Alternative Resources (ALRC) 10-Q 2000 Q3 Quarterly report

QuickLinks -- Click here to rapidly navigate through this document

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2000

Commission file number 0-23940

ALTERNATIVE RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	38-2791069
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
600 Hart Road, Suite 300, Barrington, IL	60010
(Address of principal executive offices)	(Zip code)

(847) 381-6701
(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 requirements for the past 90 days. YES X NO .

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

    16,804,794 shares of Common Stock outstanding as of November 3, 2000.

PART I—FINANCIAL INFORMATION

Item 1.—Financial Statements

ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS

			December 31, 1999			September 30, 2000
						(Unaudited)
Current assets:
	Cash and cash equivalents		$	374		$	6
	Trade accounts receivable, net of allowance for doubtful accounts			71,797			57,662
	Prepaid expenses			886			1,697
	Income taxes receivable			9,969			9,135
	Other receivables			421			238
	Deferred income taxes			534			534
		Total current assets		83,981			69,272
Property and equipment:
	Office equipment			11,086			10,143
	Furniture and fixtures			1,935			2,405
	Software			16,740			17,906
	Leasehold improvements			1,474			1,855
				31,235			32,309
	Less accumulated depreciation and amortization			(8,319	)		(12,472	)
		Net property and equipment		22,916			19,837
Other assets:
	Goodwill, net of amortization			38,432			37,670
	Other assets			1,193			1,710
		Total other assets		39,625			39,380
Total assets			$	146,522		$	128,489
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Cash overdraft		$	4,422		$	3,530
	Short-term debt			52,000			50,593
	Accounts payable			12,726			10,672
	Payroll and related expenses			14,724			10,710
	Accrued expenses			8,954			5,272
		Total current liabilities		92,826			80,777
Other liabilities				455			281
Deferred income taxes				2,391			2,391
		Total liabilities		95,672			83,449
Stockholders' equity:
	Preferred Stock, $.01 par value, 1,000,000 shares authorized, none issued and outstanding			—			—
	Common Stock, $.01 par value, 50,000,000 shares authorized, 16,015,942 and 16,150,594 shares issued at December 31, 1999 and September 30, 2000, respectively			160			162
	Additional paid-in capital			27,000			27,150
	Accumulated other comprehensive income			12			21
	Retained earnings			28,381			22,504
				55,553			49,837
	Less: Treasury stock, at cost, 500,000 and 585,800 shares at December 31, 1999 and September 30, 2000, respectively			(4,703	)		(4,797	)
		Total stockholders' equity		50,850			45,040
Total liabilities and stockholders' equity			$	146,522		$	128,489

See accompanying Notes to Consolidated Financial Statements

Page 2

ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

			Three Months Ended September 30,						Nine Months Ended September 30,
			1999			2000			1999			2000
			(Unaudited)						(Unaudited)
Revenue			$	84,171		$	64,372		$	252,032		$	200,748
Cost of services				58,902			44,250			170,439			141,545
Gross profit				25,269			20,122			81,593			59,203
Operating expenses
	Selling, general and administrative expenses			21,805			19,265			64,191			59,170
	Depreciation and amortization			1,675			1,955			4,735			5,688
		Total operating expenses		23,480			21,220			68,926			64,858
Income (loss) from operations				1,789			(1,098	)		12,667			(5,655	)
Other expense, net				(1,060	)		(2,173	)		(2,454	)		(3,356	)
Income (loss) before income taxes				729			(3,271	)		10,213			(9,011	)
Income taxes				387			(1,050	)		4,257			(3,134	)
Net income (loss)			$	342		$	(2,221	)	$	5,956		$	(5,877	)
Net earnings (loss) per share:
	Basic		$	0.02		$	(0.14	)	$	0.38		$	(0.38	)
	Diluted		$	0.02		$	(0.14	)	$	0.38		$	(0.38	)
Shares used to compute earnings (loss) per share:
	Basic			15,599			15,506			15,685			15,509
	Diluted			15,636			15,506			15,745			15,509

See accompanying Notes to Consolidated Financial Statements

Page 3

ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

		Three Months Ended September 30,					Nine Months Ended September 30,
		1999		2000			1999		2000
		(Unaudited)					(Unaudited)
Net income (loss)		$	342	$	(2,221	)	$	5,956	$	(5,877	)
Other comprehensive income:
	Foreign currency translation adjustment		4		9			39		9
Comprehensive income (loss)		$	346	$	(2,212	)	$	5,995	$	(5,868	)

See accompanying Notes to Consolidated Financial Statements

Page 4

ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

				Nine Months Ended September 30,
				1999			2000
				(Unaudited)
Cash flows from operating activities:
	Net income (loss)			$	5,956		$	(5,877	)
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization			4,735			5,688
		Gain on sale of interest rate swap			—			(1,100	)
		Gain on sale of software business			(436	)		—
		Loss on leased assets			555			—
		Provision for doubtful accounts			20			—
		Change in assets and liabilities:
			Trade accounts receivable		(4,008	)		14,135
			Prepaid expenses		(1,084	)		(811	)
			Other receivables		(92	)		183
			Other assets		(494	)		(517	)
			Accounts payable		(1,833	)		(2,054	)
			Payroll and related expenses		113			(4,014	)
			Accrued expenses and other liabilities		(4,757	)		(3,856	)
			Income taxes		719			834
Net cash provided by (used in) operating activities					(606	)		2,611
Cash flows from investing activities:
	Purchases of property and equipment				(7,809	)		(1,847	)
	Proceeds from sale of software business				1,600			—
Net cash used in investing activities					(6,209	)		(1,847	)
Cash flows from financing activities:
	Payments received on stock options exercised				490			52
	Proceeds from short-term debt				—			26,105
	Payments on short-term debt				—			(27,512	)
	Proceeds from long-term debt				19,000			—
	Payments on long-term debt				(14,000	)		—
	Proceeds from sale of interest rate swap				—			1,100
	Repurchase of common stock				(1,610	)		(94	)
	Contributions to employee stock purchase plan				(146	)		(100	)
	Issuance of common stock under employee stock purchase plan				—			200
	Cash overdraft				3,616			(892	)
Net cash provided by (used in) financing activities					7,350			(1,141	)
Effect of exchange rate changes on cash and cash equivalents					39			9
Net increase (decrease) in cash and cash equivalents					574			(368	)
Cash and cash equivalents at beginning of period					2			374
Cash and cash equivalents at end of period				$	576		$	6
Supplemental disclosures of cash flow information:
	Cash paid for interest			$	2,445		$	3,198
	Cash paid for income taxes				5,559			257

See accompanying Notes to Consolidated Financial Statements

Page 5

ALTERNATIVE RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

    The interim consolidated financial statements presented are unaudited, but in the opinion of management, have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with those of the annual financial statements. Such interim consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2000. The interim consolidated financial statements should be read in connection with the audited consolidated financial statements for the year ended December 31, 1999, included in the December 31, 1999 Form 10-K of Alternative Resources Corporation (the "Company").

2. Restructuring Charge—1999

    During the fourth quarter of 1999, the Company incurred a $4.2 million restructuring charge representing real estate and severance costs associated with re-engineering the Company's sales, recruiting and delivery models. This action was a natural extension of the changes announced in 1998, which were designed to optimize the existing branch field model, and entails a comprehensive shift to a model organized along the functional lines of sales, recruiting and delivery. The new model is expected to be more efficient in terms of meeting the demands of the Company's clients at a lower cost.

The primary components of the restructuring charge can be summarized as follows:

In thousands	Total Initial Reserve		1999 Cash Payments			Balance at December 31, 1999		2000 Cash			Balance at September 30, 2000
Real estate costs	$	3,538	$	(30	)	$	3,508	$	(1,330	)	$	2,178
Severance		630		(416	)		214		(184	)		30
Total	$	4,168	$	(446	)	$	3,722	$	(1,514	)	$	2,208

    The portion of the charge related to real estate costs, which totaled $3.5 million, relates to lease costs associated with vacating offices as the Company downsizes its office space requirements. Through a combination of adopting a more virtual office model and eliminating administrative functions that had been performed in the field offices, the Company will be able to relocate from most of its existing leased office space to smaller office space that will require 60% less square footage than what is currently used. The costs associated with this charge relate primarily to the present value of ongoing lease obligations for vacated offices net of anticipated sublease income. A portion of the charge also relates to broker commissions and estimated leasehold improvement costs necessary to sublease vacated offices. Most of the Company's office locations were targeted for relocation. As of September 30, 2000, the relocation of all targeted office locations was substantially complete. The majority of the unpaid restructuring reserve as of September 30, 2000 relates to future lease obligations that will be paid over the next 5 years.

    The $0.6 million severance charge relates to head-count reductions associated with automating and centralizing field administrative processes as part of the re-engineering exercise. A total of 88 positions were eliminated, 49 in the fourth quarter of 1999, 37 in the first quarter of 2000, and 2 employees in the second quarter of 2000. The largest group of positions eliminated was branch administrators with the remainder of positions being a mix of employees across the Company.

Page 6

3. Restructuring Charge—1998

    The 1998 restructuring charge consists of expenses associated with reorganizing the Company's management structure as well as expenses related to a restructuring of the Company's operating model. Of the $3.9 million restructuring charge, $1.9 million represents severance pay and other employment-related expenses connected with reorganizing the management structure. The remaining $2.0 million of the restructuring charge represents costs associated primarily with staff reductions and consolidation of sales offices as management implemented a plan to reduce operating costs and optimize the Company's operating model.

The primary components of the restructuring charge can be summarized as follows:

In thousands	Total Initial Reserve		1998 Cash Payments			Balance at December 31, 1998		1999 Cash Payments			Balance at December 31, 1999		2000 Cash Payments			Balance at September 30, 2000
MANAGEMENT CHANGES:
Severence	$	1,372	$	(1,272	)	$	100	$	(100	)	$	—	$	—		$	—
Other employment-related expenses		685		(547	)		138		(88	)		50		(5	)		45
Total charges related to management changes		2,057		(1,819	)		238		(188	)		50		(5	)		45
OPERATING MODEL CHANGES:
Severence		1,209		(793	)		416		(399	)		17		(17	)		—
Office consolidation		644		(305	)		339		(157	)		182		(66	)		116
Total charges related to operating model changes		1,853		(1,098	)		755		(556	)		199		(83	)		116
Total	$	3,910	$	(2,917	)	$	993	$	(744	)	$	249	$	(88	)	$	161

    The Company's plan to reduce operating costs and optimize the business model consisted of the elimination of certain programs and positions that were not considered strategic to the business. In addition, the Company closed six sales offices and consolidated their operations with other offices in order to gain operating efficiencies. In conjunction with these activities, 43 positions, which consisted of management and staff primarily related to non-strategic functional areas, were eliminated. Most of the expense associated with office consolidation relates to ongoing lease obligations for these unused locations, net of sublease income. The unpaid restructuring reserve as of September 30, 2000, relates to lease obligations and other employment-related expenses, most of which should be paid in 2000.

Page 7

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

Results of Operations

    Essentially all of the Company's revenue is generated from information technology services that offer the benefits of outsourcing, while allowing information services operations managers to retain strategic control of their operations.

RESTRUCTURING CHARGE—1999

    The Company recorded a restructuring charge, which totaled $4.2 million, in the fourth quarter of 1999. This restructuring charge represents real estate and severance costs associated with re-engineering the Company's sales, recruiting and delivery models. This action was a natural extension of the restructuring announced in 1998, which was designed to optimize the existing branch field model, and entails a comprehensive shift to a model organized along the functional lines of sales, recruiting and delivery. The new model is expected to be more efficient in terms of meeting the demands of the Company's clients at a lower cost.

    A majority of the $4.2 million restructuring charge relates to lease costs associated with vacating offices as the Company downsizes its office space requirements. Through a combination of adopting a more virtual office model and eliminating administrative functions that had been performed in the field offices, the Company relocated from most of its existing leased office space to smaller office space requiring 60% less square footage than what was previously used. Of the $4.2 million restructuring charge, $3.5 million represents the present value of ongoing lease obligations for vacated offices, net of anticipated sublease income, as well as estimated broker commissions and leasehold improvement costs necessary to sublease vacated offices. As of September 30, 2000, the relocation of all targeted office locations was substantially complete.

    The remaining $0.6 million of the $4.2 million restructuring charge relates to severance costs associated with automating and centralizing field administrative processes as part of the re-engineering exercise. A total of 88 positions were eliminated, 49 in the fourth quarter of 1999, 37 in the first quarter of 2000, and 2 in the second quarter of 2000. The majority of the decrease in selling, general and administrative expenses of $2.5 million for the third quarter of 2000 compared to the third quarter of 1999 and $5.0 million for the first nine months of 2000 compared to the first nine months of 1999 is attributable to the restructing actions.

RESTRUCTURING CHARGE—1998

    The Company recorded a restructuring charge, which totaled $3.9 million, in the third quarter of 1998. This restructuring charge consists of expenses associated with reorganizing the Company's management structure as well as expenses related to a restructuring of the Company's operating model. Of the $3.9 million restructuring charge, $1.9 million represents severance pay and other employment-related expenses connected with reorganizing the management structure. The remaining $2.0 million of the restructuring charge represents costs associated primarily with staff reductions and consolidation of sales offices as management implemented a plan to reduce operating costs and optimize the Company's operating model.

Third Quarter Fiscal 2000 Compared to Third Quarter Fiscal 1999

    Revenue.  Revenue decreased by 23.5% from $84.2 million in the third quarter of 1999 to $64.4 million in the third quarter of 2000, primarily as a result of a 21.9% decrease in staff augmentation revenue and a 26.8% decrease in Technology Management Solutions revenue. Revenue in the third quarter of 1999 included $1.5 million from the Pacbase consulting business, which was sold in September 1999. The Pacbase consulting business, which was acquired in 1997 as part of the CGI

Page 8

Systems, Inc. acquisition, focused on supporting a specific software product which was not considered strategic to the Company's business. Excluding Pacbase revenue, the Technology Management Solutions revenue decreased 22.7% in the third quarter of 2000. The restructuring of operations that disrupted normal business activities was the principal reason for the revenue reduction. In addition, the industry-wide softness in demand for information technology staffing services that was evident in the first quarter of 2000 continued through the third quarter of 2000.

    Gross Profit.  Gross profit decreased by 20.4% from $25.3 million in the third quarter of 1999 to $20.1 million in the third quarter of 2000. The decrease in gross profit was primarily due to the lower revenue in the third quarter of 2000 as compared to the third quarter of 1999. Gross margin increased from 30.0% of revenue in the third quarter of 1999 to 31.3% in the third quarter of 2000. The increase in gross margin was due primarily to higher gross margin from our Technology Management Solutions services.

    Operating Expenses.  Operating expenses decreased from $23.5 million in the third quarter of 1999 to $21.2 million in the third quarter of 2000. The decrease in operating expenses resulted primarily from the savings realized from the restructuring of operations, which included re-engineering the Company's sales, recruiting and delivery models. The savings resulted in lower compensation and occupancy expenses. The decrease in operating expenses was partially offset by the amortization of new IT systems capitalized in 1999.

    Income (Loss) from Operations.  Income from operations decreased from $1.8 million or 2.1% of revenue in the third quarter of 1999 to a loss of $1.1 million or (1.7%) of revenue in the third quarter of 2000. The loss from operations resulted primarily from the decrease in gross profit partially offset by the decrease in operating expenses detailed above.

    Other Expense.  Other expense, net, increased from $1.1 million in the third quarter of 1999 to $2.2 million in the third quarter of 2000. The increase in other expense from the third quarter of 1999 to the third quarter of 2000 is primarily the result of an increase in interest expense and an increase in lending fees. The increase in interest expense resulted from an increase in debt levels from an average of $45.5 million in the third quarter of 1999 to an average of $51.9 million in the third quarter of 2000 and an increase in interest rates on the outstanding debt.

    Provision for Income Taxes.  The Company's provision for income taxes decreased from $0.4 million in the third quarter of 1999 to a benefit of $1.1 million in the third quarter of 2000. The effective tax rate was 53.1% in the third quarter of 1999 and 32.1% in the third quarter of 2000. The change in effective tax rates primarily resulted from the amortization of goodwill, which is not tax deductible.

    Net Income (Loss).  The Company's net income decreased from $0.3 million in the third quarter of 1999, or 0.4% of total revenue, to a loss of $2.2 million in the third quarter of 2000, or (3.5%) of total revenue.

First Nine Months Fiscal 2000 Compared to First Nine Months Fiscal 1999

    Revenue.  Revenue decreased by 20.4% from $252.0 million in the first nine months of 1999 to $200.7 million in the first nine months of 2000, primarily as a result of a 19.4% decrease in staff augmentation revenue and an 22.5% decrease in Technology Management Solutions revenue. Revenue in the first nine months of 1999 included $4.5 million from the Pacbase consulting business, which was sold in September 1999. The Pacbase consulting business, which was acquired in 1997 as part of the CGI Systems, Inc. acquisition, focused on supporting a specific software product which was not considered strategic to the Company's business. Excluding Pacbase revenue, the Technology Management Solutions revenue decreased 17.9% in the first nine months of 2000. The restructuring of

Page 9

operations that disrupted normal business activities was the principal reason for the revenue reduction. Also contributing to the decline in revenue was an industry wide softness in demand, which started in the latter half of 1999 and continued through the first nine months of 2000. Also contributing to the revenue decline was the time spent on extensive training of the entire field force during the second quarter of 2000 on process and use of recently implemented new technology.

    Gross Profit.  Gross profit decreased by 27.4% from $81.6 million in the first nine months of 1999 to $59.2 million in the first nine months of 2000. The decrease in gross profit was primarily due to the lower revenue in the first nine months of 2000 as compared to the first nine months of 1999. Gross margin decreased from 32.4% of revenue in the first nine months of 1999 to 29.5% in the first nine months of 2000. The decrease in gross margin was due primarily to lower gross margin on a major project and increased benefits expense for Technical Consultants. The decrease in gross margin on the project was primarily due to under utilization of technical resources caused by changes in processes at both the client and within the Company. The changes, which occurred in the latter half of 1999, have been the focus of management and the client in the first nine months of 2000. Delivery changes and contract modifications have been implemented near the end of the first quarter of 2000, which returned the project to its historical levels of profitability by the end of the second quarter of 2000.

    The increase in benefits expense resulted from changes in the Technical Consultants' benefits plan near the end of the first quarter of 1999. The changes, which increased benefits coverage for Technical Consultants, were partially offset by the elimination of one of the Company's formal education incentive programs which was accounted for as part of the Company's selling, general and administrative expenses.

    Operating Expenses.  Operating expenses decreased from $68.9 million in the first nine months of 1999 to $64.9 million in the first nine months of 2000. The decrease in operating expenses resulted primarily from the savings realized from the restructuring of operations, which included re-engineering the Company's sales, recruiting and delivery models. The savings resulted in lower compensation and occupancy expenses. The decrease in operating expenses was partially offset by increased expenditures for additional training for all field personnel and the amortization of new IT systems that were capitalized in 1999.

    Income (Loss) from Operations.  Income from operations decreased from $12.7 million or 5.0% of revenue in the first nine months of 1999 to a loss of $5.7 million or (2.8%) of revenue in the first nine months of 2000. The loss from operations resulted primarily from the decrease in gross profit partially offset by the decrease in operating expenses detailed above.

    Other Expense.  Other expense, net, increased from $2.5 million in the first nine months of 1999 to $3.4 million in the first nine months of 2000. The decrease in other expense from the first nine months of 1999 to the first nine months of 2000 is primarily the result of a gain of $1.1 million on the sale of an interest rate swap agreement, partially offset by an increase in interest expense and an increase in lending fees. The increase in interest expense resulted from an increase in debt levels from an average of $44.3 million in the first nine months of 1999 to an average of $52.0 million in the first nine months of 2000 and an increase in interest rates on the outstanding debt.

    Provision for Income Taxes.  The Company's provision for income taxes decreased from $4.3 million in the first nine months of 1999 to a benefit of $3.1 million in the first nine months of 2000. The effective tax rate was 41.7% in the first nine months of 1999 and 34.8% in the first nine months of 2000. The change in effective tax rates primarily resulted from the amortization of goodwill, which is not tax deductible.

Page 10

    Net Income (Loss).  The Company's net income decreased from $6.0 million in the first nine months of 1999, or 2.4% of total revenue, to a loss of $5.9 million in the first nine months of 2000, or (2.9%) of total revenue.

Liquidity and Capital Resources

    During the first nine months of 2000, cash flows provided by operations were $2.6 million resulting primarily from decreased accounts receivables, and an income tax refund, partially offset by decreased accrued payroll and related expenses, accrued expenses and accounts payable, an increase in prepaid expenses and a net loss.

    As of December 31, 1999 and September 30, 2000, the total borrowings under the line of credit were $52.0 million and $50.6 million, respectively. Current liabilities exceeded current assets by $8.8 million and $11.5 million at December 31, 1999 and September 30, 2000, respectively. Current liabilities include $50.6 million of outstanding borrowings against the Company's line of credit that has a maturity date of December 31, 2000. During the third quarter the Company reached an agreement with its current group of banks which provided for increased liquidity and removed the default condition that existed at the end of the second quarter. As part of this agreement, cash receipts into the Company's bank accounts are directly applied against the outstanding bank line of credit balance. Advances from the line of credit are determined on a daily basis to minimize the Company's average debt balance, thus reducing its interest expense. The Company is currently negotiating the refinancing of its outstanding debt to include an extension of the maturity date and to provide additional borrowing capacity. There can be no guarantee that the refinancing will be completed. Should this not be completed, the Company will pursue other financing alternatives.

    The Company believes that cash provided by operations will be sufficient to meet anticipated cash requirements for both operations and investing activities for at least the next 12 months. The refinancing of the Company's outstanding debt will be required to fund its financing activities for the next 12 months.

Item 3.—Quantitative and Qualitative Disclosures About Market Risk

    The market risk inherent in the Company's financial instrument subject to such risk is the additional interest expense associated with floating-rate debt resulting from adverse changes in interest rates.

    The Company had $50.6 million of floating-rate debt outstanding as of September 30, 2000. An adverse change in interest rates during the time that this loan is outstanding would cause an increase in the amount of interest paid. Although the Company may pay down the loan prior to the expiration of the line of credit on December 31, 2000, if the Company's borrowings were to remain outstanding for the remaining term of the borrowing agreement, a 100 basis point increase in the prime rate as of September 30, 2000, would increase by $0.5 million the amount of annual interest due on this portion of the debt and annualized interest expense recognized in the financial statements.

Page 11

PART II—OTHER INFORMATION

Item 5.—Other Information

    The Company announced on November 8, 2000 that it is in the process of evaluating the recoverability of its recorded goodwill, which will likely result in a significant charge in the fourth quarter. The charge would be related to the goodwill associated with the acquisition of CGI Systems, Inc. in 1997. The Company has experienced a decline in revenue and gross margin attributable to the CGI Systems, Inc. businesses. Although the analysis is not yet complete, a preliminary analysis has indicated that current and future business levels will not support the amount of goodwill in the financial statements as of September 30, 2000. In addition, the Company will be taking a charge for severance costs in the fourth quarter of approximately $500,000.

Item 6.—Exhibits and Reports on Form 8-K

(a)

The following document is furnished as an exhibit and numbered pursuant to Item 601 of Regulation S-K:

Exhibit Number	Description
27	Financial Data Schedule

(b)

The registrant was not required to file any reports on Form 8-K for the quarter.

Page 12

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.

	ALTERNATIVE RESOURCES CORPORATION
Date: November 14, 2000	/s/ STEVEN PURCELL   Steven Purcell Senior Vice President, Chief Financial Officer, Treasurer and Secretary

Page 13

EXHIBIT INDEX

Exhibit Number	Description
27	Financial Data Schedule

Page 14

QuickLinks

PART I—FINANCIAL INFORMATION
ALTERNATIVE RESOURCES CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS
ALTERNATIVE RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
ALTERNATIVE RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
ALTERNATIVE RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
ALTERNATIVE RESOURCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PART II—OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX