UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-27792

COMSYS IT PARTNERS, INC.

Delaware (State or other jurisdiction of incorporation or organization)		56-1930691 (I.R.S. Employer Identification Number)

4400 Post Oak Parkway, Suite 1800
Houston, TX 77027
(Address, including zip code, of

principal executive offices)

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock $0.01 Par Value per Share		The NASDAQ Stock Market LLC

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 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 information statements incorporated by reference 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 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. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 28, 2009, (the last business day of the registrant’s most recently completed second fiscal quarter) was $90,888,591. For the purpose of calculating this amount only, all stockholders with more than 10% of the total voting power, all directors and all executive officers have been treated as affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The registrant does not have any non-voting common stock.

The number of shares of the registrant’s common stock outstanding as of February 26, 2010, was 21,293,875.

None.

 

 

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements			1
PART I
Item 1. Business			2
Item 1A. Risk Factors			11
Item 1B. Unresolved Staff Comments			20
Item 2. Properties			20
Item 3. Legal Proceedings			20
Item 4. Reserved			20
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			21
Item 6. Selected Financial Data			22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			36
Item 8. Financial Statements and Supplementary Data			37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			64
Item 9A. Controls and Procedures			64
Item 9B. Other Information			67
PART III
Item 10. Directors, Executive Officers and Corporate Governance			67
Item 11. Executive Compensation			69
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			83
Item 13. Certain Relationships and Related Transactions, and Director Independence			87
Item 14. Principal Accounting Fees and Services			89
PART IV
Item 15. Exhibits and Financial Statement Schedules			89
Signatures			90
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including information incorporated by reference, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of COMSYS IT Partners, Inc. and its subsidiaries. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in, or incorporated into, this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, including:

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the timing and success of the exchange offer and acquisition of us by Manpower Inc.

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the risk that our business will be adversely impacted during the pendency of the exchange offer and proposed merger with Manpower Inc.

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economic declines that affect our business, including our profitability, liquidity or the ability to comply with applicable loan covenants;

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the financial stability of our lenders and their ability to honor their commitments related to our credit agreements;

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regulatory changes that impose additional regulations or licensing requirements in such a manner as to increase our costs of doing business or restrict access to qualified technology workers;

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the risk of increased tax rates;

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adverse changes in credit and capital markets conditions that may affect our ability to obtain financing or refinancing on favorable terms or that may warrant changes to existing credit terms;

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the financial stability of our customers and other business partners and their ability to pay their outstanding obligations or provide committed services;

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changes in levels of unemployment and other economic conditions in the United States, or in particular regions or industries;

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the impact of changes in demand for our services or competitive pressures on our ability to maintain or improve our operating margins, including pricing pressures;

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the risk in an uncertain economic environment of increased incidences of employment disputes, employment litigation and workers’ compensation claims;

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our success in attracting, training, retaining and motivating billable consultants and key officers and employees;

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our ability to shift a larger percentage of our business mix into IT solutions, project management and business process outsourcing and, if successful, our ability to manage those types of business profitably;

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weakness or reductions in corporate information technology spending levels;

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our ability to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions;

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the entry of new competitors into the U.S. staffing services and consulting markets due to the limited barriers to entry or the expansion of existing competitors in that market;

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increases in employment-related costs such as healthcare and unemployment taxes;

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the possibility of our incurring liability for the activities of our billable consultants or for events impacting our billable consultants on our clients’ premises;

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the risk that we may be subject to claims for indemnification under our customer contracts;

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the risk that cost cutting or restructuring activities could cause an adverse impact on certain of our operations; and

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adverse changes to management’s periodic estimates of future cash flows that may affect our assessment of our ability to fully recover our goodwill.

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to various factors, including the factors listed in this section and the “Risk Factors” section contained in this Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

PART I

ITEM 1.		BUSINESS

Unless otherwise indicated or the context otherwise requires, all references in this report to “COMSYS,” the “Company,” “us,” “our” or “we” are to COMSYS IT Partners, Inc., a Delaware corporation formed in July 1995, and its consolidated subsidiaries. Except as otherwise specified, references to “Old COMSYS” are to COMSYS Holding, Inc., its subsidiaries and their respective predecessors prior to its merger with VTP, Inc., a wholly-owned subsidiary of Venturi Partners, Inc., on September 30, 2004, which we refer to as the “Comsys/Venturi merger.” Venturi Partners, Inc. was the surviving entity in the Comsys/Venturi merger and changed its name to “COMSYS IT Partners, Inc.” References to “Venturi” are to Venturi Partners, Inc., its subsidiaries and their respective predecessors prior to the Comsys/Venturi merger, except those subsidiaries relating to Venturi’s commercial staffing business, which were sold simultaneously with the Comsys/Venturi merger on September 30, 2004.

Pending Exchange Offer and Merger with Manpower Inc.

On February 1, 2010, we entered into an agreement and plan of merger (the “Merger Agreement”) with Manpower Inc. (“Manpower”) and a wholly-owned subsidiary of Manpower (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will commence an exchange offer to purchase all of the outstanding shares of COMSYS’ common stock (the “Offer”) and, following the completion of the Offer, merge with and into COMSYS, with COMSYS surviving as a direct or indirect wholly owned subsidiary of Manpower (the “Merger”). The Merger Agreement provides that the Offer will be commenced within five business days following the filing of this Annual Report on Form 10-K.

Pursuant to and subject to the terms and conditions of the Merger Agreement, in both the Offer and the Merger, each share of COMSYS common stock accepted by Merger Sub will be exchanged for either (at the stockholder’s election) $17.65 in cash or $17.65 in fair market value of shares of Manpower common stock, where fair market value is the average trading price of Manpower’s common stock during the ten trading days ending on and including the second trading day prior to the closing of the Offer. At the effective time of the Merger, any remaining outstanding shares of COMSYS common stock not tendered in the Offer, other than shares owned by Manpower or any direct or indirect wholly-owned subsidiary of Manpower or COMSYS, will be acquired for cash and Manpower common stock.

The aggregate amount of cash and Manpower common stock available for election at the closing of the Offer and of the Merger will be determined on a 50/50 basis, such that if the holders of more than 50% of the shares tendered in the Offer, or more than 50% of the shares converted in the Merger, elect more than the cash or Manpower common stock available in either case, they will receive on a pro rata basis the other kind of consideration to the extent the kind of consideration they elect to receive is oversubscribed. For example, if the holders of more than 50% of COMSYS Common Stock who tender in the Offer elect cash then such holders in the aggregate will receive all of the cash available for payment in the Offer (50% of the total consideration payable to all stockholders who tender in the Offer) but also will receive some Manpower common stock on a pro rata basis, since there would have been an oversubscription for cash payment. Manpower has the right, at any time not less than two business days prior to the expiration of the Offer, to elect to convert the transaction into an all-cash deal and to pay $17.65 in cash for all shares of COMSYS common stock tendered in the Offer and acquired in the Merger.

The Offer is subject to satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the tender to Merger Sub and no withdrawal of at least a majority of the shares of COMSYS common stock (the “Minimum Condition”). The Minimum Condition may not be waived by Merger Sub without the prior written consent of COMSYS. Subject to certain conditions and limitations, COMSYS has granted Manpower and Merger Sub an option to purchase from COMSYS, following the completion of the Offer, a number of additional shares of COMSYS common stock that, when added to the shares already owned by Manpower and Merger Sub, will constitute one share more than 90% of the shares of COMSYS common stock entitled to vote on the Merger. If Manpower and Merger Sub acquire more than 90% of the outstanding shares of COMSYS common stock including through exercise of the aforementioned option, it will complete the Merger through the “short form” procedures available under Delaware law.

The Merger Agreement contains certain termination rights for each of Manpower and COMSYS, and if the Merger Agreement is terminated under certain circumstances, COMSYS is required to pay Manpower a termination fee of $15.2 million and/or reimburse Manpower for its out-of-pocket transaction-related expenses up to $2.5 million.

The Merger Agreement includes customary representations, warranties and covenants of COMSYS, Manpower and Merger Sub. In addition to certain other covenants, COMSYS has agreed not to (i) encourage, solicit, initiate or facilitate any takeover proposal from a third party; (ii) enter into any agreement relating to a takeover proposal or any agreement, arrangement or understanding requiring COMSYS to abandon, terminate or fail to consummate the Offer, the Merger, the Merger Agreement or the transactions contemplated by the Merger Agreement; (iii) grant any waiver or release under any standstill agreement relating to COMSYS common stock; or (iv) enter into discussions or negotiations with a third party in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, a takeover proposal, in each case subject to certain exceptions set forth in the Merger Agreement.

In connection with the Merger Agreement, Manpower entered into a tender and voting agreement, dated as of February 1, 2010, with certain of COMSYS stockholders who beneficially own in the aggregate approximately 29.5% of COMSYS common stock on a fully diluted basis, pursuant to which each such stockholder has agreed to tender all of the shares of COMSYS common stock beneficially owned by such stockholder in the Offer and to vote any shares of COMSYS common stock not tendered in the Offer in favor of the Merger.

Company Overview

We were incorporated in Delaware in 1995 and are headquartered in Houston, Texas. We completed the Comsys/Venturi merger on September 30, 2004, and created one of the leading IT staffing and consulting companies in the United States. In connection with the Comsys/Venturi merger, we changed the name of our corporation from “Venturi Partners, Inc.” to “COMSYS IT Partners, Inc.” Concurrent with the Comsys/Venturi merger, we also completed the sale of Venturi’s commercial staffing services division, Venturi Staffing Partners, Inc., to CBS Personnel Services, Inc. (formerly known as Compass CS Inc.).

We are a leading information technology (“IT”) services company and provide a full range of specialized IT staffing and project implementation services, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. We also provide services that complement our core IT staffing services, such as vendor management, process solutions and permanent placement of IT professionals. Our TAPFIN Process Solutions division offers total human capital fulfillment and management solutions within three core service areas: vendor management services, services procurement management and recruitment process outsourcing. These additional services provide us opportunities to build relationships with new clients and enhance our service offerings to our existing clients. We operate through the following wholly-owned subsidiaries:

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COMSYS Services, LLC (“COMSYS Services”), an IT staffing services provider,

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COMSYS Information Technology Services, Inc. (“COMSYS IT”), an IT staffing services provider,

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Pure Solutions, Inc. (“Pure Solutions”), an information technology services company,

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Econometrix, LLC (“Econometrix”), a vendor management systems software provider,

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Plum Rhino Consulting LLC (“Plum Rhino”), a specialty staffing services provider to the financial services industry,

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TAPFIN, LLC (“TAPFIN”), a provider of vendor management services, recruitment process outsourcing services and human resources consulting, and

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ASET International Services, LLC (“ASET”), a globalization, localization and interactive language services provider.

Our comprehensive service offerings allow our clients to focus their resources on their core businesses rather than on recruiting, training and managing IT professionals. In using our staffing services, our clients benefit from:

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our extensive recruiting channels, providing our clients ready access to highly-skilled and specialized IT professionals, often within 48 hours of submitting a request;

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access to a flexible workforce, allowing our clients to manage their labor costs more effectively without compromising their IT goals; and

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our knowledge of the market for IT resources, providing our clients with qualified candidates at competitive prices.

We contract with our customers to provide both short- and long-term IT staffing services primarily at client locations throughout the United States. Our consultants possess a wide range of skills and experience, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration.

We had 4,596 consultants on assignment as of January 3, 2010. We recruit our consultants through our internal proprietary database that contains information about more than one million candidates, and also through the Internet, local and national advertising and trade shows, as well as through sub-contractors. We have a specialized selection, review and reference process for our IT consultant candidates. This process is an integral part of maintaining the delivery of high quality service to our clients.

We serve a broad and diversified customer base with nearly 1,000 corporate and government clients, including some of the largest users of IT services in the United States. These clients operate across a wide range of industry sectors, including financial services, telecommunications, manufacturing, information technology, government, pharmaceutical, biotechnology and transportation. Our customer base includes approximately 29% of the Fortune 500 companies and approximately 60% of the Fortune 50 companies. We have long-standing relationships with many of our clients, including relationships of more than a decade with many of our large customers. In 2009 our 15 largest customers represented approximately 39% of our revenues.

Our operations have a coast-to-coast presence in the United States, with 52 offices across the country as well as offices in Puerto Rico, Canada and the United Kingdom. This coverage allows us to meet the needs of our clients on a national basis and provides us with a competitive advantage over certain regional and local IT staffing providers.

Our consolidated financial information is reviewed by the chief decision makers, the business is managed under one operating strategy, and we operate under one reportable segment. Our principal operations are located in the United States, and the results of operations and long-lived assets in geographic regions outside of the United States are not material. During the years 2009, 2008 and 2007, no individual customer accounted for more than 10% of the Company’s consolidated revenues.

Our Services

Staffing Services

We provide a wide range of IT staffing services to companies in diversified markets, including financial services, telecommunications, manufacturing, information technology, federal, state and local government, pharmaceutical, biotechnology and transportation. We deliver qualified consultants and project managers for contract assignments and full-time employment across a number of technology disciplines. In light of the time- and location-sensitive nature of our core IT staffing services, offshore application development and maintenance centers have not to date proven critical to our operations or our competitive position. In addition, we provide expanded professional project-based consultants, staff augmentation resources and recruiting support to the functional lines of business within the financial services industry. We deliver professional resources with subject-matter expertise for projects of any size, type or length.

Our staffing services are generally provided on a time-and-materials basis, meaning that we bill our clients for the number of hours worked in providing services to the client. Hourly bill rates are typically determined based on the level of skill and experience of the consultants assigned and the supply and demand in the current market for those qualifications. Alternatively, the bill rates for some assignments are based on a mark-up over compensation and other direct and indirect costs. Assignments generally range from 30 days to over a year, with an average duration of eight months. Certain of our contracts are awarded on the basis of competitive proposals, which can be periodically re-bid by the client.

We maintain a variable cost model in which we compensate most of our consultants only for those hours that we bill to our clients. The consultants who perform IT services for our clients consist of our consultant employees as well as independent contractors and subcontractors. With respect to our consultant employees, we are responsible for all employment-related costs, including medical and health care costs, workers’ compensation and federal social security and state unemployment taxes.

Managed Solutions

We complement our core competency in IT staffing and consulting services by offering our clients specialized project services that include project managers, project teams and turn-key deliverable-based solutions in the application development, integration and re-engineering, maintenance and testing practice areas. We have a number of specialty practice areas, including business intelligence, statistical analysis solutions (“SAS”), enterprise resource applications (“ERP”), infrastructure data solutions and application services. We provide these solutions through a defined IT implementation methodology. We deliver these solutions through teams deployed at a client’s site, offsite at development centers located in Kalamazoo, Michigan; Richmond, Virginia; Somerset, New Jersey and San Francisco, California. Most of our project solutions work is also on a time-and-materials basis, but we do provide services from time to time on a fixed-price basis.

Business Process Outsourcing

Vendor Management Services. Vendor management services (“VMS”) allow our clients to automate and manage their procurement of and expenditures for temporary IT, clerical, finance and accounting personnel services. The largest users of contingent workers may rely on dozens of suppliers to meet their labor needs. VMS provides a mechanism for clients to reduce their expenditures for temporary personnel services by automating and consolidating management of the contracting processes, standardizing pay rates for similar positions and reducing the number of suppliers providing these services. VMS gives our clients the ability to leverage their purchasing power for these temporary personnel services by standardizing their requisition, contract and procurement processes. Clients also benefit from working with only one supplier, receiving a consolidated invoice and having a single point of contact while retaining access to a full range of resources offered by a diverse portfolio of suppliers.

We use third-party software products and a proprietary software program to provide our VMS. Our VMS implementation processes have been ISO 9001:2000 certified since December 2003, which means that our processes comply with a comprehensive set of international quality standards. We believe that we are one of the few companies in our industry providing vendor management services to have this ISO certification.

Services Procurement Management. Similar to VMS, services procurement management (“SPM”) allows our clients to automate and manage their procurement of and expenditures around various project and deliverable based services, including IT, clerical, finance, accounting and other professional categories. Generally, this spend includes services provided by vendors under a statement of work or service level agreement contract. SPM provides a mechanism for clients to manage their expenditures for these services by automating and consolidating management of the procurement and contracting processes, tracking deliverables and service level agreements and reducing the number of suppliers providing these services. SPM gives our clients the ability to leverage their purchasing power for these services by standardizing their requisition, contract and procurement processes. Clients also benefit from working with only one supplier, receiving a consolidated invoice and having a single point of contact while retaining access to a full range of resources offered by a diverse portfolio of suppliers.

Recruitment Process Outsourcing. We provide recruitment and human resource outsourcing services that enable companies to build competitive advantage through workforce recruitment and retention. With a focus on human capital solutions, we work as an extension of our clients’ internal HR department, providing a wide range of services that include full recruitment process outsourcing (“RPO”), on-demand and project recruitment services, executive search and human resource consulting.

We operate our VMS, SPM and RPO businesses under the brand name TAPFIN^SM. TAPFIN^SM provides a structured approach consisting of process management and a web-based software tool to help organizations more effectively fulfill and manage their workforce, whether that workforce is full-time employees, temporary contractors, or resources working under a statement of work or service level agreement.

Global Enterprise Content Management. We provide a full life-cycle of content management and translation services. Our content management services provide a technology-based approach to centralizing and standardizing the management of an organization’s data, particularly data that is presented externally. We also provide translation services across more than 100 different languages, including localizing such translation to specific regions or dialects. Our global content management and translation services can be engaged under a discrete statement of work, or can include the entire outsourcing of the business processes around this discipline.

Permanent Placement

We also assist our clients in locating IT professionals for full-time positions within their organizations. We assist in recruitment efforts and screening potential hires. If a customer hires our candidate, we are generally compensated based on a percentage of the candidate’s first-year cash compensation. Billing is contingent on the candidate beginning their employment.

Industry Overview

We believe the demand for IT staffing in the United States is highly correlated to economic conditions. We believe overall employment trends and demand will increase with an improving economy. Conversely, demand may contract during a constricting economy. After contraction in the IT staffing industry from late 2000 to 2002 caused by corporate overspending on IT initiatives during the late 1990s and subsequent poor economic conditions, the industry expanded from the later half of 2003 until 2007, growing by approximately 10% in 2005, 9% in 2006 and 8% in 2007, then contracted by 3.5% in 2008 according to a December 2009 report by Staffing Industry Analysts, Inc. (“SIA”), an independent, industry-recognized research group. Like us, we believe most of our public-company competitors experienced declining revenue in 2008 and 2009. Industry analysts are projecting the industry contracted by 20% for 2009 and will experience growth of 8% in 2010 as the economy shows signs of improvement.

SIA estimates North America IT staffing revenue in 2009 to be approximately $15.8 billion. The IT staffing industry is fragmented and highly competitive. Based on SIA data for 2008, only one provider accounted for more than 10% of total IT staffing industry revenues. The top five IT staffing providers accounted for approximately 25% of total industry revenues. We believe the larger competitors in our industry are better positioned to increase their respective market share due, in part, to the fact that many large companies increasingly source their IT staffing and service needs from a list of preferred service providers that meet specific criteria. The criteria typically include the service provider’s (i) geographic coverage relative to the client’s locations, (ii) size and market share, which is often measured by total revenues, (iii) proven ability to quickly fill client requests with qualified candidates, and (iv) pricing structure, including discounts and rebates. As a result, we believe that further consolidation of our industry will continue.

We believe that key elements of successfully competing in the industry include maintaining a strong base of qualified IT professionals to enable quick responses to client requests (often within 48 hours) and ensuring that the candidates are an appropriate fit with the cultural and technical requirements of each assignment. Other key success factors include accurate evaluation of candidates’ technical skills, strong account management to develop and maintain client relationships and efficient and consistent administrative processes to assist in the delivery of quality services.

Our Competitive Strengths

We believe our competitive strengths differentiate us from our competitors and have allowed us to successfully create a sustainable and scalable national IT staffing services business. Our competitive strengths include:

Proven Track Record with a National Footprint. We believe our experienced, tenured workforce, high-quality consultant base and broad geographic presence give us a competitive advantage as corporate and governmental clients continue to consolidate their use of IT staffing providers. We offer a wide range of IT staffing expertise, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. Our coast-to-coast presence of 52 offices allows us to meet the needs of our clients on a national basis, as well as build local relationships. For our large customers that have multiple IT centers in the United States, our geographic coverage allows us to provide consistent high-quality service through a single point of contact.

Focus on IT Staffing Services. We believe the IT staffing industry offers a greater opportunity for higher profitability than many other commercial staffing segments because of the value-added nature of IT personnel. Unlike many of our competitors that offer several types of staffing services such as IT, finance, accounting, light industrial and clerical, we are focused on the IT sector. As a result, we are able to commit our resources and capital towards our goal of building the leading IT staffing services business in the U.S.

Diversified Revenue Base With Long-Term Customer Relationships. We have nearly 1,000 corporate and government clients, including approximately 29% of the Fortune 500 companies and approximately 60% of the Fortune 50 companies. During 2009, our 15 largest clients represented approximately 39% of our revenues. Our clients operate across a broad spectrum of markets, with our four largest end-markets consisting of financial services, telecommunications, information technology and pharmaceutical and biotechnology. We have long-standing relationships with many of our clients, including relationships of more than a decade with many of our large customers.

Extensive Recruiting Channels and Effective Hiring Process. We believe our recruiting tools and processes and our depth of knowledge of the markets in which we operate provide us with a competitive advantage in meeting the demanding time-to-market requirements for placement of IT consultants. The placement of highly skilled personnel requires operational and technical knowledge to effectively recruit and screen personnel, match them to client needs, and develop and manage the resulting relationships. To find and place the best candidate with the applicable skill-set, we maintain a proprietary database that contains information about more than one million candidates. We also recruit through the internet, local and national advertising and trade shows and we maintain a national recruiting center. All of these resources assist us in locating qualified candidates quickly, often within 48 hours of a client request.

Complementary Service Offerings. We believe our complementary service offerings help us to build and facilitate expansion of our relationships with new and existing clients. In addition to our core business of IT staffing, we offer our customers vendor management services, project solutions and permanent placement of IT professionals through our business process outsourcing group. We began offering vendor management services in 2000 and now provide these services to 48 clients. We believe we are one of the leading vendor management businesses in the United States. We also evaluate opportunities to expand our service offerings based on customer demand and technology needs.

Scalable Infrastructure. We have a scalable information technology and transaction processing infrastructure. Our back-office functions, including payroll, billing, accounts payable, collections and financial reporting, are consolidated in our customer service center in Phoenix, Arizona, which operates on a PeopleSoft platform. We also have a proprietary, web-enabled front-office system, which facilitates the identification, qualification and placement of consultants in a timely manner. In addition, we maintain a centralized call center for scheduling sales appointments and a centralized proposals and contract services department. We believe this infrastructure will facilitate our internal growth strategy and allow us to continue to integrate acquisitions rapidly.

Sales and Marketing

We employ a centralized sales and marketing strategy that focuses on both national and local accounts. The marketing strategy is implemented on both national and local levels through each of our branch offices. At the national level, we focus on attaining preferred supplier status with Fortune 500 companies, a status that would make us one of a few approved service providers to those companies. An integral part of our marketing strategy at the national level is the use of our account management professionals who generally have over five years of experience in our industry. Their industry experience makes them capable of understanding our clients’ business strategies and IT staffing requirements. We are also supported by:

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centralized proposals and contract services departments;

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a strategic accounts group;

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a candidate sourcing operation for larger, high-volume clients that obtain contract IT professionals primarily through procurement departments;

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a centralized outbound call center for scheduling sales appointments with key contacts at prospective clients;

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a project solutions sales force;

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a vendor management sales force; and

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national recruiting centers for sourcing IT professionals located in the United States.

All of these assist in the development of responses to requests for proposals from large accounts and support our efforts in new client development activity.

Local accounts are targeted through account managers at the branch office level, permitting us to capitalize on the established local expertise and relationships of our branch office employees. These accounts are solicited through personal sales presentations, telephone and e-mail marketing, direct-mail solicitation, referrals and advertising in a variety of local and national media. Although local offices retain flexibility with regard to local customer and employee issues, these offices adhere to company-wide policies and procedures and a set of best practices designed to ensure quality standards throughout the organization. Local employees are encouraged to be active in civic organizations and industry trade groups to facilitate the development of new customer relationships and develop local contacts with technology user groups for referral of specific technology skills.

Local office employees report to a managing director who is responsible for day-to-day operations and the profitability of the office. Managing directors report to regional vice presidents. Regional vice presidents have substantial autonomy in making decisions regarding the operations in their respective regions, although sales activities directed toward strategic accounts are coordinated at a national level.

Our company-wide compensation program for account managers and recruiters is intended to provide incentives for higher-margin business. One component of compensation for account managers and recruiters is commissions, which increase significantly for placements with higher gross profit contribution.

Employees and Consultants

Of our 4,596 consultants on assignment at January 3, 2010, approximately 67% were employee consultants and approximately 33% were subcontractors and independent contractors. In addition, as of January 3, 2010, we had 832 permanent staff employees consisting primarily of management, administrative staff, account managers and recruiters. None of our employees are covered by collective bargaining agreements, and management believes that our relationships with our employees are good.

We recruit our consultants through both centralized and decentralized recruiting programs. Our recruiters use our internal proprietary database, the Internet, local and national advertisements and trade shows. Our front office system maintains a current database containing information about more than one million candidates, including their skills, education, desired work location and other employment-related information. The system enables us to scan, process and store thousands of resumes, making it easier for recruiters to identify, qualify and place consultants in a timely manner. It also allows billable consultants to electronically review and apply for job openings. In addition, we use our national recruiting center in Houston, Texas for sourcing IT professionals located in the United States. This center enhances our local recruitment effort by providing additional resources to meet clients’ critical timeframes and broadening our capability to deliver resources in areas of the country where no local office exists. We also recruit qualified candidates through our candidate referral program, which pays a referral fee to eligible individuals responsible for attracting new recruits that are successfully placed by us on an assignment.

We have a specialized selection, review and reference process for our IT consultant candidates that is an integral part of maintaining the delivery of high quality service to our clients. This process includes interviewing each candidate to allow us to assess whether that individual will be an appropriate match for a client’s business culture and performing reference checks. We also conduct a technical competency review of each candidate to determine whether the consultant candidate has the technical capabilities to successfully complete the client assignment. Our technical assessment will often include a formal technology skills assessment through an automated software product. We also undertake additional reviews, including more detailed background checks, at the request of our clients.

In an effort to attract a broad spectrum of qualified billable consultants, we offer a wide variety of employment options and training programs. Through our training and development department, we offer an online training platform to our consultants. This program includes over 2,600 self-paced IT and business-related courses and over 100 technical certification paths in course areas such as software development, enterprise data systems, internet and network technologies, web design, project management, operating systems, server technologies and business-related skills. We believe these training initiatives improve consultant recruitment and retention, increase the technical skills of our personnel and result in better service for our clients. We also provide consultant resource managers to assist our consultants in their career development and help maintain a positive work environment.

Competition

We operate in a highly competitive and fragmented industry. There are relatively few barriers to entry into our markets, and the IT staffing industry is served by thousands of competitors, many of which are small, local operations. There are also numerous large national and international competitors that directly compete with us, including TEKsystems, Inc., Ajilon Consulting, Kforce Inc., Spherion Corporation, CDI Corp., Computer Task Group, Inc., RCM Technologies, Inc. and Robert Half International. Some of our competitors may have greater marketing and financial resources than us.

The competitive factors in obtaining and retaining clients include, among others, an understanding of client-specific job requirements, the ability to provide appropriately skilled IT consultants in a timely manner, the monitoring of job performance quality and the price of services. The primary competitive factors in obtaining qualified candidates for temporary IT assignments are wages, the technologies that will be utilized, the challenges that an assignment presents, the timing of availability of assignments and the types of clients and industries that will be serviced. We believe our nationwide presence, strength in recruiting and account management and the broad range of customers and industries to which we provide services make us highly competitive in obtaining and retaining clients and recruiting highly qualified consultants.

Regulation

We are subject to various types of government regulations, including: employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation, registration, licensing, record keeping and reporting requirements; and federal contractor compliance.

Trademarks

We endeavor to protect our intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights. We also license certain other proprietary rights in connection with our businesses. We are not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect our use of our proprietary rights.

Seasonality

Our business is affected by seasonal fluctuations in corporate IT expenditures. Generally, expenditures are lowest during the first quarter of the year when our clients are finalizing their IT budgets. In addition, our quarterly results may fluctuate depending on, among other things, the number of billing days in a quarter and the seasonality of our clients’ businesses. Our business is also affected by the timing of holidays and seasonal vacation patterns, generally resulting in lower revenues and gross margins in the fourth quarter of each year. Extreme weather conditions may also affect demand in the first and fourth quarters of the year as certain of our clients’ facilities are located in geographic areas subject to closure or reduced hours due to inclement weather. In addition, we experience an increase in our cost of sales and a corresponding decrease in gross profit and gross margin in the first fiscal quarter of each year as a result of resetting certain state and federal employment tax rates and related salary limitations.

Available Information

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on the Investor Relations page of our website at www.COMSYS.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Information contained on our website, or on other websites linked to our website, is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report or any other filing that we make with the SEC.

EXECUTIVE OFFICERS

Information regarding the executive officers of COMSYS is as follows:

Name		Age		Position
Larry L. Enterline		57		Chief Executive Officer
Michael H. Barker		55		Executive Vice President and Chief Operating Officer
Ken R. Bramlett, Jr.		50		Senior Vice President, General Counsel and Corporate Secretary
David L. Kerr		57		Senior Vice President—Corporate Development
Amy Bobbitt		48		Senior Vice President and Chief Accounting Officer

Larry L. Enterline. Mr. Enterline was re-appointed as our Chief Executive Officer effective February 2, 2006. Mr. Enterline had previously served as our Chief Executive Officer from December 2000, when our company was known as Venturi Partners, Inc., until September 30, 2004, when we completed our merger with COMSYS Holding, Inc. He has served as a member of our Board since December 2000 and served as Chairman of the Board from December 2000 until the Comsys/Venturi merger. Prior to joining our company, Mr. Enterline served in a number of senior management positions at Scientific-Atlanta, Inc. from 1989 to 2000, the last of which was Corporate Senior Vice President for Worldwide Sales and Service. He also held management positions in the marketing, sales, engineering and products areas with Bailey Controls Company and Reliance Electric Company from 1974 to 1989. He also serves on the boards of directors of Raptor Networks Technology Inc. and Concurrent Computer Corporation.

Michael H. Barker. Mr. Barker has served as our Executive Vice President and Chief Operating Officer since October 2006. Mr. Barker served as our Executive Vice President — Field Operations from the completion of the Comsys/Venturi merger in September 2004 until October 2006. Prior to the merger, Mr. Barker had served as the President of Division Operations of Venturi since January 2003. From January 2001 through January 2003, Mr. Barker served as President of Venturi’s Technology Division. Prior to that time, Mr. Barker served as President of Divisional Operations of Venturi from October 1999 to January 2001 and as President of its Staffing Services Division from January 1998 until October 1999. Prior to joining Venturi, from 1995 to 1997 Mr. Barker served as the Chief Operations Officer for the Computer Group Division of IKON Technology Services, a diversified technology company.

Ken R. Bramlett, Jr. Mr. Bramlett was re-appointed as our Senior Vice President, General Counsel and Corporate Secretary effective January 3, 2006. Mr. Bramlett had previously served in a number of senior management positions with our company from 1996, when our company was known as Venturi Partners, Inc., until September 30, 2004, when we completed our merger with COMSYS Holding, Inc. His last position prior to the merger was Senior Vice President, General Counsel and Secretary. Prior to rejoining the Company, Mr. Bramlett was a partner in the business law department of Kennedy Covington Lobdell & Hickman LLP, a Charlotte, North Carolina law firm, from March 2005 to December 2005. Mr. Bramlett also serves on the boards of directors of World Acceptance Corporation and Raptor Networks Technology, Inc.

David L. Kerr. Mr. Kerr has served as our Senior Vice President — Corporate Development since the completion of the merger in September 2004. Prior to the merger, Mr. Kerr had served as Senior Vice President — Corporate Development of Old COMSYS since July 2004. Mr. Kerr joined Old COMSYS in October 1999 and served as its Chief Financial Officer and a Senior Vice President until December 2001. Old COMSYS retained Mr. Kerr as an independent consultant from January 2002 to July 2004, during which time Old COMSYS sought his advice and counsel on a number of business matters related to the IT staffing industry, including corporate development, mergers and acquisitions, divestitures, sales operations and financial transactions. Prior to joining Old COMSYS, Mr. Kerr was the Founder, Principal Officer, Shareholder and Managing Director of Omni Ventures LLC and Omni Securities LLC. Mr. Kerr was previously a partner with KPMG where he specialized in merger and acquisition transactions.

Amy Bobbitt. Ms. Bobbitt has served as our Senior Vice President and Chief Accounting Officer since September 2007. Prior to that, Ms. Bobbitt served as our Vice President of Finance since June 2006. Previously, Ms. Bobbitt was employed by Amkor Technology, Inc. from February 2005 to June 2006, where she served as Vice President and Corporate Controller. Prior to that, she served as Chief Accounting Officer and Corporate Controller at Rockford Corporation from December 2003 to February 2005. Ms. Bobbitt was the Vice President and Chief Financial Officer of Pima Capital Development Company for approximately eight years and was formerly an audit manager with Deloitte & Touche. Ms. Bobbitt received her Bachelor of Science in Business Administration, majoring in Accounting, from The Ohio State University and also maintains her Certified Public Accountant license.

ITEM 1A.		RISK FACTORS

In addition to the other information included in this report, the following risk factors should be considered in evaluating our business and future prospects. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to our company and our business. You should also read the other information included in this report, including our financial statements and the related notes.

Risks Related to the Pending Acquisition of COMSYS by Manpower Inc.

Failure to complete the pending exchange offer and merger with Manpower could materially and adversely affect our results of operations and our stock price.

On February 1, 2010, we entered into the Merger Agreement with Manpower and its wholly-owned subsidiary, Merger Sub. The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will commence the Offer to purchase all of the outstanding shares of COMSYS’ common stock and, following the completion of the Offer, complete the Merger by merging Merger Sub with and into COMSYS, with COMSYS surviving as a direct or indirect wholly owned subsidiary of Manpower.

Consummation of the Offer is subject to customary closing conditions, regulatory approvals, including antitrust approvals, and the tender in the Offer of at least a majority of the shares of COMSYS common stock outstanding. We cannot assure you that these conditions will be satisfied or waived, that the necessary approvals will be obtained, or the Offer and the Merger will be successfully completed as contemplated under the Merger Agreement or at all.

If for any reason the proposed Offer and Merger are not consummated:

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our investors may not receive $17.65 in cash or $17.65 in fair market value of shares of Manpower common stock that Manpower has agreed to provide in the Offer and the Merger, and our stock price would likely decline unless some other party were to offer an equivalent or higher price for our shares (and we have no expectation that there is any other party willing to offer an equivalent or higher price);

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under some circumstances, we may have to pay a termination fee to Manpower of $15.2 million and/or reimburse Manpower for its out-of-pocket transaction-related expenses up to $2.5 million;

In addition, the pendency of the Offer and the Merger could adversely affect our operations because:

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the attention of our management and our employees may be diverted from day-to-day operations as they focus on the Offer and the Merger;

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our clients may seek to modify or terminate existing agreements, or prospective clients may delay entering into new agreements or purchasing our services as a result of the announcement of the Offer and the Merger, which could cause our revenues to materially decline or any anticipated increases in revenue to be lower than expected;

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our ability to attract new employees and billable consultants and retain our existing employees and billable consultants may be harmed by uncertainties associated with the Offer and the Merger, and we may be required to incur substantial costs to recruit replacements for lost personnel or consultants; and

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stockholder lawsuits could be filed against us challenging the Offer and the Merger. If this occurs, even if the lawsuits are groundless and we ultimately prevail, we may incur substantial legal fees and expenses defending these lawsuits, and the Offer and the Merger could be prevented or delayed.

The occurrence of any of these events individually or in combination could have a material adverse affect on our results of operations and our stock price.

Risks that May Impact Future Operating Results Pending Completion of the Offer and the Merger or if the Offer and the Merger are not Consummated

Any economic downturn, or the perception that such a downturn is possible, may cause our revenues to decline and may adversely affect our results of operations, cash flows and financial condition.

Our results of operations are affected by the level of business activity of our clients, which in turn is affected by local, regional and global economic conditions. Since demand for staffing services is sensitive to changes, as well as perceived changes, in the level of economic activity, our business may suffer during economic downturns. As economic activity slows down, or companies believe that a decline in economic activity is possible, companies frequently cancel, reduce or defer capital investments in new technology systems and platforms and tend to reduce their use of temporary employees and permanent placement services before undertaking layoffs of their regular employees, resulting in decreased demand for staffing services. Also, as businesses reduce their hiring of permanent employees, revenue from our permanent placement services is adversely affected. As a result, any significant economic downturn, or the perception that a downturn is possible, could reduce our revenues and adversely affect our results of operations, cash flow and financial condition.

Our dependence on large customers and the risks we assume under our contracts with them could have a material adverse effect on our revenues and results of operations.

We depend on several large customers for a significant portion of our revenues. Our 15 largest customers represented approximately 39% of our revenues in 2009. Generally, we do not provide services to our customers under long-term contracts. If one or more of our large customers terminated an existing contract or substantially reduced the services they purchase from us, our revenues and results of operations would be adversely affected.

In addition, many customers, including those with preferred supplier arrangements, increasingly have been seeking pricing discounts, rebates or other pricing concessions in exchange for higher volumes of business or maintaining existing levels of business. Furthermore, we may be required to accept less favorable terms regarding risk allocation, including assuming obligations to indemnify our clients for damages sustained in connection with the provision of our services. Additionally, we regularly evaluate the creditworthiness of all our customers and continuously monitor accounts but typically we do not require collateral. Our allowance for doubtful accounts is based on an evaluation of the collectibility of specific accounts and on historical experience. These factors may potentially adversely affect our revenues and results of operations.

Our profitability will suffer if we are not able to maintain sufficient levels of billable hours and bill rates and control our costs or if we are unable to pass bill rate decreases to our consultants.

Our profit margins, and therefore our profitability, are largely dependent on the number of hours billed for our services, utilization rates, the bill rates we charge for these services and the pay rates of our consultants.

Accordingly, if we are unable to maintain these amounts at current levels, our profit margin and our profitability will suffer. Our bill rates are affected by a number of considerations, including:

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our clients’ perception of our ability to add value through our services;

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competition, including pricing policies of our competitors; and

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general economic conditions.

Our billable hours are affected by various factors, including:

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the demand for IT staffing services;

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the number of billing days in any period;

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the quality and scope of our services;

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seasonal trends, primarily as a result of holidays, vacations and inclement weather;

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our ability to recruit new consultants to fill open orders;

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our ability to transition consultants from completed assignments to new engagements;

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our ability to forecast demand for our services and thereby maintain an appropriately balanced and sized workforce; and

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our ability to manage consultant turnover.

Our pay rates are affected primarily by the supply of and demand for skilled U.S.-based consultants. During periods when demand for consultants exceeds the supply, pay rates may increase. In addition, large customers many times put pressure on us to absorb bill rate decreases and not reduce related pay rates. Competitive pressures impact this process.

Some of our costs, such as office rents, are fixed in the short term, which limits our ability to reduce costs in periods of declining revenues. Our current and future cost-management initiatives may not be sufficient to maintain our margins as our revenue varies.

We compete in a highly competitive market with limited barriers to entry and significant pricing pressures. There can be no assurance that we will continue to successfully compete.

The U.S. IT staffing services market is highly competitive and fragmented. We compete in national, regional and local markets with full-service and specialized staffing agencies, systems integrators, computer systems consultants, search firms and other providers of staffing and consulting services. Although the majority of our competitors are smaller than we are, a number of competitors have greater marketing and financial resources than us. In addition, there are relatively few barriers to entry into our markets and we have faced, and expect to continue to face, competition from new entrants into our markets. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or maintain or increase gross margins, either of which could have a material adverse effect on our financial condition and results of operations. In addition, from time to time we experience pressure from our clients to reduce price levels, and during these periods we may face increased competitive pricing pressures. Competition may also affect our ability to recruit the personnel necessary to fill our clients’ needs. We also face the risk that certain of our current and prospective clients will decide to provide similar services internally. There can be no assurance that we will continue to successfully compete.

We may be unable to attract and retain qualified billable consultants, which could have an adverse effect on our business, financial condition and results of operations.

Our operations depend on our ability to attract and retain the services of qualified billable consultants who possess the technical skills and experience necessary to meet our clients’ specific needs. We are required to continually evaluate, upgrade and supplement our staff in each of our markets to keep pace with changing client needs and technologies and to fill new positions. The IT staffing industry in particular has high turnover rates and is affected by the supply of and demand for IT professionals. This has resulted in intense competition for IT professionals, and we expect such competition to continue. Our customers may also hire our consultants, and direct hiring by customers adversely affects our turnover rate as well. In addition, our consultants’ loyalty to us may be harmed by our decreasing pay rates in order to preserve our profit margin during a market downturn, which may adversely affect our competitive position. Certain of our IT operations recruit consultants who require H-1B visas, and U.S. immigration policy currently restricts the number of new H-1B petitions that may be granted in each fiscal year. Our failure to attract and retain the services of consultants, or an increase in the turnover rate among our consultants, could have a material adverse effect on our business, operating results or financial condition. If a supply of qualified consultants, particularly IT professionals, is not available to us in sufficient numbers or on economic terms that are, or will continue to be, acceptable to us, our business, operating results or financial condition could be materially adversely affected.

We depend on key personnel, and the loss of the services of one or more of our senior management or a significant portion of our local management personnel could weaken our management team and our ability to deliver quality services and could adversely affect our business.

Our operations historically have been, and continue to be, dependent on the efforts of our executive officers and senior management. In addition, we are dependent on the performance and productivity of our respective regional operations executives, local managing directors and field personnel. The loss of one or more of our senior management or a significant portion of our management team could have an adverse effect on our operations, including our ability to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions. Our ability to attract and retain business is significantly affected by local relationships and the quality of services rendered by branch managerial personnel. If we are unable to attract and retain key employees to perform these services, our business, financial condition and results of operations could be materially adversely affected.

Our failure to shift more of our business into the IT solutions area could adversely impact our growth rate and profitability.

As market factors continue to pressure our revenue growth and margins in the IT staffing area, we have attempted to shift more of our business mix into the higher growth and higher margin solutions areas to complement our core business. We have committed resources and management attention to our TAPFIN Process Solutions group, which currently offers vendor management services, service procurement management, recruitment process outsourcing and other consulting services. There can be no assurance that we will succeed in shifting more of our business mix into these areas, or into other areas within the solutions sector of the IT services industries, and our failure to do so could adversely impact our growth rate and profitability.

We may suffer losses due to the conduct of our employees or our clients’ employees during staffing assignments.

We employ and place people generally in the workplaces of other businesses. Attendant risks of this activity include possible claims of discrimination and harassment, employment of illegal aliens, violations of wage and hour requirements, errors and omissions of temporary employees, particularly of professionals, misuse of client proprietary information, misappropriation of funds, other criminal activity or torts and other similar claims. In some instances we have agreed to indemnify our clients against some or all of the foregoing matters. We will be responsible for these indemnification obligations, to the extent they remain in effect, and may in the future agree to provide similar indemnities to some of our prospective clients. In certain circumstances, we may be held responsible for the actions at a workplace of persons not under our direct control. Although historically we have not suffered any material losses in this area, there can be no assurance that we will not experience such losses in the future or that our insurance, if any, will be sufficient in amount or scope to cover any such liability. The failure of any of our employees or personnel to observe our policies and guidelines, relevant client policies and guidelines, or applicable federal, state or local laws, rules and regulations, and other circumstances that cannot be predicted, could have a material adverse effect on our business, operating results and financial condition.

Additional government regulation and rising health care and unemployment insurance costs and taxes, including increased state and local taxes, could have a material adverse effect on our business, operating results and financial condition.

We are required to pay a number of federal, state and local payroll taxes and related costs, including unemployment and other taxes and insurance, workers’ compensation, FICA and Medicare, among others, for our employees. We also provide various benefits to our employees, including health insurance. Significant increases in the effective rates of any payroll-related costs would likely have a material adverse effect on our results of operations unless we can pass them along to our customers. Our costs could also increase if health care reforms expand the scope of mandated benefits or employee coverage or if regulators impose additional requirements and restrictions related to the placement of personnel. Historically, during an economic downturn, we have seen an increase in our state and local taxes. These increases result from legislation passed by various taxing jurisdictions which have traditionally increased tax rates or decreased our ability to use our net operating loss carryforwards.

We generally seek to increase fees charged to our clients to cover increases in health care, unemployment and other direct costs of services, but our ability to pass these costs to our clients over the last several years has diminished. There can be no assurance that we will be able to increase the fees charged to our clients in a timely manner and in a sufficient amount if these expenses continue to rise. There is also no assurance that we will be able to adapt to future regulatory changes made by the Internal Revenue Service, the Department of Labor or other state and federal regulatory agencies. Our inability to increase our fees or adapt to future regulatory changes could have a material adverse effect on our business, operating results and financial condition.

Due to inherent limitations, there can be no assurance that our system of disclosure and internal controls and procedures will be successful in preventing all errors and fraud, or in making all material information known in a timely manner to management.

Our management, including our Chief Executive Officer and Chief Accounting Officer, does not expect that our disclosure controls and internal controls will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within COMSYS have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected that could have a material adverse effect on our business, results of operations and financial condition.

Our strategic decision not to pursue a broad-based offshore strategy may adversely impact our revenue growth and profitability.

In the past few years, more companies are using, or are considering using, low cost “offshore” outsourcing centers, particularly in India, to perform technology related work and projects. This trend has contributed to the slowing growth in domestic IT staff augmentation revenue as well as on-site solutions oriented projects. We have strategic alliances with Indian suppliers to provide our clients with a low cost offshore alternative, but have not, to date, pursued a broad-based offshore strategy. Our strategic decision not to pursue such a broad-based offshore strategy may adversely impact our revenue growth and profitability.

We have substantial intangible assets, have incurred significant impairment charges in the past and may incur further charges if there are significant adverse changes to our operating results, outlook or market conditions.

Our intangible assets consist of goodwill and customer list intangibles resulting from acquisitions of businesses from unrelated third parties for cash and other consideration. We have accounted for these acquisitions using the purchase method of accounting, with the assets and liabilities of the businesses acquired recorded at their estimated fair values as of the dates of the acquisitions. The excess of purchase price over fair value of the net assets acquired was recorded as goodwill. Our other intangible assets consist mainly of customer lists.

ASC Topic 350, “Intangibles-Goodwill and Other,” prohibits the amortization of goodwill and requires that goodwill and other intangible assets be tested annually for impairment. We perform these tests on an annual basis or more frequently if events or changes in circumstances indicate the asset might be impaired, and any significant adverse changes in our expected future operating results or outlook would likely result in impairment of the affected intangible assets that could have a material adverse impact on our results of operations and financial condition.

The annual test requires estimates and judgments by management to determine a valuation for the reporting unit. Although we believe our assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially affect our reported financial results. Different assumptions related to future cash flows, operating margins, growth rates and discount rates could result in additional future impairment charges, which would be recognized as a non-cash charge to operating income and a reduction in asset values and shareholders’ equity on the balance sheet.

We recorded a non-cash, goodwill impairment charge of $86.8 million during the fourth quarter of 2008. The impairment was the result of the decline in our trading stock price during the fourth quarter of 2008 due to market conditions. Neither our operating trends nor our financial results for the fourth quarter of 2008 were factors that led to the charge. The non-cash charge had no impact on our existing cash balances, working capital, debt balances, revolver availability or normal business operations. There was no impairment to goodwill during 2009. Declines in our trading stock price as well as other factors could result in additional impairment charges.

Adverse results in tax audits could require significant cash expenditures or expose us to unforeseen liabilities.

We are subject to periodic federal, state and local income tax audits for various tax years. Although we attempt to comply with all taxing authority regulations, adverse findings or assessments made by the taxing authorities as the result of an audit could have a material adverse affect on our business, financial condition, cash flows and results of operations.

We may be subject to lawsuits and claims, which could have a material adverse effect on our financial condition and results of operations.

A number of lawsuits and claims are pending against us, and additional claims and lawsuits may arise in the future. Litigation is inherently uncertain. If an unfavorable ruling or outcome were to occur, such event could have a material adverse effect on our financial condition, cash flows and results of operations.

Concentration of services in metropolitan areas may adversely affect our revenues in the event of extraordinary events.

A significant portion of our revenues is derived from services provided in major metropolitan areas. A terrorist attack, such as that of September 11, 2001, or other extraordinary events in any of these markets could have a material adverse effect on our revenues and results of operations.

We depend on the proper functioning of our information systems.

We are dependent on the proper functioning of information systems in operating our business. Critical information systems are used in every aspect of our daily operations, most significantly in the identification and matching of staffing resources to client assignments and in the customer billing and consultant payment functions. Our systems are vulnerable to natural disasters, fire, terrorist acts, power loss, telecommunications failures, physical or software break-ins, computer viruses and other similar events. If our critical information systems fail or are otherwise unavailable, we would have to accomplish these functions manually, which could temporarily impact our ability to identify business opportunities quickly, maintain billing and client records reliably and bill for services efficiently. In addition, we depend on third party vendors for certain functions whose future performance and reliability we cannot control.

Risks Related to our Indebtedness

We have substantial debt obligations that could restrict our operations and adversely affect our business and financial condition.

As of January 3, 2010, our total debt was approximately $38.1 million, all of which was issued under a revolving line of credit.

Our indebtedness could have adverse consequences, including:

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increasing our vulnerability to adverse economic and industry conditions;

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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

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limiting our ability to borrow additional funds.

Our outstanding debt is subject to a borrowing base, and our lenders have substantial discretion to impose various reserves against it from time to time. Our outstanding debt bears interest at a variable rate, subjecting us to interest rate risk. Further, we use a substantial portion of our operating cash flow to pay interest on our debt instead of other corporate purposes. If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to sell assets, seek additional equity or debt capital or restructure our debt. Our cash flow and capital resources may not be sufficient for payment of interest and principal on our debt in the future, and any such alternative measures may not be successful or may not permit us to meet scheduled debt service obligations. Any failure to meet our debt obligations could harm our business and financial condition.

We will require a significant amount of cash to service our indebtedness and satisfy our other liquidity needs. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on our indebtedness and to fund our working capital requirements and other liquidity needs will depend on our ability to generate cash in the future. To a certain extent, this ability is subject to economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our revolving line of credit or otherwise in an amount sufficient to enable us to successfully execute our business strategy, pay our indebtedness and fund our other liquidity needs.

If we are not able to repay our debt obligations on or prior to their maturity, we may need to refinance all or a portion of our indebtedness. Our revolving line of credit will mature in March 2012 and, thus, we may be required to refinance any outstanding amounts under our credit facilities. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we are unable to generate sufficient cash flow to pay our indebtedness or to refinance our debt obligations on commercially reasonable terms, our business, financial condition and results of operations could be adversely affected.

Restrictive financing covenants limit the discretion of our management and may inhibit our operating flexibility.

Our credit facilities contain a number of covenants that, among other things, restrict our ability to:

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incur additional indebtedness;

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pay more than $10 million in the aggregate for stock repurchases and dividends;

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incur liens;

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make certain capital expenditures;

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make certain investments or acquisitions;

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repay debt; and

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dispose of property.

In addition, our credit facilities have springing financial covenants that would require us to satisfy a minimum fixed charge coverage ratio and a maximum total leverage ratio if our excess availability falls below $25 million. A breach of any covenants governing our debt would permit the acceleration of the related debt and potentially other indebtedness under cross-default provisions, which could harm our business and financial condition. These restrictions may place us at a disadvantage compared to our competitors that are not required to operate under such restrictions or that are subject to less stringent restrictive covenants.

If we default on our obligations to pay our indebtedness, or fail to comply with the covenants and restrictions contained in the agreements governing our indebtedness, our financial condition may be adversely affected by the consequences of any such default.

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to make required payments on our revolving line of credit or any future debt which we may incur, or if we fail to comply with the various covenants and restrictions contained in the agreements governing our indebtedness, we could be in default under the terms of such agreements governing our indebtedness.

In the event of a default under any of our debt agreements that is not cured or waived, the holders of such indebtedness could elect to declare all amounts outstanding thereunder to be immediately due and payable. In addition, upon an event of default under our credit facilities that is not cured or waived, we would no longer be able to borrow funds under our credit facilities, which would make it difficult to operate our business. Moreover, because our credit facilities contain, and any future debt agreements into which we may enter may contain, customary cross-default provisions, an event of default under our credit facilities or any future debt agreements into which we may enter, if not cured or waived, could also permit some or all of our lenders to declare all outstanding amounts to be immediately due and payable.

If the amounts outstanding under any of our debt agreements are accelerated, we cannot assure you that our assets will be sufficient to repay in full the money owed to our lenders or to our other debt holders. If we are unable to repay or refinance such accelerated amounts, lenders having secured obligations, such as the lenders under our revolving line of credit, could proceed against the collateral securing the debt, and we could be forced into bankruptcy or liquidation.

Other Risks Related to Investment in Our Common Stock

Shares of our common stock have been thinly traded in the past and the prices at which our common stock will trade in the future could fluctuate significantly.

As of February 26, 2010, there were 21,293,875 shares of our common stock issued and outstanding. Although our common stock is listed on The NASDAQ Global Market and a trading market exists, the trading volume has not been significant and there can be no assurance that an active trading market for our common stock will develop or be sustained in the future. Our average daily trading volume during the twelve months ended February 1, 2010, was approximately 45,584 shares (which excludes the trading volume since the announcement of the pending Offer and Merger on February 2, 2010). As a result of the thin trading market, or “float,” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In addition, in the absence of an active public trading market, investors may be unable to liquidate their investment in our stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. The prices at which our common stock will trade in the future could fluctuate significantly.

Ownership of our common stock is concentrated among a small number of major stockholders that have the ability to exercise significant control over us, and whose interests may differ from the interests of other stockholders.

As of February 26, 2010, there were seven beneficial owners of more than 5% of our outstanding common stock, excluding the effect of outstanding warrants and/or cash-settled equity swaps. A listing of these beneficial owners and information regarding their beneficial ownership is included in Part III, Item 12 of this Form 10-K.

As a practical matter, Wachovia Investors acting alone or these stockholders acting collectively will be able to exert significant influence over, or determine, the direction taken by us and the outcome of future matters submitted to our stockholders, including the terms of any proposal to acquire us, subject to some limited protections afforded to minority stockholders under our charter.

Concentrated ownership of large blocks of our common stock may affect the value of shares held by others and our ability to access public equity markets.

Our current degree of share ownership concentration may reduce the market value of common stock held by other investors for several reasons, including the perception of a “market overhang,” which is the existence of a large block of shares readily available for sale that could lead the market to discount the value of shares held by other investors.

We may need to access the public equity markets to secure additional capital to repay debt, pursue our acquisition strategy or meet other financial needs. Our registration obligations to our significant stockholders could limit our ability or make it more difficult for us to raise funds through common stock offerings upon desirable terms or when required. Our failure to raise additional capital when required could:

•

restrict growth, both internally and through acquisitions;

•

inhibit our ability to invest in technology and other products and services that we may need; and

•

adversely affect our ability to compete in our markets.

Future sales of shares may adversely affect the market price of our shares.

Future sales of our shares, or the availability of shares for future sale, may have an adverse effect on the market price of our shares. Sales of substantial amounts of our shares in the public market, or the perception that such sales could occur, could adversely affect the market price of our shares and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.

The market price and marketability of our shares may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings or our ability to use equity in acquisitions.

The market price of our shares may fluctuate significantly. In addition to lack of liquidity, many factors that are beyond our control may affect the market price and marketability of our shares and may adversely affect our ability to raise capital through equity financings or our ability to use equity in acquisitions. These factors include the following:

•

general price and volume fluctuations in the stock markets;

•

changes in our earnings or variations in operating results;

•

any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts;

•

changes in regulatory policies or tax laws;

•

operating performance of companies comparable to us;

•

general economic trends and other external factors; and

•

loss of a major funding source.

We do not intend to pay cash dividends on our common stock in the foreseeable future, and therefore only appreciation of the price of our common stock will provide a return to our stockholders.

We have not historically paid cash dividends on our common stock, and we currently anticipate that we will retain all future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends in the foreseeable future. Any payment of cash dividends will depend upon our financial condition, capital requirements, earnings and other factors deemed relevant by our board of directors. In addition, the terms of our credit facilities prohibit us from paying dividends and making other distributions. As a result, only appreciation of the price of our common stock, which may not occur, will provide a return to our stockholders. Also, holders of warrants to purchase our common stock and holders of unvested restricted stock also participate in dividend payments. As a result, any dividend payments must be allocated to warrant holders and unvested restricted stock holders, as well as common stock holders.

Our certificate of incorporation contains certain provisions that could discourage an acquisition or change of control of COMSYS.

Our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval. Our board of directors has the power to determine the price and terms of any preferred stock. The ability of our board of directors to issue one or more series of preferred stock without stockholder approval could deter or delay unsolicited changes of control by discouraging open market purchases of new common stock or a non-negotiated tender or exchange offer for our common stock. Discouraging open market purchases may be disadvantageous to our stockholders who may otherwise desire to participate in a transaction in which they would receive a premium for their shares.

ITEM 1B.		UNRESOLVED STAFF COMMENTS

None.

ITEM 2.		PROPERTIES

We are headquartered in Houston, Texas and maintain 52 offices in the United States, one in Puerto Rico, one in Toronto, Canada and one in the United Kingdom. Additionally, we have a customer service center in Phoenix, Arizona. We generally lease our office space under leases with initial terms of five to ten years. These leases typically contain such terms and conditions as are customary in each geographic market. Our offices are usually in office buildings, and occasionally in retail buildings, and our headquarters facilities and regional offices are in similar facilities. We believe that our offices are well maintained and suitable for their intended purpose. The lease on our corporate headquarters was renewed in August 2006 for ten years and will expire on February 28, 2017. The lease on our customer service center was entered into in October 2007 for ten years and will expire on April 30, 2018. As of January 3, 2010, we leased approximately 366,000 square feet.

ITEM 3.		LEGAL PROCEEDINGS

From time to time we are involved in certain disputes and litigation relating to claims arising out of our operations in the ordinary course of business. Further, we are periodically subject to government audits and inspections. In the opinion of our management, based on the advice of in-house and external legal counsel, matters presently pending, except as noted below, will not, individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations or cash flows.

In connection with the Comsys/Venturi merger and the sale of Venturi’s commercial staffing business in 2004, we placed $2.5 million of cash and 187,556 shares of our common stock in separate escrows pending the final determination of certain state tax and unclaimed property assessments. The shares were released from escrow on September 30, 2006, in accordance with the Comsys/Venturi merger agreement, while the cash remains in escrow. The cash escrow account was scheduled to terminate on December 31, 2009, but prior to December 31 the purchaser of Venturi’s staffing business made a claim against the escrow account pursuant to the indemnification provisions in the purchase agreement. We have disputed this claim, but as a result of the dispute the termination of the cash escrow will not occur until either the parties reach an agreement as to the matters that are the subject of the dispute or the receipt of a court order. Following the termination of the escrow, we will be paid the balance of the escrow account. We have recorded liabilities for amounts that management believes are adequate to resolve all of the matters these escrows were intended to cover, but management cannot ascertain at this time what the final outcome of these assessments (or the outcome of the dispute with the purchaser of Venturi’s staffing business) will be in the aggregate, and it is possible that management’s estimates could change. The escrowed cash is included in restricted cash on the Consolidated Balance Sheets.

ITEM 4.		RESERVED

This item is not applicable.

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our common stock is traded on the NASDAQ Global Market under the symbol “CITP.” The following table includes the high and low sales prices for our common stock as reported on the NASDAQ Global Market for each quarter during the period from December 31, 2007, through January 3, 2010.

		High				Low
2008
First Quarter		$	14.80			$	7.37
Second Quarter			12.92				7.82
Third Quarter			12.98				8.12
Fourth Quarter			10.74				1.56
2009
First Quarter		$	3.28			$	1.80
Second Quarter			6.84				1.82
Third Quarter			8.56				5.36
Fourth Quarter			9.55				5.73

As of February 26, 2010, the closing price of our common stock was $17.48, there were 21,293,875 shares of our common stock outstanding and there were 538 holders of record of our common stock.

Dividend Policy

Because our policy has been to retain earnings for use in our business, we have not historically paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings. Our credit facilities restrict our ability to pay cash dividends. Under the credit facilities, we may make up to $10.0 million in dividend payments and/or stock repurchases in the aggregate, subject to certain terms and conditions. Also, holders of warrants to purchase our common stock and holders of unvested restricted stock also participate in dividend payments. As a result, any dividend payments must be allocated to warrant holders and unvested restricted stock holders, as well as common stock holders.

Purchases of Restricted Stock and Common Shares

The following table provides information relating to our purchase of shares of our common stock in the fourth quarter of 2009. These purchases reflect shares withheld upon vesting of restricted stock, to satisfy statutory minimum tax withholding obligations.

										Total number of				Maximum dollar
										shares purchased				value of shares that
		Total number								as part of				may yet be
		of shares				Average price				publicly				purchased under the
Period		purchased (1)				paid per share				announced plan				plan (2)
September 28, 2009 – October 25, 2009			—			$	—				—
October 26, 2009 – November 22, 2009			868			$	7.04				—
November 23, 2009 – January 3, 2010			—			$	—				—
			868			$	7.04				—			$	5,000,000

ITEM 6.		SELECTED FINANCIAL DATA

You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this report.

The consolidated statements of operations data for the fiscal years ended January 3, 2010, December 28, 2008, and December 30, 2007, and the consolidated balance sheets data at January 3, 2010, and December 28, 2008, are derived from the audited consolidated financial statements appearing elsewhere in this report. The historical data presented below is not indicative of future results. We did not pay any cash dividends on our common stock during any of the periods set forth in the following table.

Consolidated Statements of Operations Data:		January 3,				December 28,				December 30,				December 31,				January 1,
(In thousands, except per share data)		2010				2008				2007				2006				2006
Revenues from services		$	649,307			$	727,108			$	743,265			$	736,645			$	661,657
Cost of services			490,864				550,189				558,074				557,598				505,233
Gross profit			158,443				176,919				185,191				179,047				156,424
Operating costs and expenses:
Selling, general and administrative			132,139				136,648				135,423				135,651				120,357
Restructuring costs			3,895				637				—				—				4,780
Depreciation and amortization			8,086				8,115				6,426				8,717				9,067
Goodwill impairment			—				86,800				—				—				—
			144,120				232,200				141,849				144,368				134,204
Operating income (loss)			14,323				(55,281	)			43,342				34,679				22,220
Interest expense and other expenses, net			4,036				5,253				7,714				15,208				17,061
Loss on early extinguishment of debt			—				—				—				3,191				2,227
Income tax expense (benefit)			881				4,654				2,279				(4,767	)			783
Net income (loss)		$	9,406			$	(65,188	)		$	33,349			$	21,047			$	2,149
Basic net income (loss) per common share		$	0.45			$	(3.19	)		$	1.67			$	1.10			$	0.14
Diluted net income (loss) per common share		$	0.45			$	(3.19	)		$	1.66			$	1.10			$	0.14
Weighted average basic and diluted shares outstanding:
Basic			19,801				19,599				19,255				18,449				15,492
Diluted			19,801				19,599				20,100				19,137				15,809
										As of
Consolidated Balance Sheets Data:		January 3,				December 28,				December 30,				December 31,				January 1,
(In thousands)		2010				2008				2007				2006				2006
Total assets		$	318,450			$	351,180			$	402,469			$	375,034			$	366,921
Other debt, including current maturities			38,101				69,692				71,903				98,542				142,273
Stockholders’ equity			96,369				83,485				144,632				94,770				71,096

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis provides a narrative on our financial performance and condition that should be read in conjunction with the consolidated financial statements, selected financials data, and related notes appearing elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this report. The historical data presented below is not indicative of future results.

Pending Exchange Offer and Merger with Manpower Inc.

On February 1, 2010, we entered into the Merger Agreement with Manpower and its wholly-owned subsidiary, Merger Sub. The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will commence the Offer to purchase all of the outstanding shares of COMSYS’ common stock and, following the completion of the Offer, complete the Merger by merging Merger Sub with and into COMSYS, with COMSYS surviving as a direct or indirect wholly owned subsidiary of Manpower. The Merger Agreement provides that the Offer will be commenced within five business days following the filing of this Annual Report on Form 10-K.

Pursuant to the Merger Agreement, and subject to the terms and conditions of the Merger Agreement, in both the Offer and the Merger, each share of COMSYS common stock accepted by Merger Sub will be exchanged for either (at the stockholder’s election) $17.65 in cash or $17.65 in fair market value of shares of Manpower common stock, where fair market value is the average trading price of Manpower’s common stock during the ten trading days ending on and including the second trading day prior to the closing of the Offer. At the effective time of the Merger, any remaining outstanding shares of COMSYS common stock not tendered in the Offer, other than shares owned by Manpower or any direct or indirect wholly-owned subsidiary of Manpower or COMSYS, will be acquired for cash and Manpower common stock.

The aggregate amount of cash and Manpower common stock available for election at the closing of the Offer and of the Merger will be determined on a 50/50 basis, such that if the holders of more than 50% of the shares tendered in the Offer, or more than 50% of the shares converted in the Merger, elect more than the cash or Manpower common stock available in either case, they will receive on a pro rata basis the other kind of consideration to the extent the kind of consideration they elect to receive is oversubscribed. For example, if the holders of more than 50% of COMSYS Common Stock who tender in the Offer elect cash then such holders in the aggregate will receive all of the cash available for payment in the Offer (50% of the total consideration payable to all stockholders who tender in the Offer) but also will receive some Manpower common stock on a pro rata basis, since there would have been an oversubscription for cash payment. Manpower has the right, at any time not less than two business days prior to the expiration of the Offer, to elect to convert the transaction into an all-cash deal and to pay $17.65 in cash for all shares of COMSYS common stock tendered in the Offer and acquired in the Merger.

The Offer is subject to satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the tender to Merger Sub and no withdrawal of at least a majority of the shares of COMSYS common stock (the “Minimum Condition”). The Minimum Condition may not be waived by Merger Sub without the prior written consent of COMSYS. Subject to certain conditions and limitations, COMSYS has granted Manpower and Merger Sub an option to purchase from COMSYS, following the completion of the Offer, a number of additional shares of COMSYS common stock that, when added to the shares already owned by Manpower and Merger Sub, will constitute one share more than 90% of the shares of COMSYS common stock entitled to vote on the Merger. If Manpower and Merger Sub acquire more than 90% of the outstanding shares of COMSYS common stock including through exercise of the aforementioned option, it will complete the Merger through the “short form” procedures available under Delaware law.

The Merger Agreement contains certain termination rights for each of Manpower and COMSYS, and if the Merger Agreement is terminated under certain circumstances, COMSYS is required to pay Manpower a termination fee of $15.2 million and/or reimburse Manpower for its out-of-pocket transaction-related expenses up to $2.5 million.

The Merger Agreement includes customary representations, warranties and covenants of COMSYS, Manpower and Merger Sub. In addition to certain other covenants, COMSYS has agreed not to (i) encourage, solicit, initiate or facilitate any takeover proposal from a third party; (ii) enter into any agreement relating to a takeover proposal or any agreement, arrangement or understanding requiring COMSYS to abandon, terminate or fail to consummate the Offer, the Merger, the Merger Agreement or the transactions contemplated by the Merger Agreement; (iii) grant any waiver or release under any standstill agreement relating to COMSYS common stock; or (iv) enter into discussions or negotiations with a third party in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, a takeover proposal, in each case subject to certain exceptions set forth in the Merger Agreement.

In connection with the Merger Agreement, Manpower entered into a tender and voting agreement, dated as of February 1, 2010, with certain of COMSYS stockholders who beneficially own in the aggregate approximately 29.5% of COMSYS common stock on a fully diluted basis, pursuant to which each such stockholder agreed to tender all of the shares of COMSYS common stock beneficially owned by such stockholder in the Offer and to vote any shares of COMSYS common stock not tendered in the Offer in favor of the Merger.

Our Business

COMSYS IT Partners, Inc. and our wholly-owned subsidiaries (collectively, “us,” “our” or “we”) provide a full range of specialized IT staffing and project implementation services, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. We also provide services that complement our IT staffing services, such as vendor management, project solutions, process solutions and permanent placement of IT professionals. Our TAPFIN Process Solutions division offers total human capital fulfillment and management solutions within three core service areas: vendor management services, services procurement management and recruitment process outsourcing. We operate through the following wholly-owned subsidiaries:

•

COMSYS Services, LLC (“COMSYS Services”), an IT staffing services provider,

•

COMSYS Information Technology Services, Inc. (“COMSYS IT”), an IT staffing services provider,

•

Pure Solutions, Inc. (“Pure Solutions”), an information technology services company,

•

Econometrix, LLC (“Econometrix”), a vendor management systems software provider,

•

Plum Rhino Consulting LLC (“Plum Rhino”), a specialty staffing services provider to the financial services industry,

•

TAPFIN, LLC (“TAPFIN”), a provider of vendor management services, recruitment process outsourcing services and human resources consulting, and

•

ASET International Services, LLC (“ASET”), a globalization, localization and interactive language services provider.

Industry trends that affect our business include:

•

rate of technological change;

•

rate of growth in corporate IT and professional services budgets;

•

penetration of IT and professional services staffing in the general workforce;

•

outsourcing of the IT and professional services workforce; and

•

consolidation of supplier bases.

The success of our business depends primarily on the volume of assignments we secure, the bill rates for those assignments, the costs of the consultants that provide the services and the quality and efficiency of our recruiting, sales and marketing and administrative functions. Our experienced, tenured workforce, our proven track record, our recruiting and candidate screening processes, our strong account management team and our efficient and consistent administrative processes are factors that we believe are key to the success of our business. Factors outside of our control, such as the demand for IT and other professional services, general economic conditions and the supply of qualified professionals, also affect our success.

Our revenue is primarily driven by bill rates and billable hours. Most of our billings for our staffing and project solutions services are on a time-and-materials basis, which means we bill our customers based on pre-agreed bill rates for the number of hours that each of our consultants works on an assignment. Hourly bill rates are typically determined based on the level of skill and experience of the consultants assigned and the supply and demand in the current market for those qualifications. General economic conditions, macro IT and profession service expenditure trends and competition may create pressure on our pricing. Increasingly, large customers, including those with preferred supplier arrangements, have been seeking pricing discounts in exchange for higher volumes of business or maintaining existing levels of business. Billable hours are affected by numerous factors, such as the quality and scope of our service offerings and competition at the national and local levels. We also generate fee income by providing vendor management and permanent placement services.

Our principal operating expenses are cost of services and selling, general and administrative expenses. Cost of services is comprised primarily of the costs of consultant labor, including employees, subcontractors and independent contractors, and related employee benefits. Approximately 67% of our consultants are employees and the remainder are subcontractors and independent contractors. We compensate most of our consultants only for the hours that we bill to our clients, which allows us to better match our labor costs with our revenue generation. With respect to our consultant employees, we are responsible for employment-related taxes, medical and health care costs and workers’ compensation. Labor costs are sensitive to shifts in the supply and demand of professionals, as well as increases in the costs of benefits and taxes.

The principal components of selling, general and administrative expenses are salaries, selling and recruiting commissions, advertising, lead generation and other marketing costs and branch office expenses. Our branch office network allows us to leverage certain selling, general and administrative expenses, such as advertising and back office functions.

Our back office functions, including payroll, billing, accounts payable, collections and financial reporting, are consolidated in our customer service center in Phoenix, Arizona, which operates on a PeopleSoft platform. We also have a proprietary, web-enabled front-office system that facilitates the identification, qualification and placement of consultants in a timely manner. We maintain a national recruiting center, a centralized call center for scheduling sales appointments and a centralized proposals and contract services department. We believe this scalable infrastructure allows us to provide high quality service to our customers and will facilitate our internal growth strategy and allow us to continue to integrate acquisitions rapidly.

Our fiscal year ends on the Sunday closest to December 31^st. Therefore, the fiscal year-ends for 2009, 2008 and 2007 were January 3, 2010, December 28, 2008, and December 30, 2007, respectively. Fiscal 2009 contained 53 weeks, while fiscal 2008 and 2007 each contained 52 weeks.

Overview of 2009 Results

Our stated priorities for 2009 were organic growth, efficiency improvements, further debt reductions and improved working capital management and expansion of our operations through acquisitions. We made the following progress against each during the year.

Our revenues declined 10.7% in 2009 from 2008; however, we started to see improvement in our trends late in the third quarter and this continued into the fourth quarter. We ended the year with 4,596 billable consultants, which was up 80 from the end of 2008. As the global economy worsened during 2009, we experienced larger-than-normal bill rate pressures from several clients. As a result, average bill rates in 2009 decreased slightly from 2008 rates. Our focus on sales, marketing and recruiting efforts to our core customers and on adding new customers has helped as certain sectors have had difficulties. We did start to see improvement in the financial services sector in the third and fourth quarters of 2009. We put increased focus on managing pay rates and pursuing high margin business to preserve our gross margin percentages.

We continued to see the benefits of our efficiency improvements throughout 2009, and these improvements allowed us to redirect resources closer to the point of sale. As part of our continuing efforts to focus on operational efficiencies and process improvements, we consolidated certain administrative functions into the Phoenix customer service center in 2008 and 2009. This restructuring was a continuation of our plan to centralize certain operations to enhance our customer service and improve our internal processes.

Due to our ability to generate cash from operations and improved working capital management, our net debt balance declined to $38.1 million at the end of 2009 from $49.7 million at the end of 2008. The 2008 amount was net of $20.0 million cash held in a separate cash account, which we borrowed on our revolver in October 2008 to insure access to liquidity, then used to pay down the balance in 2009. During 2009, we generated $17.0 million of cash flow from operations and used $3.7 million for acquisitions. Our cash flow generation was impacted by the decline in revenue and our decision to preserve infrastructure during the recession.

Future Outlook

On February 1, 2010, we entered into the Merger Agreement with Manpower and its wholly-owned subsidiary, Merger Sub. The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will commence the Offer to purchase all of the outstanding shares of COMSYS’ common stock and, following the completion of the Offer, complete the Merger by merging Merger Sub with and into COMSYS, with COMSYS surviving as a direct or indirect wholly owned subsidiary of Manpower. The Merger Agreement provides that the Offer will be commenced within five business days following the filing of this Annual Report on Form 10-K.

In connection with the Offer and merger, Manpower intends to file a Registration Statement on Form S-4 and a Tender Offer Statement on Schedule TO with the SEC, and COMSYS intends to file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC. The Offer has not yet commenced and such documents are not currently available. When these documents become available, COMSYS stockholders are urged to read them carefully before making any decisions, as they will contain important information about the transaction.

Due to the Offer and proposed merger with Manpower, we are not providing revenue or earnings per share guidance at this time.

Results of Operations

The following table sets forth the percentage relationship to revenues of certain items included in our Consolidated Statements of Operations, in thousands, except percentages and headcount amounts:

														Percent of Revenues from Services												Percent Change
		January 3,				December 28,				December 30,				January 3,				December 28,				December 30,				2009 vs.				2008 vs.
		2010				2008				2007				2010				2008				2007				2008				2007
Revenues from services		$	649,307			$	727,108			$	743,265				100.0	%			100.0	%			100.0	%			-10.7	%			-2.2	%
Cost of services			490,864				550,189				558,074				75.6	%			75.7	%			75.1	%			-10.8	%			-1.4	%
Gross profit			158,443				176,919				185,191				24.4	%			24.3	%			24.9	%			-10.4	%			-4.5	%
Operating costs and expenses:
Selling, general and administrative			132,139				136,648				135,423				20.4	%			18.8	%			18.2	%			-3.3	%			0.9	%
Restructuring costs			3,895				637				—				0.6	%			0.1	%			0.0	%			N/A				N/A
Depreciation and amortization			8,086				8,115				6,426				1.2	%			1.1	%			0.9	%			-0.4	%			26.3	%
Goodwill impairment			—				86,800				—				0.0	%			11.9	%			0.0	%			N/A				N/A
			144,120				232,200				141,849				22.2	%			31.9	%			19.1	%			-37.9	%			63.7	%
Operating income (loss)			14,323				(55,281	)			43,342				2.2	%			-7.6	%			5.8	%			-125.9	%			-227.5	%
Interest expense, net			4,185				5,457				8,250				0.6	%			0.7	%			1.1	%			-23.3	%			-33.9	%
Other income, net			(149	)			(204	)			(536	)			0.0	%			0.1	%			-0.1	%			-27.0	%			-61.9	%
Income (loss) before income taxes			10,287				(60,534	)			35,628				1.5	%			-8.3	%			4.8	%			-117.0	%			-269.9	%
Income tax expense (benefit)			881				4,654				2,279				0.1	%			0.6	%			0.2	%			-81.1	%			104.2	%
Net income (loss)		$	9,406			$	(65,188	)		$	33,349				1.4	%			-9.0	%			4.5	%			-114.4	%			-295.5	%
Billable headcount at end of period			4,596				4,516				4,986

Year Ended January 3, 2010, Compared to Year Ended December 28, 2008

We recorded operating income of $14.3 million and net income of $9.4 million in 2009 compared to an operating loss of $55.3 million and a net loss of $65.2 million in 2008. In 2008, we recorded a goodwill impairment charge of $86.8 million, or $86.0 million net of related tax effects. The decrease in operating income in 2009, excluding the goodwill impairment, was due primarily to lower revenue experienced during the recession and the higher selling, general and administrative expenses as a percent of revenue resulting from our decision to maintain infrastructure.

Revenues. Revenues for 2009 and 2008 were $649.3 million and $727.1 million, respectively, representing a decrease of 10.7%. We continued to see bill rate pressures from our clients, particularly among Fortune 500 clients early in 2009, but these pressures leveled off in the second half of the year.

In 2009, our revenue decline was driven primarily by our clients in the financial services and pharmaceutical sectors, offset somewhat by growth in the healthcare and information technology sectors. Revenues from the financial services and pharmaceutical sectors decreased by 17.4% and 18.9%, respectively, in 2009 from 2008. These decreases were partially offset by revenue increases of 29.1% and 11.3% from the healthcare and information technology sectors, respectively, over the same period. Vendor management related fee revenue decreased 9.4% to $21.5 million in 2009 from $23.7 million in 2008 due to declining fee rates at several clients, a change in the mix of our clients, and clients’ reduced spend. Reimbursable expense revenue decreased to $12.1 million in 2009 from $17.1 million in 2008, primarily in relation to reduced revenue. This decrease had no impact on gross margin dollars as the related reimbursable expense was recognized in the same period.

										Percent of Revenues from Services								Percent Change
		January 3,				December 28,				January 3,				December 28,				2009 vs.
		2010				2008				2010				2008				2008
Staffing revenue		$	616,259			$	686,530				94.9	%			94.4	%			-10.2	%
Vendor management fees			21,489				23,723				3.3	%			3.3	%			-9.4	%
Reimbursable expense revenue			12,136				17,133				1.9	%			2.4	%			-29.2	%
Pass-through fees			7,345				5,493				1.1	%			0.8	%			33.7	%
Permanent placement fees			2,641				6,087				0.4	%			0.8	%			-56.6	%
Other non-staffing revenue			1,183				1,176				0.2	%			0.2	%			0.6	%
Gross revenue			661,053				740,142				101.8	%			101.8	%			-10.7	%
Less: Discounts and rebates			(11,746	)			(13,034	)			-1.8	%			-1.8	%			-9.9	%
Revenues from services		$	649,307			$	727,108				100.0	%			100.0	%			-10.7	%

Cost of Services. Cost of services for 2009 and 2008 were $490.9 million and $550.2 million, respectively, representing a decrease of 10.8%, which is consistent with the change in revenue over the same period. Cost of services as a percentage of revenue decreased to 75.6% in 2009 from 75.7% in 2008. We were able to hold this percentage flat by managing pay rates.

										Percent of Revenues from Services								Percent Change
		January 3,				December 28,				January 3,				December 28,				2009 vs.
		2010				2008				2010				2008				2008
Labor costs		$	235,523			$	255,971				36.3	%			35.2	%			-8.0	%
Subcontractor costs			210,013				247,799				32.3	%			34.1	%			-15.2	%
Payroll burden costs			26,313				23,398				4.1	%			3.2	%			12.5	%
Reimbursable expenses			12,113				17,333				1.9	%			2.4	%			-30.1	%
Other costs of services			6,902				5,688				1.1	%			0.8	%			21.3	%
Cost of services		$	490,864			$	550,189				75.6	%			75.7	%			-10.8	%

Selling, General and Administrative. Selling, general and administrative expenses in 2009 and 2008 were $132.1 million and $136.6 million, respectively, representing a decrease of 3.3%. The decrease was primarily due to savings from the cost optimization of our restructuring and other efficiency initiatives, partially offset by spending on strategic initiatives. Included in these amounts are $3.5 million and $4.4 million of stock-based compensation in 2009 and 2008, respectively. As a percentage of revenue, selling, general and administrative expenses increased to 20.4% in 2009 from 18.8% in 2008 primarily due to lower revenue in 2009.

										Percent of Revenues from Services								Percent Change
		January 3,				December 28,				January 3,				December 28,				2009 vs.
		2010				2008				2010				2008				2008
Compensation		$	83,143			$	83,606				12.8	%			11.5	%			-0.6	%
Stock-based compensation			3,514				4,438				0.5	%			0.6	%			-20.8	%
Payroll burden costs			13,788				15,057				2.1	%			2.1	%			-8.4	%
Premises expense			8,752				9,283				1.3	%			1.3	%			-5.7	%
Other selling, general and administrative			22,942				24,264				3.5	%			3.3	%			-5.4	%
Selling, general and administrative		$	132,139			$	136,648				20.4	%			18.8	%			-3.3	%

Restructuring Costs. Restructuring costs for 2009 were $3.9 million, or 0.6% of revenue compared to $0.6 million in 2008. These employee termination benefits and lease abandonment costs for both years related primarily to the relocation of certain administrative functions into our Phoenix customer service center facility. During 2009, we entered into a sublease for one of the closing facilities, and thus reversed $1.0 million previously accrued expense, which was partially offset by $0.5 million estimated and actual leasehold improvements which were expensed in 2009.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation of our fixed assets and amortization of our customer list intangible assets. For both 2009 and 2008, depreciation and amortization expense was $8.1 million.

Interest Expense, Net. Interest expense, net was $4.2 million and $5.5 million in 2009 and 2008, respectively, a decrease of 23.3%. The decrease was due to our overall debt reduction.

Provision for Income Taxes. Our 2009 income tax expense was lower than the statutory rates given that income tax expense was in large part offset by a decrease in our valuation allowance. The total provision for federal, state and foreign income taxes was $0.9 million for 2009. Additionally, in accordance with the adoption of provisions of ASC Topic 805, Business Combinations, (formerly FAS 141R-1) on January 1, 2009, we were required to change the way in which we historically accounted for change in reserves related to tax assets acquired in purchase accounting, which resulted in a decrease in tax expense in 2009.

Our future effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. We continue to evaluate quarterly our estimates of the recoverability of our deferred tax assets based on our assessment of whether it is more likely than not any portion of these fully reserved are recoverable through future taxable income. At such time that we no longer have a reserve for our deferred tax assets, we will begin to provide for taxes at the full statutory rate. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

As of January 3, 2010, we had federal and state net operating loss carryforwards of approximately $96.7 million and $96.5 million, respectively, an alternative minimum tax credit carryforward of $0.6 million, and had recorded a reserve against the assets for net operating loss carryforwards due to the uncertainty related to the realization of these amounts.

Year Ended December 28, 2008, Compared to Year Ended December 30, 2007

We recorded an operating loss of $55.3 million and a net loss of $65.2 million in 2008. In 2008, we recorded a goodwill impairment charge of $86.8 million, or $86.0 million net of related tax effects. The decrease in operating income, excluding the goodwill impairment, was due primarily to a decrease in revenues as a result of lower billable headcount, slightly lower margins and an increase in selling, general and administrative.

Revenues. Revenues for 2008 and 2007 were $727.1 million and $743.3 million, respectively, representing a decrease of 2.2%. We continued to see bill rate pressures from our customers, particularly among Fortune 500 clients. Our revenue growth was driven primarily by our clients in the pharmaceutical and biotechnology and government sectors in 2008. Revenues from the pharmaceutical and biotechnology and government sectors increased by 17.4% and 34.7%, respectively, in 2008 from 2007. These increases were partially offset by revenue decreases of 21.1% and 21.9% from the telecommunications and financial services sectors, respectively, over the same period. Vendor management related fee revenue decreased 16.3% to $23.7 million in 2008 from $28.3 million in 2007 due to declining fee rates at several customers and a change in the mix of our customers. Reimbursable expense revenue increased to $17.1 million in 2008 from $11.1 million in 2007, primarily due to an increase in our services procurement management service offerings. This increase had no impact on gross margin dollars as the related reimbursable expense was recognized in the same period.

Cost of Services. Cost of services for 2008 and 2007 were $550.2 million and $558.1 million, respectively, representing a decrease of 1.4%. Cost of services as a percentage of revenue increased to 75.7% in 2008 from 75.1% in 2007. The increase in cost of services as a percentage of revenue was primarily due to lower revenues being spread over the fixed costs related to consultant labor such as state unemployment taxes and health care expenses.

Selling, General and Administrative. Selling, general and administrative expenses in 2008 and 2007 were $136.6 million and $135.4 million, respectively, representing an increase of 0.9%. The increase was due primarily to the additional selling, general and administrative expenses at the businesses acquired in December 2007 and June 2008, including a non-cash charge of approximately $3.4 million in 2008 for additional employee compensation relating to the Praeos purchase in December 2007. Additionally, the 2007 amount included $1.0 million in bad debt expense related to the bankruptcy of VMS provider Chimes. Included in these amounts are $4.4 million and $4.5 million of stock-based compensation in 2008 and 2007, respectively. Excluding the 2008 Praeos compensation charge and the 2007 Chimes bad debt charge, selling, general and administrative expenses decreased by 0.8% in 2008 from 2007. As a percentage of revenue, selling, general and administrative expenses increased to 18.8% in 2008 from 18.2% in 2007 primarily due to lower revenue in 2008.

Restructuring Costs. Restructuring costs for 2008 were $0.6 million, or 0.1% of revenue. These costs related primarily to the relocation of certain administrative functions from the Washington DC area and Portland, Oregon into our new Phoenix customer service center facility, employee termination benefits and lease termination costs.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation of our fixed assets and amortization of our customer list intangible assets. For 2008 and 2007, depreciation and amortization expense was $8.1 million and $6.4 million, respectively, representing an increase of 26.3% between periods. The increase in depreciation and amortization expense was primarily due to the depreciation of our enterprise software system and the amortization of the Plum Rhino, TWC and ASET customer list intangibles and the TWC assembled methodology intangible.

Goodwill Impairment. We recorded a non-cash, pre-tax goodwill impairment charge in 2008 of $86.8 million. The impairment was the result of the decline in our stock price during the fourth quarter of 2008 due to market conditions. Neither the 2008 operating trends nor our financial results for the fourth quarter of 2008 were factors that led to the charge.

Interest Expense, Net. Interest expense, net was $5.5 million and $8.3 million in 2008 and 2007, respectively, a decrease of 33.9%. The decrease was due to our overall debt reduction as well as a reduction in our related interest rates.

Provision for Income Taxes. Our 2008 income tax expense was lower than the statutory rates given that income tax expense was in large part offset by an increase in our valuation allowance. The income tax expense of $4.7 million for 2008 contains the following amounts: current expenses in the amount of $0.3 million for federal alternative minimum tax; $1.1 million for the Texas Margin tax, Michigan Gross Receipts tax, California Corporate Income and other miscellaneous state and foreign income tax expenses and a deferred expense in the amount of $3.3 million resulting from the release of a portion of the valuation allowance on Venturi’s acquired net deferred assets from the Comsys/Venturi merger. Although our net deferred tax asset is substantially offset with a valuation allowance, a portion of our fully-reserved deferred tax assets that became realized through operating profits is recognized as a reduction to goodwill to the extent it relates to benefits acquired in the Comsys/Venturi merger. This results in deferred tax expense as the assets are utilized. This portion of deferred tax expense represents the consumption of pre-merger deferred tax assets that were acquired with zero basis. In accordance with the provisions of ASC Topic 740 “Income Taxes,” we calculated a goodwill bifurcation ratio in the year of the Comsys/Venturi merger to determine the amount of deferred tax expense that should be offset to goodwill prospectively.

As of December 28, 2008, we had federal and state net operating loss carryforwards of approximately $100 million and $97 million, respectively, an alternative minimum tax credit carryforward of $0.5 million, and had recorded a reserve against the assets for net operating loss carryforwards due to the uncertainty related to the realization of these amounts.

Liquidity and Capital Resources

Overview

In March 2009, we extended the maturity of our senior credit agreement from March 2010 until March 31, 2012, as discussed below under “Credit Agreement.” Management felt it was important to extend the senior credit agreement prior to its expiration in March 2010 in order to give us the financial flexibility to make appropriate investments in our business and maintain our infrastructure through the duration of the recession.

We typically finance our operations through cash flow from operations and borrowings under our credit facilities. Due to the requirements of our senior credit agreement, as discussed in more detail below under the “Cash Flows” section, we do not maintain a significant cash balance in our primary domestic cash accounts. Excess borrowing availability under our existing revolving credit facility at January 3, 2010, was $71.0 million. Our borrowing availability is impacted by the timing of cash receipts and disbursements. Timing of receipts and disbursements in our vendor management business can have a material impact on the debt levels we report at any date; therefore, in 2008 we began reporting average daily debt for each quarter, as discussed below in “Credit Agreement.”

Should the Company not complete the Merger with Manpower (as discussed above in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Pending Exchange Offer and Merger with Manpower Inc.) we believe our cash flow provided by operating activities coupled with availability under our revolving credit facility will be sufficient to fund our working capital, debt service and purchases of fixed assets through fiscal 2010. In the event that we make future acquisitions, we may need to seek additional capital from our lenders or the capital markets; there can be no assurance that additional capital will be available when we need it, or, if available, that it will be available on favorable terms.

The performance of our business is dependent on many factors and subject to risks and uncertainties. See “Risk Factors” in Part I, Item 1A of this report.

Working Capital

Accounts receivable are a significant component of our working capital. We monitor our accounts receivable through a variety of metrics, including days sales outstanding (“DSO”). We calculate our consolidated DSO by determining average daily revenue based on an annualized three-month analysis and dividing it into the gross accounts receivable balance as of the end of the period. Accounts receivable, net, were $197.5 million and $202.3 million as of January 3, 2010, and December 28, 2008, respectively. Our consolidated DSO was 42 and 43 days as of January 3, 2010 and December 28, 2008, respectively. As a result of the timing of vendor management receipts and the seasonality in our operations, our consolidated DSO may materially fluctuate.

Additionally, we separately calculate a DSO for vendor management services (“VMS DSO”) by determining average daily vendor management service gross revenue based on an annualized three-month analysis and dividing it into the gross vendor management accounts receivable balance as of the end of the period. Vendor management accounts receivable were $92.3 million and $96.7 million as of January 3, 2010, and December 28, 2008, respectively. As of January 3, 2010, our VMS DSO was 34 days as compared to 35 days as of December 28, 2008.

Our total accounts payable were $137.4 million and $156.5 million as of January 3, 2010, and December 28, 2008, respectively. Included in the accounts payable balance, our vendor management services accounts payable and other liabilities were $90.8 million and $104.1 million as of January 3, 2010, and December 28, 2008, respectively.

Credit Agreement

In March 2009, we entered into a Ninth Amendment to our senior credit agreement (the “Amendment”). Among other things, the Amendment provided for (i) a decrease in our borrowing capacity under our existing revolving credit facility from $160.0 million to $110.0 million, (ii) an extension of the maturity date for the facility of an additional two years to March 31, 2012, and (iii) increases in the applicable interest rates under the facility to LIBOR plus a margin of 3.75% or, at our option, the prime rate plus a margin of 2.75%. The Amendment also permits us to make up to $10.0 million in stock repurchases and/or dividend payments in the aggregate subject to the terms and conditions specified.

We pay a quarterly commitment fee of 0.75% per annum on the unused portion of the revolver. We and certain of our subsidiaries guarantee the loans and other obligations under the senior credit agreement. The obligations under the senior credit agreement are secured by a perfected first priority security interest in substantially all of the assets of us and our U.S. subsidiaries, as well as the shares of capital stock of our direct and indirect U.S. subsidiaries and certain of the capital stock of our foreign subsidiaries. Pursuant to the terms of the senior credit agreement, we maintain a zero balance in our primary domestic cash accounts. Any excess cash in those domestic accounts is swept on a daily basis and applied to repay borrowings under the revolver, and any cash needs are satisfied through borrowings under the revolver.

Borrowings under the revolver are limited to 85% of eligible accounts receivable, as defined in the senior credit agreement, as amended, reduced by the amount of outstanding letters of credit and designated reserves. At January 3, 2010, these designated reserves were:

•

a $5.0 million minimum availability reserve, and

•

a $0.9 million reserve for outstanding letters of credit.

At January 3, 2010, we had outstanding borrowings of $38.1 million under the revolver at interest rates ranging from 3.99% to 6.00% per annum (weighted average rate of 4.00%) and excess borrowing availability under the revolver of $71.0 million for general corporate purposes. Fees paid on outstanding letters of credit are equal to the LIBOR margin then applicable to the revolver, which at January 3, 2010, was 3.75%. At January 3, 2010, outstanding letters of credit totaled $0.9 million. Our average daily net debt balances during 2009 were as follows, in thousands:

		2009
First quarter		$	57,871
Second quarter			59,777
Third quarter			55,793
Fourth quarter			51,840

Debt Compliance

Our credit facilities contain a number of covenants that, among other things, restrict our ability to:

•

incur additional indebtedness;

•

pay more than $10 million in the aggregate for stock repurchases and dividends;

•

incur liens;

•

make certain capital expenditures;

•

make certain investments or acquisitions;

•

repay debt; and

•

dispose of property.

In addition, our credit facilities have springing financial covenants that would require us to satisfy a minimum fixed charge coverage ratio and a maximum total leverage ratio if our excess availability falls below $25 million. A breach of any covenants governing our debt would permit the acceleration of the related debt and potentially other indebtedness under cross-default provisions, which could harm our business and financial condition. These restrictions may place us at a disadvantage compared to our competitors that are not required to operate under such restrictions or that are subject to less stringent restrictive covenants. As of January 3, 2010, we were in compliance with all covenant requirements.

The senior credit agreement contains various events of default, including failure to pay principal and interest when due, breach of covenants, materially incorrect representations, default under other agreements, bankruptcy or insolvency, the occurrence of specified ERISA events, entry of enforceable judgments against us in excess of $2.0 million not stayed and the occurrence of a change of control. In the event of a default, all commitments under the revolver may be terminated and all of our obligations under the senior credit agreement could be accelerated by the lenders, causing all loans and borrowings outstanding (including accrued interest and fees payable thereunder) to be declared immediately due and payable. In the case of bankruptcy or insolvency, acceleration of our obligations under our senior credit agreement is automatic.

Cash Flows

The following table summarizes our cash flow activity for 2009, 2008 and 2007, in thousands:

		Year ended
		January 3,				December 28,				December 30,
		2010				2008				2007
Net cash provided by operating activities		$	17,032			$	37,351			$	58,810
Net cash used in investing activities			(5,189	)			(13,675	)			(34,022	)
Net cash used in financing activities			(33,916	)			(2,128	)			(24,881	)
Effect of exchange rates on cash			67				(447	)			82
Net increase (decrease) in cash and cash equivalents		$	(22,006	)		$	21,101			$	(11	)

Cash provided by operating activities was $17.0 million, $37.4 million and $58.8 million in 2009, 2008 and 2007, respectively. The decrease in 2009 was primarily a result of lower net income due to the impact of the recession on our revenue and our decision to maintain infrastructure, as discussed above in the Overview of 2009 Results. The decrease in 2008 was primarily due to a decrease in net income and a use of cash from working capital. In addition to cash provided by earnings, cash flows from operating activities are affected by the timing of cash receipts and disbursements, including the timing of cash receipts and disbursements of our vendor management services, and the working capital requirements of the business.

Cash used in investing activities was $5.2 million, $13.7 million and $34.0 million in 2009, 2008 and 2007, respectively. Our cash flows associated with investing activities in 2009, 2008 and 2007 included capital expenditures of $1.5 million, $5.8 million and $3.1 million, respectively, and cash paid for acquisitions of $3.7 million, $7.9 million and $30.9 million, respectively. The increase in 2008 capital expenditures over 2007 was related primarily to the upgrade of our enterprise software system, leasehold improvements related to our new customer service center and the purchase of computer hardware, while in 2009, the capital expenditures were lower due to the completion of these projects as well as a planned reduction in capital projects.

Cash used in financing activities was $33.9 million, $2.1 million and $24.9 million in 2009, 2008 and 2007, respectively. Cash flows associated with financing activities in 2009, 2008 and 2007 primarily represent borrowings and payments on our revolving credit facility, plus $2.3 million used in 2009 for financing costs related to the Amendment to our senior credit agreement.

Pursuant to the terms of the senior credit agreement, we maintain a zero balance in our primary domestic cash accounts. Any excess cash in our accounts is swept on a daily basis and applied to repay borrowings under the revolver, and any cash needs are satisfied through borrowings under the revolver. Cash and cash equivalents recorded on our Consolidated Balance Sheet at January 3, 2010, and December 28, 2008, in the amount of $0.7 million and $22.7 million, respectively, represented cash balances at our Toronto and United Kingdom subsidiaries and at December 28, 2008, included $20.0 million we had invested in a US Treasury money market fund which was used to repay a portion of our senior credit agreement during the first quarter of 2009.

Seasonality

Our business is affected by seasonal fluctuations in corporate IT expenditures. Generally, expenditures are lowest during the first quarter of the year when our clients are finalizing their IT budgets. In addition, our quarterly results may fluctuate depending on, among other things, the number of billing days in a quarter and the seasonality of our clients’ businesses. Our business is also affected by the timing of holidays and seasonal vacation patterns, generally resulting in lower revenues and gross margins in the fourth quarter of each year. Extreme weather conditions may also affect demand in the first and fourth quarters of the year as certain of our clients’ facilities are located in geographic areas subject to closure or reduced hours due to inclement weather. In addition, we experience an increase in our cost of sales and a corresponding decrease in gross profit and gross margin in the first fiscal quarter of each year as a result of resetting certain state and federal employment tax rates and related salary limitations.

Off-Balance Sheet Risk Disclosure

At January 3, 2010, and December 28, 2008, we did not have any transactions, agreements or other contractual arrangements constituting an “off-balance sheet arrangement” as defined in Item 303(a)(4) of Regulation S-K.

Contractual and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments at January 3, 2010, in thousands:

						Payments Due by Period
						Less than												More than
Contractual Obligations		Total				One Year				1-3 Years				3-5 Years				5 Years
Long-term debt (1)		$	38,101			$	—			$	38,101			$	—			$	—
Notes payable (2)			1,000				1,000				—				—				—
Operating leases (5)			25,314				6,647				8,779				5,300				4,588
Purchase obligations (3)			1,783				1,601				182				—				—
Deferred compensation			1,088				150				300				300				338
Total contractual cash obligations		$	67,286			$	9,398			$	47,362			$	5,600			$	4,926

						Commitment Expiration per Period
						Less than												More than
Other Commercial Commitments		Total				One Year				1-3 Years				3-5 Years				5 Years
Letters of Credit (4)		$	871			$	871			$	—			$	—			$	—

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates affect the reported amounts of assets, liabilities, the disclosure of contingent liabilities and revenues and expenses. We evaluate these estimates and assumptions on an ongoing basis, including but not limited to those related to revenue recognition, the recoverability of goodwill, collectability of accounts receivable, reserves for medical costs, stock-based compensation, tax-related contingencies and realization of deferred tax assets. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ materially from these estimates.

We believe the following accounting policies are critical to our business operations and the understanding of our operations and include the more significant judgments and estimates used in the preparation of our consolidated financial statements. The consolidated financial statements include the accounts of COMSYS IT Partners, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition

We recognize revenue and record sales, net of related discounts, when all of the following criteria are met:

•

Persuasive evidence of an arrangement exists;

•

Ownership has transferred to the customer;

•

The price to the customer is fixed or determinable; and

•

Collectibility is reasonably assured.

Our core staffing revenues vary from period to period based on several factors that include: 1) the billable headcount during the period; 2) the number of billing days during the period; and 3) the average bill rate during the period.

Revenues under time-and-materials contracts are recorded at the time services are performed. Hourly bill rates are typically determined based on the level of skill and experience of the consultants assigned and the supply and demand in the current market for those qualifications. Alternatively, the bill rates for some assignments are based on a mark-up over compensation and other direct and indirect costs.

Revenues from services are shown net of rebates and discounts relating primarily to volume-related discount structures and prompt-payment discounts under contracts with our clients.

We report revenues from vendor management services net of the related pass-through labor costs. “Vendor management services” are services that allow our clients to automate and consolidated management of their temporary personnel contracting processes. We also report revenues net for payrolling activity. “Payrolling” is defined as a situation in which we accept a client-identified consultant for payroll processing in exchange for a fee. Permanent placement fee revenues are usually determined based on a percentage of the employee’s first year cash compensation and are recorded when candidates begin their employment.

Reimbursable expenses are expenses we pay to our consultants that are reimbursed by our clients. We record reimbursable expenses in revenue with the associated cost recorded in cost of services.

Goodwill and Other Intangible Assets

Goodwill. Goodwill and other intangible assets with indefinite lives are tested annually for impairment, unless an event occurs or circumstances change during the year that reduce or may reduce the fair value of the reporting unit below its book value, in which event an impairment charge may be required during the year. We have selected the last day of the second-to-last month of our fiscal year as the date on which we will perform our annual goodwill impairment test. We performed our annual impairment test as of November 29, 2009 and determined that the fair value of the reporting unit exceeded the carrying value and we did not have an impairment.

At January 3, 2010, and December 28, 2008, total goodwill was $89.3 million and $89.1 million, respectively.

The annual test requires estimates and judgments by management to determine a valuation for the reporting unit. Although we believe our assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially affect our reported financial results. If the merger with Manpower does not commence we could come to a different fair value that could result in additional future impairment charges, which would be recognized as a non-cash charge to operating income and a reduction in asset values and shareholders’ equity on the balance sheet.

Other intangible assets. Our intangible assets other than goodwill primarily represent acquired customer lists and are amortized over the respective contract terms or estimated life of the customer list, ranging from one to eight years. At January 3, 2010, and December 28, 2008, net intangible assets were $8.9 million and $12.0 million, respectively. In the event that facts and circumstances indicate intangibles or other long-lived assets may be impaired, we evaluate the recoverability and estimated useful lives of such assets. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges in the future. We performed an impairment test as of November 29, 2009, and concluded that no impairment charge was required. We believe that all of our long-lived assets are fully realizable as of January 3, 2010.

Collectibility of Accounts Receivable

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Estimates are used in determining our allowance for doubtful accounts and are based on our historical level of write-offs and judgments management makes about the creditworthiness of significant customers based on ongoing credit evaluations. Further, we monitor current economic trends that might impact the level of credit losses in the future. Since we cannot predict with certainty future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. Additional allowances may be required if the economy or the financial condition of our customers deteriorates. If we determined that a smaller or larger allowance was appropriate, we would record a credit or a charge to selling, general and administrative expense in the period in which we made such a determination. As of January 3, 2010, and December 28, 2008, the allowance for uncollectible accounts receivable was $3.3 million and $3.2 million, respectively.

Stock-Based Compensation

We record share-based payment awards exchanged for employee services at fair value on the date of grant and expense the awards in the consolidated statements of operations over the requisite employee service period. Stock-based compensation expense includes an estimate for forfeitures and is generally recognized over the expected term of the award on a straight-line basis. At January 3, 2010, we had two types of stock-based employee compensation: stock options and restricted stock, though we have only awarded restricted stock since January 2006.

Restricted stock. We measure the fair value of restricted shares based upon the closing market price of our common stock on the date of grant. These grants typically vest over a three-year period and any unvested awards expire at the end of the vesting period. Restricted stock awards that vest in accordance with service conditions are amortized over their applicable vesting period using the straight-line method adjusted for estimated forfeitures. For nonvested share awards partially or wholly subject to performance conditions, we are required to assess the probability that such performance conditions will be met. If the likelihood of the performance condition being met is deemed probable, we will recognize the expense using the straight-line attribution method. If such performance conditions are not met, no performance-based compensation expense will be recognized and any previously recognized compensation expense will be reversed. We have not historically issued any restricted stock awards subject to market conditions.

Stock options. The fair value of our stock option awards or modifications of these awards is estimated at the date of grant or modification using the Black-Scholes option pricing model. The Black-Scholes valuation requires us to estimate key assumptions such as future stock price volatility, expected terms, risk-free rates and dividend yield. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates. Our estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the company’s performance, and related tax impacts.

We had approximately $4.0 million of total unrecognized compensation costs related to nonvested option and restricted stock awards at January 3, 2010, that are expected to be recognized over a weighted-average period of 23 months.

Income Tax Assets and Liabilities

We follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Beginning in 2009, we changed our accounting for the remaining reserved deferred tax assets that previously would have been treated as reductions to goodwill. This resulted in a decline in our reported income tax expense (see “Recent Accounting Pronouncements” below).

We record an income tax valuation allowance when it is more likely than not that certain deferred tax assets will not be realized. These deferred tax items represent expenses or operating losses recognized for financial reporting purposes, which will result in tax deductions over varying future periods. The judgments, assumptions and estimates that may affect the amount of the valuation allowance include estimates of future taxable income, timing or amount of future reversals of existing deferred tax liabilities and other tax planning strategies that may be available to us.

We record an estimated tax liability or tax benefit for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which we operate. We use our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent upon various matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to the estimated liability would be recorded as a provision or benefit to income tax expense in the period in which it becomes probable that the amount of the actual liability or benefit differs from the recorded amount.

Our future effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. If we continue to be profitable, we will continue to evaluate each quarter our estimates of the recoverability of our deferred tax assets based on our assessment of whether any portion of these fully reserved assets become more likely than not recoverable through future taxable income. At such time, if any, that we no longer have a reserve for our deferred tax assets, we will begin to provide for taxes at the full statutory rate. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Recent Accounting Pronouncements

Recent Accounting Pronouncements are included in “Item 7. Financial Statements and Supplementary Data” Note 2 to the consolidated financial statements, “Significant Accounting Policies.”

ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following assessment of our market risks does not include uncertainties that are either nonfinancial or nonquantifiable, such as political, economic, tax and credit risks.

We are exposed to market risks, primarily related to interest rate, foreign currency and equity price fluctuations. Our use of derivative instruments has historically been insignificant.

Interest Rate Risks

Outstanding debt under our senior credit agreement at January 3, 2010, was approximately $38.1 million. Interest on borrowings under the agreement is based on the prime rate or LIBOR plus a variable margin. Based on the outstanding balance at January 3, 2010, a change of 1% in the interest rate would cause a change in interest expense of approximately $0.4 million on an annual basis.

Foreign Currency Risks

Our primary exposures to foreign currency fluctuations are associated with transactions and related assets and liabilities related to our operations in Canada and the United Kingdom. Changes in foreign currency exchange rates impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates prevailing during the period. The assets and liabilities on our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of a reporting period. The resulting translation adjustments are recorded in Stockholders’ Equity, as a component of accumulated other comprehensive income (loss), in our Consolidated Balance Sheets. These operations are not material to our overall business.

Equity Market Risks

The trading price of our common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations. Such fluctuations could impact our decision or ability to utilize the equity markets as a potential source of our funding needs in the future.

ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
Report of Independent Registered Public Accounting Firm			38
Consolidated Balance Sheets			39
Consolidated Statements of Operations			40
Consolidated Statements of Comprehensive Income (Loss)			41
Consolidated Statements of Stockholders’ Equity			42
Consolidated Statements of Cash Flows			43
Notes to Consolidated Financial Statements			44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
COMSYS IT Partners, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of COMSYS IT Partners, Inc. and Subsidiaries (the “Company”) as of January 3, 2010, and December 28, 2008, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 3, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of COMSYS IT Partners, Inc. and Subsidiaries at January 3, 2010, and December 28, 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 3, 2010, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), COMSYS IT Partners, Inc.’s internal control over financial reporting as of January 3, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2010, expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Phoenix, Arizona
March 1, 2010

COMSYS IT Partners, Inc. and Subsidiaries

Consolidated Balance Sheets

		January 3,				December 28,
(In thousands, except share and par value amounts)		2010				2008
Assets
Current assets:
Cash and cash equivalents		$	689			$	22,695
Accounts receivable, net of allowance of $3,321 and $3,232, respectively			197,537				202,297
Prepaid expenses and other			2,716				3,116
Restricted cash			2,486				2,489
Total current assets			203,428				230,597
Fixed assets, net			12,966				16,596
Goodwill			89,256				89,064
Other intangible assets, net			8,926				11,962
Deferred financing costs, net			2,463				1,175
Restricted cash			308				308
Other assets			1,103				1,478
Total assets		$	318,450			$	351,180
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	137,357			$	156,528
Payroll and related taxes			32,679				25,975
Interest payable			237				337
Other current liabilities			9,002				9,728
Total current liabilities			179,275				192,568
Long-term debt			38,101				69,692
Other liabilities			4,705				5,435
Total liabilities			222,081				267,695
Commitments and contingencies
Stockholders’ equity:
Preferred stock, no par value; 5,000,000 shares authorized; none issued			—				—
Common stock, par value $.01; 95,000,000 shares authorized; 21,061,592 and 20,465,028 shares issued and outstanding in 2009 and 2008, respectively			210				203
Common stock warrants			1,734				1,734
Accumulated other comprehensive loss			(79	)			(90	)
Additional paid-in capital			230,820				227,360
Accumulated deficit			(136,316	)			(145,722	)
Total stockholders’ equity			96,369				83,485
Total liabilities and stockholders’ equity		$	318,450			$	351,180

See notes to consolidated financial statements

COMSYS IT Partners, Inc. and Subsidiaries

Consolidated Statements of Operations

		Year ended
		January 3,				December 28,				December 30,
(In thousands, except per share amounts)		2010				2008				2007
Revenues from services		$	649,307			$	727,108			$	743,265
Cost of services			490,864				550,189				558,074
Gross profit			158,443				176,919				185,191
Operating costs and expenses:
Selling, general and administrative			132,139				136,648				135,423
Restructuring costs			3,895				637				—
Depreciation and amortization			8,086				8,115				6,426
Goodwill impairment			—				86,800				—
			144,120				232,200				141,849
Operating income (loss)			14,323				(55,281	)			43,342
Interest expense, net			4,185				5,457				8,250
Other income, net			(149	)			(204	)			(536	)
Income (loss) before income taxes			10,287				(60,534	)			35,628
Income tax expense			881				4,654				2,279
Net income (loss)		$	9,406			$	(65,188	)		$	33,349
Basic net income (loss) per common share		$	0.45			$	(3.19	)		$	1.67
Diluted net income (loss) per common share		$	0.45			$	(3.19	)		$	1.66
Weighted average basic and diluted shares outstanding:
Basic			19,801				19,599				19,255
Diluted			19,801				19,599				20,100

See notes to consolidated financial statements

COMSYS IT Partners, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

		Year Ended
		January 3,				December 28,				December 30,
(In thousands)		2010				2008				2007
Net income (loss)		$	9,406			$	(65,188	)		$	33,349
Foreign currency translation adjustments			11				(147	)			69
Total comprehensive income (loss)		$	9,417			$	(65,335	)		$	33,418

See notes to consolidated financial statements

COMSYS IT Partners, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

										Accumulated
						Common				Other				Additional								Total
		Common				Stock				Comprehensive				Paid-in				Accumulated				Stockholders’
(In thousands, except share data)		Stock				Warrants				Income (Loss)				Capital				Deficit				Equity
Balance as of December 31, 2006		$	191			$	1,734			$	(12	)		$	206,740			$	(113,883	)		$	94,770
Net income			—				—				—				—				33,349				33,349
Foreign currency translations			—				—				69				—				—				69
Issuance of 501,413 shares of common stock for acquisitions			5				—				—				10,560				—				10,565
Issuance of 244,000 shares of restricted common stock			3				—				—				(3	)			—				—
Forfeiture of 28,807 vested shares of restricted common stock			—				—				—				(428	)			—				(428	)
Options exercised for 185,683 shares of common stock			2				—				—				1,777				—				1,779
Stock issuance costs			—				—				—				(19	)			—				(19	)
Stock-based compensation			—				—				—				4,547				—				4,547
Balance as of December 30, 2007		$	201			$	1,734			$	57			$	223,174			$	(80,534	)		$	144,632
Net loss			—				—				—				—				(65,188	)			(65,188	)
Foreign currency translations			—				—				(147	)			—				—				(147	)
Issuance of 342,878 shares of restricted common stock			2				—				—				(2	)			—				—
Forfeiture of 25,132 vested shares of restricted common stock			—				—				—				(332	)			—				(332	)
Options exercised for 8,200 shares of common stock			—				—				—				83				—				83
Stock-based compensation			—				—				—				4,437				—				4,437
Balance as of December 28, 2008		$	203			$	1,734			$	(90	)		$	227,360			$	(145,722	)		$	83,485
Net income			—				—				—				—				9,406				9,406
Foreign currency translations			—				—				11				—				—				11
Issuance of 709,000 shares of restricted common stock			7				—				—				(7	)			—				—
Forfeiture of 11,004 vested shares of restricted common stock			—				—				—				(47	)			—				(47	)
Stock-based compensation			—				—				—				3,514				—				3,514
Balance as of January 3, 2010		$	210			$	1,734			$	(79	)		$	230,820			$	(136,316	)		$	96,369