UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended SeptemberMarch 28, 20072008

OR

For the transition period fromto            

Commission File Number 0-24343

Answerthink,The Hackett Group, Inc.

(Exact name of Registrant as specified in its charter)

(305) 375-8005

(Registrant’s telephone number, including area code)

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 requirement for the past 90 days.    YES  x    NO  ¨

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of October 25, 2007,May 2, 2008, there were 43,626,64041,170,844 shares of common stock outstanding.

Answerthink,The Hackett Group, Inc.

TABLE OF CONTENTS

PART I - FINANCIALI-FINANCIAL INFORMATION

Answerthink,The Hackett Group, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

Answerthink,The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

Answerthink,The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

Answerthink,The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and General Information

Basis of Presentation

The consolidated financial statements of AnswerthinkThe Hackett Group,Inc. (“Answerthink”Hackett” or the “Company”) include the accounts of the Company and all of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated financial statements include the Company’s accounts and those of its wholly owned subsidiaries which the Company is required to consolidate. The Company consolidates the assets, liabilities, and results of operations of entities in accordance with Accounting Research Bulletin (“ARB”) No. 51,Consolidated Financial Statements, Statement of Financial Accounting Standards (“SFAS”) No. 94,Consolidation of All Majority-Owned Subsidiaries – an amendment of ARB No. 51, with related amendments of Accounting Principles Board (“APB”) Opinion No. 18 and ARB No. 43, Chapter 12, and the Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46,Consolidation of Variable Interest Entities, as revised.

In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 29, 200628, 2007 included in the Annual Report Form 10-K filed by the Company with the Securities and Exchange Commission. The consolidated results of operations for the quarter and nine months ended SeptemberMarch 28, 20072008 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This standard is effective for the Company’s fiscal year beginning December 29, 2007. In accordance with FASB Staff Position FAS No. 157 (“FSP No. 157-2”),Effective Date of FASB Statement No. 157, the FASB has deferred the implementation of the provisions of SFAS No. 157 relating to nonfinancial assets and liabilities until January 1, 2009. The adoption of SFAS No. 157 did not have a material impact on the Company’s results of operations, financial position or liquidity.

At March 28, 2008, the Company’s financial instruments were carried at fair value in the consolidated balance sheet. The fair value of the Company’s short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other liabilities, equaled the respective carrying value due to the short-term nature of these instruments. The fair value of the Company’s investment in the Columbia Strategic Cash Portfolio (“Portfolio”) was based on Portfolio information available to the Company, the market outlook, and the expected timing of the remaining redemptions (see Note 6 for further detail on the Portfolio.)

2. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. With regard to common stock subject to vesting requirements or restricted stock units issued to employees, the calculation includes only the vested portion of such stock.

Net income (loss) per common share assuming dilution is computed by dividing net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.

Potentially dilutive shares were excluded from the diluted loss per share calculation for the nine monthsquarter ended September 29, 2006March 30, 2007 as their effects would have been anti-dilutive to the net loss incurred by the Company.

Answerthink,The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2. Net Income (Loss) Per Common Share (continued)

The following table reconciles basic and diluted weighted average shares:

Approximately 1.5 million and 1.71.2 million stock options were excluded from the computations of diluted net income per common share for the quartersquarter ended SeptemberMarch 28, 2007 and September 29, 2006, respectively,2008, as their stockexercise price was higher than the Company’s average stock price.

3. Comprehensive Gain (Loss)

The Company accounts for comprehensive gain (loss) under SFAS No. 130,Reporting Comprehensive Income. Comprehensive gain (loss) is summarized below (in thousands):

4. LossCollections from Misappropriation net of Collections

As described in the Company’s Form 8-K filed on November 1, 2006, on or aboutin October 26, 2006 the Company learned of a misappropriation by its former UK disbursement agent which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The Company and its former disbursement agent agreed to settlement terms that resulted in the receipt of an initial cash payment of $350 thousand in January 2007 and the receipt of the final cash payment of $2.3 million in October 2007. These receipts are and will bewere accounted for in losscollections from misappropriation net of collections, in the Consolidated Statementsconsolidated statements of Operationsoperations in the period in which they arewere received.

Answerthink,The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. Restructuring

The Company recorded restructuring costs of $10.9 million and $5.6 million in fiscal years 2002 and 2001, respectively, for reductions in consultants and functional support personnel and for the closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services throughout 2001 and 2002. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated demand for its services.

In 2004 and 2003, the Company recorded restructuring costs of $3.7 million and $4.9 million, respectively, to increase existing reserves to account for potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease excess facilities. The 2004 and 2003 restructuring costs consisted of additions of $1.8 million and $3.1 million to the 2002 restructuring accrual and $1.9 million and $1.8 million to the 2001 restructuring accrual, respectively. Also in 2004, the 2002 restructuring accrual was reduced by $370 thousand relating to the final settlement of a lease obligation which was recorded as income from discontinued operations in the Consolidated Statementconsolidated statement of Operationsoperations for year ended December 31, 2004.

In 2005, the Company recorded restructuring costs of $2.9 million which related to $1.1 million for the consolidation of additional facilities and related exit costs not included in previously established reserves, primarily as a result of the REL Consultancy Group (“REL”) acquisition on November 29, 2005, and $1.8 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities, of which $1.1 million is specifically related to the increase of previously established reserves in order to reflect the negotiated buyout of a New York City lease obligation. As a result of the buyout, the Company was fully released from $20.0 million of future lease obligations, assigned two subleases to the lessor, wrote-off a $1.4 million receivable from the lessor, and paid $3.1 million in cash to the lessor. The remaining $700 thousand related to increases in the reserves to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. The 2005 restructuring costs of $1.8 million related to previously established reserves, which consisted of additions of $1.2 million and $600 thousand to the 2002 and 2001 restructuring accruals, respectively.

In 2006, the Company recorded restructuring costs of $6.3 million, which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a result of the REL acquisition, and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shiftsshifted to a proprietary best practice and intellectual capital and strategic advisory services firm.

Answerthink,The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. Restructuring (continued)

The following tables set forth the detail and activity in the restructuring expense accruals during the nine monthsquarter ended SeptemberMarch 28, 20072008 (in thousands):

2001 Restructuring Accrual

7. Loan Payable6. Marketable Investments

At SeptemberAs of March 28, 20072008 and December 29, 2006, the Company did not have any outstanding loans. At December 30, 2005,28, 2007, the Company had $4.5 million and $7.0 million, respectively, in Bank of America’s Columbia Strategic Cash Portfolio (“Portfolio”). On December 7, 2007, the Portfolio was closed for redemptions to new investors and is currently under liquidation.

During the quarter ended March 28, 2008, the Company received redemptions from the Portfolio of 2.5 million shares, or 31% of its investment, for approximately $2.5 million or $0.99 per share (par value representing $1.00). Since the closing of the Portfolio, the Company has received total redemptions of 3.3 million shares, or 40% of its investment, for $3.2 million or $0.98 per share. The Portfolio continues to accrue and pay interest which the Company is recording as income only after the collection of the interest is certain.

Based on Portfolio information available to the Company, the market outlook, and the expected timing of the remaining redemptions, the Company has estimated the fair value of the remaining Portfolio shares to be $0.94 per share, consistent with the Company’s estimate of the Portfolio fair value at December 28, 2007. As a loan withresult of its estimation of the fair value of the Portfolio, the Company recorded a financial institutionrealized loss on the marketable investments of $3.7 million which$450 thousand in the quarter ended December 28, 2007. No impairment was repaidrecorded in the quarter ended March 2006.28, 2008.

Answerthink,The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8. Income Taxes7. Accounts Receivable and Unbilled Revenue, Net

Effective December 30, 2006, the Company adopted FIN No. 48,Accounting for Uncertainty in Income Taxes. FIN No. 48 prescribes a more-likely-than-not threshold for financial statement recognitionAccounts receivable and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

As a resultunbilled revenues, net consisted of the implementation of FIN No. 48, the Companyfollowing (in thousands):

Unbilled revenue represents revenue for services performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that hashave not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, the Company adjusted the estimated value of its uncertain tax positionsinvoiced, offset by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and included in the non-current portion of accrued expenses and other liabilities in the Consolidated Balance Sheet as of September 28, 2007. The amount of unrecognized tax positions did not materially change as of September 28, 2007 and the Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of September 28, 2007.

The Company files federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most probable outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years through 2002. All significant state, local and foreign matters have been concluded for years through 2002.uncollected advanced billings.

9.8. Stock Based Compensation

During the quarter and nine months ended SeptemberMarch 28, 2007,2008, the Company issued 105,660 and 633,660905,108 restricted stock units respectively, at a weighted average grant-date fair value of $3.51 and $3.44, respectively.$3.61. Additionally, during the quarter and nine months ended SeptemberMarch 28, 2007, 67,000 and 429,324 shares, respectively, were issued in connection with an acquisition and2008, 15,000 restricted stock units and common stock subject to vesting requirements were forfeited at a weighted average grant-date fair value of $3.18 and $4.11, respectively.$4.66. As of SeptemberMarch 28, 2007,2008, the Company had 1,430,9072,017,789 restricted stock units outstanding.outstanding at a weighted average grant-date fair value of $3.78.

10.9. Shareholders’ Equity

Treasury Stock

On July 30, 2002, the Company announced that its Board of Directors approved the repurchase of up to $5.0 million of the Company’s common stock, which was subsequently increased to $30.0 million during the fiscal years 2003 to 2005. During the quarter ended SeptemberMarch 28, 2007,2008, the Board of Directors approved the repurchase of an additional $5.0 million of the Company’s common stock, thereby increasing the total approval forunder the Company’s share repurchase program to $35.0$45.0 million. Under the repurchase plans, the Company may buy back shares of its outstanding stock from time to time either on the open market or through privately negotiated transactions subject to market conditions and trading restrictions. During the quarter ended SeptemberMarch 28, 2007,2008, the Company repurchased approximately 1.21.8 million shares of its common stock at an average price of $3.47,$3.81, for a total cost of approximately $4.1$6.8 million. As of SeptemberMarch 28, 2007,2008, the Company hadhas repurchased approximately 8.911.7 million shares of its common stock at an average price of $3.36$3.49 per share, since inception, leaving $5.3$4.3 million available under the Company’s share buyback program.

Subsequent to SeptemberMarch 28, 2007,2008, the Board of Directors approved the repurchase of an additional $5.0 million of the Company’s common stock, thereby increasing the total approval for repurchase to $40.0$50.0 million.

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11.10. Litigation

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the financial position, cash flows or results of operations of the Company.

12.The Hackett Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11. Geographic and Service Group Information

Revenues were attributed to geographic areas as follows (in thousands):

Long-lived assets were attributed to geographic areas as follows (in thousands):

As of March 28, 2008 and December 28, 2007, foreign assets included $18.9 million and $18.8 million, respectively, of goodwill and intangible assets related to the REL acquisition in November 2005.

The Company’s revenue was derived from the following groups (in thousands):

13.12. Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current year presentation.

Item 2.

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and the information incorporated by reference in it include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our business and industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward-looking statements include, among others, our ability to effectively integrate acquisitions into our operations, our ability to attract additional and retain existing business, the timing of projects and the potential for contract cancellation by our customers, changes in expectations regarding our industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, foreign currency fluctuations and changes in general economic conditions and interest rates. An additional description of our risk factors is set forth in our Annual Report on Form 10-K for the year ended December 29, 2006.28, 2007. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

The Hackett Group, Inc. (“Hackett”), formerly known as Answerthink, Inc. prior to January 1, 2008, is a leading businessstrategic advisory and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group,database, the world’s leading repository of enterprise business process performance metrics and best practice intellectual capital, our business and technology solutions help clients improve performance and maximize returns on technology investments.

The Hackett Group,is a strategic advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking, business transformation and working capital management services that empirically define and enable world-class enterprise performance. Only The Hackett Group empirically defines world-class performance in Sales, Generalsales, general and Administrativeadministrative and supply chain activities with analysis gained through more than 4,000 benchmark studies over 1516 years and work withat 2,700 of the world’s leading companies.

Answerthink’sHackett’s combined capabilities include business advisory programs, benchmarking, business transformation, working capital management and business applicationstechnology solutions, with corresponding offshore support. AnswerthinkHackett was formed on April 23, 1997.

In the following discussion, “Hackett” represents our total Company, “The Hackett Group” encompasses our Benchmarking, Business Transformation and Executive Advisory groups, and “Hackett Technology Solutions” encompasses our technology groups, including SAP, Oracle and Hyperion.

Results of Operations

The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to revenues of such results.

Quarter and Nine Months Ended SeptemberMarch 28, 20072008 versus Quarter and Nine Months Ended September 29, 2006March 30, 2007

Revenues.Revenues for the quarter ended SeptemberMarch 28, 20072008 increased 7%10% to $46.7$43.8 million from $43.6$39.9 million in the quarter ended September 29, 2006. Revenues in the nine months ended September 28, 2007 decreased 7% to $132.1 million from $142.4 million in the nine months ended September 29, 2006.March 30, 2007. The following table summarizes gross revenue:

The Hackett Group revenues have grown 42%increased 31%, or $9.0$7.1 million, and 12% or $8.3to $30.0 million forin the quarter and nine months ended SeptemberMarch 28, 2007, respectively,2008, compared to $22.9 million in the quarter and nine months ended September 29, 2006.March 30, 2007. This growth was primarily dueattributable to increased revenues of 45% and 9%a 35%, or $6.7 million, increase in our Benchmarking and Business Transformation group respectively, and increased revenuesin the quarter ended March 28, 2008 from the quarter ended March 30, 2007. The increase in The Hackett Group revenue was mostly a result of a change in our Membership Advisory Programs groupgo-to-market strategy beginning in early 2007 with the introduction of 29% and 34%, fora new transformational benchmark which integrates a benchmark with a strategic transformation plan. As a result, we have seen a steady increase in the average size of our engagements since the beginning of 2007 through March 28, 2008. During the quarter and nine months ended SeptemberMarch 28, 2007, respectively,2008, one client accounted for 7% of our total revenues, compared to the quarter and nine months ended September 29, 2006.March 30, 2007 in which no customer accounted for greater than 3% of our total revenues.

Additionally, The Hackett Group continued to realize strong growth in Europe with a 39% increase in revenues in the quarter ended March 28, 2008, compared to the quarter ended March 30, 2007. The Hackett Group European revenues accounted for 31% of The Hackett Group total revenues in the quarter ended March 28, 2008, compared to 29% in the quarter ended March 30, 2007.

The revenue increases in The Hackett Group were partially offset by revenue decreases in our Best Practice Solution groupHackett Technology Solutions of 26%18%, or $5.8$3.1 million, and 26%, or $18.6to $13.9 million forin the quarter and nine months ended SeptemberMarch 28, 2007, respectively. These decreases2008, compared to $17.0 million in the quarter ended March 30, 2007. The decrease in revenues in our Best Practice Solution group wereHackett Technology Solutions was primarily due to the exit of our Lawson and low margin SAP staff augmentation contracts at the end of 2006 and lower revenues from our Oracle and Hyperion groups.group.

Reimbursements as a percentage of revenues during the quarters ended March 28, 2008 and nine months ended September 28,March 30, 2007 and September 29, 2006 were comparable at 11% and 10%, and 10% and 10%9%, respectively.

During the quarters and nine months ended September 28, 2007 and September 29, 2006, no customer accounted for revenues equal to or greater than 5% of total revenues.

Cost of Service.Cost of service primarily consists of salaries, benefits and incentive compensation for consultants and reimbursable expenses associated with projects. Cost of service was comparable at $27.7before reimbursable expenses increased 5% to $27.5 million in the quarter ended SeptemberMarch 28, 2007 and2008 from $26.3 million in the quarter ended September 29, 2006. Cost of service decreased 9% to $81.2 million in the nine months ended September 28, 2007 from $89.2 million in the nine months ended September 29, 2006. The nine month decrease was primarily attributable to a decrease in our Best Practice Solution group’s headcount as a result of the exit from our Lawson and low margin SAP staff augmentation contracts.

March 30, 2007. Cost of service as a percentage of revenue was 63% in the quarter ended March 28, 2008 compared to 66% in the quarter ended March 30, 2007. This decrease is primarily due to The Hackett Group’s higher cost per professional and headcount, which is consistent with its revenue growth, partially offset by headcount reductions in Hackett Technology Solutions.

The growth in The Hackett Group revenues duringhas resulted in a favorable impact to net income, as The Hackett Group revenues realized a 43% gross margin for the quartersquarter ended SeptemberMarch 28, 2008, compared to Hackett Technology Solutions which realized a 23% gross margin for the same period.

Selling, General and Administrative. Selling, general and administrative costs decreased 24% (excluding foreign currency translation gains 17%) to $12.6 million in the quarter ended March 28, 2008 from $16.5 million in the quarter ended March 30, 2007, primarily from cost containment incentives initiated in early 2007 resulting in the re-alignment of the sales force and September 29, 2006 decreased to 59% from 64%, respectively, primarily as a result ofrevised incentive compensation plans, other general and administrative headcount reductions, and higher revenues. Cost of servicegains on foreign currency translation. Selling, general and administrative costs as a percentage of revenues during the nine months ended September 28, 2007 and September 29, 2006 was comparable at 61% and 63%, respectively.

Selling, General and Administrative.Selling, general and administrative costs were comparable at $15.6 million and $48.9 milliondecreased to 29% in the quarter and nine months ended SeptemberMarch 28, 2007, respectively, compared to $15.2 million and $49.6 million2008 from 41% in the quarter and nine months ended September 29, 2006, respectively.

Restructuring Costs.We recorded restructuring costs for the nine months ended September 29, 2006 of $6.3 million which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a result of the REL Consultancy Group (“REL”) acquisition and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shifts to a proprietary best practice intellectual capital and strategic advisory services firm. We did not record any restructuring costs for the quarter and nine months ended September 28,March 30, 2007.

LossCollections from Misappropriation, net of Collections.Misappropriation.The lossCollections from misappropriation net of collections, of $350 thousand for the nine monthsquarter ended SeptemberMarch 28, 2007, related to collections received on funds that were misappropriated by our former UK disbursement agent. We learned of a misappropriation by our former UK disbursement agent in 2006, which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The

We agreed to settlement terms with our former disbursement agent had been utilized from early 2003 tothat resulted in the receipt of an initial cash payment of $350 thousand in January 2006 to make payroll, payroll tax2007 and vendor disbursements in our UK operations.

Subsequent to September 28, 2007, we receivedthe receipt of the final cash payment from our former UK disbursement agent of $2.3 million which will be reflectedin October 2007. These receipts were accounted for in collections from misappropriation, in the loss from misappropriation, netconsolidated statements of collections,operations in the Consolidated Statements of Operations for the period ended December 28, 2007.in which they were received.

Income Taxes.We recorded income taxes of $112 thousand and $247$107 thousand for the quarter and nine months ended SeptemberMarch 28, 2007, respectively. These amounts reflect2008, which reflected estimated annual tax rates of 3.0% and 8.4% for the quarter and nine months ended September 28, 2007, respectively,3% for certain U.S. federal and state taxes. For the quarter and nine months ended September 29, 2006,March 30, 2007, we recorded income taxes of $249$67 thousand and $946 thousand, respectively, which reflected an estimated annual tax rate for 2006rates of 34.4% and 35.1%3% for certain U.S. federal and state taxes. The 2006 income taxes were related to federal and state taxes for REL’s U.S. entity, which could not be offset against our federal net operating loss carryforward.

Effective December 30, 2006, we adopted FIN No. 48,Accounting for Uncertainty in Income Taxes. As a result of the implementation of FIN No. 48, we performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, we adjusted the estimated value of our uncertain tax positions by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and included in the non-current portion of accrued expenses and other liabilities in the Consolidated Balance Sheet as of September 28, 2007. The amount of unrecognized tax positions did not materially change as of September 28, 2007 and we do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of September 28, 2007.

Liquidity and Capital Resources

We have funded our operations primarily with cash flows generated from operations and the proceeds from our initial public offering. At SeptemberMarch 28, 2008 and December 28, 2007, we had $25.0$20.2 million and $20.1 million, respectively, classified in cash and cash equivalents compared to $19.6 million at December 29, 2006. At September 28, 2007in the accompanying consolidated balance sheets, and December 29, 2006, we had $600 thousand at March 28, 2008 and December 28, 2007 on deposit with a financial institution as collateral for letters of credit and have classified these deposits as restricted cash in the accompanying Consolidated Balance Sheets.

The following table summarizes our cash flow activity (in thousands):

Net cash provided by operating activities was $13.2$4.7 million for the nine monthsquarter ended SeptemberMarch 28, 2007,2008, compared to net cash provided by operating activities of $7.5$4.2 million for the comparable period in 2006.quarter ended March 30, 2007. During the nine monthsquarter ended SeptemberMarch 28, 2008, net cash provided by operating activities was primarily attributable to earnings net of non-cash items including foreign currency gains, depreciation and amortization expense and non-cash stock compensation. Additionally, we had increases in accounts payable due to the timing of trade payables and increases in accrued expenses. These increases were offset by lower net collections of accounts receivable and unbilled revenue of $1.6 million, which resulted in an increase of six days in Days Sales Outstanding from December 28, 2007.

During the quarter ended March 30, 2007, net cash provided by operating activities was primarily attributable to the net collections of accounts receivable and unbilled revenue of $5.4$6.3 million, which resulted in a decrease in Days Sales Outstanding of 2614 days from December 29, 2006. Additionally, accruedThis increase was primarily offset by higher prepaid expenses and other liabilities increased $1.3 million primarilycurrent assets which was mostly related to prepaid insurance, a decrease in accounts payable due to the timing of the payroll cycle. During the nine months ended September 29, 2006, net cash provided by operating activities was primarily attributable to net collections of accounts receivabletrade payables, and unbilled revenue of $2.2 million and an increasea decrease in accrued expenses and other liabilities, primarily due to a decrease of $2.3 million.accrued commissions, bonus and professional fees, which were mostly offset by higher salary accruals.

Net cash provided by investing activities was $2.0 million for the quarter ended March 28, 2008, compared to net cash used in investing activities was $2.2of $4.7 million for the nine monthsquarter ended September 28, 2007, compared to $3.5 million for the nine months ended September 29, 2006.March 30, 2007. Cash used inprovided by investing activities in 2007the quarter ended March 28, 2008 was primarily attributable to $2.3$2.5 million of redemptions of marketable investments, partially offset by $0.5 million purchases related to computer software and equipment and the build-out of new office space in the UK. equipment.

Cash used in investing activities during the nine monthsquarter ended September 29, 2006March 30, 3007 was primarily attributable to $1.7$4.5 million net purchases of marketable investments and $0.2 million for the purchase of property and equipment and $10.5 million used for the acquisition of businesses, partially offset by maturities of marketable investments of $5.0 million and a decrease in restricted cash of $3.7 million.equipment.

Net cash used in financing activities was $5.6$6.6 million for the nine monthsquarter ended SeptemberMarch 28, 2007,2008, compared to $6.5 millioncash provided by financing activities of $24 thousand for the nine monthsquarter ended September 29, 2006.March 30, 2007. Cash used in financing activities in 2007the quarter ended March 28, 2008 was primarily attributable to the repurchase of $5.9 million1,783,907 of our common stock, at an average price of $3.46$3.81 per share.

During the nine monthsquarter ended September 29, 2006,March 30, 2007, cash used inprovided by financing activities was primarily forattributable to the repaymentexercise of the Employee Benefit Trust loan of $3.7 million, $1.7 million for the repurchase of our common stock and $1.1 million for the repayment of bank overdrafts.options.

On July 30, 2002, we announced that our Board of Directors approved the repurchase of up to $5.0 million of common stock, which was subsequently increased to $30.0 million during the fiscal years 2003 to 2005. During the quarter ended SeptemberMarch 28, 2007,2008, the Board of Directors approved the repurchase of an additional $5.0 million of our common stock, thereby increasing the total approval for the share repurchase plan to $35.0$45.0 million. Under the repurchase plans,plan, we may buy back shares from time to time either on the open market or through privately negotiated transactions subject to market conditions and trading restrictions. During the quarter ended SeptemberMarch 28, 2007,2008, we repurchased approximately 1.21.8 million

shares at an average price of $3.47,$3.81, for a total cost of approximately $4.1$6.8 million. As of SeptemberMarch 28, 2007,2008, we hadhave repurchased approximately 8.911.7 million shares of our common stock at an average price of $3.36$3.49 per share, since inception, leaving $5.3$4.3 million available under our share buyback program. Subsequent to SeptemberMarch 28, 2007, the2008, our Board of Directors approved the repurchase of an additional $5.0 million, thereby increasing the total approval for repurchase to $40.0$50.0 million.

We currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. We may decide to raise additional funds in order to fund expansion, to develop new or further enhance products and services, to respond to competitive pressures, or to acquire complementary businesses or technologies. There is no assurance, however, that additional financing will be available when needed or desired.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This standard is effective for our fiscal year beginning December 29, 2007. In accordance with FASB Staff Position FAS No. 157 (“FSP No. 157-2”),Effective Date of FASB Statement No. 157, the FASB has deferred the implementation of the provisions of SFAS No. 157 relating to nonfinancial assets and liabilities until January 1, 2009. The adoption of SFAS No. 157 did not have a material impact on our results of operations, financial position, or liquidity.

At March 28, 2008, our financial instruments were carried at fair value in the consolidated balance sheet. The fair value of our short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other liabilities, equaled the respective carrying value due to the short-term nature of these instruments. The fair value of our investment in the Portfolio was based on Portfolio information available to us, the market outlook, and the expected timing of the remaining redemptions (see Note 6 in the notes to consolidated financial statements for further detail on the Portfolio.)

At SeptemberMarch 28, 2007,2008, our exposure to market risk related primarily to changes in interest rates on our investment portfolio. Our marketable investments consist primarily of short-term fixed interestand foreign currency exchange rate securities. risks.

Interest Rate Risk

We invest only with high credit quality issuers and we do not use derivative financial instruments in our investment portfolio. At March 28, 2008, we had $4.5 million in Bank of America’s Columbia Strategic Cash Portfolio (“Portfolio”) which was closed to redemptions and to new investors effective December 7, 2007, and which is currently under liquidation. We do not believe that a significant increase or decreasehave recorded the Portfolio at fair market value in interest rates would have a material impactthe accompanying consolidated balance sheets which includes an estimated realized loss of $450 thousand which was recorded in 2007. Based on the market outlook and information relating to the Portfolio there may be further declines in the fair value of the Portfolio. To the extent we determine there is a further decline in fair value, we will recognize additional losses in future periods up to the aggregate amount of our investment portfolio.(see Note 6 in the consolidated financial statements for further detail). No additional impairment was recorded for the quarter ended March 28, 2008.

Exchange Rate Sensitivity

We face exposure to adverse movements in foreign currency exchange rates, as a portion of our revenues, expenses, assets and liabilities are denominated in currencies other than the U.S. Dollar, primarily the British poundPound and the euro.Euro. These exposures may change over time as business practices evolve. Currently, we do not hold any derivative contracts that hedge our foreign currency risk, but we may adopt such strategies in the future.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) pursuant to Rule 13a-14(c) and Rule 15d-14(c) under the Securities Exchange Act of 1934. Based upon that evaluation, the CEO and CFO concluded that our Disclosure Controls are effective in timely alerting them to material information required to be included in our periodic SEC filings.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all error and all 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 theour Company 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.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHERII-OTHER INFORMATION

We are involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on our financial position cash flows or results of operations.

During the quarter ended SeptemberMarch 28, 2007,2008, the Company repurchased 1,187,2121,783,907 shares of its common stock at a cost of approximately $4.1$6.8 million, under athe Company’s share repurchase program approved by the Board of Directors.Directors in 2002. All repurchases were made in the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. There is no expiration date on the current authorization and during the period covered by the table, nonor was any determination was made by the Company to suspend or cancel purchases under the program.

Issuer Purchases of Equity Securities

None.

See Index to Exhibits on page 19,20, which is incorporated herein by reference.

The Exhibits listed in the accompanying Index to Exhibits are filed as part of this report.

SIGNATURES

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

INDEX TO EXHIBITS

1920