    18,628Diluted weighted average shares outstanding
    
    
    18,804
    
    
    
    18,920
    
    
    
    19,299
    
    
    
    19,531
 2005First
    
    Second
    
    Third
    
    FourthRevenues from services
    
    $
    164,953
    
    
    $
    162,185
    
    
    $
    163,199
    
    
    $
    171,320Costs of services
    
    
    127,366
    
    
    
    124,647
    
    
    
    123,286
    
    
    
    129,934Gross profit
    
    
    37,587
    
    
    
    37,538
    
    
    
    39,913
    
    
    
    41,386Operating costs and expensesSelling, general and administrative expenses
    
    
    27,955
    
    
    
    29,518
    
    
    
    30,337
    
    
    
    32,547Restructuring and integration costs
    
    
    3,428
    
    
    
    424
    
    
    
    928
    
    
    
    Depreciation and amortization
    
    
    2,471
    
    
    
    2,515
    
    
    
    1,870
    
    
    
    2,21133,854
    
    
    
    32,457
    
    
    
    33,135
    
    
    
    34,758Income from operations
    
    
    3,733
    
    
    
    5,081
    
    
    
    6,778
    
    
    
    6,628Interest expense, net
    
    
    4,026
    
    
    
    4,348
    
    
    
    4,402
    
    
    
    4,486Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,227Other (income) expense, net
    
    
    (87
    )
    
    
    4
    
    
    
    (71
    )
    
    
    (47
    )Income (loss) before income taxes
    
    
    (206
    )
    
    
    729
    
    
    
    2,447
    
    
    
    (38
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783Net income (loss)
    
    $
    (206
    )
    
    $
    729
    
    
    $
    2,447
    
    
    $
    (821
    )Basic net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    0.16
    
    
    $
    (0.05
    )Diluted net income (loss) per share
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    (0.05
    )Basic weighted average shares outstanding
    
    
    15,332
    
    
    
    15,418
    
    
    
    15,505
    
    
    
    15,713Diluted weighted average shares outstanding
    
    
    15,332
    
    
    
    16,154
    
    
    
    15,933
    
    
    
    15,713
 F-31




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of COMSYS IT Partners,
Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed with
the SEC on October 4, 2004).3.2
    
    Amended and Restated Bylaws of COMSYS IT Partners, Inc. (incorporated by
reference to Exhibit 3.2 to the Form 8-K filed with the SEC on October 4,
2004).3.3
    
    First Amendment to the Amended and Restated Bylaws of COMSYS IT Partners,
Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed with
the SEC on May 4, 2005).4.1
    
    Registration Rights Agreement, dated as of September 30, 2004, between
COMSYS IT Partners, Inc. and certain of the old COMSYS Holdings
stockholders party thereto (incorporated by reference to Exhibit 4.2 to the
Form 8-A/A filed with the SEC on November 2, 2004).4.2
    
    Amendment No. 1 to Registration Rights Agreement dated April 1, 2005
between COMSYS IT Partners, Inc., and certain of the old COMSYS Holdings
stockholders party thereto (incorporated by reference to Exhibit 4.2 to the
Form 10-Q filed with the SEC on May 6, 2005).4.3
    
    Amended and Restated Registration Rights Agreement, dated as of September
30, 2004, between COMSYS IT Partners, Inc. and certain of the old Venturi
stockholders party thereto (incorporated by reference to Exhibit 4.3 to the
Form 8-A/A filed with the SEC on November 2, 2004).4.4
    
    Amendment No. 1 to Amended and Restated Registration Rights Agreement dated
April 1, 2005 between COMSYS IT Partners, Inc., and certain of the old
Venturi stockholders party thereto (incorporated by reference to Exhibit
4.4 to the Form 10-Q filed with the SEC on May 6, 2005).4.5
    
    Voting Agreement, dated as of September 30, 2004, by and among the
Registrant and the stockholders party thereto (incorporated by reference to
Exhibit 2.4 to the Form 8-K filed with the SEC on October 4, 2004).4.6
    
    Voting Agreement, dated as of September 30, 2004, between the Registrant
and MatlinPatterson Global Opportunities Partners, L.P. (incorporated by
reference to Exhibit 2.5 to the Form 8-K filed with the SEC on October 4,
2004).4.7*
    
    Common Stock Purchase Warrant dated as of April 14, 2003, issued by the
Company in favor of BNP Paribas (incorporated by reference to Exhibit 99.16
to the Form 8-K filed with the SEC on April 25, 2003).4.8
    
    Specimen Certificate for Shares of Common Stock (incorporated by reference
to Exhibit 4.6 to the Form 10-K filed with the SEC on April 1, 2005).10.1
    
    Credit Agreement dated as of December 14, 2005, among COMSYS Services LLC,
COMSYS Information Technology Services, Inc. and Pure Solutions, Inc., as
borrowers, COMSYS IT Partners, Inc. and PFI LLC, as guarantors, COMSYS
Services LLC acting in its capacity as borrowing agent and funds
administrator for the borrowers, Merrill Lynch Capital, as administrative
agent, a lender, sole bookrunner and sole lead arranger, ING Capital LLC,
as co-documentation agent and as a lender, Allied Irish Banks PLC, as
co-documentation agent and as a lender, GMAC Commercial Finance LLC, as
syndication agent and as a lender, and the lenders from time to time party
thereto (incorporated by reference to Exhibit 10.1 to the Form 8-K filed
with the SEC on December 15, 2005).10.2
    
    Consent and First Amendment to Credit Agreement, dated as of March 31,
2006, among COMSYS Services LLC, COMSYS Information Technology Services,
Inc. and Pure Solutions, Inc., as borrowers, COMSYS IT Partners, Inc. and
PFI LLC, as guarantors, COMSYS Services LLC, acting in its capacity as
borrowing agent and funds administrator for the borrowers, Merrill Lynch
Capital, as administrative agent, a lender, sole bookrunner and sole lead
arranger, ING Capital LLC, as co-documentation agent and as a lender,
Allied Irish Banks PLC, as co-documentation agent and as a lender, GMAC
Commercial Finance LLC, as syndication agent and as a lender, and the
lenders from time to time party thereto (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed with the SEC on September 15, 2006).10.3
    
    Consent, Waiver and Second Amendment to Credit Agreement, dated as of
September 15, 2006, among COMSYS Services LLC, COMSYS Information
Technology Services, Inc. and Pure Solutions, Inc., as borrowers, COMSYS IT
Partners, Inc., PFI LLC and COMSYS IT Canada, Inc. as guarantors, COMSYS
Services LLC, acting in its capacity as borrowing agent and funds
administrator for the borrowers, Merrill Lynch Capital, as administrative
agent, a lender, sole bookrunner and sole lead arranger, ING Capital LLC,
Allied Irish Banks PLC, and BMO Capital Markets Financing, Inc., as
co-documentation agents and as lenders, GMAC Commercial Finance LLC, as
syndication agent and as a lender, and the lenders from time to time party
thereto (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
with the SEC on September 15, 2006).10.4
    
    Consent and Third Amendment to Credit Agreement, dated as of December 15,
2006, among COMSYS Services LLC, COMSYS Information Technology Services,
Inc. and Pure Solutions, Inc., as borrowers, COMSYS IT Partners, Inc., PFI
LLC and COMSYS IT Canada, Inc., as guarantors, COMSYS Services LLC, acting
in its capacity as borrowing agent and funds administrator for the
borrowers, Merrill Lynch Capital, as administrative agent, a lender, sole
bookrunner and sole lead arranger, ING Capital LLC, Allied Irish Banks PLC
and BMO Capital Markets Financing, Inc., as co-documentation agents and as
lenders, GMAC Commercial Finance LLC, as syndication agent and as a lender,
and the lenders from time to time party thereto (incorporated by reference
to Exhibit 10.1 to the Form 8-K filed with the SEC on December 18, 2006).10.5
    
    Guaranty, dated as of December 14, 2005, among COMSYS IT Partners, Inc. and
PFI LLC, as guarantors, in favor of Merrill Lynch Capital, in its capacity
as administrative agent (incorporated by reference to Exhibit 10.2 to the
Form 8-K filed with the SEC on December 15, 2005).10.6
    
    Guaranty, dated as of June 15, 2006, by COMSYS IT Canada, Inc. in favor of
Merrill Lynch Capital, in its capacity as administrative agent
(incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the
SEC on September 15, 2006).




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##### Table of Contents



ExhibitNumber
    
    Description10.7+
    
    2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-8 filed with the SEC on November 9, 2004).10.8+
    
    2003 Equity Incentive Plan (incorporated by reference to Annex C to the
Companys Definitive Proxy Statement on Schedule 14A filed with the SEC on
June 24, 2003).10.9+
    
    Old COMSYS 2004 Management Incentive Plan (incorporated by reference to
Exhibit 10.10 to the Form 10-K filed with the SEC on April 1, 2005).10.10+
    
    Modification Agreement, effective as of September 30, 2006, by and between
COMSYS IT Partners, Inc. and Joseph C. Tusa, Jr. (incorporated by reference
to Exhibit 10.1 to the Form 8-K filed with the SEC on December 4, 2006).10.11+
    
    Modification Agreement, effective as of September 30, 2006, by and between
COMSYS IT Partners, Inc. and David L. Kerr (incorporated by reference to
Exhibit 10.2 to the Form 8-K filed with the SEC on December 5, 2006).10.12+
    
    Amended and Restated Employment Agreement dated December 30, 2003, between
COMSYS Information Technology Services, Inc. and Michael T. Willis
(incorporated by reference to Exhibit 10.15 to the Form 10-K filed with the
SEC on April 1, 2005).10.13+
    
    First Amendment dated November 28, 2005 to Amended and Restated Employment
Agreement between COMSYS Information Technology Services, Inc. and Michael
T. Willis (incorporated by reference to Exhibit 10.1 to the Form 8-K filed
with the SEC on December 2, 2005).10.14+
    
    Resignation Agreement and Release dated February 2, 2006 between COMSYS
Information Technology Services, Inc. and Michael T. Willis (incorporated
by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on February
3, 2006).10.15+
    
    Amended and Restated Employment Agreement dated December 9, 2005 between
COMSYS IT Partners, Inc. and Joseph C. Tusa, Jr. (incorporated by reference
to Exhibit 10.1 on Form 8-K filed with the SEC on December 14, 2005).10.16+
    
    Employment Agreement dated May 2, 2001 between COMSYS Information
Technology Services, Inc. and Margaret G. Reed (incorporated by reference
to Exhibit 10.17 to the Form 10-K filed with the SEC on April 1, 2005).10.17+
    
    First Amendment to Employment Agreement dated March 2, 2004 between COMSYS
Information Technology Services, Inc. and Margaret G. Reed (incorporated by
reference to Exhibit 10.18 to the Form 10-K filed with the SEC on April 1,
2005).10.18+
    
    Employment Agreement dated July 16, 2004 between COMSYS Information
Technology Services, Inc. and David L. Kerr (incorporated by reference to
Exhibit 10.19 to the Form 10-K filed with the SEC on April 1, 2005).10.19+
    
    Employment Agreement dated April 14, 2003 between Personnel Group of
America, Inc. and Michael H. Barker (incorporated by reference to Exhibit
99.12 to the Form 8-K filed with the SEC on April 25, 2003).10.20+
    
    Amendment to Employment Agreement dated October 1, 2004 between COMSYS IT
Partners, Inc. and Michael H. Barker (incorporated by reference to Exhibit
10.21 to the Form 10-K filed with the SEC on April 1, 2005).10.21+
    
    Employment Agreement dated as of January 3, 2006 between COMSYS IT
Partners, Inc. and Ken R. Bramlett, Jr. (incorporated by reference to
Exhibit 10.18 to the Form 10-K filed with the SEC on March 16, 2006).10.23+
    
    Employment Agreement dated as of July 27, 2006 between COMSYS IT Partners,
Inc. and Larry L. Enterline (incorporated by reference to Exhibit 10.1 to
the Form 10-Q field with the SEC on August 7, 2006).10.24+
    
    Modification Agreement, dated as of September 23, 2006, between COMSYS IT
Partners, Inc. and Larry L. Enterline (incorporated by reference to Exhibit
10.3 to the Form 8-K filed with the SEC on December 4, 2006).10.25+
    
    Form of Indemnification Agreement between COMSYS IT Partners, Inc. and each
of the Companys directors and executive officers (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed with the SEC on May 4,
2005).14.1
    
    Code of Business Conducts and Ethics for COMSYS IT Partners, Inc.
(incorporated by reference to Exhibit 14.1 to the Form 8-K filed with the
SEC on May 4, 2005).21.1**
    
    List of Subsidiaries of the Company.23.1**
    
    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.24.1**
    
    Power of Attorney (included on signature page).31.1**
    
    Certification of Chief Executive Officer of the Company pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as
amended.31.2**
    
    Certification of Chief Financial Officer of the Company pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as
amended.32**
    
    Certification of Chief Executive Officer and Chief Financial Officer of the
Company pursuant to Rule 13a-14(b) promulgated under the Securities
Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title
18 of the United States Code.
 
 *
    
    This exhibit is substantially identical to Common Stock Purchase Warrants issued by the
Company on the same date to each of Bank of America, N.A. and Bank One, N.A., and to Common Stock
Purchase Warrants, reflecting a transfer of a portion of such Common Stock Purchase Warrants,
issued by the Company (i) as of the same date to each of Inland Partners, L.P., Links Partners
L.P., MatlinPatterson Global Opportunities Partners L.P. and R2 Investments, LDC and (ii) on August
6, 2003 to Mellon HBV SPV LLC.