Analysts International (ANLY) 10-Q 2011 Q2 Quarterly report

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 2, 2011

or

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

For the transition period from             to            

Commission File Number: 1-33981

ANALYSTS INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-0905408
(State of Incorporation)	(IRS Employer Identification No.)
7700 France Ave South
Minneapolis, MN	55435
(Address of Principal Executive Offices)	(Zip Code)

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

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

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

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

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

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

As of August 1, 2011, 5,012,385 shares of the registrant’s common stock were outstanding.

ANALYSTS INTERNATIONAL CORPORATION

INDEX

Part I.	FINANCIAL INFORMATION.	3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of July 2, 2011 and January 1, 2011	3
	Consolidated Statements of Operations for the Three and Six Months Ended July 2, 2011 and July 3, 2010	4
	Consolidated Statements of Cash Flows for the Six Months Ended July 2, 2011 and July 3, 2010	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4T.	Controls and Procedures	18
Part II.	OTHER INFORMATION	18
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Remove and Reserved	18
Item 5.	Other Information	19
Item 6.	Exhibits	19
Signatures		20
Exhibit Index		21

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Analysts International Corporation

Consolidated Balance Sheets

(Unaudited)

	July 2,			January 1,
(In thousands, except share and per share amounts)	2011			2011
ASSETS
Current assets:
Cash and cash equivalents	$	4,127		$	4,328
Accounts receivable, less allowance for doubtful accounts of $689 and $713, respectively	18,102			17,425
Prepaid expenses and other current assets	546			643
Total current assets	22,775			22,396
Property and equipment, net of accumulated depreciation of $8,173 and $8,290, respectively	755			784
Other assets	450			432
Total assets	$	23,980		$	23,612
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,272		$	4,261
Line of credit	—			—
Salaries and benefits	2,140			2,189
Deferred revenue	431			359
Deferred compensation	212			181
Restructuring accrual	830			339
Other current liabilities	651			694
Total current liabilities	8,536			8,023
Non-current liabilities:
Deferred compensation	372			901
Restructuring accrual	40			167
Other long-term liabilities	—			52
Total non-current liabilities	412			1,120
Shareholders’ equity:
Common stock, par value $0.10 a share; authorized 24,000,000 shares; issued and outstanding 5,012,385 and 4,985,874, respectively	501			498
Additional capital	25,920			25,599
Accumulated deficit	(11,389		)	(11,628		)
Total shareholders’ equity	15,032			14,469
Total liabilities and shareholders’ equity	$	23,980		$	23,612

See notes to consolidated financial statements.

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Analysts International Corporation

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
(In thousands, except per share amounts)	2011		2010			2011		2010
Revenues	$	26,835	$	26,846		$	53,147	$	55,298
Cost of revenues	20,637		21,208			40,690		43,669
Gross profit	6,198		5,638			12,457		11,629
Selling, administrative and other operating costs	5,406		6,464			11,456		13,437
Restructuring costs and other severance related costs	746		8			746		182
Total operating expenses	6,152		6,472			12,202		13,619
Operating income (loss)	46		(834		)	255		(1,990		)
Non-operating income	—		5			—		10
Interest expense	—		(5		)	—		(8		)
Income (loss) before income taxes	46		(834		)	255		(1,988		)
Income tax expense	9		8			16		19
Net income (loss)	$	37	$	(842	)	$	239	$	(2,007	)
Per common share (basic):
Net income (loss)	$	0.01	$	(0.17	)	$	0.05	$	(0.40	)
Per common share (diluted):
Net income (loss)	$	0.01	$	(0.17	)	$	0.05	$	(0.40	)
Weighted-average shares outstanding:
Basic	5,012		4,986			5,004		4,986
Diluted	5,027		4,986			5,016		4,986

See notes to consolidated financial statements.

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Analysts International Corporation

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	July 2,			July 3,
(In thousands)	2011			2010
Cash flows from operating activities:
Net income (loss)	$	239		$	(2,007	)
Adjustments to net income (loss):
Loss on asset sales and disposals	—			107
Depreciation	346			467
Share based compensation	324			31
Changes in:
Accounts receivable	(677		)	3,288
Prepaid expenses and other assets	34			319
Accounts payable	—			(1,623		)
Salaries and benefits	(49		)	418
Deferred revenue	72			28
Deferred compensation	(498		)	(189		)
Restructuring accrual	364			(1,189		)
Other accrued liabilities	(35		)	(45		)
Net cash provided by (used in) operating activities	120			(395		)
Cash flows from investing activities:
Expended for property and equipment additions	(306		)	(78		)
Proceeds from asset sale	—			184
Proceeds from cash surrender of insurance policy	531			—
Net cash provided by investing activities	225			106
Cash flows from financing activities:
Net change in line of credit	—			—
Payment of insurance policy loan	(486		)	—
Payment of capital lease obligation	(60		)	(90		)
Net cash used in financing activities	(546		)	(90		)
Net decrease in cash and cash equivalents	(201		)	(379		)
Cash and cash equivalents at beginning of period	4,328			3,818
Cash and cash equivalents at end of period	$	4,127		$	3,439

See notes to consolidated financial statements.

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Analysts International Corporation

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Nature of Business

Analysts International Corporation (“AIC,” “Company,” “we,” “us,” or “our”) is an information technology (“IT”) services company. We employ approximately 950 IT professionals, management and administrative staff and are focused on serving the IT needs of mid-market to Fortune 500 companies and government agencies across North America. AIC was incorporated in Minnesota in 1966 and our corporate headquarters is located in Minneapolis, Minnesota. For a more complete description of our Company, please refer to our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

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

2.  Summary of Significant Accounting Policies

Basis of Consolidation

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

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Changes to Consolidated Statements of Operations

As presented on our second quarter 2011 Form 10-Q, we have changed the format of our Consolidated Statements of Operations for reporting revenues and cost of revenues. The change in format combines Professional services provided directly and Professional services provided through subsuppliers for both revenues and cost of revenues. Professional services provided through subsuppliers is immaterial to our current and historical operations for the periods presented and we believe this change in format will better assist in the understanding of our business.

3.   Sale of Assets

Sale of Customer Contracts

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

4.  Financing Agreement

Revolving Credit Facility

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

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

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

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

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

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

As of July 2, 2011, we were in compliance with all the requirements and had no borrowings under the Amended Credit Facility. Total availability of the Amended Credit Facility, which fluctuates based on our level of eligible accounts receivable, was $6.4 million as of July 2, 2011.

5.   Restructuring Costs and Other Severance Related Costs

For the six month period ended July 2, 2011, we recorded severance and office closure charges of $0.7 million. Of these charges, $0.3 million related to severance and severance-related charges related to changes in our senior executive officers and $0.4 million related to the relocation of our corporate headquarters.

For the six month period ended July 3, 2010, we recorded severance and office closure charges of $0.2 million. Of these charges, $0.2 million related to severance and severance-related charges.

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

(In thousands)	Severance			Office Closure			Total
Balance as of January 1, 2011	$	22		$	484		$	506
Additional restructuring charges	329			417			746
Cash expenditures	(91		)	(291		)	(382		)
Balance as of July 2, 2011	$	260		$	610		$	870

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6.  Shareholders’ Equity

									Total
	Outstanding	Common		Additional		Accumulated			Shareholders’
(In thousands, except share amounts)	Shares	Stock		Capital		Deficit			Equity
Balances as of January 1, 2011	4,985,874	$	498	$	25,599	$	(11,628	)	$	14,469
Common stock issued	26,511	3		112		—			115
Share based compensation expense	—	—		209		—			209
Net income	—	—		—		239			239
Balance as of July 2, 2011	5,012,385	$	501	$	25,920	$	(11,389	)	$	15,032

7. Share Based Compensation

Total share based compensation expense for the three and six month periods ended July 2, 2011 was approximately $0.1 million and $0.3 million, respectively. This includes compensation expense related to both stock options and stock awards. The tax benefit recorded for these same periods was approximately $19,000 and $32,000. The tax benefit is offset against our valuation allowance for our deferred tax asset.

Total share based compensation expense for the three- and six-month periods ended July 3, 2010 was approximately $0.1 million and $31,000, respectively. This includes compensation expense related to both stock options and stock awards. The tax benefit recorded for these same periods was approximately $4,000 and $6,000. The tax benefit is offset against our valuation allowance for our deferred tax asset.

No stock options were exercised during the periods ended July 2, 2011 and July 3, 2010. As of July 2, 2011, there was approximately $0.4 million of unrecognized share based compensation expense related to unvested stock options and awards that are expected to vest over a weighted-average period of 1.4 years. Options to purchase approximately 0.4 million and 0.5 million shares of common stock were outstanding at July 2, 2011 and July 3, 2010, respectively.

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

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

8.  Net Income (Loss) Per Share

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

There were 362,067 and 315,739 anti-dilutive weighted average shares excluded from the calculation of weighted average number of common equivalent shares outstanding for the three and six month periods ended July 2, 2011, respectively. For the three and six month periods ended July 3, 2010, all potential common shares outstanding were considered anti-dilutive and excluded from the calculation of weighted average number of common and common equivalent shares outstanding because we reported a net loss. The computation of basic and diluted income (loss) per share for the three and six month periods ended July 2, 2011 and July 3, 2010, is as follows:

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	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
(In thousands except per share amounts)	2011		2010			2011		2010
Net income (loss)	$	37	$	(842	)	$	239	$	(2,007	)
Weighted-average number of common shares outstanding	5,012		4,986			5,004		4,986
Dilutive effect of potential common shares outstanding	15		—			12		—
Weighted-average number of common and common equivalent shares outstanding	5,027		4,986			5,016		4,986
Net income (loss) per share:
Basic	$	0.01	$	(0.17	)	$	0.05	$	(0.40	)
Diluted	$	0.01	$	(0.17	)	$	0.05	$	(0.40	)

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

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

A.          Our Business

Analysts International Corporation (“AIC,” “Company,” “we,” “us,” or “our”) is an information technology (“IT”) services company. We employ approximately 950 IT professionals, management and administrative staff and are focused on serving the IT needs of mid-market to Fortune 500 companies and government agencies across North America. AIC was incorporated in Minnesota in 1966 and our corporate headquarters is located in Minneapolis, Minnesota.

B.          Fiscal 2011 Strategic Plan

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

·Building on our strong brand;

·Leveraging our longstanding client relationships; and

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

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

·Build a platform for growth

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

During the balance of fiscal 2011 and as part of our growth strategy, we will consider the possibility of strategic acquisitions if and when the right opportunity arises. Our acquisition strategy is to identify IT staffing firms located in our core markets that complement our existing IT staffing business. We evaluate potential future acquisitions based on the size of the firm, capabilities of their sales force and recruiter personnel and cultural fit as well as other relevant criteria.

·Improve gross margin rates

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

In the second quarter of fiscal 2011, we generated a gross margin rate of 23.1%, a 210 basis point improvement over the prior year second quarter and a 70 basis point decline over our fiscal 2011 first quarter gross margin rate. For the first six months of fiscal 2011, we generated a gross margin rate of 23.4%, a 240 basis point improvement over the prior year comparable period. The year over year improvement in gross margin rates is primarily due to lower benefit costs and changing our mix of business.

·Generate profitability in fiscal 2011

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

For the second quarter of fiscal 2011, we generated net income of $37,000 and on a year-to-date basis we have generated net income of $0.2 million. In the second quarter of fiscal 2011, we incurred charges of approximately $0.7 million relating to the

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relocation of our corporate headquarters and for severance charges related to changes in our senior executive officers. We anticipate the relocation of our corporate headquarters will reduce our annualized operating expenses by approximately $0.3 million. We believe we will be profitable for fiscal 2011.

C.          Business Developments

Leadership

On February 22, 2011, our Board of Directors appointed Brittany B. McKinney as our President and Chief Executive Officer and on May 24, 2011, she was elected as a Director of our Company. Ms. McKinney served as our Interim President and Chief Executive Officer since September 2010. Previously, Ms. McKinney was our Vice President of Corporate Development and the Senior Vice President of the Central Region.

On May 4, 2011, Randy W. Strobel resigned from his employment as the Company’s Senior Vice President, Chief Financial Officer effective as of the close of business on August 31, 2011.

Revolving Credit Facility

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

Sale of Customer Contracts

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

D.          Overview of Second Quarter Fiscal 2011 Operations

Our revenues were relatively flat as compared to the second quarter of fiscal 2010. When compared to the prior year quarter, the number of billable hours decreased 0.3% and was offset by a 2.0% increase in our average billing rates.

The gross margin rate increased 210 basis points primarily due to lower benefit costs and more favorable average billing rates.

SG&A expenses declined $1.1 million, or 16.4%, in the second quarter of fiscal 2011 over the prior year quarter as a result of personnel, benefit and non-personnel cost reductions.

We used cash from operations of $0.5 million during the second quarter of fiscal 2011. As of July 2, 2011, we had a cash balance of $4.1 million and no borrowings under our revolving line of credit.

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

The following table illustrates the relationship between revenue and expense categories along with a count of management and administrative personnel and IT professionals for the three months ended July 2, 2011 and July 3, 2010.

	Three Months Ended July 2, 2011				Three Months Ended July 3, 2010
			% of					% of		Increase (Decrease)
(Dollars in thousands)	Amount		Revenue		Amount			Revenue		Amount			%
Revenues	$	26,835	100.0	%	$	26,846		100.0	%	$	(11	)	(0.0	)%
Cost of revenues	20,637		76.9		21,208			79.0		(571		)	(2.7	)
Gross profit	6,198		23.1		5,638			21.0		560			9.9
Selling, administrative and other operating costs	5,406		20.1		6,464			24.1		(1,058		)	(16.4	)
Restructuring costs and other severance related costs	746		2.8		8			0.0		738			NM
Total operating expenses	6,152		22.9		6,472			24.1		(320		)	(4.9	)
Operating income (loss)	46		0.2		(834		)	(3.1	)	880			NM
Non-operating income	—		0.0		5			0.0		(5		)	(100.0	)
Interest expense	—		0.0		(5		)	(0.0	)	(5		)	(100.0	)
Income (loss) before income taxes	46		0.2		(834		)	(3.1	)	880			NM
Income tax expense	9		0.0		8			0.0		1			12.5
Net income (loss)	$	37	0.1	%	$	(842	)	(3.1	)%	$	879		NM
Personnel:
Management and Administrative	116				113					3			2.7	%
IT Professionals	835				809					26			3.2	%

NM = not meaningful

Revenues

Revenues remained relatively flat from the comparable period a year ago. The number of billable hours for the second quarter of fiscal 2011 declined approximately 0.3% from the prior year period; however, the slight decline in billable hours was offset by a 2.0% increase in average billing rates over the prior year period.

Cost of Revenues

Cost of revenues represents our payroll and benefit costs associated with our billable consultants and our cost of using sub-contractors. This category of expense as a percentage of revenues decreased 210 basis points to 76.9%, in the second quarter of fiscal 2011 compared to the prior year period primarily due to a decrease in our benefit costs and an increase in average billing rates.

Selling, Administrative and Other Operating Costs

SG&A costs include management and administrative salaries, salaries and commissions paid to account executives and recruiters, benefits, location costs, and other administrative costs.  This category of costs decreased approximately $1.1 million from the comparable period in 2010 and represented 20.1% of revenue for the second quarter of fiscal 2011 compared to 24.1% in fiscal 2010. In the second quarter of fiscal 2011, SG&A expenses declined as a result of lower employee benefit costs ($0.2 million), personnel and related cost reductions ($0.1 million) and the implementation of general expense reductions ($0.4 million). In addition, during the second quarter of fiscal l 2011, we required the participants in our post-retirement medical benefit plan to move to a standardized plan or accept a buyout, which resulted in a decline in our future benefit obligation of $0.4 million.

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Restructuring Costs and Other Severance Related Costs

For the three month period ended July 2, 2011, we recorded severance and office closure charges of $0.7 million. Of these charges, $0.3 million related to severance and severance-related charges related to changes in our senior executive officers and $0.4 million related to the relocation of our corporate headquarters.

Non-operating Income

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

Interest Expense

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

Income Taxes

Our income tax expense reflects the utilization of net operating loss carryforwards to offset taxable income. We currently have approximately $25.7 million of operating loss carryforwards available to offset federal and state taxes. For both the second quarters of fiscal 2011 and fiscal 2010, we recorded accruals for amounts due for certain state income taxes and changes in our reserves for tax obligations. We recorded no additional income tax expense or benefit associated with our net operating income or loss because any tax expense or benefit that would otherwise have been recorded has been negated by adjusting the valuation allowance against our deferred tax asset.  If, however, we successfully return to profitability to a point where future realization of deferred tax assets, which are currently reserved, becomes “more likely than not,” we may be required to reverse the existing valuation allowance to realize the benefit of these assets.

Personnel

Our IT professional staff levels, which include sub-contractors, finished the second quarter of fiscal 2011 at 835, a 3.2% increase against the comparable period last year. The increase in IT professional staff levels is primarily due to recent increases in our staffing business. The increase in management and administrative personnel is due to our focus on increasing the number of account executives and recruiters that are necessary to increase revenues.

Certain Information Concerning Off-Balance Sheet Arrangements

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

E.          Overview of Year to Date Fiscal 2011 Operations

Our revenues decreased $2.2 million, or 3.9%, from the first half of fiscal 2010 primarily due to a reduction in volume at lower margin accounts (3.0%) and from our planned exit from a non-core line of business (0.9%).

The gross margin rate increased 240 basis points primarily due to lower benefit costs.

SG&A expenses declined $2.0 million, or 14.7%, in first half of fiscal 2011 compared to the first half of fiscal 2010 as a result of personnel, benefit and non-personnel cost reductions.

We generated cash from operations of $0.1 million during the first half of fiscal 2011. As of July 2, 2011, we had a cash balance of $4.1 million and no borrowings under our revolving line of credit.

13

RESULTS OF OPERATIONS, SIX MONTHS ENDED JULY 2, 2011 VS. JULY 3, 2010

The following table illustrates the relationship between revenue and expense categories along with a count of management and administrative personnel and IT professionals as of July 2, 2011 and July 3, 2010.

	Six Months Ended				Six Months Ended
	July 2, 2011				July 3, 2010
			% of					% of		Increase (Decrease)
(Dollars in thousands)	Amount		Revenue		Amount			Revenue		Amount			%
Revenues	$	53,147	100.0	%	$	55,298		100.0	%	$	(2,151	)	(3.9	)%
Cost of revenues	40,690		76.6		43,669			79.0		(2,979		)	(6.8	)
Gross profit	12,457		23.4		11,629			21.0		828			7.1
Selling, administrative and other operating costs	11,456		21.6		13,437			24.3		(1,981		)	(14.7	)
Restructuring costs and other severance related costs	746		1.4		182			0.4		564			309.9
Total operating expenses	12,202		23.0		13,619			24.6		(1,417		)	(10.4	)
Operating income (loss)	255		0.5		(1,990		)	(3.6	)	2,245			NM
Non-operating income	—		0.0		10			0.0		(10		)	(100.0	)
Interest expense	—		0.0		(8		)	(0.0	)	(8		)	(100.0	)
Income (loss) before income taxes	255		0.5		(1,988		)	(3.6	)	2,243			NM
Income tax expense	16		0.0		19			0.0		(3		)	(15.8	)
Net income (loss)	$	239	0.4	%	$	(2,007	)	(3.6	)%	$	2,246		NM
Personnel:
Management and Administrative	116				113					3			2.7	%
IT Professionals	835				809					26			3.2	%

NM = not meaningful

Revenues

Revenues declined $2.2 million, or 3.9%, from the comparable period a year ago due to a reduction in volume at lower margin accounts (3.0%) and from our planned exit from a non-core line of business (0.9%). After adjusting for the planned exit from a non-core line of business, the number of billable hours for the first six months of fiscal 2011 declined 3.8% from the prior year period as a result of fewer consultants serving lower margin business. The decline in billable hours was partially offset by a 1.8% increase in average billing rates over the prior year period.

Cost of Revenues

Cost of revenues represents our payroll and benefit costs associated with our billable consultants and our cost of using sub-contractors. This category of expense as a percentage of revenues decreased 240 basis points to 76.6%, in the first six months of fiscal 2011 compared to the prior year period primarily due to a decrease in our benefit costs.

Selling, Administrative and Other Operating Costs

SG&A costs include management and administrative salaries, salaries and commissions paid to account executives and recruiters, benefits, location costs, and other administrative costs.  This category of costs decreased approximately $2.0 million from the comparable period in 2010 and represented 21.6% of revenue for the first six months of fiscal 2011 as compared to 24.3% in fiscal 2010. In the first six months of fiscal 2011, SG&A expenses declined as a result of lower employee benefit costs ($0.5 million), personnel and related cost reductions ($0.4 million) and the implementation of general expense reductions ($0.7 million). In addition, during the first half of fiscal l 2011, we required the participants in our post-retirement medical benefit plan to move to a standardized plan or accept a buyout, which resulted in a decline in our future benefit obligation of $0.4 million.

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Restructuring Costs and Other Severance Related Costs

For the six month period ended July 2, 2011, we recorded severance and office closure charges of $0.7 million. Of these charges, $0.3 million related to severance and severance-related charges related to changes in our senior executive officers and $0.4 million related to the relocation of our corporate headquarters.

During the first six months of fiscal 2010, we recorded restructuring and severance related expenses of $0.2 million.

Non-operating Income

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

Interest Expense

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

Income Taxes

Our income tax expense reflects the utilization of net operating loss carryforwards to offset taxable income. We currently have approximately $25.7 million of operating loss carryforwards available to offset federal and state taxes. For the six months ended July 2, 2011 and July 3, 2010, we recorded accruals for amounts due for certain state income taxes and changes in our reserves for tax obligations. We recorded no additional income tax expense or benefit associated with our net operating income or loss because any tax expense or benefit that would otherwise have been recorded has been negated by adjusting the valuation allowance against our deferred tax asset.  If, however, we successfully return to profitability to a point where future realization of deferred tax assets, which are currently reserved, becomes “more likely than not,” we may be required to reverse the existing valuation allowance to realize the benefit of these assets.

Personnel

Our IT professional staff levels, which include sub-contractors, finished the first six months of fiscal 2011 at 835, a 3.2% increase against the comparable period last year. The increase in IT professional staff levels is primarily due to recent increases in our staffing business. The increase in management and administrative personnel is due to our focus on increasing the number of account executives and recruiters that are necessary to increase revenues.

Certain Information Concerning Off-Balance Sheet Arrangements

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

15

Liquidity and Capital Resources

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

								Percentage
	July 2,		January 1,		Increase			Increase
(In thousands)	2011		2011		(Decrease)			(Decrease)
Cash and cash equivalents	$	4,127	$	4,328	$	(201	)	(4.6	)%
Accounts receivable	18,102		17,425		677			3.9
Prepaid expenses and other current assets	546		643		(97		)	(15.1	)
Total current assets	$	22,775	$	22,396	$	379		1.7	%
Accounts payable	$	4,272	$	4,261	$	11		0.3	%
Line of credit	—		—		—			NM
Salaries and benefits	2,140		2,189		(49		)	(2.2	)
Deferred revenue	431		359		72			20.1
Deferred compensation	212		181		31			17.1
Restructuring accrual	830		339		491			144.8
Other current liabilities	651		694		(43		)	(6.2	)
Total current liabilities	$	8,536	$	8,023	$	513		6.4	%
Working capital	$	14,239	$	14,373	$	(134	)	(0.9	)%
Current ratio	2.67		2.79		(0.12		)	(4.3	)%
Total shareholders’ equity	$	15,032	$	14,469	$	563		3.9	%

NM = not meaningful

Change in Working Capital

Working capital was $14.2 million at July 2, 2011, down approximately $0.1 million from January 1, 2011. The ratio of current assets to current liabilities decreased 0.12 to 2.67 at July 2, 2011 compared to 2.79 at January 1, 2011.

Our total current assets increased approximately $0.4 million at July 2, 2011 compared to the end of fiscal 2010 primarily as a result of increased accounts receivable balances. Our accounts receivable balance increased 3.9% as a result of a 5.9% increase in our revenues during the second quarter of fiscal 2011 over the fourth quarter of fiscal 2010 which was partially offset by a decline in our days sales outstanding from 63 days at the end of fiscal 2010 to 60 days at July 2, 2011.

Our total current liabilities increased by approximately $0.5 million at July 2, 2011 compared to the end of fiscal 2010. The relocation of our corporate headquarters and changes in our senior executive officers during the second quarter of fiscal 2011 increased our restructuring accrual balance by approximately $0.5 million.

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

Sources and Uses of Cash/Credit Facility

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

On February 23, 2011, we entered into the Amended Credit Facility, which amended the terms of the Credit Facility and extended the maturity date to September 30, 2014. Under the Amended Credit Facility, Wells Fargo will continue to advance up to $15.0 million to us for

16

working capital purposes and to facilitate the issuance of letters of credit. The total amount available for borrowing under the Amended Credit Facility will fluctuate based on our level of eligible accounts receivable.

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

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

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

As of July 2, 2011, we were in compliance with all the requirements and had no borrowing under the Amended Credit Facility. Total availability under the Amended Credit Facility, which fluctuates based on our level of eligible accounts receivable, was $6.4 million as of July 2, 2011.

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

During each of the second quarters of fiscal 2011 and fiscal 2010, we made capital expenditures of approximately $0.3 million and $19,000, respectively. For the six month periods ended July 2, 2011 and July 3, 2010, we made capital expenditures of approximately $0.3 million and $0.1 million, respectively.

During the first half of fiscal 2011, we paid off a loan on a Company owned life insurance policy of approximately $0.5 million and subsequently surrendered the Company owned life insurance policy and received proceeds of approximately $0.5 million.

Also during fiscal 2011, we required the participants in our post-retirement medical benefit plan to move to a standardized plan or accept a buyout, which resulted in a decline in our future benefit obligation by approximately $0.4 million. The reduction of our post-retirement medical benefits is recorded in our non-current Deferred compensation balance as reported in our Consolidated Balance Sheets.

Forward-Looking Statements

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

These forward-looking statements are based on current information, which we have assessed, but which by its nature is dynamic and subject to rapid and even abrupt changes.  As such, results may differ materially in response to a change in this information.  Among the factors that could cause our estimates and assumptions as to future performance, and our actual results to differ materially, are: (i) our inability, in whole or in part, to implement or execute our strategic plans, (ii) our inability to successfully recruit and hire qualified technical personnel, (iii) our inability to successfully compete on a local and national basis with other companies in our industry or with new competitors who face limited barriers to entry in the markets we serve, (iv) our inability to maintain key client relationships or to attract new clients, (v) our inability to attract, retain or motivate key personnel, (vi) our inability to continue to reduce or leverage our operating costs, (vii) the possibility that we may incur liability for the errors or omissions of our consultants providing IT services for clients or the risk that we may be subject to claims for indemnification under contracts with our clients, (viii) our inability to comply with the requirements in our

17

line of credit or to obtain a replacement line of credit on commercially reasonable terms, (ix) the risk that we will not be able to realize the benefits of its investments or exploit other opportunities of the business in a timely manner or on favorable terms, (x) potentially incorrect assumptions by management with respect to the financial effect of prior cost reduction initiatives and current strategic decisions, and (xi) as well as other economic, business, competitive and/or regulatory factors affecting our business generally, including those set forth in this Quarterly Report on Form 10-Q (especially in the Management’s Discussion and Analysis and Risk Factors section hereof) and our Current Reports on Form 8-K.  All forward-looking statements included in this Form 10-Q are based on information available to us as of the date hereof and largely reflect estimates and assumptions made by our management, which may be difficult to predict and beyond our control.  We undertake no obligation (and expressly disclaim any such obligation) to update forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to update reasons why actual results would differ from those anticipated in any such forward-looking statements, other than as required by law.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4T. Controls and Procedures.

(a)       Evaluation of Disclosure Controls and Procedures

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

(b)       Changes in Internal Controls

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

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

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

Item 1A.Risk Factors

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

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

None.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Removed and Reserved.

None.

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Item 5.Other Information.

None.

Item 6.Exhibits.

Exhibit No.	Description
^ 3.1	Articles of Incorporation, as amended (Exhibit 3-a to Annual Report on Form 10-K for fiscal year 1988, Commission File No. 0-4090, incorporated by reference).
^ 3.2	Restated Bylaws (Exhibit 3-b to Annual Report on Form 10-K for fiscal year 2000, Commission File No. 0-4090, incorporated by reference).
^ 3.3	Amendment to Articles of Incorporation to increase authorized shares to 40 million (Exhibit A to Definitive Proxy Statement dated September 5, 1996, Commission File No. 0-4090, incorporated by reference).
^ 3.4	Amendment to Articles of Incorporation to increase authorized shares to 60 million (Exhibit 3-d to Annual Report on Form 10-K for fiscal year 1998, Commission File No. 0-4090, incorporated by reference).
^ 3.5	Amendment to Articles of Incorporation to increase authorized shares to 120 million (Exhibit A to Definitive Proxy Statement dated September 8, 1998, Commission File No. 0-4090, incorporated by reference).
^3.6	Amendment to Articles of Incorporation to reduce authorized shares to 24 million.
^3.7	Amendment No. 1 to Restated Bylaws of Analysts International Corporation (Exhibit 3.1 to the Registrant’s Form 8-K filed May 25, 2010, Commission File No. 0-4090, incorporated by reference).
^3.8	Articles of Incorporation, as amended (Exhibit 3.1 to the Registrant’s Form 8-K filed December 17, 2010, Commission File No. 1-33981, incorporated by reference).
^3.9	Amendment to Bylaws of Analysts International Corporation (Exhibit 3.2 to the Registrant’s Form 8-K filed December 17, 2010, Commission File No. 1-33981, incorporated by reference).
^ 4.1	Specimen Common Stock Certificate (Exhibit 4(a) to Annual Report on Form 10-K for fiscal year 1989, Commission File No. 0-4090, incorporated by reference).
^ 4.2	Amended and Restated Rights Agreement dated as of February 27, 2008 between the Company and Wells Fargo Bank N.A. and Form of Right Certificate (Exhibit 4.1 to the Registrant’s Form 8-A12B dated February 27, 2008, Commission File No. 0-4090, incorporated by reference).
^ 4.3	Amendment No. 1 to Amended and Restated Rights Agreement dated as of May 25, 2010 by and between Analysts International Corporation and Wells Fargo Bank, N.A. (Exhibit 4.1 to the Registrant’s Form 8-K filed May 25, 2010, Commission File No. 0-4090, incorporated by reference).
^10.65	First Amendment to Credit & Security Agreement with Wells Fargo Bank, National Association, dated February 23, 2011 (Exhibit 10.1 to Current Report on Form 8-K, filed February 24, 2010, Commission File No. 1-33981, incorporated by reference).
^10.66	Employment Agreement together with Exhibits A and B, between the Company and Brittany B. McKinney, dated as of March 1, 2011 (Exhibit 10.1 to the Registrant’s Form 8-K filed February 24, 2010, Commission File No. 1-33981, incorporated by reference).
^10.67	Change in Control Severance Pay Plan, adopted February 22, 2011, dated March 1, 2011 (Exhibit 10.1 to Current Report on Form 8-K, filed February 28, 2011, Commission File No. 1-33981, incorporated by reference).
^10.68	Separation Agreement and Release of Claims dated May 4, 2011, between the Company and Randy W. Strobel (Exhibit 10.1 to the Registrant’s Form 8-K filed May 5, 2011, Commission File No. 1-33987, incorporated by reference)
^10.69	Separation Agreement and Release of Claims dated as of May 24, 2011, between Analysts International Corporation and Christopher T. Cain (Exhibit 10.1 to the Registrant’s Form 8-K filed May 27, 2011, Commission File No. 1-33987, incorporated by reference)
+ 31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
+ 31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
++ 32	Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
++ 101.1	The following materials from Analysts International Corporation’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2011 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Cash Flows, and (iv) Notes to Consolidated Financial Statements.
^	Denotes an exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference.
+	Filed herewith.
++	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

		ANALYSTS INTERNATIONAL CORPORATION
		(Registrant)
Date: August 4, 2011	By:	/s/ Brittany B. McKinney
		Brittany B. McKinney
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 4, 2011	By:	/s/ Randy W. Strobel
		Randy W. Strobel
		Senior Vice President, Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
^ 3.1	Articles of Incorporation, as amended (Exhibit 3-a to Annual Report on Form 10-K for fiscal year 1988, Commission File No. 0-4090, incorporated by reference).
^ 3.2	Restated Bylaws (Exhibit 3-b to Annual Report on Form 10-K for fiscal year 2000, Commission File No. 0-4090, incorporated by reference).
^ 3.3	Amendment to Articles of Incorporation to increase authorized shares to 40 million (Exhibit A to Definitive Proxy Statement dated September 5, 1996, Commission File No. 0-4090, incorporated by reference).
^ 3.4	Amendment to Articles of Incorporation to increase authorized shares to 60 million (Exhibit 3-d to Annual Report on Form 10-K for fiscal year 1998, Commission File No. 0-4090, incorporated by reference).
^ 3.5	Amendment to Articles of Incorporation to increase authorized shares to 120 million (Exhibit A to Definitive Proxy Statement dated September 8, 1998, Commission File No. 0-4090, incorporated by reference).
^3.6	Amendment to Articles of Incorporation to reduce authorized shares to 24 million.
^3.7	Amendment No. 1 to Restated Bylaws of Analysts International Corporation (Exhibit 3.1 to the Registrant’s Form 8-K filed May 25, 2010, Commission File No. 0-4090, incorporated by reference).
^3.8	Articles of Incorporation, as amended (Exhibit 3.1 to the Registrant’s Form 8-K filed December 17, 2010, Commission File No. 1-33981, incorporated by reference).
^3.9	Amendment to Bylaws of Analysts International Corporation (Exhibit 3.2 to the Registrant’s Form 8-K filed December 17, 2010, Commission File No. 1-33981, incorporated by reference).
^ 4.1	Specimen Common Stock Certificate (Exhibit 4(a) to Annual Report on Form 10-K for fiscal year 1989, Commission File No. 0-4090, incorporated by reference).
^ 4.2	Amended and Restated Rights Agreement dated as of February 27, 2008 between the Company and Wells Fargo Bank N.A. and Form of Right Certificate (Exhibit 4.1 to the Registrant’s Form 8-A12B dated February 27, 2008, Commission File No. 0-4090, incorporated by reference).
^ 4.3	Amendment No. 1 to Amended and Restated Rights Agreement dated as of May 25, 2010 by and between Analysts International Corporation and Wells Fargo Bank, N.A. (Exhibit 4.1 to the Registrant’s Form 8-K filed May 25, 2010, Commission File No. 0-4090, incorporated by reference).
^10.65	First Amendment to Credit & Security Agreement with Wells Fargo Bank, National Association, dated February 23, 2011 (Exhibit 10.1 to Current Report on Form 8-K, filed February 24, 2010, Commission File No. 1-33981, incorporated by reference).
^10.66	Employment Agreement together with Exhibits A and B, between the Company and Brittany B. McKinney, dated as of March 1, 2011 (Exhibit 10.1 to the Registrant’s Form 8-K filed February 24, 2010, Commission File No. 1-33981, incorporated by reference).
^10.67	Change in Control Severance Pay Plan, adopted February 22, 2011, dated March 1, 2011 (Exhibit 10.1 to Current Report on Form 8-K, filed February 28, 2011, Commission File No. 1-33981, incorporated by reference).
^10.68	Separation Agreement and Release of Claims dated May 4, 2011, between the Company and Randy W. Strobel (Exhibit 10.1 to the Registrant’s Form 8-K filed May 5, 2011, Commission File No. 1-33987, incorporated by reference)
^10.69	Separation Agreement and Release of Claims dated as of May 24, 2011, between Analysts International Corporation and Christopher T. Cain (Exhibit 10.1 to the Registrant’s Form 8-K filed May 27, 2011, Commission File No. 1-33987, incorporated by reference)
+ 31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
+ 31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
++ 32	Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
++ 101.1	The following materials from Analysts International Corporation’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2011 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Cash Flows, and (iv) Notes to Consolidated Financial Statements.
^	Denotes an exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference.
+	Filed herewith.
++	Furnished herewith.

21