**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-K**

 

**AnnualReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934for the fiscal year ended January 3, 2004**

 

**Commission file number  0-4090**

 

**ANALYSTSINTERNATIONAL CORPORATION**

(Exact name of Registrant as specified in itscharter)

 
| **Minnesota**                                                      |   | **41-0905408**           |
|--------------------------------------------------------------------|--------|--------------------------|
| (State of Incorporation)                                           |   | (IRS Identification No.) |
|                                                               |   |                     |
| **3601 West 76th Street,  Minneapolis, Minnesota**            |   | **55435**                |
| (Address of Principal Executive Office)                            |   | (Zip Code)               |
|                                                               |   |                     |
| Registrant’s telephone number, including  area code:          |   | **952/835-5900**         |
|                                                               |   |                     |
| Securities registered pursuant to  Section 12 (b) of the Act: |   | **NONE**                 |
|                                                               |   |                     |
| Securities registered pursuant to  Section 12 (g) of the Act: |
| **Common Stock, par value $.10 per share**                         |
| **Common Share Purchase Rights**                                   |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes ý   Noo

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Act).

Yes ý   Noo

 

The aggregate market value of the voting stock (Common Stock) held bynon-affiliates of the registrant as of the last business day of theregistrant’s most recently completed second fiscal quarter (June 28, 2003)was $59,288,302 based upon the closing price as reported by Nasdaq.

 

As of February 27, 2004 there were 24,211,957 shares of theregistrant’s common stock outstanding.

 

**DocumentsIncorporated by Reference**

 

Incorporated by reference are (i) portions of the annual report toshareholders for the year ended January 3, 2004 (Parts I, II and IV) and(ii) proxy statement dated April 16, 2004 (Part III).

 

 

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# **PARTI**

 

**Item 1.  Business.**

 

*Introduction*

 

Analysts International Corporation (“Analysts International,” “Analysts”or the “Company”) is a highly diversified information technology consulting andservices firm.  In the United States,Analysts International serves client companies through a network of offices.  We also have a minor presence in Canada andin the United Kingdom where we have a wholly-owned subsidiary, AiC AnalystsLtd.

 

*Services*

 

Our mission is to provide clients with IT vision and value,particularly in the areas of IT staffing, business solutions and offshoreresources, and infrastructure services. Approximately 90 percent of Analysts’ revenue is from services providedto its existing customer base, which consists primarily of Fortune 500®companies. This high percentage of repeat business demonstrates our emphasis oncustomer satisfaction and development of long-term relationships with customerswho have an ongoing need for the services we provide.

 

We offer our clients a full range of information technology consultingand software services offerings sometimes referred to in the industry as“solutions” or “projects.” Traditionally, our services were primarily in the areas of customsoftware application development and supplemental IT staffing under client orCompany project management.  We alsoprovided our clients with single source staffing (or vendor managementservices) of programmers and other software professionals through our ManagedServices Group (MSG), applications development, and legacy system maintenanceservices.  We continue to provide theseservices, and our engagements have involved nearly every type and manufactureof computer and all of the major operating systems.  Furthering our efforts to deliver high quality solutions atcompetitive prices, we have an offshore development capability that spans allof our service offerings.  During 2003we established four new subsidiaries which will allow us to more easilycustomize our delivery of services to our clients.

 

In April 2000, we acquired 80.1% of the outstanding common stockof SequoiaNET.com, Inc. (“Sequoia”). With our acquisition of Sequoia, we expanded our existing serviceofferings to include web site development and other eBusiness services, networkinfrastructure, additional application development capabilities and other ITservices.  We acquired the remainder ofSequoia effective December 27, 2000. The Sequoia acquisition also brought us key relationships withMicrosoft, Cisco, Dell, HP and other key vendors in the network infrastructurearena. Since April 2000, we have combined SequoiaNET.com’s offerings withselect Analysts’ offerings into Analysts International’s Business SolutionsGroup. Services offered by this group include internet development,applications development and integration, enterprise networking, productprocurement, field engineering, hosting and call center.  The Business Solutions Group offers itsservices in other geographical markets through Analysts International’s areasales and customer service offices.

 

During 2002, we established a wholly-owned subsidiary, Medical ConceptsStaffing, Inc. through which we have begun to offer staffing services to themedical industry.  This subsidiary didnot generate significant revenue during 2003.

 

In 2003, Analysts International formed a relationship with Mastek, Ltd.of Mumbai, India (d.b.a. Majesco Software Inc. in the United States).  This new capability, available in all ourservice offerings, combines the cost advantages of offshore services with thereduced risk that comes with an established local company.  Analysts International spent significanttime and energy in 2003 upgrading and integrating our project deliverymethodologies with those of Mastek. Onshore/offshore joint projects delivered by Analysts International andMastek are managed according to ISO 9001, SEI CMM Level 5 and SEI P-CMM Level 3certification and other industry standards.

 

*Major clients*

 

*Bank of America Corporation*

 

During the last year our business with Bank of America Corporation, oneof the world’s leading financial services companies, has grownappreciably.  Headquartered inCharlotte, North Carolina, Bank of America has an extensive branch network withmore than 4,200 locations in 21 states and the District of Columbia.  Because our geographic presence closelyaligns with their national network, we have become one of the customer’s fiveprime staffing vendors, managing an extensive subsupplier network to meet theirbusiness objectives.  Additionally, bydrawing from our base of minority and/or women-owned suppliers, we have beenable to exceed Bank of America’s goals in diversity supplier spend.

 

2

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Revenue from services provided to Bank of America was approximately 5%and 2% for the fiscal years ended January 3, 2004 and December 28,2002, respectively.

 

*Chevron/Texaco*

 

During 2003 and 2002 our revenue from services provided toChevron/Texaco represented 4% and 14% of our total revenue in those respectiveyears.  Revenue declined due to themanaged services contract expiration on December 31, 2002.  Therefore, all revenue from 2003 was derivedfrom staffing services provided directly by our personnel to Chevron/Texaco.

 

*International Business Machines Corporation*

 

Analysts International also provides services through all of its areaoffices to various divisions of International Business Machines Corporation(IBM), another major client of the Company. Analysts is a national service provider under IBM’s National Procurementinitiative.  The Company’s contract withIBM was revised and renewed on October 31, 2003 and expires onOctober 31, 2004.  Under the newagreement, IBM has the right to extend the contract under the current terms,conditions and prices for up to three years in varying increments.

 

  IBM requires the Company andother participating vendors to accept lower hourly rates in return for theopportunity to do a greater volume of business with IBM.  There can be no assurance, however, thatvolume will offset lower rates.  IBMbusiness under the national contract accounted for approximately 13% of revenuefor each of the fiscal years ended January 3, 2004 and December 28,2002.  Loss of this business could havea material adverse effect on the Company.

 

*Lexmark International, Inc.*

 

For over ten years, Analysts International has provided staffingservices for Lexmark International, Inc., a Lexington, Kentucky based companythat is a leading developer, manufacturer and supplier of laser and inkjetprinters, multifunction products, associated supplies and services.  In fiscal 2003, Lexmark chose AnalystsInternational as one of three prime vendors to continue to provide staffingservices.  The parties signed a serviceagreement for staffing on June 27, 2003. The initial term of the agreement continues through June 27,2005.  Lexmark has the option to extendthe term for up to three consecutive one-year periods.  During the last year Lexmark engagedAnalysts International’s Managed Services Group to implement the Peopleclick,Inc. Vendor Management System (VMS), a web-based application for managingtemporary labor resources.  Under this agreement,Analysts International also provides consolidated billing for all of Lexmark’scontract suppliers, and training and process management for the VMS tool andsystem.  Because the agreement was notfully implemented until the end of fiscal 2003, revenue from this portion ofthe business will be realized beginning in fiscal 2004.

 

Revenue from services provided to Lexmark was approximately 5% and 2%of revenue for the fiscal years ended January 3, 2004 andDecember 28, 2002, respectively.

 

*Revenue by Industry*

 

Analysts International provides its services to a wide range ofindustries.  Its revenue for the fiscalyear ended January 3, 2004, was derived from services rendered tocustomers in the following industry groups:

 
|                      |   | **Approximate  Percent of  FY 2003 Revenue** |   |
|---------------------------|--------|----------------------------------------------|--------|
|                      |   |                                         |   |
| Services                  |   | 24.3                                         | %      |
| Electronics/Manufacturing |   | 18.5                                         | %      |
| Oil and Chemical          |   | 13.2                                         | %      |
| Financial                 |   | 12.4                                         | %      |
| Transportation            |   | 12.3                                         | %      |
| Government                |   | 8.0                                          | %      |
| Merchandising             |   | 3.8                                          | %      |
| Health Care               |   | 2.8                                          | %      |
| Telecommunications        |   | 2.5                                          | %      |
| Other                     |   | 2.2                                          | %      |

 

Analysts International provided services to more than 1,000 clientsduring the year ended January 3, 2004. Consistent with its practices in prior years, the Company rendered theseservices almost exclusively on a time and materials hourly rate basis underwhich invoices for services rendered were submitted no less frequently thanmonthly with payment generally due in 30 days.

 

3

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# ***Organization and Marketing***

# ** **

Analysts International provides its services through area sales andcustomer service offices, assigned on a geographical basis to one of six areasand a national business group.  Eacharea sales office is staffed with technical personnel and is managed by an areasales manager, who has primary responsibility for the profitability of thearea.  The area manager has broadauthority to conduct the operation of the office, subject to adherence tocorporate policies.  In general, theCompany establishes customer service offices to support specific projects forone or more customers in areas not served by an area sales office and managethem through an area sales office within the same geographical region.  A customer service office may become an areasales office when the volume of business and the prospects for additional businessjustify the additional expenses associated with area office status.

 

During the year ended January 3, 2004, the Company maintainedoffices in the following locations: Atlanta, GA; Austin, TX; Boca Raton, FL; Boulder, CO; Charlotte, NC;Chicago, IL; Cleveland, OH; Dallas, TX; Denver, CO; Des Moines, IA; Detroit,MI; Grand Rapids, MI; Houston, TX; Indianapolis, IN; Iselin, NJ; Kansas City,MO; Lansing, MI; Las Vegas, NV; Lexington, KY; Minneapolis, MN; New York, NY;Omaha, NE; Phoenix, AZ; Raleigh/Durham, NC; Richmond, VA; Rochester, VA;Rochester, MN; Rochester, NY; San Francisco, CA; Seattle, WA; Silicon Valley,CA; Tampa, FL; Toledo, OH; Tulsa, OK; Vancouver, WA; Toronto, Canada; andLondon, UK.

 

Analysts International utilizes its own direct sales force to sell itsservices.  At January 3, 2004, theCompany employed more than 75 sales staff. The ability to recruit and hire experienced technical personnel withbackgrounds and experience suitable for customer requirements is an importantfactor in the Company’s business.  AtJanuary 3, 2004, the Company’s recruiting staff totaled more than sixty.

 

*Competition*

 

Analysts International competes with the computer consulting and/or ITsupplemental staffing divisions of several large companies (including Adecco,Accenture, Kelly Services, Modis and Procure Staff) on a national basis.  These organizations and their applicabledivisions are substantially larger than the Company in terms of sales volumeand personnel and have substantially greater financial resources.

 

The Company also competes with other national software servicescompanies such as Computer Task Group, Ciber, Keane and Computer Horizons.

 

The Company’s area and customer services offices compete in localmarket areas with numerous regional and local software services firms.  Most of these competitors are approximatelythe same size as or smaller than the Company’s local office, although incertain market areas they are larger than the Company’s local office.

 

Analysts believes its total staff and sales volume are larger than manyof the national, regional and local software services companies, but in somemarket areas certain of these competitors may be larger.

 

Principal competitive factors in the software services business includetechnical expertise, responsiveness to customers’ needs, reputation andcredibility, service delivery models and tools and hourly rates.  Analysts International believes it iscompetitive in these respects.

 

*Personnel*

 

As of January 3, 2004, Analysts International had approximately3,000 personnel. Of these, approximately 2,575 are systems analysts, computerprogrammers and other business/technology personnel whose services are billableto clients.  Several years ofprogramming experience are generally a prerequisite to employment with theCompany.

 

Maintaining the present volume of the Company’s business and growingthat business depends to some extent on the Company’s ability to attract andretain qualified technical personnel. Although the Company has been able to identify, attract and retainqualified technical personnel and believes its personnel relations aresatisfactory, there can be no assurance that Analysts International will beable to continue to attract and retain such personnel.  Its inability to do so could have a materialadverse effect on the Company’s business.

 

4

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*Available Information*

 

We maintain our company website at www.analysts.com and make available,free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Qand current reports on Form 8-K, and amendments to those reports in theInvestor Relations section of the website as soon as reasonably practicableafter we electronically file such material with, or furnish to, the SEC.

 

*Other Matters*

 

Analysts International was incorporated under Minnesota law onMarch 29, 1966.  Its principaloffice is identified in response to Item 2 below.  Raw materials, seasonality, compliance with environmentalprotection laws, and patents, trademarks, licenses, franchises or otherconcessions are not material to an understanding of the Company’sbusiness.  No portion of the Company’sbusiness is subject to re-negotiation of profits at the election of the government.  Backlog is not material because nearly allof the Company’s contracts for services, including contracts with thegovernment (which are not material), are terminable by either the customer orthe Company on notice of 30 days or less.

 

**Cautionary Statementunder the Safe Harbor Provisions of the Private Securities Litigation ReformAct of 1995.**

 

The statements included in this document that are not strictlyhistorical fact, including without limitation, the Company’s statementsrelating to the continued need of current and prospective customers for theCompany’s services and the Company’s ability to win that business, the effectsof competition and the Company’s ability to respond to competitive conditions,the availability of qualified professional staff, the Company’s ability tocontrol billing rates and labor costs, the Company’s ability to maintain grossmargin levels and control operating cost increases and the Company’s ability toachieve and maintain profitability are forward looking statements made underthe safe harbor provision of the Private Securities Litigation Reform Act.  Words such as “believes,” “intends,”“possible,” “expects,” “estimates,” “anticipates,” or “plans” and similarexpressions are intended to identify forward-looking statements.  Such statements are based on the Company’scurrent expectations as of the date of this document but involve risks,uncertainties and other factors which could cause actual results to differmaterially from those contemplated by such forward looking statements.  Investors are cautioned to consider theseforward looking statements in light of important factors which may result invariations from results contemplated by such forward looking statements.

 

5

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**Item 2.  Properties.**

 

Analysts International’s principal executive offices and theMinneapolis area office are located at 3601 West 76th Street,Minneapolis, Minnesota 55435, in a 134,000 square foot office building in whichit leases approximately 93,000 square feet. All other locations are held under leases with varying expiration datesranging from 30 days to 6 years.  SeeNote H of Notes to Consolidated Financial Statements incorporated by referencein this Form 10-K.

 

**Item 3.  Legal Proceedings.**

 

There are no pending legal proceedings to which the Company is a partyor to which any of its property is subject, other than routine litigationincidental to the business.

 

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

 

No matters were submitted to a vote of the Company’s shareholdersduring the fourth quarter of fiscal 2003.

 

6

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**EXECUTIVEOFFICERS OF THE COMPANY**

 
| **Name**             |   | **Age** |   | **Title**                                                                                                                                                                                                                                                                 |
|----------------------|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |    |   |                                                                                                                                                                                                                                                                      |
| Michael J. LaVelle   |   | 64      |   | President and Chieft Executive Officer since 2002; President and  Chief Operating Officer from  1999 to  2002; Sr.Vice President of Operations from 1998 to 1999; Southern Region Vice  President from 1996 to 1998; Dallas Branch   Manager from 1989 to 1996. |
|                 |   |    |   |                                                                                                                                                                                                                                                                      |
| John D. Bamberger    |   | 48      |   | Executive Vice President and Chief Operating Officer since 2002;  Senior Vice President of Sales and Operations from 2000 to 2002; Chief  Executive Officer of SequoiaNET.com from 1989 to 2000.                                                                          |
|                 |   |    |   |                                                                                                                                                                                                                                                                      |
| David J. Steichen    |   | 39      |   | Interim Chief Financial Officer and Treasurer since 2003; Corporate  Controller and Treasurer from 1999 to 2003.                                                                                                                                                          |
|                 |   |    |   |                                                                                                                                                                                                                                                                      |
| Colleen M. Davenport |   | 40      |   | Secretary and General Counsel since 2000; Assistant Secretary and  Associate General Counsel from 1989 to 2000.                                                                                                                                                           |

 

Terms of office expire as of the Annual Meeting in 2004.

 

7

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**PARTII**

 

The following portions of the Company’s annual report to shareholdersfor the fiscal year ended January 3, 2004 are incorporated by reference inresponse to Items 5, 6, 7, 7A and 8 as follows:

 
| **Items in Form 10-K** |   | **Caption/Section in Annual Report**                      |   | **Page** |
|------------------------|--------|----------------------------------------------------------------|--------|----------|
| 5                      |   | Stock  Data                                                    |   | 38       |
|                   |   |                                                           |   |     |
| 6                      |   | Five Year Financial Summary                                    |   | 39       |
|                   |   |                                                           |   |     |
| 7                      |   | Management’s Discussion and Analysis                      |   | 9-21     |
|                   |   |                                                           |   |     |
| 7A                     |   | Market Conditions, Business Outlook and  Risks to Our Business |   | 21-22    |
|                   |   |                                                           |   |     |
| 8                      |   | Consolidated Financial Statements                              |   | 23-26    |

 

**Item 9.****        Changesin and Disagreements with Independent Auditors on Accounting and FinancialDisclosure.**

 

There have been no disagreements with or changes in the Company’sindependent auditors within the past two fiscal years.

 

**Item 9a.****      Controlsand Procedures**

 

(a)   Evaluation of Disclosure Controls and Procedures.

 

As of the end of the period covered by this report, the Companyconducted an evaluation under the supervision and with the participation of theCompany’s management, including the Company’s Chief Executive Officer, MichaelJ. Lavelle, and Interim Chief Financial Officer, David J. Steichen, regardingthe effectiveness of the design and operation of the Company’s disclosurecontrols and procedures pursuant to Rules 13a-15(b) of the Securities ExchangeAct of 1934 (the “Exchange Act”).  Basedupon that evaluation, the Chief Executive Officer and Interim Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures areeffective to ensure that information that is required to be disclosed by theCompany in reports that it files under the Exchange Act is recorded, processed,summarized and reported within the time period specified in the rules of theSecurities Exchange Commission.

 

(b)   Changes in Internal Controls

 

There were no changes in the Company’s internal control over financialreporting that occurred during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting.

 

8

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**PARTIII**

 

The information regarding executive officers required by Item 10 is setforth under the caption “Executive Officers of the Company” in Part I of thisForm 10-K.  Other information called forin Part III, including information regarding directors (Item 10), executivecompensation (Item 11), security ownership of certain beneficial owners andmanagement (Item 12), and principal accounting fees and services paid to ourauditor (Item 14), is set forth in the Company’s definitive proxy statement forthe annual meeting of shareholders to be held May 26, 2004, filed pursuant toRegulation 14A, as follows:

 
| **Items in Form 10-K** |   | **Caption in Definitive Proxy Statement**        |   | **Page** |
|------------------------|--------|--------------------------------------------------|--------|----------|
| 10-a                   |   | Election of Directors                            |   | 2-4      |
|                   |   |                                             |   |     |
| 10-b                   |   | Audit Committee Financial Expert                 |   | 5-6      |
|                   |   |                                             |   |     |
| 10-c                   |   | Code of Ethics                                   |   | 6-7, 9   |
|                   |   |                                             |   |     |
| 11                     |   | Executive Compensation                           |   | 16-20    |
|                   |   |                                             |   |     |
| 12                     |   | Election of Directors and Principal Shareholders |   | 2-4, 23  |
|                   |   |                                             |   |     |
| 14                     |   | Independent Auditors Fees                        |   | 8        |

 

**Item 13.****      CertainRelationships and Related Transactions.**

 

During fiscal 2003:

 

a.             No director, executive officer, holder ofmore than five percent of the Company’s common stock or members of theimmediate family of any of the foregoing persons had any direct or indirectmaterial interest in any transaction or series of transactions to which theCompany was a party and in which the amount exceeded $60,000, nor is any suchtransaction proposed;

 

b.             The Company was not a party with anyentity in which any of the Company’s directors was an executive officer, heldmore than a 10% equity interest, was a member of or of counsel to (in the caseof a law firm) or was a partner or executive officer (in the case of aninvestment banking firm), in any transaction involving payments of more thanfive percent of the gross revenues of either the Company or such entity, nor isany such transaction proposed; and

 

c.             No director, executive officer or (i) anymember of the immediate family of any of the foregoing, (ii) any corporation orbeneficial holder of ten percent or more of any class of equity securities, or(iii) any trust or other estate in which such person served as a trustee or ina similar capacity was indebted to the Company in excess of $60,000.

 

d.             Subparagraphd. of this Item is not applicable.

 

9

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**PARTIV**

 

**Item 15.****      Exhibits,Consolidated Financial Statement Schedules and Reports on Form 8-K.**

 

a.1           *ConsolidatedFinancial Statements*

 

The consolidated financial statements of Analysts InternationalCorporation and its subsidiaries and the related independent auditors’ reportare included in the following pages of its annual report to shareholders forthe fiscal year ended January 3, 2004.

 
| **Description**                                                                                                                                     |   | **Page in  Annual Report** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|
|                                                                                                                                                |   |                       |
| Consolidated balance sheets at January 3, 2004 and  December 28, 2002.                                                                    |   | 23                         |
|                                                                                                                                                |   |                       |
| Consolidated statements of operations for  the years ended  January 3, 2004, December 28, 2002 and December 31, 2001.                |   | 24                         |
|                                                                                                                                                |   |                       |
| Consolidated statements of cash flows for  the years ended  January 3, 2004, December 28, 2002 and December 31, 2001.                |   | 25                         |
|                                                                                                                                                |   |                       |
| Consolidated statements of shareholders’  equity for the years ended  January 3, 2004, December 28, 2002 and December 31, 2001. |   | 26                         |
|                                                                                                                                                |   |                       |
| Notes to Consolidated Financial Statements                                                                                                          |   | 27-35                      |
|                                                                                                                                                |   |                       |
| Independent Auditors’ Report                                                                                                                   |   | 36                         |
|                                                                                                                                                |   |                       |
| Report of Management                                                                                                                                |   | 37                         |

 

a.2           *ConsolidatedFinancial Statement Schedules*

 
| **Description**                                      |   | **Page  Herein** |
|------------------------------------------------------|--------|------------------|
|                                                 |   |             |
| Independent Auditors’ Report on Schedule        |   | 13               |
|                                                 |   |             |
| Schedule II.  Valuation and Qualifying Accounts |   | 14               |

 

Other consolidated financial statement schedules are omitted becausethey are not required or the information is presented in the consolidatedfinancial statements or notes thereto.

 

10

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a.3           *Exhibits.*

 
| **Exhibit No.** |   |                                                                                                                                                                                                                                                                                                                                                |
|-----------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 3-a             |   | Articles of Incorporation, as amended (Exhibit 3-a to Annual Report  on Form 10-K for fiscal year 1988, Commission File No. 0-4090, incorporated  by reference).                                                                                                                                                                                    |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 3-b             |   | Restated Bylaws.  (Exhibit 3-b  to Annual Report on Form 10-K for fiscal year 2000, Commission File no.  0-4090, incorporated by reference).                                                                                                                                                                                                   |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 3-c             |   | Amendment to Articles of Incorporation to increase authorized shares  to 40 million (Exhibit A to Definitive Proxy Statement dated  September 5, 1996, Commission File No. 0-4090, incorporated by reference).                                                                                                                                 |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 3-d             |   | Amendment to Articles of Incorporation to increase authorized shares  to 60 million (Exhibit 3-d to Annual Report on Form 10-K for fiscal year  1998, Commission File No. 0-0409, incorporated by reference).                                                                                                                                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 3-e             |   | Amendment to Articles of Incorporation to increase authorized shares  to 120 million (Exhibit A to Definitive Proxy Statement dated  September 8, 1998, Commission File No. 0-0409, incorporated by  reference).                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 4-a             |   | Specimen Common Stock Certificate (Exhibit 4(a) to Annual Report on  Form 10-K for fiscal year 1989, Commission File No. 0-4090, incorporated by  reference).                                                                                                                                                                                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 4-b             |   | Rights Agreement dated as of June 16, 1989 between Analysts  International Corporation and Norwest Bank Minnesota, N.A., as Rights Agent  which includes the form of Rights Certificate and Summary of Rights (Exhibit  A to the Registrant’s Form 8-A dated June 16, 1989, Commission File No.  0-4090, incorporated by reference). |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 4-c             |   | First Amendment to Rights Agreement dated as of May 8,1990 between  Analysts International Corporation and Norwest Bank Minnesota, N.A. as Rights  Agent (Exhibit 4(c) to Annual Report on Form 10-K for fiscal year 1991,  Commission File No. 0-4090, incorporated by reference).                                                                 |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 4-d             |   | Second Amendment to Rights Agreement dated as of April 30, 1996  between Analysts International Corporation and Norwest Bank Minnesota as  Rights Agent (Exhibit 4(d) to Annual Report on Form 10-K for fiscal year  1996, Commission File No. 0-4090, incorporated by reference).                                                             |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 4-e             |   | Restated Rights Agreement dated as of June 16, 1989 and restated  as of April 16, 1998 between Analysts International Corporation and  Norwest Bank Minnesota, N.A. as Rights Agent (Exhibit 4-e to Annual Report on  Form 10-K for fiscal year 1998, Commission File No. 0-4090, incorporated by  reference).                            |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-a            |   | Senior Executive Retirement Plan (Exhibit 10-e to Annual Report on  Form 10-K for fiscal year 1984, Commission File No. 0-4090, incorporated by  reference).                                                                                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-b            |   | Deferred Compensation Plan (Exhibit 10-g to Annual Report on Form  10-K for fiscal year 1984, Commission File No. 0-4090, incorporated by  reference).                                                                                                                                                                                              |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-d            |   | 1994 Stock Option Plan (Exhibit A to Definitive Proxy Statement dated  September 6, 1994 for registrant’s 1994 Annual Meeting of Shareholders,  Commission File No. 0-4090, incorporated by reference).                                                                                                                                   |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-e            |   | 1996 Stock Option Plan for Non-employee Directors (Exhibit B to  Definitive Proxy Statement dated September 5, 1996, Commission File No.  0-4090, incorporated by reference).                                                                                                                                                                  |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-f            |   | 1999 Stock Option Plan (Exhibit A to Definitive Proxy Statement dated  September 13, 1999, Commission File No. 0409, incorporated by  reference).                                                                                                                                                                                              |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-g            |   | Stock Purchase Agreement dated April 12, 2000 (Exhibit 2.1 to  Form 8-K, filed May 5, 2000, Commission File No. 0-4090, incorporated by  reference).                                                                                                                                                                                           |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-h            |   | Trust Agreement dated October 20, 1992, with Norwest Bank  Minneapolis, N.A. (Exhibit 3-b to Annual Report on Form 10-K for fiscal year  2000, Commission File no. 0-4090, incorporated by reference).                                                                                                                                         |
|            |   |                                                                                                                                                                                                                                                                                                                                                |
| 10-i            |   | Form of letter agreement providing employment continuation following  a change of control. (Exhibit 3-b to Annual Report on Form 10-K for fiscal  year 2000, Commission File no. 0-4090, incorporated by reference).                                                                                                                                |

 

11

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| 10-j   |   | Form of letter agreement providing incentive bonus protection  following a change of control. (Exhibit 3-b to Annual Report on Form 10-K for  fiscal year 2000, Commission File no. 0-4090, incorporated by reference).                                          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                             |
| 10-k   |   | Credit Agreement dated April 11, 2002 between Analysts  International Corporation and General Electric Capital Corporation. (Exhibit  2.1 to current report in Form 8-K dated April 26, 2002, Commission File  No. 0-4090, incorporated by reference). |
|   |   |                                                                                                                                                                                                                                                             |
| 10-l   |   | First Amendment to Credit Agreement dated as of July 24, 2002.  (Exhibit 10-l to Annual Report on Form 10-K for fiscal year 2002, Commission  File no. 0-4090, incorporated by reference).                                                                  |
|   |   |                                                                                                                                                                                                                                                             |
| 10-m   |   | Waiver and Second Amendment to Credit Agreement dated as of  April 7, 2003.                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                             |
| 10-n   |   | Third Amendment to Credit Agreement dated as of April 28, 2003.                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                             |
| 10-o   |   | Consent and Fourth Amendment to Credit Agreement dated as of  December 31, 2003.                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                             |
| 11     |   | Calculations of Earnings Per Share.                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                             |
| 13     |   | 2003 Annual Report to Shareholders                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                             |
| 21     |   | Subsidiaries of Registrant.                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                             |
| 23     |   | Independent Auditors’ Consent.                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                             |
| 24     |   | Powers of Attorney.                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                             |
| 31.1   |   | Certification of CEO under section 302 of the Sarbanes-Oxley Act  of 2002.                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                             |
| 31.2   |   | Certification of Interim CFO under section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                             |
| 32     |   | Certification of CEO and Interim CFO pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                       |

 

b.             *Reports onForm 8-K.*

 

A.       Form 8-K filed October 1, 2003 providingfull text of press release issued September 30, 2003 revising earningsguidance for the quarter ending September 30, 2003.

 

B.       Form 8-K filed October 1, 2003 announcingthe appointment of David J. Steichen as the Company’s Interim Chief FinancialOfficer.

 

C.       Form 8-K filed October 22, 2003 announcingthe financial results of the Company for the quarter ended September 27,2003.

 

12

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**Independent Auditors’ Report on Schedule**

 

 

Shareholders and Board of Directors

Analysts International Corporation

Minneapolis, Minnesota

 

 

We have audited the consolidated financial statements of AnalystsInternational Corporation and its subsidiaries as of January 3, 2004,  December 28, 2002 and December 31,2001, and have issued our report thereon dated March 5, 2004 which reportexpresses an unqualified opinion and includes an explanatory paragraph relatingto the change in the method of accounting for goodwill and certain intangiblesin 2002; such consolidated financial statements and report are included in your2003 annual report to shareholders, and are incorporated herein byreference.  Our audits also included theconsolidated financial statement schedule of Analysts InternationalCorporation and subsidiaries, listed in Item 15a.2.  This consolidated financial statement schedule is theresponsibility of Analysts International Corporation’s management.  Our responsibility is to express an opinionbased on our audits.  In our opinion,this consolidated financial statement schedule, when considered in relation tothe basic consolidated financial statements taken as a whole, presents fairlyin all material respects the information set forth therein.

 

 
| /s/ Deloitte & Touche LLP |   |
|-------------------------------|--------|
|                          |
| Minneapolis, Minnesota        |
| March 5, 2004            |

 

13

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**Schedule II**

 

**AnalystsInternational Corporation**

**Valuationand Qualifying Accounts**

 
|                                       |   | **Additions**                        |      |
|--------------------------------------------|--------|--------------------------------------|-----------|
| **Description**                            |   | **Balance at  beginning of  period** |      | **Charged to  costs and  expenses** |   | **Write-offs,  net of  recoveries** |   | **Balance at  end of  period** |   |
| Allowance for doubtful accounts:           |   |                                 |      |   |   |   |   |   |   |
|                                       |   |                                 |      |   |   |   |   |   |   |
| Twelve months ended January 3, 2004   |   | $                                    | 1,283,000 |   | $ | 1,200,000 |   | $ | 975,000 |   | $ | 1,508,000 |   |
|                                       |   |                                 |      |   |   |   |   |   |   |
| Twelve months ended December 28, 2002 |   | 1,170,000                            |      | 1,842,000 |   | 1,729,000 |   | 1,283,000 |   |
|                                       |   |                                 |      |   |   |   |   |   |   |
| Twelve months ended December 31, 2001 |   | 2,110,000                            |      | 1,430,000 |   | 2,370,000 |   | 1,170,000 |   |
|                                            |        |                                      |           |  |  |  |  |  |  |  |  |  |  |

 

14

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15 (d) of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
| Date: March 18, 2004 | ANALYSTS INTERNATIONAL CORPORATION |
|---------------------------|------------------------------------|
|                      |                               |
|                      | By:                                | /s/ Michael J. LaVelle |   |
|                      |                               | Michael J. LaVelle, President and Chief  Executive Officer |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 

 
| **Signature**          |   | **Title**                                           |   | **Date**            |
|------------------------|--------|-----------------------------------------------------|--------|---------------------|
|                   |   |                                                |   |                |
| /s/ Michael J. LaVelle |   | President and Chief Executive Officer               |   | March 18, 2004 |
| Michael J. LaVelle     |   | (Principal Executive Officer), Director             |   |                |
|                   |   |                                                |   |                |
| /s/ David J. Steichen  |   | Interim Chief Financial Officer and Treasurer  |   |                |
| David J. Steichen      |   | (Principal Finance and Accounting Officer)          |   |                |
|                   |   |                                                |   |                |
|                   |   | Executive Vice President and Chief Operating        |   |                |
| John D. Bamberger*     |   | Officer, Director                                   |   |                |
|                   |   |                                                |   |                |
|                   |   | Chairman                                            |   |                |
| Frederick W. Lang*     |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| Willis K. Drake*       |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| Edward M. Mahoney*     |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| Margaret A. Loftus*    |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| K.K. Burhardt          |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| M.B. Esstman           |   |                                                |   |                |
|                   |   |                                                |   |                |
|                   |   | Director                                            |   |                |
| R.L. Prince            |   |                                                |   |                |

----

*                 Michael J. LaVelle, by signing hisname hereto, hereby signs this Form 10-K on behalf of the persons indicatedpursuant to powers of attorney filed herewith.

 
|   | /s/ Michael J. LaVelle                                    |   |
|--------|-----------------------------------------------------------|--------|
|   | Michael J. LaVelle, President and Chief Executive Officer |
|   |                                                      |

 

15

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**EXHIBIT INDEX**

 
| **Exhibit Number** |   | **Description**                                                                                                                                            |
|--------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                       |
| 10-m               |   | Waiver and Second Amendment to the Credit Agreement dated as of  April 7, 2003.                                                                       |
|               |   |                                                                                                                                                       |
| 10-n               |   | Third Amendment to the Credit Agreement dated as of April 28,  2003.                                                                                  |
|               |   |                                                                                                                                                       |
| 10-o               |   | Consent and Fourth Amendment to the Credit Agreement dated as of  December 31, 2003.                                                                  |
|               |   |                                                                                                                                                       |
| 11                 |   | Calculations of Earnings Per Share.                                                                                                                        |
|               |   |                                                                                                                                                       |
| 13                 |   | 2003 Annual Report to Shareholders.                                                                                                                        |
|               |   |                                                                                                                                                       |
| 21                 |   | Subsidiaries of Registrant.                                                                                                                                |
|               |   |                                                                                                                                                       |
| 23                 |   | Independent Auditors’ Consent.                                                                                                                        |
|               |   |                                                                                                                                                       |
| 24                 |   | Powers of Attorney.                                                                                                                                        |
|               |   |                                                                                                                                                       |
| 31.1               |   | Certification of CEO under section 302 of the Sarbanes-Oxley Act  of 2002.                                                                            |
|               |   |                                                                                                                                                       |
| 31.2               |   | Certification of Interim CFO under section 302 of the  Sarbanes-Oxley Act of 2002.                                                                    |
|               |   |                                                                                                                                                       |
| 32                 |   | Certification of CEO and Interim CFO pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley  Act of 2002. |

 

For a list of exhibits incorporated by reference and not filed withthis Form 10-K, see Item 15 a.3 on pages 11 and 12 of thisForm   10-K.

 

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