<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-18815
OUTLOOK GROUP CORP.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1278569
------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 American Drive
Neenah, Wisconsin 54956
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(414) 722-2333
----------------------------------------------------
(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 twelve 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.
4,649,382 shares of common stock, $.01 par value, were
outstanding at September 30, 1996.
<PAGE> 2
OUTLOOK GROUP CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 1
PART I. FINANCIAL INFORMATION:
- -------------------------------
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
As of August 30, 1996 and May 31, 1996 (Unaudited)
Condensed Consolidated Statements of Operations 3
For the quarter ended
August 30, 1996 and August 31, 1995 (Unaudited)
Condensed Consolidated Statements of Cash Flows 4
For the quarter ended August 30, 1996 and
August 31, 1995 (Unaudited)
Notes to Condensed Consolidated Financial Statements 5
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussions in this report on Form 10-Q contain various
forward-looking statements (particularly those referring to expectations as to
future business, operations and/or financing, or using terms such as "believe",
"anticipate" or "expect") that involve risks and uncertainties. The Company's
actual future results could differ materially from those discussed, due to the
factors which are noted in connection with the statements or in Management's
Discussion and Analysis of Financial Condition and Results of Operations
(particularly in the section entitled "Additional Cautionary Statements"), and
other factors.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements included herein have been
included by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. This information is unaudited
but includes all adjustments (consisting only of normal recurring accruals)
which, in the opinion of Company management, are necessary for a fair
presentation of the Company's financial position and results of operations for
such periods.
The results of operations for interim periods are not necessarily indicative of
the results of operations for the entire year. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1996 Annual Report.
- 1 -
<PAGE> 4
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 30, 1996 AND MAY 31, 1996
(UNAUDITED)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
AUGUST 30, MAY 31,
ASSETS 1996 1996
- ------ ---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 53 $ 298
Accounts receivable, less allowance
of $994 and $896 respectively . . . . . . . . . 15,450 14,785
Inventories . . . . . . . . . . . . . . . . . . . 13,424 12,127
Deferred income taxes . . . . . . . . . . . . . . 1,181 1,181
Prepaid expenses and other . . . . . . . . . . . . 1,929 1,935
Income taxes refundable . . . . . . . . . . . . . 1,704 1,964
--------- ---------
Total current assets . . . . . . . . . . . . 33,741 32,290
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . 1,051 1,051
Buildings . . . . . . . . . . . . . . . . . . . . 15,212 15,196
Machinery and equipment . . . . . . . . . . . . . 46,632 46,191
Machinery and equipment deposits . . . . . . . . . 638 227
--------- ---------
63,533 62,665
Less accumulated depreciation . . . . . . . . . 20,737 19,882
--------- ---------
42,796 42,783
--------- ---------
OTHER . . . . . . . . . . . . . . . . . . . . . . . . 2,910 2,780
--------- ---------
Total assets . . . . . . . . . . . . . . . . $ 79,447 $ 77,853
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . $ 1,898 $ 1,532
Accounts payable . . . . . . . . . . . . . . . . . 4,999 4,147
Accrued liabilities:
Salaries and wages . . . . . . . . . . . . . . . 1,771 1,737
Other . . . . . . . . . . . . . . . . . . . . . 1,283 1,174
--------- ---------
Total current liabilities . . . . . . . . . . 9,951 8,590
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . 31,530 30,859
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . 3,463 3,463
SHAREHOLDERS' EQUITY:
Cumulative Preferred Stock, $.01 par value,
1,000,000 shares authorized, none issued -- --
Common Stock, $.01 par value,
15,000,000 shares authorized,
5,099,382 shares issued . . . . . . . . . . . . 51 51
Additional paid-in capital . . . . . . . . . . . . 18,415 18,415
Retained earnings . . . . . . . . . . . . . . . . 20,486 20,924
--------- ---------
38,952 39,390
Less 450,000 of treasury stock, at cost . . . . . 4,449 4,449
--------- ---------
Total shareholders' equity . . . . . . . . . . . 34,503 34,941
--------- ---------
Total liabilities and shareholders' equity . . . $ 79,447 $ 77,853
========= =========
</TABLE>
(see accompanying notes) - 2 -
<PAGE> 5
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
August 30 August 31
1996 1995
---------- -----------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . $ 22,449 $ 26,655
Cost of goods sold . . . . . . . . . . . . . . . . . . 19,732 23,938
---------- ----------
Gross profit . . . . . . . . . . . . . . . . . 2,717 2,717
Selling, general and administrative expenses . . . . . 2,864 3,146
---------- ----------
Operating profit (loss) (147) (429)
---------- ----------
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . . . . (650) (627)
Interest and other income . . . . . . . . . . . . . . 160 870
---------- ----------
Total other income (expense) . . . . . . . . . . . . (490) 243
---------- ----------
Earnings (loss) before income taxes . . . . . . . . . (637) (186)
Provision for income taxes (benefits) . . . . . . . . (200) (72)
---------- ----------
Net earnings (loss) . . . . . . . . . . . . . . . . . $ (437) $ (114)
========== ==========
Net earnings (loss) per common share . . . . . . . . . $ (.09) $ (.02)
========== ==========
Weighted average number of common shares outstanding. . 4,649,382 4,699,382
========== ==========
</TABLE>
(see accompanying notes)
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<PAGE> 6
OUTLOOK GROUP CORP. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
August 30, August 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . $ (437) $ (114)
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . 1,433 1,332
Gain on sale of operating unit . . . . . . . . . - (334)
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . (665) (449)
Inventories . . . . . . . . . . . . . . . . . . (1,297) (1,078)
Prepaid expenses and other current assets . . . 6 (292)
Accounts payable . . . . . . . . . . . . . . . 852 (1,497)
Accrued liabilities . . . . . . . . . . . . . . 143 (163)
Income taxes . . . . . . . . . . . . . . . . . 260 83
--------- ----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . 295 (2,512)
Cash flows from investing activities:
Acquisition of property, plant and equipment . . . (1,640) (1.972)
Increase in equipment acquisition trust funds . . . - (6)
Proceeds from sale of operating unit . . . . . . . - 100
Proceeds from sale of equipment . . . . . . . . . . 242 375
Other . . . . . . . . . . . . . . . . . . . . . . . (179) -
-------- ---------
Net cash used in investing activities . . . . . (1,577) (1,503)
Cash flows from financing activities:
Increase (decrease) in revolving credit
arrangement borrowings . . . . . . . . . . . . 1,900 5,450
Acquisition of treasury stock . . . . . . . . . . . - (887)
Payments on long-term borrowings . . . . . . . . . (863) (584)
-------- --------
Net cash provided by financing activities . . . 1,037 3,979
-------- --------
Net Increase (decease) in cash . . . . . . . . . . . (245) (36)
Cash at beginning of period . . . . . . . . . . . . . 298 82
-------- --------
Cash at end of period $ 53 $ 46
========= ========
</TABLE>
(see accompanying notes)
- 4 -
<PAGE> 7
OUTLOOK GROUP CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 30, 1996
1. Net Earnings Per Common Share:
Net earnings per common share is computed using the weighted average
number of common shares outstanding, as shown in the Statements of
Operations.
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
August 30, 1996 May 31, 1996
<S> <C> <C>
Raw materials $ 7,977 $ 7,543
Work in process 1,590 1,658
Finished Goods 3,857 2,926
---------- ----------
$ 13,424 $ 12,127
========== ==========
</TABLE>
3. Income Taxes:
The effective income tax rate used to calculate the income tax benefit
for the three-month periods ended August 30, 1996 and August 31, 1995,
is based on the anticipated income tax rate for the entire fiscal
year.
4. Debt:
As of August 30, 1996 the Company had drawn $13.9 million of the $15
million available credit line. Interest on the revolving line of
credit was increased to prime plus 2% in the quarter because the
Company did not meet certain debt covenants. The company has received
a commitment from another lender to replace the existing line of
credit; the Company contemplates that new lending arrangements (when
entered into) will include revised debt covenants. The Company is in
the process of negotiating final agreements for these new lending
arrangements.
Also during the quarter, the Company made prepayments of approximately
$230,000 and $45,000, respectively, on two separate long term notes
payable to creditors as a result of the sale of equipment during the
quarter.
5. Accounting Periods:
The Company has elected to adopt 13 week quarters beginning in fiscal
1997; however, it is anticipated that the fiscal year will remain May
31.
- 5 -
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results Of Operations
Results of Operations
Net sales for the first quarter of fiscal 1997 were $22.4 million, a
16% decrease from net sales of $26.7 million in the same quarter of the prior
year. The majority of the decrease occurred in the Company's food processing
segment which reported a $3.7 million sales decline to $2.6 million in the
first quarter of fiscal 1997 from $6.3 million in the first quarter of fiscal
1996. Most of this decrease related to the anticipated and previously
disclosed termination of the Nestle gravies and sauces contract. Net sales in
the Company's graphic services segment decreased to $19.8 million in the first
quarter of fiscal 1997 from $20.4 million in the first quarter of fiscal 1996.
Sales to trading card customers were significantly lower than prior year due to
a continuing industry slow-down and a reduction in business with Fleer/Skybox
which was the Company's largest trading card customer in the first quarter of
fiscal 1996. (Sales relating to the collectable card business were already
reduced in the first quarter of fiscal 1996 as compared to prior years.) This
decrease was partially offset by other sales growth in the segment. Sales
growth occurred in the Company's Barrier Films subsidiary due to increased
capacity and greater market focus. Also, the Company made progress in
lenticular printing, a relatively new technology which provides
three-dimensional, motion or holographic effects when printed on lenticular
(plastic) stock.
Gross profit increased to 12.1% of net sales versus 10.2% in the prior
year despite reduced sales. The most significant improvements were found in
Outlook Graphics division which reduced overhead and improved its product mix.
Also, Barrier Films which reduced waste and increased throughput. Primarily as
a result of reduced sales resulting from the termination of the Nestle sauces
and gravies contract, the food processing segment reported reduced gross
profit.
Selling, general and administrative expenses declined 9% overall
versus prior year. Most significant was a 12% reduction in administrative
wages. Total selling, general and administrative expenses as a percentage of
net sales increased to 12.8% in the first quarter of fiscal 1997 from 11.8% in
the first quarter of fiscal 1996, primarily as a result of the decrease in net
sales partially offset by lower expenses.
As a result of the above, the operating loss for the quarter was
reduced to $147,000 in fiscal 1997 versus $429,000 in fiscal 1996.
Interest expense for the quarter was slightly higher than prior year
reflecting slightly increased interest rates and nearly equivalent borrowing
levels.
However, interest income and other income totalled $160,000 in the
first quarter of fiscal 1997 as compared to $870,000 in the first quarter of the
prior year. The first quarter of fiscal 1996 included non-recurring gains
totaling $0.7 million on the sale of the publishing division and certain
non-strategic equipment.
Based on the losses for the respective quarters, income tax benefits
were accrued in both periods.
The above factors yielded a net loss of $437,000, or 1.9% of first
quarter fiscal 1997 sales, as compared with a net loss of $114,000, or 0.4% of
first quarter fiscal 1996 sales. The resulting first quarter losses per share
were $0.09 in fiscal 1997 versus $0.02 in fiscal 1996.
The Company has announced its intention to dispose of its food
processing segment and its Barrier Films operations. Food segment operations
will be reported as a discontinued operation from and after the September 26,
1996 announcement of the Company's intention; Barrier Films' operations will
continue to be reported as part of ongoing operations as they are a portion of
an ongoing operation. The Company expects the sale of these operations to have
a significant effect on the operations of the Company going forward, due to
the elimination of net sales of these operations, as well as related expenses.
The Company has not yet entered into specific arrangements for the disposition
of these operations.
- 6 -
<PAGE> 9
Liquidity and Capital Resources
As shown in the Condensed Consolidated Statements of Cash Flow, cash
decreased from $298,000 at the beginning of this quarter to $53,000 at the end
of the quarter.
Operating activities provided $295,000 in increased cash during the
quarter as depreciation and increases in payables and accrued liabilities more
than offset the net loss for the quarter and increases in receivables and
inventory. The receivables increase in part reflects certain past due amounts
which have since been collected while inventories increased due to strategic
purchases, primarily at the Company's food operations.
Cash used in investing activities remained relatively stable in the
first quarter of fiscal 1997 as compared to the first quarter 1996. Capital
expenditures for the first quarter of 1997 included $760,000 for the purchase
of a press which was previously leased and $260,000 for an equipment deposit
which has since been returned. Thus, new capital expenditures were effectively
$620,000 in the quarter.
The Company obtained approximately $1.0 million in cash from financing
activities, primarily as a result of a net increase in borrowings. During the
quarter, the Company increased its borrowings under the revolving line of
credit by $1.9 million. Meanwhile, payments on long-term notes and industrial
revenue bonds utilized $863,000 of cash.
Also during the quarter, the Company's financial performance created
certain debt covenant violations. While the Company has made all interest and
principal payments on a timely basis and in accordance with the terms of its
debt instruments, the interest rate on the revolving line of credit was
increased by 2% in recognition of the covenant violations. The Company has
received a commitment from a new financial institution which the Company
expects will replace all exiting bank debt and standby letters of credit. If
completed as anticipated, Management believes these new arrangements will
facilitate greater availability of funds and reduce interest rates for the
Company.
The Company is currently working with the new financial institution to
complete documentation and close the transaction. The Company has not
requested, nor has it received, waivers of the covenant violations from the
current creditors as it expects to close the new financial package in the near
future. (No formal event of default has been declared by the current lenders.)
Management believes that completing of the Company's new financing arrangements
will be important to maintain the Company's liquidity and capital resources on
an ongoing basis.
See the discussion under "Results of Operations" relating to the
Company's intended disposition of its food packaging segment and Barrier Films
operations.
- 7 -
<PAGE> 10
* * *
Additional Cautionary Statements
In addition to the matter discussed in the preceding part of
Management's Discussion and Analysis, the following factors could cause or
contribute to differences from the future results or expectations which are
discussed, or from the Company's historical results:
A significant portion of the Company's sales historically related to
sports picture cards. Due to the project-oriented nature of the Company's
business, the maturity of the collectible picture card industry, increased
competition, and changes in customer relationships, however, these services
declined in fiscal 1994, and further significantly declined in fiscal 1996
(after having leveled in fiscal 1995). During fiscal 1996, approximately 11%
of the Company's net sales related to collectible picture cards, as compared to
27%, 27% and 51% in fiscal 1995, 1994 and 1993, respectively. Collectible
picture card services contributed significantly to the Company's earnings in
fiscal 1993 and prior years, and the reduction in these services was a factor
in reduced earnings in fiscal 1994 and 1995, and losses in fiscal 1996. The
market for these items depends upon consumer tastes and preferences, which
change frequently. The Company's collectible picture card services also depend
upon customers maintaining required licenses and continuing to use outside
vendors. A further decrease in demand for sports picture cards (which
occurred, for example, as a result of the lengthy baseball strike in fiscal
1995), a change in a customer's licensing or production arrangements (for
example, the decision of Fleer Corp. ("Fleer") to outsource primarily to
another supplier) or other events causing a further decline in the Company's
collectible picture card production could have a material adverse effect on the
Company's sales volume and profitability, as occurred in fiscal 1996, 1995 and
1994. The Company expects the percentage of its business related to the
collectible cards to be somewhat reduced in fiscal 1997 and future years as a
result of the above and other factors.
During fiscal 1996, the Company's services were sold to over 1,000
customers, although five customers accounted for approximately 51% of the
Company's net sales (as compared to the five largest customers accounting for
approximately 54% of fiscal 1995 net sales and 59% of fiscal 1994 net sales).
Due to the project-oriented nature of the Company's business, sales to
particular customers may vary significantly from year to year depending upon
the number and size of their projects, and the identity of those customers may
change.
During fiscal 1996, sales (primarily in the food processing segment)
to Nestle Beverage Company and affiliates ("Nestle") accounted for 26% of the
Company's total net sales for the period. Sales to Nestle were 22%, 33% and
13% of the Company's total net sales in fiscal 1995, 1994 and 1993. During
fiscal 1996, sales (all in the graphic services segment) to Fleer accounted for
approximately 7% of the Company's total net sales
8
<PAGE> 11
for the period; sales to Fleer were 15%, 15% and 25% of the Company's total net
sales in fiscal 1995, 1994 and 1993, respectively.
In connection with the Company's December 1992 acquisition of certain
Nestle assets, Outlook Foods, Inc. ("Foods") and Nestle entered into
operational agreements including a five-year agreement under which Foods
packages malted milk products for Nestle and an agreement (which expired in
December 1995) by which Foods packaged certain sauces and gravies for Nestle.
The Company's contract to blend sauces and gravies for Nestle expired at the
end of calendar 1995, and was not renewed because of Nestle's desire to bring
the work in-house (beginning in July 1996) to utilize its excess capacity.
That contract represented approximately 61% and 65% of the Company's sales to
Nestle in fiscal 1996 and 1995, respectively. While Nestle has indicated to
the Company that at least some of such work may be replaced with additional
Nestle non-contract projects, there can be no assurances and the Company
already has experienced a significant reduction in sales to Nestle in the first
quarter of fiscal 1997. Also, the Company's announced intention to divest
itself of Foods may affect its relationship with Nestle; almost all Company
sales to Nestle are currently made through Foods.
During fiscal 1996, as a result of a change by Fleer in its strategies
for use of outside vendors, Fleer selected a company other than the Company as
its preferred outside vendor. The decision reduced the Company's sales to
Fleer in fiscal 1996, and that reduction is expected to continue to affect
future operations even though the Company has continued to produce projects for
Fleer on a limited basis.
The Company expects that it will continue to experience significant
sales concentration (and therefore risk of volatility) given the relatively
large size of projects undertaken for certain customers. Furthermore, the
Company's largest customers may vary from year to year depending on the number
and size of the projects completed for such customers. The loss of all or part
of business of one or more principal customers or a change in the number or
character of projects for particular customers could have a material adverse
effect on the Company's sales volume and profitability.
Other than the Nestle agreements described above, customers generally
purchase the Company's services under cancelable purchase orders rather than
long-term contracts, although exceptions sometimes occur when the Company is
required to purchase substantial inventories or special machinery to meet
orders. In past years, the Company rarely experienced cancellations of
purchase orders, although it recently has increasingly experienced delays and
cancellations. The Company believes that operating without long-term contracts
is consistent with industry practices, although it increases the Company's
vulnerability to losses of business and significant period to period changes.
The Company has recently introduced several new proprietary products.
In its food processing segment, during fiscal 1996,
9
<PAGE> 12
the Company has introduced food products such as Fresh Aroma bread mix and
Outlook Hot Cocoa mix. Also, the Company's Barrier Films subsidiary has
recently begun production of extruded packaging films. The introduction of new
products such as these is subject to various risks, including the risk of
market acceptance, production difficulties and delays, pricing pressure, cost
overruns, unforeseen or under estimated competition and other similar factors.
These and other factors can affect the ultimate success and profitability of
such products. The Company's announced intention to divest itself of Foods and
Barrier Films also may affect relationships with customers and suppliers, and
sales of these entities' products.
The Company uses complex and specialized equipment in the provision of
its services, and the manufacture of its products. Therefore, the Company is
dependent upon the functioning of such machinery, and its ability to acquire
and maintain appropriate equipment. Among other factors, the Company may be
affected by equipment malfunctions, training and operational needs relating to
the equipment which may delay utilization, maintenance requirements, and
technological or mechanical obsolescence. The Company has had start up
difficulties in certain lines of equipment, and such difficulties may affect
future operations. Because of the substantial capital requirements for graphic
services equipment, larger companies with greater capital resources may have an
advantage in financing state-of-the-art equipment.
The market for the services provided by the Company is highly
competitive, primarily on the basis of price, quality, production capability,
capacity for prompt delivery and continuing relationships. The Company's
principal competitors, and the scope of the areas in which the Company
competes, vary based upon the services offered. With respect to specialty
printing services, its competitors are numerous and range in size from very
large multi-national companies with substantially greater resources than the
Company to many smaller local companies. Numerous competitors also exist for
other services. While there are fewer competitors offering converting and
packaging services, competition is very strong, particularly relating to the
contracting market for collectible picture cards. Numerous competitors also
perform services in the food processing segment.
The Company and the industries in which it operates are subject to
environmental laws and regulations concerning emissions into the air,
discharges into waterways and the generation, handling and disposal of waste
materials. These laws and regulations are constantly evolving, and it is
impossible to predict accurately the effect they may have upon the capital
expenditures, earnings and competitive position of the Company in the future.
As with other companies, the Company has significant accounts
receivable from its customers. From time to time, certain of these accounts
receivable have become unusually large and/or overdue, and on occasion the
Company has taken significant write-offs relating to accounts receivable. The
failure of the
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<PAGE> 13
Company's customers to pay in full the Company's accounts receivable would
affect future profitability.
The Company is highly dependent on the services of its President,
David L. Erdmann. Although the Company has an employment agreement with Mr.
Erdmann, the loss of Mr. Erdmann's services could have a material adverse
effect on the Company's business and operations. The Company's success also
depends upon its ability to attract and retain other qualified management and
technical personnel.
The Company has recently announced that it intends to divest itself of
the Company's food processing and Barrier Films operations. The Company has
not yet entered into any arrangements with respect to those dispositions, and
there can be no assurances that such dispositions can be made upon terms
acceptable to the Company. Also, the announcement may affect the relationships
with Foods and Barrier's customers and suppliers pending the proposed
divestitures.
The Company is engaging in discussions with a prospective new lender
with respect to new financing arrangements, and has received a commitment for
such financing. While the Company expects that documentation will be completed
for the new lending arrangements in the near future, there can be no
assurances. As a result of recent financial performance, the Company has
operated in violation of certain debt covenants in its existing credit
facilities. Because the Company is currently working with a new financial
institution to complete documentation and close a transaction for new
financing, it has not requested, nor has it received, waivers of the current
covenant violations. The Company has not received formal notices of default
from its current lenders, although the covenant violations have resulted in an
increase in the Company's interest rates under the terms of the Company's
current financing arragements. Completion of the Company's new
financing arrangements will be important to the Company to maintain its
liquidity and capital resources on an ongoing basis.
11
<PAGE> 14
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits: See attached Exhibit Index, which is incorporated by
reference herein.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for which
this report is filed.
- 12 -
<PAGE> 15
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.
OUTLOOK GROUP CORP.
-----------------------------------
(Registrant)
/s/ David L. Erdmann
Dated: October 14, 1996 -----------------------------------
David L. Erdmann, President
/s/ Larry E. Driscoll
----------------------------------
Larry E. Driscoll, Vice President
Finance and Chief Financial Officer
<PAGE> 16
OUTLOOK GROUP CORP.
(the "Company")
EXHIBIT INDEX
to
Report on Form 10-Q for Quarter Ended August 30, 1996
-------------------------------
Exhibit Filed
No. Description Herewith
- ------- ----------- --------
11 Computation of Earnings per X
Common Share
27 Financial Data Schedule X
<PAGE> 1
OUTLOOK GROUP CORP. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Quarter Ended
August 30, August 31,
1996 1995
----------- -----------
<S> <C> <C>
Primary:
Weighted average shares outstanding . . . . . . . . . 4,649,382 4,699,382
Equivalent shares--dilutive stock options
based on Treasury stock method using average
market price . . . . . . . . . . . . . . . . . . . . -- --
----------- -----------
4,649,382 4,699,382
=========== ===========
Net earnings (loss) . . . . . . . . . . . . . . . . . . $ (437) $ (114)
=========== ===========
Net earnings (loss) per common share . . . . . . . . . $ (.09) $ (.02)
=========== ===========
</TABLE>
There is no significant difference between primary and fully diluted earnings
per common share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-30-1996
<CASH> 53
<SECURITIES> 0
<RECEIVABLES> 15,450
<ALLOWANCES> 994
<INVENTORY> 13,424
<CURRENT-ASSETS> 33,741
<PP&E> 63,533
<DEPRECIATION> 20,737
<TOTAL-ASSETS> 79,447
<CURRENT-LIABILITIES> 9,951
<BONDS> 31,530
<COMMON> 51
0
0
<OTHER-SE> 34,452
<TOTAL-LIABILITY-AND-EQUITY> 79,447
<SALES> 22,449
<TOTAL-REVENUES> 22,449
<CGS> 19,732
<TOTAL-COSTS> 19,732
<OTHER-EXPENSES> 2,864
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 650
<INCOME-PRETAX> (637)
<INCOME-TAX> (200)
<INCOME-CONTINUING> (437)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (437)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
