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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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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)

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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.

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## 

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 |       
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------------ | ------
|
|Current assets:                            |                                                                                                                                                               |                            |         |                    |       
|                                           | Cash and cash equivalents                                                                                                                                     |                            | $       | 374                |       
|                                           | Trade accounts receivable, net of allowance for doubtful accounts                                                                                             |                            |         | 71,797             |       
|                                           | Prepaid expenses                                                                                                                                              |                            |         | 886                |       
|                                           | Income taxes receivable                                                                                                                                       |                            |         | 9,969              |       
|                                           | Other receivables                                                                                                                                             |                            |         | 421                |       
|                                           | Deferred income taxes                                                                                                                                         |                            |         | 534                |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Total current assets       |         |                    | 83,981
|                                           |                                                                                                                                                               |                            |         |                    |       
|Property and equipment:                    |                                                                                                                                                               |                            |         |                    |       
|                                           | Office equipment                                                                                                                                              |                            |         | 11,086             |       
|                                           | Furniture and fixtures                                                                                                                                        |                            |         | 1,935              |       
|                                           | Software                                                                                                                                                      |                            |         | 16,740             |       
|                                           | Leasehold improvements                                                                                                                                        |                            |         | 1,474              |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               |                            | 31,235  |                    |       
|                                           | Less accumulated depreciation and amortization                                                                                                                |                            |         | (8,319             | )     
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Net property and equipment |         |                    | 22,916
|                                           |                                                                                                                                                               |                            |         |                    |       
|Other assets:                              |                                                                                                                                                               |                            |         |                    |       
|                                           | Goodwill, net of amortization                                                                                                                                 |                            |         | 38,432             |       
|                                           | Other assets                                                                                                                                                  |                            |         | 1,193              |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Total other assets         |         |                    | 39,625
|                                           |                                                                                                                                                               |                            |         |                    |       
|Total assets                               |                                                                                                                                                               | $                          | 146,522 |                    | $     
|                                           |                                                                                                                                                               |                            |         |                    |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                              
|Current liabilities:                       |                                                                                                                                                               |                            |         |                    |       
|                                           | Cash overdraft                                                                                                                                                |                            | $       | 4,422              |       
|                                           | Short-term debt                                                                                                                                               |                            |         | 52,000             |       
|                                           | Accounts payable                                                                                                                                              |                            |         | 12,726             |       
|                                           | Payroll and related expenses                                                                                                                                  |                            |         | 14,724             |       
|                                           | Accrued expenses                                                                                                                                              |                            |         | 8,954              |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Total current liabilities  |         |                    | 92,826
|Other liabilities                          |                                                                                                                                                               |                            | 455     |                    |       
|Deferred income taxes                      |                                                                                                                                                               |                            | 2,391   |                    |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Total liabilities          |         |                    | 95,672
|                                           |                                                                                                                                                               |                            |         |                    |       
|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                |       
|                                           | Additional paid-in capital                                                                                                                                    |                            |         | 27,000             |       
|                                           | Accumulated other comprehensive income                                                                                                                        |                            |         | 12                 |       
|                                           | Retained earnings                                                                                                                                             |                            |         | 28,381             |       
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               |                            | 55,553  |                    |       
|                                           | Less: Treasury stock, at cost, 500,000 and 585,800 shares at
December 31, 1999 and September 30, 2000, respectively                                           |                            |         | (4,703             | )     
|                                           |                                                                                                                                                               |                            |         |                    |       
|                                           |                                                                                                                                                               | Total stockholders' equity |         |                    | 50,850
|                                           |                                                                                                                                                               |                            |         |                    |       
|Total liabilities and stockholders' equity |                                                                                                                                                               | $                          | 146,522 |                    | $     
|                                           |                                                                                                                                                               |                            |         |                    |       

See accompanying Notes to Consolidated Financial Statements

Page 2

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

|                                                  |                                              | Three Months
Ended September 30, |        | Nine Months
Ended September 30, |       
|------------------------------------------------- | -------------------------------------------- | -------------------------------- | ------ | ------------------------------- | ------
|
|
|Revenue                                           |                                              | $                                | 84,171 |                                 | $     
|Cost of services                                  |                                              |                                  | 58,902 |                                 |       
|                                                  |                                              |                                  |        |                                 |       
|Gross profit                                      |                                              |                                  | 25,269 |                                 |       
|Operating expenses                                |                                              |                                  |        |                                 |       
|                                                  | Selling, general and administrative expenses |                                  |        | 21,805                          |       
|                                                  | Depreciation and amortization                |                                  |        | 1,675                           |       
|                                                  |                                              |                                  |        |                                 |       
|                                                  |                                              | Total operating expenses         |        |                                 | 23,480
|                                                  |                                              |                                  |        |                                 |       
|Income (loss) from operations                     |                                              |                                  | 1,789  |                                 |       
|Other expense, net                                |                                              |                                  | (1,060 | )                               |       
|                                                  |                                              |                                  |        |                                 |       
|Income (loss) before income taxes                 |                                              |                                  | 729    |                                 |       
|Income taxes                                      |                                              |                                  | 387    |                                 |       
|                                                  |                                              |                                  |        |                                 |       
|Net income (loss)                                 |                                              | $                                | 342    |                                 | $     
|                                                  |                                              |                                  |        |                                 |       
|Net earnings (loss) per share:                    |                                              |                                  |        |                                 |       
|                                                  | Basic                                        |                                  | $      | 0.02                            |       
|                                                  |                                              |                                  |        |                                 |       
|                                                  | Diluted                                      |                                  | $      | 0.02                            |       
|                                                  |                                              |                                  |        |                                 |       
|Shares used to compute earnings (loss) per share: |                                              |                                  |        |                                 |       
|                                                  | Basic                                        |                                  |        | 15,599                          |       
|                                                  |                                              |                                  |        |                                 |       
|                                                  | Diluted                                      |                                  |        | 15,636                          |       
|                                                  |                                              |                                  |        |                                 |       

See
accompanying Notes to Consolidated Financial Statements

Page 3

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

|                            |                                         | Three Months
Ended September 30, |     | Nine Months
Ended September 30, |  
|--------------------------- | --------------------------------------- | -------------------------------- | --- | ------------------------------- | -
|
|
|Net income (loss)           |                                         | $                                | 342 |                                 | $
|Other comprehensive income: |                                         |                                  |     |                                 |  
|                            | Foreign currency translation adjustment |                                  |     | 4                               |  
|                            |                                         |                                  |     |                                 |  
|Comprehensive income (loss) |                                         | $                                | 346 |                                 | $
|                            |                                         |                                  |     |                                 |  

See
accompanying Notes to Consolidated Financial Statements

Page 4

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

|                                                             |                                                                                                    | Nine Months Ended
September 30,    |                                       
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | ---------------------------------- | --------------------------------------
|
|
|Cash flows from operating activities:                        |                                                                                                    |                                    |                                       
|                                                             | Net income (loss)                                                                                  |                                    | $                                     
|                                                             | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                    |                                       
|                                                             |                                                                                                    | Depreciation and amortization      |                                       
|                                                             |                                                                                                    | Gain on sale of interest rate swap |                                       
|                                                             |                                                                                                    | Gain on sale of software business  |                                       
|                                                             |                                                                                                    | Loss on leased assets              |                                       
|                                                             |                                                                                                    | Provision for doubtful accounts    |                                       
|                                                             |                                                                                                    | Change in assets and liabilities:  |                                       
|                                                             |                                                                                                    |                                    | Trade accounts receivable             
|                                                             |                                                                                                    |                                    | Prepaid expenses                      
|                                                             |                                                                                                    |                                    | Other receivables                     
|                                                             |                                                                                                    |                                    | Other assets                          
|                                                             |                                                                                                    |                                    | Accounts payable                      
|                                                             |                                                                                                    |                                    | Payroll and related expenses          
|                                                             |                                                                                                    |                                    | Accrued expenses and other liabilities
|                                                             |                                                                                                    |                                    | Income taxes                          
|                                                             |                                                                                                    |                                    |                                       
|Net cash provided by (used in) operating activities          |                                                                                                    |                                    | (606                                  
|                                                             |                                                                                                    |                                    |                                       
|Cash flows from investing activities:                        |                                                                                                    |                                    |                                       
|                                                             | Purchases of property and equipment                                                                |                                    |                                       
|                                                             | Proceeds from sale of software business                                                            |                                    |                                       
|                                                             |                                                                                                    |                                    |                                       
|Net cash used in investing activities                        |                                                                                                    |                                    | (6,209                                
|                                                             |                                                                                                    |                                    |                                       
|Cash flows from financing activities:                        |                                                                                                    |                                    |                                       
|                                                             | Payments received on stock options exercised                                                       |                                    |                                       
|                                                             | Proceeds from short-term debt                                                                      |                                    |                                       
|                                                             | Payments on short-term debt                                                                        |                                    |                                       
|                                                             | Proceeds from long-term debt                                                                       |                                    |                                       
|                                                             | Payments on long-term debt                                                                         |                                    |                                       
|                                                             | Proceeds from sale of interest rate swap                                                           |                                    |                                       
|                                                             | Repurchase of common stock                                                                         |                                    |                                       
|                                                             | Contributions to employee stock purchase plan                                                      |                                    |                                       
|                                                             | Issuance of common stock under employee stock purchase plan                                        |                                    |                                       
|                                                             | Cash overdraft                                                                                     |                                    |                                       
|                                                             |                                                                                                    |                                    |                                       
|Net cash provided by (used in) financing activities          |                                                                                                    |                                    | 7,350                                 
|                                                             |                                                                                                    |                                    |                                       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                    |                                    | 39                                    
|                                                             |                                                                                                    |                                    |                                       
|Net increase (decrease) in cash and cash equivalents         |                                                                                                    |                                    | 574                                   
|Cash and cash equivalents at beginning of period             |                                                                                                    |                                    | 2                                     
|                                                             |                                                                                                    |                                    |                                       
|Cash and cash equivalents at end of period                   |                                                                                                    | $                                  | 576                                   
|                                                             |                                                                                                    |                                    |                                       
|Supplemental disclosures of cash flow information:           |                                                                                                    |                                    |                                       
|                                                             | Cash paid for interest                                                                             |                                    | $                                     
|                                                             | Cash paid for income taxes                                                                         |                                    |                                       

See accompanying Notes to Consolidated Financial Statements

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## 

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 |                              
|                  |  |                       |       |                    |   |                              |   |           |       |                              
|Severance         |  |                       | 630   |                    |   | (416                         | ) |           | 214   |                              
|                  |  |                       |       |                    |   |                              |   |           |       |                              
|Total             |  | $                     | 4,168 |                    | $ | (446                         | ) | $         | 3,722 |                              
|                  |  |                       |       |                    |   |                              |   |           |       |                              

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.

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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                | ) |                              
|                                                 |  |                       |       |                    |   |                              |   |                    |     |                              |   |                    |   |                              
|Total charges related to management changes      |  |                       | 2,057 |                    |   | (1,819                       | ) |                    | 238 |                              |   | (188               | ) |                              
|OPERATING MODEL CHANGES:                         |  |                       |       |                    |   |                              |   |                    |     |                              |   |                    |   |                              
|Severence                                        |  |                       | 1,209 |                    |   | (793                         | ) |                    | 416 |                              |   | (399               | ) |                              
|Office consolidation                             |  |                       | 644   |                    |   | (305                         | ) |                    | 339 |                              |   | (157               | ) |                              
|                                                 |  |                       |       |                    |   |                              |   |                    |     |                              |   |                    |   |                              
|Total charges related to operating model changes |  |                       | 1,853 |                    |   | (1,098                       | ) |                    | 755 |                              |   | (556               | ) |                              
|                                                 |  |                       |       |                    |   |                              |   |                    |     |                              |   |                    |   |                              
|Total                                            |  | $                     | 3,910 |                    | $ | (2,917                       | ) | $                  | 993 |                              | $ | (744               | ) | $                            
|                                                 |  |                       |       |                    |   |                              |   |                    |     |                              |   |                    |   |                              

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.

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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

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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

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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.

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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.

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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



Exhibit Number

Description27

Financial Data Schedule




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## 

SIGNATURES

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

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

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## 

EXHIBIT INDEX

|Exhibit
Number |  | Description            
|-------------- |  | -----------------------
|27             |  | Financial Data Schedule

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